-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, AH1ZOsJMB8Vtq6UYgS/PUYHid7izEHGjmn3I5An88JhXk80NbVUjXSSkRXqzgpBN eCtrfc/xE2Y38WS+/CUbTQ== 0000950007-95-000091.txt : 199507050000950007-95-000091.hdr.sgml : 19950705 ACCESSION NUMBER: 0000950007-95-000091 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950430 FILED AS OF DATE: 19950703 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: 95551851 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 ANNUAL REPORT Dear Shareholders, Enclosed please find the Annual Report for your Blanchard Short-Term Bond Fund for the fiscal year ending April 30, 1995. As the head of the team responsible for the portfolio management of your Fund, it is my pleasure to report on the Fund's progress during the fiscal year. Thanks to an unprecedented series of interest rate hikes by Alan Greenspan and the Federal Reserve, 1994 was a very difficult year for bond markets. Even so, your Blanchard Short-Term Bond Fund was able to produce a positive total return of 1.02% for the 12 months ending 12/31/94, and 5.34% for the 12 months ending 4/30/95. This was no small feat, as only a total of 192 bond funds were able to claim a positive total return in 1994. That's out of a total universe of 2,959 bond funds tracked by Morningstar, Inc. Of course, past performance is no guarantee of future results. As with any fixed income investment, the Fund's yield, investment return and principal value will vary so that shares, when redeemed, may be worth more or less than their original pur- chase price. As you might surmise, we are very pleased with the result, as the overriding objective of your Fund is to provide a solid level of steady income while making every effort to preserve capital. We were able to produce such a The following information was reprint as a line graph. - -------------------------------------------------------------------------------- The Value of a $10,000 Investment in the Blanchard Short-Term Bond Fund inception 4/16/93 through 4/30/95 as compared to the Merrill Lynch Short-Term Treasuries Index for the same period ------------------------------------- Avg. Annual Returns through 4/30/95 Blanchard Short-Term Bond Fund* ------------------------------------- 1 year 5.34% since inception 4.51% ------------------------------------- FYE 4/30/93 FYE 4/30/94 FYE 4/30/95 STBF 0.15% 3.72% 5.34% MERRILL LYNCH 0.30% 1.62% 5.77% M.L. Corp & Govt 0.20% 1.34% 6.12% $10,000.00 $10,015 $10,388 $10,942 $10,000.00 $10,030 $10,192 $10,781 $10,000.00 $10,020 $10,154 $10,776 Blanchard Merrill Lynch Merrill Lynch Short-Term Short-Term Short-Term Govt. Bond Fund Treasuries Index(D) Corporate Index^ *The average annual and total returns quoted above and the chart shown above do not reflect the deduction of management fees and some expenses which have been waived. If reflected, the returns, which also reflect reinvestment of distributions, would be lower. The total return includes changes in principal value. Average annual return is total return annualized and compounded. Past performance is no guarantee of future results. (D)Source: Merrill Lynch Short-Term Treasury Index is an unmanaged index of U.S. Treasury bonds with maturities from 1 to 2.999 years. Unlike the BSTBF, Treasury bonds are guaranteed by the U.S. government. ^Source: Merrill Lynch Short-Term Government Corporate Index is an unmanaged index of corporate and government issues with maturities from 1 to 4.99 years. This chart is for comparative purposes only and is not intended to reflect future performance of the BSTBF, the indices, or Treasury bonds. - -------------------------------------------------------------------------------- (over, please) result by investing the portfolio in high-quality bonds, and keeping its average portfolio maturity very short. We avoided the mistake of some short-term bond funds, which may have been imprudent in their exposure to riskier alternative markets, including even emerging market debt. So far, 1995 has been a far more positive environment for bond investors, allowing us to add a satisfactory level of capital gains to our income. Over the two years since its inception, your Fund has continued to provide a relatively stable share price and solid monthly income. As shown in the chart at the beginning of this letter, its performance compares favorably with the Merrill Lynch Short-Term Treasuries Index, an unmanaged index of U.S. Treasury Bonds which cannot be invested in directly. We have also compared performance to the Merrill Lynch Short-Term Government Corporate Index. We believe that, going forward, this index more closely approximates the portfolio make-up of your Blanchard Short-Term Bond Fund. Naturally, past performance is no guarantee of future results. Looking Ahead Following the