-----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, CeHLipWu7Y4tw+KVuDWhTcAhkDb/L2hfLbiYUyEJ+HlCEKQ4dMVk5H52npchJ3dS p/LacyfP8K7ecdjWyEaCTg== 0000950007-95-000095.txt : 199507050000950007-95-000095.hdr.sgml : 19950705 ACCESSION NUMBER: 0000950007-95-000095 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: 95551857 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 Worldwide Emerging Markets Fund (formerly known as the Blanchard Emerging Markets Growth & Income Fund) for the fiscal year ending April 30, 1995. Since the launch of the Blanchard Worldwide Emerging Markets Fund, the returns available from global emerging markets have been generally disappointing and incredibly volatile. Fortunately, past performance is no indication of future performance. And indeed, the high volatility associated with the world's emerging markets has in other years led to significant returns for investors. That being said, here's a closer look at what happened in the emerging markets and your Blanchard Worldwide Emerging Markets Fund in fiscal 1994, as well as our outlook for fiscal 1995. The Year In Review The world's emerging markets were negatively affected by the change in the U.S. interest rate environment which began in early February 1994. The progressive tightening of U.S. monetary policy throughout the year significantly diminished the flow of U.S. investor dollars into emerging markets. The impact was initially felt in Asia, and as the year progressed, markets in Central Europe and Latin America also came under pressure. In addition to this diminished flow of U.S. investor dollars, a series of assassinations in Mexico, followed by the clumsy handling of the peso's devaluation in mid-December, caused the investment climate within Latin America to deteriorate rapidly. As a result, investors' perception of the risk inherent in South American investment dramatically increased and caused a sharp decline in most Latin American markets. As 1995 began, the world's emerging markets continued the volatile trend established in 1994. Latin America has experienced a roller-coaster ride, with The following information was reprint as a line graph. The Value of a $10,000 Investment in the Blanchard Worldwide Emerging Markets Fund from inception 3/1/94 through 4/30/95 as compared to Morgan Stanley Emerging Markets Index for the same period ----------------------------------------- Avg. Annual Returns through 4/30/95 Blanchard Worldwide Emerging Markets Fund* ----------------------------------------- 1 year -19.80% since inception -17.44% ----------------------------------------- FYE 4/30/94 FYE 4/30/95 BMBF -0.25% -19.80% MORGAN STANLEY -7.00% -4.78% BMBF $ 9,963 $9,938 $7,970 MORGAN STANLEY $10,000 $9,300 $8,855 Reflects deduction of $37.50 acct opening fee Blanchard Morgan Stanley Worldwide Emerging Emerging Markets Fund^ Markets Index(D) *Total return quoted above reflects reinvestment of distributions, but does not reflect the deduction of the one-time account opening fee. If deducted, return would be lower. Past performance is no guarantee of future results. (D)Source: Morgan Stanley Emerging Markets Index is an unmanaged index comprised of the average equity market performance of 20 emerging market countries throughout the world. ^Reflects deduction of one-time account opening fee of $37.50. This chart is for comparative purposes only and is not meant to reflect future performance of the Fund or the index. (over, please) both currencies and markets coming under significant pressure. This has led to a backlash of investor sentiment against emerging markets investing, affecting several markets in Asia, as well as Central Europe. Generally, investors' concerns have centered on countries where significant current account deficits have led to anxiety over currency values. The portfolio performance of your Blanchard Worldwide Emerging Markets Fund over the past year was negatively impacted by the high proportion of assets that were allocated to Latin America at the time of the Mexican devaluation. Ironically, our underweight position in these markets had affected overall returns in the summer, and the increased allocation to Latin America was in anticipation of what we believed would be a buoyant 1995! Investments in Poland and India also underperformed in 1994. A Look Ahead As 1995 has progressed, investor sentiment has gradually improved, faced with incredible valuation opportunities present in Latin America and, selectively, in Asia and Central Europe. Latin American markets, in particular, have bounced back almost to the levels at which they were standing in late December. The Fund's overweighted position in Peru has been of particular benefit to total