Morgan Grenfell SMALLCap Fund, Incorporated
Semiannual Report--1997
Dear Shareholder:
Thank you for the opportunity to update you on the Fund's performance, the
structure of the portfolio management team and our outlook for smaller
companies in the United States.
In the first half of 1997, a difficult first quarter for smaller company growth
managers was followed by a stronger quarter for managers with this style.
Although the Fund has trailed the index returns this year, the three year
performance remains strong. The returns for these periods are shown below.
<TABLE>
<CAPTION>
Smaller Companies Large Companies
MG SMALLCap ------------------------- ----------------
Fund S&P Russell S&P
Period Net Asset Value Small Cap 600 2000 500
- ---------------------------------- ----------------- --------------- --------- ----------------
<S> <C> <C> <C> <C>
First Quarter - 1997 ...... -11.0% -5.6% -5.2% +2.7%
Second Quarter - 1997 ..... +17.9% +18.1% +16.2% +17.5%
1997 - 1st Half ........... + 4.9% +11.5% +10.2% +20.6%
Three years ended 6/30/97
(Annualized) ............. +24.3% +22.6% +20.1% +28.9%
</TABLE>
The market value of the Fund's shares increased by 4.8% during the first half
of 1997.
PORTFOLIO STRUCTURE
The Fund's economic sector allocations changed as follows during the first half
of 1997:
<TABLE>
<CAPTION>
No. Companies Market Value ($M) % Portfolio
---------------------- ---------------------- ----------------------
Sector 12/31/96 6/30/97 12/31/96 6/30/97 12/31/96 6/30/97 Change
- ---------------------------- ---------- --------- ---------- --------- ---------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSUMER ................... 15 19 $ 18.6 $ 24.1 15 20 +5
TECHNOLOGY ................. 11 16 23.6 18.4 19 15 -4
CREDIT SENSITIVE ........... 11 11 15.5 16.5 12 14 +2
ENERGY ..................... 11 9 18.1 14.3 14 12 -2
SERVICE COMPANIES .......... 11 7 14.8 11.9 12 10 -2
HEALTH CARE ................ 8 8 8.4 6.5 6 6 0
TRANSPORTATION ............. 4 3 4.8 4.9 4 4 0
PROCESS INDUSTRIES ......... 3 3 4.1 4.9 3 4 +1
CAPITAL GOODS .............. 1 1 0.6 0.9 1 1 0
--- --- ------ ------ --- --- ---
TOTAL EQUITIES ............. 75 77 $108.6 $102.6 86% 86% +0
CASH AND EQUIVALENTS ....... 17.7 17.2 14 14 +0
------ ------ --- --- ---
TOTAL FUND ................. $126.3 $119.8 100% 100% --
</TABLE>
1
<PAGE>
TEN LARGEST HOLDINGS
(June 30, 1997)
<TABLE>
<CAPTION>
% Stock
Company Fund Symbol Business Focus
- ------------------------------ ---- ------ ------------------------------------
<S> <C> <C> <C>
PMC SIERRA INC. .............. 3.4 PMCS SEMICONDUCTORS, COMMUNICATIONS
DEVON ENERGY CORP. ........... 3.0 DVN OIL & GAS EXPLORATION AND PRODUCTION
LENNAR CORP. ................. 3.0 LEN HOMEBUILDER
DIME BANCORP INC. ............ 2.8 DME NEW YORK SAVINGS BANK
TRIANGLE PACIFIC CORP ........ 2.4 TRIP HARDWOOD FLOORING
FURNITURE BRANDS INTL. ....... 2.3 FBN RESIDENTIAL FURNITURE MANUFACTURER
SIEBEL SYSTEMS INC. .......... 2.3 SEBL SALESFORCE AUTOMATION SOFTWARE
AMERICAN RADIO SYSTEMS ....... 2.3 AFM RADIO BROADCASTING COMPANY
RENTAL SERVICE CORP. ......... 2.2 RSV EQUIPMENT RENTAL COMPANY
ENVOY CORP. .................. 2.2 ENVY ELECTRONIC PROCESSING SERVICES
-----
25.9
</TABLE>
The Fund focuses primarily on companies with market capitalizations between
$100 million and $2.2 billion at the time of initial investment. The weighted
average market capitalization of companies held in the Fund was $933 million on
6/30/97.