strong bond rally early in 1995, we have become somewhat more cautious on a short-term basis. As a result, the Fund's conservative portfolio mandate should serve you well. Longer-term, however, we believe that interest rates have now settled in a lower range than they have been in several years. While inflation may move somewhat higher, we don't believe it will increase to any significant degree. In essence, we are currently enjoying what a number of analysts have come to call a "soft landing." In simple terms, this means that while economic activity will most likely regain some momentum, helped along by the recent decline in interest rates and by the decline in the value of the dollar, any such expansion should not accelerate to a worrisome level in the foreseeable future. We thank you for your continued support and look forward to serving you in the months and years ahead. Sincerely, JB:ml Jack Burks Managing Director of OFFITBANK Portfolio Managers of the Blanchard Short-Term Bond Fund Distributed by Sheffield Investments, Inc. (1551) 06ARSL0695 BLANCHARD SHORT-TERM BOND FUND-PORTFOLIO OF INVESTMENTS April 30, 1995 (Left Column) Principal Value --------- ----- U.S. FIXED INCOME (70.2%) CORPORATE BONDS (4.1%) Consumer Related (2.2%) RJR Nabisco Inc. 8.30%, 4/15/99 ...................... $ 500,000 $ 509,828 ----------- Industrial Related (1.9%) PDV America Inc. 7.25%, 8/01/98 ...................... 500,000 455,841 ----------- TOTAL CORPORATE BONDS ............. 965,669 ----------- U.S. GOVERNMENT AND AGENCY ISSUES (66.1%) Federal National Mortgage Association 8.20%, 8/10/98 .......... 1,000,000 1,005,763 Government National Mortgage Association II 10%, 6/20/16 209,064 221,673 Resolution Trust Corp. 6%, 1/15/04 ... 250,000 249,688 U.S. Treasury Notes 6.88%, 10/31/96 ..................... 4,500,000 4,523,904 U.S. Treasury Notes 7.50%, 2/29/96 ... 2,500,000 2,523,438 U.S. Treasury Notes 7.50%, 1/31/96 ... 2,000,000 2,016,874 U.S. Treasury Notes 5.50%, 4/30/96 ... 5,000,000 4,959,375 ----------- TOTAL U.S. GOVERNMENT AND AGENCY ISSUES 15,500,715 TOTAL U.S. FIXED INCOME (IDENTIFIED COST $16,521,040) ..................... 16,466,384 ----------- U.S. HIGH YIELD SECURITIES (24.5%) U.S. CORPORATE BONDS (24.5%) Airlines (0.7%) U.S. Air Inc. Series D 9.8%, 1/15/00 ....................... 200,000 173,250 ----------- Basic Materials (2.1%) Owens Illinois Inc. 10.25%, 4/01/99 .. 500,000 511,250 Consumer Related (3.0%) MacAndrews & Forbes Group Inc. 12.25%, 7/01/96 ..................... 200,000 201,500 Revlon Consumer Products Corp. 9.50%, 6/01/99 ...................... 500,000 491,250 ----------- 692,750 ----------- (Right Column) Principal Value --------- ----- Energy & Oil Related (3.4%) Texas New Mexico Power Co. 9.25%, 9/15/00 ...................... $400,000 $ 399,584 Triton Energy Corp. 0%, 11/01/97 ..... 500,000 398,750 ----------- 798,334 ----------- Financial Services (8.0%) Great American Holding Corp. 11%, 8/15/98 ........................ 500,000 501,875 Navistar Financial Group Corp. 8.88%, 11/15/98 ..................... 500,000 492,500 Presidential Life Corp. 9.50%, 12/15/00 ..................... 400,000 386,000 Reliance Group Holdings Inc. 9.0%, 11/15/00 ...................... 500,000 476,875 ----------- 1,857,250 ----------- Industrial Related (5.1%) Armco, Inc. 9.38%, 11/01/00 .......... 350,000 331,625 Sequa Corp. 8.75%, 12/15/01 .......... 350,000 329,437 Unisys Corp. 10.63%, 10/01/99 ........ 500,000 527,197 ----------- 1,188,259 ----------- Medical Services (1.5%) Healthsouth Rehabilitation Corp. 9.50%, 4/01/01 ...................... 350,000 357,875 ----------- Telecommunications (0.7%) SCI Television Inc. 7.50%, 6/30/98 ... 168,800 167,112 ----------- TOTAL U.S. HIGH YIELD SECURITIES (IDENTIFIED COST $5,880,640) ............... 5,746,080 ----------- SHORT-TERM SECURITIES (3.2%) Associates Corp. of N.A. 5.80%, 5/01/95 ...................... 740,000 740,000 ----------- TOTAL SHORT-TERM SECURITIES (IDENTIFIED COST $740,000) .................. 740,000 ----------- TOTAL INVESTMENTS (97.9%)(a) (IDENTIFIED COST $23,141,680) .................... 22,952,464 CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES (2.1%) .... 492,043 ----------- NET ASSETS (100%) ................ $23,444,507 ----------- - --------------- (a) The aggregate cost for federal income tax purposes is $23,141,680; the gross unrealized appreciation is $12,801; and the gross unrealized depreciation is $202,017; resulting in net unrealized depreciation of $189,216. See notes to financial statements. 3 BLANCHARD SHORT-TERM BOND FUND (Left Column) STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1995 Assets: Investments in securities, at value (Identified Cost $23,141,680) (note 1) .......................... $22,952,464 Cash .................................. 