returns. In other regions, the portfolio's position in Poland has benefited from a 50% run in the market since the end of March, and India has recovered nicely as well. Also, selective markets in South East Asia have begun to recover, and our weightings to markets like Thailand have proved rewarding. A word of caution, however: Confidence remains fragile, and with growth estimates being pared back in South America and selectively in Asia, overall returns are likely to continue to be difficult to achieve. However, there are some bright spots. First, the long-term trend for investment in these markets is well established and will continue for the foreseeable future; and second, valuations look significantly attractive in a number of the areas into which we are investing. Poland, for example, was selling for less than 6 times 1995 earnings before its recent recovery. In summary, provided that a long-term view is adopted, we believe it is still an excellent time to be investing in these rapidly developing markets where the potential exists for significant returns over time. Sincerely, JF:ml James Fairweather Martin Currie Inc. Portfolio Managers of the Blanchard Worldwide Emerging Markets Fund Distributed by Sheffield Investments, Inc. (1551) 08ARSL0695 BLANCHARD WORLDWIDE EMERGING MARKETS FUND-PORTFOLIO OF INVESTMENTS April 30, 1995 (Left Column) Shares Value ------ ----- EMERGING MARKETS SECURITIES (92.31%) ARGENTINA (3.50%) Consumer Goods & Related (1.83%) BAESA (ADR).............................. 5,600 $ 154,000 Quilmes Industrial S.A. (Regd)........... 3,600 68,400 ----------- 222,400 ----------- Utilities & Related (1.67%) Compania Naviera Perez Compac "B" Shares. 24,920 101,669 YPF Sociedad Anonima..................... 5,000 101,250 ----------- 202,919 ----------- TOTAL ARGENTINA.................... 425,319 ----------- BRAZIL (12.14%) Basic Industries (6.14%) Acesita PN (ADR)......................... 13,620 209,250 Compania Vale Do Rio Doce (ADR).......... 4,300 179,852 Usiminas (ADR)........................... 29,500 356,000 ----------- 745,102 ----------- Capital Goods (1.31%) (d)Rhodia Ster (GDR)........................ 11,687 158,986 ----------- Energy Related (1.54%) *Electrobras.............................. 451,000 124,414 *Electrobras "B" Shares................... 235,000 63,284 ----------- 187,698 ----------- Industrial Related (1.64%) *Cemig (ADS).............................. 8,541 199,584 ----------- Telecommunications (1.51%) Telebras (ADR)........................... 5,120 183,115 ----------- TOTAL BRAZIL....................... 1,474,485 ----------- CHILE (4.45%) Basic Industries (1.55%) Antofagasta Holding...................... 33,500 156,320 *Sociedad Quimica Y Minera (ADR).......... 900 31,388 ----------- 187,708 ----------- Capital Goods (2.39%) Madeco S.A. (ADR)........................ 6,000 174,750 Maderas Y Sinteticos Sociedad (ADS)...... 6,500 113,750 ----------- 288,500 ----------- Financial Services (.51%) Banco O'Higgins (ADS).................... 3,400 62,050 ----------- TOTAL CHILE........................ 538,258 ----------- CHINA (1.24%) Financial Services (1.24%) *China North Industries Investment Ltd........................... 150,000 150,000 ----------- COLOMBIA (3.09%) Basic Industries (2.13%) Cementos Diamante (GDS).................. 11,800 258,066 ----------- Financial Services (.96%) Banco Ganadero S.A. (GDR)................ 6,100 115,900 ----------- TOTAL COLOMBIA..................... 373,966 ----------- (Right Column) Shares Value ------ ----- ECUADOR (.50%) Construction (.50%) La Cemento Nacional de Ecuador (GDR)..... 256 $ 60,160 ----------- HONG KONG (3.30%) Banking (1.48%) Dao Heng Bank Group Ltd. ................ 70,000 179,047 ----------- Manufacturing (.29%) Champion Technology...................... 465,000 35,441 *Star Paging Int'l. Warrants 12/31/96..... 40,000 248 ----------- 35,689 ----------- Transportation & Shipping (1.53%) *Shanghai Haixing Shipping................ 1,000,000 186,022 ----------- TOTAL HONG KONG.................... 400,758 ----------- HUNGARY (1.52%) Capital Goods (.80%) *Matav Rt. ............................... 550 97,345 ----------- Consumer Goods & Related (.20%) *Kekkut Asvanyjz (GDR).................... 2,800 24,284 ----------- Financial Services (.26%) *Konzum (GDR)............................. 7,600 31,176 ----------- Telecommunications (.26%) *Hungarian Telephone & Cable Co. ......... 2,700 31,725 ----------- TOTAL HUNGARY...................... 184,530 ----------- INDIA (7.20%) Basic Industries (2.45%) Principal Gujarat Ambuja Cements Ltd. --------- Conv. Bd. 3.50%, 6/30/99............... $80,000 103,000 Shares ------ *Hindalco Industries Ltd. (GDR)........... 