-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VjL3k2Pss/b2d5/CWzYhq67sH9qekZEgXxWNIfKiqojauTCwxac4dggn28VFXhd8 SPFfbG566x2T/aaHxS/OnQ== 0000789289-97-000028.txt : 19970605 0000789289-97-000028.hdr.sgml : 19970605 ACCESSION NUMBER: 0000789289-97-000028 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970604 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BLANCHARD FUNDS CENTRAL INDEX KEY: 0000789289 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 133333918 STATE OF INCORPORATION: MA FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-04579 FILM NUMBER: 97618861 BUSINESS ADDRESS: STREET 1: 41 MADSON AVE 24TH FL CITY: NEW YORK STATE: NY ZIP: 10010 BUSINESS PHONE: 2127797979 MAIL ADDRESS: STREET 1: 41 MADISON AVENUE 24TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10010 FORMER COMPANY: FORMER CONFORMED NAME: BLANCHARD STRATEGIC GROWTH FUND DATE OF NAME CHANGE: 19901225 N-30D 1 BLANCHARD GLOBAL GROWTH FUND Portfolio Adviser Mellon Capital Management Corporation The Blanchard Group of Funds are available through Signet/R/ Financial Services, Inc., member NASD, and are advised by an affiliate, Virtus Captial Management, Inc., which is compensated for this service. Investment products are not deposits, obligations of, or guaranteed by any bank. They are not insured by the FDIC. They involve risk, including the possible loss of principal invested. Federated Securities Corp. is the distributor of the Fund. S E M I - A N N U A L BLANCHARD GLOBAL GROWTH FUND SEMI-ANNUAL REPORT March 31, 1997 Available through Signet Financial Services, Inc. Managed by Virtus Capital Management, Inc. (2351) CUSIP 093265106 G01485-01 (5/97) PRESIDENT'S MESSAGE May 15, 1997 Dear Shareholder: I am pleased to present your Semi-Annual Report for the Blanchard Global Growth Fund covering the six-month period from October 1, 1996 through March 31, 1997. The report includes a complete listing of the Fund's holdings and financial activity. The Fund pursues a high level of growth around the world through a professionally managed portfolio that may include U.S. and foreign stocks* and bonds as well as precious metals securities. During the six-month reporting period, the Fund produced a total return of 2.24%** through income dividends totaling $0.21 per share and capital gains distributions totaling $2.26. The total return was negatively impacted by the Fund's $2.22 decrease in share price as market conditions affected the value of some of the Fund's holdings. Assets in the Fund stood at $61.7 million at the end of the period. Thank you for selecting the Blanchard Global Growth Fund to pursue your long-term financial goals. If you have comments or questions, please call Investors' Services at 1-800-829-3863. Sincerely, /s/ Edward C. Gonzales Edward C. Gonzales President *Foreign investing involves special risks including currency risk, increased volatility of foreign securities, and differences in auditing and other financial standards. **Performance quoted reflects past performance. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. BLANCHARD GLOBAL GROWTH FUND PORTFOLIO OF INVESTMENTS MARCH 31, 1997 (UNAUDITED) - --------------------------------------------------------------------------------
VALUE IN U.S. SHARES DOLLARS ------ ------------------------------ ----------- FOREIGN SECURITIES SECTOR--29.5% ------------------------------------- AUSTRIA--0.1% ------------------------------ BANKING--0.0% ------------------------------ 100 Bank Austria, AG $ 6,823 ------------------------------ ----------- CHEMICALS--0.0% ------------------------------ 200 Lenzing AG 10,087 ------------------------------ ----------- FINANCIAL SERVICES--0.0% ------------------------------ 100 Creditanstalt-Bankverein 6,069 ------------------------------ 200 Creditanstalt-Bankverein, Pfd. 7,736 ------------------------------ ----------- Total 13,805 ------------------------------ ----------- PETROLEUM--0.0% ------------------------------ 150 OMV AG 17,756 ------------------------------ ----------- RUBBER & MISC. MATERIALS--0.0% ------------------------------ 200 Radex-Heraklith 7,806 ------------------------------ ----------- STEEL--0.0% ------------------------------ 100 Boehler-Uddeholm 6,917 ------------------------------ ----------- UTILITIES--0.0% ------------------------------ 100 Oest Elektrizitats, Class A 7,151 ------------------------------ ----------- TOTAL AUSTRIA 70,345 ------------------------------ ----------- DENMARK--0.0% ------------------------------ BANKING--0.0% ------------------------------ 200 Den Danske Bank 18,030 ------------------------------ 400 Unidanmark, Class A 21,460 ------------------------------ ----------- Total 39,490 ------------------------------ ----------- COMMUNICATIONS EQUIPMENT--0.0% ------------------------------ 200 Tele Danmark AS, Class B 10,489 ------------------------------ -----------
BLANCHARD GLOBAL GROWTH FUND - --------------------------------------------------------------------------------
VALUE IN U.S. SHARES DOLLARS ------ ---------------------------- ----------- FOREIGN SECURITIES SECTOR--CONTINUED ----------------------------------- DENMARK--CONTINUED ---------------------------- ENVIRONMENTAL SERVICES--0.0% ---------------------------- 100 Danisco $ 6,136 ---------------------------- ----------- INDUSTRIAL SERVICES--0.0% ---------------------------- 100 Nkt Holding 6,608 ---------------------------- ----------- MISCELLANEOUS--0.0% ---------------------------- 300 Korn-Og Foderstof 10,998 ---------------------------- ----------- TRANSPORTATION-AIR--0.0% ---------------------------- 400 SAS Danmark AS 4,342 ---------------------------- ----------- TOTAL DENMARK 78,063 ---------------------------- ----------- FINLAND--0.0% ---------------------------- BANKING--0.0% ---------------------------- 3,950 Merita Ltd, Class A 13,442 ---------------------------- ----------- ELECTRICAL EQUIPMENT--0.0% ---------------------------- 250 Nokia (AB), Class K 14,913 ---------------------------- 500 Nokia AB-A 29,876 ---------------------------- ----------- Total 44,789 ---------------------------- ----------- MISCELLANEOUS--0.0% ---------------------------- 1,300 UPM--Kymmene OY 28,495 ---------------------------- ----------- NON-FERROUS METALS--0.0% ---------------------------- 500 Outokumpu Oy 9,308 ---------------------------- ----------- TRADING COMPANY--0.0% ---------------------------- 750 Kesko 10,885 ---------------------------- ----------- TOTAL FINLAND 106,919 ---------------------------- ----------- FRANCE--1.3% ---------------------------- AUTOMOBILE--0.0% ---------------------------- 150 Peugeot S.A. 17,125 ---------------------------- ----------- BEVERAGE--0.1% ---------------------------- 310 LVMH (Moet-Hennessy) 75,423 ---------------------------- -----------
BLANCHARD GLOBAL GROWTH FUND - --------------------------------------------------------------------------------
VALUE IN U.S. SHARES DOLLARS ------ ---------------------------------------- ----------- FOREIGN SECURITIES SECTOR--CONTINUED ----------------------------------------------- FRANCE--CONTINUED ---------------------------------------- BROADCASTING--0.0% ---------------------------------------- 150 Havas S.A. $ 11,168 ---------------------------------------- ----------- BUILDING MATERIALS--0.1% ---------------------------------------- 250 Compagnie de St. Gobain 37,937 ---------------------------------------- 280 Lafarge-Coppee 19,440 ---------------------------------------- ----------- Total 57,377 ---------------------------------------- ----------- CHEMICALS--0.1% ---------------------------------------- 1,100 Rhone-Poulenc, Class A 37,284 ---------------------------------------- ----------- ELECTRONIC TECHNOLOGY--0.2% ---------------------------------------- 600 Legrand 108,469 ---------------------------------------- 440 Schneider S.A. 25,235 ---------------------------------------- ----------- Total 133,704 ---------------------------------------- ----------- FINANCIAL SERVICES--0.3% ---------------------------------------- 1,300 AXA 86,204 ---------------------------------------- 230 Compagnie Financiere de Paribas, Class A 15,227 ---------------------------------------- 1,300 Societe Generale, Paris 152,356 ---------------------------------------- ----------- Total 253,787 ---------------------------------------- ----------- INSURANCE-PROPERTY & CASUALTY--0.0% ---------------------------------------- 650 Uap (Cie Uap) 17,192 ---------------------------------------- ----------- MOTOR VEHICLE PARTS--0.0% ---------------------------------------- 380 Michelin, Class B 22,640 ---------------------------------------- ----------- OIL--0.2% ---------------------------------------- 1,113 Total SA-B 96,521 ---------------------------------------- ----------- PHARMACEUTICALS--0.1% ---------------------------------------- 220 L'Oreal 77,115 ---------------------------------------- 290 Sanofi S.A. 28,409 ---------------------------------------- ----------- Total 105,524 ---------------------------------------- -----------
BLANCHARD GLOBAL GROWTH FUND - --------------------------------------------------------------------------------
VALUE IN U.S. SHARES DOLLARS ------ ----------------------------------------- ----------- FOREIGN SECURITIES SECTOR--CONTINUED ------------------------------------------------ FRANCE--CONTINUED ----------------------------------------- RETAILERS-BROADLINE--0.0% ----------------------------------------- 60 Pinault-Printemps-Redoute S.A. $ 25,862 ----------------------------------------- 50 Promodes 16,965 ----------------------------------------- ----------- Total 42,827 ----------------------------------------- ----------- RETAILERS SPECIALTY--0.2% ----------------------------------------- 272 Castorama Dubois Investisse 43,020 ----------------------------------------- 400 Primagaz Cie 41,464 ----------------------------------------- ----------- Total 84,484 ----------------------------------------- ----------- UTILITIES--0.0% ----------------------------------------- 170 Lyonnaise des Eaux S.A. 17,410 ----------------------------------------- ----------- TOTAL FRANCE 972,466 ----------------------------------------- ----------- GERMANY--5.4% ----------------------------------------- AIRLINES--0.1% ----------------------------------------- 2,500 Deutsche Lufthansa AG 36,196 ----------------------------------------- ----------- AUTOMOTIVE & RELATED--0.6% ----------------------------------------- 3,000 Daimler Benz AG 239,928 ----------------------------------------- 200 Volkswagen AG 110,552 ----------------------------------------- ----------- Total 350,480 ----------------------------------------- ----------- BANKING--0.8% ----------------------------------------- 2,250 Bayerische Hypotheken-Und Wechsel-Bank AG 78,642 ----------------------------------------- 1,950 Bayerische Vereinsbank AG, Munich 80,782 ----------------------------------------- 2,700 Deutsche Bank, AG 151,996 ----------------------------------------- 3,150 Dresdner Bank AG, Frankfurt 111,987 ----------------------------------------- ----------- Total 423,407 ----------------------------------------- ----------- CHEMICALS--0.6% ----------------------------------------- 4,500 Bayer AG 187,230 ----------------------------------------- 5,000 BASF AG 188,849 ----------------------------------------- ----------- Total 376,079 ----------------------------------------- -----------
BLANCHARD GLOBAL GROWTH FUND - --------------------------------------------------------------------------------
VALUE IN U.S. SHARES DOLLARS ------ -------------------------------------------------------- ----------- FOREIGN SECURITIES SECTOR--CONTINUED --------------------------------------------------------------- GERMANY--CONTINUED -------------------------------------------------------- ELECTRICAL EQUIPMENT--0.6% -------------------------------------------------------- 5,650 Siemens AG $ 304,517 -------------------------------------------------------- ----------- ENGINEERING-BUSINESS SERVICES--0.2% -------------------------------------------------------- 350 Systeme, Anwendungen, Produkte in der Datevnerarbeitung 59,550 -------------------------------------------------------- Systeme, Anwendungen, Produkte in der Datevnerarbeitung, 250 Pfd. 42,866 -------------------------------------------------------- ----------- Total 102,416 -------------------------------------------------------- ----------- HEALTHCARE-GENERAL--0.6% -------------------------------------------------------- 1,350 Fresenius AG, Pfd. 309,982 -------------------------------------------------------- 1,500 Merck KGAA 61,511 -------------------------------------------------------- ----------- Total 371,493 -------------------------------------------------------- ----------- INSURANCE-LIFE--0.9% -------------------------------------------------------- 150 Allianz AG Holding 309,802 -------------------------------------------------------- 50 Muenchener Rueckversicherungs-Gesellschaft AG 130,096 -------------------------------------------------------- ----------- Total 439,898 -------------------------------------------------------- ----------- MACHINERY--0.2% -------------------------------------------------------- 380 Mannesmann AG 145,348 -------------------------------------------------------- ----------- MULTI-INDUSTRY--0.2% -------------------------------------------------------- 218 Viag AG 102,988 -------------------------------------------------------- ----------- STEEL--0.1% -------------------------------------------------------- 200 Thyssen AG 45,144 -------------------------------------------------------- ----------- UTILITIES--0.3% -------------------------------------------------------- 2,750 Veba AG 155,718 -------------------------------------------------------- ----------- UTILITIES-ELECTRIC--0.2% -------------------------------------------------------- 2,050 RWE AG 91,500 -------------------------------------------------------- ----------- TOTAL GERMANY 2,945,184 -------------------------------------------------------- ----------- HONG KONG--0.9% -------------------------------------------------------- BANKING--0.3% -------------------------------------------------------- 4,800 Bank Of East Asia 16,292 --------------------------------------------------------
BLANCHARD GLOBAL GROWTH FUND - --------------------------------------------------------------------------------
VALUE IN U.S. SHARES DOLLARS ------ -------------------------------- ----------- FOREIGN SECURITIES SECTOR--CONTINUED --------------------------------------- HONG KONG--CONTINUED -------------------------------- BANKING--CONTINUED -------------------------------- 6,000 Hang Seng Bank Ltd. $ 61,946 -------------------------------- 6,545 HSBC Holdings PLC 152,038 -------------------------------- 1,000 Wing Lung Bank 6,872 -------------------------------- ----------- Total 237,148 -------------------------------- ----------- BROADCASTING--0.0% -------------------------------- 2,000 Television Broadcasting 8,130 -------------------------------- ----------- ENTERTAINMENT & RECREATION--0.0% -------------------------------- 3,000 Hong Kong & Shang Hot 4,743 -------------------------------- 4,000 Shangri-La Asia 4,646 -------------------------------- ----------- Total 9,389 -------------------------------- ----------- FINANCIAL SERVICES--0.0% -------------------------------- 6,000 Peregrine Investment 9,563 -------------------------------- ----------- MULTI-INDUSTRY--0.1% -------------------------------- 9,000 Hutchison Whampoa 67,657 -------------------------------- 3,000 Swire Pacific Ltd. 23,617 -------------------------------- ----------- Total 91,274 -------------------------------- ----------- PROPERTY--0.1% -------------------------------- 2,000 Hysan Development Co. Ltd. 5,988 -------------------------------- 5,000 New World Development Co. Ltd. 26,972 -------------------------------- 4,000 Wharf Holdings Ltd. 15,306 -------------------------------- ----------- Total 48,266 -------------------------------- ----------- REAL ESTATE--0.3% -------------------------------- 5,000 Cheung Kong 44,040 -------------------------------- 10,000 Sun Hung Kai Properties 105,824 -------------------------------- ----------- Total 149,864 -------------------------------- -----------
BLANCHARD GLOBAL GROWTH FUND - --------------------------------------------------------------------------------
VALUE IN U.S. SHARES DOLLARS ------ --------------------------------- ----------- FOREIGN SECURITIES SECTOR--CONTINUED ---------------------------------------- HONG KONG--CONTINUED --------------------------------- TELECOMMUNICATIONS--0.1% --------------------------------- 34,000 Hong Kong Telecommunications Ltd. $ 58,139 --------------------------------- ----------- UTILITIES--0.1% --------------------------------- 9,000 China Light and Power Co. Ltd. 39,607 --------------------------------- 10,000 Hong Kong and China Gas Co. Ltd. 18,777 --------------------------------- ----------- Total 58,384 --------------------------------- ----------- TOTAL HONG KONG 670,157 --------------------------------- ----------- IRELAND--0.5% --------------------------------- BANKING--0.3% --------------------------------- 16,104 Bank of Ireland PLC 160,566 --------------------------------- ----------- BUILDING MATERIALS--0.2% --------------------------------- 14,329 CRH PLC 141,493 --------------------------------- ----------- TOTAL IRELAND 302,059 --------------------------------- ----------- ITALY--0.9% --------------------------------- AUTOMOTIVE & RELATED--0.2% --------------------------------- 34,100 Fiat SPA 110,957 --------------------------------- 3,800 Fiat SPA 6,541 --------------------------------- ----------- Total 117,498 --------------------------------- ----------- BANKING--0.0% --------------------------------- 5,300 Banca Commerciale Italiana 10,713 --------------------------------- 6,200 Credito Italiano 8,943 --------------------------------- 600 Imi 5,308 --------------------------------- ----------- Total 24,964 --------------------------------- ----------- BROADCASTING--0.0% --------------------------------- 3,500 Mediaset SPA 13,981 --------------------------------- ----------- PAPER PRODUCTS--0.0% --------------------------------- 1,000 Burgo (Cartiere) S.P.A. 5,218 --------------------------------- -----------
BLANCHARD GLOBAL GROWTH FUND - --------------------------------------------------------------------------------
VALUE IN U.S. SHARES DOLLARS ------ --------------------------------------- ----------- FOREIGN SECURITIES SECTOR--CONTINUED ---------------------------------------------- ITALY--CONTINUED --------------------------------------- PETROLEUM--0.2% --------------------------------------- 26,000 Eni S.P.A. $ 134,815 --------------------------------------- ----------- RUBBER & MISC. MATERIALS--0.0% --------------------------------------- 2,300 Pirelli SPA 5,215 --------------------------------------- ----------- TELECOMMUNICATIONS--0.5% --------------------------------------- 91,000 Telecom Italia Mobile SPA 268,265 --------------------------------------- 17,900 Telecom Italia SPA 46,595 --------------------------------------- ----------- Total 314,860 --------------------------------------- ----------- UTILITIES--0.0% --------------------------------------- 1,200 Edison S.P.A. 6,492 --------------------------------------- ----------- TOTAL ITALY 623,043 --------------------------------------- ----------- JAPAN--11.3% --------------------------------------- AUTOMOTIVE & RELATED--0.9% --------------------------------------- 3,000 Honda Motor Co. Ltd. 89,512 --------------------------------------- 18,000 Toyota Motor Credit Corp. 455,567 --------------------------------------- ----------- Total 545,079 --------------------------------------- ----------- BANKING--1.9% --------------------------------------- 10,000 Asahi Bank, Ltd. 62,909 --------------------------------------- 19,000 Bank of Tokyo-Mitsubishi, Ltd. 296,515 --------------------------------------- 13,000 Fuji Bank, Ltd., Tokyo 150,319 --------------------------------------- 11,000 Industrial Bank of Japan, Ltd., Tokyo 112,072 --------------------------------------- 6,000 Mitsubishi Trust & Banking Corp., Tokyo 59,675 --------------------------------------- 4,000 Mitsui Trust & Banking 22,964 --------------------------------------- 17,000 Sakura Bank Ltd., Tokyo 95,262 --------------------------------------- 14,000 Sumitomo Bank, Ltd., Osaka 166,411 --------------------------------------- 9,000 Tokai Bank, Ltd., Nagoya 70,227 --------------------------------------- ----------- Total 1,036,354 --------------------------------------- -----------
BLANCHARD GLOBAL GROWTH FUND - --------------------------------------------------------------------------------
VALUE IN U.S. SHARES DOLLARS ------ ---------------------------------------- ----------- FOREIGN SECURITIES SECTOR--CONTINUED ----------------------------------------------- JAPAN--CONTINUED ---------------------------------------- BUILDING MATERIALS--0.0% ---------------------------------------- 4,000 Takara Standard Co. $ 28,139 ---------------------------------------- ----------- CAPITAL GOODS--0.3% ---------------------------------------- 14,000 Asahi Glass Co. Ltd. 125,657 ---------------------------------------- ----------- CHEMICALS & RELATED--0.7% ---------------------------------------- 28,000 Daicel Chemical Industries 100,752 ---------------------------------------- 12,000 Sekisui Chemical Co. 118,380 ---------------------------------------- 20,000 Sumitomo Bakelite Co., Ltd. 132,611 ---------------------------------------- ----------- Total 351,743 ---------------------------------------- ----------- CHEMICAL-SPECIALTY--0.2% ---------------------------------------- 2,000 Fuji Photo Film Co. 65,820 ---------------------------------------- 6,000 Shiseido Co. 77,626 ---------------------------------------- ----------- Total 143,446 ---------------------------------------- ----------- COMMUNICATION EQUIPMENT--0.3% ---------------------------------------- 10,000 Matsushita Electric Industrial Co. 156,060 ---------------------------------------- 3 NTT Data Communications Systems Co. 79,809 ---------------------------------------- ----------- Total 235,869 ---------------------------------------- ----------- CONSUMER ELECTRONIC--0.5% ---------------------------------------- 2,000 Rohm Co. 147,489 ---------------------------------------- 6,000 Sharp Corp. 71,319 ---------------------------------------- 1,000 Sony Corp. 69,944 ---------------------------------------- ----------- Total 288,752 ---------------------------------------- ----------- ELECTRONICS & ELECTRICAL EQUIPMENT--1.3% ---------------------------------------- 7,700 Canon Sales Co., Inc. 152,543 ---------------------------------------- 9,000 Canon, Inc. 192,852 ---------------------------------------- 23,000 Hitachi, Ltd. 204,577 ---------------------------------------- 15,000 Minebea Co. 124,929 ----------------------------------------
BLANCHARD GLOBAL GROWTH FUND - --------------------------------------------------------------------------------
VALUE IN U.S. SHARES DOLLARS ------- --------------------------------------------- ----------- FOREIGN SECURITIES SECTOR--CONTINUED ----------------------------------------------------- JAPAN--CONTINUED --------------------------------------------- ELECTRONICS & ELECTRICAL EQUIPMENT--CONTINUED --------------------------------------------- 9,000 Yamatake-Honeywell $ 128,083 --------------------------------------------- ----------- Total 802,984 --------------------------------------------- ----------- FINANCIAL SERVICES--0.9% --------------------------------------------- 8,050 Credit Saison Co. Ltd. 147,109 --------------------------------------------- 4,000 Daiwa Securities Co. Ltd. 28,851 --------------------------------------------- 134,000 (a)Nikkei 300 Stock Index List Fund 283,884 --------------------------------------------- 7,000 Nomura Securities Co., Ltd. 77,545 --------------------------------------------- 3,000 Yamaichi Securities Co., Ltd. 9,364 --------------------------------------------- ----------- Total 546,753 --------------------------------------------- ----------- FOOD PROCESSING--0.1% --------------------------------------------- 4,000 House Foods Corp. 50,457 --------------------------------------------- ----------- HOUSING & CONSTRUCTION--0.1% --------------------------------------------- 13,000 Taisei Corp. 50,457 --------------------------------------------- ----------- SHIPBUILDING--0.2% --------------------------------------------- 34,000 Mitsubishi Heavy Industries, Ltd. 221,315 --------------------------------------------- ----------- STEEL--0.1% --------------------------------------------- 58,000 NKK Corp. 121,937 --------------------------------------------- ----------- INSURANCE--0.3% --------------------------------------------- 28,000 Sumitomo Marine & Fire 169,807 --------------------------------------------- ----------- MACHINERY--0.5% --------------------------------------------- 16,000 Komatsu, Ltd. 117,086 --------------------------------------------- 6,000 Mori Seiki Co. 82,478 --------------------------------------------- 9,000 Takuma Co., Ltd. 91,696 --------------------------------------------- ----------- Total 291,260 --------------------------------------------- ----------- OIL & RELATED--0.1% --------------------------------------------- 10,000 Mitsubishi Oil Co. 44,392 --------------------------------------------- -----------
BLANCHARD GLOBAL GROWTH FUND - --------------------------------------------------------------------------------
VALUE IN U.S. SHARES DOLLARS ------ ----------------------------------- ----------- FOREIGN SECURITIES SECTOR--CONTINUED ------------------------------------------ JAPAN--CONTINUED ----------------------------------- NON-RESIDENTIAL CONSTRUCTION--0.2% ----------------------------------- 11,000 Sekisui House, Ltd. $ 107,625 ----------------------------------- ----------- PHARMACEUTICALS--0.3% ----------------------------------- 6,000 Chugai Pharmaceutical Co. 46,964 ----------------------------------- 4,000 Kaken Pharmaceutical 18,792 ----------------------------------- 3,000 Sankyo Co., Ltd. 82,720 ----------------------------------- 4,000 Shionogi and Co. 23,450 ----------------------------------- 3,000 Yamanouchi Pharmaceutical Co., Ltd. 62,101 ----------------------------------- ----------- Total 234,027 ----------------------------------- ----------- REAL ESTATE--0.2% ----------------------------------- 14,000 Mitsubishi Estate Co., Ltd. 149,430 ----------------------------------- ----------- RETAIL--0.3% ----------------------------------- 11,000 Hankyu Department Stores, Inc. 85,744 ----------------------------------- 2,000 Ito Yokado Co., Ltd. 88,946 ----------------------------------- ----------- Total 174,690 ----------------------------------- ----------- TELECOMMUNICATIONS--0.1% ----------------------------------- 13 DDI Corp. 82,098 ----------------------------------- ----------- TEXTILE & APPAREL--0.1% ----------------------------------- 17,000 Nisshinbo Industries 112,307 ----------------------------------- ----------- TRADING COMPANY--0.4% ----------------------------------- 15,000 Itochu Corp. 73,502 ----------------------------------- 22,000 Marubeni Corp. 85,389 ----------------------------------- 11,000 Onward Kashiyama Co., Ltd. 127,193 ----------------------------------- ----------- Total 286,084 ----------------------------------- ----------- TRANSPORTATION--0.5% ----------------------------------- 40,000 (a)Kawasaki Kisen Kaisha, Ltd. 73,745 ----------------------------------- 46,000 Kinki Nippon Railway 274,133 ----------------------------------- ----------- Total 347,878 ----------------------------------- -----------
BLANCHARD GLOBAL GROWTH FUND - --------------------------------------------------------------------------------
VALUE IN U.S. SHARES DOLLARS ------ ----------------------------------- ----------- FOREIGN SECURITIES SECTOR--CONTINUED ------------------------------------------ JAPAN--CONTINUED ----------------------------------- TRANSPORTATION--CONTINUED ----------------------------------- UTILITIES--0.3% ----------------------------------- 11,000 Tokyo Electric Power Co. $ 200,129 ----------------------------------- ----------- TOTAL JAPAN 6,748,669 ----------------------------------- ----------- NETHERLANDS--1.9% ----------------------------------- BANKING--0.0% ----------------------------------- 400 ABN-Amro Hldgs N.V. 27,513 ----------------------------------- ----------- CONSUMER & RELATED--0.3% ----------------------------------- 1,000 Heineken N.V. 174,567 ----------------------------------- ----------- FOOD PROCESSING--0.1% ----------------------------------- 200 Unilever N.V. 39,072 ----------------------------------- ----------- HOUSEHOLD DURABLES--0.1% ----------------------------------- 1,000 Philips Electronics N.V. 46,654 ----------------------------------- ----------- INSURANCE--1.0% ----------------------------------- 3,772 Aegon N.V. 265,679 ----------------------------------- 4,172 Ahold N.V. 290,739 ----------------------------------- 1,400 ING Groep, N.V. 55,164 ----------------------------------- ----------- Total 611,582 ----------------------------------- ----------- PETROLEUM--0.4% ----------------------------------- 1,200 Royal Dutch Petroleum 217,926 ----------------------------------- ----------- TOTAL NETHERLANDS 1,117,314 ----------------------------------- ----------- NEW ZEALAND--0.0% ----------------------------------- BUILDING MATERIALS--0.0% ----------------------------------- 5,400 Fletcher Challenge Energy 14,555 ----------------------------------- ----------- FOREST PRODUCTS--0.0% ----------------------------------- 8,300 Carter Holt Harvey 17,586 ----------------------------------- -----------
BLANCHARD GLOBAL GROWTH FUND - --------------------------------------------------------------------------------