47,520 Receivables for: Interest ............................ 543,053 Shares of beneficial interest sold .. 501 Deferred organizational expenses (note 1) ............................ 48,680 ----------- Total assets ...................... 23,592,218 ----------- Liabilities: Payables for: Shares of beneficial interest repurchased ....................... 106,165 Dividends ............................. 7,015 Accrued expenses and other liabilities ......................... 34,531 Total liabilities ................. 147,711 ----------- Net assets ........................ $23,444,507 =========== Net assets are comprised of: Paid in capital (unlimited authorized shares of beneficial interest, $.01 par value, 7,985,358 shares outstanding) ........................ $24,355,402 Accumulated overdistributed investment income - net ............. (58,696) Accumulated realized loss - net ....... (662,983) Unrealized net depreciation of investments ......................... (189,216) ----------- Net assets ........................ $23,444,507 =========== Net asset value per share ......... $2.94 ===== (Right Column) STATEMENT OF OPERATIONS For the Year Ended April 30, 1995 Investment income: Interest .............................. $1,934,317 ---------- Expenses Investment management fee (note 2) .............. $235,737 Accounting fees ............. 96,176 Plan of distribution (note 3) .................. 78,579 Transfer agent fees ......... 75,999 Trustees' fees, retirement plan curtailment and other expenses (note 5) ... 36,894 Custodian fees .............. 36,080 Professional fees ........... 34,282 Registration fees ........... 27,500 Shareholder reports and notices ................... 24,950 Organizational expenses ..... 15,429 Other ....................... 4,474 -------- Total expenses ............ 666,100 Less: Fund expenses voluntarily waived by Manager and Distributor (note 2) .... (234,663) -------- Net expenses .......................... 431,437 ---------- Investment income - net ............... 1,502,880 ---------- Realized and unrealized gain (loss) - net (note 1): Realized gain (loss) on: Investments - net (541,619) Forward currency contracts and foreign exchange transactions - net (30,645) (572,264) -------- Change in unrealized appreciation or depreciation on investments - net ..... 443,090 ---------- Net realized and unrealized losses ...... (129,174) ---------- Net increase in net assets resulting from operations ............. $1,373,706 ========== See notes to financial statements. 4 BLANCHARD SHORT-TERM BOND FUND STATEMENT OF CHANGES IN NET ASSETS
For the For the Year Ended Year Ended April 30, 1995 April 30, 1994 -------------- -------------- Increase (decrease) in net assets: Operations: Investment income - net .......................................................... $ 1,502,880 $ 1,441,173 Realized loss - net .............................................................. (572,264) (214,464) Change in unrealized appreciation or depreciation - net .......................... 443,090 (631,753) ----------- ----------- Net increase in net assets resulting from operations ............................. 1,373,706 594,956 ----------- ----------- Dividends and distributions to shareholders from: Investment income - net .......................................................... (1,502,880) (1,440,603) Dividends in excess of investment income - net ................................... (18,912) -- Realized gains - net ............................................................. - (102,660) ----------- ----------- ..................................................................................... (1,521,792) (1,543,263) ----------- ----------- Transactions in shares of beneficial interest - net increase (decrease) (note 6) ..... (18,788,567) 41,131,587 ----------- ----------- Net increase (decrease) in net assets ............................................ (18,936,653) 40,183,280 Net assets: Beginning of year ................................................................ 42,381,160 2,197,880 ----------- ----------- End of year (including accumulated overdistributed investment income - net of $58,696 and $189,258, respectively) ............................ $23,444,507 $42,381,160 =========== ===========
