<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

              Annual Report Pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934

(MARK ONE)

/X/   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
---   ACT OF 1934 [FEE REQUIRED]                                             

For the fiscal year ended March 28, 1997

                                       OR

/ /   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES 
---   EXCHANGE ACT  OF 1934 [NO FEE REQUIRED]                                 

For the transition period from_________________ to _________________

                          Commission file number 1-8526

                      McDONALD & COMPANY INVESTMENTS, INC.
             ------------------------------------------------------
             (Exact name of Registrant as specified in its charter)

             Delaware                                    34-1391950
 -------------------------------           ------------------------------------
 (State or other jurisdiction of           (I.R.S. Employer Identification No.)
 incorporation or organization)

McDonald Investment Center
800 Superior Avenue, Cleveland, Ohio                            44114
----------------------------------------                        -----
(Address of principal executive offices)                       (Zip Code)

Registrant's telephone number, including area code (216) 443-2300
                                                  ----------------

Securities Registered Pursuant to Section 12(b) of the Act:

       Title of each class            Name of each exchange on which registered
       -------------------            -----------------------------------------
                                      
Common Stock, par value $1.00 per share       New York Stock Exchange
Series A Junior Preferred Stock               New York Stock Exchange
Purchase Rights

Securities registered pursuant to Section 12(g) of the Act:  NONE

        Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X     No
                                             ----     ----

        Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. Yes X   No
                                ----   ----

        As of May 30, 1997, 9,018,938 shares of Common Stock, par value $1.00
per share, were outstanding, and the aggregate market value of the shares of
Common Stock of the Registrant held by non-affiliates (based upon the closing
price of the Registrant's shares on the New York Stock Exchange on May 30, 1997,
which was $38.375 per share) was $294,816,820. For purposes of this information,
the outstanding shares of Common Stock which were owned by all Directors and
executive officers of the Registrant, were deemed to be the shares of Common
Stock held by affiliates.

                                      - 1 -


<PAGE>   2



                       DOCUMENTS INCORPORATED BY REFERENCE

        Portions of the Registrant's definitive Proxy Statement to be used in
connection with its Annual Meeting of Stockholders to be held on July 30, 1997
are incorporated by reference into Part III of this Report.

        Except as otherwise stated, the information contained in this Report on
Form 10-K is as of March 28, 1997.

                                      - 2 -


<PAGE>   3



                                     PART I
                                     ------

ITEM 1.  BUSINESS.

(a)  GENERAL DEVELOPMENT OF BUSINESS

        McDonald & Company Investments, Inc. is a holding company which was
incorporated under the laws of the State of Delaware on May 20, 1983. As used in
this Report, the "Company" refers, unless the context requires otherwise, to
McDonald & Company Investments, Inc. and its subsidiaries. McDonald & Company
Investments, Inc. conducts substantially all of its business through its
principal subsidiary, McDonald & Company Securities, Inc. ("McDonald
Securities"), which operates a regional investment banking, investment advisory
and brokerage business. The Company also provides personal trust services
through its wholly-owned subsidiary, McDonald Trust Company.

        Effective October 4, 1991, the Company entered into an agreement of
Merger with Gradison & Company Incorporated, ("Gradison"). Gradison operated as
a full-service regional brokerage and investment advisory firm headquartered in
Cincinnati, Ohio with a primary market of southwestern Ohio and northern
Kentucky. Subsequent to the merger, Gradison operates as a division of McDonald
Securities. The merger allowed the Company to increase the size of its retail
sales force and its customer base and gave the Company a strong presence in
southwestern Ohio. Gradison also added significant asset management capabilities
to the Company.

        The Company's executive offices are located at McDonald Investment
Center, 800 Superior Avenue, Cleveland, Ohio 44ll4-2603 and its telephone number
is (216) 443-2300. The Company has 22 other offices in Ohio (including the
Gradison Division in Cincinnati, Ohio and the S. J. Wolfe Division in Dayton,
Ohio) and 19 additional offices in 10 other states.


(b)  INDUSTRY SEGMENT DATA

        The Company is engaged in one line of business, that of a securities
broker-dealer, which is comprised of several classes of products or services
including underwriting and investment banking, principal and agency
transactions, and investment advisory services.

                                      - 3 -
<PAGE>   4


ITEM 1.  BUSINESS--Continued

(c)  NARRATIVE DESCRIPTION OF BUSINESS

GENERAL
-------

        The Company, through its principal subsidiary, McDonald Securities,
operates a regional investment banking and brokerage business. The Company's
activities include the origination, underwriting, distribution, trading and
brokerage of fixed income and equity securities, investment advisory services,
and investment research and other related services. On July 20, 1983, the
Company succeeded to the business of McDonald & Company, a partnership, which
was established in 1927. The Company has expanded to its present size primarily
through internal growth rather than by acquisition, except for the merger with
Gradison.

        The Company serves institutional customers which are located throughout
the United States and in Canada, Europe, and the Far East. The Company's retail
(individual) customers are primarily located in the tri-state region of Ohio,
Michigan and Indiana. For the fiscal year ended March 28, 1997, approximately
53% of total revenues were derived from retail customers, 21% from institutional
customers, 18% from non-customer related principal transactions, investment
banking fees and other activities and 8% from interest and dividend income.

