<PAGE> 1
ESTABLISHED
VALUE FUND
GROWTH &
INCOME FUND
OPPORTUNITY
VALUE FUND
INTERNATIONAL
FUND
Semiannual Report
SEPTEMBER 30, 1997
[GRADISON MUTUAL FUNDS LOGO]
Gradison Mutual Funds
580 Walnut Street
Cincinnati, Ohio 45202-3198
This material is intended for distribution to shareholders of the Gradison
Growth Trust. It may be distributed to other persons only if it is preceded or
accompanied by a current prospectus of the Gradison Growth Trust. McDonald &
Company Securities, Inc.--Distributor
<PAGE> 2
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
November 10, 1997
Dear Shareholders:
The following letters are designed to provide general information about the
investment activities in the four stock mutual funds which constitute the
Gradison Growth Trust, during the six month period ended September 30, 1997. We
have been deliberately brief, but encourage investors with questions to call
their Investment Consultant or our Shareholder Service Representatives at (800)
869-5999.
All of us at Gradison Mutual Funds thank you for investing with us. We will
continue to do our best to serve your investing needs.
ESTABLISHED VALUE FUND
The Established Value Fund invests primarily in common stocks of companies that
are considered by Gradison to be undervalued. Stocks are selected from those in
the Standard & Poor's (S&P) 500 Composite Stock Index and from other companies
with market capitalizations of $1 billion or more. The Fund's ticker symbol is
GETGX.
Using conventional valuation benchmarks, the Established Value Fund compares
favorably with the overall market. Through September 30, 1997, the
price-earnings ratio of the securities in the Fund was 19.9 versus the market's
23.2 while the price-book ratio was 3.4 versus 4.4. During the past six months,
the Fund continued to benefit from corporate takeovers. USLIFE Corporation and
Northrop Grumman Corporation, stocks purchased by the Fund in 1996, recently
agreed to be acquired by American General Corporation and Lockheed Martin
Corporation, respectively. In addition, Tandem Computer Incorporated, purchased
by the Fund in June of this year, was acquired by Compaq Computer Corporation in
September. Compaq was already one of the Fund's largest positions. As we go to
press, MCI Communications Corporation has accepted an offer by WorldCom
Incorporated. Even though the stock market is at historically high levels, the
Fund has continued to identify stocks that are sought after by other
corporations.
On a separate note, it has been our strategy in recent years to dampen the
volatility of the Fund by holding a significant cash reserve. This has proven to
be a sound strategy given the market's recent volatility.
Sincerely,
/s/ William J. Leugers, Jr. /s/ Daniel R. Shick
William J. Leugers, Jr. Daniel R. Shick
Executive Vice President Senior Vice President
and Portfolio Manager and Portfolio Manager
GROWTH & INCOME FUND
The Growth & Income Fund seeks long-term capital growth, current income, and
growth of income by investing in high quality common stocks of large U.S.
Corporations that are determined to be relatively undervalued and which
generally have above average dividend returns. The Fund's ticker symbol is
GRINX.
The Fund's success is attributable to investing in quality common stocks at
value prices. Indeed, as shown in the table below, your Fund's asset
characteristics reflect the underlying attributes of high quality, well-known
companies with histories of growing profits and dividends. It is our view that
companies with these characteristics are usually good candidates for capital
appreciation and income growth.
<PAGE> 3
LETTER TO SHAREHOLDERS Continued
- --------------------------------------------------------------------------------
The Fund's stock portfolio exhibited the following value and growth
characteristics at September 30, 1997:
<TABLE>
<CAPTION>
GRADISON GROWTH S&P 500
& INCOME FUND INDEX
<S> <C> <C>
Yield 2.2% 1.6%
Price/earnings ratio* 19.4x 21.3x
Return on equity 19.5% 17.6%
Annual five year earnings
growth rate 12.1% 20.4%
Annual five year dividend
growth rate 10.3% 4.2%
Beta 1.01 1.00
</TABLE>
- --------------------------------------------------------------------------------
*based on 1997 earnings estimates
Diversification has been important, too. The following table shows the five
largest sectors of investment for the Fund. The Fund is defensive with a strong
sector exposure to consumer non-durables and services.
<TABLE>
<CAPTION>
SECTOR WEIGHTING
<S> <C>
Technology 19%
Consumer Non-durables 17
Energy Services 10
Financial Services 8
Healthcare 8
- --------------------------------------------------------------------------------
</TABLE>
Dividends play an important role in this Fund. Research has shown that an
"above-average dividend yield" strategy is one of the best approaches for
selecting superior stocks and can contribute to steady investment performance
results over a long-term investment horizon. Every stock in the Fund has a
history of dividend increases.
The top ten holdings of the Fund at September 30, 1997, and their current
dividend yields are presented below. All but one have dividend yields higher
than the 1.6% current yield of the S&P 500 index. Portfolio holdings of the Fund
are subject to change in the future.
<TABLE>
<CAPTION>
COMPANY CURRENT YIELD
<S> <C>
Pitney Bowes, Inc. 1.9%
Hewlett-Packard Co. 0.8
Mobil Corp. 2.9
Norwest Corporation 2.0
Morgan (J.P.) & Co. 3.1
American General Corp. 2.7
Exxon Corp. 2.6
St. Paul Companies 2.3
American Home Products Corp. 2.4
Merck & Co., Inc. 1.8
</TABLE>
The Fund has been relatively tax efficient for shareholders subject to income
taxation. The average annual portfolio turnover for the Fund has been under 9%.
This compares favorably to the mutual fund industry's average turnover which is
close to 80% annually. Reduced turnover in the Fund's holdings results in lower
recognition of capital gains. Therefore, less of the Fund's total return to
shareholders is currently taxable.
Sincerely,
/s/ Julian C. Ball
Julian C. Ball, CFA
Executive Vice President
and Portfolio Manager
2
<PAGE> 4
LETTER TO SHAREHOLDERS Continued
- --------------------------------------------------------------------------------
OPPORTUNITY VALUE FUND
The Opportunity Value Fund invests primarily in common stocks of smaller
companies that are exhibiting high earnings growth in relation to their
price-earnings ratio. These companies do not include companies in the S & P 500
and typically have market capitalizations less than $1 billion. The Fund's
ticker symbol is GOGFX.
We believe that the small-cap value sector of the market is relatively cheap and
may start to lead the pack. The Opportunity Value Fund stocks are selling at a
17 price-earnings ratio (trailing 4 quarters) and 2.8 price-book ratio. Their
return on equity is a robust 18.5% and the last five year annual earnings growth
rate is 14.5%. The financial sector has helped recently with one of our oldest
positions, Old Kent Financial, doing quite well.
The small cap sector of the market performed quite well in the last quarter
(September 30, 1997) with the Russell 2000 up 14.6%. Financial services led the
way for the Russell 2000 as it did for your Opportunity Value Fund. Old Kent
Financial, Raymond James Financial, T.R. Financial and Mercantile Bankshares are
just a few of the better performers for the quarter and the last four quarters.
We continue to find growth-at-the-right-price companies.
As in the Established Value Fund, it has been our strategy in recent years to
dampen the volatility of the Fund by holding a significant cash reserve. This
has proven to be a sound strategy given the market's recent volatility.
Sincerely,
/s/ William J. Leugers /s/ Daniel R. Shick
William J. Leugers, Jr. Daniel R. Shick
Executive Vice President Senior Vice President
and Portfolio Manager and Portfolio Manager
INTERNATIONAL FUND
The Gradison International Fund provides investors the opportunity to gain
international exposure in their portfolios. We have chosen Blairlogie Capital
Management of Edinburgh, Scotland to be our investment subadviser for this fund.
Blairlogie specializes in managing international portfolios and offers a
strategy which includes investments in both developed and emerging markets. The
Fund's ticker symbol is INTFX.
The Fund seeks growth of capital by investing in common stocks of companies
based outside the United States. The Fund generally invests a maximum of 30% of
assets in companies based in emerging market countries. As of September 30th,
the top five countries represented 51.7% of the Fund's total investments:
<TABLE>
<CAPTION>
PERCENT OF
COUNTRY NET ASSETS
<S> <C>
Japan 16.1%
France 9.0
Germany 9.0
United Kingdom 8.8
Italy 8.8
- --------------------------------------------------------------------------------
</TABLE>
The remaining 48.3% of the portfolio was diversified over an additional 3
developed and 11 emerging markets. The Fund's cash level was raised from 7% to
15% during the most recent quarter reflecting a reduced commitment to the Asian
markets. This move significantly reduced, but did not eliminate, the impact of
the recent sharp declines in the Asian markets on the Fund. The entire portfolio
is shown in the enclosed financial statements.
