================================================================================
UNIVERSAL CAPITAL GROWTH FUND
SEMI-ANNUAL REPORT
MARCH 31, 1999
================================================================================
<PAGE>
UNIVERSAL CAPITAL GROWTH FUND
100 S. WACKER DRIVE
SUITE 2100
CHICAGO, IL 60606
(800) 969-9676
- --------------------------------------------------------------------------------
April 30, 1999
Dear Shareholder,
Your fund management team at Graver, Bokhof, Goodwin & Sullivan would like to
thank you for your support. Since the start of our first full month of managing
the Universal Capital Growth Fund ("Fund") beginning August 31, 1997, UCGFX
shares have provided a cumulative total return of 45.8% compared to a 46.4%
return for the S&P 500 Stock Index ("S&P 500"). We are proud of these results
given the highly volatile and selective nature of the stock market during a
period when most equities and fund managers had difficulty performing near the
S&P 500.
In appreciation for your support we are pleased to waive the front-end sales
charge for all investors on share purchases through June 30, 1999, allowing you
to purchase shares at the prevailing net asset value.
The Fund recorded a total return of 30.2% for the fiscal six months ended March
31, 1999 and 21.0% 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 RETURNS*
March 31, 1999
<TABLE>
<CAPTION>
====================================================================================================================
Quarter 6 Months 1 Year 3 Years 5 Years Inception
1/22/91
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Universal Capital Growth Fund 7.5% 30.2% 21.0% 23.9% 24.6% 18.3%
- --------------------------------------------------------------------------------------------------------------------
S&P 500 Stock Index 5.0% 27.3% 18.5% 28.1% 26.3% 20.9%
====================================================================================================================
</TABLE>
* Returns, except for the quarter and 6 months, represent average annual return.
All returns shown include the reinvestment of dividends but exclude sales
charges. Past performance is not indicative of future performance. Investment
return and principal value will fluctuate, so that your shares, when redeemed,
may be worth more or less than the original cost. The S&P 500 Stock Index is an
unmanaged but commonly used measure of common stock total return performance.
Graver, Bokhof, Goodwin & Sullivan assumed management of the Fund on August 15,
1997.
During the past 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
not expected to occur so quickly after the sharp sell-off in October 1998. The
venerable Dow Jones Industrial Average rose above 10,000 for the first time.
Swift action by the Federal Reserve Board to cut rates during last fall's global
financial crises was the primary reason for the sharp recovery in stock prices.
Economic growth above estimates, combined with a continued low level of interest
rates and inflation, has set the stage for a further advance.
When 1999 began amid expectations of slower economic growth and lower corporate
earnings, we expected the market to consolidate and move sideways for a short
period. It did just that, from January to early March, before once again moving
to new record levels. Economic growth has proven to be much stronger than
expected. Corporate earnings, reported for the first quarter of 1999, have been
stronger than most predicted. Once again, the resiliency of our domestic economy
surprised all of us. Recent European rate cuts suggest that worldwide monetary
policy is focused upon resuming economic growth. This should prove positive for
the US going forward. In addition, these rate cuts make the possibility of a US
interest rate increase remote at the present time.
The Fund has benefited from the strong performance of large capitalization
issues once again. While some broadening of participation has occurred, the
average S&P 500 stock gained only 0.3% during the first quarter compared with
5.0% for the index. Furthermore, 56% of the companies in the S&P 500 actually
experienced a decline during the quarter.
<PAGE>
The largest gains in the portfolio came from telecommunication, technology,
investment brokerage and consumer stocks. Netbank, our only pure Internet stock
had the biggest gain, up over 900%. Telecommunication stocks including ADC
Telecom, MCI-Worldcom and Tellabs enjoyed gains of 100% or more. Financial
stocks such as Merrill Lynch and Morgan Stanley Dean Witter had similar gains.
Lexmark International and Cisco Systems were outsized performers among the
technology group which as a whole struggled for much of the first quarter of
1999. The worst performers in the Fund fell into the software application and
outsourcing sector, a group we expect to do better as the Y2K business subsides.
New purchases in the consumer area include Saks Inc., Maytag, Outback Steakhouse
and Kroger. We also reestablished our overweighting in financial stocks adding
BankAmerica, MBNA and American International Group. Selected special
opportunities presented themselves in Boston Scientific, Tyco International and
United Technologies.
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. The Fund's revenues and
earnings growth projections for the next 3-5 years are almost double that of the
S&P 500, while return on equity is some 40% higher.
