<PAGE>
Universal Capital Growth Fund
- --------------------------------------------------------------------------------
One Oakbrook Terrace
Suite 708
Oakbrook Terrace, Illinois 60181
708-932-3000
November 26, 1996
Annual Report To Shareholders
Dear Shareholder:
As of the date of this letter, the fund is up 12.4% since January 1, 1996. For
the fiscal year ended September 30, 1996 the fund gained 7.4%.
<TABLE>
<CAPTION>
Our fund's record of investment performance is summarized in the table below:
-------------------------------------------------------------------
Table II
Average Annual Total Returns
Through September 30, 1996
Past Past Past Life of
1 Year 3 Years 5 Years Fund(1)
------ ------- ------- -------
<S> <C> <C> <C> <C>
Without Sales Charge 7.4% 16.7% 13.2% 13.7%
With 1.5% Sales Charge 5.8% 16.1% 12.9% 13.4%
/1/since inception on 1/22/91
-------------------------------------------------------------------
</TABLE>
We feel that fundamentals remain strong in the U.S. Fiscal policy seems to have
achieved a "soft landing" -a moderation of economic growth without a slide into
recession. Economic data for the second quarter 1996 showed continued growth in
output, employment and income. A majority of early corporate earnings reports
reflected the positive effect of a strong economy and earnings estimates rose to
higher levels. Inflation has remained low and overall the economy seems quite
healthy.
As the general stock market rises to dizzying heights, we have become concerned
with the volatility in the technology sector, and small cap stocks. We have
taken a more conservative stance and have narrowed our focus to fewer small cap
issues and have taken a larger cash position (currently about 25%).
While opinions differ over the likely direction of financial markets and the
economy over the next year we feel that the long term outlook for the U.S.
economy and the equity markets remains positive. However, for the immediate
future it may be time for a reality check. With many respected analysts
shouting caution, we are looking for a long overdue correction to reduce our
cash position with
<PAGE>
equity purchases at more attractive prices.
Your fund's management thanks you for the vote of confidence you have shown thru
your investment and continues its dedication to performance. We look forward to
serving your investment needs for years to come.
Sincerely,
/s/ James A. Dreher
James A. Dreher
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Trustees and Shareholders
Universal Capital Growth Fund
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Universal Capital Growth Fund as of September
30, 1996, the related statements of operations for the year then ended and
changes in net assets for each of the two years in the period than ended, and
the financial highlights for each of the fiscal years since 1992. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
September 30, 1996, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Universal Capital Growth Fund at September 30, 1996, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the fiscal years since 1992, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
Chicago, Illinois
October 31, 1996
<PAGE>
UNIVERSAL CAPITAL GROWTH FUND
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Number
of Shares Value
--------- -----------
<S> <C> <C>
COMMON STOCKS - 73.6%
AUTOMOTIVE/MOTORCYCLES AND PARTS - 1.6%
Genuine Parts Co. 4,000 $ 175,000
BANKS - 4.4%
Mellon Bank Corp. 1,000 59,250
Nationsbank Corp. 2,000 173,750
Wells Fargo & Company 1,000 260,000
-----------
493,000
BIOTECHNOLOGY - 3.3%
Amgen, Inc. (a) 4,500 284,062
Genzyme Corp. (a) 3,400 86,700
-----------
370,762
COMPUTERS - 0.7%
Hewlett Packard Co. 1,600 78,000
COMPUTER PERIPHERAL EQUIPMENT - 3.7%
Cisco Systems Inc. (a) 4,000 248,250
US Robotics Corp. 1,000 64,625
Xicor (a) 8,000 93,000
-----------
405,875
COMPUTER SOFTWARE - 6.5%
C Cube Microsystems, Inc. (a) 4,600 204,125
Cognex Corp. (a) 16,000 260,000
Microsoft Corp. (a) 2,000 263,750
-----------
727,875
CONSUMER PRODUCTS - 3.3%
Kimberly Clark Corp. 2,000 176,250
Procter & Gamble Co. 2,000 195,000
-----------
371,250
DIVERSIFIED MANUFACTURING - 1.1%
Thermo Electron Corp. 3,000 121,500
ELECTRICAL EQUIPMENT - 0.8%
General Electric Co. 1,000 91,000