VALUE IN U.S. SHARES DOLLARS ------ ----------------------------------- ----------- FOREIGN SECURITIES SECTOR--CONTINUED ------------------------------------------ NEW ZEALAND--CONTINUED ----------------------------------- TELECOMMUNICATIONS--0.0% ----------------------------------- 3,900 Telecom Corp. of New Zealand $ 17,746 ----------------------------------- ----------- TOTAL NEW ZEALAND 49,887 ----------------------------------- ----------- NORWAY--0.1% ----------------------------------- ENERGY--0.1% ----------------------------------- 1,000 Norsk Hydro AS 50,079 ----------------------------------- ----------- FOREST PRODUCTS--0.0% ----------------------------------- 300 Norske Skogindustrier A.S., Class A 9,811 ----------------------------------- 200 Norske Skogindustrier A.S., Class B 6,207 ----------------------------------- ----------- Total 16,018 ----------------------------------- ----------- INSURANCE-LIFE--0.0% ----------------------------------- 1,300 (a)Storebrand ASA 8,957 ----------------------------------- ----------- MULTI-INDUSTRY--0.0% ----------------------------------- 200 Aker A.S., Class A 5,372 ----------------------------------- 100 Orkla Borregaard A.S., Class A 8,058 ----------------------------------- ----------- Total 13,430 ----------------------------------- ----------- NON-FERROUS METALS--0.0% ----------------------------------- 400 Elkem A/S, Class A 7,527 ----------------------------------- ----------- TOTAL NORWAY 96,011 ----------------------------------- ----------- SPAIN--0.5% ----------------------------------- BANKING--0.1% ----------------------------------- 300 Argentaria SA 13,081 ----------------------------------- 300 Banco Bilbao Vizcaya SA 18,220 ----------------------------------- 400 Banco Santander 27,606 ----------------------------------- ----------- Total 58,907 ----------------------------------- ----------- PETROLEUM--0.0% ----------------------------------- 1,100 Repsol SA 45,939 ----------------------------------- -----------
BLANCHARD GLOBAL GROWTH FUND - --------------------------------------------------------------------------------
VALUE IN U.S. SHARES DOLLARS ------ -------------------------------- ----------- FOREIGN SECURITIES SECTOR--CONTINUED --------------------------------------- SPAIN--CONTINUED -------------------------------- REAL ESTATE--0.2% -------------------------------- 6,000 Vallehermosa SA $ 140,152 -------------------------------- ----------- TELECOMMUNICATIONS--0.1% -------------------------------- 2,200 Telefonica de Espana 53,180 -------------------------------- ----------- UTILITIES--0.1% -------------------------------- 600 Empresa Nac De Electridad 38,775 -------------------------------- 100 Gas Natural SDG SA 21,865 -------------------------------- 2,200 Iberdrola SA 24,293 -------------------------------- 600 Union Elec Fenosa 4,927 -------------------------------- ----------- Total 89,860 -------------------------------- ----------- TOTAL SPAIN 388,038 -------------------------------- ----------- SWEDEN--0.8% -------------------------------- BANKING--0.0% -------------------------------- 1,500 Skand Enskilda BKN, Class A 16,620 -------------------------------- 300 Svenska Handelsbanken, Stockholm 9,156 -------------------------------- ----------- Total 25,776 -------------------------------- ----------- COMMUNICATIONS--0.1% -------------------------------- 2,300 Telefonaktiebolaget LM Ericsson 81,184 -------------------------------- ----------- MACHINERY--0.2% -------------------------------- 7,000 Svedala Industri 136,545 -------------------------------- ----------- MISCELLANEOUS--0.2% -------------------------------- 2,600 Scania AB, Class A 65,207 -------------------------------- 2,600 Scania AB, Class B 65,207 -------------------------------- ----------- Total 130,414 -------------------------------- ----------- PHARMACEUTICALS--0.3% -------------------------------- 3,300 Astra AB, Class A 159,614 -------------------------------- ----------- TOTAL SWEDEN 533,533 -------------------------------- -----------
BLANCHARD GLOBAL GROWTH FUND - --------------------------------------------------------------------------------
VALUE IN U.S. SHARES DOLLARS ------ -------------------------------------- ----------- FOREIGN SECURITIES SECTOR--CONTINUED --------------------------------------------- SWITZERLAND--2.1% -------------------------------------- BANKING--0.4% -------------------------------------- 600 Credit Suisse Group $ 72,029 -------------------------------------- 200 Schweizerische Bankgesellschaft (UBS) 36,067 -------------------------------------- 50 Schweizerische Bankgesellschaft (UBS) 44,962 -------------------------------------- 250 Schweizerischer Bankverein 53,423 -------------------------------------- ----------- Total 206,481 -------------------------------------- ----------- ELECTRICAL EQUIPMENT--0.2% -------------------------------------- 95 ABB AG 114,211 -------------------------------------- ----------- FOOD PROCESSING--0.3% -------------------------------------- 150 Nestle SA 175,643 -------------------------------------- ----------- HEALTHCARE-GENERAL--0.4% -------------------------------------- 30 Roche Holding AG 259,451 -------------------------------------- ----------- HOUSEHOLD PRODUCTS--0.1% -------------------------------------- 100 Zurich Versicherungsgesellschaft 31,480 -------------------------------------- ----------- INSURANCE-LIFE--0.2% -------------------------------------- 100 Schw Rueckversicherungs 106,324 -------------------------------------- ----------- MISCELLANEOUS--0.5% -------------------------------------- 100 ADIA S.A. 32,592 -------------------------------------- 200 Novartis AG 248,228 -------------------------------------- ----------- Total 280,820 -------------------------------------- ----------- TOTAL SWITZERLAND 1,174,410 -------------------------------------- ----------- UNITED KINGDOM--3.7% -------------------------------------- AEROSPACE--0.2% -------------------------------------- 4,334 British Aerospace PLC 97,262 -------------------------------------- ----------- BANKING--0.4% -------------------------------------- 7,100 Lloyds TSB Group PLC 58,291 -------------------------------------- 18,028 National Westminster Bank, PLC, London 205,700 -------------------------------------- ----------- Total 263,991 -------------------------------------- -----------
BLANCHARD GLOBAL GROWTH FUND - --------------------------------------------------------------------------------
VALUE IN U.S. SHARES DOLLARS ------ ----------------------------------- ----------- FOREIGN SECURITIES SECTOR--CONTINUED ------------------------------------------ UNITED KINGDOM--CONTINUED ----------------------------------- BROADCASTING--0.4% ----------------------------------- 900 British Sky Broadcasting Group PLC $ 9,192 ----------------------------------- 27,500 Carlton Communications PLC 235,275 ----------------------------------- ----------- Total 244,467 ----------------------------------- ----------- ENGINEERING-BUSINESS SERVICES--0.4% ----------------------------------- 29,000 Chubb Security 206,120 ----------------------------------- ----------- FOOD & BEVERAGE--0.2% ----------------------------------- 14,300 Allied Domecq PLC 108,226 ----------------------------------- ----------- HEALTH CARE--0.4% ----------------------------------- 16,611 Smithkline Beecham Corp. 247,061 ----------------------------------- ----------- LODGING & RESTAURANT--0.4% ----------------------------------- 23,400 Compass Group 252,942 ----------------------------------- ----------- MACHINERY--0.1% ----------------------------------- 8,800 Siebe PLC 148,549 ----------------------------------- ----------- MULTI-INDUSTRY--0.3% ----------------------------------- 7,500 Hanson PLC, ADR 170,625 ----------------------------------- ----------- OIL & RELATED--0.2% ----------------------------------- 10,283 British Petroleum Co. PLC 119,444 ----------------------------------- ----------- PHARMACEUTICALS--0.1% ----------------------------------- 4,800 Glaxo Wellcome PLC 88,134 ----------------------------------- ----------- PUBLISHING--0.2% ----------------------------------- 6,380 EMI Group PLC 116,725 ----------------------------------- ----------- RETAIL--0.0% ----------------------------------- 6,380 Thorn EMI 17,320 ----------------------------------- ----------- TELECOMMUNICATIONS--0.0% ----------------------------------- 1,100 Cable & Wireless 8,904 ----------------------------------- -----------
BLANCHARD GLOBAL GROWTH FUND - --------------------------------------------------------------------------------
VALUE IN U.S. SHARES DOLLARS --------- ------------------------------------------------- ------------ FOREIGN SECURITIES SECTOR--CONTINUED ----------------------------------------------------------- UNITED KINGDOM--CONTINUED ------------------------------------------------- UTILITIES--0.4% ------------------------------------------------- 7,500 (a)Energy Group PLC, ADR $ 240,938 ------------------------------------------------- ------------ TOTAL UNITED KINGDOM 2,330,708 ------------------------------------------------- ------------ TOTAL FOREIGN SECURITIES SECTOR (IDENTIFIED COST $17,841,530) 18,206,806 ------------------------------------------------- ------------ EMERGING MARKETS SECURITIES SECTOR--10.9% ----------------------------------------------------------- ARGENTINA--0.2% ------------------------------------------------- PETROLEUM--0.2% ------------------------------------------------- 19,176 Compania Naviera Perez Companc S.A., Class B 148,245 ------------------------------------------------- ------------ BRAZIL--1.3% ------------------------------------------------- BANKING--0.1% ------------------------------------------------- 7,000,000 Banco Bradesco SA, Preference 57,821 ------------------------------------------------- ------------ BASIC INDUSTRY--0.6% ------------------------------------------------- 4,387 (a)Cia Acos Especiais Itabira-Acesita, ADR 19,959 ------------------------------------------------- 3,207 (a)Companhia Energetica de Minas Gerais, ADR 132,630 ------------------------------------------------- 7,400 Companhia Vale Do Rio Doce, ADR 168,198 ------------------------------------------------- ------------ Total 320,787 ------------------------------------------------- ------------ INDUSTRIAL SERVICES--0.5% ------------------------------------------------- 2,750 Telecomunicacoes Brasileras, ADR 281,531 ------------------------------------------------- ------------ MISCELLANEOUS--0.0% ------------------------------------------------- 7,481 (a)(b)Rhodia-Ster S.A., GDR 24,313 ------------------------------------------------- ------------ STEEL--0.0% ------------------------------------------------- 1,211,792 Cia Acos Especiais Itabira-Acesita, Pfd. 3,088 ------------------------------------------------- ------------ UTILITIES--0.1% ------------------------------------------------- Centrais Eletricas Brasileiras S.A., Preference, 150,000 Series B 64,571 ------------------------------------------------- ------------ TOTAL BRAZIL 752,111 ------------------------------------------------- ------------ CHILE--0.7% ------------------------------------------------- CONSUMER DURABLES--0.1% ------------------------------------------------- 4,200 Compania Cervecerias Unidas S.A., ADR 82,950 ------------------------------------------------- ------------
BLANCHARD GLOBAL GROWTH FUND - --------------------------------------------------------------------------------
VALUE IN U.S. SHARES DOLLARS ------ ------------------------------------ ----------- EMERGING MARKETS SECURITIES SECTOR-- CONTINUED ------------------------------------------- CHILI--CONTINUED ------------------------------------ ENGINEERING-BUSINESS SERVICES--0.3% ------------------------------------ 4,000 Chilgener S.A., ADR $ 103,000 ------------------------------------ ----------- TELECOMMUNICATIONS--0.1% ------------------------------------ 2,525 Compania Telecomunicacion Chile, ADR 72,594 ------------------------------------ ----------- UTILITIES--0.2% ------------------------------------ 1,500 (b)Chilectra S.A., ADR 94,824 ------------------------------------ ----------- TOTAL CHILE 353,368 ------------------------------------ ----------- COLOMBIA--0.3% ------------------------------------ BANKING--0.2% ------------------------------------ 2,600 Banco Ganadero S.A., ADR 82,225 ------------------------------------ 5,500 Banco Industrial Colombiano, ADR 90,063 ------------------------------------ ----------- Total 172,288 ------------------------------------ ----------- MISCELLANEOUS--0.1% ------------------------------------ 3,500 Cementos Diamante S.A., GDR 48,563 ------------------------------------ ----------- TOTAL COLOMBIA 220,851 ------------------------------------ ----------- GREECE--0.2% ------------------------------------ BANKING--0.2% ------------------------------------ 1,521 Ergo Bank S.A. 96,742 ------------------------------------ ----------- INDIA--0.3% ------------------------------------ CHEMICALS--0.1% ------------------------------------ 5,700 Indian Petrochemicals, GDR 76,808 ------------------------------------ ----------- STEEL--0.1% ------------------------------------ 5,500 Steel Authority of India, GDR 44,688 ------------------------------------ ----------- TEXTILES--0.1% ------------------------------------ 4,300 Reliance Industries Ltd., GDR 78,153 ------------------------------------ ----------- TOTAL INDIA 199,649 ------------------------------------ -----------
BLANCHARD GLOBAL GROWTH FUND - --------------------------------------------------------------------------------
VALUE IN U.S. SHARES DOLLARS ------- --------------------------------------------- ----------- EMERGING MARKETS SECURITIES SECTOR--CONTINUED ----------------------------------------------------- INDONESIA--0.7% --------------------------------------------- BANKING--0.6% --------------------------------------------- 137,812 (a)PT Bank Dagang Nasional $ 137,755 --------------------------------------------- 19,687 PT Bank Dagang Nasional, Warrants 7,790 --------------------------------------------- 260,814 (a)PT Bank International Indonesia 198,245 --------------------------------------------- 32,072 PT Bank International Indonesia, Warrants 11,354 --------------------------------------------- ----------- Total 355,144 --------------------------------------------- ----------- CAPITAL GOODS--0.1% --------------------------------------------- 3,100 (a)PT Indosat, ADR 82,925 --------------------------------------------- ----------- TOTAL INDONESIA 438,069 --------------------------------------------- ----------- KOREA--0.6% --------------------------------------------- AUTOMOBILE--0.0% --------------------------------------------- 2,066 Hyundai Motor Service Co., Pfd. 23,071 --------------------------------------------- ----------- CAPITAL GOODS--0.0% --------------------------------------------- 1,904 (a)Anam Industrial Co., Ltd. 20,029 --------------------------------------------- ----------- COMPUTERS--0.1% --------------------------------------------- 7,130 Anam Industrial Co., Ltd., Pfd. 34,874 --------------------------------------------- ----------- ELECTRONICS & ELECTRICAL--0.0% --------------------------------------------- 2 (a)Samsung Electronics Co. 158 --------------------------------------------- 18 (b)Samsung Electronics Co., GDR 821 --------------------------------------------- ----------- Total 979 --------------------------------------------- ----------- HOUSING & CONSTRUCTION--0.0% --------------------------------------------- 9,000 (a)Kumho Construction & Engineering Co., Pfd. 23,920 --------------------------------------------- ----------- MACHINERY--0.0% --------------------------------------------- 6,000 (a)(b)Daewoo Heavy Industries, Pfd. 20,235 --------------------------------------------- ----------- MULTI-INDUSTRY--0.2% --------------------------------------------- 2,283 (a)(b)Dong Bang Forwarding Co. 112,174 --------------------------------------------- ----------- PETROLEUM--0.1% --------------------------------------------- 2,572 (a)Yukong, Ltd. 45,949 --------------------------------------------- -----------
BLANCHARD GLOBAL GROWTH FUND - --------------------------------------------------------------------------------
VALUE IN U.S. SHARES DOLLARS ------ ---------------------------------- ----------- EMERGING MARKETS SECURITIES SECTOR-- CONTINUED ----------------------------------------- KOREA--CONTINUED ---------------------------------- UTILITIES--0.2% ---------------------------------- 3,200 (a)Korea Electric Power Corp. $ 92,909 ---------------------------------- ----------- TOTAL KOREA 374,140 ---------------------------------- ----------- MALAYSIA--1.5% ---------------------------------- AIRLINES--0.1% ---------------------------------- 25,000 Malaysian Airline System 66,578 ---------------------------------- ----------- BANKING--0.4% ---------------------------------- 7,000 Commerce Asset Holdings Berhad 49,147 ---------------------------------- 25,000 DCB Holdings Berhad 94,319 ---------------------------------- 12,000 Malayan Banking Berhad 136,787 ---------------------------------- ----------- Total 280,253 ---------------------------------- ----------- BEVERAGES--0.1% ---------------------------------- 40,000 Guinness Anchor Berhad 91,999 ---------------------------------- ----------- FOREST PRODUCTS--0.1% ---------------------------------- 10,000 Jaya Tiasa Holdings 55,683 ---------------------------------- ----------- INDUSTRIAL COMPONENT--0.2% ---------------------------------- 9,000 United Engineers, Ltd. 78,441 ---------------------------------- ----------- LEISURE & RECREATION--0.1% ---------------------------------- 12,000 Genting Berhad 81,346 ---------------------------------- ----------- MULTI-INDUSTRY--0.2% ---------------------------------- 35,000 Sime Darby Berhad 127,809 ---------------------------------- ----------- NON RESIDENTIAL CONSTRUCTION--0.1% ---------------------------------- 47,000 Renong Berhad 79,651 ---------------------------------- ----------- TELECOMMUNICATIONS--0.1% ---------------------------------- 9,000 Telekom Malaysia Berhad 70,088 ---------------------------------- ----------- UTILITIES--0.1% ---------------------------------- 18,000 Petronas Gas Berhad 66,457 ---------------------------------- ----------- TOTAL MALAYSIA 998,305 ---------------------------------- -----------
BLANCHARD GLOBAL GROWTH FUND - --------------------------------------------------------------------------------
VALUE IN U.S. SHARES DOLLARS ------- ------------------------------------------------------ ----------- EMERGING MARKETS SECURITIES SECTOR--CONTINUED -------------------------------------------------------------- MEXICO--1.0% ------------------------------------------------------ FINANCIAL SERVICES--0.2% ------------------------------------------------------ 4,900 (a)Carso Global Telecom, ADR $ 29,408 ------------------------------------------------------ 4,900 (a)Grupo Carso S.A. de C.V., Class A1, ADR 57,458 ------------------------------------------------------ 16,000 (a)Grupo Financiero Banamex Accivel, Class B 36,481 ------------------------------------------------------ 1,140 (a)Grupo Financiero Banamex Accivel, Class L 2,306 ------------------------------------------------------ 68 Grupo Financiero Inbursa, S.A. de C.V., Class B, ADR 1,211 ------------------------------------------------------ ----------- Total 126,864 ------------------------------------------------------ ----------- INDUSTRIAL & RELATED--0.1% ------------------------------------------------------ 11,000 Apasco S.A. de C.V. 74,494 ------------------------------------------------------ ----------- MULTI-INDUSTRY--0.1% ------------------------------------------------------ 12,791 Alfa, S.A. de C.V., Class A 71,863 ------------------------------------------------------ ----------- PAPER PRODUCTS--0.2% ------------------------------------------------------ 25,000 Kimberly-Clark de Mexico 101,047 ------------------------------------------------------ ----------- TELECOMMUNICATIONS--0.3% ------------------------------------------------------ 110,000 Telefonos de Mexico 214,465 ------------------------------------------------------ ----------- TELECOMMUNICATION SERVICES--0.1% ------------------------------------------------------ 4,000 Grupo Televisa S.A. 50,293 ------------------------------------------------------ ----------- TOTAL MEXICO 639,026 ------------------------------------------------------ ----------- PHILIPPINES--0.3% ------------------------------------------------------ BANKING--0.1% ------------------------------------------------------ 1,935 Metro Bank and Trust Co. 50,274 ------------------------------------------------------ ----------- OIL & RELATED--0.2% ------------------------------------------------------ 400,000 (a)Belle Corp. 127,442 ------------------------------------------------------ ----------- TOTAL PHILIPPINES 177,716 ------------------------------------------------------ ----------- PORTUGAL--0.4% ------------------------------------------------------ ENGINEERING-BUSINESS SERVICES--0.1% ------------------------------------------------------ Sonae Investimentos Sociedade Gestora de Participacoes 1,500 Sociais, S.A. 50,704 ------------------------------------------------------ -----------
BLANCHARD GLOBAL GROWTH FUND - --------------------------------------------------------------------------------
VALUE IN U.S. SHARES DOLLARS ------ ---------------------------------------------------- ----------- EMERGING MARKETS SECURITIES SECTOR--CONTINUED ----------------------------------------------------------- PORTUGAL--CONTINUED ---------------------------------------------------- FINANCIAL SERVICES--0.1% ---------------------------------------------------- 6,000 Banco Commercial Portugues, Class R $ 89,504 ---------------------------------------------------- ----------- FOOD & BEVERAGE--0.1% ---------------------------------------------------- 1,399 Estabelecimentos Jeronimo Martins & Filho SGPS, S.A. 77,634 ---------------------------------------------------- ----------- TELECOMMUNICATIONS--0.1% ---------------------------------------------------- 2,000 Portugal Telecom S.A. 74,527 ---------------------------------------------------- ----------- TOTAL PORTUGAL 292,369 ---------------------------------------------------- ----------- SINGAPORE--0.3% ---------------------------------------------------- BANKING--0.3% ---------------------------------------------------- 3,000 Development Bank of Singapore Ltd. 34,891 ---------------------------------------------------- 5,000 Oversea-Chinese Banking Corp. Ltd. 59,536 ---------------------------------------------------- 4,000 United Overseas Bank Ltd. 40,983 ---------------------------------------------------- ----------- Total 135,410 ---------------------------------------------------- ----------- BROADCASTING--0.0% ---------------------------------------------------- 1,000 Singapore Press Holdings Ltd. 18,207 ---------------------------------------------------- ----------- ENTERTAINMENT & RECREATION--0.0% ---------------------------------------------------- 3,000 Hotel Properties Ltd. 5,151 ---------------------------------------------------- ----------- MACHINERY--0.0% ---------------------------------------------------- 1,000 Keppel Corp. 6,300 ---------------------------------------------------- 2,000 Van Der Horst Ltd. 6,784 ---------------------------------------------------- ----------- Total 13,084 ---------------------------------------------------- ----------- PROPERTY--0.0% ---------------------------------------------------- 2,000 City Developments Ltd. 17,722 ---------------------------------------------------- 3,000 DBS Land Ltd. 10,260 ---------------------------------------------------- 2,000 First Capital Corp., Ltd. 5,538 ---------------------------------------------------- 5,000 United Overseas Bank Ltd. 7,788 ---------------------------------------------------- ----------- Total 41,308 ---------------------------------------------------- -----------
BLANCHARD GLOBAL GROWTH FUND - --------------------------------------------------------------------------------
VALUE IN U.S. SHARES DOLLARS ------ --------------------------------------- ----------- EMERGING MARKETS SECURITIES SECTOR--CONTINUED ---------------------------------------------- SINGAPORE--CONTINUED --------------------------------------- TELECOMMUNICATIONS--0.0% --------------------------------------- 13,000 Singapore Telecommunications $ 26,999 --------------------------------------- ----------- TRANSPORTATION-AIR--0.0% --------------------------------------- 3,000 Singapore Airlines Ltd. 24,091 --------------------------------------- ----------- TOTAL SINGAPORE 264,250 --------------------------------------- ----------- SOUTH AFRICA--2.2% --------------------------------------- BANKING--0.3% --------------------------------------- 7,081 Amalgamated Banks of South Africa 44,862 --------------------------------------- 2,500 Nedcor Ltd. 47,800 --------------------------------------- 1,000 Standard Bank Investment Corp., Ltd. 40,955 --------------------------------------- ----------- Total 133,617 --------------------------------------- ----------- CHEMICAL--0.2% --------------------------------------- 9,000 Sasol Ltd. 96,221 --------------------------------------- ----------- COAL--0.0% --------------------------------------- 405 Anglo American Coal Corp., Ltd. 28,042 --------------------------------------- ----------- ENTERTAINMENT--0.1% --------------------------------------- 62,743 Sun International (South Africa) Ltd. 41,881 --------------------------------------- ----------- FINANCIAL SERVICES--0.2% --------------------------------------- 312 (a)Dimension Data Holdings Ltd. 1,024 --------------------------------------- 4,500 Free State Consolidated Gold Mines Ltd. 32,328 --------------------------------------- 6,000 Malbak Limited 29,868 --------------------------------------- 7,000 Rembrandt Group Ltd. 74,839 --------------------------------------- ----------- Total 138,059 --------------------------------------- ----------- HOUSEHOLD PRODUCTS--0.0% --------------------------------------- 80 (a)JD Group, Ltd. 457 --------------------------------------- ----------- INDUSTRIAL MANUFACTURING--0.2% --------------------------------------- 6,000 Barlow Limited 66,591 ---------------------------------------
BLANCHARD GLOBAL GROWTH FUND - --------------------------------------------------------------------------------
VALUE IN U.S. SHARES DOLLARS ------ -------------------------------------------------- ----------- EMERGING MARKETS SECURITIES SECTOR--CONTINUED --------------------------------------------------------- SOUTH AFRICA--CONTINUED -------------------------------------------------- INDUSTRIAL MANUFACTURING--CONTINUED -------------------------------------------------- 1,008 Anglo American Industrial Corp., Ltd. $ 41,054 -------------------------------------------------- ----------- Total 107,645 -------------------------------------------------- ----------- INSURANCE--0.3% -------------------------------------------------- 27,826 LibLife Strategic Investments, Ltd. 96,332 -------------------------------------------------- 3,000 Liberty Life Association of Africa, Ltd. 84,172 -------------------------------------------------- ----------- Total 180,504 -------------------------------------------------- ----------- LODGING & RESTAURANT--0.2% -------------------------------------------------- 4,000 South African Breweries, Ltd. 126,711 -------------------------------------------------- ----------- METALS & MINING--0.7% -------------------------------------------------- 1,500 Anglo American Corporation of South Africa Limited 92,827 -------------------------------------------------- 3,300 De Beers Centenary AG 120,217 -------------------------------------------------- 20,000 Gencor Ltd. 92,771 -------------------------------------------------- 3,000 Rustenburg Platinum Holdings Ltd. 48,535 -------------------------------------------------- ----------- Total 354,350 -------------------------------------------------- ----------- TOTAL SOUTH AFRICA 1,207,487 -------------------------------------------------- ----------- TAIWAN--0.3% -------------------------------------------------- MISCELLANEOUS--0.1% -------------------------------------------------- 6,380 (a)Walsin Lihwa Wire, GDR 64,598 -------------------------------------------------- ----------- NON-RESIDENTIAL CONSTRUCTION--0.1% -------------------------------------------------- 10,180 (a)Tuntex Distinct Corp., GDR 78,386 -------------------------------------------------- ----------- TECHNOLOGY--0.1% -------------------------------------------------- 3,251 (a)Macronix International Co., Ltd., ADR 54,048 -------------------------------------------------- ----------- TOTAL TAIWAN 197,032 -------------------------------------------------- ----------- THAILAND--0.6% -------------------------------------------------- BANKING--0.2% -------------------------------------------------- 27,000 Krung Thai Bank PLC 37,449 --------------------------------------------------
BLANCHARD GLOBAL GROWTH FUND - --------------------------------------------------------------------------------
