<PAGE> 1
GRADISON-MCDONALD
This material is intended for distribution to shareholders of the
Gradison-McDonald Established Value Fund. It may be distributed to other
persons only if it is preceded or accompanied by a current prospectus of
the Gradison-McDonald Established Value Fund.
McDonald & Company Securities, Inc.--Distributor
ESTABLISHED VALUE FUND
GRADISON-MCDONALD
SEMIANNUAL REPORT
SEPTEMBER 30, 1996
A COMMON STOCK FUND INVESTING IN LARGE
COMPANIES JUDGED TO BE UNDERVALUED
<PAGE> 2
GRADISON-MCDONALD
ESTABLISHED VALUE FUND
LETTER TO SHAREHOLDERS
October 30, 1996
Dear Shareholder:
THE ECONOMY AND THE MARKET The U.S. economy is now nearly five and one-half
years into the current expansion. Although still in progress, it already ranks
as one of the longest post-war economic upswings. This prolonged cyclical upturn
can be partially attributed to the considerable growth of international trade,
as well as leaner corporate structures.
While the expansion has persisted for some time, more recent economic data
provides mixed signals with regard to the pace of growth. Retail sales were
virtually flat during the third quarter while sales of existing homes have
declined for four consecutive months as of September. These statistics suggest a
slowing economy as we move into the fourth quarter. Information regarding
durable goods orders and the manufacturing sector, however, continues to show
signs of steady growth. More importantly, given the varied economic signals, the
inflation data over recent months has remained relatively quiet with both the
Consumer Price Index (CPI) and the Producer Price Index (PPI) up just slightly.
The stock market has continued to benefit from a favorable interest rate and low
inflationary environment. However, it has been subjected to increased volatility
resulting from economic and earnings surprises. In July, investors sent the
major indices tumbling after unemployment figures came in significantly lower
than expected, sparking fears of inflation. A recovery followed during August
and September driving the market to new record highs. The focus has now shifted
to corporate earnings as investors look for companies to meet or exceed
estimates. The punishment has been swift and fierce for those companies that
disappoint. In such an environment, it is important to adhere to a sound
long-term investment strategy. We continue to focus on companies that exhibit
consistent earnings records trading at favorable valuations.
PERFORMANCE The returns for the first and second fiscal quarters for the Fund
were 3.27% and 3.30%, respectively, versus 4.49% and 3.09% for the S&P 500 Index
during the same periods. The employment of cash equivalents in the Fund
contributed to the underperformance during the first fiscal quarter but served
to reduce volatility during the second fiscal quarter when the Fund outperformed
the benchmark. Cash equivalents remained near 28% during the period.
PORTFOLIO Stocks from the financial sector continued to benefit from a favorable
interest rate environment. The shares of Household International and Travelers
Group posted excellent returns for the Fund over the last two quarters. Despite
a softening in the broader technology sector, Intel Corporation and Compaq
Computer Corporation significantly outpaced the market during the period.
1-800-869-5999 [Graphic]
<PAGE> 3
LETTER TO SHAREHOLDER (CONTINUED)
Several companies from the energy sector have been added to the Fund since the
beginning of the fiscal year. Among the additions are Panenergy Corporation and
Nicor Incorporated from the natural gas industry. Western Atlas Incorporated, a
provider of seismic and material handling systems used in the exploration and
production of crude oil and natural gas, was also a recent purchase for the
Fund. These companies have delivered consistent earnings growth yet exhibited
discounted share valuations from market price/earnings and price/book multiples
that the Fund seeks.
Conrail Incorporated, a major rail freight transporter in the Midwest and
Northeast United States, and a Fund holding, is currently the target of a
takeover battle between CSX Corporation and Norfolk Southern Corporation. This
demonstrates one benefit associated with a prudent, value-oriented investment
approach.
DIVIDEND The Board of Trustees has declared an income dividend of $0.12 per
share and a long-term capital gain distribution of $1.75 per share payable on
November 29 to shareholders of record November 27.
Finally, we are pleased to announce that the Gradison-McDonald Established Value
Fund was recently chosen as one of only eighteen funds to be named to the
Forbes' Honor Roll. The selection was based upon performance, preservation of
capital and continuity of management.
As always, we remain committed to serving your investment needs.
Sincerely,
Gradison-McDonald Established Value Fund
/s/ William J. Leugers /s/ Daniel R. Shick
William J. Leugers, Jr. Daniel R. Shick
Executive Vice President and Vice President and
Portfolio Manager Portfolio Manager
2
<PAGE> 4
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS YEAR ELEVEN MONTHS
ENDED ENDED ENDED YEAR ENDED APRIL 30,
SEPT. 30, MARCH 31, MARCH 31,1995 ---------------------------------
1996 1996 (NOTE 1) 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 27.567 $ 23.381 $ 22.515 $ 21.375 $ 18.366 $ 17.754
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .225 .436 .376 .256 .286 .386
Net realized and unrealized
gain on investments 1.598 5.190 1.520 2.104 3.278 .916
-------- -------- -------- -------- -------- --------
Total income from investment
operations 1.823 5.626 1.896 2.360 3.564 1.302
-------- -------- -------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment
income (.230) (.430) (.370) (.220) (.285) (.420)
Distributions from realized
capital gains (.600) (1.010) (.660) (1.000) (.270) (.270)
-------- -------- -------- -------- -------- --------
Total distributions to shareholders (.830) (1.440) (1.030) (1.220) (.555) (.690)
-------- -------- -------- -------- -------- --------
Net asset value at end of period $ 28.560 $ 27.567 $ 23.381 $ 22.515 $ 21.375 $ 18.366
======== ======== ======== ======== ======== ========
Total return 6.68%(1) 24.84% 8.85%(1) 11.30% 19.86% 7.59%
======== ======== ======== ======== ======== ========
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (in millions) $ 394.2 $ 366.4 $ 277.4 $ 253.3 $ 203.6 $ 175.5
Ratio of expenses to average net assets 1.14%(2) 1.15% 1.20%(2) 1.22% 1.28% 1.31%
Ratio of net investment income
to average net assets 1.62%(2) 1.70% 1.87%(2) 1.15% 1.48% 2.12%
Portfolio turnover rate 22.41 18.48% 24.23% 38.39% 28.08% 67.96%
Average commission paid per share
traded $ .057 -- -- -- -- --
<FN>
(1) Total return represents the actual return over the period and has not been
annualized.
(2) Annualized.
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 5
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
SHARES COMMON STOCKS - 71.78% VALUE
AEROSPACE/DEFENSE
COMPANIES - 7.21%
99,756 Lockheed Martin Corporation $8,990,509
80,000 Northrop Grumman Corporation 6,420,000
126,400 Raytheon Company 7,031,000
70,000 Textron, Inc. 5,950,000
----------
28,391,509
----------
CHEMICALS - 3.35%
255,000 Engelhard Corporation 5,865,000
134,000 Hercules, Inc. 7,336,500
----------
13,201,500
----------
COMPUTING PRODUCTS - 12.38%
186,000 Compaq Computer
Corporation (1) 11,927,250
90,000 Harris Corporation 5,861,250
126,000 Intel Corporation 12,017,250
240,000 Sun Microsystems, Inc. (1) 14,880,000
100,000 Tektronix, Inc. 4,087,500
----------
48,773,250
----------
CONSUMER DURABLES - 4.30%
190,000 Brunswick Corporation 4,560,000
97,000 Goodyear Tire & Rubber
(The) Company 4,474,125
100,000 Pulte Corporation 2,562,500
166,500 Snap-on, Inc. 5,348,812
----------
16,945,437
----------
ENERGY SERVICES - 6.27%
145,000 Coastal Corporation 5,981,250
100,000 Nicor, Inc. 3,375,000
152,000 PanEnergy Corp. 5,263,000
32,000 Royal Dutch Petroleum Company 4,996,000
82,000 Western Atlas, Inc. (1) 5,104,500
----------
24,719,750
----------
FINANCIAL SERVICES - 7.57%
85,000 Beneficial Corporation $4,887,500
119,000 Household International, Inc. 9,787,750
70,000 Transamerica Corporation 4,891,250
208,500 Travelers, Inc. 10,242,563
----------
29,809,063
----------
INDUSTRIAL PRODUCTS - 7.10%
120,000 Foster Wheeler Corporation 5,250,000
180,000 Goodrich (B.F.) Company 8,122,500
74,000 Johnson Controls, Inc. 5,550,000
117,300 Parker Hannifin Corporation 4,926,600
105,000 Timken Company 4,121,250
----------
27,970,350
----------
INSURANCE - 5.58%
42,000 ITT Hartford Group, Inc. 2,478,000
110,000 Providian Corporation 4,730,000
143,000 SAFECO Corporation 4,969,250
93,000 St. Paul Companies, Inc. 5,161,500
155,000 USLIFE Corporation 4,650,000
----------
21,988,750
----------
NATURAL RESOURCES/
FOREST PRODUCTS - 2.17%
152,000 Asarco, Inc. 4,047,000
85,000 Temple-Inland, Inc. 4,483,750
----------
8,530,750
----------
RETAIL TRADE - 4.56%
160,000 American Stores Company 6,400,000
134,000 The Great Atlantic & Pacific
Tea Company, Inc. 3,467,250
99,000 Mercantile Stores, Inc. 5,346,000
100,000 Supervalu, Inc. 2,750,000
----------
17,963,250
----------
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 6
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
SHARES COMMON STOCKS (CONTINUED) VALUE
SERVICES - 3.09%
42,000 ITT Corporation (1) $1,832,250
156,000 Pittson Brink's Group 4,894,500
254,000 Wendy's International, Inc. 5,461,000
----------
12,187,750
----------
TELECOMMUNICATIONS - 4.08%
210,000 Andrew Corporation (1) 10,447,500
220,000 MCI Communications
Corporation 5,610,000
----------
16,057,500
----------
TRANSPORTATION - 4.12%
75,000 Consolidated Rail Corporation $5,428,125
67,000 Federal Express Corporation (1)5,309,750
60,000 Norfolk Southern Corporation 5,482,500
----------
16,220,375
----------
Total Common Stock
(Cost $168,293,438) 282,759,234
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST
AMOUNT COMMERCIAL PAPER - 20.77% MATURITY RATE (2) VALUE
<S> <C> <C> <C>
$9,300,000 AT&T Corporation 10/09/96 5.23% $ 9,289,192
9,300,000 Dupont (E.I.) de Nemours & Company 11/06/96 5.34 9,250,338
8,500,000 Goldman Sachs Group (The), L.P. 10/08/96 5.28 8,491,273
8,500,000 Philip Morris Company 10/02/96 5.28 8,498,753
9,300,000 Rubbermaid, Inc. 10/28/96 5.37 9,262,544
9,300,000 SmithKline Beecham Corporation 11/20/96 5.38 9,230,509
9,300,000 Walt Disney Company 11/13/96 5.28 9,241,348
9,300,000 Warner Lambert Company 10/23/96 5.28 9,269,992
9,300,000 Xerox Credit Corporation 10/17/96 5.28 9,278,176
-------------
TOTAL COMMERCIAL PAPER (COST $81,812,125) 81,812,125
-------------
</TABLE>
<TABLE>
<CAPTION>
REPURCHASE AGREEMENT - 7.45%
<S> <C> <C> <C>
29,365,000 Fuji Securities dated 9/30/96; collateral: U.S. Treasury Note, 6% due
12/31/97 with a market value of $10,165,625; U.S. Treasury Note,
5.625% due 8/31/97 with a market value of $15,046,487; U.S. Treasury
Note, 6.625% due 3/31/97 with a market value of $4,782,126; repurchase
proceeds: $29,369,649
(COST $29,365,000) 10/01/96 5.78 29,365,000
------------
TOTAL INVESTMENTS, at value (Note 1)
(Cost $279,470,563) - 100% $393,936,359
============
<FN>
(1) Non-income producing
(2) For commercial paper, the interest rate is the discount rate at the time of
purchase by the Fund. For repurchase agreements, the rate shown reflects
the actual rate of return to the Fund.
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 7
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
<S> <C>
ASSETS
Investments in securities, at value (Note 1) (Cost $279,470,563) $393,936,359
Dividends and interest receivable 349,261
Receivable for Fund shares sold 270,066
Cash 138,135
Prepaid expenses and other assets 16,795
------------
TOTAL ASSETS 394,710,616
------------
LIABILITIES
Accrued investment advisory fee (Note 2) 154,588
Other liabilities payable to adviser (Note 2) 168,753
Payable for Fund shares redeemed 119,487
Other accrued expenses and liabilities 29,357
------------
TOTAL LIABILITIES 472,185
------------
NET ASSETS $394,238,431
============
Net assets consist of:
Aggregate paid-in capital $258,557,074
Accumulated undistributed net investment income 699,042
Accumulated net realized gain 20,516,519
Net unrealized appreciation of investments 114,465,796
------------
Net Assets $394,238,431
============
Shares of capital stock outstanding
(no par value - unlimited number of shares authorized) 13,804,457
============
Net asset value and redemption price per share (Note 1) $28.56
============
</TABLE>
See accompanying notes to financial statements.
6
<PAGE> 8
STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30, 1996
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 2,317,470
Interest 2,862,545
-----------
TOTAL INVESTMENT INCOME $ 5,180,015
EXPENSES:
Investment advisory fee (Note 2) 993,571
Distribution (Note 2) 905,773
Transfer agency and accounting services fees (Note 2) 163,150
Registration fees 17,616
Professional fees 9,879
Printing 7,377
Custodian fees 7,255
ICI dues 6,990
Insurance 3,886
Trustees' fees (Note 2) 3,224
Other 17,142
-----------
TOTAL EXPENSES 2,135,863
-----------
NET INVESTMENT INCOME 3,044,152
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 20,970,548
Net change in unrealized appreciation of investments 526,844
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 21,497,392
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $24,541,544
===========
</TABLE>
See accompanying notes to financial statements.
7
<PAGE> 9
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS YEAR
ENDED ENDED
SEPTEMBER 30, 1996 MARCH 31, 1996
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 3,044,152 $ 5,553,462
Net realized gain on investments 20,970,548 13,508,988
Net change in unrealized appreciation of investments 526,844 51,890,255
------------- -------------
Net increase in net assets resulting from operations 24,541,544 70,952,705
------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (3,090,469) (5,404,325)
Net realized capital gains (7,996,887) (12,516,066)
------------- -------------
Decrease in net assets from distributions to shareholders (11,087,356) (17,920,391)
------------- -------------
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold 69,176,934 204,134,880
Net asset value of shares issued as distributions 10,954,304 17,748,840
Payments for shares redeemed (65,763,823) (185,868,913)
------------- -------------
Net increase in net assets from Fund share transactions 14,367,415 36,014,807
------------- -------------
TOTAL INCREASE IN NET ASSETS 27,821,603 89,047,121
NET ASSETS:
Beginning of period 366,416,828 277,369,707
------------- -------------
End of period (including undistributed net investment income of
$699,042 and $745,359, respectively) (Note 1) $ 394,238,431 $ 366,416,828
============= =============
NUMBER OF FUND SHARES:
Sold 2,497,326 7,979,631
Issued as distributions to shareholders 392,460 709,780
Redeemed (2,377,265) (7,260,289)
------------- -------------
Net increase in shares outstanding 512,521 1,429,122
Outstanding at beginning of period 13,291,936 11,862,814
------------- -------------
Outstanding at end of period 13,804,457 13,291,936
============= =============
</TABLE>
See accompanying notes to financial statements.