ELECTRONIC PRODUCTS AND COMPONENTS - 6.5%
Altron, Inc. (a) 4,500 60,750
Analog Devices (a) 5,000 135,625
Atmel Corp. (a) 5,400 166,725
Intel Corp. 3,000 286,313
ITI Technologies, Inc. (a) 2,000 70,500
-----------
719,913
ENERGY - 2.7%
Input/Output, Inc. (a) 3,000 89,250
Mobil Corp. 1,000 115,750
Texaco, Inc. 1,000 92,000
-----------
297,000
FIBER OPTICS - 1.1%
Amphenol Corp. (a) 5,500 125,813
FINANCE AND FINANCIAL SERVICES - 5.4%
MBIA Inc. 1,500 128,625
Merrill Lynch 3,000 196,875
Paine Webber Group, Inc. 5,000 105,000
Charles Schwab Corp. 7,200 166,500
-----------
597,000
FOOD - 1.5%
Heinz H. J. Company 5,000 168,750
HEALTH/PHARMACEUTICALS - 12.0%
Abbott Laboratories 3,000 147,750
American Home Products Corp. 3,000 191,250
Johnson & Johnson 5,000 256,250
Lilly Eli & Co. 3,000 193,500
Merck & Co., Inc. 3,600 253,350
Schering Plough Corp. 4,800 295,200
-----------
1,337,300
HEALTH/SUPPLIES - 5.5%
Biomet, Inc. 8,000 131,000
Boston Scientific Corp. (a) 2,000 115,000
Express Scripts, Inc. (a) 3,500 126,875
McKesson Corp. 2,000 94,750
Medtronic, Inc. 2,200 141,075
-----------
608,700
INSTRUMENTS/SCIENTIFIC - 2.0%
Bio-Rad Laboratories CL A (a) 5,000 143,750
Millipore Corp. 2,000 79,000
-----------
222,750
INSURANCE - 0.9%
Horace Mann Educ 3,000 98,625
LASER SYSTEMS - 1.0%
Excel Technology, Inc. (a) 13,000 112,125
MISCELLANEOUS - 3.9%
Boeing Co. 2,000 189,000
Gillette Company 2,000 144,250
Oregon Metallurgic (a) 3,000 97,500
-----------
430,750
RAILROADS - 1.5%
Burlington Northern Inc. 2,800 168,750
RETAIL - 1.7%
Walgreen Co. 5,000 185,000
TELECOMMUNICATIONS - 2.5%
Tellabs, Inc. (a) 4,000 282,500
-----------
TOTAL COMMON STOCKS
(Cost: $7,378,115) $ 8,189,238
</TABLE>
<PAGE>
UNIVERSAL CAPITAL GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
Value
-----------
<S> <C>
REPURCHASE AGREEMENT - 24.3%
UMB Bank, n.a., dated 9/30/96, due 10/3/96,
4.95%, collateralized by U.S. Treasury Bills
(Cost: $2,700,000) 2,700,000
-----------
TOTAL INVESTMENTS - 97.9%
(Cost: $10,078,115) 10,889,238
CASH AND OTHER ASSETS, LESS LIABILITIES - 2.1% 234,360
-----------
NET ASSETS - 100% $11,123,598
===========
</TABLE>
NOTE TO PORTFOLIO OF INVESTMENTS
(a) Non-income producing security
<PAGE>
UNIVERSAL CAPITAL GROWTH FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1996
<S> <C>
ASSETS
Common stocks, at value (cost $7,378,115).............................. $ 8,189,238
Repurchase agreements, at value (cost $2,700,000)...................... 2,700,000
Cash................................................................... 328,773
Receivable for fund shares sold........................................ 3,624
Accrued dividends receivable........................................... 8,353
Prepaid expenses....................................................... 2,767
-----------
TOTAL ASSETS......................................................... 11,232,755
LIABILITIES AND NET ASSETS
Payable to Advisor..................................................... 6,329
Payable to Distributor................................................. 5,396
Payable for fund shares redeemed....................................... 71,086
Accounts payable and accrued liabilities............................... 26,346
-----------
TOTAL LIABILITIES.................................................... 109,157
-----------
NET ASSETS APPLICABLE TO 742,118 SHARES OUTSTANDING, NO PAR VALUE...... $11,123,598
===========
ANALYSIS OF NET ASSETS
Paid in capital........................................................ $ 9,179,974
Accumulated net realized gain on investments........................... 1,132,501
Net unrealized appreciation of investments............................. 811,123
-----------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING............................ $11,123,598
===========
NET ASSET VALUE AND REDEMPTION PRICE
($11,123,598 DIVIDED BY 742,118 SHARES OUTSTANDING).................. $ 14.99
===========
MAXIMUM OFFERING PRICE PER SHARE
(net asset value, plus 1.52% of net asset
value or 1.50% of offering price).................................... $ 15.22
===========
</TABLE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended Year ended
Sept. 30, 1996 Sept. 30, 1995
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment loss.................................. $ (68,812) $ (45,564)
