<PAGE>
DEAR FELLOW SHAREHOLDER:
In our July 14, 1997, six month report to shareholders we stated, "It is futile
to attempt to guess what will change the bullish psychology; it is likely to be
an event that no one is talking about today." Today we can tell you that it was
Pacific Rim countries currency crises and stock market collapses that affected
the psychology. Tumbling like dominos one by one, the Pacific Rim countries
starting with Thailand and ending with Hong Kong have shown sharp declines in
their stock markets over the last six weeks. In most of those countries this
was also coupled with a sharp decline in the value of the currency. While
upsetting in the short-term to our stock market, long-term, these changes are
positive for U.S. financial assets.
It is likely that the Pacific Rim uncertainties will reduce the worldwide
economic growth rate by about 1%. Prior to this, the Pacific Rim accounted for
one-third of worldwide economic growth. There is a concern that the
devaluations will lead to intensely competitive pricing on Asian exports.
Competitive pricing is attractive to the United States as a buyer of imported
goods. However, if carried to an extreme, it can lead to deflation. A small
amount of price cutting is positive to inflation; substantial price cutting can
be very negative to economic stability.
Throughout these countries there has been excessive debt growth, which has
fueled unusual speculation in their real estate markets and left many financial
institutions in most of these countries highly vulnerable to property value
collapses. We saw this in Japan and to a minor degree in the United States in
the late '80s. We do not think the full repercussions of the Pacific Rim
currency collapses have yet played out. If the Japanese experience is any
indication, we expect it will be several years before these countries resume
anything resembling their former growth rates.
We expect U.S. Gross Domestic Product to be up about 3% next year. The dollar
should continue to appreciate, especially against emerging market currencies.
Final demand in our economy seems to be softening with perhaps the exception of
retail apparel sales. Consumer loan standards have been tightened; personal
bankruptcies have risen sharply during a boom time and this is of concern to
consumer lenders. We expect to see continued low inflation in the United States
which could lead possibly to lower bond yields.
During the most recent quarter, the Standard & Poor's 500 had another strong
performance returning 7.49%; for the nine months the total return was 29.64%.
During the third quarter there was a shift in investor emphasis from global
multinational companies to smaller capitalization domestic companies. We think
that was a positive rebalancing from overvalued stocks into an undervalued
sector.
We welcome all of our new shareholders to the Funds and thank you for your
continued support. If there are investment policy questions that you have,
please do not hesitate to contact Jim Beers, Vice President for Mutual Funds at
(800)578-8261.
Sincerely yours,
/s/ James W. Stratton
---------------------
James W. Stratton
Chairman
November 4, 1997
<PAGE>
STRATTON GROWTH FUND
- --------------------------------------------------------------------------------
The first nine months ending September 30, were an extraordinarily good period
for the market. The S&P 500 gained 29.6% for the period. Your Fund has been
able to stay relatively close to the S&P throughout this period, gaining 27.9%.
During the third quarter, the Fund returned 9.81% which was better than the S&P
500 of 7.49%. Our leading industry group remains banking/financial with 22.3%
of our assets followed by insurance services with 12.2% and consumer products
with 11.5%.
As we described in our last shareholder letter, it was our intent to pare back
some of our largest positions and to build our cash in the portfolio. To
accomplish this, we sold a portion of five of those holdings and raised cash to
7.7% of assets by quarter end.
Despite this concern for market volatility, we did add two new holdings to our
portfolio; Shared Medical Systems, a leading software and information services
company for the health care industry and Springs Industries, a diversified
producer of textiles for home furnishing, retailing and automotive uses. We
eliminated two holdings from our portfolio; First Hawaiian and The Limited. Our
turnover level for the portfolio is now at 27%, which is relatively low for a
growth and income fund in today's market environment.
The growth of assets to a new all time high level has permitted our expense
ratio to decline to 1.08%, which is a new low level of expenses for the Fund.
On October 24, the Directors of the Fund declared a $2.06 capital gain
distribution, which was paid in early November. We intend to pay our income
dividend in mid December.
Total net assets were $54,924,340. Net asset value per share rose to $33.82.
The graph below illustrates the increase in value of a $10,000 investment in
Stratton Growth Fund with all dividend income and capital gains distributions
reinvested.
[GRAPH APPEARS HERE]
Average Annual Total Return
for the period ending 9/30/97
1 year...................... +36.55%
5 year...................... +19.20
10 year...................... +12.96
15 year...................... +15.47
20 year...................... +14.31
25 year...................... +12.68
9/30/97 $197,603
Total Value of Investment
<TABLE>
<CAPTION>
Value of Shares
Value of Shares Acquired Through
Total Value Acquired Through Reinvestment of
of Original Reinvestment of Capital Gains
Shares Income Dividends Distributions
------ ---------------- --------------
<S> <C> <C> <C>
1973-1974 7,630 43 --
1975-1976 11,280 458 --
1977-1978 14,155 1,217 --
1979-1980 14,597 2,147 --
1981-1982 17,299 3,703 --
1983-1984 24,755 6,347 --
1985-1986 38,310 10,805 3,857
1987-1988 30,774 11,062 10,945
1989-1990 31,059 14,859 22,901
1991-1992 32,464 21,871 27,527
1993-1994 32,622 26,652 35,156
1995-1996 42,938 41,919 60,327
5/31/96-12/31/96* 42,654 44,981 66,844
9/30/97 53,428 57,587 86,588
</TABLE>
Past performance is not predictive of future performance.
*Prior to 12/31/96, SGF had a fiscal year-end of 5/31.
2
<PAGE>
FUND HIGHLIGHTS
- --------------------------------------------------------------------------------
Stratton Growth Fund
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 June 30, 1997
- -----------------------------------------------------------
<S> <C> <C>
Total Net Assets $54,924,340 $50,523,314
- -----------------------------------------------------------
Net Asset Value Per Share $33.82 $30.80
- -----------------------------------------------------------
Shares Outstanding 1,623,888 1,640,500
- -----------------------------------------------------------
Number of Shareholders 1,216 1,205
- -----------------------------------------------------------
Average Size Account $45,168 $41,928
- -----------------------------------------------------------
</TABLE>
PORTFOLIO CHANGES FOR THE QUARTER ENDED SEPTEMBER 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAJOR PURCHASES MAJOR SALES
- ---------------------------------------------------------------
<S> <C>
Jostens, Inc. American Express Co.
Shared Medical Systems Corp. (1) American General Corp.
Springs Industries, Inc. Cl A (1) American Home Products Corp.
Unitrin, Inc. CoreStates Financial Corp.
First Hawaiian, Inc. (2)
The Limited, Inc. (2)
The Quaker Oats Co.
SmithKline Beecham PLC ADRs
(1) New Holdings (2) Eliminations
</TABLE>
TEN LARGEST HOLDINGS SEPTEMBER 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value Percent of TNA
- ------------------------------------------------------------
<S> <C> <C>
CoreStates Financial Corp. $ 3,350,742 6.1%
- ------------------------------------------------------------
American General Corp. 2,593,750 4.7
- ------------------------------------------------------------
Pitney Bowes, Inc. 2,495,625 4.5
- ------------------------------------------------------------
Du Pont (E.I.) de Nemours & Co. 2,462,500 4.5
- ------------------------------------------------------------
PNC Bank Corp. 2,440,625 4.4
- ------------------------------------------------------------
Olin Corp. 2,340,625 4.3
- ------------------------------------------------------------
Carpenter Technology Corp. 2,277,000 4.1
- ------------------------------------------------------------
American Express Co. 2,128,750 3.9
- ------------------------------------------------------------
Commerce Bancorp, Inc. 1,982,625 3.6
- ------------------------------------------------------------
Chrysler Corp. 1,840,625 3.4
- ------------------------------------------------------------
$23,912,867 43.5%
- ------------------------------------------------------------
</TABLE>
3
<PAGE>
STRATTON MONTHLY DIVIDEND SHARES
- --------------------------------------------------------------------------------
During the first nine months of 1997, the Fund provided a total return of
15.46%. For the third quarter, the total return was 9.43%, a significant
improvement over the second quarter.
Activity in the portfolio was relatively light. We added two new holdings;
Boykin Lodging Company, a national full service hotel company and First
Industrial Realty Trust, a Midwestern owner of warehouses and other industrial
property. We sold one of our existing holdings, Summit Properties, primarily
due to disappointment with earnings. These changes did not alter significantly
the weightings in the portfolio which are presently 19.5% in shopping centers,
16.6% in hotels/motels, 16.0% in apartments, and 16.0% in health care. We have
maintained our cash level at 7.2% range in light of our concern about general
market volatility.
The portfolio has an average ratio of price to funds from operations (FFO) of
10.1x for 1998. FFO is expected to grow at 10% over 1997. The dividend payout
ratio is 80% producing an average dividend yield of 7.4% from our portfolio
holdings. The portfolio turnover rate for the first nine months was 34%, which
is relatively high for this type of portfolio. Turnover is coming down steadily
on a quarter to quarter basis as our REIT portfolio matures. Our expense ratio
remains at a low 1.03%.