ITEMS OF SHAREHOLDER INTEREST
On April 25, 1997, the Annual Meeting of Shareholders (the "Meeting") was held
at the offices of Morgan Grenfell Capital Management (MGCM). At the meeting,
two proposals were voted on which had been outlined in the proxy statement.
Under Proposal I, Mr. Michael Bullock and Mr. James E. Minnick were elected as
directors of the Fund to serve until the 2000 meeting of shareholders with
7,382,587 shares (81.23% of outstanding shares) voting in favor and 234,077
shares (2.58% of outstanding shares) withheld. Under Proposal II, KPMG Peat
Marwick, LLP, was ratified as independent auditors of the Fund for the fiscal
year ending December 31, 1997, by a vote of 7,540,883 shares (82.97% of
outstanding shares) in favor, 58,867 shares (0.65% of outstanding shares)
against, and 62,274 shares (0.69% of outstanding shares) abstained. At the
subsequent directors meeting, James E. Minnick was elected President of the
Fund.
Robert Kern, a member of MGCM's small-cap team resigned in April prior to the
expiration of his term as Director and President of the Fund. The Board would
like to thank Mr. Kern for his contributions to the Fund and wishes him the
best in the future.
John Callaghan, formerly of Odyssey Partners LP, joined MGCM's small-cap team
in June. John joins Audrey Jones and David Baratta as co-managers of the Fund.
John's expertise includes the technology and health care sectors which he will
manage for the Fund.
Also joining the Fund are Joan Binstock, Chief Operating Officer of MGCM and
James Capezzuto, MGCM's Legal Officer. Joan and Jim will serve the Fund as
Treasurer and Secretary, respectively.
2
<PAGE>
CAPITAL GAINS DISTRIBUTIONS
During 1996, the Fund's capital gains distribution totaled $1.60 per share. A
special 1996 spillover dividend of $0.07 per share was paid to shareholders of
record on June 26, 1997. Although additional distributions this year, if any,
will depend upon securities transactions during the second half of the year,
realized gains during the first half of 1997 totaled $5,906,006 or
approximately $0.65 per share. In addition, net unrealized gains in the Fund's
portfolio were an additional $23,650,441 or approximately $2.60 per share, as
of 6/30/97.
OUTLOOK
The environment continues to be favorable for equity investments currently,
particularly for small cap due to their valuation relative to large cap. The
level of economic growth has slowed from a 5.9% rate in the first quarter to a
more sustainable rate. The Federal Reserve's recent decision to leave interest
rates unchanged indicates that fears of inflation have diminished. The demand
for equity investments remains strong with increased levels of cash flows into
stock mutual funds.
Small companies should register superior earnings growth relative to large
companies. Growth prospects for small companies are more dependent on
company-specific developments such as new products, and are less dependent on
macro-economic trends.
Our investment strategy is to continue to search for smaller companies with
"above average growth" selling at reasonable valuations. Our team of
specialists remains focused on individual stock selection within their areas of
expertise with the goal of providing "value added" performance relative to the
universe of U.S. smaller companies. Earning disappointments continue to present
the primary investment risk.
Our goal is to provide superior investment results for the Fund and thus strong
returns for our shareholders.