8
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1996 (UNAUDITED)
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES
Gradison Growth Trust (the "Trust") is registered under the Investment Company
Act of 1940, as amended, as an open-end management investment company. The Trust
was created under Ohio law on May 31, 1983; it commenced investment operations
and the public offering of its shares on August 16, 1983. The Trust consists of
four series, the Gradison-McDonald Established Value Fund, the Gradison-McDonald
Opportunity Value Fund, the Gradison-McDonald Growth & Income Fund and the
Gradison-McDonald International Fund (collectively, the "Funds"); each of which,
in effect, represents a separate diversified fund with its own investment
policies. This Semiannual Report to Shareholders pertains only to the
Gradison-McDonald Established Value Fund (the "Fund"). The Fund's investment
objective is to seek long-term capital growth by investing primarily in common
stocks.
The Fund changed its fiscal year end to March 31, effective with the September
30, 1994 Semiannual Report.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amount of income and expenses for the
period. Actual results could differ from those estimates.
SECURITIES VALUATION -- Portfolio securities listed or traded on the New York or
American Stock Exchanges are valued at the last sale price on that exchange, or
if there were no sales that day, the securities are valued at the closing bid
price. All other portfolio securities for which over-the-counter market
quotations are readily available are valued at the latest bid price. Commercial
paper and discount notes are valued using the amortized cost method which
approximates market value. This involves initially valuing a security at its
original cost and thereafter assuming a constant amortization to maturity of any
discount or premium. Portfolio securities for which market quotations are not
readily available are valued at their fair value as determined in good faith
under procedures adopted by the Board of Trustees.
Repurchase agreements, which are collateralized by U.S. Government obligations,
are valued at cost which, together with accrued interest, approximates market.
Collateral for repurchase agreements is held in safekeeping in the customer-only
account of the Fund's custodian. At the time the Fund enters into a repurchase
agreement, the seller agrees that the value of the underlying security,
including accrued interest, will be equal to or exceed the face amount of the
repurchase agreement. In the event of a bankruptcy or other default of the
seller of a repurchase agreement, the Fund could experience both delays in
liquidating the underlying security and losses. These losses would not exceed an
amount equal to the difference between the liquidating value of the underlying
security and the face amount of the repurchase agreement and accrued interest.
To minimize the possibility of loss, the Fund enters into repurchase agreements
only with selected domestic banks and securities dealers which the Fund's
investment adviser believes present minimal credit risk. Refer to the Fund's
Portfolio of Investments for the face amount of repurchase agreements and
repurchase proceeds as of September 30, 1996.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions are
accounted for on the trade date (the date the order to buy or sell is executed),
and dividend income is recorded on the ex-dividend date. Interest income is
accrued as earned. Gains and losses on sales of investments are calculated on
the identified cost basis for financial reporting and tax purposes.
9
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1996 (UNAUDITED)
TAXES -- It is the Fund's policy to comply with the provisions of the Internal
Revenue Code applicable to regulated investment companies. As provided therein,
in any fiscal year in which the Fund so qualifies, and distributes at least 90%
of its taxable net income, the Fund will be relieved of federal income tax on
the income distributed. Accordingly, no provision for income taxes has been
made.
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also the Fund's intention to declare as dividends in
each calendar year, at least 98% of its net investment income (earned during the
calendar year) and 98% of its net realized capital gains, if any (earned during
the twelve months ended October 31), plus undistributed amounts from prior
years.
The tax basis of investments is equal to the cost as shown on the Statement of
Assets and Liabilities. For both financial reporting and tax purposes, gross
unrealized appreciation and gross unrealized depreciation of securities at
September 30, 1996 was $116,995,572 and $2,529,776, respectively.
FUND SHARE VALUATION AND DISTRIBUTIONS TO SHAREHOLDERS -- The net asset value
per share is computed by dividing the net asset value of the Fund (total assets
less total liabilities) by the number of shares outstanding. The redemption
price per share is equal to the net asset value per share.
Distributions to shareholders are recorded on the ex-dividend date. During the
period ended September 30, 1996, the Fund made total distributions of $.83 per
share, of which $.23 was treated as dividend income and $.60 was treated as
long-term capital gain.
EXPENSES -- Common expenses incurred by the Trust are allocated to the Fund
based on the ratio of the net assets of the Fund to the combined net assets of
the Trust. In all other respects, expenses are charged to the Fund as incurred
on a specific identification basis.
NOTE 2 -- TRANSACTIONS WITH AFFILIATES
The Trust's investments are managed, subject to the general supervision and
control of the Trust's Board of Trustees, by McDonald & Company Securities, Inc.
("McDonald"), a registered investment adviser and securities dealer, pursuant to
the terms of an Investment Advisory Agreement ("Agreement"). Under the terms of
the Agreement, effective June 1, 1995, the Fund pays McDonald a fee computed and
accrued daily and paid monthly based upon the Fund's daily net assets at the
annual rate of .65% on the first $100 million, .55% on the next $100 million and
.45% on any amounts in excess of $200 million. Prior to June 1, 1995, the Fund
paid McDonald an investment advisory fee at an annual rate of .90% on the first
$100 million, .80% on the next $100 million and .70% on any amounts in excess of
$200 million.
The Agreement provides that McDonald bears the costs of salaries and related
expenses of executive officers of the Fund who are necessary for the management
and operations of the Fund. In addition, McDonald bears the costs of preparing,
printing and mailing sales literature and other advertising materials and
compensates the Trust's trustees who are affiliated with McDonald. All expenses
not specifically assumed by McDonald are borne by the Fund.
10
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1996 (UNAUDITED)
Under the terms of a Transfer Agency, Accounting Services and Administrative
Services Agreement, effective June 1, 1995, McDonald provides transfer agent,
dividend disbursing, accounting services and administrative services to the
Fund. The Fund pays McDonald a monthly fee for transfer agency and
administrative services at an annual rate of $18.25 per shareholder non-zero
balance account, plus out-of-pocket costs for statement paper, statement and
reply envelopes and reply postage. The Fund pays McDonald a monthly fee for
accounting services based on the Fund's average daily net assets at an annual
rate of .03% on the first $100 million, .02% on the next $100 million, and .01%
on any amount in excess of $200 million, with a minimum annual fee of $40,000.
Prior to June 1, 1995, the Fund paid McDonald a monthly fee at an annual rate of
$7.36 per shareholder non-zero balance account for data processing services
provided to the Fund plus the cost of shareholder statement printing. Prior to
June 1, 1995, the Fund also reimbursed McDonald for the cost of furnishing
personnel to perform shareholder and certain other services.
In accordance with the terms of a Distribution Plan adopted under Rule 12b-1 of
the Investment Company Act of 1940, the Fund pays McDonald a fee for its
assistance in distribution of shares of the Fund. Effective June 1, 1995, in
connection with a reduction of the investment advisory fee by .25%, the
Distribution Plan was amended to increase the total fee by .25% to .50%, the
components of which are set forth in the remainder of this paragraph. The Fund
pays McDonald a service fee for personal services to shareholders, including
shareholder liaison services such as responding to shareholder inquiries and
providing information to shareholders about their Fund accounts. This fee is
computed and paid at an annual rate of .25% of the Fund's average daily net
assets. The Fund also pays McDonald a fee for its assistance in selling shares
of the Fund, including advising shareholders regarding purchase, sale and
retention of Fund shares. This fee is computed and paid at an annual rate of
.25% of the Fund's average daily net assets.
The officers of the Trust are also officers of McDonald.
Each trustee of the Trust who is not affiliated with McDonald receives fees from
the Trust for services as a trustee. The amounts of such fees for each trustee
are as follows: (a) an annual fee of $5,000 payable in quarterly installments
for service during each fiscal quarter and (b) $500 for each Board of Trustees
or committee meeting attended.
NOTE 3 -- SUMMARY OF PURCHASES AND SALES OF INVESTMENTS
For the period ended September 30, 1996, the cost of purchases and proceeds from
the sale of securities, excluding short-term securities, amounted to $59,768,000
and $68,014,070, respectively.
NOTE 4 -- SUBSEQUENT EVENT
The Board of Trustees declared an income dividend of $0.12 per share and a
long-term capital gain distribution of $1.75 per share payable on November 29,
1996 to shareholders of record on November 27, 1996.
11
<PAGE> 13
GRADISON-MCDONALD
This material is intended for distribution to shareholders of the
Gradison-McDonald Opportunity Value Fund. It may be distributed to other persons
only if it is preceded or accompanied by a current prospectus of the
Gradison-McDonald Opportunity Value Fund.
McDonald & Company Securities, Inc.--Distributor
OPPORTUNITY VALUE FUND
GRADISON-MCDONALD
SEMIANNUAL REPORT
SEPTEMBER 30, 1996
A COMMON STOCK FUND INVESTING IN SMALLER
COMPANIES JUDGED TO BE UNDERVALUED
<PAGE> 14
GRADISON-MCDONALD
OPPORTUNITY VALUE FUND
LETTER TO SHAREHOLDERS
October 30, 1996
Dear Shareholder:
THE ECONOMY AND THE MARKET The U.S. economy is now nearly five and one-half
years into the current expansion. Although still in progress, it already ranks
as one of the longest post-war economic upswings. This prolonged cyclical upturn
can be partially attributed to the considerable growth of international trade,
as well as leaner corporate structures.
While the expansion has persisted for some time, more recent economic data
provides mixed signals with regard to the pace of growth. Retail sales were
virtually flat during the third quarter while sales of existing homes have
declined for four consecutive months as of September. These statistics suggest a
slowing economy as we move into the fourth quarter. Information regarding
durable goods orders and the manufacturing sector, however, continues to show
signs of steady growth. More importantly, given the varied economic signals, the
inflation data over recent months has remained relatively quiet with both the
Consumer Price Index (CPI) and the Producer Price Index (PPI) up just slightly.
The stock market has continued to benefit from a favorable interest rate and low
inflationary environment. However, it has been subjected to increased volatility
resulting from economic and earnings surprises. In July, investors sent the
major indices tumbling after unemployment figures came in significantly lower
than expected, sparking fears of inflation. A recovery followed during August
and September driving the market to new record highs. The breadth of the rally
was generally limited to the shares of larger capitalized companies. This is
evidenced by the fact that the Russell 2000 Small Stock Index lagged the S&P 500
Index by 2.75% during the second fiscal quarter. This surge in the market was
largely driven by emotion rather than improving fundamentals. The focus has now
shifted to corporate earnings as investors look for companies to meet or exceed
estimates. The punishment has been swift and fierce for those companies that
disappoint. In such an environment, it is important to adhere to a sound
long-term investment strategy. We continue to focus on companies that exhibit
consistent earnings records trading at favorable valuations.
PERFORMANCE The returns for the first and second fiscal quarters for the Fund
were 3.68% and 1.36%, respectively, versus 5.14% and 0.34% for the Russell 2000
Small Stock Index during the same periods. The Fund's employment of cash
equivalents tempered the performance during the strong first quarter while it
helped reduce volatility during the erratic second quarter. As a result, the
Fund underperformed the benchmark during the first quarter, but outperformed
during the second quarter. Cash equivalents represented approximately 28% of net
assets during the period.
1-800-869-5999 [Graphic]
<PAGE> 15
LETTER TO SHAREHOLDERS (CONTINUED)
PORTFOLIO The Fund continues to benefit from its holdings in the financial
sector. Insurers, Fremont General Corporation and American Bankers Insurance
Group have considerably outperformed over the past six months. Additionally,
Keane Incorporated, a software developer, has risen more than 50% since the
March 31, 1996 Annual Report. Finally, recent purchases, Innovex Incorporated,
Kysor Industrial and Southdown Incorporated, have all posted superb gains.
Two of the companies whose shares are held by the Fund have recently agreed to
be acquired. Community Health Systems ("CHS") was purchased by Forstmann Little
& Company, while Boatmans Bancshares ("BOAT") agreed to be acquired by
Nationsbank Corporation. The CHS deal closed in July. The BOAT merger is
expected to be completed by January 1997. These corporate actions demonstrate
one benefit associated with prudent, value-oriented investing.
DIVIDEND The Board of Trustees has declared an income dividend of $0.10 per
share and a long-term capital gain distribution of $1.09 per share payable on
November 29 to shareholders of record November 27.
As always, we remain committed to serving your investment needs.
Sincerely,
Gradison-McDonald Opportunity Value Fund
/s/ William J. Leugers, Jr. /s/ Daniel R. Shick
------------------------------ --------------------------
William J. Leugers, Jr. Daniel R. Shick
Executive Vice President and Vice President and
Portfolio Manager Portfolio Manager
2
<PAGE> 16
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS YEAR ELEVEN MONTHS
ENDED ENDED ENDED YEAR ENDED APRIL 30,
SEPT. 30, 1996 MARCH 31, 1996 MARCH 31,1995 ---------------------------------
(NOTE 1) 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 22.264 $ 18.100 $ 18.348 $ 17.547 $ 16.462 $ 14.767
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .094 .193 .136 .086 .081 .173
Net realized and unrealized
gain on investments 1.050 4.731 .176 1.585 1.744 2.467
-------- -------- -------- -------- -------- --------
Total income from investment
operations 1.144 4.924 .312 1.671 1.825 2.640
-------- -------- -------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment
income (.065) (.185) (.120) (.070) (.100) (.270)
Distributions from realized
capital gains (.950) (.575) (.440) (.800) (.640) (.675)
-------- -------- -------- -------- -------- --------
Total distributions to shareholders (1.015) (.760) (.560) (.870) (.740) (.945)
-------- -------- -------- -------- -------- --------
Net asset value at end of period $ 22.393 $ 22.264 $ 18.100 $ 18.348 $ 17.547 $ 16.462
======== ======== ======== ======== ======== ========
Total return 5.09%(1) 28.00% 1.75%(1) 9.75% 11.57% 18.60%
======== ======== ======== ======== ======== ========
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (in millions) $ 107.6 $ 103.0 $ 84.7 $ 83.3 $ 68.2 $ 47.4
Ratio of expenses to average net assets . 1.39%(2) 1.41% 1.37%(2) 1.38% 1.44% 1.49%
Ratio of net investment income
to average net assets .86%(2) .95% .84%(2) .47% .61% 1.32%
Portfolio turnover rate 14.96% 23.98% 31.90% 40.41% 39.00% 64.25%
Average commission paid per share
traded $ .032 -- -- -- -- --
<FN>
(1) Total return represents the actual return over the period and has not been
annualized.
