O'Shaughnessy Cornerstone Growth Fund
O'Shaughnessy Cornerstone Value Fund
April 10, 1997
To our Valued Shareholders,
We are delighted to have you as a shareholder in our Cornerstone Funds, and as a
partner in strategic investing. We believe that Strategy Indexing(TM) is a major
innovation in equity investing, since it is supported by 45 years of time-tested
data. Our investment strategies are based on information and knowledge,
discipline and consistency. We'll never shoot from the hip and buy stocks based
on hunches, gut feelings, fear or greed.
Our research tells us that the key reason the S&P 500 routinely beats about 80
percent of conventionally managed mutual funds is that it consistently holds
large capitalization stocks. We now know that there are many other strategies
that perform much better than the simple S&P strategy. But to enjoy this
enhanced performance you must consistently and slavishly stick to the strategy
that produces it--something conventional managers aren't very good at.
Without a doubt, sticking with an investment strategy through its ups and downs
is a very difficult thing to do. Today's events cloud our thinking and often
make us lose sight of our long-term investment goals. At O'Shaughnessy Capital
Management, it's our job to keep you focused on decades, not days. We do not
intend to let the short-term vagaries of the stock market steer us off course
because we know that these strategies are appropriate for long-term investors.
We're committed to offering you the best possible investment strategy for your
needs, whether it's the more conservative Cornerstone Value Fund or the more
aggressive Cornerstone Growth Fund. What's more, we are your investment
partners--all employees of OCM can only invest the equity portion of their
portfolios in strategies we offer to the public.
Thank you for your trust in us. We look forward to a long and fruitful
relationship.
Sincerely,
/s/ Jim O'Shaughnessy
Jim O'Shaughnessy
President - O'Shaughnessy Funds, Inc.
<PAGE>
2
O'Shaughnessy Cornerstone Growth Fund
PORTFOLIO OF INVESTMENTS at March 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Shares COMMON STOCKS: 90.80% Market Value
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Aerospace/Defense: 3.74%
6,666 Ducommun, Inc.#......................................................... $ 162,484
8,143 UNC, Inc.#.............................................................. 116,038
---------
278,522
---------
Agricultural Products: 1.73%
7,190 Standard Commercial Corp.#.............................................. 128,521
---------
Airlines: 1.51%
9,649 Mesaba Holdings, Inc.#.................................................. 112,170
---------
Beverages - Non-Alcoholic: 2.67%
15,921 National Beverage Corp.#................................................ 199,012
---------
Buildings Materials Group: 1.93%
7,267 Apogee Enterprises, Inc................................................. 143,523
---------
Computers - Hardware: 5.78%
11,672 Advanced Logic Research, Inc.#.......................................... 109,425
2,722 Dell Computer Corp.#.................................................... 184,075
2,693 Gateway 2000, Inc.#..................................................... 138,016
---------
431,516
---------
Computers - Software/Services: 3.52%
4,772 Computer Data Systems, Inc.............................................. 143,757
3,351 Computer Task Group, Inc................................................ 118,960
---------
262,717
---------
Electrical Equipment: 2.18%
3,612 Jabil Circuit, Inc.#.................................................... 162,766
---------
Electronics - Component Disk: 1.32%
6,062 Brightpoint, Inc.#...................................................... 98,508
---------
Electronics & Semiconductors: 1.83%
5,740 Smart Modular Technologies, Inc.#....................................... 136,325
---------
Foods: 3.46%
9,685 Imperial Holly Corp.#................................................... 116,220
7,345 Morningstar Group, Inc.#................................................ 141,391
---------
257,611
---------
</TABLE>
<PAGE>
3
O'Shaughnessy Cornerstone Growth Fund
PORTFOLIO OF INVESTMENTS at March 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Hardware & Tools: 1.71%
4,998 Watsco, Inc............................................................. $ 127,449
---------
Healthcare - Managed Care: 1.67%
6,447 FPA Medical Management#................................................. 124,105
---------
Household Furnishings & Appliances: 2.19%
3,747 Ethan Allen Interiors................................................... 162,995
---------
Insurance - Life/Health: 2.16%
4,524 Conseco, Inc............................................................ 161,167
---------
Investment - Banking/Brokerage: 2.02%
4,157 McDonald & Company Investments.......................................... 150,691
---------
Leisure Time - Products: 1.29%
5,083 Coachmen Industries, Inc................................................ 95,942
---------
Machinery - Diversified: 3.18%
4,121 DT Industries, Inc...................................................... 108,176
3,563 Manitowoc Co............................................................ 128,713
---------
236,889
---------
Manufacturing - Diversified: 7.23%
2,623 AEP Industries, Inc.#................................................... 121,970
8,419 Chart Industries, Inc................................................... 177,851
6,207 NGC Corp................................................................ 97,760
6,171 Shaw Group, Inc.#....................................................... 141,162
---------
538,743
---------
Metal Fabricators: 1.30%
5,683 Olympic Steel, Inc...................................................... 96,611
---------
Office Equipment & Supplies: 2.34%
2,552 Herman Miller, Inc...................................................... 174,174
---------
Oil & Gas - Drilling & Equipment: 2.29%
8,419 Stolt Comex Seaway S.A.#................................................ 170,485
---------
</TABLE>
<PAGE>
4
O'Shaughnessy Cornerstone Growth Fund
PORTFOLIO OF INVESTMENTS at March 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Shares Market Value
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Restaurants: 1.79%
6,012 CKE Restaurants, Inc.................................................... $ 133,016
---------
Retail - Building Supplies: 1.68%
6,949 Eagle Hardware & Garden, Inc.#.......................................... 125,082
---------
Retail - Computers/Electronics: 1.47%
6,949 CompUSA, Inc.#.......................................................... 109,447
---------
Retail - Discounters: 7.23%
5,638 Dollar General, Corp.................................................... 176,188
5,782 Ross Stores, Inc........................................................ 146,718
6,744 Tuesday Morning Corp.#.................................................. 215,808
---------
538,714
---------
Retail - Home Shopping: 1.71%
5,153 Insight Enterprises, Inc.#.............................................. 127,537
---------
Retail Specialty - Apparel: 4.65%
8,037 Goodys Family Clothing, Inc.#........................................... 184,851
6,744 Wet Seal, Inc., Class A#................................................ 161,856
---------
346,707
---------
Retail - Specialty: 2.35%
15,545 Genesco, Inc.#.......................................................... 174,881
---------
Retail Stores - Food Chains: 2.02%
4,545 Riser Foods, Inc., Class A.............................................. 150,553
---------
Services - Commercial/Consumer: 5.06%
6,843 Central Garden & Pet Co.#............................................... 124,029
5,991 Greenwich Air Services, Class A......................................... 170,744
3,612 Inacom Corp.#........................................................... 82,173
---------
376,946
---------
Services - Computer Systems: 2.30%
8,419 CHS Electronics, Inc.#.................................................. 171,537
---------
Steel: 1.47%
5,493 Gibraltar Steel Corp.#.................................................. 109,860
---------
</TABLE>
<PAGE>
5
O'Shaughnessy Cornerstone Growth Fund
PORTFOLIO OF INVESTMENTS at March 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Shares Market Value
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Waste Management: 2.02%
9,932 Philip Environmental, Inc.#............................................. $ 150,221
---------
Total Common Stocks (cost $6,960,865)................................... 6,764,943
---------
Principal Amount SHORT-TERM INVESTMENTS: 6.75%
- -------------------------------------------------------------------------------------------------------------------
$189,978 Wisconsin Electric Demand Note, 5.3265%, due 4/1/97*.................... 189,978
313,277 Johnson Controls Demand Note, 5.3200%, due 4/1/97*...................... 313,277
---------
503,255
---------
Total Investments in Securities (cost $7,464,120): 97.55% .............. 7,268,198
Other Assets less Liabilities: 2.45%.................................... 182,256
----------
Total Net Assets: 100.0% ............................................... $7,450,454
==========
</TABLE>
*Variable rate demand notes are considered short-term obligations and are
payable on demand. Interest rates change periodically on specified dates. The
rates listed are as of March 31, 1997.