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
3
<PAGE> 5
LETTER TO SHAREHOLDERS Continued
- --------------------------------------------------------------------------------
of the Asian markets, 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.
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 market is less inspiring. Second, the growth
of many foreign economies is greater than our own, particularly in the emerging
markets. Over time, this will be reflected in the stock markets of these
countries. Third, demographic trends indicate the growing importance of foreign
economies.
Sincerely,
/s/ Bradley E. Turner
Bradley E. Turner
President
4
<PAGE> 6
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a share outstanding throughout each period (Unaudited)
<TABLE>
<CAPTION>
ESTABLISHED VALUE FUND 6 Months Year Ended 11 Months Year Ended
Ended Ended
9/30/97 3/31/97 3/31/96 3/31/95 4/30/94 4/30/93
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $28.827 $27.567 $23.381 $22.515 $21.375 $18.366
------- ------- ------- ------- ------- -------
Income from investment operations:
Net investment income .233 .445 .436 .376 .256 .286
Net realized and unrealized gain on investments 6.244 3.615 5.190 1.520 2.104 3.278
------- ------- ------- ------- ------- -------
Total income from investment operations 6.477 4.060 5.626 1.896 2.360 3.564
------- ------- ------- ------- ------- -------
Distributions to shareholders:
Dividends from net investment income (.220) (.450) (.430) (.370) (.220) (.285)
Distributions from realized capital gains (.890) (2.350) (1.010) (.660) (1.000) (.270)
------- ------- ------- ------- ------- -------
Total distributions to shareholders (1.110) (2.800) (1.440) (1.030) (1.220) (.555)
------- ------- ------- ------- ------- -------
Net asset value at end of period $34.194 $28.827 $27.567 $23.381 $22.515 $21.375
======= ======= ======= ======= ======= =======
Total return 22.93%(1) 15.14% 24.84% 8.85%(1) 11.30% 19.86%
======= ======= ======= ======= ======= =======
Ratios/Supplemental data:
Net assets at end of period (in millions) $ 530.7 $ 429.7 $ 366.4 $ 277.4 $ 253.3 $ 203.6
Ratio of gross expenses to average net assets (2) 1.11%(3) 1.12% 1.16% -- -- --
Ratio of net expenses to average net assets 1.11%(3) 1.12% 1.15% 1.20%(3) 1.22% 1.28%
Ratio of net investment income to average net assets 1.47%(3) 1.57% 1.70% 1.87%(3) 1.15% 1.48%
Portfolio turnover rate 7% 31% 18% 24% 38% 28%
Average commission paid per share traded $ .0824 $ .0600 -- -- -- --
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH & INCOME FUND 6 Months Year Ended Period
Ended 2/28/95*
9/30/97 3/31/97 3/31/96 To 3/31/95
------- ------- ------- ----------
<S> <C> <C> <C> <C>
Net asset value at beginning of period $ 21.477 $ 18.459 $ 15.189 $ 15.000
-------- -------- -------- --------
Income from investment operations:
Net investment income .103 .246 .173 .030
Net realized and unrealized gain on investments 4.175 3.112 3.317 .159
-------- -------- -------- --------
Total income from investment operations 4.278 3.358 3.490 .189
-------- -------- -------- --------
Distributions to shareholders:
Dividends from net investment income (.120) (.210) (.185) --
Distributions from realized capital gains (.180) (.130) (.035) --
-------- -------- -------- --------
Total distributions to shareholders (.300) (.340) (.220) --
-------- -------- -------- --------
Net asset value at end of period $ 25.454 $ 21.477 $ 18.459 $ 15.189
======== ======== ======== ========
Total return 20.00%(1) 18.33% 23.09% 1.27%(1)
======== ======== ======== ========
Ratios/Supplemental data:
Net assets at end of period (in millions) $ 42.0 $ 25.7 $ 12.0 $ 1.2
Ratio of gross expenses to average net assets (2) (4) 1.59%(3) 1.84% 3.09% 13.88%
Ratio of net expenses to average net assets 1.50%(3) 1.50% 1.50% 0.00%(3)
Ratio of net investment income to average net assets (4) 1.00%(3) 1.34% 1.39% 4.09%(3)
Portfolio turnover rate 2% 16% 3% 4%
Average commission paid per share traded $ .0458 $ .0466 -- --
</TABLE>
- --------------------------------------------------------------------------------
(1) Total return represents the actual return over the period and has not been
annualized.
(2) Effective March 31, 1996, this ratio reflects gross expenses before
reduction for earnings credits; such reductions are included in the ratio of
net expenses.
(3) Annualized.
(4) During each of the periods ending March 31, 1997, 1996, and 1995, the
adviser absorbed expenses of the Growth & Income Fund through waiver of
certain expenses. Assuming no waiver of expenses, the ratio of net
investment income to average net assets would have been 1.09%, .01% and
-9.79% (annualized), respectively. (Note 2)
*Date of public offering
See accompanying notes to financial statements.
5
<PAGE> 7
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
For a share outstanding throughout each period (Unaudited)
<TABLE>
<CAPTION>
6 Months Year Ended 11 Months Year Ended
Ended Ended
OPPORTUNITY VALUE FUND 9/30/97 3/31/97 3/31/96 3/31/95 4/30/94 4/30/93
------- ------- ------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $22.771 $22.264 $18.100 $18.348 $17.547 $16.462
------- ------- ------- ------- ------- -------
Income from investment operations:
Net investment income .108 .203 .193 .136 .086 .081
Net realized and unrealized gain on investments 6.231 2.509 4.731 .176 1.585 1.744
------- ------- ------- ------- ------- -------
Total income from investment operations 6.339 2.712 4.924 .312 1.671 1.825
------- ------- ------- ------- ------- -------
Distributions to shareholders:
Dividends from net investment income (.110) (.165) (.185) (.120) (.070) (.100)
Distributions from realized capital gains (.910) (2.040) (.575) (.440) (.800) (.640)
------- ------- ------- ------- ------- -------
Total distributions to shareholders (1.020) (2.205) (.760) (.560) (.870) (.740)
------- ------- ------- ------- ------- -------
Net asset value at end of period $28.090 $22.771 $22.264 $18.100 $18.348 $17.547
======= ======= ======= ======= ======= =======
Total return 28.64%(1) 12.46% 28.00% 1.75%(1) 9.75% 11.57%
======= ======= ======= ======= ======= =======
Ratios/Supplemental data:
Net assets at end of period (in millions) $ 148.0 $ 114.5 $ 103.0 $ 84.7 $ 83.3 $ 68.2
Ratio of gross expenses to average net assets (2) 1.33%(3) 1.36% 1.41% -- -- --
Ratio of net expenses to average net assets 1.33%(3) 1.36% 1.41% 1.37%(3) 1.38% 1.44%
Ratio of net investment income to average net assets .87%(3) .90% .95% .84%(3) .47% .61%
Portfolio turnover rate 12% 35% 24% 32% 40% 39%
Average commission paid per share traded $ .0576 $ .0600 -- -- -- --
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
6 Months Year Period
Ended Ended 5/31/95*
INTERNATIONAL FUND 9/30/97 3/31/97 To 3/31/96
------- ------- ----------
<S> <C> <C> <C>
Net asset value at beginning of period $ 16.226 $ 15.822 $ 15.000
-------- -------- --------
Income from investment operations:
Net investment income (loss) .069 (.023) .065
Net realized and unrealized gain on investments 1.339 .457 .799
-------- -------- --------
Total income from investment operations 1.408 .434 .864
-------- -------- --------
Distributions to shareholders:
Dividends from net investment income -- -- (.042)
Distributions from realized capital gains -- (.030) --
-------- -------- --------
Total distributions to shareholders -- (.030) (.042)
-------- -------- --------
Net asset value at end of period $ 17.634 $ 16.226 $ 15.822
======== ======== ========
Total return 8.63%(1) 2.78% 5.76%(1)
======== ======== ========
Ratios/Supplemental data:
Net assets at end of period (in millions) $ 29.2 $ 24.8 $ 15.3
Ratio of expenses to average net assets (4) 2.00%(3) 2.00% 1.75%(3)
Ratio of net investment income (loss) to average net assets (4) .80%(3) (.13%) .70%(3)
Portfolio turnover rate 57% 92% 72%
Average commission paid per share traded $ .0035 $ .0010 --
</TABLE>
- --------------------------------------------------------------------------------
(1) Total return represents the actual return over the period and has not been
annualized.