We are encouraged by the progress we have made since assuming management of the
Fund's assets in the fall of 1997 and look forward to working for you in the
years ahead. Please feel free to call us if you have any questions or concerns.
We would be delighted to hear from you.
Sincerely,
Andrew J. Goodwin, III
President
*The views expressed in this report reflect those of the investment adviser as
of April 30, 1999 and those views are subject to change at any time based upon
market and other conditions. The Fund holdings may change due to ongoing
management and references to specific investments should not be construed as a
recommendation of the Fund or its Adviser.
GROWTH OF $10,000 INVESTMENT
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
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
9/30/98 28,648.96 37,282.86
3/31/99 37,313.55 47,476.10
------------------------------------
TOTAL RETURN*
with 5.5% sales load effect
------------------------------------
1 year 14.4%
---------------------- -------------
5 year 23.2%
---------------------- -------------
Since inception 17.4%
---------------------- -------------
*Represent average annual returns.
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 the 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.
Dreher & Associates, Inc. as Distributor
<PAGE>
UNIVERSAL CAPITAL GROWTH FUND
PORTFOLIO OF INVESTMENTS
MARCH 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
COMMON STOCKS 97.10%
- ----------------------------------------------------------
<S> <C> <C> <C>
AEROSPACE AND DEFENSE 2.29%
United Technologies Corporation 3,000 $ 406,312
BANKS 6.50%
BankAmerica Corporation 4,500 317,812
MBNA Corp. 15,000 358,125
Net.b@nk, Inc.* 7,000 476,000
----------
1,151,937
COMPUTERS 4.00%
International Business Machines Corporation 4,000 709,000
COMPUTER NETWORKS 3.71%
Cisco Systems, Inc.* 6,000 657,375
COMPUTER SOFTWARE 5.51%
BMC Software, Inc.* 7,000 259,438
Microsoft Corporation* 8,000 717,000
----------
976,438
CONSUMER GOODS 2.04%
Maytag Corporation 6,000 362,250
CONSUMER STAPLES 3.09%
PepsiCo, Inc. 14,000 548,625
DIVERSIFIED MISCELLANEOUS 1.42%
Tyco International Ltd. 3,500 251,125
ELECTRICAL EQUIPMENT 2.50%
General Electric Company 4,000 442,500
ELECTRONIC PRODUCTS & COMPONENTS 8.03%
American Power Conversion Corporation* 10,000 270,000
Intel Corporation 5,000 595,625
Lexmark International Group, Inc.* 5,000 558,750
----------
1,424,375
</TABLE>
* Non-income producing
See notes to the financial statements
<PAGE>
UNIVERSAL CAPITAL GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
MARCH 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
COMMON STOCKS (CONTINUED) 97.10%
- ----------------------------------------------------------
<S> <C> <C> <C>
ENERGY 2.17%
Halliburton Company 10,000 $ 385,000
FINANCE & FINANCIAL SERVICES 6.72%
American International Group, Inc. 3,000 361,875
Merrill Lynch & Co., Inc. 6,000 530,625
Morgan Stanley Dean Witter & Co. 3,000 299,813
----------
1,192,313
HEALTHCARE 11.97%
Amgen Inc.* 9,000 673,875
Boston Scientific Corporation* 10,000 405,625
Johnson & Johnson 5,000 468,437
Medtronic, Inc. 8,000 574,000
----------
2,121,937
PHARMACEUTICALS 9.13%
Abbott Laboratories 9,000 421,312
Merck & Co., Inc. 7,200 577,350
Schering-Plough Corporation 11,200 619,500
----------
1,618,162
RETAIL 10.70%
Office Depot Incorporated* 5,000 184,063
Kroger Co. (The)* 5,000 299,375
Saks Incorporated* 8,000 208,000
Staples, Inc.* 19,500 641,063
Walgreen Co. 20,000 565,000
----------
1,897,501
SERVICES 6.84%
Complete Business Solutions, Inc.* 18,000 353,250
Outback Steakhouse, Inc.* 15,000 491,250
Sterling Commerce, Inc.* 12,000 369,000
----------
1,213,500
</TABLE>
* Non-income producing
See notes to the financial statements
<PAGE>
UNIVERSAL CAPITAL GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
MARCH 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
COMMON STOCKS (CONTINUED) 97.10%
- ----------------------------------------------------------
<S> <C> <C> <C>
TELECOMMUNICATIONS 10.48%
ADC Telecommunications, Inc.* 8,000 $ 381,500
MCI WorldCom, Inc.* 8,951 792,723
Tellabs, Inc.* 7,000 684,250
-----------
1,858,473
TOTAL COMMON STOCKS (COST $10,004,375) 17,216,823