SHARES OR VALUE PRINCIPAL IN U.S. AMOUNT DOLLARS ---------- ----------------------------------------------------- ----------- EMERGING MARKETS SECURITIES SECTOR--CONTINUED ---------------------------------------------------------------- THAILAND--CONTINUED ----------------------------------------------------- BANKING--CONTINUED ----------------------------------------------------- 13,500 Siam Commercial Bk $ 79,060 ----------------------------------------------------- ----------- Total 116,509 ----------------------------------------------------- ----------- BUILDING MATERIALS--0.1% ----------------------------------------------------- 2,000 Siam Cement Co., Ltd 52,090 ----------------------------------------------------- ----------- COMMUNICATIONS--0.2% ----------------------------------------------------- 35,000 (a)TelecomAsia Corp. 59,671 ----------------------------------------------------- 9,000 United Communication Industry Public Co., Ltd. 58,255 ----------------------------------------------------- ----------- Total 117,926 ----------------------------------------------------- ----------- PETROLEUM--0.1% ----------------------------------------------------- 4,500 PTT Exploration and Production Public Co. 66,925 ----------------------------------------------------- ----------- TOTAL THAILAND 353,450 ----------------------------------------------------- ----------- TURKEY--0.0% ----------------------------------------------------- MULTI-INDUSTRY--0.0% ----------------------------------------------------- 255 Koc Yatirim Ve Sanayi Mamulleri Pazarlama S.A. 76 ----------------------------------------------------- ----------- TOTAL EMERGING MARKETS SECURITIES SECTOR (IDENTIFIED COST $6,274,796) 6,712,886 ----------------------------------------------------- ----------- COMMERCIAL PAPER--33.7% ---------------------------------------------------------------- BANKING--4.8% ----------------------------------------------------- $3,000,000 Abby National, 5.34%, 6/10/1997 2,970,870 ----------------------------------------------------- ----------- FINANCE--28.9% ----------------------------------------------------- 3,000,000 Associates First Capital Corp., 5.54%, 6/23/1997 2,964,960 ----------------------------------------------------- 3,000,000 Ford Motor Credit Corp., 5.55%, 6/20/1997 2,966,340 ----------------------------------------------------- 3,000,000 Halifax Building Society, 5.31%, 6/9/1997 2,971,320 ----------------------------------------------------- 3,000,000 Hertz Corp., 5.51%, 6/23/1997 2,964,960 ----------------------------------------------------- 3,000,000 Repsol International Finance, 5.32%, 6/9/1997 2,971,320 ----------------------------------------------------- 3,000,000 Xerox Credit Corp., 5.32%, 6/5/1997 2,973,150 ----------------------------------------------------- ----------- Total 17,812,050 ----------------------------------------------------- ----------- TOTAL COMMERCIAL PAPER (IDENTIFIED COST $20,765,481) 20,782,920 ----------------------------------------------------- -----------
BLANCHARD GLOBAL GROWTH FUND - --------------------------------------------------------------------------------
PRINCIPAL AMOUNT OR FOREIGN VALUE CURRENCY PAR IN U.S. AMOUNT DOLLARS ------------ -------------------------------------------------- ----------- U.S. FIXED INCOME SECURITIES SECTOR--11.1% --------------------------------------------------------------- GOVERNMENT/AGENCY--11.1% -------------------------------------------------- $ 1,850,000 United States Treasury Bill, 6/26/1997 $ 1,827,238 -------------------------------------------------- 2,500,000 United States Treasury Bond, 7.25%, 8/15/2022 2,503,675 -------------------------------------------------- 500,000 United States Treasury Bond, 7.50%, 11/15/2016 514,500 -------------------------------------------------- 1,200,000 United States Treasury Bond, 7.625%, 11/15/2022 1,254,732 -------------------------------------------------- 400,000 United States Treasury Note, 6.25%, 2/15/2003 389,125 -------------------------------------------------- 350,000 United States Treasury Note, 8/15/2005 196,538 -------------------------------------------------- 350,000 United States Treasury Receipt IO Strip, 2/15/2005 204,202 -------------------------------------------------- ----------- TOTAL U.S. FIXED INCOME SECURITIES SECTOR (IDENTIFIED COST $6,985,472) 6,890,010 -------------------------------------------------- ----------- FOREIGN FIXED INCOME SECURITIES SECTOR--8.2% --------------------------------------------------------------- DENMARK--0.9% -------------------------------------------------- 3,310,000 Denmark--Bullet, Bond, 8.00%, 3/15/2006 565,823 -------------------------------------------------- ----------- FRANCE--1.5% -------------------------------------------------- 4,890,000 France (Govt of), 6.50%, 10/25/2006 921,649 -------------------------------------------------- ----------- GERMANY--1.6% -------------------------------------------------- 287,000 Deutschland Republic, Deb., 7.125%, 12/20/2002 188,821 -------------------------------------------------- 165,000 Germany (Fed Republic), 6.50%, 7/15/2003 105,103 -------------------------------------------------- 1,140,000 Germany (Fed Republic), Bond, 6.00%, 1/5/2006 692,953 -------------------------------------------------- ----------- Total 986,877 -------------------------------------------------- ----------- ITALY--1.2% -------------------------------------------------- 880,000,000 Buoni Poliennali Del Tes, Deb., 10.50%, 4/15/1998 542,062 -------------------------------------------------- 310,000,000 Italy (Republic of), Deb., 10.50%, 4/1/2005 212,524 -------------------------------------------------- ----------- Total 754,586 -------------------------------------------------- ----------- SPAIN--1.4% -------------------------------------------------- Bonos Y Obligation Del Estado, Deb., 12.25%, 104,600,000 3/25/2000 858,271 -------------------------------------------------- -----------
BLANCHARD GLOBAL GROWTH FUND - -------------------------------------------------------------------------------
FOREIGN CURRENCY PAR AMOUNT OR VALUE PRINCIPAL IN U.S. AMOUNT DOLLARS ------------ -------------------------------------------------- ----------- FOREIGN FIXED INCOME SECURITIES SECTOR--CONTINUED --------------------------------------------------------------- SWEDEN--0.4% -------------------------------------------------- 1,600,000 Sweden (Kingdom of), 10.25%, 5/5/2000 $ 240,130 -------------------------------------------------- ----------- UNITED KINGDOM--1.2% -------------------------------------------------- 239,000 United Kingdom Treasury, 7.75%, 9/8/2006 394,819 -------------------------------------------------- 190,000 United Kingdom Treasury, 9.75%, 8/27/2002 344,058 -------------------------------------------------- ----------- Total 738,877 -------------------------------------------------- ----------- TOTAL FOREIGN FIXED INCOME SECURITIES SECTOR (IDENTIFIED COST $5,209,383) 5,066,213 -------------------------------------------------- ----------- (C) REPURCHASE AGREEMENT--6.9% --------------------------------------------------------------- $4,230,345 CS First Boston, 6.45%, dated 3/31/1997, due 4/1/1997 (AT AMORTIZED COST) 4,230,345 -------------------------------------------------- ----------- TOTAL INVESTMENTS (IDENTIFIED COST 61,307,007)(D) $61,889,180 -------------------------------------------------- -----------
(a) Non-income producing security. (b) Denotes a restricted security which is subject to restrictions on resale under Federal Securities laws. At March 31, 1997, these securities amounted to $252,367 which represents 0.4% of net assets. (c) The repurchase agreement is fully collateralized by U.S. government and/or agency obligations based on market prices at the date of the portfolio. (d) The cost of investments for federal tax purposes amounts to $61,307,007. The net unrealized appreciation of investments on a federal tax basis amounts to $582,173 which is comprised of $4,285,437 appreciation and $3,703,264 depreciation at March 31, 1997. Note: The categories of investments are shown as a percentage of net assets ($61,750,080) at March 31, 1997. The following acronyms are used throughout this portfolio: ADR--American Depository Receipt GDR--Global Depository Receipt IO--Interest Only PLC--Public Limited Company STRIP--Separate Trading of Registered Interest & Principal of Securities (See Notes which are an integral part of the Financial Statements) BLANCHARD GLOBAL GROWTH FUND STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 1997 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS: - ------------------------------------------------------------- Total investments in securities, at value (identified and tax cost $61,307,007) $61,889,180 - ------------------------------------------------------------- Cash 52,632 - ------------------------------------------------------------- Income receivable 377,917 - ------------------------------------------------------------- Receivable for investments sold 135,632 - ------------------------------------------------------------- ----------- Total assets 62,455,361 - ------------------------------------------------------------- LIABILITIES: - --------------------------------------------------- Payable for investments purchased $163,351 - --------------------------------------------------- Payable for shares redeemed 15,136 - --------------------------------------------------- Net payable for foreign currency exchange contracts 118,144 - --------------------------------------------------- Payable for taxes withheld 11,822 - --------------------------------------------------- Payable for daily variation margin 203,984 - --------------------------------------------------- Accrued expenses 192,844 - --------------------------------------------------- -------- Total liabilities 705,281 - ------------------------------------------------------------- ----------- NET ASSETS for 6,487,405 shares outstanding $61,750,080 - ------------------------------------------------------------- ----------- NET ASSETS CONSIST OF: - ------------------------------------------------------------- Paid in capital $59,378,544 - ------------------------------------------------------------- Net unrealized depreciation of investments, translation of assets and liabilities in foreign currency, and futures contracts (110,761) - ------------------------------------------------------------- Accumulated net realized gain on investments and foreign currency transactions 2,254,782 - ------------------------------------------------------------- Undistributed net investment income 227,515 - ------------------------------------------------------------- ----------- Total Net Assets $61,750,080 - ------------------------------------------------------------- ----------- NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE: - ------------------------------------------------------------- $61,750,080 / 6,487,405 shares outstanding $9.52 - ------------------------------------------------------------- -----------
(See Notes which are an integral part of the Financial Statements) BLANCHARD GLOBAL GROWTH FUND STATEMENT OF OPERATIONS SIX MONTHS ENDED MARCH 31, 1997 (UNAUDITED) - -------------------------------------------------------------------------------- INVESTMENT INCOME: - ---------------------------------------------------------- Dividends (net of foreign taxes withheld of $5,303) $ 143,725 - ---------------------------------------------------------- Interest (net of foreign taxes withheld of $2,571) 1,225,379 - ---------------------------------------------------------- ----------- Total income 1,369,104 - ---------------------------------------------------------- EXPENSES: - ------------------------------------------------ Management fee $327,866 - ------------------------------------------------ Administrative personnel and services fee 37,397 - ------------------------------------------------ Custodian fees 36,041 - ------------------------------------------------ Transfer and dividend disbursing agent fees and expenses 61,152 - ------------------------------------------------ Directors'/Trustees' fees 1,153 - ------------------------------------------------ Auditing fees 10,079 - ------------------------------------------------ Legal fees 4,945 - ------------------------------------------------ Portfolio accounting fees 31,268 - ------------------------------------------------ Distribution services fee 245,900 - ------------------------------------------------ Share registration costs 6,249 - ------------------------------------------------ Printing and postage 24,116 - ------------------------------------------------ Insurance premiums 1,275 - ------------------------------------------------ Taxes 242 - ------------------------------------------------ Miscellaneous 1,517 - ------------------------------------------------ --------- Total expenses 789,200 - ------------------------------------------------ Net investment income 579,904 - ---------------------------------------------------------- ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY: - ---------------------------------------------------------- Net realized gain on investments and foreign currency transactions 3,572,824 - ---------------------------------------------------------- Net change in unrealized depreciation of investments and translation of assets and liabilities in foreign currency (2,653,119) - ---------------------------------------------------------- ----------- realized and unrealized gain on investments and foreign currency 919,705 - ---------------------------------------------------------- ----------- Change in net assets resulting from operations $ 1,499,609 - ---------------------------------------------------------- -----------
(See Notes which are an integral part of the Financial Statements) BLANCHARD GLOBAL GROWTH FUND STATEMENT OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
SIX MONTHS ENDED (UNAUDITED) PERIOD ENDED YEAR ENDED MARCH 31, SEPTEMBER 30, APRIL 30, 1997 1996 1996 - ----------------------------------- ------------ ------------- ------------ INCREASE (DECREASE) IN NET ASSETS: - ----------------------------------- OPERATIONS-- - ----------------------------------- Net investment income $ 579,904 $ 465,544 $ 295,860 - ----------------------------------- Net realized gain (loss) on investments and foreign currency transactions ($3,572,824, $6,561,362, and 5,881,028 net gains, respectively, as computed for federal tax purposes) 3,572,824 6,148,207 8,019,815 - ----------------------------------- Net change in unrealized appreciation (depreciation) of investments and translation of assets and liabilities in foreign currency (2,653,119) (5,394,534) 5,636,916 - ----------------------------------- ------------ ------------ ------------ Change in net assets resulting from operations 1,499,609 1,219,217 13,952,591 - ----------------------------------- ------------ ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS-- - ----------------------------------- Distributions from net investment income (1,170,525) -- (295,860) - ----------------------------------- Distributions in excess of net investment income -- -- (274,732) - ----------------------------------- Distributions from net realized gains on investments and foreign currency transactions (12,602,965) -- -- - ----------------------------------- ------------ ------------ ------------ Change in net assets resulting from distributions to shareholders (13,773,490) -- (570,592) - ----------------------------------- ------------ ------------ ------------ SHARE TRANSACTIONS-- - ----------------------------------- Proceeds from sale of shares 1,541,361 8,636,590 5,765,409 - ----------------------------------- Net asset value of shares issued to shareholders in payment of distributions declared 13,095,701 -- 548,261 - ----------------------------------- Cost of shares redeemed (8,520,230) (13,130,249) (35,601,975) - ----------------------------------- ------------ ------------ ------------ Change in net assets resulting from share transactions 6,116,832 (4,493,659) (29,288,305) - ----------------------------------- ------------ ------------ ------------ Change in net assets (6,157,049) (3,274,442) (15,906,306) - ----------------------------------- NET ASSETS: - ----------------------------------- Beginning of period 67,907,129 71,181,571 87,087,877 - ----------------------------------- ------------ ------------ ------------ End of period (including undistributed net investment income of $227,515 and $818,136, and $0, respectively) $ 61,750,080 $ 67,907,129 $ 71,181,571 - ----------------------------------- ------------ ------------ ------------
(See Notes which are an integral part of the Financial Statements) BLANCHARD GLOBAL GROWTH FUND FINANCIAL HIGHLIGHTS - ------------------------------------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
SIX MONTHS ENDED YEAR ENDED APRIL 30, (UNAUDITED) PERIOD ENDED ------------------------------------ MARCH 31, SEPTEMBER 30, 1997 1996(A) 1996 1995 1994 1993 ------------------------ ----------- ------------- ------- ------- -------- ------- NET ASSET VALUE, BEGINNING OF PERIOD $11.74 $11.53 $ 9.71 $10.04 $10.00 $ 9.92 ------------------------ INCOME FROM INVESTMENT OPERATIONS ------------------------ Net investment income 0.10 0.08 0.04 0.08 0.03 0.25 ------------------------ Net realized and unrealized gain (loss) on investments and foreign currency transactions 0.15 0.13 1.86 (0.19) 1.29 0.32 ------------------------ ------- ------- ------- ------- -------- ------- Total from investment operations 0.25 0.21 1.90 (0.11) 1.32 0.57 ------------------------ ------- ------- ------- ------- -------- ------- LESS DISTRIBUTIONS ------------------------ Distributions from net investment income (0.21) -- (0.04) -- -- (0.30) ------------------------ Distribution in excess of net investment income (b) -- -- (0.04) -- -- -- ------------------------ Distributions from net realized gains and foreign currency transactions (2.26) -- -- -- (1.28) (0.19) ------------------------ Distributions in excess of net realized gains and foreign currency transactions (b) -- -- -- (0.22) -- -- ------------------------ ------- ------- ------- ------- -------- ------- Total distributions (2.47) -- (0.08) (0.22) (1.28) (0.49) ------------------------ ------- ------- ------- ------- -------- ------- NET ASSET VALUE, END OF PERIOD $ 9.52 $11.74 $11.53 $ 9.71 $10.04 $10.00 ------------------------ ------- ------- ------- ------- -------- ------- TOTAL RETURN (C) 2.24% 1.91% 19.68% (1.04%) 12.91% 6.08% ------------------------ RATIOS TO AVERAGE NET ASSETS ------------------------ Expenses 2.41%* 2.52%* 2.54% 2.51% 2.61% 2.40% ------------------------ Net investment income 1.77%* 1.60%* 0.38% 0.76% 0.67% 1.72% ------------------------ SUPPLEMENTAL DATA ------------------------ Net assets, end of period (000 omitted) $61,750 $67,907 $71,182 $87,088 $109,805 $84,780 ------------------------ Average commission rate paid (d) 0.0020 0.0040 -- -- -- -- ------------------------ Portfolio turnover 17% 47% 91% 221% 166% 138% ------------------------
* Computed on an annualized basis. (a) The Fund has changed its fiscal year end from April 30th to September 30th. Reflects operations for the period from May 1, 1996 to September 30, 1996. (b) Distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These distributions do not represent a return of capital for federal income tax purposes. (c) Based on net asset value. (d) Represents total commissions paid on portfolio securities divided by total portfolio shares purchased or sold on which commissions were charged. This disclosure is required for fiscal years beginning on or after September 1, 1995. (See Notes which are an integral part of the Financial Statements) BLANCHARD GLOBAL GROWTH FUND FINANCIAL HIGHLIGHTS - ------------------------------------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED APRIL 30, ----------------------------------------------------------- 1992 1991 1990 1989 1988 1987(A) - ------------------------ -------- -------- -------- -------- -------- -------- NET ASSET VALUE, BEGINNING OF PERIOD $ 9.64 $ 9.62 $10.11 $ 9.68 $10.51 $ 8.00 - ------------------------ INCOME FROM INVESTMENT OPERATIONS - ------------------------ Net investment income 0.33 0.30 0.30 0.22 0.14 0.01 - ------------------------ Net realized and unrealized gain (loss) on investments and foreign currency transactions 0.26 0.14 0.09 0.49 (0.21) 2.50 - ------------------------ -------- -------- -------- -------- -------- -------- Total from investment operations 0.59 0.44 0.39 0.71 (0.07) 2.51 - ------------------------ -------- -------- -------- -------- -------- -------- LESS DISTRIBUTIONS - ------------------------ Distributions from net investment income (0.31) (0.21) (0.38) (0.10) (0.12) -- - ------------------------ Distribution in excess of net investment income (b) -- -- -- -- -- -- - ------------------------ Distributions from net realized gains and foreign currency transactions -- (0.21) (0.50) (0.18) (0.64) -- - ------------------------ Distributions in excess of net realized gains and foreign currency transactions (b) -- -- -- -- -- -- - ------------------------ -------- -------- -------- -------- -------- -------- Total distributions (0.31) (0.42) (0.88) (0.28) (0.76) -- - ------------------------ -------- -------- -------- -------- -------- -------- NET ASSET VALUE, END OF PERIOD $ 9.92 $ 9.64 $ 9.62 $10.11 $ 9.68 $10.51 - ------------------------ -------- -------- -------- -------- -------- -------- TOTAL RETURN (C) 6.24% 4.61% 3.74% 7.55% (0.57%) 31.38% - ------------------------ RATIOS TO AVERAGE NET ASSETS - ------------------------ Expenses 2.31% 2.36% 2.28% 2.29% 2.28% 3.10%* - ------------------------ Net investment income 2.31% 2.84% 2.86% 2.27% 1.42% 0.34%* - ------------------------ SUPPLEMENTAL DATA - ------------------------ Net assets, end of period (000 omitted) $128,047 $193,593 $233,300 $244,048 $246,048 $149,018 - ------------------------ Average commission rate paid (d) -- -- -- -- -- -- - ------------------------ Portfolio turnover 109% 78% 88% 85% 120% 70% - ------------------------
* Computed on an annualized basis. (a) Represents period from June 1, 1986 (commencement of the Fund's operations) to April 30, 1987. (b) Distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These distributions do not represent a return of capital for federal income tax purposes. (c) Based on net asset value. (d) Represents total commissions paid on portfolio securities divided by total portfolio shares purchased or sold on which commissions were charged. This disclosure is required for fiscal years beginning on or after September 1, 1995. (See Notes which are an integral part of the Financial Statements) BLANCHARD GLOBAL GROWTH FUND NOTES TO FINANCIAL STATEMENTS MARCH 31, 1997 - ------------------------------------------------------------------------------- (1) ORGANIZATION Blanchard Funds (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end, management investment company. The Trust consists of seven portfolios. The financial statements included herein are only those of Blanchard Global Growth Fund (the "Fund"), a non-diversified portfolio. The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. The Fund's investment objective is long-term capital growth. (2) SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with generally accepted accounting principles. INVESTMENT VALUATIONS--U.S. government securities, listed corporate bonds, other fixed income and asset-backed securities, and unlisted and private placement securities are generally valued at the mean of the latest bid and asked price as furnished by an independent pricing service. Foreign government and corporate bonds are valued at the last sales price reported on a national exchange. If the last sales price is not available the securities are valued at the mean of the latest bid and ask price as furnished by an independent pricing service. Listed foreign and domestic equity securities are valued at the last sale price reported on a national securities exchange. Short-term foreign and domestic securities are valued at the prices provided by an independent pricing service. However, short-term foreign and domestic securities with remaining maturities of sixty days or less at the time of purchase may be valued at amortized cost, which approximates fair market value. Investments in open-end regulated investment companies are valued at net asset value. The Fund's restricted securities are valued at the price provided by dealers in the secondary market or, if no market prices are available, at the fair value as determined by the Fund's pricing committee. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the custodian bank to take possession, to have legally segregated in the Federal Reserve Book Entry System, or to have segregated within the custodian bank's vault, all securities held as collateral under repurchase agreement transactions. Additionally, procedures have been established by the Fund to monitor, on a daily basis, the market value of each repurchase agreement's collateral to ensure that the value of collateral at least equals the repurchase price to be paid under the repurchase agreement transaction. The Fund will only enter into repurchase agreements with banks and other recognized financial institutions, such as broker/dealers, which are deemed by the Fund's manager to be creditworthy pursuant to the guidelines and/or standards reviewed or established by the Board of Trustees (the "Trustees"). Risks may arise from the potential inability of counterparties to honor the terms of the repurchase agreement. Accordingly, the Fund could receive less than the repurchase price on the sale of collateral securities. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses are accrued daily. Bond premium and discount, if applicable, are amortized as required by the Internal Revenue Code, as amended (the "Code"). Dividend income and distributions to shareholders are recorded on the ex-dividend date. Certain dividends from foreign securities may be recorded after the ex-dividend date based upon when information becomes available to the Fund. Distributions in excess of net investment income were the result of certain book and tax timing differences. These distributions do not represent a return of capital for federal income tax purposes. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the Code applicable to regulated investment companies and to distribute to shareholders each year substantially all of its income. Accordingly, no provisions for federal tax are necessary. Withholding taxes on foreign interest and dividends have been provided for in accordance with the Fund's understanding of the applicable country's tax rules and rates. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in when- issued or delayed delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when-issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. FUTURES CONTRACTS--The Fund purchases stock index futures contracts to manage cashflows, enhance yield, and to potentially reduce transaction costs. Upon entering into a stock index futures contract with a broker, the Fund is required to deposit in a segregated account a specified amount of cash or U.S. government securities. Futures contracts are valued daily and unrealized gains or losses are recorded in a "variation margin" account. Daily, the Fund receives from or pays to the broker a specified amount of cash based upon changes in the variation margin account. When a contract is closed, the Fund recognizes a realized gain or loss. For the period ended March 31, 1997, the Fund had realized gains on futures contracts of $2,596,681. Futures contracts have market risks, including the risk that the change in the value of the contract may not correlate with changes in the value of the underlying securities. At March 31, 1997, the Fund had outstanding futures contracts as set forth below:
UNREALIZED EXPIRATION DATE CONTRACTS TO RECEIVE POSITION APPRECIATION --------------- --------------------- --------- ------------ June 1997 19 S&P 500 Long (239,380) September 1997 12 S&P 500 Long (214,200) June 1997 16 T-Note Long (34,962) June 1997 10 Australia Bond Long (24,078) June 1997 4 TSE 35 Long (36,186) June 1997 13 Canadian Bond Long (15,773) June 1997 16 Long Gilt Long (32,431) June 1997 261 Nikkei 300 Long 63,175 June 1997 4 DAX Long 18,507 June 1997 11 Bund Long (43,274) June 1997 6 CAC 40 Long 13,550 June 1997 8 Notional Long (6,066) --------- Net Unrealized Appreciation on Futures Contracts $(551,118) ---------
FOREIGN EXCHANGE CONTRACTS--The Fund may enter into foreign currency exchange contracts as a way of managing foreign exchange rate risk. The Fund may enter into these contracts for the purchase or sale of a specific foreign currency at a fixed price on a future date as a hedge or cross hedge against either specific transactions or portfolio positions. The objective of the Fund's foreign currency hedging transactions is to reduce the risk that the U.S. dollar value of the Fund's foreign currency denominated securities will decline in value due to changes in foreign currency exchange rates. All foreign currency exchange contracts are "marked to market" daily at the applicable translation rates resulting in unrealized gains or losses. Realized gains or losses are recorded at the time the foreign currency exchange contract is offset by entering into a closing transaction or by the delivery or receipt of the currency. Risk may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. At March 31, 1997, the Fund had outstanding foreign exchange contracts as set forth below: BLANCHARD GLOBAL GROWTH FUND - -------------------------------------------------------------------------------
IN UNREALIZED COMMITMENTS TO EXCHANGE CONTRACTS AT APPRECIATION SETTLEMENT DATE DELIVER/RECEIVE FOR VALUE (DEPRECIATION) -------------------- ----------------------------- ---------- ------------ -------------- Contracts Purchased: 4/2/97 9,600,000 French Franc $1,914,488 $1,710,090 $(204,398) 6/25/97 1,200,000 Australian Dollar 931,500 939,924 8,424 6/25/97 800,000 Pound Sterling 1,282,560 1,314,631 32,071 Contracts Sold: 4/2/97 600,000 French Franc 108,814 106,881 1,933 6/25/97 325,000 Deutsche Mark 200,345 196,024 4,321 6/25/97 1,700,000 Netherlands Guilder 932,836 912,009 20,827 6/25/97 1,600,000 Swiss Franc 1,140,901 1,122,223 18,678 --------- Net Unrealized Depreciation on Foreign Exchange Contracts ($118,144) ---------