#Non-income producing security.
See accompanying "Notes to Financial Statements."
<PAGE>
6
O'Shaughnessy Cornerstone Growth Fund
STATEMENT OF ASSETS AND LIABILITIES at March 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments in securities, at value (identified cost $7,464,120) (Note 2-A) ........... $7,268,198
Receivables:
Portfolio securities sold........................................................ 149,455
Fund shares sold................................................................. 6,350
Dividends and interest .......................................................... 2,646
Due from Advisor................................................................. 2,138
Cost of insurance reserve premium...................................................... 4,785
Deferred organization costs.................................................................. 23,137
Prepaid expenses....................................................................... 16,007
----------
Total assets .............................................................. 7,472,716
----------
LIABILITIES
Accrued expenses....................................................................... 22,262
----------
Total liabilities.......................................................... 22,262
----------
NET ASSETS................................................................................... $7,450,454
==========
Net asset value, offering price and redemption price per share
($7,450,454/764,482 shares outstanding;
unlimited number of shares (par value $.0001) authorized) ....................... $9.75
=====
SOURCE OF NET ASSETS
Paid-in capital ....................................................................... $7,686,499
Undistributed net investment loss...................................................... (13,536)
Accumulated net realized loss on investment transactions............................... (26,587)
Net unrealized depreciation of investments............................................. (195,922)
----------
Net assets ...................................................................... $7,450,454
==========
</TABLE>
See accompanying "Notes to Financial Statements."
<PAGE>
7
O'Shaughnessy Cornerstone Growth Fund
STATEMENT OF OPERATIONS
For the Period November 1, 1996* through March 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Income:
Dividends........................................................................ $ 3,132
Interest......................................................................... 7,096
----------
Total income............................................................... 10,228
----------
Expenses:
Administration fee (Note 3)...................................................... 8,274
Advisory fees (Note 3)........................................................... 8,665
Amortization of deferred organization costs...................................... 2,052
Auditing fees.................................................................... 4,521
Custodian and accounting fees.................................................... 10,046
Directors' fees.................................................................. 4,247
Insurance........................................................................ 1,662
Legal fees....................................................................... 4,932
Miscellaneous.................................................................... 2,055
Registration fees................................................................ 5,883
Reports to shareholders.......................................................... 4,067
Transfer agent fees.............................................................. 4,488
----------
Total expenses............................................................. 60,892
Less: expense reimbursements (Note 3)...................................... (37,474)
----------
Net expenses............................................................... 23,418
----------
Net investment loss ................................................. (13,190)
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss from securities transactions................................... (26,587)
Net unrealized depreciation of investments....................................... (195,923)
----------
Net realized and unrealized loss on investments............................ (222,510)
----------
Net Decrease in Net Assets Resulting from Operations ................ $ (235,700)
==========
</TABLE>
*Commencement of operations.
See accompanying "Notes to Financial Statements."
<PAGE>
8
O'Shaughnessy Cornerstone Growth Fund
STATEMENT OF CHANGES IN NET ASSETS (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
November 1, 1996*
through
March 31, 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
DECREASE IN NET ASSETS FROM
OPERATIONS
Net investment income (loss)............................................................... $ (13,190)
Net realized loss on securities transactions............................................... (26,587)
Net unrealized depreciation of investments................................................. (195,923)
----------
Net decrease in net assets resulting from operations ................................ (235,700)
----------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends paid from net investment income.................................................. (345)
----------
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from capital shares transactions (a).................... 7,661,499
----------
Total increase in net assets ........................................................ 7,425,454
NET ASSETS
Beginning of period........................................................................ 25,000
----------
End of period ............................................................................. $7,450,454
==========
(a) A summary of capital shares transactions is as follows:
November 1, 1996*
through
March 31, 1997
-----------------------
Shares Value
------- ----------
Shares sold................................................................. 772,011 $7,762,640
Shares issued on reinvestment of distributions.............................. 30 297
Shares redeemed............................................................. (10,059) (101,438)
------- ----------
Net increase................................................................ 761,982 $7,661,499
======= ==========
</TABLE>
*Commencement of operations.
See accompanying "Notes to Financial Statements."
<PAGE>
9
O'Shaughnessy Cornerstone Growth Fund
FINANCIAL HIGHLIGHTS
Per Share Operating Performance
(For a share outstanding throughout the period) (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
November 1, 1996*
through
March 31, 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period....................................................... $10.00
------
Income from investment operations:
Net investment income................................................................ (.02)
Net realized and unrealized loss on investments...................................... (.23)
------
Total from investment operations........................................................... (.25)
------
Net asset value, end of period............................................................. $ 9.75
======
Total return .............................................................................. (2.47%)**
Ratios/supplemental data:
Net assets, end of period (thousands)...................................................... $7,450
Ratio of expenses to average net assets:
Before expense reimbursement......................................................... 5.20%+
After expense reimbursement.......................................................... 2.00%+
Ratio of net investment loss to average net assets:
Before expense reimbursement......................................................... (1.79%)+
After expense reimbursement.......................................................... (0.47%)+
Portfolio turnover rate.................................................................... 15.39%
Average commission rate paid............................................................... $.0497++
</TABLE>
*Commencement of operations.
**Not Annualized.
+Annualized.
++For fiscal years beginning after September 1, 1995, a fund is required to
disclose average commission rate per share for security trades on which
commissions are charged.
See accompanying "Notes to Financial Statements."