(2) Annualized.
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 17
STATEMENT OF NET ASSETS SEPTEMBER 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES COMMON STOCKS - 71.74% VALUE
<S> <C> <C>
BANKS - 8.50%
29,600 Boatmen's Bankshares, Inc. $1,650,200
5,000 First Empire State Corporation 1,245,000
31,100 Firstar Corporation 1,500,575
45,000 HUBCO, Inc. 961,875
30,750 Mercantile Bankshares
Corporation 907,125
26,514 Old Kent Financial Corporation 1,123,531
24,800 Union Planters Corporation 880,400
10,000 Zions Bancorporation 880,000
----------
9,148,706
----------
BUSINESS SERVICES - 5.70%
90,000 ABM Industries, Inc. 1,518,750
40,500 Banta Corporation 921,375
25,000 Interpool, Inc. 525,000
100,000 Norstan, Inc. (1) 1,625,000
52,000 PHH Corporation 1,547,000
----------
6,137,125
----------
COMPUTER HARDWARE - 3.30%
37,000 Adaptec, Inc. (1) 2,215,375
56,250 D.H. Technologies, Inc. (1) 1,335,937
----------
3,551,312
----------
COMPUTER SOFTWARE - 1.33%
37,000 Computer Data Systems, Inc. 888,000
11,250 Keane, Inc. (1) 540,000
----------
1,428,000
----------
CONSUMER DURABLES - 4.10%
46,000 Agco Corporation 1,173,000
42,000 Culp, Inc. 577,500
45,000 Titan Wheel International
Corporation 675,000
70,500 Wynn's International, Inc. 1,991,625
----------
4,417,125
----------
ELECTRONICS - 5.00%
65,000 Bel Fuse, Inc. (1) $ 780,000
30,000 Bell Industries, Inc. (1) 465,000
80,000 Innovex, Inc. 1,490,000
60,000 Input/Output, Inc. (1) 1,785,000
72,450 Sterling Electronics
Corporation (1) 860,344
----------
5,380,344
----------
FINANCIAL SERVICES - 7.63%
60,000 Aames Financial Corporation 3,022,500
33,000 Advanta Corporation 1,513,875
17,000 Alex Brown, Incorporated 983,875
46,000 Raymond James Financial, Inc. 1,115,500
42,000 TCF Financial Corporation 1,580,250
----------
8,216,000
----------
HEALTH CARE - 3.91%
60,000 HealthSouth Corporation (1) 2,302,500
70,000 Universal Health Services, 1,907,500
Inc.(1)
----------
4,210,000
----------
HOUSING/BUILDING
MATERIALS - 5.52%
39,000 Butler Manufacturing Company 1,072,500
34,000 Continental Homes Holding
Corporation 607,750
43,000 Lennar Corporation 956,750
80,000 Oakwood Homes Corporation 2,200,000
76,500 Republic Group, Inc. 1,099,687
----------
5,936,687
----------
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 18
STATEMENT OF NET ASSETS SEPTEMBER 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES COMMON STOCKS (CONTINUED) VALUE
<S> <C> <C>
INDUSTRIAL PRODUCTS - 4.15%
30,000 Amcast Industries Corporation $ 577,500
15,000 Gleason Corporation 585,000
21,000 Kysor Industrial Corporation 564,375
25,000 Raymond Corporation 468,750
60,000 Regal-Beloit Corporation 997,500
25,000 United Dominion Industries, Ltd. 500,000
35,090 Varlen Corporation 771,980
----------
4,465,105
----------
INDUSTRIAL SERVICES - 3.04%
50,000 Jaco Electronics, Inc. (1) 387,500
60,000 Kent Electronics Corporation (1) 1,297,500
36,000 Marshall Industries (1) 1,084,500
45,000 Pioneer Standard Electronics, Inc 506,250
----------
3,275,750
----------
INSURANCE COMPANIES - 6.77%
35,000 American Bankers Insurance
Group, Inc. 1,745,625
26,000 Equitable of Iowa Corporation 1,079,000
56,100 Fremont General Corporation 1,654,950
66,811 GAINSCO, Inc. 684,813
20,000 Orion Capital Corporation 1,032,500
29,000 Protective Life Corporation 1,094,750
----------
7,291,638
----------
NATURAL RESOURCES - 5.14%
51,000 Global Industries
Technologies, Inc. (1) $ 937,125
54,000 Mueller Industries, Inc. (1) 2,193,750
95,000 Patrick Industries, Inc. 1,413,125
40,000 Southdown, Inc. 985,000
----------
5,529,000
----------
RETAIL TRADE & SERVICES - 3.64%
80,000 Comair Holdings, Inc. 1,880,000
55,000 DAKA International, Inc. (1) 495,000
51,000 Rex Stores Corporation (1) 561,000
43,000 Waban, Inc. (1) 983,625
----------
3,919,625
----------
SEMICONDUCTORS -4.01%
55,000 Dallas Semiconductor
Corporation 1,003,750
50,000 Electroglas, Inc. (1) 687,500
60,000 EXAR Corporation (1) 862,500
89,000 Integrated Device
Technology, Inc. (1) 878,875
46,000 Zilog, Inc. (1) 879,750
----------
4,312,375
----------
TOTAL COMMON STOCKS
(COST $46,570,611) 77,218,792
----------
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 19
STATEMENT OF NET ASSETS SEPTEMBER 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL INTEREST
AMOUNT COMMERCIAL PAPER - 20.83% MATURITY RATE (2) VALUE
<S> <C> <C> <C> <C>
$2,500,000 AT&T Corporation 10/09/96 5.23% $ 2,497,095
2,500,000 Dupont (E.I.) de Nemours & Company 11/06/96 5.34 2,486,650
2,500,000 Goldman Sachs Group (The), L.P. 10/08/96 5.28 2,497,433
2,500,000 Philip Morris Company 10/02/96 5.28 2,499,633
2,500,000 Rubbermaid, Inc. 10/28/96 5.37 2,489,931
2,500,000 SmithKline Beecham Corporation 11/20/96 5.38 2,481,320
2,500,000 Walt Disney Company 11/13/96 5.28 2,484,234
2,500,000 Warner Lambert Company 10/23/96 5.28 2,491,933
2,500,000 Xerox Credit Corporation 10/17/96 5.28 2,494,133
-------------
TOTAL COMMERCIAL PAPER (Cost $22,422,362) 22,422,362
-------------
</TABLE>
<TABLE>
<CAPTION>
REPURCHASE AGREEMENT - 7.24%
<S> <C> <C> <C> <C>
7,790,000 Fuji Securities dated 9/30/96; collateral: U.S. Treasury Note,
4.375% due 11/15/96 with a market value of $7,952,734; repurchase
proceeds: $7,791,233
(COST $7,790,000) 10/01/96 5.78 7,790,000
------------
TOTAL INVESTMENTS, at value (NOTE 1)
(COST $76,782,973) - 99.81% 107,431,154
ACCRUED INVESTMENT ADVISORY FEE (NOTE 2) - (0.05%) (51,705)
OTHER LIABILITIES PAYABLE TO ADVISER (NOTE 2) - (0.05%) (52,915)
OTHER ASSETS AND LIABILITIES, NET - 0.29% 307,213
------------
NET ASSETS - APPLICABLE TO 4,806,578 OUTSTANDING SHARES (NO PAR
VALUE - UNLIMITED NUMBER OF SHARES AUTHORIZED) (NOTE 4) - 100% $107,633,747
============
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE (NOTE 1) $ 22.39
============
<FN>
(1) Non-income producing
(2) For commercial paper, the interest rate is the discount rate at the time of
purchase by the Fund. For repurchase agreements, the rate shown reflects
the actual rate of return to the Fund.
</TABLE>
See accompanying notes to financial statements.
6
<PAGE> 20
STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30, 1996
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 791,693
Dividends 388,074
----------
TOTAL INVESTMENT INCOME $1,179,767
EXPENSES:
Investment advisory fee (Note 2) 338,569
Distribution (Note 2) 262,211
Transfer agency and accounting services fees (Note 2) 77,250
Registration fees 16,763
Professional fees 9,846
Custodian fees 7,962
Printing 4,242
Trustees' fees (Note 2) 3,223
Other 10,430
---------
TOTAL EXPENSES 730,496
----------
NET INVESTMENT INCOME 449,271
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 4,515,929
Net change in unrealized appreciation of investments 244,777
---------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 4,760,706
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $5,209,977
==========
</TABLE>
See accompanying notes to financial statements.
7
<PAGE> 21
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
SIX MONTHS YEAR
ENDED ENDED
SEPTEMBER 30, 1996 MARCH 31, 1996
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 449,271 $ 873,255
Net realized gain on investments 4,515,929 4,563,431
Net change in unrealized appreciation of investments 244,777 17,064,801
------------- -------------
Net increase in net assets resulting from operations 5,209,977 22,501,487
------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (302,862) (836,073)
Net realized capital gains (4,426,440) (2,617,212)
------------- -------------
Decrease in net assets from distributions to shareholders (4,729,302) (3,453,285)
------------- -------------
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold 32,798,740 57,418,476
Net asset value of shares issued in reinvestment of distributions 4,692,958 3,398,854
Payments for shares redeemed (33,317,156) (61,625,425)
------------- -------------
Net increase (decrease) in net assets from Fund share transactions 4,174,542 (808,095)
------------- -------------
Total increase in net assets 4,655,217 18,240,107
NET ASSETS:
Beginning of period 102,978,530 84,738,423
------------- -------------
End of period (including undistributed net investment income of
$322,791 and $176,382, respectively) (Note 1) $ 107,633,747 $ 102,978,530
============= =============
NUMBER OF FUND SHARES:
Sold 1,470,812 2,817,109
Issued in reinvestment of distributions to shareholders 207,195 180,968
Redeemed (1,496,820) (3,054,423)
------------- -------------
Net increase (decrease) in shares outstanding 181,187 (56,346)
Outstanding at beginning of period 4,625,391 4,681,737
------------- -------------
Outstanding at end of period 4,806,578 4,625,391
============= =============
</TABLE>
See accompanying notes to financial statements.
8
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1996 (UNAUDITED)
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES
Gradison Growth Trust (the "Trust") is registered under the Investment Company
Act of 1940, as amended, as an open-end management investment company. The
Trust was created under Ohio law on May 31, 1983; it commenced investment
operations and the public offering of its shares on August 16, 1983. The Trust
consists of four series, the Gradison-McDonald Opportunity Value Fund, the
Gradison-McDonald Established Value Fund, the Gradison-McDonald Growth &
Income Fund, and the Gradison-McDonald International Fund (collectively, the
"Funds"); each of which, in effect, represents a separate diversified fund
with its own investment policies. This Semiannual Report to Shareholders
pertains only to the Gradison-McDonald Opportunity Value Fund (the "Fund").
The Fund's investment objective is to seek long-term capital growth by
investing primarily in common stocks.
The Fund changed its fiscal year end to March 31, effective with the September
30, 1994 Semiannual Report.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses for the
period. Actual results could differ from those estimates.
SECURITIES VALUATION -- Portfolio securities listed or traded on the New York
or American Stock Exchanges are valued at the last sale price on that
exchange, or if there were no sales that day, the securities are valued at the
closing bid price. All other portfolio securities for which over-the-counter
market quotations are readily available are valued at the latest bid price.
Commercial paper and discount notes are valued using the amortized cost method
which approximates market value. This involves initially valuing a security at
its original cost and thereafter assuming a constant amortization to maturity
of any discount or premium. Portfolio securities for which market quotations
are not readily available are valued at their fair value as determined in good
faith under procedures adopted by the Board of Trustees.
Repurchase agreements, which are collateralized by U.S. Government
obligations, are valued at cost which, together with accrued interest,
approximates market. Collateral for repurchase agreements is held in
safekeeping in the customer-only account of the Fund's custodian. At the time
the Fund enters into a repurchase agreement, the seller agrees that the value
of the underlying security, including accrued interest, will be equal to or
exceed the face amount of the repurchase agreement. In the event of a
bankruptcy or other default of the seller of a repurchase agreement, the Fund
could experience both delays in liquidating the underlying security and
losses. These losses would not exceed an amount equal to the difference
between the liquidating value of the underlying security and the face amount
of the repurchase agreement and accrued interest. To minimize the possibility
of loss, the Fund enters into repurchase agreements only with selected
domestic banks and securities dealers which the Fund's investment adviser
believes present minimal credit risk. Refer to the Fund's Statement of Net
Assets for the face amount of repurchase agreements and repurchase proceeds as
of September 30, 1996.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions are
accounted for on the trade date (the date the order to buy or sell is
executed), and dividend income is recorded on the ex-dividend date. Interest
income is accrued as earned. Gains and losses on sales of investments are
calculated on the identified cost basis for financial reporting and
tax purposes.
TAXES -- It is the Fund's policy to comply with the provisions of the Internal
Revenue Code applicable to regulated investment companies. As provided
therein, in any fiscal year in which the Fund so qualifies, and distributes at
least 90% of its taxable net income, the Fund will be relieved of federal
income tax on the income distributed. Accordingly, no provision for income
taxes has been made.
9
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1996 (UNAUDITED)
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also the Fund's intention to declare as dividends
in each calendar year, at least 98% of its net investment income (earned
during the calendar year) and 98% of its net realized capital gains, if any
(earned during the twelve months ended October 31), plus undistributed amounts
from prior years.
The tax basis of investments is equal to the cost as shown on the Statement of
Net Assets.
For both financial reporting and tax purposes, gross unrealized appreciation
and gross unrealized depreciation of securities at September 30, 1996 was
$32,814,506 and $2,166,325, respectively.
FUND SHARE VALUATION AND DISTRIBUTIONS TO SHAREHOLDERS -- The net asset value
per share is computed by dividing the net asset value of the Fund (total
assets less total liabilities) by the number of shares outstanding. The
redemption price per share is equal to the net asset value per share.
Distributions to shareholders are recorded on the ex-dividend date. During the
period ended September 30, 1996, the Fund made total distributions of $1.015
per share, of which $.065 was treated as dividend income, and $.95 was treated
as long-term capital gain.
EXPENSES -- Common expenses incurred by the Trust are allocated to the Fund
based on the ratio of the net assets of the Fund to the combined net assets of
the Trust. In all other respects, expenses are charged to the Fund as incurred
on a specific identification basis.