In a separate mailing to each shareholder, we have asked shareholders to
approve changing the name of the Fund to Stratton Monthly Dividend REIT Shares
and to approve the portfolio concentration in the real estate sector.
Currently, 87% of the Fund's assets are in real estate securities. We believe
that the long-term best shareholder interest for both capital growth and income
production is met by concentrating all of our investment research efforts in
the REIT industry.
Total net assets were $104,337,882. Net asset value per share grew to $30.06.
The graph below illustrates the increase in value of a $10,000 investment in
Stratton Monthly Dividend Shares with all dividend income and capital gains
distributions reinvested.
[GRAPH APPEARS HERE]
Average Annual Total Return
for the period ending 9/30/97
1 year...................... +27.74%
5 year...................... + 8.71
10 year...................... + 9.33
15 year...................... +12.12
9/30/97 $68,538
Total Value of Investment
<TABLE>
<CAPTION>
Value of Shares
Value of Shares Acquired Through
Total Value Acquired Through Reinvestment of
of Original Reinvestment of Capital Gains
Shares Income Dividends Distributions
------ ---------------- --------------
<S> <C> <C> <C>
1981 9,113 583 --
1982 9,354 1,641 --
1983 10,808 3,107 --
1984 10,667 4,379 --
1985 11,795 6,627 --
1986 14,604 10,328 --
1987 16,320 13,744 503
1988 13,181 13,041 1,043
1989 12,824 15,044 1,015
1990 12,861 17,513 1,018
1991 12,084 19,388 956
1992 14,609 26,570 1,156
1993 15,701 31,818 1,242
1994 15,060 33,590 1,192
1995 13,039 32,499 1,032
1996 14,383 39,890 1,138
1/31/96-12/31/96* 14,399 43,821 1,139
9/30/97 15,780 51,510 1,248
</TABLE>
Past performance is not predictive of future performance.
*Prior to 12/31/96, SMDS had a fiscal year-end of 1/31.
4
<PAGE>
FUND HIGHLIGHTS
- --------------------------------------------------------------------------------
Stratton Monthly Dividend Shares
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 June 30, 1997
- -----------------------------------------------------------
<S> <C> <C>
Total Net Assets $104,337,882 $95,957,343
- -----------------------------------------------------------
Net Asset Value Per Share $30.06 $27.94
- -----------------------------------------------------------
Shares Outstanding 3,470,991 3,434,764
- -----------------------------------------------------------
Number of Shareholders 5,100 5,339
- -----------------------------------------------------------
Average Size Account $20,458 $17,973
- -----------------------------------------------------------
</TABLE>
PORTFOLIO CHANGES FOR THE QUARTER ENDED SEPTEMBER 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAJOR PURCHASES MAJOR SALES
- ------------------------------------------------------------------------
<S> <C>
Boykin Lodging Co. (1) CCA Prison Realty Trust (2)
Bradley Real Estate, Inc. Excel Realty Trust, Inc.
CCA Prison Realty Trust (1) Health Care REIT, Inc.
First Industrial Realty Trust, Inc. (1) Mills Corp.
Glimcher Realty Trust National Health Investors, Inc.
Home Properties of New York, Inc. Summit Properties, Inc. (2)
Jameson Inns, Inc.
(1) New Holdings (2) Eliminations
</TABLE>
TEN LARGEST HOLDINGS SEPTEMBER 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value Percent of TNA
- ---------------------------------------------------------------------------
<S> <C> <C>
Health Care REIT, Inc. $ 5,087,500 4.9%
- ---------------------------------------------------------------------------
Excel Realty Trust, Inc. 5,020,000 4.8
- ---------------------------------------------------------------------------
National Health Investors, Inc. 4,665,000 4.5
- ---------------------------------------------------------------------------
Glimcher Realty Trust 3,670,000 3.5
- ---------------------------------------------------------------------------
Mid-America Realty Investments, Inc. 3,601,875 3.4
- ---------------------------------------------------------------------------
Developers Diversified Realty Corp. 3,600,000 3.4
- ---------------------------------------------------------------------------
Mid-Atlantic Realty Trust, 7.625% due 09/15/03 3,140,625 3.0
- ---------------------------------------------------------------------------
Equity Inns, Inc. 3,004,375 2.9
- ---------------------------------------------------------------------------
EastGroup Properties, SBI 2,982,656 2.9
- ---------------------------------------------------------------------------
Town & Country Trust 2,874,375 2.8
- ---------------------------------------------------------------------------
$37,646,406 36.1%
- ---------------------------------------------------------------------------
</TABLE>
Because of the Fund's large concentration in REITs, some portion of the monthly
dividend to shareholders will be re-classified as a return of capital at year-
end. 1099-DIV forms will be mailed by January 31, 1998 specifying the amount of
taxable income.
5
<PAGE>
STRATTON SMALL-CAP YIELD FUND
- --------------------------------------------------------------------------------
Stratton Small-Cap Yield Fund is comprised of small companies all of which have
market capitalizations of less than $500 million at the time of purchase.
Currently the median market capitalization of the stocks in the portfolio is
approximately $360 million. The current number of holdings is now 64, up from
57 in the June quarter. Our portfolio turnover remains low at 24.3%, partly due
to the influx of new assets into the Fund.
At the end of the quarter, the portfolio was 92.3% invested with the remaining
cash reserves held in short-term commercial paper. Your Fund's industry mix has
remained primarily the same. Industrial stocks still make up our largest sector
weighting at 25.6%, with Banking at 17.3%. Business Service companies make up
10.8% of the portfolio while 10.0% is in Technology issues. Other important
sector weights include Insurance and REITs at 5.8% and 5.5% respectively.
Performance for the quarter was better than the Russell 2000, as financial
stocks soared. Your Fund had a 16.7% return versus the 14.9% return for the
Russell. Year to date your Fund is up 39.6% compared to the Russell 2000 gain
of 26.6%. We continue to look aggressively for new undervalued purchase
candidates which we hope will provide continued strong performance within the
value based parameters required by the Fund.
The Fund's Board of Directors declared the regular third quarter ordinary
income dividend at the rate of $0.11 per share, payable on September 22, to
stockholders of record as of September 12, 1997.
Total net assets have grown to $35,449,310. Net asset value per share was
$45.98.
The graph below illustrates the increase in value of a $10,000 investment in
Stratton Small-Cap Yield Fund with all dividend income and capital gains
distributions reinvested.
[GRAPH APPEARS HERE]
Average Annual Total Return
for the period ending 9/30/97
1 year...................... +52.19%
3 year...................... +25.76
9/30/97 $21,381
Total Value of Investment
<TABLE>
<CAPTION>
Value of Shares
Value of Shares Acquired Through
Total Value Acquired Through Reinvestment of
of Original Reinvestment of Capital Gains
Shares Income Dividends Distributions
------ ---------------- --------------
<S> <C> <C> <C>
4/93 10,000 -- --
3/31/94 10,376 158 --
3/31/95 10,352 402 --
3/31/96 12,780 789 --
3/31/96-12/31/96* 13,432 1,067 813
9/30/97 18,392 1,632 1,357
</TABLE>
Past performance is not predictive of future performance.
*Prior to 12/31/96, SSCY had a fiscal year-end of 3/31.
6
<PAGE>
FUND HIGHLIGHTS
- --------------------------------------------------------------------------------
Stratton Small-Cap Yield Fund
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 June 30, 1997
- -----------------------------------------------------------
<S> <C> <C>
Total Net Assets $35,449,310 $27,434,369
- -----------------------------------------------------------
Net Asset Value Per Share $45.98 $39.49
- -----------------------------------------------------------
Shares Outstanding 771,053 694,761
- -----------------------------------------------------------
Number of Shareholders 1,101 916
- -----------------------------------------------------------
Average Size Account $32,197 $29,950
- -----------------------------------------------------------
</TABLE>
PORTFOLIO CHANGES FOR THE QUARTER ENDED SEPTEMBER 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAJOR PURCHASES MAJOR SALES
- -----------------------------------------------------------------------------
<S> <C>
American Heritage Life Investment Corp.
(1) Acordia, Inc. (2)
Defiance, Inc. (1) American Business Products, Inc. (2)
Greenbrier Companies, Inc. (1) BB & T Corp. (2)
Parkway Properties, Inc. (1) Cleveland-Cliffs, Inc. (2)
PonceBank (1) Helix Technology Corp.
Primesource Corp. Mississippi Chemical Corp. (2)
Quaker Chemical Corp. (1) Technitrol, Inc.