(2) Effective March 31, 1996, this ratio reflects gross expenses before
reduction for earnings credits; such reductions are included in the ratio of
net expenses.
(3) Annualized.
(4) During each of the periods ending September 30, 1997 and March 31, 1997 and
1996, the adviser absorbed expenses of the International Fund through waiver
of certain expenses. Assuming no waiver of expenses, the ratio of expenses
to average net assets would have been 2.51% (annualized), 2.78% and 3.73%
(annualized) and the ratio of net investment income to average net assets
would have been .29% (annualized), -.91% and -1.28% (annualized),
respectively. (Note 2)
*Date of public offering
See accompanying notes to financial statements.
6
<PAGE> 8
ESTABLISHED VALUE FUND
- --------------------------------------------------------------------------------
September 30, 1997 (Unaudited)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
Shares Common Stocks - 72.17% Value
Aerospace/Defense Companies - 6.94%
<S> <C> <C>
99,756 Lockheed Martin Corporation $ 10,636,483
80,000 Northrop Grumman Corporation 9,710,000
126,400 Raytheon Company 7,473,400
140,000 Textron, Inc. 9,100,000
-----------
36,919,883
-----------
Chemicals - 2.29%
255,000 Engelhard Corporation 5,498,438
134,000 Hercules, Inc. 6,666,500
-----------
12,164,938
-----------
Computing Products - 13.25%
250,000 Compaq Computer Corporation (1) 18,687,500
300,000 Data General Corporation (1) 7,987,500
180,000 Harris Corporation 8,235,000
160,000 Intel Corporation 14,780,000
300,000 Sun Microsystems, Inc. (1) 14,025,000
100,000 Tektronix, Inc. 6,743,750
-----------
70,458,750
-----------
Consumer Non-Durables - 2.27%
190,000 Adolph Coors Brewing Cl. B 7,196,250
142,000 RJR Nabisco Holdings Corporation 4,881,250
-----------
12,077,500
-----------
Consumer Durables - 5.61%
133,000 Black & Decker Corporation 4,954,250
190,000 Brunswick Corporation 6,697,500
97,000 Goodyear Tire & Rubber (The) Company 6,668,750
100,000 Pulte Corporation 3,825,000
166,500 Snap-on, Inc. 7,669,406
-----------
29,814,906
-----------
Energy - 5.07%
145,000 Coastal Corporation 8,881,250
100,000 Nicor, Inc. 3,750,000
128,000 Royal Dutch Petroleum Company 7,104,000
82,000 Western Atlas, Inc. (1) 7,216,000
-----------
26,951,250
-----------
Financial Services - 7.56%
85,000 Beneficial Corporation 6,475,938
100,000 Household International, Inc. 11,318,750
75,000 Provident Companies 5,245,312
70,000 Transamerica Corporation 6,965,000
150,000 Travelers, Inc. 10,237,500
-----------
40,242,500
-----------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Common Stocks (continued) Value
Industrial Products - 9.51%
<S> <C> <C>
118,000 Cooper Industries, Inc. $ 6,379,375
120,000 Foster Wheeler Corporation 5,272,500
180,000 Goodrich (B.F.) Company 8,145,000
165,000 Ingersoll-Rand Company 7,105,313
148,000 Johnson Controls, Inc. 7,335,250
175,950 Parker Hannifin Corporation 7,917,750
210,000 Timken Company 8,413,125
-----------
50,568,313
-----------
Insurance - 5.49%
142,500 Berkley (W.R.) Corporation 6,100,781
42,000 ITT Hartford Group, Inc. 3,614,625
110,000 Providian Corporation 4,365,625
143,000 SAFECO Corporation 7,561,125
93,000 St. Paul Companies, Inc. 7,585,312
-----------
29,227,468
-----------
Retail Trade - 6.92%
320,000 American Stores Company 7,800,000
150,000 Dayton-Hudson Corporation 8,990,625
134,000 The Great Atlantic &
Pacific Tea Company, Inc. 4,254,500
400,000 K Mart Corporation (1) 5,600,000
99,000 Mercantile Stores, Inc. 6,230,813
100,000 Supervalu, Inc. 3,925,000
-----------
36,800,938
-----------
Services - 3.41%
250,000 Boston Chicken, Inc. (1) 3,671,875
42,000 ITT Corporation (1) 2,845,500
156,000 Pittson Brink's Group 6,249,750
254,000 Wendy's International, Inc. 5,397,500
-----------
18,164,625
-----------
Telecommunications - 2.69%
300,000 Andrew Corporation (1) 7,837,500
220,000 MCI Communications Corporation 6,448,750
-----------
14,286,250
-----------
Transportation - 1.16%
60,000 Norfolk Southern Corporation 6,195,000
-----------
Total Common Stock
(Cost $189,484,731 ) 383,872,321
-----------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
7
<PAGE> 9
ESTABLISHED VALUE FUND
- --------------------------------------------------------------------------------
September 30, 1997 (Unaudited)
PORTFOLIO OF INVESTMENTS Continued
<TABLE>
<CAPTION>
Principal Interest
Amount Commercial Paper - 16.86% Maturity Rate (2) Value
<S> <C> <C> <C> <C>
$10,000,000 Coca Cola (The) Company 10/01/97 5.40% $ 10,000,000
10,000,000 General Electric Capital Corporation 10/01/97 5.58 10,000,000
10,000,000 Great Lakes Chemical Corporation 10/08/97 5.59 9,989,131
10,000,000 United Parcel Service of America, Inc. 10/15/97 5.42 9,978,922
10,000,000 American Home Products Corporation 10/22/97 5.50 9,967,917
10,000,000 Koch Industries, Inc. 10/29/97 5.49 9,957,300
10,000,000 Du Pont (E.I.) de Nemours and Company 11/05/97 5.47 9,946,819
10,000,000 Goldman Sachs Group (The), L.P. 11/12/97 5.50 9,935,833
10,000,000 Anheuser Busch Companies, Inc. 11/19/97 5.44 9,925,956
-----------
Total Commercial Paper (Cost $89,701,878) 89,701,878
-----------
- --------------------------------------------------------------------------------------------------------------------------------
Discount Note - 10.97%
58,350,000 Federal Home Loan Bank (Cost $58,350,000) 10/01/97 6.00 58,350,000
-----------
TOTAL INVESTMENTS, at value (Note 1) (Cost $337,536,609) - 100% $531,924,199
===========
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Non-income producing
(2) For commercial paper and discount notes, the rate is the discount rate at
the time of purchase by the Fund.
See accompanying notes to financial statements.