-----------
RIGHTS 0.00%
- ---------------------------------------------------------
U.S. Surgical, 9/23/00* 7 382
-----------
TOTAL RIGHTS (COST $0) 382
-----------
PRINCIPAL
AMOUNT VALUE
------ -----
SHORT-TERM INVESTMENTS 1.58%
- ---------------------------------------------------------
MONEY MARKET 1.58%
UMB Bank, n.a. Money Market Fiduciary, 3.80% $280,850 $ 280,850
-----------
TOTAL MONEY MARKET 280,850
-----------
TOTAL SHORT-TERM INVESTMENTS
(Cost $280,850) 280,850
-----------
TOTAL INVESTMENTS 98.68%
(Cost $10,285,225) 17,498,055
CASH AND OTHER ASSETS LESS LIABILITIES 1.32% 233,688
-----------
NET ASSETS 100.00% $17,731,743
===========
</TABLE>
* Non-income producing
See notes to the financial statements
<PAGE>
UNIVERSAL CAPITAL GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1999 (Unaudited)
ASSETS:
Investments at value (cost $10,285,225) $17,498,055
Receivable for investment securities sold 277,471
Dividends and interest receivable 5,328
Prepaid expenses and other assets 11,575
-----------
Total Assets 17,792,429
LIABILITIES:
Accrued distribution fees 21,103
Payable to Adviser 12,965
Accrued audit fees 11,759
Other accrued expenses 14,859
-----------
Total Liabilities 60,686
-----------
NET ASSETS $17,731,743
===========
NET ASSETS CONSIST OF:
Paid-in-capital $ 9,854,590
Accumulated net realized gain
on investments 664,323
Net unrealized appreciation
on investments 7,212,830
-----------
TOTAL NET ASSETS $17,731,743
===========
NET ASSET VALUE PER SHARE
($17,731,743 DIVIDED BY
794,337 SHARES OUTSTANDING) $ 22.32
===========
MAXIMUM OFFERING PRICE
PER SHARE
(NET ASSET VALUE, PLUS 5.82% OF NET
ASSET VALUE OR 5.50% OF OFFERING PRICE) $ 23.62
===========
See notes to the financial statements
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1999 (UNAUDITED)
INVESTMENT INCOME:
Dividend income $ 40,308
Interest income 30,970
-----------
71,278
-----------
EXPENSES:
Investment advisory fees 79,059
Distribution fees 39,529
Transfer agent fees and expenses 11,171
Audit fees 8,161
Legal fees 7,526
Reports to shareholders 6,744
Fund accounting fees 6,363
Federal and state registration fees 5,113
Custody fees 4,133
Trustees' fees and expenses 3,131
Other 1,638
-----------
Total expenses before waiver 172,568
Waiver of fees (14,451)
-----------
Net expenses 158,117
-----------
Net investment loss (86,839)
-----------
REALIZED AND UNREALIZED GAINS:
Net realized gain on investments 664,323
Change in net unrealized appreciation
on investments 3,575,289
-----------
Net gain on investments 4,239,612
-----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 4,152,773
===========
See notes to the financial statements
<PAGE>
UNIVERSAL CAPITAL GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31, 1999 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 1998
----------- ------------------
<S> <C> <C>
OPERATIONS:
Net investment loss $ (86,839) $ (148,469)
Net realized gain on investments 664,323 1,402,832
Change in net unrealized appreciation on investments 3,575,289 (332,626)
------------ ------------
Net increase in net assets resulting from operations 4,152,773 921,737
------------ ------------
DISTRIBUTIONS:
Net realized gains (1,399,939) (355,252)
------------ ------------
CAPITAL SHARE TRANSACTIONS :
Proceeds from 12,523 and 58,241 shares issued, respectively 263,508 1,125,668
Net asset value of 71,994 and 19,566 shares issued to
holders in reinvestment of dividends, respectively 1,375,088 345,153
Cost of 27,967 and 58,235 shares redeemed, respectively (570,666) (1,120,802)
------------ ------------
Net increase from capital transactions 1,067,930 350,019
------------ ------------
TOTAL INCREASE IN NET ASSETS 3,820,764 916,504
NET ASSETS:
Beginning of period 13,910,979 12,994,475
------------ ------------
End of period $ 17,731,743 $ 13,910,979
============ ============
</TABLE>
See notes to the financial statements
<PAGE>
UNIVERSAL CAPITAL GROWTH FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, 1999 ---------------------------------------------------------------------
(UNAUDITED) 1998 1997(a) 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $18.86 $18.09 $14.99 $16.28 $12.47 $12.27