See notes to financial statements. 5 BLANCHARD SHORT-TERM BOND FUND NOTES TO FINANCIAL STATEMENTS April 30, 1995 NOTE 1 - Organization and Accounting Policies: Blanchard Short-Term Bond Fund (the "Fund") is a series of Blanchard Funds which was organized as a Massachusetts business trust on January 24, 1986. The Fund is a registered, open-end non-diversified management investment company under the Investment Company Act of 1940, as amended (the "Act"). The Fund had no operations before April 16, 1993 other than the sale of shares of beneficial interest to Sheffield Management Company (the "Manager") and OFFITBANK (the "Portfolio Adviser"). The following is a summary of the significant accounting policies followed by the Fund: A. Valuation of Investments-Portfolio securities traded on domestic or foreign exchanges are valued at the 4 PM EST price on that date, or if no sales are made on that day, at the closing bid price (or the mean price in cases where a mean is reported instead of the closing bid). In cases where a security is traded on more than one exchange, it is valued at the quotation on the exchange determined to be the primary market for such security by the Trustees or the Manager. All other portfolio securities for which over-the-counter market quotations are readily available are valued at the latest available bid prices. Short-term debt securities which mature in 60 days or less are valued at amortized cost if their original maturity was 60 days or less. Short-term debt securities having a maturity date of more than sixty days at the time of purchase are valued on a mark to market basis until sixty days prior to maturity and thereafter at amortized cost based on their value on the 61st day. All other securities and other assets of the Fund are valued at fair value as determined in good faith by the Trustees. Foreign currency exchange rates are determined when such rates are made available to the Fund at times prior to the close of the New York Stock Exchange. The ability of the issuers of debt securities held by the Fund to meet their obligations may be affected by economic or political developments in a particular country, industry or region. The Fund invests a portion of its assets in high yield securities, which may be subject to a greater degree of credit risk, greater market fluctuations and risks of loss of income and principal, and may be more sensitive to economic conditions than lower yielding, higher rated fixed income securities. B. Accounting for Investments and Investment Income-Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Realized gains and losses on security transactions are determined on the identified cost method. Interest income is accrued daily. Premiums or discounts on debt securities are amortized or accreted as adjustments to interest income over the lives of such securities. C. Foreign Currency Translation-The books and records of the Fund are maintained in U.S. dollars as follows: (1) the foreign currency market value of investment securities, forward currency contracts, and other assets and liabilities denominated in foreign currencies are translated at the exchange rate at the end of the period, and (2) purchases, sales, income and expenses are translated at rates of exchange prevailing on the respective dates of such transactions. The Fund does not separately identify that portion of the results of operations of the Fund that arise as a result of changes in the exchange rates from the fluctuations that arise from changes in market prices of equity investments during the period. However, in accordance with the requirements of the Internal Revenue Code, the Fund isolates the effect of changes in foreign exchange rates from the fluctuations arising from changes in market prices of foreign debt obligations sold, and such foreign exchange losses, which amounted to $24,650, are included in ordinary income for federal 6 BLANCHARD SHORT-TERM BOND FUND NOTES TO FINANCIAL STATEMENTS (continued) April 30, 1995 income tax purposes and have been reclassified from realized gain (loss) on investments to realized gain (loss) on forward currency contracts and foreign exchange transactions - net in the Statement of Operations. Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of domestic origin as a result of, among other factors, the level of governmental supervision and regulation of foreign securities markets and the possibility of political or economic instability. The Fund may enter into forward currency contracts to protect the U.S. dollar value of securities and related receivables and payables against changes in future foreign exchange rates. Forward currency contracts are valued based upon the current forward rates. Fluctuations in the value of such contracts are recorded as unrealized gains or losses; realized gains or losses include net gains or losses on contracts which have settled. The Fund generally enters into a forward currency contract as a hedge against foreign exchange rate fluctuations upon the purchase or sale of a security denominated in a foreign currency. The Fund maintains, as collateral, U.S. Government or other highly liquid debt obligations in an amount equal to or greater than its net obligation for forward currency contracts. Risks may arise as