8
<PAGE> 10
GROWTH & INCOME FUND
- --------------------------------------------------------------------------------
September 30, 1997 (Unaudited)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
Shares Common Stocks - 93.86% Value
Bank Services - 7.67%
<S> <C> <C>
8,800 Huntington Bancshares, Inc. $ 316,800
12,000 Morgan (J.P.) & Company, Inc. 1,363,500
25,000 Norwest Corporation 1,531,250
----------
3,211,550
----------
Chemical - 4.98%
18,000 Avery-Dennison Corporation 720,000
16,000 Du Pont (E.I.) de Nemours & Company 985,000
18,000 Schulman, (A.), Inc. 381,375
----------
2,086,375
----------
Consumer Durables - 3.24%
20,000 Cooper Tire & Rubber Company 531,250
15,000 TRW, Inc. 823,125
----------
1,354,375
----------
Consumer Non-Durables - 15.91%
26,250 Archer Daniels Midland Corporation 628,359
10,000 CPC International, Inc. 926,250
15,000 Heinz (H.J.) Company 692,812
20,000 International Flavors & Fragrances, Inc. 980,000
20,000 Kellogg Company 842,500
10,000 Lancaster Colony Corporation 531,250
20,000 Newell Company 800,000
14,000 Pepsico, Inc. 567,875
10,000 Procter & Gamble Company 690,625
----------
6,659,671
----------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Common Stocks (continued) Value
<S> <C> <C>
Energy - 9.34%
12,000 Chevron Corporation $ 998,250
20,000 Exxon Corporation 1,281,250
22,000 Mobil Corporation 1,628,000
----------
3,907,500
----------
Financial Services - 8.69%
25,000 American General Corporation 1,296,875
10,000 Cincinnati Financial Corporation 820,000
5,000 Excel Limited 297,812
15,000 St. Paul Companies 1,223,438
----------
3,638,125
----------
Healthcare & Pharmaceuticals - 7.38%
15,000 American Home Products Corporation 1,095,000
12,000 Bristol-Myers Squibb Company 993,000
10,000 Merck & Co., Inc. 999,375
----------
3,087,375
----------
Industrial Products - 5.94%
12,000 General Electric Company 816,750
25,000 Pall Corporation 539,063
15,000 Waste Management, Inc. 524,063
30,000 Worthington Industries, Inc. 605,625
----------
2,485,501
----------
Retail Trade & Services - 4.29%
8,000 J.C. Penney Company, Inc. 466,000
10,000 May Department Stores Co. 545,000
7,000 McDonald's Corporation 333,375
10,000 Reynolds & Reynolds Company Cl. A 194,375
10,000 Walgreen Co. 256,250
----------
1,795,000
----------
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE> 11
GROWTH & INCOME FUND
- --------------------------------------------------------------------------------
September 30, 1997 (Unaudited)
PORTFOLIO OF INVESTMENTS Continued
<TABLE>
<CAPTION>
Shares Common Stocks (continued) Value
Technology - 17.59%
<S> <C> <C>
10,000 Automatic Data Processing, Inc. $ 500,000
20,000 Diebold, Inc. 947,500
25,000 Hewlett Packard Company 1,739,062
8,000 Intel Corporation 739,000
10,000 Minnesota Mining &
Manufacturing Company 925,000
6,000 Motorola, Inc. 431,250
25,000 Pitney-Bowes, Inc. 2,079,688
----------
7,361,500
----------
Telecommunications - 6.06%
15,000 Ameritech Corporation 997,500
10,000 Bell Atlantic Corporation 804,375
12,000 SBC Communications, Inc. 736,500
----------
2,538,375
----------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Common Stocks (continued) Value
<S> <C> <C>
Transportation - 1.05%
12,000 Illinois Central Corporation $ 441,000
----------
Utilities - 1.72%
10,000 Duke Energy Company 494,375
10,000 Southern Corporation 225,625
----------
720,000
----------
Total Common Stock
Cost ($30,335,800) 39,286,347
----------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Interest
Amount Discount Note - 6.14% Maturity Rate (1) Value
<S> <C> <C> <C> <C>
$2,570,000 Federal Home Loan Bank (Cost $2,570,000) 10/01/97 6.00% $ 2,570,000
----------
TOTAL INVESTMENTS, at value (Note 1) (Cost $32,905,800) - 100% $41,856,347
==========
</TABLE>
- --------------------------------------------------------------------------------
(1) For discount notes, the rate is the discount rate at the time of purchase by
the Fund.
See accompanying notes to financial statements.
10
<PAGE> 12
OPPORTUNITY VALUE FUND
- --------------------------------------------------------------------------------
September 30, 1997 (Unaudited)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
Shares Common Stocks - 72.21% Value
<S> <C> <C>
Automotives - 4.88%
30,000 Amcast Industries Corporation $ 735,000
25,000 Borg-Warner Auto, Inc. 1,421,875
25,000 Excel Industries, Inc. 498,438
30,000 Gleason Corporation 825,000
70,000 Intermet Corporation 1,216,250
75,000 Wynn's International, Inc. 2,493,750
-----------
7,190,313
-----------
Banks - 11.19%
5,000 First Empire State Corporation 2,075,000
62,200 Firstar Corporation 2,254,750
46,350 HUBCO, Inc. 1,460,025
46,125 Mercantile Bankshares Corporation 1,499,063
27,839 Old Kent Financial Corporation 1,795,616
42,000 TCF Financial Corporation 2,454,375
66,000 TR Financial Corporation 2,079,000
24,800 Union Planters Corporation 1,385,700
40,000 Zions Bancorporation 1,485,000
-----------
16,488,529
-----------
Building Materials - 5.19%
43,000 ABT Building Products Company (1) 860,000
35,000 Building Materials Hldg. Company (1) 455,000
39,000 Butler Manufacturing Company 1,316,250
32,000 Cascade Corporation 632,000
45,000 Hughes Supply Company 1,358,438
84,150 Republic Group, Inc. 1,577,813
34,000 Texas Industries, Inc. 1,442,875
-----------
7,642,376
-----------
Business Services - 5.89%
90,000 ABM Industries, Inc. 2,379,375
45,000 Graphics Industries 829,687
30,000 Inacom Corporation (1) 1,115,625
37,500 Interpool, Inc. 660,938
35,000 Merrill Corporation 1,592,500
100,000 Norstan, Inc.(1) 2,100,000
-----------
8,678,125
-----------
Chemicals - 1.73%
30,000 Cambrex Corporation 1,398,750
30,000 Ferro Corporation 1,145,625
-----------
2,544,375
-----------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Common Stocks (continued) Value
<S> <C> <C>
Computer Products - 5.86%
60,000 Adaptec, Inc. (1) $ 2,797,500
37,000 Computer Data Systems, Inc. 1,558,625
70,000 Innovex, Inc. 2,257,500
45,000 Keane, Inc. (1) 1,428,750
30,000 Printronix (1) 588,750
-----------
8,631,125
-----------
Consumer Durables - 2.61%
55,000 Coachman Industries, Inc. 1,045,000
60,000 Coastcast Corporation (1) 937,500
42,000 Culp, Inc. 871,500
30,000 West Company 990,000
-----------
3,844,000
-----------
Electronics - 2.88%
36,000 Bell Industries, Inc. (1) 609,750
13,500 CTS Corporation 1,282,500
25,000 Electro Scientific Industries, Inc.(1) 1,525,000
25,000 Tech-Sym Corporation (1) 831,250
-----------
4,248,500
-----------
Financial Services - 2.34%
60,000 Aames Financial Corporation 971,250
69,000 Raymond James Financial, Inc. 2,484,000
-----------
3,455,250
-----------
Health Care - 2.92%
80,000 HealthSouth Corporation (1) 2,135,000
50,000 Universal Health Services, Inc. (1) 2,162,500
-----------
4,297,500
-----------
Housing - 5.34%
80,000 Cavalier Homes, Inc. 830,000
34,000 Continental Homes Holding Corporation 996,625
50,000 D.R. Horton, Inc. 787,500
43,000 Lennar Corporation 1,827,500
80,000 Oakwood Homes Corporation 2,270,000
50,000 Toll Brothers, Inc. (1) 1,162,500
-----------
7,874,125
-----------
Industrial Products - 3.72%
29,000 Atchison Casting Corporation (1) 616,250
25,000 Chase Industries, Inc. (1) 718,750
44,000 Gehl Company (1) 990,000
51,000 Global Industries Technologies, Inc.(1) 1,055,062
14,000 Lamson & Session Corporation (1) 107,625
35,000 Tally Industries, Inc. (1) 430,938
32,000 Transtechnology Corporation 854,000
25,000 United Dominion Industries, Inc. 707,812
-----------
5,480,437
-----------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
11
<PAGE> 13
OPPORTUNITY VALUE FUND
- --------------------------------------------------------------------------------
September 30, 1997 (Unaudited)
PORTFOLIO OF INVESTMENTS Continued
<TABLE>
<CAPTION>
Shares Common Stocks (continued) Value
<S> <C> <C>
Insurance Companies - 7.09%
60,000 American Bankers Insurance Group, Inc. $ 2,190,000
26,000 Equitable of Iowa Corporation 1,742,000
56,100 Fremont General Corporation 2,678,775
40,000 Orion Capital Corporation 1,812,500
29,000 Protective Life Corporation 1,464,500
11,000 Selective Insurance Group, Inc. 566,500
-----------
10,454,275
-----------
Natural Resources - 5.22%
12,000 Florida Rock Industries 714,000
45,000 Mueller Industries, Inc. (1) 2,044,687
95,000 Patrick Industries, Inc. 1,460,625
37,000 Quanex Corporation 1,297,312
40,000 Southdown, Inc. 2,185,000
-----------
7,701,624
-----------
Retail Trade & Services - 2.57%
43,000 BJ's Wholesale Club, Inc. (1) $ 1,255,062
43,000 Homebase, Inc.(1) 387,000
80,000 Comair Holdings, Inc. 2,150,000
-----------
3,792,062
-----------
Semiconductors - 2.78%
40,000 Bell Microproducts, Inc. (1) 435,000
90,000 Chips & Technology, Inc. (1) 1,428,750
50,000 Dallas Semiconductor Corporation 2,237,500
-----------
4,101,250
-----------
Total Common Stocks
Cost ($51,424,636) 106,423,866
-----------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Interest
Amount Commercial Paper - 15.21% Maturity Rate (2) Value
<S> <C> <C> <C> <C>
$ 2,500,000 Coca Cola (The) Company 10/01/97 5.40% $ 2,500,000
2,500,000 General Electric Capital Corporation 10/01/97 5.58 2,500,000
2,500,000 Great Lakes Chemical Corporation 10/08/97 5.59 2,497,283
2,500,000 United Parcel Service of America, Inc. 10/15/97 5.42 2,494,730
2,500,000 American Home Products Corporation 10/22/97 5.50 2,491,979
2,500,000 Koch Industries, Inc. 10/29/97 5.49 2,489,325
2,500,000 Du Pont (E.I.) de Nemours and Company 11/05/97 5.47 2,486,705
2,500,000 Goldman Sachs Group (The), L.P. 11/12/97 5.50 2,483,958
2,500,000 Anheuser Busch Companies, Inc. 11/19/97 5.44 2,481,489
-----------
Total Commercial Paper (Cost $22,425,469) 22,425,469
-----------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Discount Note - 12.58%
<S> <C> <C> <C> <C>
18,540,000 Federal Home Loan Bank (Cost $18,540,000) 10/01/97 6.00 18,540,000
-----------
TOTAL INVESTMENTS, at value (Note 1) (Cost $92,390,105) - 100% $147,389,335
===========
</TABLE>
- --------------------------------------------------------------------------------
(1) Non-income producing
(2) For commercial paper and discount notes, the rate is the discount rate at
the time of purchase by the Fund
See accompanying notes to financial statements.