NOTE 2 -- TRANSACTIONS WITH AFFILIATES
The Trust's investments are managed, subject to the general supervision and
control of the Trust's Board of Trustees, by McDonald & Company Securities,
Inc. ("McDonald"), a registered investment adviser and securities dealer,
pursuant to the terms of an Investment Advisory Agreement ("Agreement"). Under
the terms of the Agreement, effective June 1, 1995, the Fund pays McDonald a
fee computed and accrued daily and paid monthly based upon the Fund's daily
net assets at the annual rate of .65% on the first $100 million, .55% on the
next $100 million and .45% on any amounts in excess of $200 million. Prior to
June 1, 1995, the Fund paid McDonald an investment advisory fee at an annual
rate of .90% on the first $100 million, .80% on the next $100 million and .70%
on any amounts in excess of $200 million.
The Agreement provides that McDonald bears the costs of salaries and related
expenses of executive officers of the Fund who are necessary for the
management and operations of the Fund. In addition, McDonald bears the costs
of preparing, printing and mailing sales literature and other advertising
materials and compensates the Trust's trustees who are affiliated with
McDonald. All expenses not specifically assumed by McDonald are borne by the
Fund.
Under the terms of a Transfer Agency, Accounting Services and Administrative
Services Agreement, effective June 1, 1995, McDonald provides transfer agent,
dividend disbursing, accounting services and administrative services to the
Fund. The Fund pays McDonald a monthly fee for transfer agency and
administrative services at an annual rate of $18.25 per shareholder non-zero
balance account, plus out-of-pocket costs for statement paper, statement and
reply envelopes and reply postage. The Fund pays McDonald a monthly fee for
accounting services based on the Fund's average daily net assets at an annual
rate of .03% on the first $100 million, .02% on the next $100 million, and
.01% on any amount in excess of $200 million, with a minimum annual fee of
$40,000.
Prior to June 1, 1995, the Fund paid McDonald a monthly fee at an annual rate
of $7.36 per shareholder non-zero balance account for data processing services
provided to the Fund plus the cost of shareholder statement printing. Prior to
June 1, 1995, the Fund also reimbursed McDonald for the cost of furnishing
personnel to perform shareholder and certain other services.
10
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1996 (UNAUDITED)
In accordance with the terms of a Distribution Plan adopted under Rule 12b-1
of the Investment Company Act of 1940, the Fund pays McDonald a fee for its
assistance in distribution of shares of the Fund. Effective June 1, 1995, in
connection with a reduction of the investment advisory fee by .25%, the
Distribution Plan was amended to increase the total fee by .25% to .50%, the
components of which are set forth in the remainder of this paragraph. The Fund
pays McDonald a service fee for personal services to shareholders, including
shareholder liaison services such as responding to shareholder inquiries and
providing information to shareholders about their Fund accounts. This fee is
computed and paid at an annual rate of .25% of the Fund's average daily net
assets. The Fund also pays McDonald a fee for its assistance in selling shares
of the Fund including advising shareholders regarding purchase, sale and
retention of Fund shares. This fee is computed and paid at an annual rate of
.25% of the Fund's average daily net assets.
The officers of the Trust are also officers of McDonald.
Each trustee of the Trust who is not affiliated with Gradison receives fees
from the Trust for services as a trustee. The amounts of such fees for each
trustee are as follows: (a) an annual fee of $5,000 payable in quarterly
installments for service during each fiscal quarter and (b) $500 for each
Board of Trustees or committee meeting attended.
NOTE 3 -- SUMMARY OF PURCHASES AND SALES OF INVESTMENTS
For the period ended September 30, 1996, the cost of purchases and proceeds
from the sale of securities, excluding short-term securities, amounted to
$11,298,246 and $11,970,674, respectively.
NOTE 4 -- NET ASSETS
<TABLE>
<CAPTION>
Net assets of the Fund consisted of:
SEPTEMBER 30, 1996
<S> <C>
Aggregate paid-in capital $ 72,267,579
Accumulated undistributed net investment income 322,791
Accumulated net realized gain 4,395,196
Net unrealized appreciation of investments 30,648,181
------------
Net Assets $107,633,747
============
- --------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 5 -- SUBSEQUENT EVENT
The Board of Trustees declared an income dividend of $0.10 per share and a
long-term capital gain distribution of $1.09 per share payable on November 29,
1996 to shareholders of record on November 27, 1996.
11
<PAGE> 25
GRADISON-MCDONALD
This material is intended for distribution to shareholders of the
Gradison-McDonald Growth & Income Fund. It may be distributed to other persons
only if it is preceded or accompanied by a current prospectus of the Gradison-
McDonald Growth & Income Fund.
McDonald & Company Securities, Inc.-- Distributor
GROWTH & INCOME FUND
GRADISON-MCDONALD
SEMIANNUAL REPORT
SEPTEMBER 30, 1996
A COMMON STOCK FUND SEEKING LONG-TERM GROWTH
OF CAPITAL, CURRENT INCOME, AND GROWTH OF INCOME
<PAGE> 26
GRADISON-MCDONALD
GROWTH & INCOME FUND
LETTER TO SHAREHOLDERS
November 7, 1996
Dear Shareholder:
The stock market, as measured by the Standard & Poor's 500 Composite Stock
Price Index (S&P 500) has posted solid returns for the first nine months of
this year. The market's strength is exceptional, considering this Index's
superb investment results for all of 1995. The details of the Gradison-
McDonald Growth & Income Fund's growth in assets and in number of shares
outstanding are described below and in the financial reports that follow.
PORTFOLIO At September 30, 1996 your Fund's net assets totaled more than
seventeen million dollars. Your Fund's assets have grown because of price
appreciation of its portfolio of common stocks and the influx of cash from new
shareholders. The Fund's strategy continues to be one of maintaining a
significant exposure to the common stock of high quality companies. The fund
is fully invested with a five percent commitment to liquid reserves.
We have remained committed to the Fund's focus and primary objective of
long-term capital growth, current income and growth of income. The following
table shows that your Fund's assets are invested primarily in the common stock
of high quality companies with histories of growing profits and dividends.
Companies with these characteristics are generally strong candidates for
capital appreciation and income growth and it is our view that these
characteristics bode well for future results.
The Fund's holdings exhibited the following value and growth characteristics
at September 30, 1996:
<TABLE>
<CAPTION>
GRADISON-MCDONALD S&P 500
GROWTH & INCOME FUND INDEX
<S> <C> <C>
Yield 2.6% 2.1%
Price/earnings ratio 19.9x* 19.8x
Return on equity 20.3% 15.2%
Average annual five years earnings growth 9.4% 9.8%
Annual five year dividend growth rate 8.6% 4.1%
Beta 1.01 1.00
[/FN]
* based on trailing 12 month earnings
</TABLE>
INVESTMENT PERFORMANCE For the year ended September 30, 1996 your Fund
achieved a total return of 18.6%. This compares to the 20.3% total return
achieved by the S&P 500 for the same time period. Your Fund achieved 92% of
the return of the S&P while assuming less risk due to the more conservative
nature of its diversification. Compared to the S&P 500, the Fund had smaller
positions in technology and cyclical stocks which were top performing sectors
for the period. Your Fund's greater exposure to defensive and interest rate
sensitive positions inhibited performance during this period. The Fund began
operating on February 28, 1995, twenty months ago. Since its inception your
Fund has achieved an annualized total return of 19.9% whereas the S&P 500's
total return for the same period was 27.2%.**
1-800-869-5999 [Graphic]
<PAGE> 27
LETTER TO SHAREHOLDERS (CONTINUED)
DIVIDENDS Dividends are paid quarterly. Shareholders have received the
following distributions for the fiscal year ending March 31, 1997:
<TABLE>
<CAPTION>
INCOME DISTRIBUTIONS CAPITAL GAINS DISTRIBUTIONS
<S> <C> <C>
May 28, 1996 $0.05 $0.05
August 28, 1996 0.05 -
[/FN]
In total, $ 0.15 per share has been distributed to shareholders during
our fiscal year so far.
</TABLE>
DIVIDEND REINVESTMENT PLAN The Fund has a dividend reinvestment plan available
to all shareholders. You may elect to automatically reinvest dividends and/or
capital gains distributions. You may change or terminate this election at any
time.
MARKET OUTLOOK The growth of the economy over the past two years has been
below its postwar average of three percent. Most forecasters are predicting
sub-average economic growth for the coming year. Current economic health
reflects the trend of declining corporate profits, decline compounded by weak
demand for products by debt encumbered consumers. Many industries are
experiencing narrowing profit margins as corporations hold prices steady amid
rising raw material prices. Rising energy prices are likely to be reflected in
a combination of lower economic growth and higher inflation in the months
ahead. However, inflation, as measured by the Consumer Price Index (CPI), has
stayed below the 3% range for the year to date. Lower unemployment has not yet
resulted in a powerful upsurge in wages or consumption. The Federal Reserve
Board has stayed the course, allowing interest rates to seek their own levels
which have remained within a narrow range this year. A slowing economy in the
months ahead may discourage any additional interest rate hikes in the near
future.
In October, the stock market began its seventh year of the longest postwar
bull market in history. The major stock market indices have reached all time
highs and it "appears" that there is no end to investors' euphoria. Corporate
earnings growth is mixed and investors are quick to punish offenders by
selling out. Corporate boards of profitable companies are increasing dividends
payments to shareholders albeit at lower rates, as the uncertainty of an
overdue correction weakens their resolve. Some corporations are considering
buybacks of stock in lieu of dividend increases. We are maintaining a cautious
approach to common stock selection, with a greater allocation to defensive
issues with emphasis on earnings reliability, dividend growth and reasonable
price/earnings multiples.
PUBLISHED PRICES Since the end of May, the Gradison-McDonald Growth & Income
Fund has been listed in daily newspaper mutual fund price listings along with
the other Gradison-McDonald Mutual Funds.
Thank you for investing with the Gradison-McDonald Growth & Income Fund. We
will continue to do our best to serve you and your investing needs.
Sincerely,
Gradison Growth Trust
Gradison-McDonald Growth & Income Fund
/s/ Julian C. Ball
-----------------------
Julian C. Ball, CFA
Executive Vice President and Portfolio Manager
**This represents historical performance. The investment return and value of
an investment in the Fund will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than the original cost. Total return
includes changes in share value and reinvestment of all distributions. Expense
reimbursement by the Adviser increased performance during the period shown.
2
<PAGE> 28
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS YEAR FOR THE PERIOD
ENDED ENDED FEBRUARY 28, 1995*
SEPTEMBER 30, 1996 MARCH 31,1996 TO MARCH 31, 1995
<S> <C> <C> <C>
Net asset value at beginning of period $18.459 $15.189 $15.000
------- ------- -------
INCOME FROM INVESTMENT OPERATION
Net investment income .097 .173 .030
Net realized and unrealized gain on investments 1.186 3.317 .159
------- ------- -------
Total income from investment operations 1.283 3.490 .189
------- ------- -------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income (.100) (.185) -
Distributions from realized capital gains (.050) (.035) -
------- ------- -------
Total distributions to shareholders (.150) (.220) -
------- ------- -------
Net asset value at end of period $19.592 $18.459 $15.189
======= ======= =======
Total return 6.96%(1) 23.09% 1.27%(1)
======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (in millions) $17.3 $12.0 $ 1.2
RATIOS NET OF EXPENSES WAIVED
AND REIMBURSED BY THE ADVISER (2):
Ratio of expenses to average net assets 1.50%(3) 1.50% 0.00%(3)
Ratio of net investment income
to average net assets
1.11%(3) 1.39% 4.09%(3)
RATIOS ASSUMING NO ADVISER WAIVER
OR REIMBURSEMENT OF EXPENSES (2):
Ratio of expenses to average net assets 1.96%(3) 2.87% 13.88%(3)
Ratio of net investment income (loss)
to average net assets .65%(3) .01% (9.79)%(3)
Portfolio turnover rate 4.72% 3.07% 3.62%
Average commission paid per share traded $.051 - -
[/FN]
(1) Total return represents the actual return over the period and has not been annualized.
(2) The adviser absorbed expenses of the Fund through waiver of fees and reimbursement of certain expenses (Note 2).
(3) Annualized.
* Date of public offering
</TABLE>
See accompanying notes to financial statements
3
<PAGE> 29
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES COMMON STOCKS - 95.41% VALUE
<S> <C> <C>
BANK SERVICES - 7.64%
7,000 Huntington Bankshares,
Incorporated $ 161,000
7,000 Morgan (J.P.) & Company,
Incorporated 622,125
13,000 Norwest Corporation 531,375
-----------
1,314,500
-----------
CONSUMER DURABLES - 4.54%
14,000 Cooper Tire & Rubber Company 302,750
8,000 Shaw Industries Corp. 107,000
4,000 TRW Inc. 372,000
-----------
781,750
-----------
CONSUMER
NON-DURABLES - 12.48%
5,000 CPC International, Inc. 374,375
14,000 Heinz (H.J.) Company 472,500
2,000 International Flavors &
Fragrances, Inc. 87,250
3,000 Kellogg Company 206,625
14,000 Newell Company 420,000
7,000 Pepsico, Inc. 197,750
4,000 Procter & Gamble Company 390,000
-----------
2,148,500
-----------
ENERGY - 8.93%
6,000 Chevron Corporation 375,750
7,000 Exxon Corporation 582,750
5,000 Mobil Corporation 578,750
-----------
1,537,250
-----------
FINANCIAL SERVICES - 6.88%
10,000 American Express Company 462,500
10,000 American General Corporation 377,500
6,000 Cincinnati Financial Corporation 343,500
-----------
1,183,500
-----------
SHARES COMMON STOCKS (CONTINUED) VALUE
HEALTHCARE &
PHARMACEUTICALS - 9.91%
9,000 American Home Products
Corporation $ 573,750
6,000 Bristol-Myers Squibb Company 578,250
6,000 Merck & Co., Inc. 422,250
2,000 Warner-Lambert Company 132,000
-----------
1,706,250
-----------
INDUSTRIAL PRODUCTS - 7.25%
6,000 General Electric Company 546,000
6,000 Pall Corporation 169,500
7,000 WMX Technologies, Inc. 230,125
15,000 Worthington Industries, Inc. 301,875
-----------
1,247,500
-----------
NATURAL RESOURCES - 5.10%
5,000 Avery-Dennison Corporation 277,500
5,000 Du Pont (E.I.) de Nemours &
Company 441,250
7,000 Schulman, (A.), Inc. 159,250
-----------
878,000
-----------
RETAIL TRADE & SERVICES - 7.56%
6,000 Dun & Bradstreet Corporation 357,750
3,000 J.C. Penney Company, Inc. 162,375
7,000 May Department Stores Co. 340,375
3,000 McDonald's Corporation 142,125
3,000 Nordstrom, Inc. 114,000
5,000 Walgreen Co. 185,000
-----------
1,301,625
-----------
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 30
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES COMMON STOCKS (CONTINUED) VALUE
<S> <C> <C>
TECHNOLOGY - 15.62%
9,000 Automated Data Processing, Inc. $ 392,625
5,000 Hewlett Packard Company 243,750
6,000 Intel Corporation 572,250
7,000 Minnesota Mining &
Manufacturing Company 489,125
9,000 Motorola, Inc. 464,625
10,000 Pitney-Bowes, Inc. 526,250
-----------
2,688,625
-----------
TRANSPORTATION - 0.74%
4,000 Illinois Central Corporation 126,500
-----------
SHARES COMMON STOCKS (CONTINUED) VALUE
UTILITIES - 8.76%
7,000 Ameritech Corporation $ 368,375
4,000 Bell Atlantic Corporation 239,500
9,000 Central & South West
Corporation 234,000
5,000 Duke Power Company 233,125
9,000 SBC Communications, Inc. 433,125
-----------
1,508,125
-----------
TOTAL COMMON STOCKS
(COST $14,470,710) 16,422,125
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST
AMOUNT COMMERCIAL PAPER - 2.32% MATURITY RATE (1) VALUE
<S> <C> <C> <C> <C>
$400,000 AT&T Corporation
(COST $399,535) 10/09/96 5.23% $ 399,535
-----------
REPURCHASE AGREEMENT - 2.27%
390,000 Fuji Securities dated 9/30/96; collateral: U.S. Treasury Note,
6.125% due 9/30/00 with a market value of $398,844; repurchase
proceeds: $390,062
(COST $390,000) 10/01/96 5.78 390,000
-----------
TOTAL INVESTMENTS, AT VALUE (NOTE 1)
(COST $15,260,245) - 100% $17,211,660
===========
[/FN]
(1)For commercial paper, the interest rate is the discount rate at the time of
purchase by the Fund. For repurchase agreements, the interest rate reflects
the actual rate of return to the Fund.