<PAGE>
10
O'Shaughnessy Cornerstone Value Fund
PORTFOLIO OF INVESTMENTS at March 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Shares COMMON STOCKS: 95.61% Market Value
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Airlines: 2.00%
4,441 KLM Royal Dutch Air - NY REG............................................ $ 127,124
---------
Auto Parts & Equipment: 2.04%
12,340 Pacific Dunlop Ltd. - ADR............................................... 129,570
---------
Automobiles: 3.67%
3,754 Chrysler Corp........................................................... 112,620
3,842 Ford Motor Co........................................................... 120,543
---------
233,163
---------
Banks - Major Regional: 2.07%
3,291 PNC Bank Corp........................................................... 131,640
---------
Banks - Money Center: 7.66%
3,155 Allied Banks - Europe................................................... 127,383
1,438 Bankers Trust New York Corp............................................. 117,916
1,781 National Westminster Bank - ADR......................................... 117,101
4,345 Westpac Banking - Spon ADR.............................................. 123,832
---------
486,232
---------
Building Materials Group: 2.03%
5,455 Boral Ltd - ADR......................................................... 128,874
---------
Chemicals: 7.58%
18,937 Courtaulds Plc - ADR.................................................... 118,356
1,581 Dow Chemical............................................................ 126,480
2,380 Imperial Chemical Industries Plc - ADR.................................. 108,290
5,591 Lyondell Petrochemical.................................................. 127,894
---------
481,020
---------
Chemicals - Specialty: 1.74%
2,532 Arco Chemical Co........................................................ 110,142
---------
Containers/Packaging - Paper: 7.09%
4,856 AMCOR Ltd. - ADR........................................................ 122,007
20,503 Rexam Plc - ADR......................................................... 112,767
8,314 Stone Container Corp.................................................... 92,493
2,596 Union Camp Corp......................................................... 122,336
---------
449,603
---------
</TABLE>
<PAGE>
11
O'Shaughnessy Cornerstone Value Fund
PORTFOLIO OF INVESTMENTS at March 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Shares Market Value
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Foods: 3.80%
3,642 RJR Nabisco Holdings Corp............................................... $ 117,455
---------
6,685 Tomkins Plc - ADR....................................................... 123,672
---------
241,127
---------
Gaming, Lottery & Parimutual: 1.85%
8,243 Rank Group Plc - ADR.................................................... 117,463
---------
Manufacturing - Diversified: 1.69%
2,748 Tenneco, Inc............................................................ 107,172
---------
Office Equipment & Supplies: 1.90%
6,038 Moore Corp., Ltd........................................................ 120,760
---------
Oil - Domestic Integrated: 4.04%
935 Atlantic Richfield Co................................................... 126,225
5,295 Occidental Petroleum Corp............................................... 130,389
---------
256,614
---------
Oil - International Integrated: 3.16%
2,285 Energy Group Plc - ADR.................................................. 73,398
1,214 Shell Transport & Trading............................................... 126,863
---------
200,261
---------
Oil & Gas - Drilling & Equipment: 1.97%
4,289 IPL Energy, Inc......................................................... 124,917
---------
Oil & Gas - Refining & Marketing: 2.09%
5,080 Sun Co., Inc............................................................ 132,715
---------
Publishing: 1.39%
3,075 Readers Digest Association, Class A..................................... 88,406
---------
Retail - Discounters: 2.20%
3,754 Coles Myer Ltd. - Sponsor ADR........................................... 139,837
---------
Retail Stores - Department Stores: 1.91%
2,540 JC Penney Co............................................................ 120,967
---------
</TABLE>
<PAGE>
12
O'Shaughnessy Cornerstone Value Fund
PORTFOLIO OF INVESTMENTS at March 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Shares Market Value
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Services - Comercial/Consumer: 2.09%
5,215 Dun & Bradstreet Corp................................................... $ 132,331
---------
Specialty Printing: 1.93%
3,778 Deluxe Corp............................................................. 122,313
---------
Steel: 1.89%
4,505 British Steel Plc - Sponsored ADR....................................... 119,946
---------
Telephone: 7.71%
1,917 Bell Atlantic Corp...................................................... 116,697
2,732 GTE Corp................................................................ 127,380
3,187 Southern New England Telecomm........................................... 114,334
3,842 U.S. West Communications Group.......................................... 130,628
---------
489,039
---------
Telephone - Long Distance: 11.28%
2,596 BCE, Inc................................................................ 119,416
1,805 British Telecom. Plc - ADR.............................................. 126,350
7,612 Hong Kong Telecom. Ltd. - ADR........................................... 124,646
3,267 Royal PTT Nederland NV - ADR............................................ 118,429
1,533 Telecom CP New Zealand - ADR............................................ 108,843
4,521 Tele Danmark - ADR...................................................... 118,111
4,784 Telefonica de Argentina - ADR........................................... 140,530
---------
856,325
---------
Tobacco: 4.78%
2,500 American Brands, Inc./DE................................................ 126,562
2,285 Hanson Plc - ADR........................................................ 51,978
1,094 Philip Morris Cos., Inc................................................. 124,853
---------
303,393
---------
Trucking: 1.82%
3,626 Mayne Nickless Ltd. - ADR............................................... 115,395
---------
Total Common Stocks (cost $6,301,067)................................... 6,066,349
---------
</TABLE>
<PAGE>
13
O'Shaughnessy Cornerstone Value Fund
PORTFOLIO OF INVESTMENTS at March 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Principal Amount SHORT-TERM INVESTMENTS: 3.62% Market Value
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
$138,334 Wisconsin Electric Demand Note, 5.3265%, 4/1/2031*...................... $ 138,334
91,161 Johnson Controls Demand Note, 5.3200%, 4/1/2031*........................ 91,161
----------
229,495
----------
Total Investments in Securities (cost $6,530,562): 99.23% .............. 6,295,844
Other Assets less Liabilities: 0.77%.................................... 49,022
----------
Total Net Assets: 100.0% ............................................... $6,344,866
==========
</TABLE>
*Variable rate demand notes are considered short-term obligations and are
payable on demand. Interest rates change periodically on specified dates. The
rates listed are as of March 31, 1997.
See accompanying "Notes to Financial Statements."
<PAGE>
14
O'Shaughnessy Cornerstone Value Fund
STATEMENT OF ASSETS AND LIABILITIES at March 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments in securities, at value (identified cost $6,530,562) (Note 2-A) ........... $6,295,844
Receivables:
Fund shares sold................................................................. 5,000
Dividends and interest .......................................................... 20,853
Due from Advisor................................................................. 3,029
Cost of insurance reserve premium...................................................... 3,855
Deferred organization costs............................................................ 23,137
Prepaid expenses....................................................................... 16,183
Total assets .............................................................. 6,367,901
LIABILITIES
Accrued expenses....................................................................... 23,035
Total liabilities.......................................................... 23,035
NET ASSETS................................................................................... $6,344,866
==========
Net asset value, offering price and redemption price per share
($6,344,866/647,517 shares outstanding;
unlimited number of shares (par value $.0001) authorized) ....................... $9.80
=====
SOURCE OF NET ASSETS
Paid-in capital ....................................................................... $6,560,587
Undistributed net investment income.................................................... 17,444
Accumulated net realized gain on investment transactions............................... 1,553
Net unrealized depreciation of investments............................................. (234,718)
----------
Net assets ...................................................................... $6,344,866
==========
</TABLE>
See accompanying "Notes to Financial Statements."
<PAGE>
15
O'Shaughnessy Cornerstone Value Fund
STATEMENT OF OPERATIONS
For the Period November 1, 1996* through March 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Income:
Dividends (net of foreign witholding tax of $2,325).............................. $ 30,529
Interest......................................................................... 5,238
----------
Total income............................................................... 35,767
----------
Expenses:
Administration fee (Note 3)...................................................... 8,274
Advisory fees (Note 3)........................................................... 6,161
Amortization of deferred organization costs...................................... 2,053
Auditing fees.................................................................... 4,521
Custodian and accounting fees.................................................... 10,045
Directors' fees.................................................................. 4,247
Insurance........................................................................ 1,482
Legal fees....................................................................... 4,932
Miscellaneous.................................................................... 2,055
Registration fees................................................................ 5,883
Reports to shareholders.......................................................... 4,068
Transfer agent fees.............................................................. 4,488
----------
Total expenses............................................................. 58,209
Less: expense reimbursements (Note 3)...................................... (41,558)
----------
Net expenses............................................................... 16,651
----------
Net investment income ............................................... 19,116
----------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized gain from securities transactions................................... 1,553
Net unrealized depreciation of investments....................................... (234,718)
----------
Net realized and unrealized loss on investments............................ (233,165)
----------
Net Decrease in Net Assets Resulting from Operations ................ $ (214,049)
==========
</TABLE>
*Commencement of operations.
See accompanying "Notes to Financial Statements."
<PAGE>
16
O'Shaughnessy Cornerstone Value Fund
STATEMENT OF CHANGES IN NET ASSETS (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
November 1, 1996*
through
March 31, 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
DECREASE IN NET ASSETS FROM
OPERATIONS
Net investment income...................................................................... $ 19,116
Net realized gain on securities transactions............................................... 1,553
Net unrealized depreciation of investments................................................. (234,718)
----------
Net decrease in net assets resulting from operations ................................ (214,049)
----------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends paid from net investment income.................................................. (1,672)
----------
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from capital share transactions (a)..................... 6,535,587
----------
Total increase in net assets ........................................................ 6,319,866
NET ASSETS
Beginning of period........................................................................ 25,000
----------
End of period ............................................................................. $6,344,866
==========
(a) A summary of capital shares transactions is as follows:
November 1, 1996*
through
March 31, 1997
-----------------------
Shares Value
------- ----------
Shares sold................................................................. 650,042 $6,586,521
Shares issued on reinvestment of distributions.............................. 132 1,322
Shares redeemed............................................................. (5,157) (52,256)
------- ----------
Net increase................................................................ 645,017 $6,535,587
======= ==========
</TABLE>
*Commencement of operations.