Standard Motor Products, Inc. (1)
Trans Financial, Inc. (1)
Wireless Telecom Group, Inc. (1)
(1) New Holdings (2) Eliminations
</TABLE>
TEN LARGEST HOLDINGS SEPTEMBER 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value Percent of TNA
- ----------------------------------------------------------
<S> <C> <C>
Technitrol, Inc. $1,190,394 3.4%
- ----------------------------------------------------------
Quanex Corp. 1,051,875 3.0
- ----------------------------------------------------------
Interra Financial, Inc. 1,021,063 2.9
- ----------------------------------------------------------
Primex Technologies, Inc. 967,500 2.7
- ----------------------------------------------------------
Eaton Vance Corp. 965,250 2.7
- ----------------------------------------------------------
Helix Technology Corp. 928,593 2.6
- ----------------------------------------------------------
Kuhlman Corp. 900,000 2.6
- ----------------------------------------------------------
Florida Rock Industries, Inc. 892,500 2.5
- ----------------------------------------------------------
Marc, Inc. 890,625 2.5
- ----------------------------------------------------------
A.O. Smith Corp. 792,500 2.2
- ----------------------------------------------------------
$9,600,300 27.1%
- ----------------------------------------------------------
</TABLE>
7
<PAGE>
STRATTON GROWTH FUND
- -------------------------------------------------------------------------------
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The primary objective of SGF is to seek possible growth of capital for its
shareholders' investments with current income from interest and dividends as a
secondary objective. The Fund's investments will normally consist of common
stock and securities convertible into common stock.
WHAT IS THE INVESTMENT PHILOSOPHY USED IN MANAGING THE FUND?
Our in-house research of historical data shows that investing in high yielding
common stocks has produced above-average returns while lowering risk and
preserving capital. For Stratton Management Co., the common stock yield is the
primary screen in sorting out the equity stocks that are available. We then
look at additional yield characteristics such as dividend growth rates and
dividend coverage. Finally, we conduct fundamental analysis of important
characteristics such as the earnings and cash flow outlook, management
strengths, and industry competitive position.
WHY ARE DIVIDEND PAYING COMPANIES SO IMPORTANT TO THE FUND'S PORTFOLIO?
Stocks of companies that pay above average dividends tend to be less volatile
than companies that do not distribute dividends to shareholders. Though stock
prices do vary over time, dividend payouts tend to be very consistent. We find
that companies which consistently strive to increase their dividends tend to
offer the potential of above average returns. Steady, stable growth of
principal and dividend income is what SGF hopes to achieve.
WHAT ARE THE PRIMARY INVESTMENT CHARACTERISTICS OF THE PORTFOLIO?
. Average gross portfolio yield target should exceed the S&P 500 by more than
50%.
. Approximately 30 companies are held.
. By combining high dividend yield and underlying low price volatility
(Beta), SGF should have the potential to produce good relative performance
in up markets and superior relative performance in down markets.
8
<PAGE>
STRATTON MONTHLY DIVIDEND SHARES
- -------------------------------------------------------------------------------
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The primary objective of SMDS is to seek a high rate of return from dividend
and interest income on its investments in common stock and securities
convertible into common stock. In order to achieve these goals, the Fund
invests substantially all of its assets in high income-producing U.S. equity
securities.
WHAT IS THE INVESTMENT PHILOSOPHY USED IN MANAGING THE FUND?
The Fund is managed to provide a high level of monthly income to its
shareholders and, therefore, looks for companies that have strong dividend
payouts. Currently, 80% or more of the Fund is invested in high dividend
paying REITs. There are several types of real estate properties that are owned
by REITs, including multifamily apartment complexes, health care facilities,
shopping centers, regional malls, office centers, hotels, and industrial
buildings. The portfolio is diversified across several sectors within the REIT
industry.
WHY ARE DIVIDEND PAYING COMPANIES SO IMPORTANT TO THE FUND'S PORTFOLIO?
Current income is paramount for the SMDS portfolio. The Fund needs higher
yielding securities to maintain its own attractive dividend payout. REITs
satisfy this income requirement, while also offering the potential for
dividend growth and capital appreciation. REITs must distribute 95% of their
net investment income, so, as the earnings of these companies grow, increases
in dividends should follow.
WHAT ARE THE PRIMARY INVESTMENT CHARACTERISTICS OF THE PORTFOLIO?
. The portfolio is comprised of high dividend paying securities.
. Approximately 40 companies are held.
. SMDS is managed to provide a high level of current monthly income, and to
offer the potential for long-term capital appreciation.
9
<PAGE>
STRATTON SMALL-CAP YIELD FUND
- -------------------------------------------------------------------------------
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The primary objective of SSCY is to achieve both dividend income and capital
appreciation for its shareholders' investments by investing in dividend paying
small capitalization companies. We attempt to purchase companies whose recent
and future earnings power give them the potential for higher valuations and
continued dividend growth.
WHAT IS THE INVESTMENT PHILOSOPHY USED IN MANAGING THE FUND?
This all equity mutual fund invests in the common stocks of small but
established dividend paying companies. The initial screen for stock selection
requires that a stock yields greater than the Small Cap average as measured by
the Russell 2000 Index. We then employ a three step process which focuses on a
stock's fundamental valuation, earnings prospects, and, as a confirming
factor, relative price strength. We feel that companies that exhibit
consistent earnings and that regularly increase their dividends have superior
appreciation potential with reasonable levels of risk.
WHY ARE DIVIDEND PAYING COMPANIES SO IMPORTANT TO THE FUND'S PORTFOLIO?
Our research has shown that dividends tend to dampen stock price volatility.
Small-cap companies that pay dividends tend to have strong financial
characteristics since the quarterly dividend payout requires managements to
exhibit a high degree of financial discipline. The combination of strong
earnings growth and superior earnings stability are crucial elements in
meeting SSCY's investment objectives.
WHAT ARE THE PRIMARY INVESTMENT CHARACTERISTICS OF THE PORTFOLIO?
. Average gross portfolio yield target should exceed the S&P 500 and be
approximately twice the yield of the average small-cap company.
. Approximately 60 companies are held.
. By combining high dividend yields and underlying low price volatility
(Beta), SSCY seeks to produce good relative performance in up markets and
superior relative performance in down markets.
10
<PAGE>
SCHEDULE OF INVESTMENTS September 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
Stratton Growth Fund
<TABLE>
<CAPTION>
MARKET
NUMBER OF VALUE
SHARES (NOTE 1)
--------- -----------
<S> <C> <C>
COMMON STOCKS - 92.3%
BANKING/FINANCIAL - 22.3%
Comerica, Inc. .......................................... 15,000 $ 1,184,062
Commerce Bancorp, Inc. .................................. 51,000 1,982,625
CoreStates Financial Corp. .............................. 50,625 3,350,742
First Commerce Corp. .................................... 20,000 1,122,500
PNC Bank Corp. .......................................... 50,000 2,440,625
Summit Bancorp, Inc. .................................... 30,000 1,333,125
Union Planters Corp. .................................... 15,000 838,125
-----------
12,251,804
-----------
BUSINESS SERVICES - 8.4%
American Express Co. .................................... 26,000 2,128,750
Pitney Bowes, Inc. ...................................... 30,000 2,495,625
-----------
4,624,375
-----------
CAPITAL GOODS/TECHNOLOGY - 7.3%
Harris Corp. ............................................ 40,000 1,830,000
Shared Medical Systems Corp. ............................ 10,000 528,750
Thomas & Betts Corp. .................................... 30,000 1,638,750
-----------
3,997,500
-----------
CHEMICAL - 8.7%
Du Pont (E.I.) de Nemours & Co. ......................... 40,000 2,462,500
Olin Corp. .............................................. 50,000 2,340,625
-----------
4,803,125
-----------
CONSUMER PRODUCTS - 11.5%
Chrysler Corp. .......................................... 50,000 1,840,625
Jostens, Inc. ........................................... 40,000 1,085,000
Kimberly-Clark Corp. .................................... 28,000 1,370,250
Springs Industries, Inc. Class A......................... 10,000 525,000
The Quaker Oats Co. ..................................... 30,000 1,511,250
-----------
6,332,125
-----------
ENERGY - 6.7%
El Paso Energy Corp. .................................... 10,000 605,625
Exxon Corp. ............................................. 20,000 1,281,250
Mobil Corp. ............................................. 24,000 1,776,000
-----------
3,662,875
-----------
HEALTH CARE - 3.5%
American Home Products Corp. ............................ 18,000 1,314,000
SmithKline Beecham PLC ADRs.............................. 12,000 586,500
-----------
1,900,500
-----------
INDUSTRIAL - 2.4%
Fleetwood Enterprises, Inc. ............................. 40,000 1,342,500
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
NUMBER OF VALUE
SHARES (NOTE 1)
---------- -----------
<S> <C> <C>
INSURANCE/SERVICES - 12.2%
American General Corp. ................................. 50,000 $ 2,593,750
Aon Corp. .............................................. 22,500 1,189,688
HSB Group, Inc. ........................................ 10,000 556,875
Lincoln National Corp. ................................. 20,000 1,392,500
Unitrin, Inc. .......................................... 15,000 975,000
-----------
6,707,813
-----------
METALS - 4.2%
Carpenter Technology Corp. ............................. 46,000 2,277,000
-----------
PAPER - 4.0%
Glatfelter (P.H.) Co. .................................. 60,000 1,331,250
Weyerhaeuser Co. ....................................... 15,000 890,625
-----------
2,221,875
-----------
RETAILING - 1.1%
Penney (J.C.) Co., Inc. ................................ 10,000 582,500
-----------
Total Common Stocks
(cost $28,213,711)..................................... 50,703,992
-----------
<CAPTION>
PRINCIPAL
AMOUNT
----------
<S> <C> <C>
SHORT-TERM NOTES - 7.4%
General Electric Capital Corp.