Sincerely,
/s/ James E. Minnick
- -----------------------------
James E. Minnick
President
Morgan Grenfell SMALLCap Fund
3
<PAGE>
SCHEDULE OF INVESTMENTS
June 30, 1997
<TABLE>
<CAPTION>
CONSUMER COMPANIES: 20.2% BUSINESS FOCUS SHARES MARKET VALUE
- ----------------------------------- ------------------------------------------ -------- -------------
<S> <C> <C> <C>
Furniture Brands International Inc. Residential Furniture Manufacturer 138,800 $ 2,689,250
Rental Service Corp. Equipment Rental Company 98,300 2,580,375
Westpoint Stevens Inc. Textile Products 64,700 2,531,388
Damark International Inc. General Merchandise 120,050 1,860,775
Mail Boxes Etc. Postal Service Centers 66,395 1,850,761
Regal Cinemas Inc. Theater Operator 54,400 1,795,200
Mohawk Industries Inc. Carpet Manufacturer 70,700 1,608,425
Petsmart Inc. Pet Supplies Retailer 132,500 1,523,750
Garden Ridge Corp. Specialty Home Accessories 112,790 1,409,875
Equity Corp. Inc. Funeral Home Operator 53,200 1,286,802
Coldwater Creek Inc. Direct Mail Apparel Retailer 38,100 990,600
Robert Mondavi Corp. Premium Quality Winery 18,100 855,225
Service Merchandise Inc. Consumer Catalog Stores 213,700 641,100
Filene's Basement Corp. Clothing Retailer 85,400 565,775
*Dreyer's Grand Ice Cream Ice Cream Manufacturer & Dist. 13,900 549,050
Genesco Inc. Branded Apparel 26,985 382,863
Rock Bottom Restaurants Inc. Casual Dining Restaurants 39,700 377,150
Factory Card Outlet Corp. Party Supply Superstores 57,500 334,248
Rio Hotel & Casino Inc. Hotel and Casino Owner/Operator 20,400 307,285
------------
$ 24,139,896
------------
TECHNOLOGY: 15.4%
- -----------------------------------
PMC-Sierra Inc. Semiconductors, Communications 150,585 $ 3,952,856
Siebel Systems Inc. Salesforce Automation Software 82,600 2,663,850
Micrel Inc. Analog Semiconductors 45,900 2,340,900
Vitesse Semiconductor Co. Integrated Circuit Manufacturer 51,400 1,680,163
Analog Devices Inc. Integrated Circuit Manufacturer 57,033 1,514,968
Novellus Systems Inc. Semiconductor Equipment Manufacturer 13,400 1,159,100
Komag Inc. Supplier of Disk Drive Components 68,500 1,121,688
Microage Inc. Microcomputer Systems Distributor 49,300 905,888
Electroglas Inc. Wafer Processing Equipment Manufacturing 35,100 884,099
Speedfam International Inc. Semiconductor Manufacturer 17,045 611,489
Cognex Corp. Machine Vision Systems Manufacturing 22,300 590,950
Segue Software Inc. Automated Software Testing Tools Provider 27,100 369,237
Premisys Communications Integrated Access Product Design and Mfg. 23,900 376,425
Compuserve Inc. Del. Online Service Provider 11,300 121,475
Aetrium Inc. Integrated Circuit Design and Mfg. 5,400 99,900
Centura Software Network Integration Service Provider 5,989 13,475
------------
$ 18,406,462
------------
CREDIT SENSITIVE: 13.8%
- -----------------------------------
*Lennar Corp. Residential & Commercial Builders 109,000 $ 3,481,242
*Dime Bancorp Inc. New New York Savings Bank 184,900 3,235,750
Triangle Pacific Corp. Del. Hardwood Flooring 86,700 2,774,400
*Bank United Corp. Texas Savings Bank 42,800 1,626,400
*Long Island Bancorp Inc. New York Savings Bank 29,000 1,053,077
*Paine Webber Group Inc. Financial Broker 29,250 1,023,750
Glendale Fed. Bank Fed. Svgs. California Savings and Loan 38,450 1,004,506
*Income Producing Security
4
<PAGE>
CREDIT SENSITIVE: continued BUSINESS FOCUS SHARES MARKET VALUE
- ----------------------------------- ------------------------------------------ -------- ------------
Northeast Utilities New England Power Generator 86,400 $ 826,200
First Alliance Corp. Nontraditional Mortgage Finance 27,100 792,443
Bank Plus Corp. California Savings Bank 65,000 706,875
*D.R. Horton Inc. Homebuilder 1,100 11,412
------------
$ 16,536,055
------------
ENERGY: 12.0%
- --------------------------------
*Devon Energy Corp. Oil and Gas Producer 95,700 $ 3,516,975
BJ Services Co. Stimulation and Pumping Services 39,500 2,118,188
*Lomak Pete Inc. Oil and Gas Exploration & Production 117,400 2,091,000
Marine Drilling Cos. Inc. Offshore Drilling Contractor 83,300 1,634,763
Seagull Energy Corp. Oil and Gas Producer 73,900 1,293,250
*Camco International Inc. Oil Field Services and Equipment 21,100 1,155,225
Benton Oil & Gas Co. Oil and Gas Producer 60,300 904,500
United Meridian Corp. Oil and Gas Producer 28,100 843,000
*Tidewater Inc. Marine Support Vessels 17,900 787,600
------------
$ 14,344,500
------------
SERVICE: 10.0%
- --------------------------------
American Radio Systems Corp. Radio Broadcasting Services 66,500 $ 2,651,688