a result of the potential inability of the counterparties to meet the terms of their contracts. D. Federal Income Tax Status-It is Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income to its shareholders. Accordingly, no federal income tax provision is required. E. Dividends and Distribution to Shareholders-The Fund records dividends and distributions to its shareholders on the record date. The amount of dividends and distributions from net investment income and net realized capital gains are determined in accordance with federal income tax regulations which may differ from generally accepted accounting principles. These "book/tax" differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences do not require reclassification. Dividends and distributions which exceed net investment income and net realized capital gains for financial reporting purposes but not for tax purposes are reported as dividends in excess of net investment income or distributions in excess of net realized capital gains. To the extent they exceed net investment income and net realized capital gains for tax purposes, they are reported as distributions of paid-in capital. F. Organizational Expenses-The Fund's Manager paid the organizational expenses of the Fund incurred prior to the public offering of its shares amounting to $77,143. The Fund reimbursed the Manager for these expenses and has deferred and is amortizing such expenses on the straight-line method over five years from the date of commencement of the Fund's operations. G. Other-Certain expenses for the Blanchard Funds are allocated among the Funds based upon their relative average net assets. 7 BLANCHARD SHORT-TERM BOND FUND NOTES TO FINANCIAL STATEMENTS (continued) April 30, 1995 NOTE 2 - Investment Management Agreement: Pursuant to a management agreement (the "Agreement"), the Manager manages the Fund and the investment of the Fund's assets, subject at all times to the supervision of the Fund's Trustees. In addition to providing overall business management and administrative services, the Manager selects, monitors and evaluates the Portfolio Adviser described below. The Manager receives from the Fund an advisory fee payable monthly at an annual rate of .75% of the Fund's average daily net assets. For the year ended April 30, 1995, the Manager and Distributor voluntarily waived the advisory and distribution fee, which amounted to $181,185 and $5,944, respectively, and absorbed $47,534 of other expenses of the Fund. Expenses of the Fund, exclusive of taxes, interest, brokerage commissions, distribution fees, extraordinary expenses and certain other excludable expenses, are subject to the expense limitation imposed by one of the states in which shares of the Fund are offered for sale. For the year ended April 30, 1995, the Fund's expenses did not exceed such limitation. Certain officers and/or Trustees of the Fund are officers/directors of the Manager. The Manager has sub-advisory agreements with the Portfolio Adviser. The Manager has advised the Fund that fees paid to the Portfolio Adviser were $27,254 for the year ended April 30, 1995. Although not required to do so pursuant to the Management Agreement and Distribution Plan in effect between the Fund and its Manager and Sheffield Investments, Inc. (the "Distributor"), respectively, the Manager and the Distributor voluntarily agreed that they will defer all or a portion of fees payable to them and absorb a portion of other expenses until further notice. Such deferred fees and expense absorptions are subject to later reimbursement. The Manager and the Distributor have conditioned their right to receive a portion of any earned but deferred fees and to receive reimbursement for absorbed expenses (measured on a rolling two-year period, starting from the date the portion of the fee is deferred and/or the expenses are absorbed) upon the Fund reaching and maintaining the following specified levels of net assets for 30 continuous days (excluding assets exchanged into the Fund from other funds in the Blanchard Group of Funds) provided that such reimbursement would not cause the Fund's expenses in such a year to exceed 1.75% of average daily net assets. Conditional Portion of Specified Level of Earned but Deferred Fund's Net Assets Fees to be Received $50 Million 25% 60 Million 25% 70 Million 25% 80 Million 25% --- 100% === Subject to this agreement, $360,855 which was deferred in fiscal 1994 was permanently waived by the Manager and Distributor in fiscal 1995. 