3,500 91,000 United Phosphorus (GDR).................. 4,300 104,275 ----------- 298,275 ----------- Consumer Goods & Related (1.38%) *DCW Ltd. (GDR)........................... 4,800 62,400 *Dr. Reddy's Laboratories (GDR)........... 10,000 105,000 ----------- 167,400 ----------- Investment Companies (3.37%) *Himalayan Fund........................... 7,803 106,901 *Himalayan Fund Bonus Wts. 12/31/96....... 1,180 738 *Indian Opportunities Fund Ltd............ 22,807 301,514 ----------- 409,153 ----------- TOTAL INDIA........................ 874,828 ----------- INDONESIA (2.74%) Banking (.79%) Bank Internasional Indonesia............. 41,000 95,477 ----------- Chemicals (.29%) *PT Keramika Indonesia Assoc. ............ 41,000 34,886 ----------- Capital Goods (.52%) *PT Argha Karya Prima..................... 12,000 8,598 PT Indosat (ADR)......................... 1,500 54,187 ----------- 62,785 ----------- 3 BLANCHARD WORLDWIDE EMERGING MARKETS FUND-PORTFOLIO OF INVESTMENTS April 30, 1995 (continued) (Left column) Shares Value ------ ----- Consumer Goods & Related (1.14%) PT Andayani Megah........................ 34,000 $ 30,452 PT Concord Benefic Textile Co. .......... 39,000 77,721 *PT Kalbe Farma........................... 8,500 30,262 ----------- 138,435 ----------- TOTAL INDONESIA.................... 331,583 ----------- ISRAEL (.34%) Investment Companies (.23%) First Israel Fund........................ 2,300 27,600 ----------- Financial Services (.11%) *Ampal American Israel Cl. A ............. 2,200 14,025 ----------- TOTAL ISRAEL....................... 41,625 ----------- KOREA (8.87%) Basic Industries (.46%) Kumho Construction & Energy Co. Pfd. .... 8,000 56,142 ----------- Capital Goods (.83%) *Anam Industrial Co. Ltd. Pfd. ........... 4,000 50,318 *Dae Woo Heavy Industries Pfd. ........... 6,000 50,764 ----------- 101,082 ----------- Consumer Goods & Related (1.99%) *Midopa Co. .............................. 6,000 74,769 *Samsung Electronics Pfd. ................ 2,036 166,651 ----------- 241,420 ----------- Energy Related (.12%) Principal Ssangyong Oil Refining Co. --------- 3.00% 12/31/04 .................... $20,000 14,050 Shares ----------- Financial Services (1.69%) ------ *Commercial Bank of Korea................. 12,000 124,352 *Hanshin Securities Co. Pfd. ............. 3,000 37,975 *Jin Heung Svgs. & Finance................ 1,500 42,697 ----------- 205,024 ----------- Transportation (.34%) *Dong Bang Forwarding Co. ................ 1,000 40,795 ----------- Utilities & Related (3.44%) *Korea Electric Power Co. ................ 9,000 329,376 *Yukong Ltd. ............................. 2,000 88,673 ----------- 418,049 ----------- TOTAL KOREA........................ 1,076,562 ----------- LUXEMBOURG (1.23%) Telecommunications (1.23%) *Millicom International Cellular.......... 6,000 149,250 ----------- MALAYSIA (2.87%) Basic Industries (1.57%) Aokam Perdana Ltd. ...................... 42,400 190,465 ----------- Consumer Goods & Related (.41%) Edaran Otomobile Nasional................ 7,000 49,858 ----------- Financial Services (.89%) Westmont Berhard......................... 25,000 108,256 ----------- TOTAL MALAYSIA..................... 348,579 ----------- (Right column) Shares Value ------ ----- MEXICO (3.55%) Basic Industries (.51%) Kimberly Clark de Mexico (ADR)........... 3,000 $ 61,976 ----------- Financial Services (3.04%) *Ceteco (ADR)............................. 9,500 260,965 *Grupo Carso S.A. (ADR)................... 10,000 108,526 ----------- 369,491 ----------- TOTAL MEXICO....................... 431,467 ----------- PAKISTAN (.05%) Basic Industries (.05%) *D.G. Khan Cement Ltd. ................... 4,620 6,369 ----------- PERU (7.90%) Capital Goods (1.64%) Cementos Lima "C" Shares................. 7,800 172,908 Cementos Norte Pacasmayo................. 7,632 26,552 ----------- 199,460 ----------- Financial Services (1.84%) Banco Wiese (ADR)........................ 8,149 73,339 *Banco Wiese " C" Shares.................. 2 4 Banco de Credito del Peru................ 71,785 150,486 ----------- 223,829 ----------- Real Estate (2.36%) *Peru Real Estate S.A. "B" Shares.......... 345,000 286,350 ----------- Telecommunications (2.06%) *CIA Peruana de Telefonos "B" Shares....... 129,874 217,808 *La Neuva Com de Telefonos................. 39,756 32,273 ----------- 250,081 ----------- TOTAL PERU......................... 959,720 ----------- POLAND (4.26%) Capital Goods (1.21%) *Bydogoska Fabryka Kabli (PDR)............ 3,000 33,060 *Polifarb Ciezyn (PDR).................... 11,500 63,607 *T. C. Debica (PDR)....................... 4,000 50,666 ----------- 147,333 ----------- Consumer Goods & Related (1.44%) *Irena Huta Szkla Gospodarcz (PDR)........ 