OPTIONS CONTRACTS--The Fund may write option contracts. A written option obligates the Fund to sell (on a written call)/buy (on a written put) the underlying securities to/from the option holder upon excercise. The value of the option contract is recorded as a liability and unrealized gain or loss is measured by the difference between the current value and the premium received. For the period ended March 31, 1997, the Fund had no written options. The Funds may purchase put options on foreign currencies to increase a Fund's gross income and for the purpose of protecting against declines in the U.S. dollar value of foreign currency denominated portfolio securities and against increases in the U.S. dollar cost of such securities to be acquired. The risk associated with purchasing an option is tat the Fund pays a premium whether or not the option is excercised. Additionally, the Fund bears the risk of loss of premium and change in market value should the counterparty not perform under the contract. Put options purchased are accounted for in the same manner as portfolio securities. FOREIGN CURRENCY TRANSLATION--The accounting records of the Fund are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies ("FC") are translated into U.S. dollars based on the rate of exchange of such currencies against U.S. dollars on the date of valuation. Purchases and sales of securities, income and expenses are translated at the rate of exchange quoted on the respective date that such transactions are recorded. Differences between income and expense amounts recorded and collected or paid are adjusted when reported by the custodian bank. The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Reported net realized foreign exchange gains or losses arise from sales of portfolio securities, sales and maturities of short-term securities, sales of FCs, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books, and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities at fiscal year end, resulting from changes in the exchange rate. RESTRICTED SECURITIES--Restricted securities are securities that may only be resold upon registration under federal or international securities laws or in transactions exempt from such registration. In some cases, the issuer of restricted securities has agreed to register such securities for resale, at the issuer's expense either upon demand by the Fund or in connection with another registered offering of the securities. Many restricted securities may be resold in the secondary market in transactions exempt from registration. Such restricted securities may be determined to be liquid under criteria established by the Board of Trustees. The Fund will not incur any registration costs upon such resales. Additional information on each restricted security held at March 31, 1997 is as follows:
SECURITY ACQUISITION DATE ACQUISITION COST ----------------------------- ---------------- ---------------- Rhodia-Ster S.A., GDR 2/21/95-9/25/95 $91,642 Chilectra S.A., ADR 7/19/96 91,177 Daewoo Heavy Industries, Pfd. 2/3/95-4/12/95 49,952 Samsung Electronics Co., GDR 1/3/95 917 Dong Bang Forwarding Co. 2/3/95-5/29/95 74,380
CHANGE IN FISCAL YEAR--The Fund has changed its fiscal year-end from April 30 to September 30 beginning May 1, 1996. USE OF ESTIMATES--The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ from those estimated. OTHER--Investment transactions are accounted for on the trade date. (3) SHARES OF BENEFICIAL INTEREST The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest (without par value). Transactions in shares were as follows:
SIX MONTHS YEAR ENDED PERIOD ENDED ENDED MARCH 31, SEPTEMBER 30, APRIL 30, 1997 1996 1995 - ---------------------------------------- ---------- ------------- ---------- Shares sold 146,455 748,872 559,635 - ---------------------------------------- Shares issued to shareholders in payment of distributions declared 1,381,403 -- 52,311 - ---------------------------------------- Shares redeemed (823,403) (1,137,138) (3,413,086) - ---------------------------------------- --------- ---------- ---------- Net change resulting from share transactions 704,455 (388,266) (2,801,140) - ---------------------------------------- --------- ---------- ----------
(4) MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES MANAGEMENT FEE--Virtus Capital Management Inc., the Fund's manager, (the "Manager"), receives for its services an annual management fee equal to 1.00% of the Fund's first $150 million of average daily net assets, 0.875% of the Fund's average daily net assets in excess of $150 million but not exceeding $300 million and 0.75% of the Fund's average daily net assets in excess of $300 million. Mellon Capital Management Corp. provides the Manager with sub-advisory services for which it receives an annual management fee equal to 0.375% of the Fund's first $100 million of average daily net assets, 0.350% of the Fund's average daily net assets in excess of $100 million but not exceeding $150 million and 0.325% of the Fund's average daily net assets in excess of $150 million. ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund with certain administrative personnel and services. The fee paid to FAS is based on the level of average combined aggregate net assets of the Trust, the Blanchard Precious Metals Fund, Inc., and the Virtus Funds, all of which are advised by the Manager. The administrative fee received during the period of the Administrative Services Agreement shall be at least $75,000 per portfolio. DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will reimburse Federated Securities Corp.("FSC"), the principal distributor, from the net assets of the Fund to finance activities intended to result in the sale of the Fund's Fund shares. The Plan provides that the Fund may incur distribution expenses up to 0.75% of the average daily net assets of the Fund, annually, to reimburse FSC. TRANSFER AGENT AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company ("FServ"), through its subsidiary, Federated Shareholder Services Company serves as transfer and dividend disbursing agent for the Fund. The fee paid to FServ is based on the size, type, and number of accounts and transactions made by shareholders. PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting records for which it receives a fee. The fee is based on the level of the Fund's average daily net assets for the period, plus out-of-pocket expenses. CUSTODIAN FEES--Signet Trust Co. is the Fund's custodian. The fee is based on the level of the Fund's average daily net assets for the period, plus out-of-pocket expenses. GENERAL--Certain of the Officers and Trustees of the Trust are Officers and Directors or Trustees of the above companies. (5) INVESTMENT TRANSACTIONS Purchases and sales of investments, excluding short-term securities, for the period ended March 31, 1997, were as follows: - --------- PURCHASES $ 6,024,881 - --------- ----------- SALES $10,075,513 - --------- -----------
(6) CONCENTRATION OF CREDIT RISK The Fund invests in securities of non-U.S. issuers. Although the Fund maintains a non-diversified investment portfolio, the political or economic developments within a particular country or region may have an adverse effect on the ability of domiciled issuers to meet their obligations. Additionally, political or economic developments may have an effect on the liquidity and volatility of portfolio securities and currency holdings. TRUSTEES OFFICERS - -------------------------------------------------------------------------------- John F. Donahue John F. Donahue Thomas G. Bigley Chairman John T. Conroy, Jr. Edward C. Gonzales William J. Copeland President and Treasurer James E. Dowd J. Christopher Donahue Lawrence D. Ellis, M.D. Executive Vice President Edward L. Flaherty, Jr. John W. McGonigle Edward C. Gonzales Executive Vice President and Peter E. Madden Secretary Gregor F. Meyer Joseph S. Machi John E. Murray, Jr. Vice President and Assistant Wesley W. Posvar Treasurer Marjorie P. Smuts Richard B. Fisher Vice President C. Grant Anderson Assistant Secretary This report is authorized for distribution to prospective investors only when preceded or accompanied by the fund's prospectus which contain facts concerning its objective and policies, management fees, expenses and other information. BLANCHARD SHORT-TERM FLEXIBLE INCOME FUND Portfolio Adviser OFFITBANK The Blanchard Group of Funds are available through Signet/R/ Financial Services, Inc., member NASD, and are advised by an affiliate, Virtus Captial Management, Inc., which is compensated for this service. Investment products are not deposits, obligations of, or guaranteed by any bank. They are not insured by the FDIC. They involve risk, including the possible loss of principal invested. Federated Securities Corp. is the distributor of the Fund. S E M I - A N N U A L BLANCHARD SHORT-TERM FLEXIBLE INCOME FUND SEMI-ANNUAL REPORT March 31, 1997 Available through Signet Financial Services, Inc. Managed by Virtus Capital Management, Inc. (2351) CUSIP 093212305 G01485-04 (5/97) PRESIDENT'S MESSAGE May 15, 1997 Dear Shareholder: I am pleased to present your Semi-Annual Report for the Blanchard Short-Term Flexible Income Fund covering the six-month period from October 1, 1996 through March 31, 1997. The report includes a complete listing of the Fund's holdings and financial activity. On your behalf, the Fund pursues income through a professionally managed portfolio of U.S. and international corporate bonds and U.S. and international government bonds.* During the six-month reporting period, the Fund's income paid to shareholders totaled $0.08 per share. The total return was 2.49%, the result of income distributions and a minimal $0.01 decrease in share price from the first day of the period to the last day.** Assets in the Fund stood at $144.7 million at the end of the period. Thank you for selecting the Blanchard Short-Term Flexible Income Fund to pursue your financial goals. If you have comments or questions, please call Investors' Services at 1-800-829-3863. Sincerely, /s/ Edward C. Gonzales Edward C. Gonzales President *Foreign investing involves special risks including currency risk, increased volatility of foreign securities, and differences in auditing and other financial standards. **Performance quoted reflects past performance. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. BLANCHARD SHORT-TERM FLEXIBLE INCOME FUND PORTFOLIO OF INVESTMENTS MARCH 31, 1997 (UNAUDITED) - --------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE ----------- --------------------------------------------------- ------------ COLLATERALIZED MORTGAGE OBLIGATIONS--7.3% --------------------------------------------------------------- FINANCIAL SERVICES--1.8% --------------------------------------------------- $ 1,016,173 CMC Securities Corp. 1993-A, Series 1993-A, Class A2, 7.50%, 2/25/2023 $ 1,017,352 --------------------------------------------------- 734,626 GE Capital MTG Services 1992-12A, Series 1992-12A, Class A4, 7.50%, 11/25/2018 733,179 --------------------------------------------------- 910,706 Merrill Lynch Mtg. Investors 1990-I, Series 1990-I, Class A, 9.20%, 1/15/2011 919,285 --------------------------------------------------- ------------ Total 2,669,816 --------------------------------------------------- ------------ GOVERNMENT/AGENCY--5.5% --------------------------------------------------- 1,745,982 Resolution Trust Corp 1991-M7, Series 1991-M7, Class A2, 8.15%, 1/25/2021 1,749,805 --------------------------------------------------- 2,143,741 (a)Resolution Trust Corp 1992-3, Series 1992-3, Class A2, 6.89%, 9/25/2019 2,129,013 --------------------------------------------------- 1,472,046 (a)Resolution Trust Corp 1992-3, Series 1992-3, Class A3, 6.96%, 5/25/2021 1,456,413 --------------------------------------------------- 1,565,457 (a)Resolution Trust Corp 1992-6, Series 1992-6, Class A4, 7.52%, 11/25/2025 1,570,592 --------------------------------------------------- 914,840 Resolution Trust Corp 1992-C1, Series 1992-C1, Class A1, 8.80%, 8/25/2023 919,990 --------------------------------------------------- ------------ Total 7,825,813 --------------------------------------------------- ------------ TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (IDENTIFIED COST $10,362,609) 10,495,629 --------------------------------------------------- ------------ CORPORATE BONDS--28.1% --------------------------------------------------------------- AEROSPACE/DEFENSE--0.8% --------------------------------------------------- 500,000 Sequa Corp., Sr. Note, 8.75%, 12/15/2001 502,500 --------------------------------------------------- 700,000 UNC, Inc., Sr. Note, 9.125%, 7/15/2003 738,500 --------------------------------------------------- ------------ Total 1,241,000 --------------------------------------------------- ------------ AIRLINES--0.1% --------------------------------------------------- 200,000 USAir, Inc., 9.80%, 1/15/2000 200,950 --------------------------------------------------- ------------ BASIC MATERIALS--0.7% --------------------------------------------------- 500,000 Owens-Illinois, Inc., Sr. Sub. Note, 10.25%, 4/1/1999 503,125 ---------------------------------------------------
BLANCHARD SHORT-TERM FLEXIBLE INCOME FUND - --------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE ----------- -------------------------------------------------- ------------ CORPORATE BONDS--CONTINUED -------------------------------------------------------------- BASIC MATERIALS--CONTINUED -------------------------------------------------- $ 500,000 Owens-Illinois, Inc., Sr. Sub. Note, 10.50%, 6/15/2002 $ 527,500 -------------------------------------------------- ------------ Total 1,030,625 -------------------------------------------------- ------------ CHEMICALS--2.2% -------------------------------------------------- 500,000 Borden Chemicals & Plastics Operating Limited Partnership, Note, 9.50%, 5/1/2005 523,750 -------------------------------------------------- 500,000 Harris Chemical North America, Inc., Sr. Note, 10.25%, 7/15/2001 507,500 -------------------------------------------------- 300,000 ISP Holding, Inc., Sr. Note, 9.00%, 10/15/2003 303,000 -------------------------------------------------- 500,000 Kaiser Alumnimum & Chemical Group, Sr. Note, 9.875%, 2/15/2002 502,500 -------------------------------------------------- 600,000 SIFTO Canada, Inc., Sr. Note, 8.50%, 7/15/2000 600,000 -------------------------------------------------- 700,000 Uniroyal Chemical Corp., Sr. Note, 9.00%, 9/1/2000 712,250 -------------------------------------------------- ------------ Total 3,149,000 -------------------------------------------------- ------------ CONSUMER RELATED--3.5% -------------------------------------------------- 750,000 Chiquita Brands International, Sr. Note, 9.625%, 1/15/2004 772,500 -------------------------------------------------- 800,000 HMH Properties, Inc., Sr. Note, Series B, 9.50%, 5/15/2005 800,000 -------------------------------------------------- 2,460,000 RJR Nabisco, Inc., Note, 8.75%, 7/15/2007 2,412,645 -------------------------------------------------- 1,000,000 Revlon Consumer Products Corp., Note, 9.375%, 4/1/2001 1,017,500 -------------------------------------------------- ------------ Total 5,002,645 -------------------------------------------------- ------------ CONTAINERS-PAPER/PLASTIC--1.3% -------------------------------------------------- 500,000 Container Corp. of America, Sr. Note, 11.25%, 5/1/2004 537,500 -------------------------------------------------- 700,000 Gaylord Container Corp., Sr. Note, 11.50%, 5/15/2001 738,500 -------------------------------------------------- 500,000 Sea Containers Ltd., Sr. Note, 9.50%, 7/1/2003 512,500 -------------------------------------------------- ------------ Total 1,788,500 -------------------------------------------------- ------------ ENERGY & OIL RELATED--0.4% -------------------------------------------------- 500,000 Triton Energy Corp., Sr. Sub. Disc. Note 10.00%, 12/15/2000 523,750 -------------------------------------------------- ------------ ENTERTAINMENT--3.5% -------------------------------------------------- 1,000,000 Caesars World, Inc., Sr. Sub. Note, 8.875%, 8/15/2002 1,045,000 -------------------------------------------------- 1,000,000 Harrah's Operations, Inc., Sr. Sub. Note, 8.75%, 3/15/2000 1,020,000 -------------------------------------------------- 400,000 Station Casinos, Inc., Sr. Sub. Note, 9.625%, 6/1/2003 384,000 -------------------------------------------------- 500,000 Station Casinos, Inc., Sr. Sub., 9.625%, 6/1/2003 480,000 --------------------------------------------------
BLANCHARD SHORT-TERM FLEXIBLE INCOME FUND - --------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE ----------- -------------------------------------------------- ------------ CORPORATE BONDS--CONTINUED -------------------------------------------------------------- ENTERTAINMENT--CONTINUED -------------------------------------------------- $ 1,000,000 Time Warner, Inc., Note, 9.625%, 5/1/2002 $ 1,093,257 -------------------------------------------------- 600,000 Trump Hotels & Casino Resorts, Inc., Company Guarantee, 11.25%, 5/1/2006 544,500 -------------------------------------------------- 500,000 Viacom, Inc., Sub. Deb., 8.00%, 7/7/2006 470,625 -------------------------------------------------- ------------ Total 5,037,382 -------------------------------------------------- ------------ FINANCE-RETAIL--0.4% -------------------------------------------------- 500,000 Scotsman Industries, Inc., Sr. Note, 9.50%, 12/15/2000 511,250 -------------------------------------------------- ------------ FINANCIAL SERVICES--1.5% -------------------------------------------------- 500,000 Navistar Financial Corp. Owner Trust 1995-A , Sr. Sub. Note, 8.875%, 11/15/1998 508,259 -------------------------------------------------- 500,000 Presidential Life Corp., Sr. Note, 9.50%, 12/15/2000 512,500 -------------------------------------------------- 1,000,000 Reliance Group Holdings, Inc., Sr. Note, 9.00%, 11/15/2000 1,022,500 -------------------------------------------------- ------------ Total 2,043,259 -------------------------------------------------- ------------ INDUSTRIAL RELATED--3.1% -------------------------------------------------- 850,000 Armco, Inc., Sr. Note, 9.375%, 11/1/2000 869,125 -------------------------------------------------- 350,000 Bethlehem Steel Corp., Sr. Note, 10.375%, 9/1/2003 366,625 -------------------------------------------------- 1,000,000 Clark USA, Inc., Sr. Note, 11.00% accrual, 2/15/2000 732,500 -------------------------------------------------- 500,000 Exide Corp., Sr. Note, 10.75%, 12/15/2002 515,625 -------------------------------------------------- 500,000 John Q. Hammons Hotels, 1st Mtg. Bond, 8.875%, 2/15/2004 491,250 -------------------------------------------------- 700,000 K-III Communications Corp., Sr. Secd. Note, 10.625%, 5/1/2002 728,000 -------------------------------------------------- 500,000 Unisys Corp., Deb., 9.50%, 7/15/1998 502,500 -------------------------------------------------- 300,000 Unisys Corp., Sr. Note, 10.625%, 10/1/1999 311,625 -------------------------------------------------- ------------ Total 4,517,250 -------------------------------------------------- ------------ OIL REFINING--1.8% -------------------------------------------------- 300,000 Clark Refining & Marketing Inc., Sr. Note, 10.50%, 12/1/2001 309,000 -------------------------------------------------- 500,000 PDV America, Sr. Note, 7.25%, 8/1/1998 499,989 -------------------------------------------------- 2,000,000 USX Marathon Corp., 5.75%, 7/1/2001 1,895,000 -------------------------------------------------- ------------ Total 2,703,989 -------------------------------------------------- ------------
BLANCHARD SHORT-TERM FLEXIBLE INCOME FUND - --------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE ----------- --------------------------------------------------- ------------ CORPORATE BONDS--CONTINUED --------------------------------------------------------------- PAPER PRODUCTS--2.1% --------------------------------------------------- $ 500,000 Fort Howard Corp., Sr. Note, 9.25%, 3/15/2001 $ 515,000 --------------------------------------------------- 500,000 Repap New Brunswick, 1st Priority Sr. Secd. Note, 9.875%, 7/15/2000 502,500 --------------------------------------------------- 500,000 Repap New Brunswick, Sr. Note, 8.875%, 7/15/2000 490,000 --------------------------------------------------- 700,000 Repap Wisconsin, Inc., 1st Priority Sr. Secd. Note, 9.25%, 2/1/2002 693,000 --------------------------------------------------- 700,000 Stone Container Corp., Sr. Note, 9.875%, 2/1/2001 657,125 --------------------------------------------------- 200,000 Stone Container Corp., Sr. Sub. Note, 11.00%, 8/15/1999 193,250 --------------------------------------------------- ------------ Total 3,050,875 --------------------------------------------------- ------------ PRINTING & PUBLISHING--0.4% --------------------------------------------------- 600,000 World Color Press, Sr. Sub. Note, 9.125%, 3/15/2003 603,000 --------------------------------------------------- ------------ SERVICES--0.3% --------------------------------------------------- 500,000 Prime Hospitality Corp., 1st Mtg. Bond, 9.25%, 1/15/2006 505,000 --------------------------------------------------- ------------ STEEL--0.5% --------------------------------------------------- 750,000 Wheeling Pittsburgh Corp., Sr. Note, 9.375%, 11/15/2003 711,562 --------------------------------------------------- ------------ TELECOMMUNICATIONS--4.1% --------------------------------------------------- 1,000,000 Cablevision Systems Corp., Sr. Sub. Deb., 10.75%, 4/1/2004 1,035,000 --------------------------------------------------- 750,000 Centennial Cellular Corp., Sr. Note, 8.875%, 11/1/2001 727,500 --------------------------------------------------- 750,000 Century Communications, Corp., Sr. Note, 9.75%, 2/15/2002 765,937 --------------------------------------------------- 1,000,000 Comcast Corp., Sr. Sub. Deb., 9.375%, 5/15/2005 1,005,000 --------------------------------------------------- 1,000,000 Le Groupe Videotron Ltee, Sub. Deb Conv., 10.625%, 2/15/2005 1,097,500 --------------------------------------------------- 1,000,000 Lenfest Communications Inc., Sr. Note, 8.375%, 11/1/2005 920,000 --------------------------------------------------- 500,000 Olympus Communication LP, Sr. Note, Series 144A, 10.625%, 11/15/2006 505,000 --------------------------------------------------- ------------ Total 6,055,937 --------------------------------------------------- ------------ TEXTILE PRODUCTS--0.3% --------------------------------------------------- 500,000 Dominion Textiles Inc., Sr. Note, 8.875%, 11/1/2003 506,250 --------------------------------------------------- ------------ UTILITIES-ELECTRIC--1.1% --------------------------------------------------- 500,000 Jones Intercable, Inc., Sr. Note, 9.625%, 3/15/2002 519,375 ---------------------------------------------------
BLANCHARD SHORT-TERM FLEXIBLE INCOME FUND - -------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE ----------- --------------------------------------------------- ------------ CORPORATE BONDS--CONTINUED --------------------------------------------------------------- UTILITIES-ELECTRIC--CONTINUED --------------------------------------------------- $ 1,000,000 Long Island Lighting Co., Deb., 7.30%, 7/15/1999 $ 1,005,194 --------------------------------------------------- ------------ Total 1,524,569 --------------------------------------------------- ------------ TOTAL CORPORATE BONDS (IDENTIFIED COST $39,939,634) 40,706,793 --------------------------------------------------- ------------ CORPORATE NOTE--0.7% --------------------------------------------------------------- TELECOMMUNICATIONS--0.7% --------------------------------------------------- 1,000,000 Rogers Cablesystems Ltd., Note, 9.625%, 8/1/2002 (IDENTIFIED COST $1,007,315) 1,037,500 --------------------------------------------------- ------------ U.S. TREASURY OBLIGATIONS--56.6% --------------------------------------------------------------- U.S. TREASURY NOTES--56.6% --------------------------------------------------- 20,000,000 5.75%, 10/31/1997 19,987,500 --------------------------------------------------- 15,000,000 5.75%, 12/31/1998 14,850,000 --------------------------------------------------- 17,000,000 5.875%, 7/31/1997 17,015,929 --------------------------------------------------- 20,000,000 6.125%, 3/31/1998 20,012,500 --------------------------------------------------- 10,000,000 6.875%, 8/31/1999 10,078,120 --------------------------------------------------- ------------ TOTAL U.S. TREASURY OBLIGATIONS (IDENTIFIED COST $81,963,425) 81,944,049 --------------------------------------------------- ------------ (B) REPURCHASE AGREEMENT--6.6% --------------------------------------------------------------- 9,601,701 Credit Suisse First Boston, 6.45%, dated 3/31/1997, due 4/1/1997 (AT AMORTIZED COST) 9,601,701 --------------------------------------------------- ------------ TOTAL INVESTMENTS (IDENTIFIED COST $142,874,684)(C) $143,785,672 --------------------------------------------------- ------------
(a) Denotes variable rate securities which show current rate. (b) The repurchase agreement is fully collateralized by U.S. government and/or agency obligations based on market prices at the date of the portfolio. (c) The cost of investments for federal tax purposes amounts to $142,874,684. The net unrealized appreciation of investments on a federal tax basis amounts to $910,988 which is comprised of $1,161,272 appreciation and $250,284 depreciation at March 31, 1997. Note: The categories of investments are shown as a percentage of net assets ($144,749,149) at March 31, 1997. The following acronym is used throughout this portfolio: LP--Limited Partnership (See Notes which are an integral part of the Financial Statements) BLANCHARD SHORT-TERM FLEXIBLE INCOME FUND STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 1997 (UNAUDITED) - --------------------------------------------------------------------------------
ASSETS: - ------------------------------------- Total investments in securities, at value (identified and tax cost $142,874,684) $143,785,672 - ------------------------------------- Cash 7,323 - ------------------------------------- Income receivable 2,071,692 - ------------------------------------- Receivable for shares sold 1,000 - ------------------------------------- Deferred expenses 17,490 - ------------------------------------- ------------ Total assets 145,883,177 - ------------------------------------- LIABILITIES: - --------------------------- Income distribution payable $723,008 - --------------------------- Accrued expenses 411,020 - --------------------------- -------- Total liabilities 1,134,028 - ------------------------------------- ------------ Net Assets for 48,357,640 shares outstanding $144,749,149 - ------------------------------------- ------------ NET ASSETS CONSIST OF: - ------------------------------------- Paid in capital $153,424,503 - ------------------------------------- Net unrealized appreciation of investments 913,108 - ------------------------------------- Accumulated net realized loss on investments (9,468,527) - ------------------------------------- Distributions in excess of net investment income (119,935) - ------------------------------------- ------------ Total Net Assets $144,749,149 - ------------------------------------- ------------ NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE: - ------------------------------------- $144,749,149 / 48,357,640 shares outstanding $ 2.99 - ------------------------------------- ------------
(See Notes which are an integral part of the Financial Statements) BLANCHARD SHORT-TERM FLEXIBLE INCOME FUND STATEMENT OF OPERATIONS SIX MONTHS ENDED MARCH 31, 1997 (UNAUDITED) - -------------------------------------------------------------------------------- INVESTMENT INCOME: - ----------------------------------------------------------- Interest $ 5,244,504 - ----------------------------------------------------------- ----------- EXPENSES: - ----------------------------------------------- Investment advisory fee $ 567,288 - ----------------------------------------------- Administrative personnel and services fee 73,276 - ----------------------------------------------- Custodian fees 30,267 - ----------------------------------------------- Transfer and dividend disbursing agent fees and expenses 211,420 - ----------------------------------------------- Directors'/Trustees' fees 1,697 - ----------------------------------------------- Auditing fees 18,660 - ----------------------------------------------- Legal fees 2,189 - ----------------------------------------------- Portfolio accounting fees 32,712 - ----------------------------------------------- Distribution services fee 189,096 - ----------------------------------------------- Share registration costs 8,734 - ----------------------------------------------- Printing and postage 28,239 - ----------------------------------------------- Insurance premiums 1,460 - ----------------------------------------------- Taxes 242 - ----------------------------------------------- Miscellaneous 8,058 - ----------------------------------------------- ---------- Total expenses 1,173,338 - ----------------------------------------------- Waivers-- - ----------------------------------------------- Waiver of investment advisory fee (129,528) - ----------------------------------------------- ---------- Net expenses 1,043,810 - ----------------------------------------------------------- ----------- Net investment income 4,200,694 - ----------------------------------------------------------- ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: - ----------------------------------------------------------- Net realized gain on investments 186,667 - ----------------------------------------------------------- Net change in unrealized appreciation of investments (191,347) - ----------------------------------------------------------- ----------- Net realized and unrealized loss on investments (4,680) - ----------------------------------------------------------- ----------- Change in net assets resulting from operations $(4,196,014) - ----------------------------------------------------------- -----------
(See Notes which are an integral part of the Financial Statements) BLANCHARD SHORT-TERM FLEXIBLE INCOME FUND STATEMENT OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