12
<PAGE> 14
INTERNATIONAL FUND
- --------------------------------------------------------------------------------
September 30, 1997 (Unaudited)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
Shares Preferred Stocks -.69% Value
<S> <C> <C>
Germany - 0.69%
700 Man Ag-vorzugsaktien $ 172,010
----------
Total Preferred Stocks (Cost $146,544)
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stocks - 99.31%
<S> <C> <C>
Argentina - 4.58%
32,750 Astra Cia Argentina de Petroleum 63,547
8,500 Banco De Galicia Bue "B" 62,487
6,650 Banco Frances Rio Plata 71,833
38,364 Dalmine Siderca Sa 115,113
525 IRSA (Inversiones y
Representaciones SA) 144A ADR 23,231
9,800 Molinos Rio Plata "B" 32,346
9,750 Perez Companc SA ADR 156,613
6,600 Telefonica de Argentina ADR 241,725
10,100 YPF SA ADR 372,438
----------
1,139,333
----------
Belgium - 2.62%
39,000 Webs Belgium Index Series 653,250
----------
Chile - 3.43%
4,700 Banco Santander Chile ADR 69,325
3,524 Chilgener SA ADR 96,690
1,750 Cia Cerveceria Unidas ADR 50,313
6,050 Cia Telecommunications Chile ADR 195,869
6,000 Empresa Nacional de Electridad SA ADS 127,125
4,900 Enersis SA ADR 181,606
1,600 Madeco SA ADR 39,200
2,500 Maderas y Sinteticos ADR 34,391
1,000 Quimica y Minera SA ADR 59,000
----------
853,519
----------
Finland - 5.44%
5,000 Enso Oy $ 51,263
950 Hartwall Oy 84,461
6,860 Metsa Serla Oy B Ord 63,196
2,070 Neste Oy 56,307
6,635 Nokia AB Oy 631,314
5,200 Okobank Osuspankk 87,545
55 Rauma Oy 1,144
7,100 Rautaruuki Oy 76,554
4,880 Upm-Kymmene Oy 135,698
550 Viking Line AB 19,247
3,000 Werner Soderstrom 104,985
3,200 Yit Yhtyma 41,465
----------
1,353,179
----------
France - 9.02%
1,308 Alcatel Alst 173,967
1,616 AXA 108,419
3,850 Banque Nationale de Paris 193,986
750 Cie De St Gobain 115,682
880 Danone 138,700
1,300 Eaux (Cie Generale) 152,961
550 Eaux Cie Generale Warrant 297
1,482 Elf Aquitaine 197,859
1,590 Hermes International 125,973
490 L'Oreal 196,175
2,050 Lafarge 150,254
1,550 Peugeot SA 204,325
1,710 Societe Generale 247,612
752 Schneider SA 47,474
980 Synthelabo 115,970
1,160 Valeo 76,183
----------
2,245,837
----------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
13
<PAGE> 15
INTERNATIONAL FUND
- --------------------------------------------------------------------------------
September 30, 1997 (Unaudited)
PORTFOLIO OF INVESTMENTS Continued
<TABLE>
<CAPTION>
Shares Common Stocks (continued) Value
<S> <C> <C>
Germany - 8.30%
900 Allianz AG Holdings $ 217,230
6,090 Bayer AG 242,574
2,400 Commerzbank AG 86,559
2,050 Daimler-Benz AG 169,229
3,960 Degussa AG 217,261
3,100 Dresdner Bank AG 142,522
462 Mannesmann AG 220,250
3,920 Siemens AG 264,894
6,042 Veba AG 353,211
218 Volkswagen AG 151,448
----------
2,065,178
----------
Hungary - 1.86%
1,500 Danibius Hotels (1) 48,470
400 Egis Gyogyszergyar Rt. 20,633
650 Graboplast Textiles Rt. 38,443
5,800 Magyar Olaj Es Gazipari Rt. 127,223
2,900 OTP Bank Rt. 95,937
1,250 Richter Gedeon Rt. 132,609
----------
463,315
----------
Indonesia - 0.03%
2,142 Bank Internasional Indonesia Warrants 182
24,109 Bank Internasional Indonesia 6,986
----------
7,168
----------
Israel - 3.69%
3,800 Agis Industries $ 37,705
21,600 Bezeq Israel Telecommunications 63,247
40,000 Bk Hapoalim BM 92,761
6,500 Blue Square Chain Stores (1) 58,176
207,000 Clal Israel 66,885
5,200 Eci Telecommunications ADR 168,350
6,700 Elco Holdings Ltd. 46,574
1,740 Elite Industries 50,501
2,000 Formula Systems (1) 60,563
63,000 ICI-Israel Chemical 77,283
37,000 Industrial Building 72,155
2,170 Teva Pharmaceutical Industries Ltd. 124,324
----------
918,524
----------
Italy - 8.77%
13,500 Alleanza Assicuraz 130,145
7,000 Assicurazioni Generali SpA 158,067
77,000 BCA Communicatios Italiana 221,132
6,240 Benetton Group SpA 104,234
12,500 Danieli & Co. 99,805
72,500 Eni SpA 456,295
61,600 Fiat SpA 219,705
97,000 Istituto Nazionale delle Assicurazioni 154,729
18,300 Istituto Mobiliare Italiano 196,232
36,110 Telecom Italia SpA 240,439
51,000 TIM SpA 202,274
----------
2,183,057
----------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
14
<PAGE> 16
INTERNATIONAL FUND
- --------------------------------------------------------------------------------
September 30, 1997 (Unaudited)
PORTFOLIO OF INVESTMENTS Continued
<TABLE>
<CAPTION>
Shares Common Stocks (continued) Value
<S> <C> <C>
Japan - 16.09%
7,700 Aoyama Trading Co. $ 220,649
3,300 Autobacs Seven Co. 154,418
30,000 Dainippon Screen Manufacturing Co. 265,852
30,000 Daiwa Securities Co. Ltd. 183,861
6,200 Fanuc 235,689
5,000 Fuji Photo Film Co. 206,222
29,000 Fujisawa Pharmaceutical Co. 247,383
32,000 Hitachi Ltd. 278,275
17,000 Kirin Brewery Co. 139,949
48,000 Marubeni Corp. 159,014
19,000 Matsushita Electric Works 198,271
65,000 Mitsui O.S.K. Lines Ltd. (1) 82,903
6,000 Murata Manufacturing Co. 259,392
18,000 Nippon Oil Co. 73,644
42 Nippon Telgraph & Telephone Co. 193,053
122,000 NKK Corp. 163,686
18,000 Sumitomo Bank 271,318
21,000 Sumitomo Metal Mining 112,354
22,000 Sumitomo Trust & Banking 218,645
33,000 Tokyu Corp. 158,518
45,000 Tokyo Tatemono Co Ltd 181,500
----------
4,004,596
----------
Mexico - 4.16%
4,600 Alfa SA de CV Ser A $ 43,660
2,500 Apasco SA Co. 18,905
13,500 Cemex, SA 69,969
2,128 Cifra SA de CV Ser A 4,653
17,400 Cifra SA de CV Ser B 40,817
18,000 Controlodora Comerical
Mexicana SA de CV 22,686
106 Desc SA de CV Ser C 1,096
3,450 Desc SA de CV Ser B 36,383