1,400 19,625 *Mostostal Exports (PDR).................. 13,775 77,353 Zwyeic Brewing Company (PDR)............. 1,019 77,443 ----------- 174,421 ----------- Financial Services (1.61%) Bank Rozwoju Eksportu S.A. (PDR)......... 9,200 135,565 Elektrim Trading Co. (PDR)............... 15,760 60,220 ----------- 195,785 ----------- TOTAL POLAND....................... 517,539 ----------- RUSSIA (.46%) Telecommunications (.46%) *Petersburg Long Distance Inc. ........... 11,000 56,375 ----------- SINGAPORE (1.43%) Capital Goods (1.43%) Clipsal Industries Holdings Ltd. ........ 48,000 103,680 GP Batteries Int'l. Ltd. ................ 29,000 69,600 ----------- TOTAL SINGAPORE.................... 173,280 ----------- 4 BLANCHARD WORLDWIDE EMERGING MARKETS FUND-PORTFOLIO OF INVESTMENTS April 30, 1995 (continued) (Left column) Shares Value ------ ----- SLOVENIA (.51%) Banking (.51%) *Slovenia Kredit Bank (IDR)............... 210 $ 61,377 ----------- SOUTH AFRICA (5.34%) Basic Industries (1.54%) *Iscor Ltd. .............................. 72,633 90,120 Sasol Ltd. .............................. 10,000 96,718 ----------- 186,838 ----------- Consumer Goods & Related (1.08%) *JD Group................................. 17,000 62,245 South African Breweries Ltd. ............ 2,500 69,085 ----------- 131,330 ----------- Financial Services (.60%) Barlow Rand Ltd. ........................ 3,700 37,320 *Nedcor Ltd. ............................. 2,900 35,461 ----------- 72,781 ----------- Real Estate (1.23%) Safmarine & Rennie Hldgs. Ltd. .......... 48,000 149,223 ----------- Metals & Mining (.89%) Samancor Ltd. ........................... 7,800 108,311 ----------- TOTAL SOUTH AFRICA................. 648,483 ----------- TAIWAN (6.02%) Basic Industries (.82%) *Tuntex Distinct (GDS).................... 8,500 99,875 ----------- Industrial & Related (1.16%) Principal Pacific Construction Conv. Bond --------- 2.13%, 10/1/98......................... $150,000 140,997 ----------- Shares Investment Companies (4.04%) ------ *Taiwan Opportunities Fund Ltd. .......... 47,500 490,200 ----------- TOTAL TAIWAN....................... 731,072 ----------- (Right column) Shares Value ------ ----- THAILAND (9.11%) Capital Goods (.37%) *Hana Microelectronics.................... 12,000 $ 45,131 ----------- Financial Services (7.68%) Bangkok Bank Public Co. Ltd. ............ 20,000 193,535 Dhana Siam Finance & Securities Co. ..... 33,000 140,882 General Finance & Securities............. 46,500 185,282 MDX Corporation Ltd. .................... 31,500 65,318 Nat'l Finance & Securities............... 40,000 136,613 Siam City Bank Ltd. ..................... 140,000 143,728 Siam City Credit Fin. & Securities....... 22,000 67,087 ----------- 932,445 ----------- Transportation (1.06%) Precious Shipping Corp. ................. 12,000 128,807 ----------- TOTAL THAILAND..................... 1,106,383 ----------- URUGUAY (.69%) Financial Services (.69%) *Banco Commercial S.A. ................... 6,400 83,200 ----------- TOTAL EMERGING MARKETS SECURITIES (IDENTIFIED COST $12,596,388)..................... 11,205,168 ----------- Principal SHORT-TERM SECURITIES (2.89%) --------- U.S. GOVERNMENT OBLIGATIONS (2.89%) U.S. Treasury Bill 5.50%, 5/4/95 (AMORTIZED COST $349,840).......... $350,000 349,840 ----------- TOTAL INVESTMENTS (IDENTIFIED COST $12,946,228)(a) (95.20%). 11,555,008 CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES (4.80%)(b).......... 583,044 ----------- NET ASSETS (100%).................. $12,138,052 =========== (a) The aggregate cost for federal income tax purposes is $13,038,908; the gross unrealized appreciation is $460,586 and the gross unrealized depreciation is $1,944,486; resulting in net unrealized depreciation of $1,483,900. (b) Includes one open forward currency contract as of April 30, 1995. The Fund sold 15,761 South African Commercial Rand and purchased US $4,360 for delivery on May 2, 1995. At April 30, 1995, there was no unrealized appreciation or depreciation on this contract. * Non-income producing. (d) Registered under SEC rule 144A; resale restricted as to qualified institutional buyers, represents 1.31% of net assets. See notes to financial statements. 5 BLANCHARD WORLDWIDE EMERGING MARKETS FUND-PORTFOLIO OF INVESTMENTS April 30, 1995 (continued) Schedule of Foreign Currency Held as of April 30, 1995 Currency Held Cost Market Value ------------- ---- ------------ Argentina Peso........................ 102,859 $102,864 $102,854 So. African Commercial Rand........... 188,067 52,323 51,970 -------- -------- $155,187 $154,824 ======== ======== 6 BLANCHARD WORLDWIDE EMERGING MARKETS FUND Statement of Assets and Liabilities April 30, 1995 Assets: Investments in securities, at value (Identified Cost $12,946,228) (note 1).................. $11,555,008 Cash....................................................... 479,261 Foreign currencies (Identified Cost $155,187).............. 