UNIVERSAL CAPITAL GROWTH FUND
100 S. WACKER DRIVE
SUITE 2100
CHICAGO, IL 60606
(800) 969-9676
- -------------------------------------------------------------------------------
April 20, 1998
Dear Shareholder,
The Universal Capital Growth Fund ("Fund") recorded a total return of 15.3% for
the fiscal six months ended March 31, 1998 and 50.3% for the prior twelve month
period. The Fund's investment results and those of the S&P 500 are summarized in
the following table:
TOTAL RETURN<F1>
March 31, 1998
- -------------------------------------------------------------------------------
Quarter 6 Months 1 Year 3 Years 5 Years Inception
- -------------------------------------------------------------------------------
Universal Capital
Growth Fund 11.1% 15.3% 50.3% 28.6% 21.9% 17.9%
- -------------------------------------------------------------------------------
S&P 500 Stock Index 14.0% 17.2% 48.0% 32.8% 22.4% 21.3%
- -------------------------------------------------------------------------------
<F1>Returns, except for the quarter and 6 months, represent average annual
return. All returns include the reinvestment of dividends but exclude sales
charges. Please refer to the performance chart below. Graver, Bokhof,
Goodwin & Sullivan assumed management of the fund on August 15, 1997.
In the fiscal six-month period, the Fund and the S&P 500 again rose to all time
record levels, achieving performance results many on Wall Street had expected
for all of 1998. Economic growth above estimates, combined with a continued low
level of interest rates, set the stage for this advance. Current projections
call for a further slowing of economic activity for the next couple of quarters,
which could result in an additional deceleration in corporate earnings growth.
Under such conditions, we would expect the market to consolidate and move
sideways for a short period, similar to the last half of 1997.
During the past six months your Fund benefited from the strong performance of
large capitalization issues once again. The largest gain in the portfolio came
from a special situation provider of information services, Complete Business
Solutions, which rose 120% during the period. Excellent results were also
recorded by Schering-Plough and Merck in the drug area; Travelers Group, Fannie
Mae and Merrill Lynch in the financial group; and Gillette, a global consumer
products firm. While Microsoft continued to produce good gains as a software
company, the hardware companies in the technology area were major
underperformers. Declines were recorded in Intel, Compaq Computer, Cognex and
Hewlett-Packard. The portfolio also saw declines in the oil service sector where
Halliburton and R&B Falcon suffered declines due to concerns about oil pricing.
We did some profit taking by paring back some of the Fund's more profitable
positions that had become too large a holding, but we chose to stay invested in
the technology and oil service areas anticipating recoveries during the
remainder of the year. We made new purchases in service oriented businesses
such as Computer Associates and Sterling Commerce in the software consulting
area and Hagler Bailly in business and utility consulting. Other additions
include Costco and Proffitt's in retailing and Illinois Tool Works in the
capital goods arena.
We are confident that the Fund's portfolio is well positioned to participate in
any further appreciation of the general market. Fundamentally, the portfolio
looks very attractive when compared to the S&P 500. Our earnings growth
projections for the Fund's portfolio for the next 3-5 years are double that of
the S&P, while return on equity is some 50% higher and debt burden 30% lower.
The Fund's average P/E ratio is 20% higher than the S&P, but sells at only 1.6X
its earnings growth expectations compared to the S&P selling at 2.5X its growth
rate.
We are encouraged by the progress we have made since assuming management of the
Fund's assets and look forward to working for you in the years ahead. Please
feel free to call us if you have any questions.
Sincerely,
/s/ Andrew J. Goodwin, III
Andrew J. Goodwin, III
President
GROWTH OF A $10,000 INVESTMENT
Date Universal Capital Growth Fund S&P 500 Stock Index
1/22/91 9,451.80 10,000.00
9/30/91 10,548.21 11,983.75
9/30/92 11,000.61 13,307.97
9/30/93 12,337.45 15,038.25
9/30/94 13,257.32 15,592.47
9/30/95 18,277.98 20,230.40
9/30/96 19,630.60 24,343.67
9/30/97 26,745.47 34,190.28
3/31/98 30,836.37 40,077.89
This chart assumes an initial gross investment of $10,000 made on 1/22/91
(commencement). Returns shown include the reinvestment of all dividends.
Past performance is not predictive of future performance. Investment return
and principal value will fluctuate, so that your shares, when redeemed, may
be worth more or less than original cost. The Fund's performance graph includes
deduction of the 5.5% front end load. The S&P 500 Stock Index is an unmanaged
but commonly used measure of common stock total return performance.