9,720 Empresas ICA Sociedad Controladora 28,252
4,700 Empresas La Modern A 25,780
7,000 Fomento Economico Mexico SA de CV 60,317
8,400 Grupo Carso SA de CV Ser A1 67,627
17,704 Grupo Financiero Banamex
Accival SA de CV (1) 50,091
4,693 Grupo Industrial Bimbo SA 42,249
11,100 Grupo Mexico SA 43,326
7,250 Grupo Modelo SA de CV 68,532
1,380 Grupo Televisa GDS (1) 49,421
8,750 Industrias Penoles SA 42,087
16,650 Kimberly Clark de Mexico SA 85,546
1,200 TV Azteca ADS (1) 27,000
3,670 Telefonos de Mexico ADR 189,923
700 Tubos de Acero de Mexico SA (1) 16,178
----------
1,034,498
----------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
15
<PAGE> 17
INTERNATIONAL FUND
- --------------------------------------------------------------------------------
September 30, 1997 (Unaudited)
PORTFOLIO OF INVESTMENTS Continued
<TABLE>
<CAPTION>
Shares Common Stocks (continued) Value
<S> <C> <C>
Netherlands - 5.17%
3,064 ABN-AMRO Holdings NV $ 62,068
350 Akzo Nobel NV 59,834
2,200 Ing Groep NV 101,075
1,800 Koninklijke PTT Nederland NV 70,754
1,300 Philips Electronic 110,042
3,000 Polygram NV 173,870
6,880 Royal Dutch Petroleum 385,255
610 Unilever NV 130,253
1,500 Vendex International NV 88,971
4,480 Ver Ned Uitgevers 104,039
----------
1,286,161
----------
Philippines - 0.05%
912 Ayala Corp. 371
2,800 Equitable Banking Corp. 4,687
46,160 Petron Corp. 5,913
383 San Miguel Corp. Class B 619
----------
11,590
----------
Portugal - 4.51%
4,750 Banco Espirito Santo 131,894
3,460 Cimpor (Cimentos de Portugal) 93,555
3,600 Colep 64,000
5,100 Electricidade de Portugal 87,604
2,350 Investec Consultadoria Internacional(1) 83,607
1,478 Jeronimo Martins & Filho 113,795
4,000 Mundial Confianca 81,717
7,430 Portugal Telecom SA 322,373
2,640 Sonae Investimentos Socieda da
Gestora de Participacoes Sociais SA 104,403
500 Telecel-Comunicacoes 40,581
----------
1,123,529
----------
South Korea - 2.32%
19,090 Cho Hung Bank $ 90,347
12,400 Korea Fund, Inc. (closed-end mutual fund) 147,250
9,850 Korea Electric Power 218,551
8,800 Samsung Corp 97,146
335 Samsung Electronics 24,349
----------
577,643
----------
Switzerland - 7.75%
72 ABB AG 106,195
238 Ciba Specialty Chemical Nw (1) 23,025
125 Clariant AG 100,704
944 Credit Suisse Group 127,728
99 Holderbank Finance Glaris AG 94,073
30 Kuoni Reisen Holdings 119,606
138 Nestle SA 192,518
323 Novartis AG 495,974
39 Roche Holdings AG 346,423
200 Schweiz Bankgesellschaft 233,978
650 Tag Heuer (1) 87,277
----------
1,927,501
----------
Turkey - 2.71%
632,700 Adana Cimento Sanayii 46,304
624,237 Akal Tekstil Sanayii 30,815
953,203 Akbank 73,864
313,000 Arcelik AS 39,526
132,000 Bagfas Bandirma Gubre AS 43,188
306,000 Ege Biracilik Ve Malt SA 35,129
329,000 Eregli Demir Celik 58,542
73,000 Ford Otomobil Sanayii 56,568
2,844,000 Izmar Demir Celik Sanayi (1) 42,444
73,650 Migros Turk TAS 64,470
119,000 Netas Telekomunik AS (1) 39,617
906,000 Sabanci Holding (1) 40,043
481,358 T Sise Cam (1) 33,156
402,000 Turkiye Garanti Bankasi 21,690
1,921,000 Yapi Ve Kredi Bankasi 47,965
----------
673,321
----------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
16
<PAGE> 18
INTERNATIONAL FUND
- --------------------------------------------------------------------------------
September 30, 1997 (Unaudited)
PORTFOLIO OF INVESTMENTS Continued
<TABLE>
<CAPTION>
Shares Common Stocks (continued) Value
<S> <C> <C>
United Kingdom - 8.81%
7,240 Abbey National PLC $ 111,669
7,600 Boots Co. PLC 107,792
2,800 British Petroleum 42,314
8,500 British Telecom PLC 56,159
7,900 Commercial Union PLC 102,667
4,850 Glaxo Wellcome 109,255
2,950 HSBC Holdings 104,897
11,200 IMI PLC 74,179
19,100 Lasmo PLC 83,923
17,059 Lloyds TSB Group PLC 229,413
9,400 Prudential PLC 104,851
20,829 Scot Power 161,170
9,100 Scottish & Newcastle PLC 103,930
17,350 Shell Transport & Trading PLC 127,103
16,300 Smith Kline Beecham 159,303
8,300 Tesco 62,749
7,830 Thorn EMI PLC 77,030
3,800 Unilever PLC 111,169
12,030 Wolseley PLC 98,915
4,990 Zeneca Group PLC 163,232
----------
2,191,720
----------
Total Common Stocks
(Cost $21,917,005) 24,712,919
----------
TOTAL INVESTMENTS, at value (Note 1)
(Cost $22,063,549) - 100% $24,884,929
==========
</TABLE>
- --------------------------------------------------------------------------------
SUMMARY OF INVESTMENTS BY INDUSTRY
<TABLE>
<CAPTION>
Industry Market Value
<S> <C>
Automotive 4.61%
Banking 11.71
Beverages and Tobacco 2.29
Broadcasting and Publishing 1.79
Building Materials 2.43
Business Services 0.62
Chemicals 4.25
Construction and Housing 0.96
Diversified Companies 4.73
Electronics 7.34
Energy 7.98
Financial Services 6.23
Food and Household Products 2.81
Forest Products and Paper 1.28
Health and Personal Care 6.55
Household Appliances and Durables 0.90
Insurance 4.25
Machinery and Engineering 1.29
Materials and Commodities 1.08
Merchandising 5.52
Metals and Mining 1.57
Real Estate 0.82
Steel 1.73
Telecommunications 10.23
Textiles and Apparel 0.70
Tourism 0.48
Transportation 1.28
Utilities 4.57
-------
100.00%
======
</TABLE>
- --------------------------------------------------------------------------------
(1) Non-income producing
The following abbreviations are used in this portfolio: ADR - American
Depository Receipts; ADS - American Depository Shares; 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 $23,231 as of September 30, 1997.
See accompanying notes to financial statements.