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 31
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investments in securities, at value (Note 1) (Cost $15,260,245) $17,211,660
Receivable for Fund shares sold 81,440
Dividends and interest receivable 27,692
Cash 15,476
Prepaid expenses and other assets 5,126
Organization expenses, net (Note 1) 4,308
-----------
TOTAL ASSETS 17,345,702
-----------
LIABILITIES
Accrued investment advisory fee (Note 2) 13,684
Other liabilities payable to adviser (Note 2) 11,444
Other accrued expenses and liabilities 6,023
Payable for Fund shares redeemed 512
-----------
TOTAL LIABILITIES 31,663
-----------
NET ASSETS $17,314,039
===========
Net assets consist of:
Aggregate paid-in capital $15,204,989
Accumulated undistributed net investment income (Note 1) 13,008
Accumulated net realized gain 144,627
Net unrealized appreciation of investments 1,951,415
-----------
Net Assets $17,314,039
===========
Shares of capital stock outstanding
(no par value - unlimited number of shares authorized) 883,748
===========
Net asset value and redemption price per share (Note 1) $19.59
===========
</TABLE>
See accompanying notes to financial statements.
6
<PAGE> 32
STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30, 1996
INVESTMENT INCOME:
<S> <C> <C>
Dividends $ 182,078
Interest 6,739
---------
TOTAL INVESTMENT INCOME $ 188,817
EXPENSES:
Investment advisory fee (Note 2) 47,070
Distribution (Note 2) 36,209
Transfer agency and accounting services fees (Note 2) 30,254
Professional fees 11,188
Registration fees 8,110
Trustees' fees (Note 2) 5,389
Printing 1,853
Other 1,895
---------
TOTAL EXPENSES 141,968
LESS FEES WAIVED BY THE ADVISER (NOTE 2) (33,386)
---------
NET EXPENSES 108,582
----------
NET INVESTMENT INCOME 80,235
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 177,293
Net change in unrealized appreciation of investments 764,206
---------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 941,499
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,021,734
==========
</TABLE>
See accompanying notes to financial statements.
7
<PAGE> 33
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) SIX MONTHS YEAR
ENDED ENDED
SEPTEMBER 30, 1996 MARCH 31, 1996
FROM OPERATIONS:
<S> <C> <C>
Net investment income $ 80,235 $ 90,227
Net realized gain on investments 177,293 19,093
Net change in unrealized appreciation of investments 764,206 1,179,997
----------- -----------
Net increase in net assets resulting from operations 1,021,734 1,289,317
----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (78,848) (81,010)
Net realized capital gains (37,045) (15,124)
----------- -----------
Decrease in net assets from distributions to shareholders (115,893) (96,134)
----------- -----------
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold 5,369,515 10,777,990
Net asset value of shares issued as distributions 113,613 93,588
Payments for shares redeemed (1,052,288) (1,295,409)
----------- -----------
Net increase in net assets from Fund share transactions 4,430,840 9,576,169
----------- -----------
TOTAL INCREASE IN NET ASSETS 5,336,681 10,769,352
NET ASSETS:
Beginning of period 11,977,358 1,208,006
----------- -----------
End of period (including undistributed net investment
income of $13,008 and $11,621, respectively) (Note 1) $17,314,039 $11,977,358
=========== ===========
NUMBER OF FUND SHARES:
Sold 284,201 640,085
Issued in reinvestment of distributions to shareholders 6,012 5,402
Redeemed (55,342) (76,141)
----------- -----------
Net increase in shares outstanding 234,871 569,346
Outstanding at beginning of period 648,877 79,531
----------- -----------
Outstanding at end of period 883,748 648,877
=========== ===========
</TABLE>
See accompanying notes to financial statements.
8
<PAGE> 34
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1996 (UNAUDITED)
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES
Gradison Growth Trust (the "Trust") is registered under the Investment Company
Act of 1940, as amended, as an open-end management investment company. The
Trust was created under Ohio law on May 31, 1983; it commenced investment
operations and the public offering of its shares on August 16, 1983. The Trust
consists of four series, the Gradison-McDonald Growth & Income Fund, the
Gradison-McDonald Established Value Fund, the Gradison-McDonald
Opportunity Value Fund and the Gradison-McDonald International Fund
(collectively, the "Funds"); each of which, in effect, represents a separate
diversified fund with its own investment policies. This Semiannual Report to
Shareholders pertains only to the Gradison-McDonald Growth & Income Fund
(the "Fund"), the public offering of shares of which commenced on February 28,
1995. The Fund's investment objective is to seek long-term growth of capital,
current income, and growth of income consistent with reasonable investment
risk.
The following is a summary of significant accounting policies followed by the
Fund in preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses for the
period. Actual results could differ from those estimates.
SECURITIES VALUATION -- Portfolio securities listed or traded on the New York
or American Stock Exchanges are valued at the last sale price on that
exchange, or if there were no sales that day, the securities are valued at the
closing bid price. All other portfolio securities for which over-the-counter
market quotations are readily available are valued at the latest bid price.
Commercial paper and discount notes are valued using the amortized cost method
which approximates market value. This involves initially valuing a security at
its original cost and thereafter assuming a constant amortization to maturity
of any discount or premium. Portfolio securities for which market quotations
are not readily available are valued at their fair value as determined in good
faith under procedures adopted by the Board of Trustees.
Repurchase agreements, which are collateralized by U.S. Government
obligations, are valued at cost which, together with accrued interest,
approximates market. Collateral for repurchase agreements is held in
safekeeping in the customer-only account of the Fund's custodian. At the time
the Fund enters into a repurchase agreement, the seller agrees that the value
of the underlying security, including accrued interest, will be equal to or
exceed the face amount of the repurchase agreement. In the event of a
bankruptcy or other default of the seller of a repurchase agreement, the Fund
could experience both delays in liquidating the underlying security and
losses. These losses would not exceed an amount equal to the difference
between the liquidating value of the underlying security and the face amount
of the repurchase agreement and accrued interest. To minimize the possibility
of loss, the Fund enters into repurchase agreements only with selected
domestic banks and securities dealers which the Fund's investment adviser
believes present minimal credit risk. Refer to the Fund's Portfolio of
Investments for the face amount of repurchase agreements and repurchase
proceeds as of September 30, 1996.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions are
accounted for on the trade date (the date the order to buy or sell is
executed), and dividend income is recorded on the ex-dividend date. Interest
income is accrued as earned. Gains and losses on sales of investments are
calculated on the identified cost basis for financial reporting and
tax purposes.
TAXES -- It is the Fund's policy to comply with the provisions of the Internal
Revenue Code available to regulated investment companies. As provided therein,
in any fiscal year in which the Fund so qualifies, and distributes at least
90% of its taxable net income, the Fund will be relieved of federal income tax
on the income distributed. Accordingly, no provision for income taxes has been
made.
9
<PAGE> 35
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1996 (UNAUDITED)
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also the Fund's intention to declare as dividends
in each calendar year, at least 98% of its net investment income (earned
during the calendar year) and 98% of its net realized capital gains, if any
(earned during the twelve months ended October 31), plus undistributed amounts
from prior years.
The tax basis of investments is equal to the cost as shown on the Statement of
Assets and Liabilities.
For both financial reporting and tax purposes, gross unrealized appreciation
and gross unrealized depreciation of securities at September 30, 1996 was
$2,118,258 and $166,843, respectively.
FUND SHARE VALUATION AND DISTRIBUTIONS TO SHAREHOLDERS -- The net asset value
per share is computed by dividing the net asset value of the Fund (total
assets less total liabilities) by the number of shares outstanding. The
redemption price per share is equal to the net asset value per share.
Distributions to shareholders are recorded on the ex-dividend date. During the
period ended September 30, 1996, the Fund made total distributions of $.15 per
share, $.10 of which was treated as dividend income, $.04 was treated as
short-term capital gain, and $.01 was treated as long-term capital gain.
EXPENSES -- Common expenses incurred by the Trust are allocated to the Fund
based on the ratio of the net assets of the Fund to the combined net assets of
the Trust. In all other respects, expenses are charged to the Fund as incurred
on a specific identification basis.
ORGANIZATION EXPENSES -- Expenses of organization have been capitalized and
are being amortized on a straight-line basis over 60 months commencing upon
the public offering of the Fund's shares.
NOTE 2 -- TRANSACTIONS WITH AFFILIATES
The Trust's investments are managed, subject to the general supervision and
control of the Trust's Board of Trustees, by McDonald & Company Securities,
Inc. ("McDonald"), a registered investment adviser and securities dealer,
pursuant to the terms of an Investment Advisory Agreement ("Agreement"). Under
the terms of the Agreement, the Fund pays McDonald a fee computed and accrued
daily and paid monthly based upon the Fund's daily net assets at the annual
rate of .65% on the first $100 million, .55% on the next $100 million and .45%
on any amounts in excess of $200 million.
The Agreement provides that McDonald bear the costs of salaries and related
expenses of executive officers of the Fund who are necessary for the
management and operations of the Fund. In addition, McDonald bears the costs
of preparing, printing and mailing sales literature and other advertising
materials and compensates the Trust's trustees who are affiliated with
McDonald. All expenses not specifically assumed by McDonald are borne by the
Fund.
Under the terms of a Transfer Agency, Accounting Services and Administrative
Services Agreement, McDonald provides transfer agent, dividend disbursing,
accounting services and administrative services to the Fund. The Fund pays
McDonald a monthly fee for transfer agency and administrative services at an
annual rate of $18.25 per shareholder non-zero balance account, plus
out-of-pocket costs for statement paper, statement and reply envelopes and
reply postage. The Fund pays McDonald a monthly fee for accounting services
based on the Fund's average daily net assets at an annual rate of .03% on the
first $100 million, .02% on the next $100 million and .01% on any amount in
excess of $200 million, with a minimum annual fee of $40,000.
10
<PAGE> 36
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1996 (UNAUDITED)
Under the terms of an Expense Reimbursement Agreement, McDonald has agreed to
forego fees owed to it under the Advisory Agreement or any other agreement
with the Trust and to reimburse the Fund if, and to the extent that, expenses
(excluding brokerage commissions, taxes, interest and extraordinary items)
borne by the Fund in any fiscal year exceed 1.50% of the average net assets of
the Fund. This agreement is in effect until July 31, 1997 and is subject to
termination by either party upon written notice subsequent to that date. In
addition, McDonald may, at its discretion, agree to waive fees and/or
reimburse the Fund for other expenses in order to limit the Fund's expenses to
a specified percentage of average net assets lower than 1.50%. For the period
ended September 30, 1996, McDonald waived advisory fees of $33,386.
In accordance with the terms of a Distribution Plan adopted under Rule 12b-1
of the Investment Company Act of 1940, the Fund pays McDonald a service fee
for personal services to shareholders including shareholder liaison services
such as responding to shareholder inquiries and providing information to
shareholders about their Fund accounts. This fee is computed and paid at an
annual rate of .25% of the Fund's average daily net assets. The Fund also pays
McDonald a fee for its assistance in selling shares of the Fund including
advising shareholders regarding purchase, sale and retention of Fund shares.
This fee is computed and paid at an annual rate of .25% of the Fund's average
daily net assets.
The officers of the Trust are also officers of McDonald.
Each trustee of the Trust who is not affiliated with McDonald receives fees
from the Trust for services as a trustee. The amounts of such fees for each
trustee are as follows: (a) an annual fee of $5,000 payable in quarterly
installments and
(b) $500 for each Board of Trustees or committee meeting attended.
NOTE 3 -- SUMMARY OF PURCHASES AND SALES OF INVESTMENTS
For the period ended September 30, 1996, the cost of purchases and proceeds
from the sale of securities, excluding short-term securities, amounted to
$4,508,653 and $644,102, respectively.
NOTE 4 -- SUBSEQUENT EVENT
The Board of Trustees declared an income dividend of $0.13 per share, of which
$0.08 per share is attributable to short-term capital gains, payable on
November 29, 1996 to shareholders of record on November 27, 1996.
11
<PAGE> 37
GRADISON-MCDONALD
This material is intended for distribution to shareholders of the
Gradison-McDonald International Fund. It may be distributed to other
persons only if it is preceded or accompanied by a current prospectus of
the Gradison-McDonald International Fund.
McDoald & Company Securities, Inc.-Distributor
INTERNATIONAL
FUND
GRADISON-MCDONALD
SEMIANNUAL REPORT
SEPTEMBER 30, 1996
A COMMON STOCK FUND INVESTING
IN NON-UNITED STATES COMPANIES
<PAGE> 38
GRADISON-MCDONALD
INTERNATIONAL FUND
LETTER TO SHAREHOLDERS
November 7, 1996
Dear Shareholder:
It has been over a year since we commenced operations in the Gradison-McDonald
International Fund. You will recall that we chose Blairlogie Capital Management
of Edinburgh, Scotland to be our subadvisor on this Fund. Blairlogie specializes
in managing international portfolios and offers a strategy which includes
investments in both developed and emerging stock markets, called the hybrid
strategy.
The Fund has continued to attract new shareholders and now stands at over $21
million in assets. The Fund is now listed on NASDAQ under the symbol INTFX and
appears daily in most major newspapers under the heading Gradison-McDonald.
These milestones could not have been accomplished without the support of our
shareholders, and for that, we thank you.