See accompanying "Notes to Financial Statements."
<PAGE>
17
O'Shaughnessy Cornerstone Value Fund
FINANCIAL HIGHLIGHTS
Per Share Operating Performance
(For a share outstanding throughout the period) (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
November 1, 1996*
through
March 31, 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period....................................................... $10.00
------
Income from investment Operations:
Net investment income................................................................ .04
Net realized and unrealized loss on investments...................................... (.22)
------
Total from investment operations........................................................... (.18)
------
Distributions paid from net investment income.............................................. (.02)
Net asset value, end of period............................................................. $ 9.80
======
Total return .............................................................................. (1.82%)**
Ratios/supplemental data:
Net assets, end of period (thousands)...................................................... $6,345
Ratio of expenses to average net assets:
Before expense reimbursement......................................................... 6.99%+
After expense reimbursement.......................................................... 2.00%+
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement......................................................... (2.69%)+
After expense reimbursement.......................................................... 2.30%+
Portfolio turnover rate.................................................................... 5.30%
Average commission rate paid............................................................... $.0500++
</TABLE>
*Commencement of operations.
**Not Annualized.
+Annualized.
++For fiscal years beginning after September 1, 1995, a fund is required to
disclose average commission rate per share for security trades on which
commissions are charged.
See accompanying "Notes to Financial Statements."
<PAGE>
18
O'Shaughnessy Cornerstone Growth Fund
O'Shaughnessy Cornerstone Value Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION
The O'Shaughnessy Cornerstone Growth Fund and O'Shaughnessy Cornerstone
Value Fund (the "Funds") are each a series of shares of O'Shaughnessy Funds,
Inc., which is registered under the Investment Company Act of 1940 as a
diversified, open-end management company. The Funds began operations on November
1, 1996.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds. These policies are in conformity with generally accepted
accounting principles.
A. Security Valuation: The Funds' investments are carried at market
value. Securities listed on an exchange or quoted on a national
market system are valued at the last sale price. Other securities
are valued at the mean between the bid and asked prices. Securities
for which market quotations are not readily available, if any, are
valued following procedures approved by the Board of Directors.
Short-term investments are valued at amortized cost which
approximates market value.
B. Federal Income Taxes: It is the Funds' policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no federal income tax
provision is required.
C. Securities Transactions, Dividends and Distributions: As is common
in the industry, security transactions are accounted for on the
trade date. Dividend income and distributions to shareholders are
recorded on the ex-dividend date.
D. 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
reported amount of assets and liabilities at the date of the
financial statements. Actual results could differ from those
estimates.
NOTE 3 - INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
For the period ended March 31, 1997, O'Shaughnessy Capital Management,
Inc. (the "Advisor") provided the Funds with investment management services
under an Investment Advisory Agreement. The Advisor furnished all investment
advice, office space, facilities, and provides most of the personnel needed by
the Funds. As compensation for its services, the Advisor is entitled to a
monthly fee at the annual rate of 0.74% based upon the average daily net assets
of the Funds.
The Funds are responsible for their own operating expenses. The Advisor
has agreed to reduce fees payable to it by the Funds or reimburse the Funds to
the extent necessary to limit the Funds' aggregate annual operating expenses to
2.00% of average net assets annually. Any such reductions made by the Advisor in
its fees or payments may be subject to reimbursement by the Funds through
September 30, 2000 if the Funds are able to effect such reimbursement and remain
in compliance with any expense limitations in effect. For the period ended March
31, 1997, the Advisor has reimbursed the Cornerstone Growth Fund and the
Cornerstone Value Fund in the amounts of $37,474 and $41,558, respectively.
<PAGE>
19
O'Shaughnessy Cornerstone Growth Fund
O'Shaughnessy Cornerstone Value Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited), Continued
- --------------------------------------------------------------------------------
Investment Company Administration Corporation (the "Administrator") acts
as the Funds' Administrator under an Administration Agreement. The Administrator
prepares various federal and state regulatory filings, reports and returns for
the Funds; prepares reports and materials to be supplied to the directors;
monitors the activities of the Funds' custodian, transfer agent and accountants;
coordinates the preparation and payment of Fund expenses and reviews Fund
expense accruals. For its services, the Administrator receives a monthly fee per
portfolio at the following annual rate:
Under $100 million - 0.10% of average net assets, subject to a minimum fee
of $40,000 annually $100 to $200 million - 0.05% of average net assets
over $200 million - 0.03% of average net assets
First Fund Distributors, Inc. (the "Distributor") acts as the Funds'
principal underwriter in a continuous public offering of the Funds' shares. The
Distributor is an affiliate of the Administrator.
Certain officers of the Funds are also officers and/or directors of the
Administrator and the Distributor.
NOTE 4 - PURCHASES AND SALES OF SECURITIES
For the period ended March 31, 1997, the cost of purchases and the
proceeds from sales of securities, excluding short-term securities, for the
Cornerstone Growth Fund, were $7,414,471 and $427,019, respectively.
For the period ended March 31, 1997, the cost of purchases and the
proceeds from sales of securities, excluding short-term securities, for the
Cornerstone Value Fund, were $6,431,038 and $131,525, respectively.
This report is intended for shareholders of O'Shaughnessy Cornerstone Growth
Fund and O'Shaughnessy Cornerstone Value Fund and may not be used as sales
literature unless preceded or accompanied by a current prospectus.
<PAGE>
[Back Cover Artwork] [Front Cover Artwork]
O'Shaughnessy Cornerstone
Growth Fund
O'Shaughnessy Cornerstone
Value Fund
Semi-Annual
March 31, 1997
<PAGE>
O'Shaughnessy Aggressive Growth Fund
April 10, 1997
To our Valued Shareholders,
We are delighted to have you as a shareholder in the O'Shaughnessy Aggressive
Growth Fund and as a partner in strategic investing. We believe that investing
based on disciplined strategies is the best way to consistently perform well
over time.
The O'Shaughnessy Aggressive Growth Fund uses a highly disciplined investment
approach that relies on a series of quantitative models developed by our firm.
We use these strategies to select aggressive growth stocks with desirable
characteristics that we beleive have historically led to outstanding stock price
gains. All our stocks are selected by our established strategies, and we'll
never shoot from the hip and buy stocks based on hunches, gut feelings, fear or
greed.
The market's recent gyrations remind us that sticking with a strategy can be
very trying. The intense emotions of the present may lead us astray, because
they give undue weight to the transitory events of the moment. This often makes
us lose sight of our long-term investment goals. At O'Shaughnessy Capital
Management, we believe it's our job to keep you focused on decades, not days.
Remember that our strategy emphasizes the long term. It's our job at OCM to keep
your focus there. We do not intend to let short term vagaries steer us off
course. We believe that for aggressive investors with a long-term outlook,
O'Shaughnessy Aggressive Growth Fund is an ideal solution. What's more, we are
your investment partners--all employees of OCM can only invest the equity
portion of their portfolios in strategies we offer to the public.
Thank you for your trust in us. We look forward to a long and fruitful
relationship.
Sincerely,
/s/ Jim O'Shaughnessy
Jim O'Shaughnessy
President - O'Shaughnessy Funds, Inc.