5.47% due 10/01/97..................................... $1,750,000 1,750,000
General Motors Acceptance Corp. 5.61% due 10/06/97...... 2,300,000 2,300,000
-----------
Total Short-Term Notes
(cost $4,050,000)...................................... 4,050,000
-----------
TOTAL INVESTMENTS - 99.7%
(cost $32,263,711*).................................... 54,753,992
CASH AND OTHER ASSETS,
LESS LIABILITIES - 0.3%................................ 170,348
-----------
NET ASSETS - 100.0%..................................... $54,924,340
===========
</TABLE>
- --------
* Aggregate cost for federal income tax purposes is $32,263,711; and net
unrealized appreciation is as follows:
<TABLE>
<S> <C>
Gross unrealized appreciation...................................... $22,504,031
Gross unrealized depreciation...................................... (13,750)
-----------
Net unrealized appreciation....................................... $22,490,281
===========
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
SCHEDULE OF INVESTMENTS September 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
Stratton Monthly Dividend Shares
<TABLE>
<CAPTION>
MARKET
NUMBER OF VALUE
SHARES (NOTE 1)
--------- ------------
<S> <C> <C>
COMMON STOCKS - 87.4%
REAL ESTATE - 87.4%
APARTMENTS - 16.0%
Berkshire Realty Co., Inc. ............................. 110,000 $ 1,347,500
Cornerstone Realty Income Trust, Inc. .................. 80,000 955,000
Evans Withycombe Residential, Inc. ..................... 60,000 1,620,000
Gables Residential Trust................................ 100,000 2,712,500
Home Properties of New York, Inc. ...................... 80,000 2,080,000
Mid-America Apartment Communities, Inc. ................ 50,000 1,484,375
Oasis Residential, Inc. ................................ 65,000 1,584,375
Town & Country Trust.................................... 153,300 2,874,375
Walden Residential Properties, Inc. .................... 80,000 2,020,000
------------
16,678,125
------------
DIVERSIFIED - 6.6%
Colonial Properties Trust............................... 75,000 2,240,625
EastGroup Properties, SBI............................... 136,350 2,982,656
Pacific Gulf Properties, Inc. .......................... 70,000 1,662,500
------------
6,885,781
------------
HEALTH CARE - 16.0%
American Health Properties, Inc. ....................... 100,000 2,450,000
Health & Retirement Properties Trust.................... 70,000 1,321,250
Health Care REIT, Inc. ................................. 185,000 5,087,500
LTC Properties, Inc. ................................... 80,000 1,520,000
National Health Investors, Inc. ........................ 120,000 4,665,000
Universal Health Realty Income Trust.................... 75,000 1,612,500
------------
16,656,250
------------
HOTELS/MOTELS - 16.6%
Boykin Lodging Co. ..................................... 44,600 1,190,263
Equity Inns, Inc. ...................................... 190,000 3,004,375
Hospitality Properties Trust............................ 50,000 1,768,750
Innkeepers USA Trust.................................... 160,000 2,750,000
Jameson Inns, Inc. ..................................... 155,000 1,898,750
RFS Hotel Investors, Inc. .............................. 110,000 2,145,000
Sunstone Hotel Investors, Inc. ......................... 130,000 2,291,250
Winston Hotels, Inc. ................................... 170,000 2,273,750
------------
17,322,138
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
NUMBER OF VALUE
SHARES (NOTE 1)
--------- ------------
<S> <C> <C>
OFFICE/INDUSTRIAL - 5.3%
Commercial Net Lease Realty, Inc. ..................... 90,000 $ 1,434,375
First Industrial Realty Trust, Inc. ................... 20,000 680,000
Liberty Property Trust................................. 75,000 2,020,313
TriNet Corporate Realty Trust, Inc. ................... 40,000 1,405,000
------------
5,539,688
------------
OUTLET CENTERS - 3.9%
Mills Corp. ........................................... 53,700 1,386,131
Tanger Factory Outlet Centers, Inc. ................... 90,000 2,649,375
------------
4,035,506
------------
REGIONAL MALLS - 3.5%
Mid-America Realty Investments, Inc. .................. 339,000 3,601,875
------------
SHOPPING CENTERS - 19.5%
Bradley Real Estate, Inc. ............................. 85,000 1,785,000
Developers Diversified Realty Corp. ................... 90,000 3,600,000
Excel Realty Trust, Inc. .............................. 160,000 5,020,000
Glimcher Realty Trust.................................. 160,000 3,670,000
IRT Property Co. ...................................... 166,000 2,116,500
The Price REIT, Inc. .................................. 67,500 2,712,656
Western Investment Real Estate Trust................... 110,000 1,485,000
------------
20,389,156
------------
Total Common Stocks
(cost $77,704,042).................................... 91,108,519
------------
PREFERRED STOCKS - 2.4%
Psychiatric Group Preferred Depositary Shares.......... 100,000 1,550,000
(each depositary share represents 1/10th of a share of
American Health Properties Psychiatric Group Pfd.
Stock)
Rouse Co.
$3.00 Cv. Pfd. Series B............................... 20,000 995,000
------------
Total Preferred Stocks
(cost $2,771,480)..................................... 2,545,000
------------
</TABLE>
See accompanying notes to financial statements.
12
<PAGE>
SCHEDULE OF INVESTMENTS September 30, 1997 (unaudited) (continued)
- --------------------------------------------------------------------------------
Stratton Monthly Dividend Shares
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE
AMOUNT (NOTE 1)
---------- ------------
<S> <C> <C>
CONVERTIBLE DEBENTURES - 3.0%
Mid-Atlantic Realty Trust
7.625% Cv. Sub. Debs.
due 09/15/03.......................................... $2,500,000 $ 3,140,625
------------
Total Convertible Debentures
(cost $2,500,000)..................................... 3,140,625
------------
SHORT-TERM NOTES - 6.6%
General Electric Capital Corp.
5.56% due 10/01/97.................................... 2,765,000 2,765,000
General Motors Acceptance Corp. 5.65% due 10/02/97..... 2,195,000 2,195,000
Ford Motor Credit Corp.
5.63% due 10/03/97.................................... 1,210,000 1,210,000
Ford Motor Credit Corp.
5.78% due 10/03/97.................................... 740,000 740,000
------------
Total Short-Term Notes
(cost $6,910,000)..................................... 6,910,000
------------
TOTAL INVESTMENTS - 99.4%
(cost $89,885,522*)................................... 103,704,144
CASH AND OTHER ASSETS,
LESS LIABILITIES - 0.6%............................... 633,738
------------
NET ASSETS - 100.0%.................................... $104,337,882
============
</TABLE>
- --------
* Aggregate cost for federal income tax purposes is $89,885,522; and net
unrealized appreciation is as follows:
<TABLE>
<S> <C>
Gross unrealized appreciation...................................... $14,256,966
Gross unrealized depreciation...................................... (438,344)
-----------
Net unrealized appreciation....................................... $13,818,622
===========
</TABLE>
See accompanying notes to financial statements.