Net realized gain on investments..................... 1,302,945 1,218,344
Change in net unrealized appreciation................ (499,880) 829,469
----------- -----------
Net increase in net assets from operations............. 734,253 2,002,249
DISTRIBUTIONS TO SHAREHOLDERS:
Net realized gain on investment transactions......... (1,269,948) (250,706)
NET INCREASE (DECREASE) FROM
CAPITAL SHARE TRANSACTIONS............................ 3,510,647 1,428,388
----------- -----------
TOTAL INCREASE IN NET ASSETS........................... 2,974,952 3,179,931
NET ASSETS:
Beginning of year...................................... 8,148,646 4,968,715
----------- -----------
End of year............................................ $11,123,598 $ 8,148,646
=========== ===========
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
Year ended September 30, 1996
<S> <C>
INVESTMENT INCOME
Dividends............................................................. $ 98,159
Interest.............................................................. 37,382
----------
TOTAL INVESTMENT INCOME.................................................. 135,541
EXPENSES
Investment advisory fee................................................ 102,176
Distribution fees...................................................... 51,088
Transfer agent fees.................................................... 11,307
Legal fees............................................................. 12,000
Audit fees............................................................. 15,500
Accounting fees........................................................ 14,043
Amortization of deferred organization costs............................ 2,916
Printing and postage................................................... 4,500
Custodian fees......................................................... 8,000
Trustees fees.......................................................... 2,750
Registration fees...................................................... 14,088
Insurance.............................................................. 916
Other.................................................................. 500
----------
TOTAL EXPENSES...................................................... 239,784
Less expense waiver and reimbursement............................... 35,431
----------
NET EXPENSES ABSORBED BY FUND....................................... 204,353
----------
NET INVESTMENT LOSS...................................................... (68,812)
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investment transactions.......................... 1,302,945
Change in net unrealized appreciation of investments.................. (499,880)
----------
NET GAIN ON INVESTMENTS.................................................. 803,065
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS............................... $ 734,253
==========
</TABLE>
See accompanying notes to financial statements
================================================================================
FEDERAL TAX STATUS OF 1996 DIVIDENDS
The income dividend and the short term capital gain dividend are taxable as
ordinary income. Income and capital gain dividends paid to you, whether received
in cash or reinvested in shares, must be included in your federal income tax
return and must be reported by the Fund to the Internal Revenue Service in
accordance with U.S. Treasury Department regulations.
Under current tax law, 6.5% of the ordinary income dividends paid by the Fund
may qualify for the 70% dividends received deduction available to certain
corporate shareholders.
===============================================================================
<PAGE>
UNIVERSAL CAPITAL GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION. Universal Capital Investment Trust (the "Trust") is a
Massachusetts business trust organized on October 18, 1990. The Trust is
registered under the Investment Company Act of 1940 as a diversified, open-end
investment company. Universal Capital Growth Fund (the "Fund") is the only
series of the Trust currently offered, and commenced selling shares of
beneficial interest to the public on January 22, 1991 (commencement of
operations).