17
<PAGE> 19
STATEMENTS OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
September 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Established Growth & Opportunity International
Value Fund Income Fund Value Fund Fund
----------- ---------- ---------- ----------
Assets
<S> <C> <C> <C> <C>
Investments in securities, at cost $337,536,609 $32,905,800 $ 92,390,105 $22,063,549
=========== ========== =========== ==========
Investments in securities, at value (Note 1) $531,924,199 $41,856,347 $147,389,335 $24,884,929
Cash 266,401 10,096 44,690 4,911,866
Foreign currency, at value (Note 1) (Cost $6,181) -- -- -- 6,218
Receivable for securities sold -- -- 148,795 514,127
Receivable for Fund shares sold 718,798 73,964 761,804 21,754
Dividends and interest receivable 475,779 66,185 40,539 48,490
Prepaid expenses and other assets 12,506 9,731 17,488 18,060
Organization expenses, net (Note 1) -- 3,048 -- 12,747
----------- ---------- ---------- ----------
Total Assets 533,397,683 42,019,371 148,402,651 30,418,191
----------- ---------- ---------- ----------
Liabilities
Payable for Fund shares redeemed 2,182,558 8,587 85,735 9,503
Payable for securities purchased -- -- 204,600 1,084,693
Forward foreign exchange currency contracts (Note 1) -- -- -- 2,840
Accrued investment advisory fee (Note 2) 211,829 19,800 70,461 17,865
Other accrued expenses payable to adviser (Note 2) 232,479 22,329 70,400 36,938
Other accrued expenses and liabilities 63,076 2,997 13,004 39,007
----------- ---------- ---------- ----------
Total Liabilities 2,689,942 53,713 444,200 1,190,846
----------- ---------- ---------- ----------
Net Assets $530,707,741 $41,965,658 $147,958,451 $29,227,345
=========== ========== =========== ==========
Net assets consist of:
Aggregate paid-in capital $308,899,149 $32,812,720 $ 83,555,381 $25,991,015
Accumulated undistributed net investment income 989,077 60,602 386,647 63,823
Accumulated undistributed net realized gains 26,431,925 141,789 9,017,193 351,507
Net unrealized appreciation of investments 194,387,590 8,950,547 54,999,230 2,821,380
Net unrealized depreciation on translation of assets
and liabilities in foreign currency -- -- -- (380)
----------- ---------- ----------- ----------
Net Assets $530,707,741 $41,965,658 $147,958,451 $29,227,345
=========== ========== =========== ==========
Shares of capital stock outstanding
(no par value - unlimited number of shares authorized) 15,520,387 1,648,629 5,267,270 1,657,432
=========== ========== =========== ==========
Net asset value and redemption price per share (Note 1) $34.19 $25.45 $28.09 $17.63
=========== ========== =========== ==========
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
18
<PAGE> 20
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
For the six months ended September 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Established Growth & Opportunity International
Value Fund Income Fund Value Fund Fund
<S> <C> <C> <C> <C>
Investment income:
Dividends, net of foreign withholding taxes $ 2,571,781 $ 367,603 $ 461,895 $ 316,297
Interest 3,700,386 69,747 960,841 71,899
------------ ----------- ------------ -----------
Total investment income 6,272,167 437,350 1,422,736 388,196
------------ ----------- ------------ -----------
Expenses:
Investment advisory fee (Note 2) 1,244,644 111,451 405,511 138,721
Distribution (Note 2) 1,178,588 85,731 323,067 69,360
Transfer agency fees (Note 2) 145,713 20,226 61,323 19,733
Accounting services fees (Note 2) 39,357 20,000 20,000 30,000
Custodian fees (Note 1) 15,516 6,001 11,455 54,463
Registration fees 25,715 12,060 16,906 9,480
Professional fees 9,666 8,010 8,007 16,316
Printing 9,513 2,553 4,171 2,241
Trustees' fees (Note 2) 4,795 4,043 3,992 3,966
Amortization of organization expense (Note 1) -- 630 -- 2,354
Other 18,753 1,093 4,780 1,264
------------ ----------- ------------ -----------
Gross expenses 2,692,260 271,798 859,212 347,898
Less fees waived by the adviser (Note 2) -- -- -- (70,631)
Less earnings credits on cash balances (Note 1) (2,142) (6,001) (1,410) --
------------ ----------- ------------ -----------
Net expenses 2,690,118 265,797 857,802 277,267
------------ ----------- ------------ -----------
Net investment income 3,582,049 171,553 564,934 110,929
------------ ----------- ------------ -----------
Net realized and unrealized gains on investments:
Net realized gain on investments 26,742,218 153,846 9,105,958 329,716
Net realized loss on foreign currency transactions -- -- -- (237,807)
Net change in unrealized appreciation of investments 68,674,285 5,437,883 22,864,742 1,970,834
Net change in unrealized depreciation of foreign currency transactions -- -- -- 1,230
------------ ----------- ------------ -----------
Net realized and unrealized gains on investments 95,416,503 5,591,729 31,970,700 2,063,973
------------ ----------- ------------ -----------
Net increase in net assets resulting from operations $ 98,998,552 $ 5,763,282 $ 32,535,634 $ 2,174,902
============ =========== ============ ===========
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
19
<PAGE> 21
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Established Value Fund Growth & Income Fund
6 Months Year 6 Months Year
Ended Ended Ended Ended
9/30/97 3/31/97 9/30/97 3/31/97
<S> <C> <C> <C> <C>
From operations:
Net investment income (loss) $ 3,582,049 $ 6,257,379 $ 171,553 $ 242,652
Net realized gain on investments 26,742,218 37,844,738 153,846 337,124
New realized loss on foreign
currency transactions -- -- -- --
Net change in unrealized
appreciation of investments 68,674,285 11,774,353 5,437,883 2,325,455
Net change in unrealized
depreciation on translation
of assets and liabilities in
foreign currencies -- -- -- --
------------- ------------- ------------- -------------
Net increase in net assets
resulting from operations 98,998,552 55,876,470 5,763,282 2,905,231
------------- ------------- ------------- -------------
From distributions to shareholders:
Net investment income (3,346,846) (6,248,864) (174,832) (190,392)
Net realized capital gains (13,355,938) (32,341,951) (240,815) (112,745)
------------- ------------- ------------- -------------
Decrease in net assets from
distributions to shareholders (16,702,784) (38,590,815) (415,647) (303,137)
------------- ------------- ------------- -------------
From Fund share transactions:
Proceeds from shares sold 65,902,925 150,040,288 13,614,802 13,724,115
Net asset value of shares issued
in reinvestment of distributions 16,346,585 37,843,938 405,182 297,051
Payments for shares redeemed (63,563,073) (141,861,173) (3,103,682) (2,898,897)
------------- ------------- ------------- -------------
Net increase in net assets from
Fund share transactions 18,686,437 46,023,053 10,916,302 11,122,269
------------- ------------- ------------- -------------
Total increase in net assets 100,982,205 63,308,708 16,263,937 13,724,363
Net assets:
Beginning of period 429,725,536 366,416,828 25,701,721 11,977,358
------------- ------------- ------------- -------------
End of period $ 530,707,741 $ 429,725,536 $ 41,965,658 $ 25,701,721
============= ============= ============= =============
Undistributed net investment
income (Note 1) $ 989,077 $ 753,874 $ 60,602 $ 63,881
============= ============= ============= =============
Number of Fund shares:
Sold 2,091,512 5,266,990 564,889 674,493
Issued in reinvestment of
distributions to shareholders 537,014 1,334,128 17,252 14,650
Redeemed (2,015,039) (4,986,154) (130,231) (141,301)
------------- ------------- ------------- -------------
Net increase in shares
outstanding 613,487 1,614,964 451,910 547,842
Outstanding at beginning of period 14,906,900 13,291,936 1,196,719 648,877
------------- ------------- ------------- -------------
Outstanding at end of period 15,520,387 14,906,900 1,648,629 1,196,719
============= ============= ============= =============
<CAPTION>
Opportunity Value Fund International Fund
6 Months Year 6 Months Year
Ended Ended Ended Ended
9/30/97 3/31/97 9/30/97 3/31/97
<S> <C> <C> <C> <C>
From operations:
Net investment income (loss) $ 564,934 $ 984,370 $ 110,929 $ (27,104)
Net realized gain on investments 9,105,958 9,839,496 329,716 690,706
New realized loss on foreign
currency transactions -- -- (237,807) (403,339)
Net change in unrealized
appreciation of investments 22,864,742 1,723,084 1,970,834 289,521
Net change in unrealized
depreciation on translation
of assets and liabilities in
foreign currencies -- -- 1,230 (31,683)
------------- ------------- ------------- -------------
Net increase in net assets
resulting from operations 32,535,634 12,544,950 2,174,902 518,101
------------- ------------- ------------- -------------
From distributions to shareholders:
Net investment income (558,273) (780,766) -- --
Net realized capital gains (4,609,111) (9,624,857) -- (41,790)
------------- ------------- ------------- -------------
Decrease in net assets from
distributions to shareholders (5,167,384) (10,405,623) -- (41,790)
------------- ------------- ------------- -------------
From Fund share transactions:
Proceeds from shares sold 39,056,211 74,520,949 5,104,479 12,548,017
Net asset value of shares issued
in reinvestment of distributions 5,087,333 10,317,863 -- 38,087
Payments for shares redeemed (38,004,200) (75,515,812) (2,868,108) (3,551,439)
------------- ------------- ------------- -------------
Net increase in net assets from
Fund share transactions 6,139,344 9,323,000 2,236,371 9,034,665
------------- ------------- ------------- -------------
Total increase in net assets 33,507,594 11,472,327 4,411,273 9,510,976
Net assets:
Beginning of period 114,450,857 102,978,530 24,816,072 15,305,096
------------- ------------- ------------- -------------
End of period $ 147,958,451 $ 114,450,857 $ 29,227,345 $ 24,816,072
============= ============= ============= =============
Undistributed net investment
income (Note 1) $ 386,647 $ 379,986 $ 63,823 --
============= ============= ============= =============
Number of Fund shares:
Sold 1,546,479 3,262,371 292,530 780,856
Issued in reinvestment of
distributions to shareholders 213,484 454,117 -- 2,370
Redeemed (1,518,956) (3,315,616) (164,319) (221,365)
------------- ------------- ------------- -------------
Net increase in shares
outstanding 241,007 400,872 128,211 561,861
Outstanding at beginning of period 5,026,263 4,625,391 1,529,221 967,360
------------- ------------- ------------- -------------
Outstanding at end of period 5,267,270 5,026,263 1,657,432 1,529,221
============= ============= ============= =============
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
20
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
September 30, 1997 (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. The Trust consists of four series,
the Gradison Established Value Fund ("Established Fund"), the Gradison Growth
& Income Fund ("Growth & Income Fund"), the Gradison Opportunity Value Fund
("Opportunity Fund") and the Gradison International Fund ("International Fund"),
(collectively, the "Funds"); each of which, in effect, represents a separate
diversified fund with its own investment policies.