13
<PAGE>
SCHEDULE OF INVESTMENTS September 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
Stratton Small-Cap Yield Fund
<TABLE>
<CAPTION>
MARKET
NUMBER OF VALUE
SHARES (NOTE 1)
--------- -----------
<S> <C> <C>
COMMON STOCKS - 92.3%
BANKING/FINANCIAL - 17.3%
Affiliated Community Bancorp............................. 2,500 $ 70,000
American Bank of Connecticut............................. 7,500 301,875
CCB Financial Corp. ..................................... 4,000 322,500
Centura Banks, Inc. (NC)................................. 8,000 440,500
CFX Corp. ............................................... 19,000 407,312
Colonial BancGroup, Inc. ................................ 14,000 402,500
Commerce Bancorp, Inc. (NJ).............................. 15,000 583,125
Community Bank Systems, Inc. ............................ 12,000 348,000
Eagle Financial Corp. ................................... 9,900 396,000
First Essex Bancorp, Inc. ............................... 20,000 407,500
First Financial Holdings, Inc. .......................... 9,000 340,875
Firstbank of Illinois Co. ............................... 6,750 216,422
Medford Savings Bank..................................... 13,000 468,000
ML Bancorp, Inc. ........................................ 10,000 273,750
PonceBank................................................ 5,700 117,562
Reliance Bancorp, Inc. .................................. 10,000 330,000
Trans Financial, Inc. ................................... 10,000 318,750
Vermont Financial Services Corp. ........................ 7,000 378,000
-----------
6,122,671
-----------
BUSINESS SERVICES - 10.8%
Eaton Vance Corp. ....................................... 27,000 965,250
Interra Financial, Inc. ................................. 17,000 1,021,063
Marc, Inc. .............................................. 37,500 890,625
Primesource Corp. ....................................... 32,700 339,262
True North Communications, Inc. ......................... 25,000 620,313
-----------
3,836,513
-----------
CHEMICAL - 3.6%
Primex Technologies, Inc. ............................... 30,000 967,500
Quaker Chemical Corp. ................................... 16,500 309,375
-----------
1,276,875
-----------
CONSUMER DURABLES - 3.9%
Hunt Manufacturing Co. .................................. 3,600 82,350
K2, Inc. ................................................ 23,000 577,875
TB Wood's Corp. ......................................... 40,000 730,000
-----------
1,390,225
-----------
CONSUMER NON-DURABLES - 9.1%
International Multifoods Corp. .......................... 25,000 742,188
Morrison Health Care, Inc. .............................. 9,200 158,700
Riviana Foods, Inc. (DE)................................. 25,000 515,625
Tasty Baking Co. ........................................ 27,500 574,062
Velcro Industries, N.V. ................................. 6,000 582,000
West Co., Inc. .......................................... 20,000 660,000
-----------
3,232,575
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
NUMBER OF VALUE
SHARES (NOTE 1)
--------- -----------
<S> <C> <C>
INDUSTRIAL - 25.6%
A.O. Smith Corp. ........................................ 20,000 $ 792,500
Carpenter Technology Corp. .............................. 12,000 594,000
Commercial Intertech Corp. .............................. 40,500 739,125
Defiance, Inc. .......................................... 60,000 435,000
Excel Industries, Inc. .................................. 35,000 697,813
Florida Rock Industries, Inc. ........................... 15,000 892,500
Greenbrier Companies, Inc. .............................. 21,000 351,750
Guilford Mills, Inc. .................................... 30,000 780,000
Kuhlman Corp. ........................................... 25,000 900,000
Quanex Corp. ............................................ 30,000 1,051,875
Republic Group, Inc. .................................... 32,000 600,000
Roanoke Electric Steel Corp. ............................ 30,000 667,500
Standard Motor Products, Inc. ........................... 25,000 584,375
-----------
9,086,438
-----------
INSURANCE/SERVICES - 5.8%
American Heritage Life Investment Corp. ................. 15,000 600,000
Donegal Group, Inc. ..................................... 33,333 674,993
Selective Insurance Group, Inc. ......................... 15,000 772,500
-----------
2,047,493
-----------
REAL ESTATE - 5.5%
Brandywine Realty Trust.................................. 6,000 143,625
Camden Property Trust.................................... 8,000 245,000
CCA Prison Realty Trust.................................. 3,500 132,125
Chateau Communities, Inc. ............................... 9,378 276,651
Colonial Properties Trust................................ 8,000 239,000
Innkeepers USA Trust..................................... 20,000 343,750
Parkway Properties, Inc. ................................ 10,000 339,375
Sovran Self Storage, Inc. ............................... 7,000 220,500
-----------
1,940,026
-----------
TECHNOLOGY - 10.0%
Boston Acoustics, Inc. .................................. 14,500 489,375
Helix Technology Corp. .................................. 15,000 928,593
Shared Medical Systems Corp. ............................ 9,000 475,875
Technitrol, Inc. ........................................ 29,900 1,190,394
Wireless Telecom Group, Inc. ............................ 50,000 468,750
-----------
3,552,987
-----------
UTILITIES - 0.7%
WICOR, Inc. ............................................. 6,000 259,125
-----------
Total Common Stocks
(cost $20,483,135)...................................... 32,744,928
-----------
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
SCHEDULE OF INVESTMENTS September 30, 1997 (unaudited) (continued)
- --------------------------------------------------------------------------------
Stratton Small-Cap Yield Fund
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE
AMOUNT (NOTE 1)
---------- -----------
<S> <C> <C>
SHORT-TERM NOTES - 7.5%
Ford Motor Credit Corp.
5.78% due 10/03/97..................................... $1,325,000 $ 1,325,000
General Electric Capital Corp.
5.65% due 10/08/97..................................... 1,325,000 1,325,000
-----------
Total Short-Term Notes
(cost $2,650,000)...................................... 2,650,000
-----------
TOTAL INVESTMENTS - 99.8%
(cost $23,133,135*).................................... 35,394,928
CASH AND OTHER ASSETS,
LESS LIABILITIES - 0.2%................................ 54,382
-----------
NET ASSETS - 100.0%..................................... $35,449,310
===========
</TABLE>
- --------
* Aggregate cost for federal income tax purposes is $23,133,135; and net
unrealized appreciation is as follows:
<TABLE>
<S> <C>
Gross unrealized appreciation...................................... $12,401,543
Gross unrealized depreciation...................................... (139,750)
-----------
Net unrealized appreciation....................................... $12,261,793
===========
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
September 30, 1997 (unaudited)
<TABLE>
<CAPTION>
SGF SMDS SSCY
----------- ------------ -----------
<S> <C> <C> <C>
ASSETS:
Investments in securities at value
(cost $32,263,711, $89,885,522, and
$23,133,135, respectively) (Note 1)... $54,753,992 $103,704,144 $35,394,928
Cash................................... 70,505 2,928 60,134
Dividends and interest receivable...... 96,398 666,033 55,386
Prepaid expenses....................... 7,246 -- --
----------- ------------ -----------
Total Assets......................... 54,928,141 104,373,105 35,510,448
----------- ------------ -----------
LIABILITIES:
Accrued expenses and other liabili-
ties.................................. 3,801 35,223 22,299
Payable for investment securities pur-
chased................................ -- -- 38,839
----------- ------------ -----------
Total Liabilities.................... 3,801 35,223 61,138
----------- ------------ -----------
NET ASSETS:
Applicable to 1,623,888, 3,470,991 and
771,053 shares outstanding,
respectively/1/....................... $54,924,340 $104,337,882 $35,449,310
=========== ============ ===========
Net asset value, offering and redemp-
tion price per share.................. $ 33.82 $ 30.06 $ 45.98
=========== ============ ===========
SOURCE OF NET ASSETS:
Paid-in capital........................ $28,894,522 $108,601,752 $22,009,493
Undistributed net investment income.... 400,279 156,964 15,287
Accumulated net realized gain (loss) on
investments........................... 3,139,258 (18,239,456) 1,162,737
Net unrealized appreciation of invest-
ments................................. 22,490,281 13,818,622 12,261,793
----------- ------------ -----------
Net Assets........................... $54,924,340 $104,337,882 $35,449,310
=========== ============ ===========
</TABLE>
- --------
/1/ SGF: $.10 par value, 10,000,000 shares authorized; SMDS: $1.00 par value,
10,000,000 shares authorized; SSCY: $.001 par value, 1,000,000,000 shares
authorized.
See accompanying notes to financial statements.
16
<PAGE>
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
Nine Months Ended September 30, 1997 (unaudited)
<TABLE>
<CAPTION>
SGF SMDS SSCY
<S> <C> <C> <C>
----------- ----------- ----------
INCOME:
Dividends................................ $ 968,915 $ 5,470,275 $ 481,521
Interest................................. 141,485 514,479 61,967
----------- ----------- ----------
Total Income........................... 1,110,400 5,984,754 543,488
----------- ----------- ----------
EXPENSES:
Accounting/Pricing services fees (Note
2)...................................... 15,000 19,500 13,333
Administration services fees (Note 2).... 20,000 22,500 6,667
Advisory fees (Note 2)................... 264,131 444,754 212,154
Audit fees............................... 96 2,295 12,900
Custodian fees (Note 2).................. 16,900 31,323 11,147
Directors' fees.......................... 7,170 13,717 3,864
Legal fees............................... 3,380 6,656 1,978
Miscellaneous fees....................... 4,377 16,599 2,376
Printing and postage fees................ 14,926 34,941 7,738
Registration fees (Note 2)............... 24,748 33,451 25,532
Shareholder services fees (Note 2)....... 22,938 121,129 16,152
Taxes other than income taxes............ 1,573 4,944 1,675
----------- ----------- ----------
Total Expenses......................... 395,239 751,809 315,516
----------- ----------- ----------
Net Investment Income................ 715,161 5,232,945 227,972
----------- ----------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) on investments.. 3,140,619 (2,239,242) 1,167,918
Net increase in unrealized appreciation
on investments.......................... 8,342,856 11,156,565 7,729,004
----------- ----------- ----------
Net gain on investments.................. 11,483,475 8,917,323 8,896,922
----------- ----------- ----------
Net increase in net assets resulting
from operations....................... $12,198,636 $14,150,268 $9,124,894
=========== =========== ==========
</TABLE>
See accompanying notes to financial statements.