<PAGE>
2
O'Shaughnessy Aggressive Growth Fund
PORTFOLIO OF INVESTMENTS at March 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Shares COMMON STOCKS: 1.04% Market Value
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Air Freight: 1.98%
1,980 RPC, Inc.#.............................................................. $ 28,462
--------
Airlines: 3.05%
416 British Airways Plc - ADR............................................... 43,732
--------
Automobiles: 0.85%
208 Honda Motor Co. Ltd. ADR................................................ 12,168
--------
Auto Parts & Equipment: 4.57%
1,447 SPX Corp................................................................ 65,658
--------
Beverages - Non-Alchoholic: 1.65%
1,900 National Beverage Corp.#................................................ 23,750
--------
Communications Equipment: 0.85%
276 Vodafone Group Plc - ADR................................................ 12,179
--------
Computers - Hardware: 6.45%
341 Adaptec, Inc.#.......................................................... 12,191
780 Dell Computer Corp.#.................................................... 52,747
538 Gateway 2000, Inc.#..................................................... 27,573
--------
92,511
--------
Computers - Peripherals: 13.52%
366 EMC Corp./Massachusetts#................................................ 12,993
1,396 Quantum Corp.#.......................................................... 53,920
1,039 Seagate Technology#..................................................... 46,625
500 STB Systems, Inc.#...................................................... 14,625
579 Storage Technology Corp. - Class A#..................................... 22,726
762 Western Digital Corp.#.................................................. 43,148
--------
194,037
--------
Consumer Finance: 2.82%
1,451 MBNA Corp............................................................... 40,447
--------
Electrical Equipment: 5.15%
665 American Power Conversion Co.#.......................................... 14,381
1,308 Applied Magnetics Corp.#................................................ 36,951
500 Jabil Circuit, Inc.#.................................................... 22,531
--------
73,863
--------
</TABLE>
<PAGE>
3
O'Shaughnessy Aggressive Growth Fund
PORTFOLIO OF INVESTMENTS at March 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Shares Market Value
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Electronics - Instrument: 0.82%
323 KLA Instruments Corp.#.................................................. $ 11,790
--------
Electronics - Semiconductors: 4.71%
427 Atmel Corp.#............................................................ 10,221
328 Intel Corp.............................................................. 45,633
363 Unitrode Corp.#......................................................... 11,797
--------
67,651
--------
Equipment - Semiconductor: 0.75%
156 Novellus Systems, Inc.#................................................. 10,764
--------
Foods: 3.68%
282 Interstate Bakeries Corp................................................ 13,325
2,054 Morningstar Group, Inc.#................................................ 39,539
--------
52,864
--------
Footwear: 2.94%
900 Converse, Inc.#......................................................... 16,313
188 Nike, Inc., Class B..................................................... 11,656
325 Timberland Co., Class A#................................................ 14,259
--------
42,228
--------
Hardware & Tools: 0.88%
335 The Stanley Works....................................................... 12,688
--------
Health Care - Medical Products: 0.85%
197 Boston Scientific Corp.#................................................ 12,165
--------
Homebuilding: 0.80%
325 Centex Corp............................................................. 11,456
--------
Insurance - Life/Health: 0.81%
327 Conseco, Inc............................................................ 11,649
--------
Machinery - Diversified: 2.05%
633 Harnischfeger Industries, Inc........................................... 29,434
--------
Manufacturing - Diversified: 3.00%
1,464 Nortek, Inc.#........................................................... 28,731
706 Wyman-Gordon Co.#....................................................... 14,385
--------
43,116
--------
</TABLE>
<PAGE>
4
O'Shaughnessy Aggressive Growth Fund
PORTFOLIO OF INVESTMENTS at March 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Shares Market Value
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Office Equipment & Supplies: 3.45%
725 Herman Miller, Inc...................................................... $ 49,481
--------
Oil & Gas - Drilling & Equipment: 9.37%
614 Ensco International, Inc.#.............................................. 30,240
2,027 Global Marine, Inc.#.................................................... 43,580
607 Rowan Companies., Inc.#................................................. 13,733
436 Smith International, Inc.#.............................................. 19,893
300 Tidewater, Inc.......................................................... 13,800
532 Varco International#.................................................... 13,300
--------
134,546
--------
Oil & Gas - Exploration/Production: 3.29%
2,162 Santa Fe Energy Resources#.............................................. 29,998
1,100 Transmontaigne Oil Co.#................................................. 17,187
--------
47,185
--------
Oil - Domestic Integrated: 1.89%
711 Unocal Corp............................................................. 27,107
--------
Power Producers - Independent: 0.81%
207 AES Corp.#.............................................................. 11,592
--------
Restaurants: 3.15%
2,046 CKE Restaurants, Inc.................................................... 45,268
--------
Retail - Computers/Electronics: 2.01%
1,836 CompUSA, Inc.#.......................................................... 28,917
--------
Retail - Discounters: 5.62%
2,100 Ames Department Stores, Inc.#........................................... 19,163
1,666 Ross Stores, Inc........................................................ 42,275
600 Tuesday Morning Corp.#.................................................. 19,200
--------
80,638
--------
Retail Specialty - Apparel: 3.21%
807 Burlington Coat Factory Warehouse#...................................... 14,526
1,200 Paul Harris Stores#..................................................... 18,600
302 TJX Companies, Inc...................................................... 12,911
--------
46,037
--------
</TABLE>
<PAGE>
5
O'Shaughnessy Aggressive Growth Fund
PORTFOLIO OF INVESTMENTS at March 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Shares Market Value
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings & Loan Companies: 0.81%
752 Dime Bancorp, Inc.#..................................................... $ 11,562
----------
Services - Advertising Markets: 2.18%
769 WPP Group Plc - ADR..................................................... 31,337
----------
Textiles - Apparel: 6.43%
316 Fruit of the Loom, Inc., Class A#....................................... 13,114
1,714 Oxford Industries, Inc.................................................. 45,635
4,336 Tultex Corp.#........................................................... 33,604
----------
92,353
----------
Total Common Stocks (cost $1,528,974)................................... 1,498,634
----------
Total Investments in Securities (cost $1,528,974): 1.04% ............... 1,498,634
Liabilities in excess of Other Assets: (0.04)%.......................... (63,398)
----------
Total Net Assets: 100.0% ............................................... $1,435,236
==========
</TABLE>
#Non-income producing security.
See accompanying "Notes to Financial Statements."
<PAGE>
6
O'Shaughnessy Aggressive Growth Fund
STATEMENT OF ASSETS AND LIABILITIES at March 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments in securities, at value (identified cost $1,528,974) (Note 2-A) ........... $1,498,634
Receivables:
Fund shares sold................................................................. 10,000
Dividends and interest .......................................................... 958
Due from Advisor................................................................. 6,357
Cost of insurance reserve premium...................................................... 2,127
Deferred organization costs.................................................................. 23,139
Prepaid expenses....................................................................... 13,178
----------
Total assets .............................................................. 1,554,393
----------
LIABILITIES
Accrued expenses....................................................................... 23,216
Custody account overdraft.............................................................. 95,941
----------
Total liabilities.......................................................... 119,157
----------
NET ASSETS................................................................................... $1,435,236
==========
Net asset value, offering price and redemption price per share
($1,435,236/145,577 shares outstanding;
unlimited number of shares (par value $.0001) authorized) ....................... $9.86
=====
SOURCE OF NET ASSETS
Paid-in capital ....................................................................... $1,508,507
Undistributed net investment loss...................................................... (3,365)
Accumulated net realized loss on investment transactions............................... (39,566)
Net unrealized depreciation of investments............................................. 30,340
----------
Net assets ...................................................................... $1,435,236
==========
</TABLE>
See accompanying "Notes to Financial Statements."