The public offering of shares of the Funds commenced as follows:
- --------------------------------------------------------------------------------
DATE OF
PUBLIC OFFERING
Established Value Fund 8/16/83
Growth & Income Fund 2/28/95
Opportunity Value Fund 8/16/83
International Fund 5/31/95
- --------------------------------------------------------------------------------
The investment objective of the Established Fund and the Opportunity Fund is
long-term capital growth by investing primarily in common stocks. The investment
objective of the Growth & Income Fund is long-term growth of capital, current
income, and growth of income consistent with reasonable investment risk. The
investment objective of the International Fund is growth of capital.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their 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 using procedures approved by the
Board of Trustees. Short-term securities with remaining maturities of sixty days
or less are valued at amortized cost, which approximates value.
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 Funds' custodian. At the time the Funds enter 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 Funds 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
securities and the face amount of the repurchase agreement and accrued interest.
To minimize the possibility of loss, the Funds enter into repurchase agreements
only with selected domestic banks and securities dealers which the Funds'
investment adviser believes present minimal credit risk. There were no
repurchase agreements held in the Funds' Portfolio of Investments at September
30, 1997.
FUNDS SHARE VALUATION AND
DISTRIBUTIONS TO SHAREHOLDERS
The net asset value per share of each Fund is computed by dividing the net asset
value of each Fund (total assets less total
21
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS Continued
- ------------------------------------------------------------------------------
September 30, 1997 (Unaudited)
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.
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.
EXPENSE OFFSET ARRANGEMENT
Each Fund, other than the International Fund, has an arrangement with its
custodian bank whereby the custodian's fees are reduced by credits earned on
each Fund's cash on deposit with the bank. This deposit arrangement is an
alternative to overnight investments. The credits are shown as a reduction of
expenses on the Statement of Operations.
TAXES
It is the Funds' 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 Funds so qualify, and distribute at least 90% of their
taxable net income, the Funds 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 Funds' intention to declare as dividends in
each calendar year, at least 98% of each Fund's net investment income (earned
during the calendar year) and 98% of each Fund's 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 for each Fund is approximately equal to the cost as
shown on each Fund's Statement of Assets and Liabilities. For both financial
reporting and tax purposes, gross unrealized appreciation and gross unrealized
depreciation of securities of the Funds at September 30, 1997 was:
<TABLE>
<CAPTION>
Gross Unrealized Gross Unrealized
Appreciation Depreciation
of Securities of Securities
<S> <C> <C>
Established Value Fund $195,149,992 $ 762,402
Growth & Income Fund 9,015,161 64,614
Opportunity Value Fund 55,389,864 390,634
International Fund 4,188,942 1,367,562
</TABLE>
EXPENSES
Common expenses incurred by the Trust are allocated among the Funds based on the
ratio of the net assets or number of accounts, as appropriate. In all other
respects, expenses are charged to the respective Fund as incurred on a specific
identification basis.
ORGANIZATION EXPENSES
Expenses of organization of the Growth & Income Fund and the International Fund
have been capitalized and are being amortized on a straight-line basis over 60
months commencing upon the public offering of the respective Fund's shares.
INTERNATIONAL FUND
FOREIGN CURRENCY TRANSLATION
The accounting records of the International 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 International 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.
22
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS Continued
- ------------------------------------------------------------------------------
September 30, 1997 (Unaudited)
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 International 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.
INTERNATIONAL FUND
FORWARD FOREIGN CURRENCY CONTRACTS
During the period ended September 30, 1997, the International Fund entered into
forward foreign currency contracts under which it was obligated to exchange
currencies at specified future dates. The International Fund's currency
transactions were 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, 1997:
PORTFOLIO HEDGES:
<TABLE>
<CAPTION>
U.S. Unrealized
Buy/ Foreign Dollar Settlement Appreciation
Sell Amount Currency Proceeds Date (Depreciation)
<S> <C> <C> <C> <C> <C>
Buy 260,000,000 Japanese Yen $2,170,284 10/16/97 $ (16,506)
Buy 1,200,000 British Pound 1,926,000 10/16/97 14,021
---------
$ (2,485)
=========
</TABLE>
<TABLE>
Transaction Hedges:
U.S. Unrealized
Buy/ Foreign Dollar Settlement Appreciation
Sell Amount Currency Proceeds Date (Depreciation)
<S> <C> <C> <C> <C> <C>
Buy 421,231 Finnish Marka $80,036 10/01/97 $ (355)
=======
</TABLE>
At September 30, 1997, the Fund had sufficient cash and/or securities to cover
any commitments under these contracts.
INTERNATIONAL FUND
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
International Fund records a realized gain or loss equal to the difference
between the opening and closing value of the contract.
The International Fund had no futures contracts as of September 30, 1997.
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 Funds pay McDonald a fee computed and accrued daily and paid
monthly based upon each Fund's daily net assets, other than
23
<PAGE> 25
NOTES TO FINANCIAL STATEMENTS Continued
- ------------------------------------------------------------------------------
September 30, 1997 (Unaudited)
the International Fund, 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 International Fund pays McDonald a fee computed and accrued daily and paid
monthly based upon its daily net assets at the annual rate of 1.00% of the first
$100 million of its 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 International 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 bears the costs of salaries and related
expenses of executive officers of the Trust who are necessary for the management
and operations of the Funds. 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 Funds.
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 Funds. Effective July 1,
1997, the Funds pay McDonald a monthly fee for transfer agency and
administrative services at an annual rate of $18.50 per shareholder non-zero
balance account and $5.00 per closed shareholder account, as defined, plus
out-of-pocket costs for statement paper, statement and reply envelopes and reply
postage. Prior to July 1, 1997 the Funds, other than the International Fund,
paid 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. Prior to July 1, 1997 the International Fund paid 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 Funds, other than
the International Fund, pay 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. The International 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 Growth & Income Fund and the International Fund
if, and to the extent that, expenses (excluding brokerage commissions, taxes,
interest and extraordinary items) borne by the respective Fund in any fiscal
year exceed 1.50% with respect to the Growth & Income Fund, and 2.00% with
respect to the International Fund, of the average net assets of the respective
Fund. This agreement is in effect until July 31, 1998 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
a Fund for other expenses in order to limit the Fund's expenses to a specified
percentage of average net assets lower than the amount subject to the agreement.
For the period ended September 30, 1997, McDonald waived $32,009 of advisory
fees and distribution expenses of $38,622 with respect to the International
Fund.
In accordance with the terms of a Distribution Plan adopted under Rule 12b-1 of
the Investment Company Act of 1940, the Funds pay McDonald a service fee for
personal services to
24
<PAGE> 26
NOTES TO FINANCIAL STATEMENTS Continued
- ------------------------------------------------------------------------------
September 30, 1997 (Unaudited)
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 Funds'
average daily net assets. The Funds also pay McDonald a fee for its assistance
in selling shares of the Fund including advising shareholders regarding
purchase, sale and retention of Funds 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, 1997, cost of purchases, and proceeds from
the sale of securities, excluding short-term securities, amounted to:
<TABLE>
<CAPTION>
Cost of Proceeds
Purchases from Sales
<S> <C> <C>
Established Value Fund $25,990,566 $44,527,907
Growth & Income Fund 10,231,008 724,453
Opportunity Value Fund 11,673,772 17,927,395
International Fund 14,685,325 14,006,950
</TABLE>
25
<PAGE> 27
This page intentionally left blank.
26
<PAGE> 28
GRADISON FAMILY OF FUNDS
- ------------------------------------------------------------------------------
Increasingly, MUTUAL FUNDS are the preferred vehicle for starting and building
an investment program. And today, GRADISON 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.
INTERNATIONAL FUND
A common stock fund that seeks capital growth by investing in common stocks of
non-United States companies.
MONEY MARKET FUNDS
Gradison 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.
27