8 BLANCHARD SHORT-TERM BOND FUND NOTES TO FINANCIAL STATEMENTS (continued) April 30, 1995 NOTE 3 - Distribution Agreement and Plan: Pursuant to a Distribution Agreement, the Distributor, an affiliated company of the Manager, acts as principal distributor of the Fund's shares. The Distributor has the exclusive right to distribute Fund shares directly or through other broker-dealers. The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the Act which provides that the Fund may finance activities which are primarily intended to result in the sale of the Fund's shares, including but not limited to advertising, printing of prospectuses and reports for other than existing shareholders, preparation and distribution of advertising material and sales literature, and payments to dealers and shareholder servicing agents who enter into agreements with the Manager or Distributor. Pursuant to the Plan, the Fund may pay distribution fees not to exceed .25% per annum of the Fund's average daily net assets. Provided that the Plan continues in effect, any cumulative expenses incurred by the Distributor on or after April 16, 1993, but not yet reimbursed by the Fund, may be reimbursed through future distribution fees from the Fund. The Distributor has advised the Fund that at April 30, 1995, the unreimbursed distribution expenses amounted to $486,173. If the Plan is terminated or discontinued in accordance with its terms, the obligation of the Fund to make payments to the Distributor pursuant to the Plan will cease and the Fund will not be required to make any payments past the date the Plan is terminated. NOTE 4 - Acquisition Agreement: Sheffield Management Company (the "Manager") and Sheffield Investments, Inc. (the "Distributor"), have entered into an acquisition agreement (the "Acquisition Agreement") with Signet Banking Corporation and two of its subsidiaries ("Signet"), dated February 15, 1995, pursuant to which Sheffield will sell to Signet the assets relating to, and the ability to succeed to contracts with, the Blanchard Funds, including Blanchard Short-Term Bond Fund (collectively, the "Funds"). The transactions contemplated by the Acquisition Agreement which have been approved by the Board of Trustees of the Funds are conditioned upon the approval of the shareholders of each Fund, of (1) a new investment management agreement with Signet, (2) a new distribution agreement with Federated Securities Corp., and (3) certain other conditions. No material changes are contemplated in the operation of the Funds and no management or distribution and administration fee increases are being proposed. 9 BLANCHARD SHORT-TERM BOND FUND NOTES TO FINANCIAL STATEMENTS (continued) April 30, 1995 NOTE 5 - Security Transactions and Transactions with Affiliates: Purchases and sales of portfolio securities for the year ended April 30, 1995, excluding short-term investments, aggregated $33,808,339 and $24,658,325, respectively, including purchases and sales of U.S. Government obligations of $32,814,578 and $18,848,241, respectively. The Manager has advised the Fund that, for the year ended April 30, 1995, it incurred costs, which were reimbursed by the Fund, amounting to $36,438 for performing internal accounting and transfer agency functions for the Fund. The Funds have adopted an unfunded noncontributory pension plan (the "Plan") covering all independent directors/trustees of the Funds who will have served as an independent director/trustee for at least five years at the time of retirement. Benefits under this plan are based on an annual amount equal to 75% of the director/trustee fee at the time of retirement, plus 5% for each year of service in excess of five years of service but not in excess of ten years of service. Net periodic pension expense included in Trustees' fees, retirement plan curtailment and other fees in the Statement of Operations for the year ended April 30, 1995 was $5,230. As indicated in Note 4, the Manager has entered into an agreement which provides for the acquisition of the Manager by Signet. Following the acquisition, the independent directors/trustees of the Funds will not stand for re-election. As a result, the Plan was curtailed and additional pension expense of $24,679 was recorded to reflect the previously unrecognized prior service costs of the independent directors/trustees. Included in accrued expenses and other liabilities at April 30, 1995 is $29,909 of accrued pension expense. NOTE 6 - Shares of Beneficial Interest: For the For the Year Ended Year Ended April 30, 1995 April 30, 1994 -------------- -------------- Shares Amount Shares Amount ------ ------ ------ ------ Sold ..................... 7,207,260 $21,020,411 28,775,937 $86,052,474 Reinvestment of dividends and distributions ...... 