UNIVERSAL CAPITAL GROWTH FUND
PORTFOLIO OF INVESTMENTS
MARCH 31, 1998
(UNAUDITED)
SHARES VALUE
------ -----
COMMON STOCK 96.65%
- ---------------------------------------------
BANKS 5.48%
First Chicago NBD Corporation 3,500 $308,438
Net.b@nk, Inc.* 8,000 198,000
Wells Fargo & Company 1,000 331,250
---------
837,688
COMPUTERS 5.47%
Compaq Computer Corporation 5,000 129,375
Hewlett-Packard Company 4,600 291,525
International Business Machines Corporation 4,000 415,500
---------
836,400
COMPUTER NETWORKS 2.68%
Cisco Systems, Inc.* 6,000 410,250
COMPUTER SOFTWARE 5.02%
Computer Associates International, Inc. 4,000 231,000
Microsoft Corporation* 6,000 537,000
---------
768,000
ELECTRICAL EQUIPMENT 5.37%
General Electric Company 2,000 172,375
Illinois Tool Works Inc. 4,000 259,000
Kuhlman Corporation 8,000 389,500
---------
820,875
ELECTRONIC PRODUCTS & COMPONENTS 5.12%
American Power Conversion Corporation* 5,000 143,437
Cognex Corporation* 8,000 171,000
Intel Corporation 6,000 468,375
---------
782,812
ENERGY 3.38%
Hallibutron Company 5,000 250,938
R&B Falcon Corporation* 9,000 266,625
---------
517,563
FINANCE & FINANCIAL SERVICES 14.73%
American Express Company 3,000 275,437
Charles Schwab Corporation (The) 10,800 410,400
Fannie Mae 5,500 347,875
Merrill Lynch & Company, Inc. 6,000 498,000
Paine Webber Group Inc. 7,500 300,937
Travelers Group Inc. 7,000 420,000
---------
2,252,649
* Non-income producing
See notes to the financial statements
UNIVERSAL CAPITAL GROWTH FUND
PORTFOLIO OF INVESTMENTS
MARCH 31, 1998 (CONTINUED)
(UNAUDITED)
SHARES VALUE
------ -----
COMMON STOCK (CONTINUED)
- ---------------------------------------------
HEALTHCARE 17.47%
Abbott Laboratories 4,500 $338,906
Amgen, Inc.* 4,500 273,938
Eli Lilly & Company 6,000 357,750
Johnson & Johnson 5,000 366,562
Medtronic, Inc. 8,000 415,000
Merck & Co., Inc. 3,600 462,150
Schering-Plough Corporation 5,600 457,450
---------
2,671,756
INSURANCE 3.82%
Horace Mann Educators Corporation 10,000 351,250
MBIA Inc. 3,000 232,500
---------
583,750
RETAIL 8.70%
Costco Companies, Inc.* 5,000 267,500
Lowe's Companies, Inc. 6,000 421,125
Proffitt's, Inc.* 8,000 290,000
Walgreen Co. 10,000 351,875
---------
1,330,500
SERVICES 7.11%
Complete Business Solutions, Inc.* 13,000 466,375
Hagler Bailly, Inc.* 10,000 250,000
Sterling Commerce, Inc.* 8,000 371,000
---------
1,087,375
STAPLES 8.79%
Gillette Company (The) 3,500 415,406
H.J. Heinz Company 5,000 291,875
PepsiCo, Inc. 7,000 298,813
Procter & Gamble Company (The) 4,000 337,500
---------
1,343,594
TELECOMMUNICATIONS 3.51%
Tellabs, Inc.* 8,000 537,000
---------
TOTAL COMMON STOCKS (COST $9,508,726) 14,780,212
----------
* Non-income producing
See notes to the financial statements
UNIVERSAL CAPITAL GROWTH FUND
PORTFOLIO OF INVESTMENTS
MARCH 31, 1998 (CONTINUED)
(UNAUDITED)
PRINCIPAL
AMOUNT VALUE
------ -----
SHORT-TERM INVESTMENTS 3.58%
- ---------------------------------------------
MONEY MARKET 0.31%
UMB Bank, n.a. Money
Market Fiduciary, 4.54% $48,101 $48,101
---------
TOTAL MONEY MARKET 48,101
---------
REPURCHASE AGREEMENTS 3.27%
UMB Bank, n.a., 5.10%,
dated 3/31/98, repurchase
price $500,210, maturing 4/03/98,
collateralized by U.S. Treasury Notes,
5.875%, maturing 6/30/00 500,000 500,000
---------
TOTAL REPURCHASE AGREEMENTS 500,000
---------
TOTAL SHORT-TERM INVESTMENTS
(COST $548,101) 548,101
---------
TOTAL INVESTMENTS 100.23%
(COST $10,056,827) 15,328,313
LIABILITIES LESS CASH
AND OTHER ASSETS (0.23)% (35,255)
---------
NET ASSETS 100.00% $15,293,058
===========
See notes to the financial statements
UNIVERSAL CAPITAL GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1998 (UNAUDITED)
ASSETS:
Investments at value (cost $10,056,827) $15,328,313
Dividends and interest receivable 9,857
Prepaid expenses and other assets 6,820
---------
Total Assets 15,344,990
----------
LIABILITIES:
Payable to Adviser 10,397
Payables for shares redeemed 7,568
Other accrued expenses 33,967
---------
Total Liabilities 51,932
---------
NET ASSETS $15,293,058
===========
NET ASSETS CONSIST OF:
Paid in capital $9,313,878
Accumulated net realized gain
on investments 707,694
Unrealized net appreciation
on investments 5,271,486
---------
TOTAL NET ASSETS $15,293,058
===========
NET ASSET VALUE PER SHARE
($15,293,058 DIVIDED BY
753,489 SHARES OUTSTANDING) $20.30
=========
MAXIMUM OFFERING PRICE PER SHARE
(net asset value, plus 5.8% of net
asset value or 5.5% of offering price) $21.48