PORTFOLIO The Fund seeks growth of capital by investing in common stocks of
companies based outside of the United States. The Fund generally invests a
maximum of 30% of assets in companies based in emerging market countries. As of
September 30, the top five countries represented 53.61% of the Fund's total
investments in securities as listed below:
<TABLE>
<CAPTION>
PERCENT OF
COUNTRY NET ASSETS
<S> <C>
Japan 22.75%
United Kingdom 12.93%
Germany 6.98%
Switzerland 5.81%
Brazil 5.14%
</TABLE>
The remaining 46.39% of the portfolio was diversified over an additional eight
established and thirteen emerging markets. The entire portfolio breakdown is
shown in the enclosed financial statements.
OUTLOOK With the domestic stock market continuing to achieve record highs,
investors have had little reason to focus on the international markets. Add to
this the recent volatility in many of the markets outside our borders and it's
easy to understand why investors have preferred to stay at home and enjoy the
prospect of another year (almost) of double digit returns.
1-800-869-5999 [GRAPHIC]
<PAGE> 39
LETTER TO SHAREHOLDERS (CONTINUED)
As uninspiring as the international markets have been recently, it's important
to remember why investors with a long-term perspective should benefit from their
portfolios having an international component. First, prudent investors
diversify. As the recent period indicates, markets rarely move in tandem. There
will come a day when the domestic markets are less inspiring. Second, above
average economic growth in the emerging markets bodes well for those countries'
stock markets. Third, demographic trends suggest the increasing importance of
foreign economies.
We appreciate your participation in the Gradison-McDonald International Fund.
We will do our best to serve your investing needs.
Sincerely,
Gradison Growth Trust
Gradison-McDonald International Fund
/s/ Bradley E. Turner
-----------------------
Bradley E. Turner
President
2
<PAGE> 40
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS FOR THE PERIOD
ENDED MAY 31, 1995*
SEPTEMBER 30, 1996 TO MARCH 31, 1996
<S> <C> <C>
Net asset value at beginning of period $15.822 $15.000
------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .020 .065
Net realized and unrealized gain on investments .070 .799
------- -------
Total income from investment operations .090 .864
------- -------
Dividends to shareholders from net investment income -- (.042)
------- -------
Net asset value at end of period $15.912 $15.822
======= =======
Total return (1) .57% 5.76%
======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (in millions) $ 21.2 $ 15.3
RATIOS NET OF EXPENSES WAIVED AND REIMBURSED
BY THE ADVISER (2)(3):
Ratio of expenses to average net assets 2.00% 1.75%
Ratio of net investment income to average net assets .37% .70%
RATIOS ASSUMING NO ADVISER WAIVER
OR REIMBURSEMENT OF EXPENSES (2)(3):
Ratio of expenses to average net assets 2.88% 3.73%
Ratio of net investment loss to average net assets (.51%) (1.28%)
Portfolio turnover rate 48.40% 71.78%
Average commission paid per share traded $ .001 --
<FN>
(1) Total return represents the actual return over the period and has not been
annualized.
(2) The adviser absorbed expenses of the Fund through waiver of fees and
reimbursement of certain expenses (Note 2).
(3) Annualized.
* Date of public offering
</TABLE>
See accompanying note to Financial Statements.
3
<PAGE> 41
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES PREFERRED STOCKS - 3.55% VALUE
BRAZIL - 3.55%
<S> <C> <C>
9,195,000 Banco Bradesco SA $ 77,897
190,000 Brasmotor SA 70,154
1,010,000 Ceval Alimentos SA 9,298
100,000 Cia Cervejaria Brahma 61,995
2,370,000 Cia Energetica Minas Gerais 70,795
4,214 Companhia Vale Rio Doce 83,575
831,000 Duratex 31,578
433,000 Elerobras Centrais Eletricas 120,438
6,200,000 Fosfertil Fertiliz 30,058
364,000 Petrol Brasileiros 41,710
85,000 Tecidos Norte De Minas 30,635
39,760,000 Usiminas Siderugicas
Minas Gerais 39,330
--------
TOTAL PREFERRED STOCKS
(COST $638,460) 667,463
--------
COMMON STOCKS - 96.45%
BRAZIL - 1.59%
3,100 Souza Cruz 20,038
2,900 Telebras SA ADR 227,650
800,000 Telecomunicacoes
Brasileiras SA 52,221
--------
299,909
--------
COLOMBIA - 1.18%
5,520 Carulla 144A ADR 36,779
1,200 Cementos Diamante
144A ADR 15,300
3,250 Cementos Paz Rio ADR (1) 39,717
900 Banco Ganadero ADR 18,225
6,000 Banco Ind Columbiano ADS 111,750
--------
221,771
--------
FINLAND - 1.38%
950 Hartwall Oy $ 31,198
1,140 Kemira Oy 13,103
1,930 Kesko 31,015
935 Nokia (AB) Oy 41,739
200 Stockmann (AB) Oy 10,728
1,980 Upm-Kymmene Oy 41,269
1,480 Valmet Oy 24,399
2,300 Werner Soderstrom 51,362
1,200 Yit Huber 14,450
--------
259,263
--------
FRANCE - 3.64%
848 Alcatel Alst 71,553
916 AXA 54,911
389 Bic 51,101
108 Carrefour 60,662
368 Cie De St Gobain 49,910
355 Clarins 49,591
340 Compagnie Bancaire SA 35,507
952 Elf Aquitaine 74,500
1,980 Rhone-Poulenc 55,242
172 Roussel-Uclaf 41,490
42 Salomon SA 37,311
600 Societe Generale 66,379
752 Schneider SA 35,405
--------
683,562
--------
</TABLE>
See accompanying note to Financial Statements.
4
<PAGE> 42
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES COMMON STOCKS (CONT.) VALUE
<S> <C> <C>
GERMANY - 6.98%
95 Allianz AG Holding $167,793
5,540 Bayer AG 203,401
240 Commerzbank AG 54,836
1,000 Daimler-Benz AG 55,007
276 Degussa 99,976
2,400 Dresdner Bank 63,302
512 Mannesmann AG 192,008
15 Munchener
Rueckversicherungs-
Gesellschaft 34,027
2,370 Siemens AG 125,021
3,792 Veba AG 198,641
318 Volkswagen AG 118,630
---------
1,312,642
---------
HONG KONG - 2.20%
17,000 Amoy Properties 19,785
8,000 Cheung Kong (Holdings) 61,554
4,000 Citic Pacific 18,104
28,000 Guangdong Investment Ltd. 19,735
4,800 Hang Seng Bank 50,898
12,000 Hong Kong & China Gas 20,406
12,000 Hong Kong
Telecommunications 21,725
5,000 Hutchison Whampoa Ltd. 33,622
6,000 New World
Development Co. 31,501
7,000 Sun Hung Kai
Properties Ltd. 74,453
7,000 Swire Pacific Ltd. 62,685
---------
414,468
---------
HUNGARY - 1.08%
800 Borsodchem Rt. $ 15,243
700 Egis Rt. 49,282
500 Graboplast Rt. 15,340
3,500 Magyar Olaj Es Gazipari 32,101
2,100 OTP Bank Rt. 33,232
1,100 Richter Gedeon Rt. 58,225
---------
203,423
---------
INDONESIA - 0.59%
19,235 Bank Internasional
Indonesias 28,122
15,500 Semen Gresik 45,988
19,500 United Tractors 36,475
---------
110,585
---------
ISRAEL - 2.33%
42,000 Bank Hapoalim Ltd. 57,661
4,400 Blue Square
Chain Stores ADR 64,900
6,000 Elite Industries 23,345
50,000 Israel Chemical Ltd. 38,534
720 Koor Industries Ltd. 63,923
6,000 Osem Investments Ltd. 34,971
1,400 Super Sol 31,967
11,200 Tadiran Ltd. 45,535
168 Teva Pharmaceutical
Industries Ltd. 77,393
---------
438,229
---------
</TABLE>
See accompanying note to Financial Statements.
5
<PAGE> 43
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
SHARES COMMON STOCKS (CONT.) VALUE
ITALY - 3.23%
25,000 Bca Fideuram SpA $ 59,459
39,325 Credito Italiano SpA 45,188
8,000 Edison SpA 49,879
12,100 Eni SpA 61,888
40,000 Istituto Nazionale delle
Assicurazioni 57,947
62,160 Montedison SpA (1) 40,186
50,400 Parmalat Finanziaria SpA 72,517
28,000 Pirelli SpA 51,049
14,390 Sasib SpA 25,432
23,000 STET-Sicieta Finanziaria
Telefonica 79,862
29,000 Telecom Italia SpA 64,494
---------
607,901
---------
JAPAN - 22.75%
16,000 Daiwa Securities Co. Ltd. 183,869
29,000 Fujisawa Pharmaceutical Co. 275,984
28,000 Hitachi Ltd. 271,495
58,000 Marubeni Corp. 302,020
19,000 Matsushita Electric Works 187,640
51,000 Mitsubishi Chemical Corp. 215,203
85,000 Mitsui Engineering
& Shipbuilding (1) 232,755
17,000 Mitsui Fudosan Co. Ltd. 225,887
65,000 Mitsui O.S.K. Lines Ltd. (1) 200,748
39,000 Nippon Oil Co. 238,447
40 Nippon Telephone
& Telegraph Corp. 294,478
81,000 NKK Corp. (1) 207,984
15,000 Sumitomo Bank 277,420
27,000 Sumitomo Metal Mining 228,104
21,000 Sumitomo Trust & Banking 263,953
6,900 Tokyo Electric 167,260
13,000 Tokyo Steel Manufacturing 229,927
39,000 Tokyu Corp. 274,511
---------
4,277,685
---------
MALAYSIA - 4.35%
1,000 Edaran Otomobil Nasional
Berhad $ 9,854
11,000 Gamuda Berhad 82,066
14,000 Jaya Tiasa Holdings Berhad 87,132
10,000 Land & General Berhad 21,344
8,000 Malayan Banking Berhad 79,472
28,000 Metacorp Berhad 80,430
13,000 Perusahaan Otomobil Berhad 70,536
40,000 Public Bank Berhad 74,047
16,000 Road Builder Berhad 82,345
10,000 Sungei Way Holdings
Berhad 53,460
11,000 Telekom Malaysia Berhad 96,987
17,000 UMW Holdings Berhad 65,449
2,000 United Engineers Berhad 15,480
---------
818,602
---------
MEXICO - 4.36%
19,000 Cemex, SA 71,595
33,000 Cifra SA De CV 47,555
42,000 Controlodora Comercial
Mexicana SA de CV 41,388
4,200 Desc SA de CV 23,586
87 Desc SA de CV, Series C 483
3,420 Empresas ICA Sociedad
Controladora SA 51,775
7,000 Fomento Economico
Mexicano SA de CV 21,463
48,354 Grupo Financiero Banamex
Accival SA de CV 98,628
10,800 Grupo Mexico SA (1) 33,473
6,700 Grupo Modelo SA de CV 34,609
1,200 Grupo Televisa ADR 34,650
5,300 Industrias Penoles SA 22,534
1,800 Kimberly-Clark
de Mexico SA 34,092
8,370 Telefonos de Mexico ADR 268,886
3,200 Tubos de Acero
de Mexico SA (1) 35,009
---------
819,726
---------
</TABLE>
See accompanying note to Financial Statements.
6
<PAGE> 44
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
SHARES COMMON STOCKS (CONT.) VALUE
NETHERLANDS - 3.67%
766 ABN-AMRO Holdings NV $ 42,487
753 Ahold (Koninklijke) NV 42,646
350 Akzo Nobel NV 42,427
350 DSM NV 34,367
4,220 Elsevier NV 69,801
927 Fortis Amev NV 27,740
1,200 Ing Groep NV 37,453
1,270 Royal Dutch Petroleum NV 198,559
680 Unilever NV 107,348
1,200 Vendex International NV 46,781
2,030 VNU (Verenigde
Nederlandse Uitgevbedri
Verigd Bezit) 39,747
--------
689,356
--------
PERU - 1.00%
8,993 Cerveceria Backus
& Johnston SA 10,390
2,000 Banco Wiese ADR 12,750
47,600 Telefonica del Peru SA 107,145
760 Credicorp Ltd. ADR 14,440
1,414 Co de Minas
Buenaventura SA 12,112
353 Co de Minas
Buenaventura SA 3,375
5,500 Ferreyros (Enrique) SA 5,894
1,300 Minsur SA 12,119
2,700 Southern Peru Copper Corp. 9,896
--------
188,121
--------
PHILLIPINES - 2.56%
53,250 Ayala Corp. $ 60,892
4,600 Metropolitan Bank
& Trust Co. 109,586
120,900 Petron Corp. 43,779
1,900 Philippine Long Distance
Telephone Co. ADR 118,750
29,630 San Miguel Corp. 97,129
219,000 SM Prime Holdings 50,921
--------
481,057
--------
POLAND - 2.11%
3,160 Bank Rozwoju Eksportu SA 107,990
570 Bank Slaski SA 55,800
2,565 Debica SA (1) 54,786
13,680 Elektrim Spolka Akcyjna SA 133,920
9,600 Polifarb-Cieszyn SA 45,110
--------
397,606
--------
PORTUGAL - 1.03%
1,460 Cimpor-Cimentos
de Portugal 30,732
2,107 Empresa Fabril
de Maquinas Electricas 23,786
650 Investec Consultadoria
Internacional (1) 20,743
440 Jeronimo Martins & Filho 40,054
2,130 Portugal Telecom SA 54,791
790 Sonae Investimentos
Sociedade Gestora de
Participacoes Sociais SA 22,919
--------
193,025
--------
</TABLE>
See accompanying note to Financial Statements.
7
<PAGE> 45
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
SHARES COMMON STOCKS (CONT.) VALUE
SINGAPORE - 1.48%
28,000 Comfort Group Ltd. $ 24,458
3,000 Cycle & Carriage Ltd. 32,596
8,000 DBS Land Ltd. 26,474
6,000 Hong Leong Finance Ltd. 19,515
3,000 Keppel Corp. Ltd. 23,222
5,500 Oversea-Chinese
Banking Corp. Ltd. 66,009
8,000 Overseas Union Bank Ltd. 55,960
9,000 Straits Steamship Land Ltd. 29,400
--------
277,634
--------
SOUTH KOREA - 1.81%
2,860 Cho Hung Bank 31,146
1,200 Daewoo Securities Co. 25,410
2,300 Han Wha Chemical Corp. 20,928
1,250 Korea Electric Power 41,291
11,800 Korea Fund, Inc.