Envoy Corp. New Electronic Interchange Data Service 77,200 2,566,900
Checkpoint Systems Inc. Electronic Security Systems 126,100 2,025,544
Allwaste Inc. Industrial and Environmental Services 208,700 1,982,650
NUCO2 Inc. Bulk CO2 Services 98,500 1,699,125
Paging Network Inc. Paging and Wireless Messaging Services 90,800 797,315
Vanguard Cellular Systems Inc. Cellular Telephone Services 15,800 215,275
------------
$ 11,938,497
------------
HEALTH CARE: 5.5%
- --------------------------------
Henry Schein Inc. Health Care Products Distributor 51,000 $ 1,593,750
Covance Inc. Contract Research Operator 76,600 1,479,376
American Medserve Corp. Institutional Pharmacy Services 81,250 1,056,250
HPR Inc. Health Care Information Services 50,800 939,800
Ivax Corp. Pharmeceutical Developer 74,500 833,506
Gensia Sicor Inc. Pharmeceutical Developer 103,189 457,953
Cohr Inc. Medical Equipment Servicing Contractor 6,700 125,625
Prime Medical Services Inc. New Lithotripsy Provider for Kidney Stones 5,300 57,309
------------
$ 6,543,568
------------
TRANSPORT: 4.1%
- --------------------------------
*USFreightways Corp. Regional Motor Carrier 96,900 $ 2,507,288
*ASA Holdings Inc. Air Carrier 45,300 1,296,713
*Royal Caribbean Cruises Cruise Line 32,000 1,118,016
------------
$ 4,922,016
------------
*Income Producing Security
5
<PAGE>
PROCESS INDUSTRIES: 4.1% BUSINESS FOCUS SHARES MARKET VALUE
- ---------------------------------- --------------------------------- ------ --------------
*Glatfelter P.H. Co. Paper Manufacturer 93,600 $ 1,872,000
*Bowater Inc. Newsprint and Paper Producer 38,800 1,794,500
*Rayonier Inc. Forest Products & Specialty Pulp 29,000 1,219,827
------------
$ 4,886,327
------------
CAPITAL GOODS: 0.7%
- ----------------------------------
Miller Industries Inc. Tenn. Towing and Recovery Equipment 54,867 $ 877,872
------------
$ 877,872
------------
TOTAL COMMON STOCKS (cost $79,710,764) $102,595,193
============
COMMERCIAL PAPER: 14.3%
- ----------------------------------
Associates Corp. 6.161% due 7/1/97 $ 17,160,000
------------
TOTAL: 100% (cost $79,710,764 + $17,160,000 = $96,870,764) $119,755,193
============
*Income Producing Security
</TABLE>
6
<PAGE>
Statement of Assets and Liabilities--June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities at market value,
cost $96,870,764 (including cash equivalents of $17,160,000) ...... $119,755,193
Cash ............................................................... 4,582
Receivables
Investment Securities sold ........................................ 18,280,366
Accrued income ..................................................... 48,871
------------
$138,089,012
------------
LIABILITIES:
Payable for investment securities purchased ........................ $ 21,318,107
Capital Gain payable ............................................... 636,202
Accrued expenses ................................................... 201,717
------------
Total liabilities ................................................... $ 22,156,026
------------
Net Assets applicable to 9,088,598 shares of beneficial interest
($0.01 par value per share; authorized 150,000,000).................. $115,932,986
------------
Net Asset Value per share as at the close of business June 30, 1997
($115,932,986 divided by 9,088,598) ................................. $ 12.76
============
</TABLE>
See accompanying Notes to Financial Statements
7
<PAGE>
Statement of Operations for the Six Months ending June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
Investment income:
Interest ................................................... $ 278,958
Cash dividends ............................................. 173,319
------------
$ 452,277
Expenses:
Investment advisory fees (Note 2) ........................... $ 532,480
Custodian and transfer agent fees ........................... 50,420
Professional fees .......................................... 40,576
Shareholder communications ................................. 43,896
Directors' fees ............................................. 25,787
Insurance ................................................... 12,152
Regulatory fees ............................................. 15,621
Miscellaneous ............................................. 3,975
------------
$ 724,911
-----------
Net investment expense ....................................... $ (272,634)
Realized and unrealized gain/(loss) on investments:
Proceeds from sales ....................................... $12,207,840