154,824 Receivables for: Investments sold........................................ 452,347 Shares of beneficial interest sold...................... 158,840 Dividends............................................... 25,083 Interest................................................ 3,652 Foreign withholding tax reclaimable..................... 308 Deferred organizational costs (note 1...................... 116,081 ----------- Total assets...................................... 12,945,404 ----------- Liabilities: Payables for: Investments purchased................................... 762,573 Accrued expenses and other liabilities..................... 44,779 ----------- Total liabilities................................. 807,352 ----------- Net assets........................................ $12,138,052 =========== Net assets are comprised of: Paid in capital (unlimited authorized shares of beneficial interest, $.01 par value, 1,895,181 shares outstanding). $16,198,715 Accumulated investment loss-net ........................... (115,247) Accumulated realized loss-net.............................. (2,552,372) Unrealized net depreciation of investments................. (1,393,044) ----------- Net assets................................................. $12,138,052 =========== Net asset value per share.................................. $6.40 ===== See notes to financial statements. 7 BLANCHARD WORLDWIDE EMERGING MARKETS FUND STATEMENT OF OPERATIONS For the Year Ended April 30, 1995
Investment income: Interest (net of $3,051 foreign withholding tax)........................ $ 187,123 Dividends (net of $7,632 foreign withholding tax)....................... 122,193 ----------- Total income........................................................ 309,316 ----------- Expenses Investment management fee (note 2)...................................... $ 174,720 Custodian fees.......................................................... 90,580 Accounting fees......................................................... 73,203 Plan of distribution fees (note 3)...................................... 72,335 Transfer agent fees..................................................... 54,178 Professional fees....................................................... 47,739 Organizational expenses................................................. 29,000 Registration fees....................................................... 27,099 Shareholder reports and notices......................................... 19,067 Trustees' fees, retirement plan curtailment and other expenses (note 5). 16,786 Other................................................................... 1,606 --------- Total expenses...................................................... 606,313 Less: Expenses absorbed by Manager (note 2)......................... (90,297) --------- Net expenses............................................................ 516,016 ----------- Investment loss - net................................................... (206,700) ----------- Realized and unrealized gain (loss) - net (note 1): Investments in securities-net (net of $20,951 foreign capital gains tax) (2,292,242) Foreign currency contracts and foreign exchange transactions-net...................................................... (167,440) (2,459,682) --------- Change in unrealized appreciation on investments-net and translation of other assets and liabilities donominated in foreign currencies-net................................. (1,382,453) ----------- Net realized and unrealized losses...................................... (3,842,135) ----------- Net decrease in net assets resulting from operations.................... $(4,048,835) -----------
See notes to financial statements. 8 BLANCHARD WORLDWIDE EMERGING MARKETS FUND STATEMENT OF CHANGES IN NET ASSETS
For the period March 1, 1994* For the (commencement of Year Ended operations) to April 30, 1995 April 30, 1994 -------------- -------------- Increase (decrease) in net assets: Operations: Investment loss-net.................................................. $ (206,700) $ (707) Realized loss-net.................................................... (2,459,682) (530) Change in unrealized appreciation or depreciation-net................ (1,382,453) (10,591) ----------- ---------- Net decrease in net assets resulting from operations................. (4,048,835) (11,828) ----------- ---------- Transactions in shares of beneficial interest-net increase (note 6).... 8,144,318 7,554,397 ----------- ---------- Net increase in net assets....................................... 4,095,483 7,542,569 Net assets: Beginning of year.................................................... 8,042,569 500,000 ----------- ---------- End of year (including accumulated investment loss-net of $115,247 and $707, respectively)............................................ $12,138,052 $8,042,569 =========== ========== *Commencement of operations.