INVESTMENT VALUATION. Investments are stated at value. Investments traded on a
securities exchange or in the over-the-counter market are valued at the last
current sale price as of the time of valuation or, lacking any current reported
sale on that day, at the mean between the most recent bid and asked quotations.
Investments for which quotations are not readily available and securities for
which the valuation methods described above do not produce a value reflective of
the fair value of the securities are valued at a fair value as determined in
good faith by the board of trustees or a committee thereof.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME. Investment transactions are
recorded on the trade date (the day the order to buy or sell is executed).
Dividend income is recorded on the ex-dividend date and interest income is
recorded on the accrual basis. Realized gains and losses from investment
transactions are reported on an identified cost basis.
USE OF ESTIMATES. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
FEDERAL INCOME TAXES AND DIVIDENDS TO SHAREHOLDERS. It is the Fund's policy to
comply with the special provisions of the Internal Revenue Code available to
regulated investment companies and, in the manner provided therein, to
distribute all of its taxable income, as well as any net realized gain on sales
of investments. Such provisions were complied with and therefore no provision
for federal income taxes is required.
Distributions are determined in accordance with income tax principles which may
treat certain transactions differently than generally accepted accounting
principles.
REPURCHASE AGREEMENTS. The fund has a significant portion of its investments in
repurchase agreements. All repurchase agreements are fully collateralized by
U.S. Treasury securities. All collateral is held through the Fund's custodian
bank and is monitored daily by the Fund to ensure that its market value exceeds
the carrying value of the repurchase agreement.
2. TRANSACTIONS WITH AFFILIATES
Pursuant to an investment advisory agreement with Integrated Financial Services,
Inc. ("Advisor"), the Fund pays an investment advisory fee accrued daily and
paid monthly at the annual rate of 1.0% of the first $250 million of the Fund's
average daily net assets and .75% of the Fund's average daily net assets in
excess of $250 million. During the year ended September 30, 1996, the Fund
incurred an investment advisory fee of $102,176.
The agreement provides for the waiver or reimbursement of expenses from the
Advisor should the Fund's normal operating expenses exceed the most restrictive
applicable state expense limitation. The Advisor also has agreed to limit the
Fund's annual operating expenses to 2.0% of average daily net assets through
December 31, 1996. During the year ended September 30, 1996, the Advisor waived
or reimbursed the Fund for expenses of $35,431.
While serving as Distributor, Dreher & Associates, Inc. ("Distributor") assumed
all expenses of personnel, office space, office facilities and equipment
incidental to such service. The Trust has adopted a Distribution Plan pursuant
to Rule 12b-1 under the Investment Company Act of 1940 whereby the Fund pays the
Distributor an annual service fee of .25% and an annual sales compensation fee
of .25%, both accrued daily and paid monthly and based on the Fund's average
daily net assets. In return, the Distributor bears all expenses incurred in the
distribution and promotion of the Fund's shares. During the year ended
September 30, 1996, the Fund incurred distribution fees of $51,088. The
Distributor received commissions of $33,145 from sale of the Fund's shares
during the year ended September 30, 1996, of which $2,569 was paid to brokers
affiliated with the Distributor and the remainder was paid to retail brokers.
Portfolio transactions for the Fund have been executed through the Distributor,
consistent with the Fund's policy of obtaining best price and execution. During
the year ended September 30, 1996, the Fund paid brokerage commissions to the
Distributor on purchases and sales of securities in the amount of $31,168. It is
management's opinion that commission rates charged to the Fund by the
Distributor are consistent with those charged to comparable unaffiliated
customers in similar transactions.
Certain officers or trustees of the Fund are also officers of the Distributor
and/or the Advisor. During the year ended September 30, 1996, the Fund made no
direct payments to its officers and incurred trustees' fees of $2,750 to its
unaffiliated trustees.