Less-cost of securities sold .............................. 6,301,834
------------
Net realized gain on investments ........................... $ 5,906,006
-----------
Unrealized appreciation:
Beginning of period ....................................... $23,860,143
As at June 30, 1997 ....................................... 23,650,441
------------
Net increase in unrealized appreciation on investments ...... $ (209,702)
-----------
Net realized and unrealized gain on investments ............ $ 5,696,304
-----------
Net increase in net assets resulting from operations ......... $ 5,423,670
===========
</TABLE>
Statement of Changes in Net Assets for the Six Months ending June 30, 1997
(Unaudited)
Increase (decrease) in net assets resulting from operations:
Net investment expense .................................... $ (272,634)
Net realized gain on investments ........................... 5,906,006
Net change in unrealized appreciation ..................... (209,702)
------------
Net increase in net assets resulting from operations ...... $ 5,423,670
Capital Gain Distribution ................................. $ (636,202)
Share Transactions ....................................... 9,546
------------
Net increase in assets .................................... $ 4,797,014
Net assets:
Beginning of period ....................................... $111,135,972
------------
End of period ............................................. $115,932,986
============
See accompanying Notes to Financial Statements
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies
Morgan Grenfell SMALLCap Fund, Inc. ("the Fund") was organized as a Maryland
corporation on January 16, 1987 and is registered under the Investment Company
Act of 1940, as amended, as a closed-end, diversified management investment
company. The Fund commenced operations on May 6, 1987.
The following is a summary of the significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
Portfolio valuation: Securities listed on an exchange and over-the-counter
securities quoted on the NASDAQ system are valued on the basis of the last sale
price on the last business day of the year. Over-the-counter securities not
quoted on the NASDAQ system are valued on the basis of the average bid and
asked prices on that date. Commercial paper is carried at cost, which
approximates market.
Securities transactions and investment income: Securities transactions are
recorded on a trade date basis. Dividend income is recorded on the ex-dividend
date and interest income is recorded on the accrual basis. Realized gains and
losses from securities transactions are recorded on the basis of identified
cost.
Federal income taxes: It is the policy of the Fund to qualify as a regulated
investment company by complying with provisions available to certain investment
companies, as defined in applicable sections of the Internal Revenue Code, and
to make distributions of income and securities profits (after application of
net capital loss carryovers) sufficient to relieve it from all, or
substantially all, Federal income taxes.
2. Investment Advisory Fee and Other Transactions with Affiliates
The Fund pays advisory fees for investment and advisory services to Morgan
Grenfell Capital Management, Inc. ("MGCM"), a wholly-owned subsidiary of
Deutsche Morgan Grenfell. Under the terms of the investment advisory agreement,
the management fee is calculated at an annual rate of one percent of the Fund's
average daily net assets. Certain individuals who are officers or directors, or
both, of the Fund are also officers or directors, or both, of MGCM.
3. Investment Transactions
The aggregate cost of securities purchased and the aggregate proceeds of
securities sold during the six-month period ended June 30, 1997, excluding
short-term investments, were $40,430,913 and $52,103,128, respectively.
4. Remuneration to Directors and Officers
Payments to unaffiliated Directors on an accrual basis for the period January
1, 1997 to June 30, 1997 amounted to $25,787 representing Directors' fees and
costs attending Board Meetings.
5. Capital Share Transactions
The Fund has issued the following shares under the Dividend Reinvestment plan:
1990 1992 1994 1995 1996 1997
229,642 441,639 103,447 256,925 426,804 762
9
<PAGE>
SUPPLEMENTARY INFORMATION
Financial Highlights
(Unaudited)
The information contained below has been derived from information provided in
the financial statement and market price data for the Fund's shares for the
six-month period ended June 30, 1997 and the fiscal year ended December 31,
1996.