=========
See notes to the financial statements
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1998 (UNAUDITED)
INVESTMENT INCOME:
Dividend income $54,088
Interest income 19,805
---------
73,893
---------
EXPENSES:
Investment advisory fees 68,423
Distribution fees 34,212
Legal fees 17,175
Audit fees 10,056
Reports to shareholders 6,320
Fund accounting fees 6,111
Transfer agent fees and expenses 6,052
Federal and state registration fees 2,956
Custody fees 1,923
Trustees' fees 1,636
Other 877
---------
Total expenses before waiver 155,741
Waiver of fees (18,894)
---------
Net expenses 136,847
---------
Net investment loss (62,954)
---------
REALIZED AND UNREALIZED GAINS:
Net realized gain on investments 773,541
Change in unrealized appreciation
on investments 1,301,319
---------
Net gain on investments 2,074,860
---------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $2,011,906
==========
See notes to the financial statements
UNIVERSAL CAPITAL GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED
March 31, 1998 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 1997
----------- ------------------
OPERATIONS:
Net investment loss $(62,954) $(54,361)
Net realized gain on investments 773,541 405,187
Change in unrealized appreciation
on investments 1,301,319 3,159,044
---------- ----------
Net increase in net assets
resulting from operations 2,011,906 3,509,870
---------- ----------
DISTRIBUTIONS:
Net realized gains (355,252) (1,185,143)
---------- ----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from 35,413 and 54,442
shares issued, respectively 661,794 888,007
Net asset value of 19,566 and
82,871 shares issued to holders
in reinvestment of dividends,
respectively 345,153 1,150,243
Cost of 19,705 and 161,216 shares
redeemed, respectively (365,018) (2,492,100)
---------- ----------
Net increase (decrease)
from capital transactions 641,929 (453,850)
---------- ----------
TOTAL INCREASE IN NET ASSETS 2,298,583 1,870,877
NET ASSETS:
Beginning of period 12,994,475 11,123,598
---------- ----------
End of period $15,293,058 $12,994,475
=========== ===========
See notes to the financial statements
UNIVERSAL CAPITAL GROWTH FUND
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED
MARCH 31, 1998 YEAR ENDED SEPTEMBER 30,
(UNAUDITED) 1997(C) 1996
---------- ------- -------
NET ASSET VALUE, BEGINNING OF PERIOD $18.09 $14.99 $16.28
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss (0.09) (0.08) (0.10)
Net realized and unrealized gains
on investments 2.78 4.97 1.14
------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 2.69 4.89 1.04
------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income - - -
Net realized gains (0.48) (1.79) (2.33)
------ ------ -------
Total distributions to shareholders (0.48) (1.79) (2.33)
NET ASSET VALUE, END OF PERIOD $20.30 $18.09 $14.99
====== ====== ======
TOTAL RETURN <F2><F4> 15.30% 36.24% 7.40%
SUPPLEMENTAL DATA AND RATIOS:
Ratio of net expenses
to average net assets <F1><F5> 2.00% 2.00% 2.00%
Ratio of net investment loss
to average net assets, <F1><F5> (0.9)% (0.5)% (0.7)%
Portfolio turnover rate 20.4% 49.2% 262.1%
Average commission rate per share $0.0800 $0.0740 $0.0413
Net assets, end of period (in 000's) $15,293 $12,994 $11,124
YEAR ENDED SEPTEMBER 30,
1995 1994 1993
------ ------ ------
NET ASSET VALUE, BEGINNING OF PERIOD $12.47 $12.27 $11.38
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss (0.10) (0.13) (0.04)
Net realized and unrealized gains
on investments 4.54 0.96 1.39
------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 4.44 0.83 1.35
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income - - (0.11)
Net realized gains (0.63) (0.63) (0.35)
------ ------ ------
Total distributions to shareholders (0.63) (0.63) (0.46)
NET ASSET VALUE, END OF PERIOD $16.28 $12.47 $12.27
====== ====== ======
TOTAL RETURN <F2><F4> 37.87% 7.46% 12.15%
SUPPLEMENTAL DATA AND RATIOS:
Ratio of net expenses
to average net assets <F1><F5> 2.00% 2.00% 2.00%
Ratio of net investment loss
to average net assets, <F1><F5> (0.8)% (1.1)% (0.4)%
Portfolio turnover rate 157.6% 188.7% 186.3%
Average commission rate per share N/A N/A N/A
Net assets, end of period (in 000's) $8,149 $4,969 $4,892
<F1> After reimbursement and waiver of Adviser fees and earnings credits of the
custodian of 0.28%, 0.50%, 0.35%, 0.7%, 1.1%, and 0.9% of average net
assets for 1998, 1997, 1996, 1995, 1994, and 1993.