See notes to financial statements. 9 BLANCHARD WORLDWIDE EMERGING MARKETS FUND NOTES TO FINANCIAL STATEMENTS April 30, 1995 NOTE 1-Organization and Accounting Policies: Blanchard Worldwide Emerging Markets Fund (the "Fund"), formerly known as the Blanchard Emerging Markets Growth & Income 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 (the "Act"). The Fund had no operations before March 1, 1994 other than the sale of 62,500 shares of beneficial interest for $500,000 to Sheffield Management Company (the "Manager"). 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 sale is 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 abilities 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. B. Accounting for Investments and Investment Income Transactions-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. Dividend income and other distributions are recorded on the ex-dividend date, except that certain dividends from foreign securities are recorded as soon as the Fund is informed after the ex-dividend date. 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 Contracts & 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 rates at the end of the period; and (2) purchases, sales, income and expenses are translated at the 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 year. 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. 10 BLANCHARD WORLDWIDE EMERGING MARKETS FUND NOTES TO FINANCIAL STATEMENTS-(continued) April 30, 1995 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 fluctuation upon the purchase or sale of a security denominated in a foreign currency. The Fund maintains, as collateral, U.S. Government debt obligations in an amount equal to or greater than its net obligation for forward foreign currency contracts. Risks may arise as a result of the potential inability of the counterparts to meet the terms of their contracts. D. Federal Income Tax Status-It is the 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 Distributions 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 or 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 or 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 $145,001. The Fund is liable to 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 of the Blanchard Funds are allocated among the Funds based upon their relative average net assets. 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 Managers described below. The Manager receives from the Fund an advisory fee payable monthly at an annual rate of 1.25% of the Fund's average daily net assets. Expenses of the Fund, exclusive of taxes, interest, brokerage commissions, distribution fees, extraordinary expenses and certain other excludable expenses for which a waiver has been obtained, are subject to the 11 BLANCHARD WORLDWIDE EMERGING MARKETS FUND NOTES TO FINANCIAL STATEMENTS-(continued) April 30, 1995 expense limitation imposed by one state in which shares of the Fund are offered for sale. For the year ended April 30, 1995, the Fund's expenses did not exceed the above limitation. Certain officers and/or Trustees of the Fund are officers and/or directors of the Manager. The Manager has sub-advisory agreements with Martin Currie, Inc. (Equities Sector) and OFFITBANK (Fixed Income Sector) to serve, as the Portfolio Managers for their respective sectors of the Fund. The Manager has advised the Fund that the amount of fees paid to the Portfolio Managers was $59,427 and $2,703, respectively. The Manager voluntarily waived a portion of its advisory fee, which amounted to $90,297, for the year ended April 30, 1995. NOTE 3-Distribution Agreement and Plan: Pursuant to a Distribution Agreement, Sheffield Investments, Inc. (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 .50% 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 March 1, 1994, 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 $1,010,046. 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 Worldwide Emerging Market 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. 12 BLANCHARD WORLDWIDE EMERGING MARKETS 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 $29,004,768 and $16,231,172, respectively. The Distributor has advised the Fund that it received $17,513 from shareholders as account opening fees for the year ended April 30, 1995. The Manager has advised the Fund that, for the same period, it incurred costs, which were reimbursed by the Fund, amounting to $16,196 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 expenses in the Statement of Operations for the year ended April 30, 1995 was $2,615. 