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
6/30/97 12/31/96
----------- --------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .......................... $ 12.23 $ 12.31
Net investment expense ........................................ (0.03) (0.06)
Net gain/(loss) on securities (realized and unrealized) ....... 0.63 2.18
----------- -------
Total from investment operations .............................. $ 0.60 $ 2.12
Less dividends and distributions:
Capital distribution .......................................... (0.07) (1) (1.60)
----------- -------
Dilution due to rights offering ............................... (0.60)
-------
Net asset value, end of period ................................ $ 12.76 $ 12.23
Market value per share, end of period ......................... $ 10.94 $ 10.50
TOTAL INVESTMENT RETURN:
Based on net asset value per share ............................ +4.9 % +20.8 %
Based on market value per share ............................... +4.8 % +17.5 %
RATIOS TO AVERAGE NET ASSETS:
Expenses ...................................................... 1.35%* 1.76%
Net investment income (expense) ............................... (0.51%)* (0.57%)
SUPPLEMENTAL DATA: (000 omitted)
Net assets at end of period ................................... $ 115,933 $111,135
Average net assets during period .............................. $ 107,509 $ 99,372
Portfolio turnover ............................................ 93%* 162%
Average commission per share .................................. $ 0.08 $ 0.10
Total debt outstanding at end of period ....................... 0 0
Asset coverage per $1,000 of debt ............................. N/A N/A
</TABLE>
* Annualized.
(1) Spillover dividend from 1996 Capital Gains
10
<PAGE>
[BACK COVER]
MORGAN GRENFELL
SMALLCap FUND, INC. DIRECTORS AND OFFICERS
- -------------------------- --------------------------
Michael Bullock Audrey M.T. Jones
CHAIRMAN AND DIRECTOR EXECUTIVE VICE PRESIDENT
Chief Investment Officer Executive Vice President
Morgan Grenfell Asset Morgan Grenfell Capital
Management, Ltd. Management, Inc.
James E. Minnick Joan A. Binstock
PRESIDENT AND DIRECTOR TREASURER
President Chief Operating Officer
Morgan Grenfell Capital Morgan Grenfell Capital
Management, Inc. Management, Inc.
Robert E. Greeley James A. Capezzuto
DIRECTOR SECRETARY
President, Legal Officer
Page Mill Asset Morgan Grenfell Capital
Management Ltd. Management, Inc.
Joseph J. Incandela INDEPENDENT AUDITORS
DIRECTOR --------------------
Partner/Managing Director KPMG Peat Marwick, LLP
Thomas H. Lee Co. 345 Park Avenue
New York, NY 10154
Richard D. Wood TRANSFER AGENT & CUSTODIAN
DIRECTOR --------------------------
Consultant The Bank of New York
101 Barclay Street
New York, NY 10286
David A. Baratta INVESTMENT ADVISOR
EXECUTIVE VICE PRESIDENT ------------------
Morgan Grenfell Capital Morgan Grenfell Capital
Management, Inc. Management, Inc.
885 Third Avenue
32nd Floor
New York, NY 10022
Shares of the Morgan Grenfell SMALLCap Fund are traded on the New York Stock
Exchange under the symbol "MGC."
In accordance with Section 23(c) of the Investment Company Act of 1940, the
Fund hereby serves notice that it may from time to time repurchase shares of
the Fund in the open market at the option of the Board of Directors.
SHAREHOLDER & INFORMATION SERVICES
Information regarding the Fund's net asset value is available by calling
1-800-888-8060. Additional shareholder information can be obtained by calling
1-800-432-8224 through the Bank of New York's Shareholder Relations Department.
The Fund's net asset value is reported each week in The Wall Street Journal and
Barron's. Selected reports can be obtained from the Fund's fax on demand
service by calling 212-826-3747 from the handset of a fax machine.
[FRONT COVER]
[Morgan Grenfell logo]
Morgan
Grenfell
SMALLCap
Fund,
Inc.
- --------------------------------------------------------------------------------
Semiannual Report
June 30, 1997
- --------------------------------------------------------------------------------