SIX MONTHS ENDED (UNAUDITED) PERIOD ENDED YEAR ENDED MARCH 31, SEPTEMBER 30, APRIL 30, 1997 1996 1996 - ----------------------------------- ------------ ------------- ------------ INCREASE (DECREASE) IN NET ASSETS: - ----------------------------------- OPERATIONS-- - ----------------------------------- Net investment income $ 4,200,694 $ 3,640,476 $ 3,088,222 - ----------------------------------- Net realized gain (loss) on investments ($186,667, $87,710, and $493,015 net gains, respectively, as computed for federal tax purposes) 186,667 (42,344) 511,538 - ----------------------------------- Net change in unrealized (191,347) 526,658 767,013 appreciation (depreciation) ------------ ------------ ------------ - ----------------------------------- Change in net assets resulting 4,196,014 4,124,790 4,366,773 from operations ------------ ------------ ------------ - ----------------------------------- DISTRIBUTIONS TO SHAREHOLDERS-- - ----------------------------------- Distributions from net investment income (4,198,617) (3,150,985) (3,088,222) - ----------------------------------- Tax return of capital -- (529,561) -- - ----------------------------------- Distributions in excess of net investment income -- -- (4,918) - ----------------------------------- Distributions from net realized gains (45,361) -- -- - ----------------------------------- ------------ ------------ ------------ Change in net assets resulting from distributions to shareholders (4,243,978) (3,680,546) (3,093,140) - ----------------------------------- ------------ ------------ ------------ SHARE TRANSACTIONS-- - ----------------------------------- Proceeds from sale of shares 17,377,778 12,700,025 13,369,396 - ----------------------------------- Proceeds from shares issued in connection with the acquisition of Blanchard Short-Term Global Income Fund -- -- 174,188,041 - ----------------------------------- Net asset value of shares issued to shareholders in payment of distributions declared 3,081,804 3,194,311 2,652,603 - ----------------------------------- Cost of shares redeemed (33,695,987) (36,071,531) (37,161,711) - ----------------------------------- ------------ ------------ ------------ Change in net assets resulting from share transactions (13,236,405) (20,177,195) 153,048,329 - ----------------------------------- ------------ ------------ ------------ Change in net assets (13,284,369) (19,732,951) 154,321,962 - ----------------------------------- NET ASSETS: - ----------------------------------- Beginning of period 158,033,518 177,766,469 23,444,507 - ----------------------------------- ------------ ------------ ------------ End of period $144,749,149 $158,033,518 $177,766,469 - ----------------------------------- ------------ ------------ ------------
(See Notes which are an integral part of the Financial Statements) BLANCHARD SHORT-TERM FLEXIBLE INCOME FUND FINANCIAL HIGHLIGHTS - ------------------------------------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
SIX MONTHS ENDED PERIOD (UNAUDITED) ENDED YEAR ENDED APRIL 30, MARCH 31, SEPTEMBER 30, ----------------------------------------- 1997 1996 (A) 1996 1995 1994 1993(B) - ------------------------ ----------- ------------- -------- ------- ------- ------- NET ASSET VALUE, $ 3.00 $ 2.99 $ 2.94 $ 2.93 $ 3.00 $ 3.00 BEGINNING OF PERIOD - ------------------------ INCOME FROM INVESTMENT OPERATIONS - ------------------------ Net investment income 0.08 0.07 0.22 0.15 0.17 0.00(f) - ------------------------ Net realized and unrealized gain (loss) on investments (0.01) 0.01 -- -- (0.06) 0.00(f) - ------------------------ -------- -------- -------- ------- ------- ------ Total from investment operations 0.07 0.08 0.22 0.15 0.11 0.00(f) - ------------------------ -------- -------- -------- ------- ------- ------ LESS DISTRIBUTIONS - ------------------------ Distributions from net investment income (0.08) (0.06) (0.17) (0.14) (0.17) (0.00)(f) - ------------------------ Distributions in excess -- (0.00)(f) (0.00)(f) (0.00)(f) -- -- of net investment income (c) - ------------------------ Tax return of capital -- (0.01) -- -- -- -- - ------------------------ Distributions from net realized gain on investments (0.00)(f) -- -- -- (0.01) (0.00)(f) - ------------------------ -------- -------- -------- ------- ------- ------ Total distributions (0.08) (0.07) (0.17) (0.14) (0.18) (0.00)(f) - ------------------------ -------- -------- -------- ------- ------- ------ NET ASSET VALUE, END OF PERIOD $ 2.99 $ 3.00 $ 2.99 $ 2.94 $ 2.93 $ 3.00 - ------------------------ -------- -------- -------- ------- ------- ------ TOTAL RETURN (D) 2.49% 2.61% 7.47% 5.34% 3.72% 0.15% - ------------------------ RATIOS TO AVERAGE NET ASSETS - ------------------------ Expenses 1.38%* 1.39%* 1.44% 1.38% 0.63% 3.03%* - ------------------------ Net investment income 5.55%* 5.26%* 5.49% 4.80% 5.64% 3.89%* - ------------------------ Expense 0.17%* 0.25%* 0.40% 0.75% 1.42% -- waiver/reimbursement (e) - ------------------------ SUPPLEMENTAL DATA - ------------------------ Net assets, end of $144,749 $158,034 $177,766 $23,445 $42,381 $2,000 period (000 omitted) - ------------------------ Portfolio turnover 32% 21% 291% 84% 212% 36% - ------------------------
* Computed on an annualized basis. (a) The fund changed its fiscal year end from April 30 to September 30. Reflects operations for the period from May 1, 1996 to September 30, 1996. (b) Reflects operations for the period from April 16, 1993 (commencement of operations) to April 30, 1993. (c) Distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These distributions do not represent a return of capital for federal income tax purposes. (d) Based on net asset value. (e) This voluntary expense decrease is reflected in both the expense and net investment income ratios shown above. (f) Less than one cent per share. (See Notes which are an integral part of the Financial Statements) BLANCHARD SHORT-TERM FLEXIBLE INCOME FUND NOTES TO FINANCIAL STATEMENTS MARCH 31, 1997 - ------------------------------------------------------------------------------- (1) ORGANIZATION Blanchard Funds (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "Act") as an open-end, management investment company. The Trust consists of seven portfolios. The financial statements included herein are only those of Blanchard Short-Term Flexible Income Fund (the "Fund"), a non-diversified portfolio. The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. The Fund seeks to provide high current income while seeking opportunities for capital appreciation. On February 12, 1996, the fund acquired all the net assets of Blanchard Short- Term Global Income Fund pursuant to a plan of reorganization approved by Blanchard Short-Term Global Income Fund's shareholders on February 9, 1996. The acquisition was accomplished by a tax-free exchange of 102,463,593 shares of the Blanchard Short-Term Global Income Fund for 57,869,781 shares of the Fund valued at $174,188,041. Blanchard Short-Term Global Income Fund's net assets at that date ($174,188,041) included $2,707,873 of unrealized appreciation. Immediately following the acquisition the Fund had net assets of $193,217,808. (2) SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with generally accepted accounting principles. INVESTMENT VALUATIONS--U.S. government securities, listed corporate bonds, other fixed income and asset-backed securities, and unlisted securities are generally valued at the mean of the latest bid and asked price as furnished by an independent pricing service. Short-term securities are valued at the prices provided by an independent pricing service. However, short-term securities with remaining maturities of sixty days or less at the time of purchase may be valued at amortized cost, which approximates fair market value. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the custodian bank to take possession, to have legally segregated in the Federal Reserve Book Entry System, or to have segregated within the custodian bank's vault, all securities held as collateral under repurchase agreement transactions. Additionally, procedures have been established by the Fund to monitor, on a daily basis, the market value of each repurchase agreement's collateral to ensure that the value of collateral at least equals the repurchase price to be paid under the repurchase agreement transaction. The Fund will only enter into repurchase agreements with banks and other recognized financial institutions, such as broker/dealers, which are deemed by the Fund's manager to be creditworthy pursuant to the guidelines and/or standards reviewed or established by the Board of Trustees (the "Trustees"). Risks may arise from the potential inability of counterparties to honor the terms of the repurchase agreement. Accordingly, the Fund could receive less than the repurchase price on the sale of collateral securities. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses are accrued daily. Bond premium and discount, if applicable, are amortized as required by the Internal Revenue Code, as amended (the "Code"). Distributions to shareholders are recorded on the ex-dividend date. Distributions in excess of net investment income were the result of certain book and tax timing differences. These distributions do not represent a return of capital for federal income tax purposes. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the Code applicable to regulated investment companies and to distribute to shareholders each year substantially all of its income. Accordingly, no provisions for federal tax are necessary. Withholding taxes on foreign interest have been provided for in accordance with the Fund's understanding of the applicable country's tax rules and rates. The Fund acquired a capital loss carryforward of $9,885,574, which will expire 2003, from Blanchard Short-Term Global Income Fund as a result of the merger on February 12, 1996. At September 30, 1996, the Fund, for federal tax purposes, had a capital loss carryforward of $9,609,833, which will reduce the Fund's taxable income arising from future net realized gain on investments, if any, to the extent permitted by the Code, and thus will reduce the amount of the distributions to shareholders which would otherwise be necessary to relieve the Fund of any liability for federal tax. Pursuant to the Code, such capital loss carryforward will expire as follows:
EXPIRATION YEAR EXPIRATION AMOUNT --------------- ----------------- 2003 $9,609,833
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in when- issued or delayed delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when-issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. DEFERRED EXPENSES--The costs incurred by the Fund with respect to registration of its shares in its first fiscal year, excluding the initial expense of registering its shares, have been deferred and are being amortized over a period not to exceed five years from the Fund's commencement date. FOREIGN CURRENCY COMMITMENTS--The Fund may enter into foreign currency commitments for the delayed delivery of securities or foreign currency exchange transactions. Purchase contracts are used to acquire exposure to foreign currencies; whereas, contracts to sell are used to hedge the fund's securities against currency fluctuations. Risks may arise upon entering these transactions from the potential inability of counter-parts to meet the terms of their commitments and from unanticipated movements in security prices or foreign exchange rates. The foreign currency transactions are adjusted by the daily exchange rate of the underlying currency and any gains or losses are recorded for financial statement purpose as unrealized until the settlement date. As of March 31, 1997, the Fund had no outstanding foreign currency commitments. OPTIONS CONTRACTS--The Fund purchases over-the-counter put options on U.S. government securities to hedge fluctuations in the market value of certain portfolio securities. The risk associated with purchasing an option is that the Fund pays a premium whether or not the option is exercised. Additionally, the Fund bears the risk of loss of premium and change in market value should the counterparty not perform under the contract. Put options purchased are accounted for in the same manner as portfolio securities. As of March 31, 1997, the Fund had no outstanding options contracts. FOREIGN CURRENCY TRANSLATION--The accounting records of the Fund are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies ("FC") are translated into U.S. dollars based on the rate of exchange of such currencies against U.S. dollars on the date of valuation. Purchases and sales of securities, income and expenses are translated at the rate of exchange quoted on the respective date that such transactions are recorded. Differences between income and expense amounts recorded and collected or paid are adjusted when reported by the custodian bank. The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Reported net realized foreign exchange gains or losses arise from sales of portfolio securities, sales and maturities of short-term securities, sales of FCs, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books, and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities at fiscal year end, resulting from changes in the exchange rate. CHANGE IN FISCAL YEAR--The Fund has changed its fiscal year-end from April 30 to September 30 beginning May 1, 1996. USE OF ESTIMATES--The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ from those estimated. OTHER--Investment transactions are accounted for on the trade date. BLANCHARD SHORT-TERM FLEXIBLE INCOME FUND - ------------------------------------------------------------------------------- (3) SHARES OF BENEFICIAL INTEREST The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest (without par value). Transactions in shares were as follows:
SIX MONTHS ENDED PERIOD ENDED YEAR ENDED MARCH 31, SEPTEMBER 30, APRIL 30, 1997 1996 1996 - ------------------------------------ ----------- ------------- ----------- Shares sold 5,765,904 4,248,564 4,477,310 - ------------------------------------ Shares issued in connection with the acquisition of Blanchard Short-Term Global Income Fund -- -- 57,869,781 - ------------------------------------ Shares issued to shareholders in payment of distributions declared 1,021,844 1,070,524 888,044 - ------------------------------------ Shares redeemed (11,182,141) (12,096,346) (11,691,202) - ------------------------------------ ----------- ----------- ----------- Net change resulting from share transactions (4,394,393) (6,777,258) 51,543,933 - ------------------------------------ ----------- ----------- -----------
(4) INVESTMENT MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES MANAGEMENT FEE--Virtus Capital Management, Inc. the Fund's manager, (the "Manager"), receives for its services an annual management fee equal to 0.75% of the Fund's average daily net assets. The Manager may voluntarily choose to waive any portion of its fee. The Manager can modify or terminate this voluntary waiver at any time at its sole discretion. SUB-ADVISORY FEE--OFFITBANK provides the manager with sub-advisory services for which it receives a fee from the Manager equal to 0.25% of the Fund's average daily net assets. In addition, OFFITBANK may voluntarily choose to reduce its compensation. ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund with certain administrative personnel and services. The fee paid to FAS is based on the level of average combined aggregate net assets of the Trust, the Blanchard Precious Metals Fund, Inc., and the Virtus Funds, all of which are advised by the Manager for the period. The administrative fee received during the period of the Administrative Services Agreement shall be at least $75,000 per portfolio. DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will reimburse Federated Securities Corp. ("FSC"), the principal distributor, from the net assets of the Fund to finance activities intended to result in the sale of the Fund's shares. The Plan provides that the Fund may incur distribution expenses up to 0.25% of the average daily net assets of the Fund shares, annually, to reimburse FSC. TRANSFER AGENT AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company ("FServ"), through its subsidiary, Federated Shareholder Services Company serves as transfer and dividend disbursing agent for the Fund. The fee paid to FServ is based on the size, type, and number of accounts and transactions made by shareholders. BLANCHARD SHORT-TERM FLEXIBLE INCOME FUND - ------------------------------------------------------------------------------- PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting records for which it receives a fee. The fee is based on the level of the Fund's average daily net assets for the period, plus out-of-pocket expenses. CUSTODIAN FEES--Signet Trust Co. is the Fund's custodian. The fee paid to the custodian is based on the level of the Fund's average daily net assets for the period, plus out-of-pocket expenses. ORGANIZATIONAL EXPENSES--The Fund's Manager paid the organizational expenses of the Fund incurred prior to the public offering of its shares amounting to $80,724. The Fund reimbursed the Manager for these expenses and has deferred and is amortizing such expenses over five years from the date of commencement of the Fund's operations. GENERAL--Certain of the Officers and Trustees of the Trust are Officers and Directors or Trustees of the above companies. (5) INVESTMENT TRANSACTIONS Purchases and sales of investments, excluding short-term securities, for the period ended March 31, 1997, were as follows: - --------- PURCHASES $43,969,287 - --------- ----------- SALES $55,406,335 - --------- -----------
TRUSTEES OFFICERS - -------------------------------------------------------------------------------- John F. Donahue John F. Donahue Thomas G. Bigley Chairman John T. Conroy, Jr. Edward C. Gonzales William J. Copeland President and Treasurer James E. Dowd J. Christopher Donahue Lawrence D. Ellis, M.D. Executive Vice President Edward L. Flaherty, Jr. John W. McGonigle Edward C. Gonzales Executive Vice President and Peter E. Madden Secretary Gregor F. Meyer Joseph S. Machi John E. Murray, Jr. Vice President and Assistant Wesley W. Posvar Treasurer Marjorie P. Smuts Richard B. Fisher Vice President C. Grant Anderson Assistant Secretary This report is authorized for distribution to prospective investors only when preceded or accompanied by the fund's prospectus which contain facts concerning its objective and policies, management fees, expenses and other information. BLANCHARD FLEXIBLE TAX-FREE BOND FUND Portfolio Adviser The United States Trust Company of New York The Blanchard Group of Funds are available through Signet/R/ Financial Services, Inc., member NASD, and are advised by an affiliate, Virtus Captial Management, Inc., which is compensated for this service. Investment products are not deposits, obligations of, or guaranteed by any bank. They are not insured by the FDIC. They involve risk, including the possible loss of principal invested. Federated Securities Corp. is the distributor of the Fund. S E M I - A N N U A L BLANCHARD FLEXIBLE TAX-FREE BOND FUND SEMI-ANNUAL REPORT March 31, 1997 Available through Signet Financial Services, Inc. Managed by Virtus Capital Management, Inc. (2351) CUSIP 093212603 G01485-05 (5/97) PRESIDENT'S MESSAGE May 15, 1997 Dear Shareholder: I am pleased to present your Semi-Annual Report for the Blanchard Flexible Tax- Free Bond Fund covering the six-month period from October 1, 1996 through March 31, 1997. The report includes a complete listing of the Fund's holdings and financial activity. Designed for tax-sensitive investors, the Fund pursues tax-free income through a professionally managed portfolio of municipal bonds issued across the United States.* During the six-month reporting period, the Fund's income distributions totaled $0.12 per share. The Fund's total return of 1.45% was impacted by a relatively weak bond market environment.** Assets in the Fund stood at $21.9 million at the end of the period. Tax-free investing can give you a significant advantage over taxable investments. For example, the Fund's 30-day current net yield on the last day of the period was 4.63%, which is really the equivalent of a 6.71% taxable yield to an investor in the 31% tax bracket.+ Thank you for selecting the Blanchard Flexible Tax-Free Bond Fund to help you to keep more of what you earn. If you have comments or questions, please call Investors' Services at 1-800-829-3863. Sincerely, /s/ Edward C. Gonzales Edward C. Gonzales President *Income may be subject to the federal alternative minimum tax and state and local taxes. **Performance quoted reflects past performance. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. +The 30-day current net yield is calculated by dividing the investment income per share for the prior 30 days by the maximum offering price per share on that date. The figure is compounded and annualized. BLANCHARD FLEXIBLE TAX-FREE BOND FUND PORTFOLIO OF INVESTMENTS MARCH 31, 1997 (UNAUDITED) - --------------------------------------------------------------------------------
PRINCIPAL CREDIT AMOUNT RATING* VALUE ---------- --------------------------------------------- ------- ----------- LONG-TERM MUNICIPALS--94.6% --------------------------------------------------------- ALASKA--8.4% --------------------------------------------- $1,000,000 Alaska State Housing Finance Corp., Refunding Revenue Bonds (Series A), 5.40%, 12/1/2013 A+ $ 944,282 --------------------------------------------- 1,000,000 Valdez, AK Marine Terminal, Revenue Refunding Bonds (Series B), 5.50% (BP Pipeline Inc.), 10/1/2028 AA- 904,867 --------------------------------------------- ----------- Total 1,849,149 --------------------------------------------- ----------- ARIZONA--4.3% --------------------------------------------- 1,000,000 Salt River Project, AZ Agricultural Improvement & Power District, (Series C), Revenue Refunding Bonds, 5.00% (Original Issue Yield: 5.239%), 1/1/2013 AA 942,657 --------------------------------------------- ----------- CONNECTICUT--4.4% --------------------------------------------- 1,000,000 Connecticut State HEFA, Revenue Bonds, 5.50% (Hartford Hospital)/(MBIA INS), 7/1/2026 AAA 956,536 --------------------------------------------- ----------- FLORIDA--21.6% --------------------------------------------- 1,000,000 Dade County, FL Water & Sewer System, Revenue Bonds, 5.50% (FGIC INS)/(Original Issue Yield: 5.86%), 10/1/2025 AAA 949,086 --------------------------------------------- 1,000,000 Florida State Board of Education Capital Outlay, GO UT Bonds (Series A), 5.50%, 6/1/2026 AA 963,388 --------------------------------------------- 1,000,000 Florida State Municipal Power Agency, Refunding Revenue Bonds, 5.25% (St. Lucie County, FL)/(FGIC INS)/(Original Issue Yield: 5.85%), 10/1/2021 AAA 915,130 --------------------------------------------- 1,000,000 Orlando & Orange County Expressway Authority, FL, Expressway Revenue Refunding Bonds-Senior Lien, 5.25% (AMBAC INS)/(Original Issue Yield: 5.64%), 7/1/2012 AAA 975,334 --------------------------------------------- 1,000,000 Orlando, FL Utilites Commission, Water and Electricity Revenue Bonds, 5.25% (Original Issue Yield: 5.768%), 10/1/2023 AA- 913,427 --------------------------------------------- ----------- Total 4,716,365 --------------------------------------------- ----------- MASSACHUSETTS--4.4% --------------------------------------------- 1,000,000 Commonwealth of Massachusetts, GO UT Refunding Bonds, 5.00% (MBIA INS)/(Original Issue Yield: 5.25%), 11/1/2009 AAA 959,356 --------------------------------------------- -----------
BLANCHARD FLEXIBLE TAX-FREE BOND FUND - --------------------------------------------------------------------------------
PRINCIPAL CREDIT AMOUNT RATING* VALUE ---------- ------- ----------- LONG-TERM MUNICIPALS--CONTINUED --------------------------------------------------------- MINNESOTA--4.0% --------------------------------------------- $1,000,000 Southern Minnesota Municipal Power Agency, Supply System Revenue Bonds (Series A), 4.75% (MBIA INS)/(Original Issue Yield: 5.52%), 1/1/2016 AAA $ 876,696 --------------------------------------------- ----------- NEVADA--4.3% --------------------------------------------- 1,000,000 Nevada State, GO LT Refunding Bonds, 5.30% (Colorado River Community)/(Original Issue Yield: 5.45%), 7/1/2024 AA 937,038 --------------------------------------------- ----------- NEW JERSEY--4.4% --------------------------------------------- 1,000,000 New Jersey State Transportation Trust Fund Agency, Refunding Bonds (Series A), 5.25% (MBIA INS)/(Original Issue Yield: 5.80%), 6/15/2014 AAA 960,509 --------------------------------------------- ----------- NEW YORK--12.8% --------------------------------------------- 1,000,000 New York State Medical Care Facilities Finance Agency, Mortgage Revenue Refunding Bonds (Series A), 5.50% (Presbyterian Hospital)/(FHA and MBIA INSs)/(Original Issue Yield: 5.534%), 8/15/2024 AAA 939,487 --------------------------------------------- 1,000,000 New York State Power Authority, Refunding Revenue Bonds (Series CC), 5.00% (Original Issue Yield: 5.32%), 1/1/2014 AA- 927,046 --------------------------------------------- 1,000,000 Port Authority of New York and New Jersey, Revenue Bonds (104th Series) , 5.20% (AMBAC INS)/(Original Issue Yield: 5.35%), 7/15/2021 AAA 922,260 --------------------------------------------- ----------- Total 2,788,793 --------------------------------------------- ----------- TEXAS--8.6% --------------------------------------------- 1,000,000 Lower Colorado River Authority, TX, Refunding Revenue Bonds, 5.00%, 1/1/2009 A+ 962,922 --------------------------------------------- 1,000,000 San Antonio, TX Electric & Gas, Revenue Refunding Bonds, 5.00% (Original Issue Yield: 5.275%), 2/1/2014 AA 927,861 --------------------------------------------- ----------- Total 1,890,783 --------------------------------------------- ----------- WASHINGTON--13.0% --------------------------------------------- 1,000,000 Port of Seattle, WA, Revenue Bonds (Series A), 5.50% (FGIC INS)/(Original Issue Yield: 5.90%), 9/1/2021 AAA 947,303 --------------------------------------------- 1,000,000 Seattle, WA, Drain & Wastewater Utilities Refunding Revenue Bonds, 5.25% (MBIA INS)/(Original Issue Yield: 5.375%), 12/1/2025 AAA 918,287 ---------------------------------------------
BLANCHARD FLEXIBLE TAX-FREE BOND FUND - -------------------------------------------------------------------------------
PRINCIPAL AMOUNT CREDIT OR SHARES RATING* VALUE ---------- ------- ----------- LONG-TERM MUNICIPALS--CONTINUED --------------------------------------------------------- WASHINGTON--CONTINUED --------------------------------------------- $1,000,000 Washington State, GO UT Bonds (Series A), 5.75% (Original Issue Yield: 6.25%), 9/1/2019 AA $ 988,771 --------------------------------------------- ----------- Total 2,854,361 --------------------------------------------- ----------- WISCONSIN--4.4% --------------------------------------------- 1,000,000 Wisconsin State Transportation, Revenue Bonds (Series B), 5.50% (Original Issue Yield: 5.912%), 7/1/2022 AA- 951,494 --------------------------------------------- ----------- TOTAL LONG-TERM MUNICIPALS (IDENTIFIED COST $20,580,466) 20,683,737 --------------------------------------------- ----------- MUTUAL FUND SHARES--4.4% --------------------------------------------------------- 751,900 Dreyfus Tax Exempt Cash Management 751,900 --------------------------------------------- 203,400 Nuveen Tax Exempt Money Market Fund 203,400 --------------------------------------------- ----------- TOTAL MUTUAL FUND SHARES (AT NET ASSET VALUE) 955,300 --------------------------------------------- ----------- TOTAL INVESTMENTS (IDENTIFIED COST $21,535,766)(A) $21,639,037 --------------------------------------------- -----------
(a) The cost of investments for federal tax purposes amounts to $21,535,766. The net unrealized appreciation of investments on a federal tax basis amounts to $103,271 which is comprised of $287,450 appreciation and $184,374 depreciation at March 31, 1997. * Please refer to the Appendix of the Statement of Additional Information for an explanation of the credit ratings. Current credit ratings are unaudited. Note: The categories of investments are shown as a percentage of net assets ($21,860,247) at March 31, 1997. The following acronyms are used throughout this portfolio: AMBAC--American Municipal Bond Assurance INS--Insured Corporation LOC--Letter of Credit FGIC--Financial Guaranty Insurance Company LT--Limited Tax FHA--Federal Housing Administration MBIA--Municipal Bond Investors GO--General Obligation Assurance UT--Unlimited Tax HEFA--Health and Education Facilities Authority (See Notes which are an integral part of the Financial Statements) BLANCHARD FLEXIBLE TAX-FREE BOND FUND STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 1997 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS: - ------------------------------------- Total investments in securities, at value (identified and tax cost $21,535,766) $21,639,037 - ------------------------------------- Cash 75 - ------------------------------------- Income receivable 344,347 - ------------------------------------- Deferred expenses 25,344 - ------------------------------------- ----------- Total assets 22,008,803 - ------------------------------------- LIABILITIES: - --------------------------- Payable for shares redeemed $ 639 - --------------------------- Income distribution payable 104,160 - --------------------------- Accrued expenses 43,757 - --------------------------- -------- Total liabilities 148,556 - ------------------------------------- ----------- NET ASSETS FOR 4,151,995 shares outstanding $21,860,247 - ------------------------------------- ----------- NET ASSETS CONSIST OF: - ------------------------------------- Paid in capital $22,139,126 - ------------------------------------- Net unrealized appreciation of investments 103,271 - ------------------------------------- Accumulated net realized loss on investments (362,671) - ------------------------------------- Distributions in excess of net investment income (19,479) - ------------------------------------- ----------- Total Net Assets $21,860,247 - ------------------------------------- ----------- NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE: - ------------------------------------- $21,860,247 / 4,151,995 shares outstanding $5.26 - ------------------------------------- -----------