(closed-end mutual fund) 215,350
320 Pohang Iron &
Steel Co. Ltd. ADR 6,840
--------
340,965
--------
SPAIN - 2.79%
5,250 Aumar (Autopistas del
Marc Nostrum SA) 75,223
1,120 Banco Bilbao Vizcaya SA 51,631
462 Banco Popular Espanol SA 84,903
7,164 Iberdrola SA 69,454
1,586 Empresa Nacional
de Electridad SA 93,367
1,575 Repsol SA 51,756
5,290 Telefonica de Espana 98,246
--------
524,580
--------
SWITZERLAND - 5.81%
73 Alusuisse Lonza Holding AG $ 54,799
82 ABB AG 100,345
87 Ciba-Geigy AG 111,322
160 Clariant AG 55,522
2,414 CS Holding AG 238,791
59 Holderbank Financiere
Garis AG 42,830
143 Nestle SA 159,478
22 Roche Holdings AG 162,076
93 Sandoz AG 111,729
91 Winterthur Schweizerische
Versicherungs-Gesellschaft 56,188
---------
1,093,080
---------
THAILAND - 1.25%
3,800 Bangkok Bank
Public Co. Ltd. 49,634
4,100 Dhana Siam Finance 19,356
8,200 Industrial Finance Corp. 33,551
6,500 Krung Thai Bank
Public Co. Ltd. 27,874
1,300 Land & House Co. Ltd. 16,060
4,000 Phatra Thanakit Co. Ltd. 22,818
2,800 Thai Farmers Bank
Public Co. Ltd. 29,522
5,000 Total Access
Communications 37,000
--------
235,815
--------
</TABLE>
See accompanying note to financial statements.
8
<PAGE> 46
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
SHARES COMMON STOCKS (CONT.) VALUE
TURKEY - 2.27%
477,850 Akal Tekstil Sanayii $ 29,627
332,000 Akbank 31,208
418,000 Arcelik AS 40,128
930,000 Demirbank 28,365
883,000 Eczacibasi Yapi Gere 33,554
71,000 Erciyas Biracilik 33,725
366,000 Eregli Demir Co. 36,234
158,000 Kordsa 45,820
50,800 Migros Turk TAS 41,656
277,000 Netas Telekomunik AS 66,480
674,000 Trakya Cam 39,092
--------
425,889
--------
UNITED KINGDOM - 12.93%
13,740 Abbey National PLC 127,490
11,775 BAA PLC 91,493
13,700 Boots PLC 133,652
6,400 Burmah Castrol PLC 114,566
8,300 Commercial Union PLC 77,922
4,900 EMI Group PLC (1) 102,117
9,200 Granada Group PLC 123,265
22,259 Lloyds TSB Group PLC 131,543
14,000 Marks & Spencer PLC 108,562
22,500 Pilkington PLC 66,484
15,500 Prudential PLC 109,047
15,979 Scot Power 76,194
12,700 Scottish & Newcastle PLC 133,228
7,050 Shell Transportation
& Trading PLC 107,574
7,000 Smith Kline Beecham 85,416
27,240 Tesco PLC 129,039
14,400 3I Group PLC 109,188
(closed-end mutual fund)
6,000 Unilever PLC 128,183
18,830 Wolseley PLC 143,367
13,390 Zeneca Group PLC 332,431
---------
2,430,761
---------
VENEZUELA - 2.08%
60,000 Banco Provincial $119,977
200,000 Electricid Caracas 192,979
6,500 Mavesa SA 144A ADR 42,508
10,000 Sider Venezuela ADR 36,296
-----------
391,760
-----------
TOTAL COMMON STOCKS
(Cost $17,499,147) $18,137,415
-----------
TOTAL INVESTMENTS,
at value (Note 1)
(Cost $18,137,607) -
100% $18,804,878
===========
<FN>
(1) Non-income producing.
</TABLE>
The following abbreviations are used in this portfolio.
ADR - American Depository Receipts
ADS - American Depository Shares
GDR - Global Depository Receipts
GDS - Global Depository Shares
144A - These securities are exempt from registration under rule 144A of the
Securities Act of 1933. Such securities may be resold, normally to qualified
institutional buyers, in transactions exempt from registration. See Note 1 of
the Notes to Financial Statements for valuation policy. Rule 144A securities
amounted to $79,287 as of September 30, 1996.
See accompanying notes to financial statements.
9
<PAGE> 47
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
<S> <C>
ASSETS
Investments in securities, at value (Note 1) (Cost $18,137,607) $ 18,804,878
Cash 1,993,352
Foreign currency, at value (Note 1) (Cost $451,325) 449,501
Receivable for securities sold 85,665
Dividends and interest receivable 54,371
Receivable for Fund shares sold 53,622
Prepaid expenses 18,000
Organization expenses, net (Note 1) 17,528
Futures variation margin receivable (Note 1) 3,449
------------
Total Assets 21,480,366
------------
LIABILITIES
Payable for securities purchased 111,958
Payable for Fund shares redeemed 98,686
Forward foreign exchange currency contracts (Note 1) 35,673
Payable to adviser (Note 2) 15,408
Accrued investment advisory fee (Note 2) 12,739
Other accrued expenses and liabilities 23,842
------------
TOTAL LIABILITIES 298,306
------------
Net Assets $ 21,182,060
============
Net assets consist of:
Aggregate paid-in capital $ 20,548,223
Accumulated undistributed net investment income 56,834
Accumulated net realized loss from investments and foreign currency transactions (59,392)
Net unrealized appreciation of investments 667,271
Net unrealized depreciation on translation of assets and liabilities in foreign currencies (30,876)
------------
Net Assets $ 21,182,060
============
Shares of capital stock outstanding
(no par value - unlimited number of shares authorized) 1,331,187
============
Net asset value and redemption price per share (Note 1) $ 15.91
============
</TABLE>
See accompanying notes to financial statements.
10
<PAGE> 48
STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30, 1996
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 34,526
Dividends, net of foreign withholding taxes of $26,361 189,349
---------
TOTAL INVESTMENT INCOME $ 223,875
EXPENSES:
Investment advisory fees (Note 2) 94,416
Custodian fees 53,394
Distribution (Note 2) 47,208
Accounting services fees (Note 2) 30,000
Transfer agency fees (Note 2) 14,413
Professional fees 13,225
Registration fees 11,137
Trustees' fees (Note 2) 3,688
Amortization of organization expenses (Note 1) 2,390
Other 2,293
---------
TOTAL EXPENSES 272,164
LESS FEES WAIVED BY THE ADVISER (NOTE 2) (83,335)
---------
NET EXPENSES 188,829
---------
NET INVESTMENT INCOME 35,046
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized loss on investments (4,318)
Net realized loss on foreign currency transactions (27,305)
Net change in unrealized appreciation of investments 106,246
Net change in unrealized depreciation on translation of
assets and liabilities in foreign currencies (60,949)
---------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY 13,674
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 48,720
=========
</TABLE>
See accompanying notes to financial statements.
11
<PAGE> 49
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS FOR THE PERIOD
ENDED MAY 31, 1995
SEPTEMBER 30, 1996 TO MARCH 31, 1996*
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 35,046 $ 52,075
Net realized gain (loss) on investments (4,318) 60,985
Net realized loss on foreign currency transactions (27,305) (88,754)
Net change in unrealized appreciation of investments 106,246 561,025
Net change in unrealized appreciation (depreciation) on translation
of assets and liabilities in foreign currencies (60,949) 30,073
------------ ------------
Net increase in net assets resulting from operations 48,720 615,404
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME -- (30,287)
FROM FUND SHARE TRANSACTIONS:X
Proceeds from shares sold 7,170,831 17,657,397
Net asset value of shares issued in reinvestment of distributions -- 30,169
Payments for shares redeemed (1,342,587) (2,967,587)
------------ ------------
Net increase in net assets from Fund share transactions 5,828,244 14,719,979
------------ ------------
TOTAL INCREASE IN NET ASSETS 5,876,964 15,305,096
NET ASSETS:
Beginning of period 15,305,096 --
------------ ------------
End of period (including undistributed net investment income of
$56,834 and $21,788, respectively) (Note 1) $ 21,182,060 $ 15,305,096
============ ============
NUMBER OF FUND SHARES:
Sold 448,139 1,162,052
Issued in reinvestment of distributions to shareholders -- 1,987
Redeemed (84,312) (196,679)
------------ ------------
Net increase in shares outstanding 363,827 967,360
Outstanding at beginning of period 967,360 --
------------ ------------
Outstanding at end of period 1,331,187 967,360
============ ============
<FN>
*Date of public offering
</TABLE>
See accompanying notes to financial statements.
12
<PAGE> 50
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1996 (UNAUDITED)
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES
Gradison Growth Trust (the "Trust") is registered under the Investment Company
Act of 1940, as amended, as an open-end management investment company. The Trust
was created under Ohio law on May 31, 1983; it commenced investment operations
and the public offering of its shares on August 16, 1983. The Trust consists of
four series, the Gradison-McDonald International Fund, the Gradison-McDonald
Established Value Fund, the Gradison-McDonald Opportunity Value Fund and the
Gradison-McDonald Growth &Income Fund (collectively, the "Funds"); each of
which, in effect, represents a separate diversified fund with its own investment
policies. This Semiannual Report to Shareholders pertains only to the
Gradison-McDonald International Fund (the "Fund"), the public offering of shares
of which commenced on May 31, 1995. The Fund's investment objective is to seek
long-term growth of capital.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses for the
period. Actual results could differ from those estimates.
SECURITIES VALUATION -- Listed equity securities are valued at the last sale
price reported on national securities exchanges, or if there were no sales that
day, the security is valued at the closing bid price. Unlisted securities, 144A
securities and short-term obligations (and private placement securities) are
generally valued at the prices provided by an independent pricing service.
Portfolio securities and other assets for which market quotations are not
readily available are valued at their fair value as determined by management of
the Fund and approved in good faith by the Board of Trustees. Short-term
securities with remaining maturities of sixty days or less are valued at
amortized cost, which approximates value.
FOREIGN CURRENCY TRANSLATION -- The accounting records of the Fund are
maintained in U.S. dollars. All assets and liabilities denominated in foreign
currencies ("FC") are translated into U.S. dollars based on the rate of exchange
of such currencies against U.S. dollars on the date of valuation. Purchases and
sales of securities, income and expenses are translated at the rate of exchange
quoted on the respective date that such transactions are recorded. Differences
between income and expense amounts recorded and collected or paid are adjusted
when reported by the custodian bank. The Fund does not isolate that portion of
the results of operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of FCs, currency gains or losses
realized between the trade and settlement dates on securities transactions, the
difference between the amounts of dividends, interest, and foreign withholding
taxes recorded on the Fund's books, and the U.S. dollar equivalent of the
amounts actually received or paid. Net unrealized foreign exchange gains and
losses arise from changes in the value of assets and liabilities, other than
investments in securities, resulting from changes in the exchange rate.
FUND SHARE VALUATION AND DISTRIBUTIONS TO SHAREHOLDERS -- The net asset value
per share is computed by dividing the net asset value of the Fund (total assets
less total liabilities) by the number of shares outstanding. The redemption
price per share is equal to the net asset value per share.
13
<PAGE> 51
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1996 (UNAUDITED)
FORWARD FOREIGN CURRENCY CONTRACTS -- At September 30, 1996, the Fund had
entered into forward foreign currency contracts under which it is obligated to
exchange currencies at specified future dates. The Fund's currency transactions
are currently transaction hedges and portfolio hedges involving either specific
transactions or portfolio positions.
The contractual amounts of forward foreign exchange contracts do not necessarily
represent the amounts potentially subject to risk. The measurement of the risks
associated with these instruments is meaningful only when all related and
offsetting transactions are considered. Risks arise from the possible inability
of counterparties to meet the terms of their contracts and from movements in
currency values. The Fund had the following outstanding contracts at September
30, 1996:
PORTFOLIO HEDGES:
<TABLE>
<CAPTION>
UNREALIZED
U.S. DOLLAR SETTLEMENT APPRECIATION
BUY/SELL AMOUNT FOREIGN CURRENCY PROCEEDS DATE (DEPRECIATION)
<S> <C> <C> <C> <C> <C>
Buy 250,000,000 Japanese Yen $2,284,565 10/15/96 $(41,688)
Sell 240,000,000 Japanese Yen 2,159,147 10/15/96 5,985
--------
$(35,703)
========
</TABLE>
TRANSACTION HEDGES:
<TABLE>
<CAPTION>
UNREALIZED
U.S. DOLLAR SETTLEMENT APPRECIATION
BUY/SELL AMOUNT FOREIGN CURRENCY PROCEEDS DATE (DEPRECIATION)
<S> <C> <C> <C> <C> <C>
Buy 7,768,607 Spanish Peseta $60,456 10/03/96 $ 38
Buy 30,576 Malaysian Ringgit 12,206 10/04/96 (8)
-----------
$ 30
===========
</TABLE>
At September 30, 1996, the Fund had sufficient cash and/or securities to cover
any commitments under these contracts.
FUTURES CONTRACTS -- Initial margin deposits made upon entering into futures
contracts are recognized as assets due from the broker (the Fund's agent in
acquiring the futures position). During the period the futures contract is open,
changes in the value of the contract are recognized as unrealized gains or
losses by "marking to market" on a daily basis to reflect the market value of
the contract at the end of each day's trading.
Variation margin payments are received or made, depending upon whether
unrealized gains or losses are incurred. When the contract is closed, the Fund
records a realized gain or loss equal to the difference between the opening and
closing value of the contract.
Currencies with an aggregate market value of $449,501 have been segregated with
the custodian for the following open stock index futures contracts at September
30, 1996:
<TABLE>
<CAPTION>
OPENING UNREALIZED
MARKET MARKET APPRECIATION
TYPE EXPIRATION VALUE VALUE (DEPRECIATION)
<S> <C> <C> <C> <C> <C> <C>
Long Nikkei 300 (Yen) 12/96 $130,692 $139,087 $8,395
Long FT-SE 100 (Pound) 12/96 312,339 310,228 (2,111)
</TABLE>
14
<PAGE> 52
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1996 (UNAUDITED)
SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions are
accounted for on the trade date (the date the order to buy or sell is executed),
and dividend income is recorded on the ex-dividend date. Interest income is
accrued as earned. Gains and losses on sales of investments are calculated on
the identified cost basis for financial reporting and tax purposes.
TAXES -- It is the Fund's policy to comply with the provisions of the Internal
Revenue Code applicable to regulated investment companies. As provided therein,
in any fiscal year in which the Fund so qualifies, and distributes at least 90%
of its taxable net income, the Fund will be relieved of federal income tax on
the income distributed. Accordingly, no provision for income taxes has been
made.
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also the Fund's intention to declare as dividends in
each calendar year, at least 98% of its net investment income (earned during the
calendar year) and 98% of its net realized capital gains, if any (earned during
the twelve months ended October 31), plus undistributed amounts from prior
years.
The tax basis of investments is equal to the cost as shown on the Statement of
Assets and Liabilities.
For both financial reporting and tax purposes, gross unrealized appreciation and
gross unrealized depreciation of securities at September 30, 1996 was $1,231,337
and $564,066, respectively.