3. INVESTMENTS
Purchases and sales of investments, other than short-term obligations, were
$24,338,274 and $23,797,076, respectively, for the year ended September 30,
1996.
The cost basis of investments for federal income tax purposes at September 30,
1996 was $7,378,115. At September 30, 1996, on a tax basis, gross unrealized
appreciation was $1,058,998, gross unrealized depreciation was $247,875 and net
unrealized appreciation was $811,123.
<PAGE>
4. CAPITAL SHARE TRANSACTIONS
The following table summarizes the activity in capital shares of the Fund.
<TABLE>
<CAPTION>
Year Year
ended ended
Sept. 30, 1996 Sept. 30, 1995
-------------- --------------
Shares Amount Shares Amount
------ -------- ------ ------
<S> <C> <C> <C> <C>
Shares sold 202,722 $3,008,775 103,666 $1,490,399
Shares issued
on reinvestment
of distributions 90,601 1,268,410 22,243 250,009
Less shares redeemed (51,688) (766,538) (23,751) (312,020)
------- ---------- ------- ----------
Net increase 241,635 $3,510,647 102,158 $1,428,388
======= ========== ======= ==========
</TABLE>
5. ORGANIZATION COSTS
Costs amounting to $45,961 were paid by the Advisor in connection with the
organization and initial registration of the Fund. These costs were amortized
over the period between June 1991 (when the Fund reached $2.5 million in total
assets) and January 1996.
INVESTMENT ADVISOR
Integrated Financial Services, Inc.
One Oakbrook Terrace, Suite 708
Oakbrook Terrace, Illinois 60181
DISTRIBUTOR
Dreher & Associates, Inc.
One Oakbrook Terrace, Suite 708
Oakbrook Terrace, Illinois 60181
CUSTODIAN
UMB Bank, n.a.
P.O. Box 419226
Kansas City, Missouri 64141
TRANSFER AGENT
Jones & Babson
2440 Pershing Road
Kansas City, Missouri 64108
COUNSEL
Bell, Boyd & Lloyd
Chicago, Illinois
INDEPENDENT AUDITORS
Ernst & Young LLP
Chicago, Illinois
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Per share income and capital changes (for a share outstanding throughout the period).
Year Year Year Year Year
ended ended ended ended ended
Sept. 30, 1996 Sept. 30, 1995 Sept. 30, 1994 Sept. 30, 1993 Sept. 30, 1992
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 16.28 $12.47 $12.27 $11.38 $11.16
Income from investment operations:
Net investment income (loss)(a) (.10) (.10) (.13) (.04) .11
Net realized & unrealized gain on investments 1.14 4.54 .96 1.39 .37
------- ------ ------ ------ ------
Total from investment operations 1.04 4.44 .83 1.35 .48
Less distribution to shareholders from:
Net investment income .... .... .... .11 .07
Realized gains on investments 2.33 .63 .63 .35 .19
------- ------ ------ ------ ------
Total distributions to shareholders 2.33 .63 .63 .46 .26
Net asset value, end of period $ 14.99 $16.28 $12.47 $12.27 $11.38
======= ====== ====== ====== ======
Total return (b) 7.4% 37.9% 7.5% 12.2% 4.3%
Ratio of net expenses to average net assets (a) 2.0% 2.0% 2.0% 2.0% 2.0%
Ratio of net investment income (loss) to
average net assets (a) (0.7)% (0.8)% (1.1)% (0.4)% 1.2%
Portfolio turnover rate 262.1% 157.6% 188.7% 186.3% 111.3%
Average commission rate per share .0208 N/A N/A N/A N/A
Net assets, end of period (in 000's) $11,124 $8,149 $4,969 $4,892 $4,715
</TABLE>
(a) After reimbursement and waiver of expenses by the Advisor of .35%, .7%,
1.1%, .9%, and 1.2% of average net assets for 1996, 1995, 1994, 1993 and 1992,
respectively.
(b) Total return is not annualized and does not reflect the effect of any sales
charges.
Note: Per share data for 1996, 1995, 1994 and 1993 was determined based on
average shares outstanding.