(See Notes which are an integral part of the Financial Statements) BLANCHARD FLEXIBLE TAX-FREE BOND FUND STATEMENT OF OPERATIONS SIX MONTHS ENDED MARCH 31, 1997 (UNAUDITED) - -------------------------------------------------------------------------------- INVESTMENT INCOME: - ----------------------------------------------------------- Interest $ 601,246 - ----------------------------------------------------------- EXPENSES: - ------------------------------------------------- Management fee $ 83,238 - ------------------------------------------------- Administrative personnel and services fee 37,397 - ------------------------------------------------- Custodian fees 10,770 - ------------------------------------------------- Transfer and dividend disbursing agent fees and expenses 21,575 - ------------------------------------------------- Directors'/Trustees' fees 1,745 - ------------------------------------------------- Auditing fees 7,200 - ------------------------------------------------- Legal fees 1,110 - ------------------------------------------------- Portfolio accounting fees 26,870 - ------------------------------------------------- Distribution services fee 27,746 - ------------------------------------------------- Share registration costs 6,046 - ------------------------------------------------- Printing and postage 14,394 - ------------------------------------------------- Insurance premiums 542 - ------------------------------------------------- Miscellaneous 9,979 - ------------------------------------------------- -------- Total expenses 248,612 - ------------------------------------------------- Waivers-- - --------------------------------------- Waiver of management fee $(83,238) - --------------------------------------- Waiver of administrative personnel and services fee (26,645) - --------------------------------------- Waiver of distribution services fee (27,746) - --------------------------------------- -------- Total waivers (137,629) - ------------------------------------------------- -------- Net expenses 110,983 - ----------------------------------------------------------- --------- Net investment income 490,263 - ----------------------------------------------------------- --------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: - ----------------------------------------------------------- Net realized gain on investments 277,088 - ----------------------------------------------------------- Net change in unrealized appreciation of investments (438,110) - ----------------------------------------------------------- --------- Net realized and unrealized loss on investments (161,022) - ----------------------------------------------------------- --------- Change in net assets resulting from operations $ 329,241 - ----------------------------------------------------------- ---------
(See Notes which are an integral part of the Financial Statements) BLANCHARD FLEXIBLE TAX-FREE BOND FUND STATEMENT OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
SIX MONTHS ENDED (UNAUDITED) PERIOD ENDED YEAR ENDED MARCH 31, SEPTEMBER 30, APRIL 30, 1997 1996 1996 - ------------------------------------- ----------- ------------- ------------ INCREASE (DECREASE) IN NET ASSETS: - ------------------------------------- OPERATIONS-- - ------------------------------------- Net investment income $ 490,263 $ 461,956 $ 960,342 - ------------------------------------- Net realized gain (loss) on investments 277,088 39,445 891,432 - ------------------------------------- Net change in unrealized appreciation (depreciation) (438,110) 594,290 (406,293) - ------------------------------------- ----------- ----------- ------------ Change in net assets resulting from operations 329,241 1,095,691 1,445,481 - ------------------------------------- ----------- ----------- ------------ DISTRIBUTIONS TO SHAREHOLDERS-- - ------------------------------------- Distributions from net investment income (490,263) (445,952) (960,342) - ------------------------------------- Distributions in excess of net investment income -- -- (8,706) - ------------------------------------- ----------- ----------- ------------ Change in net assets resulting from distributions to shareholders (490,263) (445,952) (969,048) - ------------------------------------- ----------- ----------- ------------ SHARE TRANSACTIONS-- - ------------------------------------- Proceeds from sale of shares 4,387,511 6,936,750 26,287,368 - ------------------------------------- Net asset value of shares issued to shareholders in payment of distributions declared 395,829 411,088 750,232 - ------------------------------------- Cost of shares redeemed (5,332,205) (8,149,963) (24,287,075) - ------------------------------------- ----------- ----------- ------------ Change in net assets resulting from share transactions (548,865) (802,125) 2,750,525 - ------------------------------------- ----------- ----------- ------------ Change in net assets (709,887) (152,386) 3,226,958 - ------------------------------------- NET ASSETS: - ------------------------------------- Beginning of period 22,570,134 22,722,520 19,495,562 - ------------------------------------- ----------- ----------- ------------ End of period $21,860,247 $22,570,134 $ 22,722,520 - ------------------------------------- ----------- ----------- ------------
(See Notes which are an integral part of the Financial Statements) BLANCHARD FLEXIBLE TAX-FREE BOND FUND FINANCIAL HIGHLIGHTS - ------------------------------------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
SIX MONTHS ENDED (UNAUDITED) PERIOD ENDED YEAR ENDED APRIL 30, MARCH 31, SEPTEMBER 30, ------------------------- 1997 1996(A) 1996 1995 1994(B) - ------------------------ ----------- ------------- ------- ------- ------- NET ASSET VALUE, BEGINNING OF PERIOD $ 5.31 $ 5.16 $ 5.03 $ 4.77 $ 5.00 - ------------------------ INCOME FROM INVESTMENT OPERATIONS - ------------------------ Net investment income 0.12 0.11 0.22 0.24 0.18 - ------------------------ Net realized and unrealized gain (loss) on investments (0.05) 0.15 0.13 0.26 (0.20) - ------------------------ ------- ------- ------- ------- ------- Total from investment operations 0.07 0.26 0.35 0.50 (0.02) - ------------------------ ------- ------- ------- ------- ------- LESS DISTRIBUTIONS - ------------------------ Distributions from net investment income (0.12) (0.11) (0.22) (0.23) (0.18) - ------------------------ Distributions in excess of net investment income (c) -- -- -- (0.01) -- - ------------------------ Distributions from net realized gain on investments -- -- -- -- (0.03) - ------------------------ ------- ------- ------- ------- ------- Total distributions (0.12) (0.11) (0.22) (0.24) (0.21) - ------------------------ ------- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $ 5.26 $ 5.31 $ 5.16 $ 5.03 $ 4.77 - ------------------------ ------- ------- ------- ------- ------- TOTAL RETURN (D) 1.45% 5.02% 6.86% 10.74% (0.48)% - ------------------------ RATIOS TO AVERAGE NET ASSETS - ------------------------ Expenses 1.00%* 1.01%* 1.05% 1.00% 0.00%* - ------------------------ Net investment income 4.42%* 4.83%* 4.43% 4.87% 6.79%* - ------------------------ Expense waiver/reimbursement (e) 1.24%* 1.23%* 1.25% 1.17% 2.22%* - ------------------------ SUPPLEMENTAL DATA - ------------------------ Net assets, end of period (000 omitted) $21,860 $22,570 $22,723 $19,496 $23,267 - ------------------------ Portfolio turnover 39% 25% 275% 170% 190% - ------------------------
* Computed on an annualized basis. (a) The fund changed its fiscal year end from April 30 to September 30. Reflects operations for the period from May 1, 1996 to September 30, 1996. (b) Reflects operations for the period from August 12, 1993 (commencement of operations) to April 30, 1994. (c) Distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These distributions do not represent a return of capital for federal income tax purposes. (d) Based on net asset value. (e) This voluntary expense decrease is reflected in both the expense and net investment income ratios shown above. (See Notes which are an integral part of the Financial Statements) BLANCHARD FLEXIBLE TAX-FREE BOND FUND NOTES TO FINANCIAL STATEMENTS MARCH 31, 1997 (UNAUDITED) - ------------------------------------------------------------------------------- (1) ORGANIZATION Blanchard Funds (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "Act") as an open-end, management investment company. The Trust consists of seven portfolios. The financial statements included herein are only those of Blanchard Flexible Tax Free Bond Fund (the "Fund"), a non-diversified portfolio. The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. The Fund seeks to provide a high level of current interest income exempt from federal income tax, consistent with the preservation of capital. (2) SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with generally accepted accounting principles. INVESTMENT VALUATIONS--Municipal bonds are valued by an independent pricing service, taking into consideration yield, liquidity, risk, credit quality, coupon, maturity, type of issue, and any other factors or market data the pricing service deems relevant. Short-term securities are valued at the prices provided by an independent pricing service. However, short-term securities with remaining maturities of sixty days or less at the time of purchase may be valued at amortized cost, which approximates fair market value. Investments in other open-end investment regulated companies are valued at net asset value. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses are accrued daily. Bond premium and discount, if applicable, are amortized as required by the Internal Revenue Code, as amended (the "Code"). Distributions to shareholders are recorded on the ex-dividend date. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the Code applicable to regulated investment companies and to distribute to shareholders each year substantially all of its income. Accordingly, no provisions for federal tax are necessary. At September 30, 1996, the Fund, for federal tax purposes, had a capital loss carryforward of $639,759, which will reduce the Fund's taxable income arising from future net realized gain on investments, if any, to the extent permitted by the Code, and thus will reduce the amount of the distributions to shareholders which would otherwise be necessary to relieve the Fund of any liability for federal tax. Pursuant to the Code, such capital loss carryforward will expire in 2003. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in when- issued or delayed delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when-issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. BLANCHARD FLEXIBLE TAX-FREE BOND FUND - ------------------------------------------------------------------------------- DEFERRED EXPENSES--The costs incurred by the Fund with respect to registration of its shares in its first fiscal year, excluding the initial expense of registering its shares, have been deferred and are being amortized over a period not to exceed five years from the Fund's commencement date. CHANGE IN FISCAL YEAR--The Fund has changed its fiscal year-end from April 30 to September 30 beginning May 1, 1996. USE OF ESTIMATES--The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ from those estimated. OTHER--Investment transactions are accounted for on the trade date. (3) SHARES OF BENEFICIAL INTEREST The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest (without par value). Transactions in shares were as follows:
SIX MONTHS ENDED PERIOD ENDED YEAR ENDED MARCH 31, SEPTEMBER 30, APRIL 30, 1997 1996 1996 - ---------------------------------------- ---------- ------------- ---------- Shares sold 817,834 1,341,280 5,015,985 - ---------------------------------------- Shares issued to shareholders in payment of distributions declared 73,387 78,775 142,764 - ---------------------------------------- Shares redeemed (992,498) (1,571,250) (4,631,991) - ---------------------------------------- -------- ---------- ---------- Net change resulting from share transactions (101,277) (151,195) 526,758 - ---------------------------------------- -------- ---------- ----------
(4) MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES MANAGEMENT FEE--Virtus Capital Management Inc., the Fund's investment manager (the "Manager"), receives for its services an annual management fee equal to 0.75% of the Fund's average daily net assets. The Manager may voluntarily choose to waive any portion of its fee. The Manager can modify or terminate this voluntary waiver at any time at its sole discretion. SUB-ADVISORY FEE--United States Trust Company of New York provides the Manager with sub-advisory services for which it receives a monthly fee at the annual rate of 0.20% of the Fund's average daily net assets. In addition, United States Trust Company of New York may voluntarily choose to reduce its compensation. ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund with certain administrative personnel and services. The fee paid to FAS is based on the level of average combined aggregate net assets of the Trust, the Blanchard Precious Metals Fund, Inc., and the Virtus Funds, all of which are advised by the Manager. The administrative fee received during the period of the Administrative Services Agreement shall be at least $75,000 per portfolio. FAS may voluntarily choose to waive a portion of its fee. DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will reimburse Federated Securities Corp. ("FSC"), the principal distributor, from the net assets of the Fund to finance activities intended to result in the sale of the Fund's Fund shares. The Plan provides that the Fund may incur distribution expenses up to 0.25% of the average daily net assets of the Fund shares, annually, to reimburse FSC. The distributor may voluntarily choose to waive any portion of its fee. The distributor can modify or terminate this voluntary waiver at any time at its sole discretion. TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated Services Company ("FServ"), through its subsidiary, Federated Shareholder Services Company ("FSSC") serves as transfer and dividend disbursing agent for the Fund. The fee paid to FSSC is based on the size, type, and number of accounts and transactions made by shareholders. PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting records for which it receives a fee. The fee is based on the level of the Fund's average daily net assets for the period, plus out-of-pocket expenses. CUSTODIAN FEES--Signet Trust Co. is the Fund's custodian. The fee is based on the level of the Fund's average daily net assets for the period, plus out-of-pocket expenses. ORGANIZATIONAL EXPENSES--The Fund's Manager paid the organizational expenses of the Fund incurred prior to the public offering of its shares amounting to $89,448. The Fund reimbursed the Manager for these expenses and has deferred and is amortizing such expenses over five years from the date of commencement of the Fund's operations. GENERAL--Certain of the Officers and Trustees of the Trust are Officers and Directors or Trustees of the above companies. (5) INVESTMENT TRANSACTIONS Purchases and sales of investments, excluding short-term securities, for the period ended March 31, 1997, were as follows: - --------- PURCHASES $8,209,993 - --------- ---------- SALES $9,209,930 - --------- ----------
TRUSTEES OFFICERS - -------------------------------------------------------------------------------- John F. Donahue John F. Donahue Thomas G. Bigley Chairman John T. Conroy, Jr. Edward C. Gonzales William J. Copeland President and Treasurer James E. Dowd J. Christopher Donahue Lawrence D. Ellis, M.D. Executive Vice President Edward L. Flaherty, Jr. John W. McGonigle Edward C. Gonzales Executive Vice President and Peter E. Madden Secretary Gregor F. Meyer Joseph S. Machi John E. Murray, Jr. Vice President and Assistant Wesley W. Posvar Treasurer Marjorie P. Smuts Richard B. Fisher Vice President C. Grant Anderson Assistant Secretary This report is authorized for distribution to prospective investors only when preceded or accompanied by the fund's prospectus which contain facts concerning its objective and policies, management fees, expenses and other information. BLANCHARD FLEXIBLE INCOME FUND Portfolio Adviser OFFITBANK The Blanchard Group of Funds are available through Signet/R/ Financial Services, Inc., member NASD, and are advised by an affiliate, Virtus Captial Management, Inc., which is compensated for this service. Investment products are not deposits, obligations of, or guaranteed by any bank. They are not insured by the FDIC. They involve risk, including the possible loss of principal invested. Federated Securities Corp. is the distributor of the Fund. S E M I - A N N U A L BLANCHARD FLEXIBLE INCOME FUND SEMI-ANNUAL REPORT March 31, 1997 Available through Signet Financial Services, Inc. Managed by Virtus Capital Management, Inc. (2351) CUSIP 093212306 G01485-07 (5/97) PRESIDENT'S MESSAGE May 15, 1997 Dear Shareholder: I am pleased to present your Semi-Annual Report for the Blanchard Flexible Income Fund covering the six-month period from October 1, 1996 through March 31, 1997. The report includes a complete listing of the Fund's holdings and financial activity. On your behalf, the Fund pursues income through a professionally managed, diversified portfolio of U.S. and international corporate bonds and U.S. and international government bonds.* During the six-month reporting period, the Fund produced a 2.99% total return, the result of income distributions totaling $0.15 per share.** Due to the relatively weak bond market environment, the share price experienced a minimal $0.01 decrease from the first day of the period to the last day. Assets in the Fund stood at $166.8 million at the end of the period. Thank you for selecting the Blanchard Flexible Income Fund to pursue your financial goals. If you have comments or questions, please call Investors' Services at 1-800-829-3863. Sincerely, /s/ Edward C. Gonzales Edward C. Gonzales President *Foreign investing involves special risks including currency risk, increased volatility of foreign securities, and differences in auditing and other financial standards. **Performance quoted reflects past performance. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. BLANCHARD FLEXIBLE INCOME FUND PORTFOLIO OF INVESTMENTS MARCH 31, 1997 (UNAUDITED) - --------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE --------- ----------------------------------------------------- ------------ COLLATERALIZED MORTGAGE OBLIGATIONS--0.1% --------------------------------------------------------------- $133,010 (a)Resolution Trust Corp. 1994-N2, Series 1994-N2, Class 4, 10.50%, 12/15/2004 (IDENTIFIED COST $131,030) $ 133,010 ----------------------------------------------------- ------------ CORPORATE BONDS--32.8% --------------------------------------------------------------- AEROSPACE--2.0% ----------------------------------------------------- 1,700,000 Sequa Corp., Sr. Note, 8.75%, 12/15/2001 1,708,500 ----------------------------------------------------- 1,500,000 UNC, Inc., Sr. Note, 9.125%, 7/15/2003 1,582,500 ----------------------------------------------------- ------------ Total 3,291,000 ----------------------------------------------------- ------------ CONSUMER RELATED--1.6% ----------------------------------------------------- 1,000,000 Host Marriot Travel Plaza, Sr. Note, 9.50%, 5/15/2005 1,020,000 ----------------------------------------------------- 1,600,000 Revlon Consumer Products Corp. Sr. Deb. 10.875%, 7/15/2010 1,644,000 ----------------------------------------------------- ------------ Total 2,664,000 ----------------------------------------------------- ------------ ENERGY & OIL RELATED--1.9% ----------------------------------------------------- 2,000,000 Maxus Energy Corp., Medium Term Note, 11.02%, 5/15/2001 2,059,000 ----------------------------------------------------- 1,000,000 Triton Energy Corp., Sr. Sub. Note, 9.75%, 12/15/2000 1,047,500 ----------------------------------------------------- ------------ Total 3,106,500 ----------------------------------------------------- ------------ FINANCE--3.2% ----------------------------------------------------- 1,500,000 Americo Life, Inc., Sr. Sub. Note, 9.25%, 6/1/2005 1,503,750 ----------------------------------------------------- 1,000,000 Navistar Financial Corp. Owner Trust 1995-A, Sr. Sub. Note, 8.875%, 11/15/1998 1,016,517 ----------------------------------------------------- 1,500,000 Presidential Life Corp., Sr. Note, 9.50%, 12/15/2000 1,537,500 ----------------------------------------------------- 1,250,000 Reliance Group Holdings, Inc., Sr. Note, 9.00%, 11/15/2000 1,278,125 ----------------------------------------------------- ------------ Total 5,335,892 ----------------------------------------------------- ------------ INDUSTRIAL SERVICES--1.8% ----------------------------------------------------- 1,000,000 ADT Operations, Sr. Sub. Note, 9.25%, 8/1/2003 1,060,000 ----------------------------------------------------- 1,000,000 Bell & Howell Oper Co., Sr. Note, 9.25%, 7/15/2000 1,021,250 ----------------------------------------------------- 1,000,000 EnviroSource, Inc., Sr. Note, 9.75%, 6/15/2003 960,000 ----------------------------------------------------- ------------ Total 3,041,250 ----------------------------------------------------- ------------
BLANCHARD FLEXIBLE INCOME FUND - --------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE ----------- --------------------------------------------------- ------------ CORPORATE BONDS--CONTINUED --------------------------------------------------------------- OIL REFINING--1.3% --------------------------------------------------- $ 2,250,000 PDV America, Sr. Note, 7.25%, 8/1/1998 $ 2,249,951 --------------------------------------------------- ------------ PAPER/FOREST PRODUCTS/CONTAINERS--6.6% --------------------------------------------------- 1,000,000 Doman Industries, Ltd., Sr. Note, 8.75%, 3/15/2004 945,000 --------------------------------------------------- 1,250,000 Fort Howard Corp., Sr. Sub. Note, 9.00%, 2/1/2006 1,268,750 --------------------------------------------------- 1,000,000 Gaylord Container Corp., Sr. Note, 11.50%, 5/15/2001 1,055,000 --------------------------------------------------- 1,000,000 Maxxam Group, Inc., Sr. Note, 11.25%, 8/1/2003 1,030,000 --------------------------------------------------- 2,500,000 Owens--Illinois, Inc., Sr. Sub. Note, 10.00%, 8/1/2002 2,634,375 --------------------------------------------------- 1,000,000 Repap New Brunswick, Inc., 1st Priority Sr. Secd. Note, 9.875%, 7/15/2000 1,005,000 --------------------------------------------------- 1,000,000 Repap Wisconsin, Inc., 1st Priority Sr. Secd. Note, 9.25%, 2/1/2002 990,000 --------------------------------------------------- 2,000,000 (a)Stone Container Finance Co. Can., 11.50%, 8/15/2006 2,040,000 --------------------------------------------------- ------------ Total 10,968,125 --------------------------------------------------- ------------ REAL ESTATE DEVELOPMENT--0.9% --------------------------------------------------- 1,500,000 Granite Development Partners LP, Sr. Note, 10.83%, 11/15/2003 1,477,500 --------------------------------------------------- ------------ SERVICES--1.2% --------------------------------------------------- 1,000,000 HMH Properties, Inc., Sr. Note, 9.5%, 5/15/2005 1,000,000 --------------------------------------------------- 1,000,000 (a)Prime Hospitality Corp., Sr. Sub. Note, 9.75%, 4/1/2007 1,008,750 --------------------------------------------------- ------------ Total 2,008,750 --------------------------------------------------- ------------ STEEL--2.7% --------------------------------------------------- 1,500,000 Armco, Inc., Sr. Note, 9.375%, 11/1/2000 1,533,750 --------------------------------------------------- 1,000,000 Bethlehem Steel Corp., Sr. Note, 10.375%, 9/1/2003 1,047,500 --------------------------------------------------- 1,000,000 Earle M. Jorgensen Co., Sr. Note, 10.75%, 3/1/2000 987,500 --------------------------------------------------- 1,000,000 Northwestern Steel & Wire Co., Sr. Note, 9.50%, 6/15/2001 977,500 --------------------------------------------------- ------------ Total 4,546,250 --------------------------------------------------- ------------ TELECOMMUNICATIONS/CABLE--3.0% --------------------------------------------------- 1,000,000 Cablevision Systems Corp., Sr. Sub. Deb., 10.75%, 4/1/2004 1,035,000 --------------------------------------------------- 1,000,000 Centennial Cellular Corp., Sr. Note, 8.875%, 11/1/2001 970,000 --------------------------------------------------- 1,000,000 Lenfest Communications Inc., Sr. Note, 8.375%, 11/1/2005 920,000 ---------------------------------------------------
BLANCHARD FLEXIBLE INCOME FUND - --------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE ------------- ------------------------------------------------ ------------ CORPORATE BONDS--CONTINUED -------------------------------------------------------------- TELECOMMUNICATIONS/CABLE--CONTINUED ------------------------------------------------ $ 1,000,000 Storer Communications, Sub. Deb., 10.00%, 5/15/2003 $ 1,016,250 ------------------------------------------------ 1,000,000 Teleport Communications Group, Inc., Sr. Note, 9.875%, 7/1/2006 1,042,500 ------------------------------------------------ ------------ Total 4,983,750 ------------------------------------------------ ------------ TRANSPORTATION--3.7% ------------------------------------------------ 1,500,000 Eletson Holdings, Inc., 1st Pfd. Ship Mtg. Note, 9.25%, 11/15/2003 1,503,750 ------------------------------------------------ 1,389,000 Piedmont Aviation, EQPT Trust Ctfs., 10.15%, 3/28/2003 1,364,692 ------------------------------------------------ 852,000 Piedmont Aviation, EQPT Trust Ctfs., 9.90%, 1/15/2001 867,975 ------------------------------------------------ 1,500,000 Sea Containers Ltd., Sr. Note, 9.50%, 7/1/2003 1,537,500 ------------------------------------------------ 896,000 USAir, Inc., EQPT Trust Ctfs., 9.9%, 1/15/2001 884,800 ------------------------------------------------ ------------ Total 6,158,717 ------------------------------------------------ ------------ UTILITIES--ELECTRIC--2.9% ------------------------------------------------ 1,000,000 Cleveland Electric Illuminating Co., 1st Mtg. Bond, 9.50%, 5/15/2005 1,071,250 ------------------------------------------------ 1,494,000 CTC Mansfield Funding, Secured Lease Obligation Bonds, 10.25%, 3/30/2003 1,531,350 ------------------------------------------------ 2,218,808 (a)Tucson Electric Power Co., Secured Notes, 10.21%, 1/1/2009 2,152,244 ------------------------------------------------ ------------ Total 4,754,844 ------------------------------------------------ ------------ TOTAL CORPORATE BONDS (IDENTIFIED COST $53,709,228) 54,586,529 ------------------------------------------------ ------------ FOREIGN SECURITIES--0.9% -------------------------------------------------------------- TELECOMMUNICATIONS/CABLE--0.9% ------------------------------------------------ CAD 2,000,000 Rogers Cablesystems Ltd., Sr. Secd. 2nd Priority Note, 9.65%, 1/15/2014 (IDENTIFIED COST $1,511,716) 1,430,119 ------------------------------------------------ ------------ MORTGAGE BACKED SECURITIES--32.3% -------------------------------------------------------------- FEDERAL HOME LOAN MORTGAGE CORPORATION--14.3% ------------------------------------------------ 37,673 Pool E00434, 7.00%, 5/1/2011 37,124 ------------------------------------------------ 1,763,386 Pool E20217, 7.00%, 1/1/2011 1,741,271 ------------------------------------------------ 3,816,831 Pool E20271, 7.00%, 11/1/2011 3,761,254 ------------------------------------------------ 718,157 Pool E64769, 7.00%, 7/1/2011 707,700 ------------------------------------------------
BLANCHARD FLEXIBLE INCOME FUND - --------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE --------- ------------------------------------------------- ----------- MORTGAGE BACKED SECURITIES--CONTINUED ----------------------------------------------------------- FEDERAL HOME LOAN MORTGAGE CORPORATION--CONTINUED ------------------------------------------------- $ 278,459 Pool E64891, 7.00%, 7/1/2011 $ 274,405 ------------------------------------------------- 1,552,710 Pool E65184, 7.00%, 8/1/2011 1,530,101 ------------------------------------------------- 468,603 Pool E65186, 7.00%, 8/1/2011 461,780 ------------------------------------------------- 59,866 Pool E65399, 7.00%, 9/1/2011 58,994 ------------------------------------------------- 479,199 Pool E65450, 7.00%, 10/1/2011 472,221 ------------------------------------------------- 312,251 Pool E65454, 7.00%, 10/1/2011 307,704 ------------------------------------------------- 166,603 Pool E65468, 7.00%, 10/1/2011 164,177 ------------------------------------------------- 2,254,852 Pool E65490, 7.00%, 10/1/2011 2,222,019 ------------------------------------------------- 2,932,549 Pool E65503, 7.00%, 10/1/2011 2,889,848 ------------------------------------------------- 321,451 Pool E65597, 7.00%, 10/1/2011 316,770 ------------------------------------------------- 247,813 Pool E65645, 7.00%, 11/1/2011 244,205 ------------------------------------------------- 657,490 Pool E65660, 7.00%, 11/1/2011 647,916 ------------------------------------------------- 828,791 Pool E65690, 7.00%, 11/1/2011 816,723 ------------------------------------------------- 1,606,660 Pool E65702, 7.00%, 11/1/2011 1,583,266 ------------------------------------------------- 977,241 Pool E65703, 7.00%, 11/1/2011 963,011 ------------------------------------------------- 1,955,020 Pool E65712, 7.00%, 12/1/2011 1,926,553 ------------------------------------------------- 337,703 Pool E65717, 7.00%, 11/1/2011 332,785 ------------------------------------------------- 1,060,557 Pool E65723, 7.00%, 11/1/2011 1,045,114 ------------------------------------------------- 426,562 Pool E65750, 7.00%, 11/1/2011 420,351 ------------------------------------------------- 35,343 Pool E65759, 7.00%, 12/1/2011 34,828 ------------------------------------------------- 32,973 Pool G10524, 7.00%, 6/1/2011 32,493 ------------------------------------------------- 630,253 Pool G10556, 7.00%, 7/1/2011 621,075 ------------------------------------------------- 312,165 Pool G10590, 7.00%, 10/1/2011 307,619 ------------------------------------------------- ----------- Total 23,921,307 ------------------------------------------------- ----------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION--18.0% ------------------------------------------------- 648,729 Pool 193576, 8.00%, 7/15/2026 653,321 ------------------------------------------------- 41,537 Pool 326542, 8.00%, 5/15/2022 42,098 ------------------------------------------------- 29,983 Pool 334760, 8.00%, 8/15/2025 30,223 ------------------------------------------------- 37,037 Pool 338684, 8.00%, 7/15/2024 37,365 -------------------------------------------------