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss (0.11) (0.21) (0.08) (0.10) (0.10) (0.13)
Net realized and unrealized gain
on investments 5.49 1.46 4.97 1.14 4.54 0.96
---------- ---------- ---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT OPERATIONS 5.38 1.25 4.89 1.04 4.44 0.83
---------- ---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gains (1.92) (0.48) (1.79) (2.33) (0.63) (0.63)
---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $22.32 $18.86 $18.09 $14.99 $16.28 $12.47
========== ========== ========== ========== ========== ==========
TOTAL RETURN (B)(D) 30.24% 7.12% 36.24% 7.40% 37.87% 7.46%
SUPPLEMENTAL DATA AND RATIOS:
Ratio of net expenses
to average net assets (c)(e) 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%
Ratio of net investment loss
to average net assets (c)(e) (1.1)% (1.0)% (0.5)% (0.7)% (0.8)% (1.1)%
Portfolio turnover rate (d) 49.5% 58.1% 49.2% 262.1% 157.6% 188.7%
Net assets, end of period (in 000's) $17,732 $13,911 $12,994 $11,124 $8,149 $4,969
</TABLE>
(a) On August 15, 1997, the adviser changed to Graver, Bokhof, Goodwin &
Sullivan from Integrated Financial Services, Inc.
(b) The total return calculation does not reflect any sales load imposed on the
purchase of shares.
(c) After waiver of adviser fees and earnings credits of the custodian of
0.18%, 0.37%, 0.50%, 0.35%, 0.70% and 1.10% of average net assets for 1999,
1998, 1997, 1996, 1995 and 1994.
(d) Not annualized for the period ended March 31, 1999.
(e) Annualized for the period ended March 31, 1999.
See notes to the financial statements
<PAGE>
UNIVERSAL CAPITAL GROWTH FUND
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 1999 (UNAUDITED)
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 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
or 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, 1999, the Fund reduced
paid-in-capital by $86,839 for the current period'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 agreements.
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, 1999, the Fund incurred investment
advisory fees of $79,059 under this agreement.
The agreement provides for the waiver of expenses from the Adviser through
December 31, 1999 should the Fund's normal operating expenses exceed 2.00% of
average daily net assets. During the six months ended March 31, 1999, the
Adviser waived $14,451 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, 1999, the Fund incurred distribution fees of $39,529. The
Distributor received commissions of $2,205 from sale of the Fund's shares during
the six months ended March 31, 1999, 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, 1999, the Fund paid brokerage commissions to the
Distributor on purchases and sales of securities in the amount of $13,080. It is
the Adviser'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
$7,742,173 and $7,305,146 respectively, for the six months ended March 31, 1999.
<PAGE>
UNIVERSAL CAPITAL GROWTH FUND
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 1999 (UNAUDITED)
The cost basis of investments for federal income tax purposes at March 31, 1999
was $10,285,225. At March 31, 1999, on a tax basis, gross unrealized
appreciation was $7,473,290, gross unrealized depreciation was $260,460 and net
unrealized appreciation was $7,212,830.
INVESTMENT ADVISER
Graver, Bokhof, Goodwin & Sullivan
100 South Wacker Drive, Suite 2100
Chicago, Illinois 60606
(800) 969-9676
DISTRIBUTOR
Dreher & Associates, Inc.
One Oakbrook Terrace, Suite 708
Chicago, Illinois 60181
(630) 932-3000
CUSTODIAN
UMB Bank, n.a.
P.O. Box 419226
Kansas City, Missouri 64141
TRANSFER AGENT
Sunstone Financial Group, Inc.
207 East Buffalo Street, Suite 400
Milwaukee, WI 53202
(800) 537-3446
COUNSEL
Vedder, Price, Kaufman & Kammholz
Chicago, Illinois
INDEPENDENT AUDITORS
Ernst & Young LLP
Chicago, Illinois
This report is submitted for the general information of shareholders of the
Universal Capital Growth Fund. It is not authorized for distribution to
prospective investors unless accompanied or preceded by an effective prospectus
for the Fund. The prospectus gives details about charges, investment objectives,
risks and operation policies of the Fund. Read the prospectus carefully.