17
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SGF SMDS
----------------------------------------- ------------------------------
9 MONTHS ENDED 7 MONTHS ENDED YEAR ENDED 9 MONTHS ENDED 11 MONTHS ENDED
09/30/97* 12/31/96 05/31/96 09/30/97* 12/31/96
-------------- -------------- ----------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income.. $ 715,161 $ 514,358 $ 854,333 $ 5,232,945 $ 6,886,732
Net realized gain
(loss) on
investments........... 3,140,619 749,571 2,277,319 (2,239,242) 1,855,839
Net increase (decrease)
in unrealized
appreciation
(depreciation) of
investments........... 8,342,856 1,414,784 6,391,511 11,156,565 (2,376,846)
----------- ----------- ----------- ------------ ------------
Net increase in net
assets resulting from
operations............ 12,198,636 2,678,713 9,523,163 14,150,268 6,365,725
----------- ----------- ----------- ------------ ------------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income ($0.20, $0.58
and $0.54 per share,
respectively, for SGF,
$1.44 and $1.63,
respectively, for
SMDS)................. (323,965) (936,276) (788,687) (5,075,981) (6,886,732)
From realized gains on
investments ($0.46,
$1.21 and $0.945 per
share, respectively,
for SGF).............. (745,123) (1,910,237) (1,357,531) -- --
In excess of net
investment income
($0.13 for SMDS)...... -- -- -- -- (531,985)
CAPITAL SHARE
TRANSACTIONS: 2 (1,006,464) 2,089,016 3,783,914 (8,516,140) (24,434,759)
----------- ----------- ----------- ------------ ------------
Total increase
(decrease) in net
assets................ 10,123,084 1,921,216 11,160,859 558,147 (25,487,751)
NET ASSETS:
Beginning of period.... 44,801,256 42,880,040 31,719,181 103,779,735 129,267,486
----------- ----------- ----------- ------------ ------------
End of period
(including
undistributed net
investment income of
$400,279, $9,083 and
$431,001,
respectively, for SGF,
$156,964 and $0,
respectively, for
SMDS)................. $54,924,340 $44,801,256 $42,880,040 $104,337,882 $103,779,735
=========== =========== =========== ============ ============
</TABLE>
<TABLE>
<CAPTION>
SSCY
-----------------------------
9 MONTHS ENDED 9 MONTHS ENDED
09/30/97* 12/31/96
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income........................... $ 227,972 $ 310,419
Net realized gain on investments................ 1,167,918 946,175
Net increase in unrealized appreciation of in-
vestments...................................... 7,729,004 1,260,568
----------- -----------
Net increase in net assets resulting from opera-
tions.......................................... 9,124,894 2,517,162
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ($0.31 and $0.54, re-
spectively).................................... (212,685) (333,221)
From realized gains on investments ($0.46 and
$1.83, respectively)........................... (304,565) (1,129,636)
CAPITAL SHARE TRANSACTIONS: 2 5,150,590 1,044,806
----------- -----------
Total increase in net assets.................... 13,758,234 2,099,111
NET ASSETS:
Beginning of period............................. 21,691,076 19,591,965
----------- -----------
End of period (including undistributed net in-
vestment income of $15,287 and $0, respective-
ly)............................................ $35,449,310 $21,691,076
=========== ===========
</TABLE>
- --------
* Unaudited
See accompanying notes to financial statements.
18
<PAGE>
CAPITAL SHARE TRANSACTIONS
- --------------------------------------------------------------------------------
2 A summary of capital share transactions follows:
<TABLE>
<CAPTION>
SGF
-----------------------------------------------------------------------------
9 MONTHS ENDED 09/30/97* 7 MONTHS ENDED 12/31/96 YEAR ENDED 05/31/96
-------------------------- -------------------------- ---------------------
SHARES VALUE SHARES VALUE SHARES VALUE
-------------------------- ------------ ------------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Shares issued........... 78,212 $ 2,333,399 84,152 $ 2,143,395 234,168 $ 5,879,301
Shares reinvested from
net investment income
and capital gains
distributions.......... 29,770 926,402 96,302 2,447,768 80,419 1,841,377
---------- -------------- ----------- ------------- -------- -----------
107,982 3,259,801 180,454 4,591,163 314,587 7,720,678
Shares redeemed......... (143,502) (4,266,265) (98,426) (2,502,147) (156,417) (3,936,764)
---------- -------------- ----------- ------------- -------- -----------
Net increase
(decrease)........... (35,520) $ (1,006,464) 82,028 $ 2,089,016 158,170 $ 3,783,914
========== ============== =========== ============= ======== ===========
<CAPTION>
SMDS
------------------------------------------------------
9 MONTHS ENDED 09/30/97* 11 MONTHS ENDED 12/31/96
-------------------------- --------------------------
SHARES VALUE SHARES VALUE
-------------------------- ------------ -------------
<S> <C> <C> <C> <C>
Shares issued........... 262,004 $ 7,453,777 238,241 $ 6,238,119
Shares reinvested from
net investment income.. 103,568 2,845,742 165,671 4,298,372
---------- -------------- ----------- -------------
365,572 10,299,519 403,912 10,536,491
Shares redeemed......... (678,241) (18,815,659) (1,338,319) (34,971,250)
---------- -------------- ----------- -------------
Net decrease.......... (312,669) $ (8,516,140) (934,407) $ (24,434,759)
========== ============== =========== =============
<CAPTION>
SSCY
------------------------------------------------------
9 MONTHS ENDED 09/30/97* 9 MONTHS ENDED 12/31/96
-------------------------- --------------------------
SHARES VALUE SHARES VALUE
-------------------------- ------------ -------------
<S> <C> <C> <C> <C>
Shares issued........... 222,751 $ 8,707,317 28,881 $ 940,160
Shares reinvested from
net investment income
and capital gains
distributions.......... 10,086 394,032 32,327 1,049,304
---------- -------------- ----------- -------------
232,837 9,101,349 61,208 1,989,464
Shares redeemed......... (107,662) (3,950,759) (28,629) (944,658)
---------- -------------- ----------- -------------
Net increase.......... 125,175 $ 5,150,590 32,579 $ 1,044,806
========== ============== =========== =============
</TABLE>
- --------
* Unaudited
See accompanying notes to financial statements.
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
September 30, 1997 (unaudited)
NOTE 1. - Significant Accounting Policies
Stratton Mutual Funds consist of Stratton Growth Fund, Inc. ("SGF"), Stratton
Monthly Dividend Shares, Inc. ("SMDS") and The Stratton Funds, Inc. The
Stratton Funds, Inc. (the "Company") operates as a series, consisting of
Stratton Small-Cap Yield Fund ("SSCY"). The Funds and Company are registered
under the Investment Company Act of 1940, as amended, as open-end management
investment companies. The Funds offer diversified portfolios.
Investments in the Funds normally consist of common stock and securities
convertible into or exchangeable into common stock. Each Fund has specific
investment objectives:
The objective of SGF is to seek possible growth of capital with current income
from interest and dividends as secondary objective.
The objective of SMDS is to seek a high rate of return from dividend and
interest income. It will seek its objective through investment of at least 25%
of assets in securities of real estate investment trusts and of public utility
companies engaged in the production, transmission or distribution of electric,
energy, gas, water or telephone services.
The objective of SSCY is to achieve both dividend income and capital
appreciation through investment in the securities of small-cap companies which
have certain risks associated with them. First and foremost is their greater
earnings and price volatility in comparison to large companies. Earnings risk
is partially due to the undiversified nature of small company business lines.
Due to the inherent risk of investments there can be no assurance that the
objectives of the Funds will be met. The Funds' fiscal years changed to
December 31, commencing with December 31, 1996.
The following is a summary of significant accounting policies consistently
followed by these Funds in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A. Security Valuation - Securities listed or admitted to trading on
any national securities exchange are valued at their last sale price
on the exchange where the securities are principally traded or, if
there has been no sale on that date, at the mean between the last
reported bid and asked prices. Securities traded in the over-the-
counter market are valued at the last sale price, if carried in the
National Market Issues section by NASDAQ; other over-the-counter
securities are valued at the mean between the closing bid and asked
prices obtained from a principal market maker. All other securities
and assets are valued at their fair value as determined in good
faith by the Boards of Directors of the Funds, which may include the
amortized cost method for securities maturing in sixty days or less
and other cash equivalent investments.
B. Determination of Gains or Losses on Sales of Securities - Gains
or losses on the sale of securities are calculated for accounting
and tax purposes on the identified cost basis.