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 $9,250 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 $11,865 of accrued pension expense. NOTE 6-Shares of Beneficial Interest: For the period March 1, 1994 For the (commencement of Year Ended operations) April 30, 1995 to April 30, 1994 ---------------------- ------------------- Shares Amount Shares Amount ------ ------ ------ ------ Sold................. 2,641,403 $21,445,228 1,072,843 $8,573,224 Repurchased.......... (1,754,090) (13,300,910) (127,475) (1,018,827) --------- ----------- --------- ---------- Net increase......... 887,313 $ 8,144,318 945,368 $7,554,397 ========= =========== ========= ========== NOTE 7-Federal Income Taxes: Any capital or foreign currency loss incurred after October 31 through the end of the Fund's taxable year is deemed to arise on the first day of the Fund's next taxable year, if so elected. The Fund elected to defer a net capital loss of $2,474,894 and a currency loss of $144,048 incurred during such period in fiscal 1995. As of April 30, 1995, the Fund had temporary book/tax differences primarily attributable to wash sales and post-October capital and currency loss deferrals. To reflect reclassifications arising from permanent book/tax differences for the year ended April 30, 1995, accumulated realized loss-net was credited $92,160 and accumulated net loss was debited $92,160. 13 BLANCHARD WORLDWIDE EMERGING MARKETS FUND NOTES TO FINANCIAL STATEMENTS-(continued) April 30, 1995 NOTE 8-Financial Highlights: Selected ratios and per share data for a share of beneficial interest outstanding:
For the period March 1, 1994 For the (commencement Year Ended of operations) April 30, 1995 to April 30, 1994 -------------- ----------------- Per Share Operating Performance: Net asset value, beginning of year..................................... $7.98 $8.00 ----- ----- Income from investment operations: Net investment income (loss)........................................ (.11) (.00)(3) Net gains or loss on securities (both realized and unrealized)...... (1.47) (.02) ----- ----- Net (loss) from investment operations............................ (1.58) (.02) ----- ----- Less dividends and distributions: Dividends from investment income.................................... - - Distributions from realized gains................................... - - ----- ----- Change in net asset value........................................ (1.58) (.02) ----- ----- Net asset value, end of period......................................... $6.40 $7.98 ===== ===== Total return (not annualized).......................................... (19.80%) (.25%) Ratios/Supplemental Data: Net assets, end of period ($ Million)............................... $12 $8 Ratio of expenses to average net assets............................. 3.59%(2) 3.07%(1)(2) Ratio of net investment income (loss) to average net assets......... (1.44%)(2) (.10%)(1)(2) Portfolio turnover.................................................. 132% 0% - ----------------- (1) Annualized. (2) The ratios of expenses to average net assets and net investment (loss) to average net assets would have been 4.22% and (2.07%), respectively, for the year ended April 30, 1995 and 4.42% and (1.45%), respectively, for the period ended April 30, 1994, if a portion of the Fund's expenses had not been voluntarily deferred and absorbed by the Manager (See note 2). (3) Less than one cent per share.
14 BLANCHARD WORLDWIDE EMERGING MARKETS FUND REPORT OF INDEPENDENT ACCOUNTANTS To the Trustees and Shareholders of Blanchard Worldwide Emerging Markets 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 Worldwide Emerging Markets Fund (the "Fund") at April 30, 1995, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for the year then ended and for the period March 1, 1994 (commencement of operations) through April30, 1994, 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 and brokers and the application of alternative auditing procedures where confirmations from brokers were not received, 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 15 (Left Column) Portfolio Advisers Martin Currie Inc. Equity Securities OFFITBANK Fixed Income Securities 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 Worldwide Emerging Markets Fund 41 Madison Ave., 24th Floor New York, NY 10010-2267 (Right Column) ------------------ Blanchard Worldwide Emerging Markets 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-----