<PAGE>
7
O'Shaughnessy Aggressive Growth Fund
STATEMENT OF OPERATIONS
For the Period November 1, 1996* through March 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Income:
Dividends (net of witholding tax of $20)......................................... $ 1,591
Interest......................................................................... 1,233
---------
Total income............................................................... 2,824
---------
Expenses:
Administration fee (Note 3)...................................................... 8,274
Advisory fees (Note 3)........................................................... 3,094
Amortization of deferred organization costs...................................... 2,053
Auditing fees.................................................................... 4,521
Custodian and accounting fees.................................................... 10,045
Directors' fees.................................................................. 4,247
Insurance........................................................................ 1,147
Legal fees....................................................................... 4,932
Miscellaneous.................................................................... 2,055
Registration fees................................................................ 6,075
Reports to shareholders.......................................................... 4,068
Transfer agent fees.............................................................. 4,488
---------
Total expenses............................................................. 54,999
Less: expense reimbursements (Note 3)...................................... (48,811)
---------
Net expenses............................................................... 6,188
---------
Net investment loss ................................................. (3,364)
---------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss from securities transactions................................... (39,566)
Net unrealized depreciation of investments....................................... (30,341)
---------
Net realized and unrealized loss on investments............................ (69,907)
---------
Net Decrease in Net Assets Resulting from Operations ................ $ (73,271)
=========
</TABLE>
*Commencement of operations.
See accompanying "Notes to Financial Statements."
<PAGE>
8
O'Shaughnessy Aggressive Growth Fund
STATEMENT OF CHANGES IN NET ASSETS (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
November 1, 1996*
through
March 31, 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
DECREASE IN NET ASSETS FROM
OPERATIONS
Net investment loss........................................................................ $ (3,364)
Net realized loss on securities transactions............................................... (39,566)
Net unrealized depreciation of investments................................................. (30,341)
----------
Net decrease in net assets resulting from operations ................................ (73,271)
----------
CAPITAL SHARE TRANSACTIONS:
Net increase in net assets derived from capital share transactions (a)..................... 1,483,507
----------
Total increase in net assets ........................................................ 1,410,236
NET ASSETS
Beginning of period........................................................................ 25,000
----------
End of period ............................................................................. $1,435,236
==========
(a) A summary of capital shares transactions is as follows:
November 1, 1996*
through
March 31, 1997
-----------------------
Shares Value
------- ----------
Shares sold................................................................. 192,247 $1,995,042
Shares redeemed............................................................. (49,170) (511,535)
------- ----------
Net increase................................................................ 143,077 $1,483,507
======= ==========
*Commencement of operations.
</TABLE>
See accompanying "Notes to Financial Statements."
<PAGE>
9
O'Shaughnessy Aggressive Growth Fund
FINANCIAL HIGHLIGHTS
Per Share Operating Performance
(For a share outstanding throughout the period) (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
November 1, 1996*
through
March 31, 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period....................................................... $10.00
Income from investment operations:
Net investment loss.................................................................. (.02)
Net realized and unrealized loss on investments...................................... (.12)
Total from investment operations........................................................... (.14)
Net asset value, end of period............................................................. $ 9.86
Total Return .............................................................................. (1.40%)**
Ratios/supplemental data:
Net assets, end of period (thousands)...................................................... $1,435
Ratio of expenses to average net assets:
Before expense reimbursement......................................................... 17.79%+
After expense reimbursement.......................................................... 2.00%+
Ratio of net investment loss to average net assets:
Before expense reimbursement......................................................... (16.82%)+
After expense reimbursement.......................................................... (1.08%)+
Portfolio turnover rate.................................................................... 53.87%
Average commission rate paid............................................................... $.0489++
</TABLE>
*Commencement of operations.
**Not Annualized.
+Annualized.
++For fiscal years beginning after September 1, 1995, a fund is required to
disclose average commission rate per share for security trades on which
commissions are charged.
See accompanying "Notes to Financial Statements."
<PAGE>
10
O'Shaughnessy Aggressive Growth Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION
The O'Shaughnessy Aggressive Growth Fund (the "Fund") is a series of
shares of O'Shaughnessy Funds, Inc., which is registered under the Investment
Company Act of 1940 as a diversified, open-end management company. The Fund
began operations on November 1, 1996.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund. These policies are in conformity with generally accepted
accounting principles.
A. Security Valuation: The Fund's investments are carried at market
value. Securities listed on an exchange or quoted on a national
market system are valued at the last sale price. Other securities
are valued at the mean between the bid and asked prices. Securities
for which market quotations are not readily available, if any, are
valued following procedures approved by the Board of Directors.
Short-term investments are valued at amortized cost which
approximates market value.
B. Federal Income Taxes: It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no federal income tax
provision is required.
C. Securities Transactions, Dividends and Distributions: As is common
in the industry, security transactions are accounted for on the
trade date. Dividend income and distributions to shareholders are
recorded on the ex-dividend date.
D. 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
reported amount of assets and liabilities at the date of the
financial statements. Actual results could differ from those
estimates.
NOTE 3 - INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
For the period ended March 31, 1997, O'Shughnessy Capital Management, Inc.
(the "Advisor") provided the Funds with investment management services under an
Investment Advisory Agreement. The Advisor furnished all investment advice,
office space, facilities, and provides most of the personnel needed by the Fund.
As compensation for its services, the Advisor is entitled to a monthly fee at
the annual rate of 1.00% based upon the average daily net assets of the Fund.
The Fund is responsible for its own operating expenses. The Advisor has
agreed to reduce fees payable to it by the Fund or reimburse the Fund to the
extent necessary to limit the Fund's aggregate annual operating expenses to
2.00% of average net assets annually. Any such reductions made by the Advisor in
its fees or payments may be subject to reimbursement by the Fund through
September 30, 2000 if the Fund is able to effect such reimbursement and remain
in compliance with any expense limitations in effect. For the period ended March
31, 1997, the Advisor has reimbursed the Fund in the amount of $48,811.
<PAGE>
11
O'Shaughnessy Aggressive Growth Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited), Continued
- --------------------------------------------------------------------------------
Investment Company Administration Corporation (the "Administrator") acts
as the Fund's Administrator under an Administration Agreement. The Administrator
prepares various federal and state regulatory filings, reports and returns for
the Fund; prepares reports and materials to be supplied to the directors;
monitors the activities of the Fund's custodian, transfer agent and accountants;
coordinates the preparation and payment of Fund's expenses and reviews the
Fund's expense accruals. For its services, the Administrator receives a monthly
fee per portfolio at the following annual rate:
Under $100 million - 0.10% of average net assets, subject to a minimum fee
of $40,000 annually $100 to $200 million - 0.05% of average net assets
over $200 million - 0.03% of average net assets
First Fund Distributors, Inc. (the "Distributor") acts as the Fund's
principal underwriter in a continuous public offering of the Fund's shares. The
Distributor is an affiliate of the Administrator.
Certain officers of the Fund are also officers and/or directors of the
Administrator and the Distributor.
NOTE 4 - PURCHASES AND SALES OF SECURITES
For the period ended March 31, 1997, the cost of purchases and the
proceeds from sales of securities, excluding short-term securities, were
$2,022,252 and $453,712, respectively.
This report is intended for shareholders of O'Shaughnessy Aggressive Growth
Fund and may not be used as sales literature unless preceded or
accompanied by a current prospectus.
<PAGE>
[Front Cover Artwork]
O'Shaughnessy
Aggressive Growth Fund
Semi-Annual
March 31, 1997
<PAGE>
O'Shaughnessy Dogs of the Market(TM) Fund
April 10, 1997
To our Valued Shareholders,
We are delighted to have you as a shareholder in our Dogs of the Market(TM) Fund
and as a partner in strategic investing. We believe that disciplined investing
based on established strategies is the best way to consistently perform well
over time.
The Dogs of the Market Fund uses a highly disciplined investment approach. Half
of the portfolio is invested in the ten highest yielding stocks from the Dow
Jones Industrial Average, the other half in high-yielding blue chip stocks. By
doing this, we seek to take advantage of the Dogs of the Dow strategy--which has
beaten the market in every decade, from the 1930s to the 1990s--and extend it to
stocks outside the DJIA as well.