C. 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 all taxable income
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
- -------------------------------------------------------------------------------
September 30, 1997 (unaudited)
to its shareholders. Therefore, no federal income tax provision is
required. SMDS has a capital loss carryover available to offset
future capital gains, if any, of approximately $16,000,000 of which
$11,669,000 expires in 2003 and $4,331,000 expires in 2004.
D. Use of Estimates in Financial Statements - In preparing financial
statements in conformity with generally accepted accounting
principles, management makes estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the
financial statements, as well as the reported amounts of income and
expenses during the reporting period. Actual results may differ from
these estimates.
E. Other - Security transactions are accounted for on the date the
securities are purchased or sold. Interest income is recorded on the
accrual basis and dividend income on the ex-dividend date.
Distributions to Shareholders - Distributions to shareholders are recorded on
the ex-dividend date. The character of distributions paid to shareholders is
determined by reference to income as determined for income tax purposes, after
giving effect to temporary differences between the financial reporting and tax
basis of assets and liabilities, rather than income as determined for
financial reporting purposes.
SMDS has made certain investments in real estate investment trusts ("REITS")
which pay dividends to their shareholders based upon available funds from
operations. It is quite common for these dividends to exceed the REIT's
taxable earnings and profits resulting in the excess portion of such dividends
being designated as a return of capital. The Fund intends to include the gross
dividends from such REITS in its monthly distributions to its shareholders
and, accordingly, a portion of the Fund's distributions will also be
designated as a return of capital.
NOTE 2. - During the nine months ended September 30, 1997, the Funds paid
advisory fees to Stratton Management Company, (the "Advisor") as follows:
SGF--$264,131; SMDS--$444,754; SSCY--$212,154. Management services are
provided by the Advisor under an agreement whereby the Advisor furnishes all
investment advice, office space and facilities to the Funds and pays the
salaries of the Funds' officers and employees, except to the extent that those
employees are engaged in administrative and accounting services activities. In
return for these services, SGF pays to the Advisor a monthly fee of 3/48 of 1%
(annually 3/4 of 1%) of the daily net asset value of the Fund for such month.
SMDS pays a monthly fee at an annual rate of 5/8 of 1% of the daily net asset
value of the Fund for such month. The Advisor has voluntarily agreed to waive
$15,000 annually of the compensation due it under the agreement with each of
these Funds to offset a portion of the cost of certain administrative
responsibilities delegated to FPS Services, Inc.
SSCY pays a monthly fee at an annual rate of 0.75% of the daily net asset
value of the Fund for such month, subject to a performance adjustment. The
performance adjustment will be calculated at the end of each month based upon
a rolling 24 month performance period. The performance adjustment is added to
or subtracted from the basic investment advisory fee. The Fund's gross
performance is compared with the performance of the Frank Russell 2000 Index,
("Russell 2000"). When the Fund performs better than the Russell 2000, it pays
the Investment Advisor an incentive fee; less favorable performance than the
Russell 2000 reduces the basic fee. Each 1.00% of the difference in
performance between the Fund and the Russell 2000 during the performance
period is equal to a 0.10% adjustment to the basic fee. The maximum annualized
performance adjustment rate is +/-0.50% of average net assets which would be
added to or deducted from the advisory fee if the Fund
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
- -------------------------------------------------------------------------------
September 30, 1997 (unaudited)
outperformed or under performed the Russell 2000 by 5.00%. The performance fee
adjustment for the period ended September 30, 1997 caused the advisory fee to
increase by $67,350.
Certain officers and directors of the Funds are also officers and directors of
the Advisor. None of the Funds' officers receive compensation from the Funds.
The Funds' Administrator, Accounting Agent and Transfer Agent, FPS Services,
Inc. ("FPS"), is a wholly-owned subsidiary of FinDaTex, Inc. Certain directors
and officers of the Funds are shareholders of FinDaTex, Inc. FPS received fees
for providing shareholder services, for certain administrative services and
for accounting/pricing services during the nine months ended September 30,
1997 as follows:
<TABLE>
<CAPTION>
SGF SMDS SSCY
------- -------- -------
<S> <C> <C> <C>
Shareholder Services $22,938 $121,129 $16,152
Administration 20,000 22,500 6,667
Accounting/Pricing 15,000 19,500 13,333
</TABLE>
Pursuant to an agreement between The Bank of New York, (the "Custodian"), and
FPS, the Custodian reallows a portion of its custody fees to FPS for certain
services delegated to FPS. The amount is not readily determinable. FPS Broker
Services, Inc., a wholly-owned subsidiary of FPS, serves as the Funds'
principal underwriter and receives no fees for services in assisting in sales
of the Funds' shares but does receive an annual fee of $3,000 for each Fund
for its services in connection with the registration of the Funds' shares
under state securities laws.
NOTE 3. - Purchases and sales of investment securities, excluding short-term
notes, for the nine months ended September 30, 1997 were as follows:
<TABLE>
<CAPTION>
SGF SMDS SSCY
----------- ----------- ----------
<S> <C> <C> <C>
Cost of purchases $12,319,031 $30,604,204 $9,635,655
Proceeds of sales 14,391,015 40,164,668 5,975,536
</TABLE>
22
<PAGE>
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
Stratton Growth Fund
The table below sets forth financial data for a share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
9 MONTHS
ENDED 7 MONTHS YEARS ENDED MAY 31,
09/30/97 ENDED -------------------------------------------
(UNAUDITED) 12/31/96 1996 1995 1994 1993 1992
----------- -------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 27.00 $ 27.18 $ 22.35 $ 20.65 $ 20.89 $ 20.55 $ 19.75
------- ------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS
Net investment
income............... 0.441 0.312 0.556 0.537 0.510 0.560 0.640
Net gains on
securities (both
realized and
unrealized).......... 7.039 1.298 5.759 2.978 0.665 1.160 1.320
------- ------- ------- ------- ------- ------- -------
Total from
investment
operations......... 7.480 1.610 6.315 3.515 1.175 1.720 1.960
------- ------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends (from net
investment income)... (0.200) (0.580) (0.540) (0.540) (0.510) (0.565) (0.725)
Distributions (from
capital gains)....... (0.460) (1.210) (0.945) (1.275) (0.905) (0.815) (0.435)
------- ------- ------- ------- ------- ------- -------
Total
distributions...... (0.660) (1.790) (1.485) (1.815) (1.415) (1.380) (1.160)
------- ------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD................. $ 33.82 $ 27.00 $ 27.18 $ 22.35 $ 20.65 $ 20.89 $ 20.55
======= ======= ======= ======= ======= ======= =======
TOTAL RETURN............ 27.92% 6.40% 29.62% 18.61% 5.92% 8.91% 10.57%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period (in 000's).... $54,924 $44,801 $42,880 $31,719 $25,475 $25,315 $25,311
Ratio of expenses to
average net assets... 1.08%/1/ 1.17%/1/ 1.16% 1.31% 1.34% 1.39% 1.35%
Ratio of net
investment income to
average net assets... 1.95%/1/ 2.08%/1/ 2.28% 2.70% 2.51% 2.76% 3.20%
Portfolio turnover
rate................. 27.10% 20.32% 15.41% 42.54% 49.81% 35.34% 59.76%
Average commission
rate paid............ $0.0506 $0.0537 N/A N/A N/A N/A N/A
</TABLE>
- --------
/1/Annualized
See accompanying notes to financial statements.
23
<PAGE>
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
Stratton Monthly Dividend Shares
The table below sets forth financial data for a share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
9 MONTHS
ENDED 11 MONTHS YEARS ENDED JANUARY 31,
09/30/97 ENDED ----------------------------------------------
(UNAUDITED) 12/31/96 1996 1995 1994 1993 1992
----------- --------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING
OF PERIOD.............. $ 27.43 $ 27.40 $ 24.84 $ 28.69 $ 29.91 $ 27.83 $ 23.02
-------- -------- -------- -------- -------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS
Net investment
income............... 1.49 1.63 1.88 1.94 1.87 1.94 1.97
Net gains (losses) on
securities (both
realized and
unrealized).......... 2.58 0.16 2.60 (3.87) (1.14) 2.08 4.79
-------- -------- -------- -------- -------- ------- -------
Total from
investment
operations......... 4.07 1.79 4.48 (1.93) 0.73 4.02 6.76
-------- -------- -------- -------- -------- ------- -------
LESS DISTRIBUTIONS
Dividends (from net
investment income)... (1.44) (1.63) (1.89) (1.92) (1.94) (1.94) (1.95)
Distributions (in
excess of net
investment income)... 0.00 (0.13) (0.03) 0.00 (0.01) 0.00 0.00
-------- -------- -------- -------- -------- ------- -------
Total
distributions...... (1.44) (1.76) (1.92) (1.92) (1.95) (1.94) (1.95)
-------- -------- -------- -------- -------- ------- -------
NET ASSET VALUE, END OF
PERIOD................. $ 30.06 $ 27.43 $ 27.40 $ 24.84 $ 28.69 $ 29.91 $ 27.83
======== ======== ======== ======== ======== ======= =======
TOTAL RETURN............ 15.46% 7.12% 18.98% (6.57%) 2.22% 15.18% 30.55%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period
(in 000's)........... $104,338 $103,780 $129,267 $134,066 $165,798 $98,227 $45,566
Ratio of expenses to
average
net assets........... 1.03%/1/ 1.02%/1/ 0.99% 1.08% 0.99% 1.10% 1.23%
Ratio of net
investment income to
average net assets... 7.17%/1/ 6.94%/1/ 7.42% 7.71% 6.12% 6.74% 7.63%
Portfolio turnover
rate................. 34.00% 69.19% 53.30% 39.50% 19.15% 35.94% 43.55%
Average commission
rate paid............ $ 0.0500 $ 0.0498 N/A N/A N/A N/A N/A
</TABLE>
- --------
/1/Annualized
See accompanying notes to financial statements.