460,620 1,341,339 456,142 1,364,050 ----------- ----------- ----------- ----------- 7,667,880 22,361,750 29,232,079 87,416,524 Repurchased .............. (14,143,317) (41,150,317) (15,504,618) (46,284,937) ----------- ------------ ----------- ----------- Net increase (decrease) .. (6,475,437) $(18,788,567) 13,727,461 $41,131,587 =========== ============ =========== =========== NOTE 7 - Federal Income Taxes: Capital and foreign currency losses incurred after October 31 ("post-October losses") within the taxable year are deemed to arise on the first business day of the Fund's next taxable year. The Fund incurred and will elect to defer net capital and foreign currency losses of approximately $247,000 and $7,000, respectively during fiscal 1995. 10 BLANCHARD SHORT-TERM BOND FUND NOTES TO FINANCIAL STATEMENTS (continued) April 30, 1995 As of April 30, 1995, the Fund had temporary book/tax differences primarily attributable to post-October loss deferrals and non-deductible expenses. The Fund had permanent book/tax differences primarily attributable to foreign currency losses. To reflect reclassifications arising from permanent book/tax differences for the year ended April 30, 1995, paid-in-capital was charged $187,618, accumulated realized loss-net was credited $38,144 and accumulated overdistributed investment income-net was credited $149,474. At April 30, 1995 the Fund had a net capital carryover of $401,749 which is available through April 30, 2003 to offset future capital gains. To the extent that these carryover losses are used to offset future capital gains, it is probable that the gains so offset will not be distributed to shareholders. NOTE 8 - Financial Highlights: Selected ratios and per share data for a share of beneficial interest outstanding: For the Period April 16, 1993 For the Year Ended (commencement April 30, of operations) to ------------------------- April 30, 1995 1994 1993 ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period ......................... $2.93 $3.00 $3.00 ----- ----- ----- Income from investment operations: Net investment income ...................................... .15 .17 .00(3) Net gains or losses on securities (both realized and unrealized) .............................................. .00(3) (.06) .00(3) ----- ----- ----- Net income from investment operations .................... .15 .11 .00(3) ----- ----- ----- Less dividends and distributions: Dividends from net investment income ....................... (.14) (.17) .00(3) Dividends in excess of net investment income................ (.00)(3) -- -- Distributions from realized gains - net .................... .00 (.01) .00(3) ----- ----- ----- Change in net asset value ................................ .01 (.07) .00(3) ----- ----- ----- Net asset value, end of period ............................... $2.94 $2.93 $3.00 ===== ===== ===== Total return ................................................. 5.34% 3.72% .15%(4) Ratios/Supplemental Data: Net assets end of period ($ Million) ....................... $23 $42 $2 Ratio of expenses to average net assets .................... 1.38%(2) .63%(2) 3.03%(1) Ratio of net investment income to average net assets ....... 4.80%(2) 5.64%(2) 3.89%(1) Portfolio turnover ........................................... 84% 212% 36% - ------------- (1) Annualized. (2) The ratios of expenses to average net assets and net investment income to average net assets would have been 2.13% and 4.05%, respectively, for the year ended April 30, 1995 and 2.05% and 4.22%, respectively, for the year ended April 30, 1994, if a portion of the Fund's expenses had not been voluntarily deferred and absorbed by the Manager and Distributor. (3) Less than one cent per share. (4) Not annualized.
11 BLANCHARD SHORT-TERM BOND FUND REPORT OF INDEPENDENT ACCOUNTANTS To the Trustees and Shareholders of Blanchard Short-Term Bond Fund In our opinion, the accompanying statement of assets and liabilities, including the portfolio of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Blanchard Short-Term Bond Fund (the "Fund") at April30, 1995, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the two years in the period then ended and for the period April 16, 1993 (commencement of operations) through April30, 1993, in conformity with generally accepted accounting principles. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at April 30, 1995 by correspondence with the custodian, provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP 1177 Avenue of the Americas New York, New York 10036 June 20, 1995 12 (Left Column) Portfolio Adviser OFFITBANK Custodian and Transfer Agent United States Trust Company of New York Independent Accountants Price Waterhouse LLP Legal Counsel Kramer, Levin, Naftalis, Nessen, Kamin & Frankel Blanchard Short-Term Bond Fund 41 Madison Ave., 24th Floor New York, NY 10010-2267 (Right Column) Blanchard Short-Term Bond Fund Annual Report April 30, 1995 Managed by: Sheffield Management Company 41 Madison Ave., 24th Floor New York, NY 10010-2267 1-800-922-7771 -----END PRIVACY-ENHANCED MESSAGE-----