The market's recent gyrations remind us that sticking with a strategy can be
very trying. The intense emotions of the present may lead us astray, because
they give undue weight to the transitory events of the moment. This often makes
us lose sight of our long-term investment goals. At O'Shaughnessy Capital
Management, we believe it's our job to keep you focused on decades, not days.
We have tested the Dogs of the Dow strategy back to 1928, the year the Dow was
expanded to 30 stocks. We do not intend to let the short-term vagaries of the
stock market steer us off course because we know that, over the long-term, the
Dogs of the Dow strategy is appropriate for long-term investors. What's more, we
are your investment partners--all employees of OCM can only invest the equity
portion of their portfolios in strategies we offer to the public.
Thank you for your trust in us. We look forward to a long and fruitful
relationship.
Sincerely,
/s/ Jim O'Shaughnessy
Jim O'Shaughnessy
President - O'Shaughnessy Funds, Inc.
<PAGE>
2
O'Shaughnessy Dogs of the Market(TM) Fund
PORTFOLIO OF INVESTMENTS at March 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Shares COMMON STOCKS: 95.18% Market Value
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Automobiles: 7.17%
1,340 Chrysler Corp........................................................... $ 40,200
1,443 Ford Motor Co........................................................... 45,274
2,222 General Motors Corp..................................................... 123,043
--------
208,517
--------
Banks - Major Regional: 1.55%
824 Wachovia Corp........................................................... 44,908
--------
Banks - Money Center: 6.11%
876 First Chicago NBD Corp.................................................. 47,414
1,324 J.P. Morgan Co., Inc.................................................... 130,083
--------
177,497
--------
Beverages - Alcoholic: 1.65%
1,139 Anheuser-Busch Cos., Inc................................................ 47,980
--------
Chemicals: 6.35%
681 Akzo Nobel NV - ADR..................................................... 47,840
1,290 E. I. Du Pont de Nemours................................................ 136,740
--------
184,580
--------
Chemicals - Diversified: 1.56%
841 PPG Industries, Inc..................................................... 45,414
--------
Chemicals - Specialty: 1.56%
1,037 International Flavors & Fragrances...................................... 45,369
--------
Electrical Equipment: 2.92%
1,210 AMP, Inc................................................................ 41,594
962 Emerson Electric Co..................................................... 43,290
--------
84,884
--------
Financial - Diversified: 1.57%
422 ABB AB Sponsored ADR.................................................... 45,681
--------
Foods: 6.87%
1,507 Grand Metropolitan Plc - ADR............................................ 48,036
1,317 H. J. Heinz Co.......................................................... 52,022
717 Kellogg Co.............................................................. 48,218
492 Unilever Plc - ADR...................................................... 51,537
--------
199,813
--------
</TABLE>
<PAGE>
3
O'Shaughnessy Dogs of the Market(TM) Fund
PORTFOLIO OF INVESTMENTS at March 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Shares Market Value
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Manufacturing - Diversified: 4.55%
1,566 Minnesota Mining & Manufacturing Co..................................... $ 132,327
---------
Oil - Domestic Integrated: 1.68%
362 Atlantic Richfield Co................................................... 48,870
---------
Oil - International Integrated: 19.91%
575 Amoco Corp.............................................................. 49,809
2,026 Chevron Corp............................................................ 141,060
1,039 Elf Aquitane - ADR...................................................... 51,171
1,344 Exxon Corp.............................................................. 144,816
466 Shell Transport & Trading............................................... 48,697
1,308 Texaco, Inc............................................................. 143,226
---------
578,779
---------
Paper & Forest Products: 4.33%
3,236 International Paper Co.................................................. 125,800
---------
Railroads: 1.58%
537 Norfolk Southern Corp................................................... 45,779
---------
Retail Stores - Food Chains: 3.06%
1,486 Weis Markets, Inc....................................................... 41,236
1,450 Winn-Dixie Stores, Inc.................................................. 47,850
---------
89,086
---------
Telephone: 11.48%
778 Ameritech Corp.......................................................... 47,847
706 Bell Atlantic Corp...................................................... 42,978
1,145 BellSouth Corp.......................................................... 48,376
1,083 GTE Corp................................................................ 50,495
1,271 Pacific Telesis Group................................................... 47,980
895 SBC Communications, Inc................................................. 47,099
1,441 U S West Communications Group........................................... 48,994
---------
333,769
---------
Telephone - Long Distance: 5.52%
3,242 AT&T Corp............................................................... 112,660
681 British Telecom Plc - ADR............................................... 47,670
---------
160,330
---------
<PAGE>
4
O'Shaughnessy Dogs of the Market(TM) Fund
PORTFOLIO OF INVESTMENTS at March 31, 1997 (Unaudited)
- -------------------------------------------------------------------------------------------------------------------
Shares Market Value
- -------------------------------------------------------------------------------------------------------------------
Tobacco: 5.74%
1,121 Philip Morris Cos., Inc................................................. $ 127,934
1,398 UST, Inc................................................................ 38,969
166,903
Total Common Stocks (cost $2,832,998)................................... 2,766,287
Principal Amount SHORT-TERM INVESTMENTS: 3.61%
- -------------------------------------------------------------------------------------------------------------------
$104,805 Wisconsin Electric Demand Note, 5.3265%, 4/1/1997*...................... 104,805
Total Investments in Securities (cost $2,937,803): 98.79% .............. 2,871,092
Other Assets less Liabilities: 1.21%.................................... 35,188
----------
Total Net Assets: 100.0% ............................................... $2,906,280
==========
</TABLE>
*Variable rate demand notes are considered short-term obligations and are
payable on demand. Interest rates change periodically on specified dates. The
rates listed are as of March 31, 1997.
See accompanying "Notes to Financial Statements."
<PAGE>
5
O'Shaughnessy Dogs of the Market(TM) Fund
STATEMENT OF ASSETS AND LIABILITIES at March 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments in securities, at value (identified cost $2,937,803) (Note 2-A) ........... $2,871,092
Receivables:
Fund shares sold................................................................. 6,850
Dividends and interest .......................................................... 7,594
Due from Advisor................................................................. 5,461
Cost of insurance reserve premium...................................................... 2,526
Deferred organization costs............................................................ 23,138
Prepaid expenses....................................................................... 13,420
----------
Total assets .............................................................. 2,930,081
----------
LIABILITIES
Accrued expenses....................................................................... 23,801
----------
Total liabilities.......................................................... 23,801
----------
NET ASSETS................................................................................... $2,906,280
==========
Net asset value, offering price and redemption price per share
($2,906,280/288,953 shares outstanding;
unlimited number of shares (par value $.0001) authorized) ....................... $10.06
======
SOURCE OF NET ASSETS
Paid-in capital ....................................................................... $2,965,704
Undistributed net investment income.................................................... 6,675
Accumulated net realized gain on investment transactions............................... 612
Net unrealized depreciation of investments............................................. (66,711)
----------
Net assets ...................................................................... $2,906,280
==========
</TABLE>
See accompanying "Notes to Financial Statements."