BLANCHARD FLEXIBLE INCOME FUND - --------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE --------- --------------------------------------------------- ------------ MORTGAGE BACKED SECURITIES--CONTINUED ------------------------------------------------------------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION--CONTINUED --------------------------------------------------- $454,507 Pool 353016, 8.00%, 1/15/2025 $ 458,143 --------------------------------------------------- 556,760 Pool 354163, 8.00%, 8/15/2026 560,701 --------------------------------------------------- 162,227 Pool 361590, 8.00%, 7/15/2024 163,665 --------------------------------------------------- 259,220 Pool 361942, 8.00%, 5/15/2025 261,294 --------------------------------------------------- 46,489 Pool 365136, 8.00%, 9/15/2024 46,901 --------------------------------------------------- 470,284 Pool 369463, 8.00%, 1/15/2025 474,046 --------------------------------------------------- 874,404 Pool 369485, 8.00%, 9/15/2024 882,150 --------------------------------------------------- 555,579 Pool 370587, 8.00%, 9/15/2025 560,023 --------------------------------------------------- 875,492 Pool 372365, 8.00%, 7/15/2026 881,690 --------------------------------------------------- 194,281 Pool 375080, 8.00%, 4/15/2025 195,836 --------------------------------------------------- 51,899 Pool 375189, 8.00%, 2/15/2024 52,359 --------------------------------------------------- 240,420 Pool 376175, 8.00%, 2/15/2025 242,343 --------------------------------------------------- 72,155 Pool 376198, 8.00%, 5/15/2025 72,732 --------------------------------------------------- 59,282 Pool 377404, 8.00%, 1/15/2025 59,756 --------------------------------------------------- 381,919 Pool 377608, 8.00%, 8/15/2025 384,974 --------------------------------------------------- 554,686 Pool 379597, 8.00%, 5/15/2025 559,123 --------------------------------------------------- 29,388 Pool 380634, 8.00%, 10/15/2024 29,648 --------------------------------------------------- 55,433 Pool 382067, 8.00%, 5/15/2025 55,876 --------------------------------------------------- 437,935 Pool 384598, 8.00%, 4/15/2025 441,438 --------------------------------------------------- 828,007 Pool 384600, 8.00%, 5/15/2025 834,630 --------------------------------------------------- 556,853 Pool 384694, 8.00%, 8/15/2025 561,307 --------------------------------------------------- 723,152 Pool 385904, 8.00%, 9/15/2024 729,558 --------------------------------------------------- 377,050 Pool 386613, 8.00%, 11/15/2024 380,390 --------------------------------------------------- 732,374 Pool 386721, 8.00%, 4/15/2025 738,232 --------------------------------------------------- 106,893 Pool 388751, 8.00%, 6/15/2024 107,840 --------------------------------------------------- 203,681 Pool 388757, 8.00%, 9/15/2024 205,485 --------------------------------------------------- 802,553 Pool 389603, 8.00%, 9/15/2024 809,663 --------------------------------------------------- 597,643 Pool 390343, 8.00%, 4/15/2025 602,424 --------------------------------------------------- 750,985 Pool 390602, 8.00%, 9/15/2024 757,638 ---------------------------------------------------
BLANCHARD FLEXIBLE INCOME FUND - --------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE ----------- --------------------------------------------------- ------------ MORTGAGE BACKED SECURITIES--CONTINUED --------------------------------------------------------------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION--CONTINUED --------------------------------------------------- $ 82,084 Pool 392003, 8.00%, 9/15/2024 $ 82,811 --------------------------------------------------- 48,157 Pool 392233, 8.00%, 5/15/2024 48,584 --------------------------------------------------- 36,024 Pool 392550, 8.00%, 9/15/2024 36,343 --------------------------------------------------- 724,826 Pool 393260, 8.00%, 4/15/2025 730,624 --------------------------------------------------- 111,816 Pool 393769, 8.00%, 5/15/2025 112,710 --------------------------------------------------- 203,478 Pool 394649, 8.00%, 8/15/2024 205,281 --------------------------------------------------- 213,770 Pool 395262, 8.00%, 8/15/2024 215,664 --------------------------------------------------- 785,118 Pool 396925, 8.00%, 7/15/2025 791,398 --------------------------------------------------- 357,161 Pool 398502, 8.00%, 3/15/2026 359,689 --------------------------------------------------- 500,066 Pool 398646, 8.00%, 5/15/2026 503,606 --------------------------------------------------- 284,971 Pool 398734, 8.00%, 6/15/2026 286,988 --------------------------------------------------- 33,578 Pool 398746, 8.00%, 6/15/2026 33,815 --------------------------------------------------- 723,515 Pool 398807, 8.00%, 7/15/2026 728,637 --------------------------------------------------- 616,274 Pool 399971, 8.00%, 6/15/2026 620,636 --------------------------------------------------- 220,234 Pool 400737, 8.00%, 5/15/2024 222,185 --------------------------------------------------- 701,591 Pool 401191, 8.00%, 11/15/2024 707,807 --------------------------------------------------- 134,098 Pool 401819, 8.00%, 4/15/2025 135,171 --------------------------------------------------- 568,703 Pool 402263, 8.00%, 12/15/2024 573,741 --------------------------------------------------- 659,619 Pool 402680, 8.00%, 5/15/2026 664,289 --------------------------------------------------- 45,416 Pool 403582, 8.00%, 1/15/2025 45,780 --------------------------------------------------- 817,587 Pool 403965, 8.00%, 9/15/2024 824,830 --------------------------------------------------- 54,415 Pool 404080, 8.00%, 4/15/2025 54,850 --------------------------------------------------- 378,752 Pool 405449, 8.00%, 4/15/2025 381,782 --------------------------------------------------- 384,662 Pool 405873, 8.00%, 5/15/2025 387,739 --------------------------------------------------- 151,029 Pool 405937, 8.00%, 7/15/2025 152,237 --------------------------------------------------- 96,817 Pool 406638, 8.00%, 5/15/2025 97,591 --------------------------------------------------- 185,192 Pool 408449, 8.00%, 5/15/2025 186,674 --------------------------------------------------- 145,698 Pool 409740, 8.00%, 5/15/2025 146,863 --------------------------------------------------- 28,100 Pool 410214, 8.00%, 12/15/2025 28,325 ---------------------------------------------------
BLANCHARD FLEXIBLE INCOME FUND - --------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE ----------- --------------------------------------------------- ------------ MORTGAGE BACKED SECURITIES--CONTINUED --------------------------------------------------------------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION--CONTINUED --------------------------------------------------- $ 561,713 Pool 410284, 8.00%, 9/15/2025 $ 566,207 --------------------------------------------------- 349,904 Pool 410554, 8.00%, 12/15/2025 352,703 --------------------------------------------------- 31,070 Pool 410858, 8.00%, 12/15/2025 31,318 --------------------------------------------------- 790,971 Pool 412618, 8.00%, 6/15/2026 796,571 --------------------------------------------------- 436,464 Pool 413170, 8.00%, 10/15/2025 439,956 --------------------------------------------------- 337,291 Pool 413535, 8.00%, 10/15/2025 339,989 --------------------------------------------------- 86,501 Pool 413553, 8.00%, 11/15/2025 87,193 --------------------------------------------------- 378,589 Pool 414080, 8.00%, 8/15/2025 381,618 --------------------------------------------------- 230,293 Pool 415464, 8.00%, 7/15/2025 232,135 --------------------------------------------------- 378,504 Pool 418481, 8.00%, 9/15/2025 381,532 --------------------------------------------------- 915,695 Pool 423964, 8.00%, 7/15/2026 922,177 --------------------------------------------------- 889,170 Pool 424694, 8.00%, 12/15/2025 896,282 --------------------------------------------------- 627,211 Pool 425651, 8.00%, 6/15/2026 631,651 --------------------------------------------------- 742,048 Pool 435289, 8.00%, 7/15/2026 747,300 --------------------------------------------------- 41,453 Pool 780195, 8.00%, 7/15/2025 41,785 --------------------------------------------------- 839,754 Pool 780247, 8.00%, 9/15/2025 846,471 --------------------------------------------------- 123,552 Pool 780249, 8.00%, 9/15/2025 124,540 --------------------------------------------------- ------------ Total 30,058,950 --------------------------------------------------- ------------ TOTAL MORTGAGE BACKED SECURITIES (IDENTIFIED COST $54,376,660) 53,980,257 --------------------------------------------------- ------------ U.S. TREASURY--29.8% --------------------------------------------------------------- U.S. TREASURY NOTES--29.8% --------------------------------------------------- 15,000,000 5.75%, 8/15/2003 14,156,250 --------------------------------------------------- 10,000,000 7.00%, 7/15/2006 10,021,870 --------------------------------------------------- 25,000,000 7.25%, 5/15/2004 25,500,000 --------------------------------------------------- ------------ TOTAL U.S. TREASURY (IDENTIFIED COST $50,885,010) 49,678,120 --------------------------------------------------- ------------ (C)REPURCHASE AGREEMENT--3.4% --------------------------------------------------------------- 5,752,241 CS First Boston, Inc., 6.45%, dated 3/31/1997, due 4/1/1997 (AT AMORTIZED COST) 5,752,241 --------------------------------------------------- ------------ TOTAL INVESTMENTS (IDENTIFIED COST $166,365,885)(D) $165,560,276 --------------------------------------------------- ------------
BLANCHARD FLEXIBLE INCOME FUND - ------------------------------------------------------------------------------- (a) Denotes a restricted security which is subject to restrictions on resale under Federal Securities laws. At March 31, 1997, these securities amounted to $5,334,004 which represents 3.2% of net assets. (b) Denotes variable rate securities which show the current rate. (c) The repurchase agreement is fully collateralized by U.S. Treasury obligations based on market prices at the date of the portfolio. (d) The cost of investments for federal tax purposes amounts to $166,365,885. The net unrealized depreciation of investments on a federal tax basis amounts to $805,609 which is comprised of $1,202,575 appreciation and $2,008,184 depreciation at March 31, 1997. Note: The categories of investments are shown as a percentage of net assets ($166,763,097) at March 31, 1997. The following acronyms are used throughout this portfolio: CAD--Canadian Dollars EGPT--Equipment Trust Certificates LP--Limited Partnership (See Notes which are an integral part of the Financial Statements) BLANCHARD FLEXIBLE INCOME FUND STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 1997 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS: - --------------------------------------- Total investments in securities, at value (identified and tax cost $166,365,885) $165,560,276 - --------------------------------------- Income receivable 2,563,542 - --------------------------------------- Receivable for shares sold 5,000 - --------------------------------------- Receivable for forward foreign currency exchange contracts sold 146,768 - --------------------------------------- Deferred expenses 15,094 - --------------------------------------- ------------ Total assets 168,290,680 - --------------------------------------- LIABILITIES: - --------------------------- Income distribution payable $1,158,483 - --------------------------- Accrued expenses 369,100 - --------------------------- ---------- Total liabilities 1,527,583 - --------------------------------------- ------------ NET ASSETS for 34,548,505 shares outstanding $166,763,097 - --------------------------------------- ------------ NET ASSETS CONSIST OF: - --------------------------------------- Paid in capital $185,453,404 - --------------------------------------- Net unrealized depreciation of investments and translation of assets and liabilities in foreign currency (659,402) - --------------------------------------- Accumulated net realized loss on investments and foreign currency transactions (17,132,822) - --------------------------------------- Distributions in excess of net investment income (898,083) - --------------------------------------- ------------ Total Net Assets $166,763,097 - --------------------------------------- ------------ NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE: - --------------------------------------- $166,763,097 / 34,548,505 shares outstanding $4.83 - --------------------------------------- ------------
(See Notes which are an integral part of the Financial Statements) BLANCHARD FLEXIBLE INCOME FUND STATEMENT OF OPERATIONS SIX MONTHS ENDED MARCH 31, 1997 (UNAUDITED) - -------------------------------------------------------------------------------- INVESTMENT INCOME: - ----------------------------------------------------------- Interest $ 6,895,039 - ----------------------------------------------------------- EXPENSES: - ----------------------------------------------- Management fee $ 665,703 - ----------------------------------------------- Administrative personnel and services fee 85,983 - ----------------------------------------------- Custodian fees 40,251 - ----------------------------------------------- Transfer and dividend disbursing agent fees and expenses 220,642 - ----------------------------------------------- Directors'/Trustees' fees 1,730 - ----------------------------------------------- Auditing fees 8,150 - ----------------------------------------------- Legal fees 2,368 - ----------------------------------------------- Portfolio accounting fees 34,532 - ----------------------------------------------- Distribution services fee 221,901 - ----------------------------------------------- Share registration costs 6,144 - ----------------------------------------------- Printing and postage 32,763 - ----------------------------------------------- Insurance premiums 1,095 - ----------------------------------------------- Taxes 242 - ----------------------------------------------- Miscellaneous 16,956 - ----------------------------------------------- ---------- Total expenses 1,338,460 - ----------------------------------------------------------- ----------- Net investment income 5,556,579 - ----------------------------------------------------------- ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY: - ----------------------------------------------------------- Net realized gain on investments and foreign currency transactions 1,430,448 - ----------------------------------------------------------- Net change in unrealized depreciation of investments and translation of assets and liabilities in foreign currency (1,479,139) - ----------------------------------------------------------- ----------- Net realized and unrealized loss on investments and foreign currency (48,691) - ----------------------------------------------------------- ----------- Change in net assets resulting from operations $ 5,507,888 - ----------------------------------------------------------- -----------
(See Notes which are an integral part of the Financial Statements) BLANCHARD FLEXIBLE INCOME FUND STATEMENT OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
SIX MONTHS ENDED PERIOD YEAR (UNAUDITED) ENDED ENDED MARCH 31, SEPTEMBER 30, APRIL 30, 1997 1996 1996 - ---------------------------------- ------------ ------------- ------------- INCREASE (DECREASE) IN NET ASSETS: - ---------------------------------- OPERATIONS-- - ---------------------------------- Net investment income $ 5,556,579 $ 5,059,729 $ 14,539,300 - ---------------------------------- Net realized gain (loss) on investments and foreign currency transactions ($1,430,448 net gain and $1,335,786 net loss, and $3,223,064 net loss respectively, as computed for federal tax purposes) 1,430,448 175,174 480,236 - ---------------------------------- Net change in unrealized appreciation (depreciation) of investments and translation of assets and liabilities in foreign currency (1,479,139) 2,016,909 5,042,160 - ---------------------------------- ------------ ------------ ------------- Change in net assets resulting from operations 5,507,888 7,251,812 20,061,696 - ---------------------------------- ------------ ------------ ------------- DISTRIBUTIONS TO SHAREHOLDERS-- - ---------------------------------- Distributions from net investment income (5,558,514) (5,012,727) (15,359,777) - ---------------------------------- Tax return of capital -- (48,762) -- - ---------------------------------- ------------ ------------ ------------- Change in net assets resulting from distributions to shareholders (5,558,514) (5,061,489) (15,359,777) - ---------------------------------- ------------ ------------ ------------- SHARE TRANSACTIONS-- - ---------------------------------- Proceeds from sale of shares 18,024,068 13,294,718 60,702,516 - ---------------------------------- Net asset value of shares issued to shareholders in payment of distributions declared 3,706,523 4,042,963 11,757,432 - ---------------------------------- Cost of shares redeemed (42,269,409) (38,410,603) (133,349,811) - ---------------------------------- ------------ ------------ ------------- Change in net assets resulting from share transactions (20,538,818) (21,072,922) (60,889,863) - ---------------------------------- ------------ ------------ ------------- Change in net assets (20,589,444) (18,882,599) (56,187,944) - ---------------------------------- NET ASSETS: - ---------------------------------- Beginning of period 187,352,541 206,235,140 262,423,084 - ---------------------------------- ------------ ------------ ------------- End of period $166,763,097 $187,352,541 $ 206,235,140 - ---------------------------------- ------------ ------------ -------------
(See Notes which are an integral part of the Financial Statements) BLANCHARD FLEXIBLE INCOME FUND FINANCIAL HIGHLIGHTS - ------------------------------------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
SIX MONTHS ENDED YEAR ENDED APRIL 30, (UNAUDITED) PERIOD ENDED ---------------------------------------- MARCH 31, SEPTEMBER 30, 1997 1996(A) 1996 1995 1994 1993(B) - ------------------------ ----------- ------------- -------- -------- -------- -------- NET ASSET VALUE, BEGINNING OF PERIOD $ 4.84 $ 4.78 $ 4.71 $ 4.85 $ 5.09 $ 5.00 - ------------------------ INCOME FROM INVESTMENT OPERATIONS - ------------------------ Net investment income 0.15 0.15 0.28 0.30 0.40 0.21 - ------------------------ Net realized and unrealized gain (loss) on investments and foreign currency (0.01) 0.04 0.10 (0.13) (0.17) 0.09 - ------------------------ -------- -------- -------- -------- -------- -------- Total from investment operations 0.14 0.19 0.38 0.17 0.23 0.30 - ------------------------ -------- -------- -------- -------- -------- -------- LESS DISTRIBUTIONS - ------------------------ Distributions from net investment income (0.15) (0.13) (0.31) 0.00(c) (0.36) (0.21) - ------------------------ Tax return of capital (0.00)(c) -- (0.31) (0.03) -- - ------------------------ Distributions from net realized gain on investments and foreign currency transactions -- -- -- -- (0.08) -- - ------------------------ -------- -------- -------- -------- -------- -------- Total distributions (0.15) (0.13) (0.31) (0.31) (0.47) (0.21) - ------------------------ -------- -------- -------- -------- -------- -------- NET ASSET VALUE, END OF PERIOD $ 4.83 $ 4.84 $ 4.78 $ 4.71 $ 4.85 $ 5.09 - ------------------------ -------- -------- -------- -------- -------- -------- TOTAL RETURN (D) 2.99% 3.95% 8.06% 3.74% 4.11% 6.17% - ------------------------ RATIOS TO AVERAGE NET ASSETS - ------------------------ Expenses 1.51%* 1.59%* 1.56% 1.58% 1.30% 0.20%* - ------------------------ Net investment income 6.26%* 7.38%* 6.06% 6.52% 7.10% 9.02%* - ------------------------ Expense waiver/reimbursement (e) -- 0.01%* -- -- -- -- - ------------------------ SUPPLEMENTAL DATA - ------------------------ Net assets, end of period (000 omitted) $166,763 $187,353 $206,235 $262,423 $550,254 $315,845 - ------------------------ Portfolio turnover 65% 87% 347% 455% 346% 129% - ------------------------
*Computed on an annualized basis. (a) The fund has changed its fiscal year end from April 30 to September 30. Reflects operations for the period from May 1, 1996 to September 30, 1996. (b) Reflects operations for the period from November 2, 1992 (commencement of operations) to April 30, 1993. (c) Less than one cent per share. (d) Based on net asset value. (e) This voluntary expense decrease is reflected in both the expense and net investment income ratios shown above. (See Notes which are an integral part of the Financial Statements) BLANCHARD FLEXIBLE INCOME FUND NOTES TO FINANCIAL STATEMENTS MARCH 31, 1997 (UNAUDITED) - ------------------------------------------------------------------------------- (1) ORGANIZATION Blanchard Funds (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end, management investment company. The Trust consists of seven portfolios. The financial statements included herein are only those of Blanchard Flexible Income Fund (the "Fund"), a diversified portfolio. The financial statements of the other portfolio's are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. The fund seeks to provide high current income while seeking opportunities for capital appreciation. (2) SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with generally accepted accounting principles. INVESTMENT VALUATIONS--U.S. government securities, listed corporate bonds, other fixed income and asset-backed securities, unlisted securities and private placement securities and other foreign securities are generally valued at the mean of the latest bid and asked price as furnished by an independent pricing service. Short-term securities are valued at the prices provided by an independent pricing service. However, short-term securities with remaining maturities of sixty days or less at the time of purchase may be valued at amortized cost, which approximates fair market value. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the custodian bank to take possession, to have legally segregated in the Federal Reserve Book Entry System, or to have segregated within the custodian bank's vault, all securities held as collateral under repurchase agreement transactions. Additionally, procedures have been established by the Fund to monitor, on a daily basis, the market value of each repurchase agreement's collateral to ensure that the value of collateral at least equals the repurchase price to be paid under the repurchase agreement transaction. The Fund will only enter into repurchase agreements with banks and other recognized financial institutions, such as broker/dealers, which are deemed by the Fund's manager to be creditworthy pursuant to the guidelines and/or standards reviewed or established by the Board of Trustees (the "Trustees"). Risks may arise from the potential inability of counterparties to honor the terms of the repurchase agreement. Accordingly, the Fund could receive less than the repurchase price on the sale of collateral securities. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses are accrued daily. Bond premium and discount, if applicable, are amortized as required by the Internal Revenue Code, as amended (the "Code"). Distributions to shareholders are recorded on the ex-dividend date. BLANCHARD FLEXIBLE INCOME FUND - ------------------------------------------------------------------------------- Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the Code applicable to regulated investment companies and to distribute to shareholders each year substantially all of its income. Accordingly, no provisions for federal tax are necessary. Withholding taxes on foreign interest and dividends have been provided for in accordance with the Fund's understanding of the applicable country's tax rules and rates. At September 30, 1996, the Fund, for federal tax purposes, had a capital loss carryforward of $18,382,894, which will reduce the Fund's taxable income arising from future net realized gain on investments, if any, to the extent permitted by the Code, and thus will reduce the amount of the distributions to shareholders which would otherwise be necessary to relieve the Fund of any liability for federal tax. Pursuant to the Code, such capital loss carryforwards will expire as follows:
EXPIRATION YEAR EXPIRATION AMOUNT --------------- ----------------- 2002 13,824,044 2003 3,223,064 2004 1,335,786
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in when- issued or delayed delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when-issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. DEFERRED EXPENSES--The costs incurred by the Fund with respect to registration of its shares in its first fiscal year, excluding the initial expense of registering its shares, have been deferred and are being amortized over a period not to exceed five years from the Fund's commencement date. FOREIGN EXCHANGE CONTRACTS--The Fund may enter into foreign currency commitments for the delayed delivery of securities or foreign currency exchange transactions. Purchase contracts are used to acquire exposure to foreign currencies; whereas, contracts to sell are used to hedge the Fund's securities against currency fluctuations. Risks may arise upon entering these transactions from the potential inability of counter-parts to meet the terms of their commitments and from unanticipated movements in security prices or foreign exchange rates. The foreign currency transactions are adjusted by the daily exchange rate of the underlying currency and any gains or losses are recorded for financial statement purpose as unrealized until the settlement date. At March 31, 1997, the Fund had outstanding foreign currency commitments as set forth below: BLANCHARD FLEXIBLE INCOME FUND - -------------------------------------------------------------------------------
IN UNREALIZED SETTLEMENT CONTRACTS TO EXCHANGE CONTRACTS APPRECIATION DATE DELIVER/RECEIVE FOR AT VALUE (DEPRECIATION) ---------- --------------- ---------- ---------- -------------- Contracts Sold: Australian Dollar 6/10/97 7,000,000 $5,553,100 $5,415,900 $137,200 Australian Dollar 9/25/97 2,040,000 1,500,000 1,496,918 3,082 Canadian Dollar 9/25/97 2,040,000 1,496,040 1,489,554 6,486 ---------- ---------- -------- $8,549,140 $8,402,372 $146,768 ---------- ---------- --------
FOREIGN CURRENCY TRANSLATION--The accounting records of the Fund are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies ("FC") are translated into U.S. dollars based on the rate of exchange of such currencies against U.S. dollars on the date of valuation. Purchases and sales of securities, income and expenses are translated at the rate of exchange quoted on the respective date that such transactions are recorded. Differences between income and expense amounts recorded and collected or paid are adjusted when reported by the custodian bank. The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Reported net realized foreign exchange gains or losses arise from sales of portfolio securities, sales and maturities of short-term securities, sales of FCs, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books, and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities at fiscal year end, resulting from changes in the exchange rate. RESTRICTED SECURITIES--Restricted securities are securities that may only be resold upon registration under federal securities laws or in transactions exempt from such registration. In some cases, the issuer of restricted securities has agreed to register such securities for resale, at the issuer's expense either upon demand by the Fund or in connection with another registered offering of the securities. Many restricted securities may be resold in the secondary market in transactions exempt from registration. Such restricted securities may be determined to be liquid under criteria established by the Board of Trustees. The Fund will not incur any registration costs upon such resales. The Fund's restricted securities are valued at the price provided by dealers in the secondary market or, if no market prices are available, at the fair value as determined by the Fund's pricing committee. BLANCHARD FLEXIBLE INCOME FUND - ------------------------------------------------------------------------------- Additional information on each restricted security held at March 31, 1997 is as follows:
SECURITY FUND ACQUISITION DATE ACQUISITION COST --------------------------- --------------------- ---------------- Stone Container Finance Co. 8/9/1996 $2,000,000 Prime Hospitality Corp. 3/21/1997 1,000,000 Tucson Electric Power Co. 2/10/1993-12/22/1993 2,095,389 Resolution Trust Corp. 12/8/1994 131,030