EXPENSES -- Common expenses incurred by the Trust are allocated to the Fund
based on the ratio of the net assets of the Fund to the combined net assets of
the Trust. In all other respects, expenses are charged to the Fund as incurred
on a specific identification basis.
ORGANIZATION EXPENSES -- Expenses of organization have been capitalized and are
being amortized on a straight-line basis over 60 months commencing upon the
public offering of the Fund's shares.
NOTE 2 -- TRANSACTIONS WITH AFFILIATES
The Trust's investments are managed, subject to the general supervision and
control of the Trust's Board of Trustees, by McDonald & Company Securities, Inc.
("McDonald"), a registered investment adviser and securities dealer, pursuant to
the terms of an Investment Advisory Agreement ("Agreement"). Under the terms of
the Agreement, the Fund pays McDonald a fee computed and accrued daily and paid
monthly based upon the Fund's daily net assets at the annual rate of 1.00% of
the first $100 million of the Fund's average daily net assets, .90% of the next
$150 million, .80% of the next $250 million and .75% of net assets in excess of
$500 million for acting as its investment adviser. McDonald has engaged
Blairlogie Capital Management ("Blairlogie") as Portfolio Manager for the Fund
pursuant to a Portfolio Management Agreement, and McDonald compensates
Blairlogie from its advisory fee at the rate of .80% of the first $25 million of
average daily net assets, .70% of the next $25 million, .60% of the next $50
million, .50% of the next $150 million, and .40% of assets in excess of $250
million.
The Agreement provides that McDonald bear the costs of salaries and related
expenses of executive officers of the Fund who are necessary for the management
and operations of the Fund. In addition, McDonald bears the costs of preparing,
printing and mailing sales literature and other advertising materials and
compensates the Trust's trustees who are affiliated with McDonald. All expenses
not specifically assumed by McDonald are borne by the Fund.
15
<PAGE> 53
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1996 (UNAUDITED)
Under the terms of a Transfer Agency, Accounting Services and Administrative
Services Agreement, McDonald provides transfer agent, dividend disbursing,
accounting services and administrative services to the Fund. The Fund pays
McDonald a monthly fee for transfer agency and administrative services at an
annual rate of $19.25 per shareholder non-zero balance account, plus
out-of-pocket costs for statement paper, statement and reply envelopes and reply
postage. The Fund pays McDonald a monthly fee for accounting services based on
the Fund's average daily net assets at an annual rate of .045% on the first $100
million, .03% on the next $100 million and .015% on any amount in excess of $200
million, with a minimum annual fee of $60,000.
Under the terms of an Expense Reimbursement Agreement, McDonald has agreed to
forego fees owed to it under the Advisory Agreement or any other agreement with
the Trust and to reimburse the Fund if, and to the extent that, expenses
(excluding brokerage commissions, taxes, interest and extraordinary items) borne
by the Fund in any fiscal year exceed 2.00% of the average net assets of the
Fund. This agreement is in effect until July 31, 1997 and is subject to
termination by either party upon written notice subsequent to that date. In
addition, McDonald may, at its discretion, agree to waive fees and/or reimburse
the Fund for other expenses in order to limit the Fund's expenses to a specified
percentage of average net assets lower than 2.00%. For the period ended
September 30, 1996, McDonald waived advisory fees of $18,883, distribution
expenses of $47,208, and accounting services fees of $17,244.
In accordance with the terms of a Distribution Plan adopted under Rule 12b-1 of
the Investment Company Act of 1940, the Fund pays McDonald a service fee for
personal services to shareholders including shareholder liaison services such as
responding to shareholder inquiries and providing information to shareholders
about their Fund accounts. This fee is computed and paid at an annual rate of
.25% of the Fund's average daily net assets. The Fund also pays McDonald a fee
for its assistance in selling shares of the Fund including advising shareholders
regarding purchase, sale and retention of Fund shares. This fee is computed and
paid at an annual rate of .25% of the Fund's average daily net assets.
The officers of the Trust are also officers of McDonald.
Each trustee of the Trust who is not affiliated with McDonald receives fees from
the Trust for services as a trustee. The amounts of such fees for each trustee
are as follows: (a) an annual fee of $5,000 payable in quarterly installments
and (b) $500 for each Board of Trustees or committee meeting attended.
NOTE 3 -- SUMMARY OF PURCHASES AND SALES OF INVESTMENTS
For the period ended September 30, 1996, cost of purchases, and proceeds from
the sale of securities, excluding short-term securities, amounted to $13,588,699
and $8,084,046, respectively.
NOTE 4 -- SUBSEQUENT EVENT
The Board of Trustees declared an income dividend of $0.03 per share payable on
November 29, 1996 to shareholders of record on November 27, 1996.
16
<PAGE> 54
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1996 (UNAUDITED)
NOTE 5 -- PORTFOLIO COMPOSITION
The Fund invests in equity securities of non-U.S. issuers. Although the Fund
maintains a diversified investment portfolio, the political or economic
developments within a particular country or region may have an adverse effect on
the ability of domiciled issuers to meet their obligations. Additionally,
political or economic developments may have an effect on the liquidity and
volatility of portfolio securities and currency holdings.
At September 30, 1996 the Portfolio was diversified within the following
industries:
<TABLE>
<CAPTION>
MARKET
VALUE
<S> <C>
Automotive 1.52%
Banking 13.55
Beverages and Tobacco 2.18
Broadcasting and Publishing 1.69
Building Materials 2.48
Business Services 0.40
Chemicals 6.76
Construction and Housing 2.32
Diversified Companies 4.08
Electronics 5.07
Energy 5.16
Financial Services 5.48
Food and Household Products 3.96
Forest Products and Paper 0.98
Health and Personal Care 0.54
Household Appliances and Durables 0.55
MARKET
VALUE
Insurance 3.12%
Iron and Steel 3.15
Machinery and Engineering 2.64
Materials and Commodities 1.36
Merchandising 3.80
Metals and Mining 2.99
Pharmaceuticals 4.72
Real Estate 2.69
Telecommunications 8.67
Textiles and Apparel 0.24
Tires 0.56
Tourism 0.66
Toys 0.20
Transportation 3.27
Utilities 5.21
------
100.00%
======
</TABLE>
17
<PAGE> 55
This page intentionally left blank.
18
<PAGE> 56
GRANDISON - MCDONALD FAMILY OF FUNDS
Increasingly, MUTUAL FUNDS are the preferred vehicle for starting and building
an investment program. And today, GRADISON-MCDONALD is a preferred name in
mutual funds for a GROWING number of investors.
GOVERNMENT INCOME FUND
An income fund which invests in intermediate to long-term U.S. Government
securities.
OHIO TAX-FREE INCOME FUND
An income fund which seeks to provide income exempt from regular Federal income
tax and Ohio state personal income tax.*
ESTABLISHED VALUE FUND
A common stock fund that seeks long-term capital growth by investing in
companies that are included in the Standard & Poor's 500 Index and other large
companies.
GROWTH & INCOME FUND
A common stock fund that seeks long-term capital growth, current income and
growth of income.
OPPORTUNITY VALUE FUND
A common stock fund that seeks long-term capital growth by investing in
companies that are generally smaller in size than those included in the Standard
& Poor's 500 Index.
MONEY MARKET FUNDS
Gradison-McDonald offers a full range of taxable and tax-free money market
funds.
Prospectuses are available upon request by calling (800) 869-5999 and should be
read carefully before you invest. An investment in the money market funds is
neither insured nor guaranteed by the U.S. Government and there can be no
assurance that they will be able to maintain a stable $1.00 share price. The
return and principal value of an investment in other funds will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than the
original cost. The returns of all funds will fluctuate.
* Investment income may be subject to the federal alternative minimum tax.
Capital gains, if any, are taxable.
19
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
SEMI-ANNUAL REPORT-SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000720492
<NAME> GRADISON GROWTH TRUST
<SERIES>
<NUMBER> 1
<NAME> ESTABLISHED VALUE FUND
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 279,470,563
<INVESTMENTS-AT-VALUE> 393,936,359
<RECEIVABLES> 619,327
<ASSETS-OTHER> 154,930
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 394,710,616
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 472,185
<TOTAL-LIABILITIES> 472,185
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 258,557,074
<SHARES-COMMON-STOCK> 13,804,457
<SHARES-COMMON-PRIOR> 13,291,936
<ACCUMULATED-NII-CURRENT> 699,042
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 20,516,519
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 114,465,796
<NET-ASSETS> 394,238,431
<DIVIDEND-INCOME> 2,317,470
<INTEREST-INCOME> 2,862,545
<OTHER-INCOME> 0
<EXPENSES-NET> 2,135,863
<NET-INVESTMENT-INCOME> 3,044,152
<REALIZED-GAINS-CURRENT> 20,970,548
<APPREC-INCREASE-CURRENT> 526,844
<NET-CHANGE-FROM-OPS> 24,541,544
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,090,469
<DISTRIBUTIONS-OF-GAINS> 7,996,887
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,497,326
<NUMBER-OF-SHARES-REDEEMED> 2,377,265
<SHARES-REINVESTED> 392,460
<NET-CHANGE-IN-ASSETS> 27,821,603
<ACCUMULATED-NII-PRIOR> 699,042
<ACCUMULATED-GAINS-PRIOR> 20,516,519
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 993,571
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,135,863
<AVERAGE-NET-ASSETS> 373,714,071
<PER-SHARE-NAV-BEGIN> 27.567
<PER-SHARE-NII> .225
<PER-SHARE-GAIN-APPREC> 1.598
<PER-SHARE-DIVIDEND> .23
<PER-SHARE-DISTRIBUTIONS> .60
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 28.560
<EXPENSE-RATIO> 1.14
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000720492
<NAME> GRADISON GROWTH TRUST
<SERIES>
<NUMBER> 2
<NAME> OPPORTUNITY VALUE FUND
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 76,782,973
<INVESTMENTS-AT-VALUE> 107,431,154
<RECEIVABLES> 299,914
<ASSETS-OTHER> 41,458
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 107,772,526
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 138,779
<TOTAL-LIABILITIES> 138,779
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 72,267,579
<SHARES-COMMON-STOCK> 4,806,578
<SHARES-COMMON-PRIOR> 4,625,391
<ACCUMULATED-NII-CURRENT> 322,791
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 4,395,196
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 30,648,181
<NET-ASSETS> 107,633,747
<DIVIDEND-INCOME> 388,074
<INTEREST-INCOME> 791,693
<OTHER-INCOME> 0
<EXPENSES-NET> 730,496
<NET-INVESTMENT-INCOME> 449,271
<REALIZED-GAINS-CURRENT> 4,515,929
<APPREC-INCREASE-CURRENT> 244,777
<NET-CHANGE-FROM-OPS> 5,209,977
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 302,862
<DISTRIBUTIONS-OF-GAINS> 4,426,440
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,470,812
<NUMBER-OF-SHARES-REDEEMED> 1,496,820
<SHARES-REINVESTED> 207,195
<NET-CHANGE-IN-ASSETS> 4,655,217
<ACCUMULATED-NII-PRIOR> 322,791
<ACCUMULATED-GAINS-PRIOR> 4,395,196
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 338,569
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 730,496
<AVERAGE-NET-ASSETS> 104,597,837
<PER-SHARE-NAV-BEGIN> 22.264
<PER-SHARE-NII> .094
<PER-SHARE-GAIN-APPREC> 1.050
<PER-SHARE-DIVIDEND> .065
<PER-SHARE-DISTRIBUTIONS> .950
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 22.393
<EXPENSE-RATIO> 1.39
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000720492
<NAME> GRADISON GROWTH TRUST
<SERIES>
<NUMBER> 3
<NAME> GROWTH AND INCOME FUND
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 15,260,245
<INVESTMENTS-AT-VALUE> 17,211,660
<RECEIVABLES> 109,132
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 24,910
<TOTAL-ASSETS> 17,345,702
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 31,663
<TOTAL-LIABILITIES> 31,663
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 15,204,989
<SHARES-COMMON-STOCK> 883,748
<SHARES-COMMON-PRIOR> 648,877
<ACCUMULATED-NII-CURRENT> 13,008
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 144,627
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,951,415
<NET-ASSETS> 17,314,039
<DIVIDEND-INCOME> 182,078
<INTEREST-INCOME> 6,739
<OTHER-INCOME> 0
<EXPENSES-NET> 108,582
<NET-INVESTMENT-INCOME> 80,235
<REALIZED-GAINS-CURRENT> 177,293
<APPREC-INCREASE-CURRENT> 764,206
<NET-CHANGE-FROM-OPS> 1,021,734
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 78,848
<DISTRIBUTIONS-OF-GAINS> 37,045
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 284,201
<NUMBER-OF-SHARES-REDEEMED> 55,342
<SHARES-REINVESTED> 6,012
<NET-CHANGE-IN-ASSETS> 5,336,681
<ACCUMULATED-NII-PRIOR> 13,008
<ACCUMULATED-GAINS-PRIOR> 144,627
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 47,070
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 141,968
<AVERAGE-NET-ASSETS> 14,443,573
<PER-SHARE-NAV-BEGIN> 18.459
<PER-SHARE-NII> .097
<PER-SHARE-GAIN-APPREC> 1.186
<PER-SHARE-DIVIDEND> .100
<PER-SHARE-DISTRIBUTIONS> .050
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 19.592
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000720492
<NAME> GRADISON GROTH TRUST
<SERIES>
<NUMBER> 4
<NAME> INTERNATIONAL
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 18,137,607
<INVESTMENTS-AT-VALUE> 18,804,878
<RECEIVABLES> 193,658
<ASSETS-OTHER> 2,481,830
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 21,480,366
<PAYABLE-FOR-SECURITIES> 111,958
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 186,348
<TOTAL-LIABILITIES> 298,306
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 20,548,223
<SHARES-COMMON-STOCK> 1,331,187
<SHARES-COMMON-PRIOR> 967,360
<ACCUMULATED-NII-CURRENT> 56,834
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (59,392)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 636,395
<NET-ASSETS> 21,182,060
<DIVIDEND-INCOME> 189,349
<INTEREST-INCOME> 34,526
<OTHER-INCOME> 0
<EXPENSES-NET> 188,829
<NET-INVESTMENT-INCOME> 35,046
<REALIZED-GAINS-CURRENT> (31,623)
<APPREC-INCREASE-CURRENT> 45,297
<NET-CHANGE-FROM-OPS> 48,720
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 448,139
<NUMBER-OF-SHARES-REDEEMED> 84,312
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 5,876,964
<ACCUMULATED-NII-PRIOR> 21,788
<ACCUMULATED-GAINS-PRIOR> (27,769)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 94,416
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 272,164
<AVERAGE-NET-ASSETS> 18,831,542
<PER-SHARE-NAV-BEGIN> 15.822
<PER-SHARE-NII> .020
<PER-SHARE-GAIN-APPREC> .070
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.912
<EXPENSE-RATIO> 2.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