<PAGE>
6
O'Shaughnessy Dogs of the Market(TM) Fund
STATEMENT OF OPERATIONS
For the Period November 1, 1996* through March 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Income:
Dividends (net of foreign witholding tax of $90)................................. $ 14,528
Interest......................................................................... 2,753
--------
Total income............................................................... 17,281
--------
Expenses:
Administration fee (Note 3)...................................................... 8,274
Advisory fees (Note 3)........................................................... 4,417
Amortization of deferred organization costs...................................... 2,053
Auditing fees.................................................................... 4,521
Custodian and accounting fees.................................................... 10,045
Directors' fees.................................................................. 4,247
Insurance........................................................................ 1,225
Legal fees....................................................................... 4,932
Miscellaneous.................................................................... 2,055
Registration fees................................................................ 6,075
Reports to shareholders.......................................................... 4,068
Transfer agent fees.............................................................. 4,488
--------
Total expenses............................................................. 56,400
Less: expense reimbursements (Note 3)...................................... (46,585)
--------
Net expenses............................................................... 9,815
--------
Net investment income ............................................... 7,466
--------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized gain from securities transactions................................... 612
Net unrealized depreciation of investments....................................... (66,711)
--------
Net realized and unrealized loss on investments............................ (66,099)
--------
Net Decrease in Net Assets Resulting from Operations ................ $ (58,633)
=========
</TABLE>
*Commencement of operations.
See accompanying "Notes to Financial Statements."
<PAGE>
7
O'Shaughnessy Dogs of the Market(TM) Fund
STATEMENT OF CHANGES IN NET ASSETS (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
November 1, 1996*
through
March 31, 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
DECREASE IN NET ASSETS FROM
OPERATIONS
Net investment income...................................................................... $ 7,466
Net realized gain on securities transactions............................................... 612
Net unrealized depreciation of investments................................................. (66,711)
----------
Net decrease in net assets resulting from operations ................................ (58,633)
----------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends paid from net investment income.................................................. (791)
----------
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from capital shares transactions (a).................... 2,940,704
----------
Total increase in net assets ........................................................ 2,881,280
NET ASSETS
Beginning of period........................................................................ 25,000
----------
End of period ............................................................................. $2,906,280
==========
(a) A summary of capital shares transactions is as follows:
November 1, 1996*
through
March 31, 1997
----------------------
Shares Value
------ -----
Shares sold................................................................. 292,356 $3,001,874
Shares issued on reinvestment of distributions.............................. 66 662
Shares redeemed............................................................. (5,969) (61,832)
------- ----------
Net increase................................................................ 286,453 $2,940,704
======= ==========
</TABLE>
*Commencement of operations.
See accompanying "Notes to Financial Statements."
<PAGE>
8
O'Shaughnessy Dogs of the Market(TM) Fund
FINANCIAL HIGHLIGHTS
Per Share Operating Performance
(For a share outstanding throughout the period) (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
November 1, 1996*
through
March 31, 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period....................................................... $10.00
------
Income from investment operations:
Net investment income................................................................ .04
Net realized and unrealized loss on investments...................................... .03***
------
Total from investment operations........................................................... .07
------
Distributions paid from net investment income.............................................. (.01)
Net asset value, end of period............................................................. $10.06
======
Total Return .............................................................................. 0.72%**
Ratios/supplemental data:
Net assets, end of period (thousands)...................................................... $2,906
Ratio of expenses to average net assets:
Before expense reimbursement......................................................... 11.50%+
After expense reimbursement.......................................................... 2.00%+
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement......................................................... (7.98%)+
After expense reimbursement.......................................................... 1.52%+
Portfolio turnover rate.................................................................... 4.20%
Average commission rate paid............................................................... $.0503++
</TABLE>
*Commencement of operations.
**Not Annualized.
***The amount shown in this caption for a share outstanding throughout the
period does not correspond with the change in realized gains and losses in the
portfolio securities for the period because of the timing of sales and
repurchases of portfolio shares in relation to fluctuating market values for the
portfolio.
+Annualized.
++For fiscal years beginning after September 1, 1995, a fund is required to
disclose average commission rate per share for security trades on which
commissions are charged.
See accompanying "Notes to Financial Statements."
<PAGE>
9
O'Shaughnessy Dogs of the Market(TM) Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION
The O'Shaughnessy Dogs of the Market(TM) Fund (the "Fund") is a series of
shares of O'Shaughnessy Funds, Inc., which is registered under the Investment
Company Act of 1940 as a diversified, open-end management company. The Fund
began operations on November 1, 1996.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund. These policies are in conformity with generally accepted
accounting principles.
A. Security Valuation: The Fund's investments are carried at market
value. Securities listed on an exchange or quoted on a national
market system are valued at the last sale price. Other securities
are valued at the mean between the bid and asked prices. Securities
for which market quotations are not readily available, if any, are
valued following procedures approved by the Board of Directors.
Short-term investments are valued at amortized cost which
approximates market value.
B. Federal Income Taxes: It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no federal income tax
provision is required.
C. Securities Transactions, Dividends and Distributions: As is common
in the industry, security transactions are accounted for on the
trade date. Dividend income and distributions to shareholders are
recorded on the ex-dividend date.
D. 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
reported amount of assets and liabilities at the date of the
financial statements. Actual results could differ from those
estimates.
NOTE 3 - INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
For the period ended March 31, 1997, O'Shughnessy Capital Management, Inc.
(the "Advisor") provided the Funds with investment management services under an
Investment Advisory Agreement. The Advisor furnished all investment advice,
office space, facilities, and provides most of the personnel needed by the Fund.
As compensation for its services, the Advisor is entitled to a monthly fee at
the annual rate of 0.90% based upon the average daily net assets of the Fund.
The Fund is responsible for its own operating expenses. The Advisor has
agreed to reduce fees payable to it by the Fund or reimburse the Fund to the
extent necessary to limit the Fund's aggregate annual operating expenses to
2.00% of average net assets annually. Any such reductions made by the Advisor in
its fees or payments may be subject to reimbursement by the Fund through
September 30, 2000 if the Fund is able to effect such reimbursement and remain
in compliance with any expense limitations in effect. For the period ended March
31, 1997, the Advisor has reimbursed the Fund in the amount of $46,585.
<PAGE>
10
O'Shaughnessy Dogs of the Market(TM) Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited), Continued
- --------------------------------------------------------------------------------
Investment Company Administration Corporation (the "Administrator") acts
as the Fund's Administrator under an Administration Agreement. The Administrator
prepares various federal and state regulatory filings, reports and returns for
the Fund; prepares reports and materials to be supplied to the directors;
monitors the activities of the Fund's custodian, transfer agent and accountants;
coordinates the preparation and payment of Fund's expenses and reviews the
Fund's expense accruals. For its services, the Administrator receives a monthly
fee per portfolio at the following annual rate:
Under $100 million - 0.10% of average net assets, subject to a minimum fee
of $40,000 annually $100 to $200 million - 0.05% of average net assets
over $200 million - 0.03% of average net assets
First Fund Distributors, Inc. (the "Distributor") acts as the Fund's
principal underwriter in a continuous public offering of the Fund's shares. The
Distributor is an affiliate of the Administrator.
Certain officers of the Fund are also officers and/or directors of the
Administrator and the Distributor.
NOTE 4 - PURCHASES AND SALES OF SECURITES
For the period ended March 31, 1997, the cost of purchases and the
proceeds from sales of securities, excluding short-term securities, were
$2,890,210 and $57,825, respectively.
<PAGE>
INVESTMENT ADVISOR
O'Shaughnessy Capital Management, Inc.
60 Arch Street
Greenwich, Connecticut 06830
ADMINISTRATOR
Investment Company Administration Corporation
4455 E. Camelback Road, Suite 261 E
Phoenix, Arizona 85018
DISTRIBUTOR
First Fund Distributors, Inc.
4455 E. Camelback Road, Suite 261 E
Phoenix, Arizona 85018
TRANSFER AGENT
Firstar Trust Company
615 E. Michigan Street
Milwaukee, Wisconsin 53202
LEGAL COUNSEL
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022
This report is intended for shareholders of O'Shaughnessy Dogs of the
Market(TM) Fund and may not be used as sales literature unless preceded or
accompanied by a current prospectus.
<PAGE>
[Back Cover Artwork] [Front Cover Artwork]
O'Shaughnessy
Dogs of the Market(TM)
Fund
Semi-Annual
March 31, 1997