24
<PAGE>
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
Stratton Small-Cap Yield Fund
The table below sets forth financial data for a share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
9 MONTHS
ENDED 9 MONTHS YEAR YEAR FOR THE PERIOD
09/30/97 ENDED ENDED ENDED 04/12/93/1/
(UNAUDITED) 12/31/96 03/31/96 03/31/95 TO 03/31/94
----------- -------- -------- -------- --------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 33.58 $ 31.95 $ 25.88 $ 25.94 $25.00
------- ------- ------- ------- ------
INCOME FROM INVESTMENT
OPERATIONS
Net investment
income............... 0.33 0.53 0.66 0.57 0.43
Net gains (loss) on
securities (both
realized and
unrealized).......... 12.84 3.47 6.07 (0.04) 0.91
------- ------- ------- ------- ------
Total from
investment
operations......... 13.17 4.00 6.73 0.53 1.34
------- ------- ------- ------- ------
LESS DISTRIBUTIONS
Dividends (from net
investment income)... (0.31) (0.54) (0.66) (0.59) (0.40)
Distributions (from
capital gains)....... (0.46) (1.83) 0.00 0.00 0.00
------- ------- ------- ------- ------
Total
distributions...... (0.77) (2.37) (0.66) (0.59) (0.40)
------- ------- ------- ------- ------
NET ASSET VALUE, END OF
PERIOD................. $ 45.98 $ 33.58 $ 31.95 $ 25.88 $25.94
======= ======= ======= ======= ======
TOTAL RETURN............ 39.64% 12.84% 26.18% 2.09% 5.51%/2/
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period (in 000's).... $35,449 $21,691 $19,592 $14,058 $8,257
Ratio of expenses to
average net assets... 1.63%/2/ 1.29%/2/ 1.46% 2.12% 2.28%/2/
Ratio of net
investment income to
average net assets... 1.18%/2/ 2.03%/2/ 2.28% 2.36% 1.85%/2/
Portfolio turnover
rate................. 24.29% 35.86% 33.50% 30.20% 28.60%/2/
Average commission
rate paid............ $0.0550 $0.0579 N/A N/A N/A
</TABLE>
- --------
/1/Commencement of operations
/2/Annualized
See accompanying notes to financial statements.
25
<PAGE>
SHAREHOLDER INFORMATION
- -------------------------------------------------------------------------------
MINIMUM INVESTMENT
The minimum amount for the initial purchase of shares of SGF, SMDS or SSCY is
$2,000 each. Subsequent purchases may be made in amounts of $100 or more.
TELEPHONE EXCHANGE
Shares of each Fund may be exchanged for shares of the other Funds, provided
such other shares may legally be sold in the state of the investor's
residence. Each Fund has a distinct investment objective which should be
reviewed before executing any exchange of shares. Shares may be exchanged by:
(1) written request; or (2) telephone if a special authorization form has been
completed and is on file with the Transfer Agent in advance. See "How to
Redeem Fund Shares--Additional Information" in the Prospectus for a
description of the Funds' policy regarding telephone instructions.
DIVIDENDS AND DISTRIBUTIONS
SMDS declares and pays dividends from net investment income on a monthly
basis. SGF declares and pays dividends from net investment income on a semi-
annual basis. SSCY declares and pays dividends from net investment income
quarterly. Each Fund will make distributions from net realized gains, if any,
once a year. Distributions may be reinvested in additional shares of such
fund, see "Reinvestment of Income Dividends and Capital Gains Distribution" in
the Prospectus.
AUTOMATIC INVESTMENT PLAN
Shares of a Fund may be purchased through our "Automatic Investment Plan" (the
"Plan"), (a tear-out application is attached to the back of our Prospectus).
The Plan provides a convenient method by which investors may have monies
debited directly from their checking, savings or bank money market accounts
for investment in a Fund. The minimum investment pursuant to this Plan is $100
per month. The account designated will be debited in the specified amount, on
the date indicated, and Fund shares will be purchased. Only an account
maintained at a domestic financial institution which is an Automated Clearing
House member may be so designated. A Fund may alter, modify or terminate this
Plan at any time.
SHARE PRICE INFORMATION
The daily share price of our Funds can be found in the mutual fund section of
most major daily newspapers as well as The Wall Street Journal and Investor's
Daily, where the Funds are listed under Stratton Funds. The Funds' stock
ticker symbols for SGF, SMDS and SSCY are STRGX, STMDX and STSCX,
respectively.
RETIREMENT PLANS
Stratton Mutual Funds has IRA, Defined Contribution Plans and 403(b)(7)
Retirement Plans available at no minimum investment.
26
<PAGE>
SHAREHOLDER INFORMATION (Continued)
- -------------------------------------------------------------------------------
GENERAL INFORMATION ON THE FUNDS
Requests for a prospectus and financial information, past performance figures
and an application, should be directed to the Funds' Distributor:
FPS BROKER SERVICES, INC.
3200 Horizon Drive, P. O. Box 61503, King of Prussia, PA 19406-0903
Telephone: 800-634-5726
EXISTING SHAREHOLDER ACCOUNT SERVICES
Shareholders seeking information regarding their accounts and other fund
services, and shareholders executing redemption requests, should continue to
call or write our Transfer Agent and Dividend Paying Agent:
FPS SERVICES, INC.
3200 Horizon Drive, P. O. Box 61503, King of Prussia, PA 19406-0903
Telephone: 610-239-4600 . 800-472-4266
INVESTMENT PORTFOLIO ACTIVITIES
Questions regarding any of our Funds' investment portfolios should be directed
to the Funds' Investment Advisor:
STRATTON MANAGEMENT COMPANY
Plymouth Meeting Executive Campus
610 W. Germantown Pike, Suite 300, Plymouth Meeting, PA 19462-1050
Telephone: 610-941-0255
ADDITIONAL PURCHASES ONLY TO EXISTING ACCOUNTS SHOULD BE MAILED TO A SEPARATE
LOCK BOX UNIT:
c/o FPS SERVICES, INC.
P. O. Box 412797, Kansas City, MO 64141-2797
THIS REPORT IS AUTHORIZED FOR DISTRIBUTION TO SHAREHOLDERS AND TO OTHERS WHO
HAVE
RECEIVED A COPY OF THE COMBINED PROSPECTUS OF STRATTON MUTUAL FUNDS.
27
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000030137
<NAME> STRATTON MONTHLY DIVIDEND SHARES, INC.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 89,885,522
<INVESTMENTS-AT-VALUE> 103,704,144
<RECEIVABLES> 666,033
<ASSETS-OTHER> 2,928
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 104,373,105
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 35,223
<TOTAL-LIABILITIES> 35,223
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 108,601,752
<SHARES-COMMON-STOCK> 3,470,991
<SHARES-COMMON-PRIOR> 3,783,660
<ACCUMULATED-NII-CURRENT> 156,964
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (18,239,456)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 13,818,622
<NET-ASSETS> 104,337,882
<DIVIDEND-INCOME> 5,470,275
<INTEREST-INCOME> 514,479
<OTHER-INCOME> 0
<EXPENSES-NET> 751,809
<NET-INVESTMENT-INCOME> 5,232,945
<REALIZED-GAINS-CURRENT> (2,239,242)
<APPREC-INCREASE-CURRENT> 11,156,565
<NET-CHANGE-FROM-OPS> 14,150,268
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5,075,981
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 262,004
<NUMBER-OF-SHARES-REDEEMED> 678,241
<SHARES-REINVESTED> 103,568
<NET-CHANGE-IN-ASSETS> 558,147
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (16,000,214)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 444,754
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 751,809
<AVERAGE-NET-ASSETS> 98,212,827
<PER-SHARE-NAV-BEGIN> 27.43
<PER-SHARE-NII> 1.49
<PER-SHARE-GAIN-APPREC> 2.58
<PER-SHARE-DIVIDEND> 1.44
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 30.06
<EXPENSE-RATIO> 1.03
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