CHANGE IN FISCAL YEAR--The Trust has changed its fiscal year-end from April 30 to September 30 beginning May 1, 1996. USE OF ESTIMATES--The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ from those estimated. OTHER--Investment transactions are accounted for on the trade date. (3) SHARES OF BENEFICIAL INTEREST The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest (without par value). Transactions in shares were as follows:
PERIOD PERIOD YEAR ENDED ENDED ENDED MARCH 31, SEPTEMBER 30, APRIL 30, 1997 1996 1996 - --------------------------------- ---------- ------------- ----------- Shares sold 3,682,883 2,777,685 12,498,920 - --------------------------------- Shares issued to shareholders in payment of distributions declared 755,521 844,211 2,424,612 - --------------------------------- Shares redeemed (8,629,826) (8,034,939) (27,527,713) - --------------------------------- ---------- ---------- ----------- Net change resulting from share transactions (4,191,422) (4,413,043) (12,604,181) - --------------------------------- ---------- ---------- -----------
(4) MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES MANAGEMENT FEE--Virtus Capital Management Inc., the Fund's manager (the "Manager"), receives for its services an annual fee equal to 0.75% of the Fund's average daily net assets. SUB-ADVISORY FEE--OFFITBANK provides the Manager with sub-advisory services for which it receives a fee from the Manager determined by applying the following annual rates to the Fund's average daily net assets: .30% of the first $25 million of the Fund's average daily net assets; .25% of the next $25 million of average daily net assets; and .20% of average daily net assets in excess of $50 million. BLANCHARD FLEXIBLE INCOME FUND - ------------------------------------------------------------------------------- ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund with certain administrative personnel and services. The fee paid to FAS is based on the level of average combined aggregate net assets of the Trust, the Blanchard Precious Metals Fund, Inc. and the Virtus Funds, all of which are advised by the Manager. The administrative fee received during the period of the of the Administrative Services agreement shall be at least $75,000 per portfolio. DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will reimburse Federated Securities Corp. ("FSC"), the principal distributor, from the net assets of the Fund to finance activities intended to result in the sale of the Fund's shares. The Plan provides that the Fund may incur distribution expenses up to 0.25% of the average daily net assets of the Fund shares, annually, to reimburse FSC. TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated Services Company ("FServ"), through its subsidiary, Federated Shareholder Services Company ("FSSC") serves as transfer and dividend disbursing agent for the Fund. The fee paid to FSSC is based on the size, type, and number of accounts and transactions made by shareholders. PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting records for which it receives a fee. The fee is based on the level of the Fund's average daily net assets for the period, plus out-of-pocket expenses. CUSTODIAN FEES--Signet Trust Company is the Fund's Custodian. The fee is based on the level of the Fund's daily net assets for the period, plus out-of-pocket expenses. ORGANIZATIONAL EXPENSES--The Fund's Manager paid the organizational expenses of the Fund incurred prior to the public offering of its shares amounting to $151,712. The Fund reimbursed the Manager for these expenses and has deferred and is amortizing such expenses over five years from the date of commence of the Fund's operation's. GENERAL--Certain of the Officers and Trustees of the Trust are Officers and Directors or Trustees of the above companies. (5) INVESTMENT TRANSACTIONS Purchases and sales of investments, excluding short-term securities, for the period ended March 31, 1997, were as follows: - --------- PURCHASES $111,366,333 - --------- ------------ SALES $133,163,304 - --------- ------------
(6) CONCENTRATION OF CREDIT RISK CONCENTRATION OF CREDIT RISK--The Fund invests in securities of non-U.S. issuers. The political or economic developments within a particular country or region may have an adverse effect on the ability of domiciled issuers to meet their obligations. Additionally, political or economic developments may have an effect on the liquidity and volatility of portfolio securities and currency holdings. TRUSTEES OFFICERS - -------------------------------------------------------------------------------- John F. Donahue John F. Donahue Thomas G. Bigley Chairman John T. Conroy, Jr. Edward C. Gonzales William J. Copeland President and Treasurer James E. Dowd J. Christopher Donahue Lawrence D. Ellis, M.D. Executive Vice President Edward L. Flaherty, Jr. John W. McGonigle Edward C. Gonzales Executive Vice President and Peter E. Madden Secretary Gregor F. Meyer Joseph S. Machi John E. Murray, Jr. Vice President and Assistant Wesley W. Posvar Treasurer Marjorie P. Smuts Richard B. Fisher Vice President C. Grant Anderson Assistant Secretary This report is authorized for distribution to prospective investors only when preceded or accompanied by the fund's prospectus which contain facts concerning its objective and policies, management fees, expenses and other information. BLANCHARD ASSET ALLOCATION FUND Portfolio Adviser Mellon Capital Management Corporation The Blanchard Group of Funds are available through Signet/R/ Financial Services, Inc., member NASD, and are advised by an affiliate, Virtus Captial Management, Inc., which is compensated for this service. Investment products are not deposits, obligations of, or guaranteed by any bank. They are not insured by the FDIC. They involve risk, including the possible loss of principal invested. Federated Securities Corp. is the distributor of the Fund. S E M I - A N N U A L BLANCHARD ASSET ALLOCATION FUND SEMI-ANNUAL REPORT March 31, 1997 Available through Signet Financial Services, Inc. Managed by Virtus Capital Management, Inc. (2351) CUSIP 093212504 G01668-03 (5/97) PRESIDENT'S MESSAGE May 15, 1997 Dear Shareholder: I am pleased to present your Semi-Annual Report for the Blanchard Asset Allocation Fund covering the six-month period from October 1, 1996 through March 31, 1997. The report includes a complete listing of the Fund's holdings and financial activity. On your behalf, the Fund pursues a competitive total return through income and share price growth by investing in a strategic combination of stocks, bonds, money market securities and other investments. During the six-month reporting period, the Fund delivered a total return of 9.45% through income distributions totaling $0.31 per share, capital gains distributions totaling $0.45 per share, and a $0.25 increase in net asset value.* Assets in the Fund stood at $3.7 million at the end of the period. Thank you for selecting the Blanchard Asset Allocation Fund to pursue your financial goals. If you have comments or questions, please call Investors' Services at 1-800-829-3863. Sincerely, /s/ Edward C. Gonzales Edward C. Gonzales President *Performance quoted reflects past performance. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. BLANCHARD ASSET ALLOCATION FUND PORTFOLIO OF INVESTMENTS MARCH 31, 1997 (UNAUDITED) - -------------------------------------------------------------------------------
PRINCIPAL AMOUNT OR CONTRACTS VALUE ------------ ---------------------------------------------------- ---------- CORPORATE BONDS--12.1% ------------------------------------------------------------------ $ 150,000 Associates First Capital Corp., 5.54%, 6/23/1997 $ 148,248 ---------------------------------------------------- 150,000 Ford Motor Credit Corp., 5.55%, 6/20/1997 148,317 ---------------------------------------------------- 150,000 Hertz Corp., 5.51%, 6/23/1997 148,248 ---------------------------------------------------- ---------- TOTAL CORPORATE BONDS (IDENTIFIED COST $444,329) 444,813 ---------------------------------------------------- ---------- OPTIONS--3.7% ------------------------------------------------------------------ (a) Call option on S&P 500, expires 6/20/1997 strike 22 at 750 74,800 ---------------------------------------------------- (a) Call option on S&P 500, expires 6/20/1997 strike 15 at 735 61,125 ---------------------------------------------------- ---------- TOTAL OPTIONS (IDENTIFIED COST $129,211) 135,925 ---------------------------------------------------- ========== U.S. TREASURY--70.6% ------------------------------------------------------------------ 50,000 United States Treasury Bill, 6/26/1997 49,385 ---------------------------------------------------- 2,200,000 United States Treasury Bond, 8.75%, 5/15/2017 2,551,311 ---------------------------------------------------- ---------- TOTAL U.S. TREASURY (IDENTIFIED COST $2,624,411) 2,600,696 ---------------------------------------------------- ---------- (B) REPURCHASE AGREEMENT--11.3% ------------------------------------------------------------------ 418,372 CS First Boston, Inc., 6.45%, dated 3/31/1997, due 4/1/1997 (AT AMORTIZED COST) 418,372 ---------------------------------------------------- ---------- TOTAL INVESTMENTS (IDENTIFIED COST $3,616,323)(C) $3,599,806 ---------------------------------------------------- ----------
(a) Non-income producing security. (b) The repurchase agreement is fully collateralized by U.S. government and/or agency obligations based on market prices at the date of the portfolio. (c) The cost of investments for federal tax purposes amounts to $3,616,323. The net unrealized depreciation of investments on a federal tax basis amounts to $16,517 which is comprised of $7,198 appreciation and $23,715 depreciation at March 31, 1997. Note: The categories of investments are shown as a percentage of net assets ($3,685,379) at March 31, 1997. (See Notes which are an integral part of the Financial Statements) BLANCHARD ASSET ALLOCATION FUND STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 1997 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS: - ------------------------------------ Investments in repurchase agreements $ 418,372 - ------------------------------------ Investments in securities 3,181,434 - ------------------------------------ ---------- Total investments in securities, at value (identified and tax cost $3,616,323) $3,599,806 - ------------------------------------------------ Cash 1,028 - ------------------------------------------------ Income receivable 72,927 - ------------------------------------------------ Prepaid expenses 20,418 - ------------------------------------------------ ---------- Total assets 3,694,179 - ------------------------------------------------ LIABILITIES: - ------------------------------------------------ Payable for daily variation margin 8,800 - ------------------------------------------------ ---------- NET ASSETS for 342,488 shares outstanding $3,685,379 - ------------------------------------------------ ---------- NET ASSETS CONSIST OF: - ------------------------------------------------ Paid in capital $3,438,579 - ------------------------------------------------ Net unrealized depreciation of investments and futures contracts (46,942) - ------------------------------------------------ Accumulated net realized gain on investments and futures contracts 244,126 - ------------------------------------------------ Undistributed net investment income 49,616 - ------------------------------------------------ ---------- Total Net Assets $3,685,379 - ------------------------------------------------ ---------- NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE: - ------------------------------------------------ $3,685,379 / 342,488 shares outstanding $10.76 - ------------------------------------------------ ----------
(See Notes which are an integral part of the Financial Statements) BLANCHARD ASSET ALLOCATION FUND STATEMENT OF OPERATIONS SIX MONTHS ENDED MARCH 31, 1997 (UNAUDITED) - -------------------------------------------------------------------------------- INVESTMENT INCOME: - -------------------------------------------------------------- Interest $ 113,115 - -------------------------------------------------------------- EXPENSES: - --------------------------------------------------- Management fee $ 18,623 - --------------------------------------------------- Administrative personnel and services fee 37,397 - --------------------------------------------------- Custodian fees 5,052 - --------------------------------------------------- Transfer and dividend disbursing agent fees and expenses 11,389 - --------------------------------------------------- Directors'/Trustees' fees 1,361 - --------------------------------------------------- Auditing fees 6,777 - --------------------------------------------------- Legal fees 777 - --------------------------------------------------- Portfolio accounting fees 35,834 - --------------------------------------------------- Share registration costs 345 - --------------------------------------------------- Printing and postage 1,167 - --------------------------------------------------- Miscellaneous 2,092 - --------------------------------------------------- --------- Total expenses 120,814 - --------------------------------------------------- Waivers and reimbursements-- - ------------------------------------------ Waiver of management fee $(18,623) - ------------------------------------------ Waiver of administrative personnel and services fee (30,617) - ------------------------------------------ Waiver of custodian fees (5,052) - ------------------------------------------ Reimbursement of other operating expenses (47,899) - ------------------------------------------ -------- Total waivers and reimbursements (102,191) - --------------------------------------------------- --------- Net expenses 18,623 - -------------------------------------------------------------- --------- Net investment income 94,492 - -------------------------------------------------------------- --------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: - -------------------------------------------------------------- Net realized gain on investments and futures contracts 485,847 - -------------------------------------------------------------- Net change in unrealized depreciation of investments and (260,185) futures contracts - -------------------------------------------------------------- --------- Net realized and unrealized gain on investments and futures contracts 225,662 - -------------------------------------------------------------- --------- Change in net assets resulting from operations $ 320,154 - -------------------------------------------------------------- ---------
(See Notes which are an integral part of the Financial Statements) BLANCHARD ASSET ALLOCATION FUND STATEMENT OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
SIX MONTHS ENDED PERIOD ENDED (UNAUDITED) SEPTEMBER 30, MARCH 31, 1997 1996(A) - ------------------------------------------------ ---------------- ------------- INCREASE (DECREASE) IN NET ASSETS: - ------------------------------------------------ OPERATIONS-- - ------------------------------------------------ Net investment income $ 94,492 $ 53,879 - ------------------------------------------------ Net realized gain (loss) on investments and futures contracts ($485,847 and $68,583 net gains, respectively, as computed for federal tax purposes) 485,847 (98,943) - ------------------------------------------------ Net change in unrealized appreciation (depreciation) of investments and futures contracts (260,185) 213,243 - ------------------------------------------------ ---------- ---------- Change in net assets resulting from operations 320,154 168,179 - ------------------------------------------------ ---------- ---------- DISTRIBUTIONS TO SHAREHOLDERS-- - ------------------------------------------------ Distributions from net investment income (98,755) -- - ------------------------------------------------ Distributions from net realized gains on investments and futures contracts (142,778) -- - ------------------------------------------------ ---------- ---------- Change in net assets resulting from distributions to shareholders (241,533) -- - ------------------------------------------------ ---------- ---------- SHARE TRANSACTIONS-- - ------------------------------------------------ Proceeds from sale of shares -- 3,200,250 - ------------------------------------------------ Net asset value of shares issued to shareholders in payment of distributions declared 238,429 -- - ------------------------------------------------ Cost of shares redeemed -- (100) - ------------------------------------------------ ---------- ---------- Change in net assets resulting from share transactions 238,429 3,200,150 - ------------------------------------------------ ---------- ---------- Change in net assets 317,050 3,368,329 - ------------------------------------------------ NET ASSETS: - ------------------------------------------------ Beginning of period 3,368,329 -- - ------------------------------------------------ ---------- ---------- End of period (including undistributed net investment income of $49,616 and $53,879, respectively) $3,685,379 $3,368,329 - ------------------------------------------------ ---------- ----------
(a) For the period from June 6, 1996 (date of initial public investment) to September 30, 1996. (See Notes which are an integral part of the Financial Statements) BLANCHARD ASSET ALLOCATION FUND FINANCIAL HIGHLIGHTS - ------------------------------------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
SIX MONTHS ENDED (UNAUDITED) PERIOD ENDED MARCH 31, SEPTEMBER 30, 1997 1996 (A) - ---------------------------------------------------- ----------- ------------- NET ASSET VALUE, BEGINNING OF PERIOD $10.51 $10.00 - ---------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS - ---------------------------------------------------- Net investment income 0.29 0.17 - ---------------------------------------------------- Net realized and unrealized gain (loss) on 0.72 0.34 investments - ---------------------------------------------------- ------ ------ Total from investment operations 1.01 0.51 - ---------------------------------------------------- ------ ------ LESS DISTRIBUTIONS - ---------------------------------------------------- Distributions from net investment income (0.31) -- - ---------------------------------------------------- Distributions from net realized gain on investments (0.45) -- - ---------------------------------------------------- ------ ------ Total distributions (0.76) -- - ---------------------------------------------------- ------ ------ NET ASSET VALUE, END OF PERIOD $10.76 $10.51 - ---------------------------------------------------- ------ ------ TOTAL RETURN (B) 9.45% 5.10% - ---------------------------------------------------- RATIOS TO AVERAGE NET ASSETS - ---------------------------------------------------- Expenses 1.00%* 1.00%* - ---------------------------------------------------- Net investment income 5.07%* 5.39%* - ---------------------------------------------------- Expense waiver/reimbursement (c) 5.49%* 6.24%* - ---------------------------------------------------- SUPPLEMENTAL DATA - ---------------------------------------------------- Net assets, end of period (000 omitted) $3,685 $3,368 - ---------------------------------------------------- Portfolio turnover 93% 33% - ----------------------------------------------------
*Computed on an annualized basis. (a) Reflects operations for the period from June 6, 1996 (date of initial public investment) to September 30, 1996. (b) Based on net asset value. (c) This voluntary expense decrease is reflected in both the expense and net investment income ratios shown above. (See Notes which are an integral part of the Financial Statements) BLANCHARD ASSET ALLOCATION FUND NOTES TO FINANCIAL STATEMENTS MARCH 31, 1997 (UNAUDITED) - ------------------------------------------------------------------------------- (1) ORGANIZATION Blanchard Funds (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "Act") as an open-end, management investment company. The Trust consists of seven portfolios. The financial statements included herein are only those of Blanchard Asset Allocation Fund (the "Fund"), a diversified portfolio. The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. The investment objective of the Fund is to maximize total return over the long term by allocating its assets among stocks, bonds, short-term instruments, and other instruments. (2) SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with generally accepted accounting principles. INVESTMENT VALUATIONS--U.S. government securities, listed corporate bonds, other fixed income and asset-backed securities, and unlisted securities and private placement securities are generally valued at the mean of the latest bid and asked price as furnished by an independent pricing service. Short- term securities are valued at the prices provided by an independent pricing service. However, short-term securities with remaining maturities of sixty days or less at the time of purchase may be valued at amortized cost, which approximates fair market value. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the custodian bank to take possession, to have legally segregated in the Federal Reserve Book Entry System, or to have segregated within the custodian bank's vault, all securities held as collateral under repurchase agreement transactions. Additionally, procedures have been established by the Fund to monitor, on a daily basis, the market value of each repurchase agreement's collateral to ensure that the value of collateral at least equals the repurchase price to be paid under the repurchase agreement transaction. The Fund will only enter into repurchase agreements with banks and other recognized financial institutions, such as broker/dealers, which are deemed by the Fund's manager to be creditworthy pursuant to the guidelines and/or standards reviewed or established by the Board of Trustees (the "Trustees"). Risks may arise from the potential inability of counterparties to honor the terms of the repurchase agreement. Accordingly, the Fund could receive less than the repurchase price on the sale of collateral securities. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses are accrued daily. Bond premium and discount, if applicable, are amortized as required by the Internal Revenue Code, as amended (the "Code"). Distributions to shareholders are recorded on the ex-dividend date. BLANCHARD ASSET ALLOCATION FUND - ------------------------------------------------------------------------------- FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the Code applicable to regulated investment companies and to distribute to shareholders each year substantially all of its income. Accordingly, no provisions for federal tax are necessary. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in when- issued or delayed delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when-issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. FUTURES CONTRACTS--The Fund purchases stock index futures contracts to manage cashflows, enhance yield, and to potentially reduce transaction costs. Upon entering into a stock index futures contract with a broker, the Fund is required to deposit in a segregated account a specified amount of cash or U.S. government securities. Futures contracts are valued daily and unrealized gains or losses are recorded in a "variation margin" account. Daily, the Fund receives from or pays to the broker a specified amount of cash based upon changes in the variation margin account. When a contract is closed, the Fund recognizes a realized gain or loss. For the period ended March 31, 1997, the Fund had realized gains/losses on futures contracts of $130,385. Futures contracts have market risks, including the risk that the change in the value of the contract may not correlate with changes in the value of the underlying securities. At March 31, 1997, the Fund had outstanding futures contracts as set forth below:
UNREALIZED EXPIRATION DATE CONTRACTS TO RECEIVE POSITION DEPRECIATION --------------- --------------------------- -------- ------------ September 1997 1 S&P 500 September Futures Long $30,425
OPTIONS TRANSACTIONS--The Fund may purchase over-the-counter put options to hedge against the effects of fluctuations in interest rates and other market conditions. The risk associated with purchasing an option is that the Fund pays a premium whether or not the option is exercised. Additionally, the Fund bears the risk of loss of premium and change in market value should the counterparty not perform under the contract. Put options purchases are accounted for in the same manner as portfolio securities. USE OF ESTIMATES--The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ from those estimated. OTHER--Investment transactions are accounted for on the trade date. (3) SHARES OF BENEFICIAL INTEREST The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest (without par value). BLANCHARD ASSET ALLOCATION FUND - ------------------------------------------------------------------------------- Transactions in shares were as follows:
SIX MONTHS ENDED PERIOD ENDED MARCH 31, 1997 SEPTEMBER 30, 1996* - ---------------------------------- ---------------- ------------------- Shares sold -- 320,643 - ---------------------------------- Shares issued to shareholders in payment of distributions declared 21,855 -- - ---------------------------------- Shares redeemed -- (10) - ---------------------------------- ------ ------- Net change resulting from share transactions 21,855 320,633 - ---------------------------------- ------ -------
*For the period from June 6, 1996 (date of initial public investment) to September 30, 1996. (4) MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES MANAGEMENT FEE--Virtus Capital Management Inc., the Fund's manager (the "Manager"), receives for its services an annual management fee equal to 1.00% of the Fund's average daily net assets. The Manager may voluntarily choose to waive any portion of its fee and/or reimburse certain operating expenses of the Fund. The Manager can modify or terminate this voluntary waiver and/or reimbursement at any time at its sole discretion. SUB-ADVISORY FEE--Under the terms of a sub-advisory agreement between the Manager and the Mellon Capital Management Corporation (the "Portfolio Adviser"), the Portfolio Adviser receives an annual fee from the Manager equal to 0.50% of the Fund's average daily net assets up to $50 million, 0.375% of the Fund's net assets between $50 million and $200 million, and 0.25% on net assets in excess of $200 million, payable by the Manager, in quarterly installments. ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund with certain administrative personnel and services. The fee paid to FAS is based on the level of average combined aggregate net assets of the Trust, the Blanchard Precious Metals Fund Inc., and the Virtus Funds, all of which are advised by the Manager, for the period. The administrative fee received during the period of the Administrative Services Agreement shall be at least $75,000 per portfolio. FAS may voluntarily choose to waive a portion of its fee. DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will reimburse Federated Securities Corp. ("FSC"), the principal distributor, from the net assets of the Fund to finance activities intended to result in the sale of the Fund's shares. The Plan provides that the Fund may incur distribution expenses up to 0.25% of the average daily net assets of the Fund, annually, to reimburse FSC. As of March 31, 1997, the Fund accrued no distribution services fee and has no current intention of accruing this fee. TRANSFER AGENT AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company ("FServ"), through its subsidiary, Federated Shareholder Services Company ("FSSC") serves as transfer and dividend disbursing agent for the Fund. The fee paid to FSSC is based on size, type, and number of accounts and transactions made by shareholders. BLANCHARD ASSET ALLOCATION FUND - ------------------------------------------------------------------------------- PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting records for which it receives a fee. The fee is based on the level of the Fund's average daily net assets for the period, plus out-of-pocket expenses. CUSTODIAN FEES--Signet Trust Company is the Fund's custodian. The fee is based on the level of the Fund's average daily net assets for the period, plus out-of-pocket expenses. The custodian may voluntarily choose to waive a portion of its fee. GENERAL--Certain of the Officers and Trustees of the Trust are Officers and Directors or Trustees of the above companies. (5) INVESTMENT TRANSACTIONS Purchases and sales of investments, excluding short-term securities, for the period ended March 31, 1997, were as follows: - --------- PURCHASES $2,880,425 - --------- ---------- SALES $3,026,264 - --------- ----------
TRUSTEES OFFICERS - -------------------------------------------------------------------------------- John F. Donahue John F. Donahue Thomas G. Bigley Chairman John T. Conroy, Jr. Edward C. Gonzales William J. Copeland President and Treasurer James E. Dowd J. Christopher Donahue Lawrence D. Ellis, M.D. Executive Vice President Edward L. Flaherty, Jr. John W. McGonigle Edward C. Gonzales Executive Vice President and Peter E. Madden Secretary Gregor F. Meyer Joseph S. Machi John E. Murray, Jr. Vice President and Assistant Wesley W. Posvar Treasurer Marjorie P. Smuts Richard B. Fisher Vice President C. Grant Anderson Assistant Secretary This report is authorized for distribution to prospective investors only when preceded or accompanied by the fund's prospectus which contain facts concerning its objective and policies, management fees, expenses and other information. -----END PRIVACY-ENHANCED MESSAGE-----