<F2> The total return calculation does not reflect the sales load imposed on the
purchase of shares.
<F3> On August 15, 1997, the adviser changed to Graver, Bokhof, Goodwin &
Sullivan from Integrated Financial Services, Inc.
<F4> Not annualized for the period ended March 31, 1998.
<F5> Annualized for the period ended March 31, 1998.
See notes to the financial statements
UNIVERSAL CAPITAL GROWTH FUND
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 1998
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 (the "1940 Act") as a
diversified, open-end investment company. Universal Capital Growth Fund (the
"Fund"), the only series of the Trust currently offered, 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.
The character of distributions made during the year from net investment income
of net realized gains may differ from the characterization for federal income
tax purposes due to differences in the recognition of income, expense or gain
items for financial statement and tax purposes. Where appropriate,
reclassifications between net asset accounts are made for such differences that
are permanent in nature. Accordingly, at March 31, 1998, the Fund reduced
accumulated net realized gain on investments by $62,954 for the current year's
net investment loss.
REPURCHASE AGREEMENTS. The Fund may invest 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 Graver, Bokhof, Goodwin &
Sullivan (the "Adviser"), the Fund pays an investment advisory fee 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 six months ended March 31, 1998, the Fund incurred investment
advisory fees of $68,423 under this agreement.
The agreement provides for the waiver or reimbursement of expenses from the
Adviser should the Fund's normal operating expenses exceed the most restrictive
applicable state expense limitation. The Adviser also has agreed to limit the
Fund's annual operating expenses to 2.00% of average daily net assets through
December 31, 1998. During the six months ended March 31, 1998, the Adviser
waived or reimbursed $18,894 of its investment advisory fee.
While serving as distributor, Dreher & Associates, Inc. (the "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 1940 Act whereby the Fund pays the Distributor a monthly
service fee of .25% and a monthly sales compensation fee of .25%, 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 six
months ended March 31, 1998, the Fund incurred distribution fees of $34,212. The
Distributor received commissions of $2,139 from sale of the Fund's shares the
six months ended March 31, 1998, all of which was paid to brokers affiliated
with the Fund.
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 six months ended March 31, 1998, the Fund paid brokerage commissions to the
Distributor on purchases and sales of securities in the amount of $7,749. It is
the 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.
3. INVESTMENTS
Purchases and sales of investments, other than short-term obligations, were
$2,898,505 and $2,660,596 respectively, for the six months ended March 31, 1998.
UNIVERSAL CAPITAL GROWTH FUND
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 1998 (UNAUDITED)
The cost basis of investments for federal income tax purposes at March 31, 1998
was $10,059,720. At March 31, 1998, on a tax basis, gross unrealized
appreciation was $5,338,154, gross unrealized depreciation was $69,561 and net
unrealized appreciation was $5,268,593.
INVESTMENT ADVISER
Graver, Bokhof, Goodwin & Sullivan
100 South Wacker Drive, Suite 2100
Chicago, Illinois 60606
DISTRIBUTOR
Dreher & Associates, Inc.
One Oakbrook Terrace, Suite 708
Chicago, Illinois 60181
CUSTODIAN
UMB Bank, n.a.
P.O. Box 419226
Kansas City, Missouri 64141
TRANSFER AGENT
Sunstone Investor Services, LLC
207 East Buffalo Street, Suite 315
Milwaukee, WI 53202
COUNSEL
Vedder, Price, Kaufman & Kammholz
Chicago, Illinois
INDEPENDENT AUDITORS
Ernst & Young LLP
Chicago, Illinois