        The Company has formulated a comprehensive strategic plan, which is
periodically reviewed and revised as business conditions dictate. The plan
emphasizes the Company's historical roots as a regional brokerage and investment
banking firm. The Company has focused on the Ohio, Michigan and Indiana area by
increasing the number of investment brokers covering individual investors, as
well as increasing investment banking activities in the region. The merger with
Gradison has enabled the Company to expand its retail sales force and its
customer base in southwestern Ohio and northern Kentucky, and has added
significantly to the Company's asset management capabilities.

        McDonald Securities is a member of the New York Stock Exchange, Inc.
(the "NYSE"), the American Stock Exchange, Inc. (Associate), the Midwest Stock
Exchange, Inc., the Philadelphia Stock Exchange, Inc. and the National
Association of Securities Dealers, Inc. (the "NASD"). The Company is also a
member of the Securities Investor Protection Corporation ("SIPC").

        The Company has a total of 42 offices in 11 states, all of which offices
are leased. The Company has approximately 1,300 employees, of whom 322 are
full-time retail investment consultants and 81 are full time institutional
investment consultants.


















                                      - 4 -


<PAGE>   5



ITEM 1.  BUSINESS--Continued

REVENUES BY SOURCE
------------------

    The following table sets forth the revenues of the Company on a comparative
basis for the three most recent fiscal years.
<TABLE>
<CAPTION>

                                                                         McDonald & Company Investments, Inc.
                                           ---------------------------------------------------------------------------------------
                                                                                 Fiscal Year Ended
                                           ---------------------------------------------------------------------------------------
                                                   March 28, 1997                 March 29, 1996            March 31, 1995
                                                   ---------------                ---------------           ---------------

(Dollar amounts in thousands)

                                               Amount            %             Amount         %             Amount           %
                                           -------------     ---------      -----------   ---------     -------------     --------
<S>                                           <C>                <C>       <C>                <C>       <C>                <C>
Underwriting and
   investment banking:
     Corporate                                $ 60,651           23%       $ 45,672           20%       $  30,045          17%
     Limited partnership
        investments                              9,043            3           4,161            2            4,000           2
     Municipal                                   3,917            1           5,826            3            7,906           4
                                              --------       ------        --------       ------        ---------        ----
                                                73,611           27          55,659           25           41,951          23
Principal transactions:
     Unlisted stocks                            22,411            9          21,457            9           16,340           9
     Corporate bonds
        and preferred stocks                    11,303            4          10,914            5           11,073           7
     Municipal bonds                            10,128            4           9,001            4            7,346           4
     Government bonds                            6,130            2           6,470            3            5,768           3
     Mortgage-backed
        securities                               5,270            2           6,180            3            5,479           3
     Other                                         143            1              79            1             (123)         (1)
                                              --------       ------        --------       ------        ---------        ----
                                                55,385           22          54,101           25           45,883          25
Commissions:
     Listed stocks                              37,426           14          33,860           15           26,388          15
     Mutual funds and
       money market funds                       25,210            9          19,588            8           13,914           8
     Unlisted stocks                            10,618            4           8,411            4            4,867           3
     Annuities                                   5,356            2           3,510            2            3,963           2
     Options                                     1,297            1           1,129            1              922           1
                                              --------       ------        --------       ------        ---------        ----
                                                79,907           30          66,498           30           50,054          29
Investment management fees:
     Investment advisory fees                   14,717            6          10,333            5            6,935           4
     Mutual funds and money
       market funds                             10,419            4           9,509            4            9,026           5
                                              --------       ------        --------       ------        ---------        ----
                                                25,136           10          19,842            9           15,961           9

Interest and dividends                          20,406            8          17,170            8           19,197          11

Other                                            7,052            3           7,351            3            4,680           3
                                              --------       ------        --------       ------        ---------        ----

     Total revenues                           $261,497          100%       $220,621          100%       $ 177,726         100%
                                              ========       ======        ========       ======        =========        ====
</TABLE>





                                      - 5 -

<PAGE>   6
ITEM 1.  BUSINESS--Continued

UNDERWRITING AND INVESTMENT BANKING
-----------------------------------

        McDonald Securities participates in corporate and municipal securities
distributions as a manager or co-manager of an underwriting syndicate or as a
member thereof, or as a member of a selling group. Municipal securities are
obligations issued by state and local governments, hospitals, public utility
systems and industrial development authorities.

        Revenues from underwriting and investment banking activities are highly
dependent on general market conditions for such business activities. Market
conditions for underwriting and investment banking services can be affected by
political and economic events both in the United States and abroad. To the
extent future events are unpredictable, uncertainty will be a factor in the
level of McDonald's business activity. Also, competitive pressure from other
investment bankers has an effect on the success of McDonald Securities in
obtaining such business and on the prices which can be charged for investment
banking and underwriting services. The management of McDonald Securities
believes it can compete effectively in this segment of its business activities.

        Participation in an underwriting syndicate or selling group involves
both economic and regulatory risks. An underwriter or selling group member may
incur losses if it is forced to resell the securities it is committed to
purchase at less than the agreed purchase price. In addition, under the federal
securities laws, other statutes and court decisions with respect to
underwriters' liabilities and limitations on indemnification of underwriters by
issuers, an underwriter is subject to substantial potential liability for
material misstatements or omissions in prospectuses and other communications
with respect to underwritten offerings. Further, underwriting or selling
commitments constitute a charge against net capital, and the Company's
underwriting or selling commitments may be limited by the requirement that it
must at all times be in compliance with the net capital rule. See "Net Capital
Requirements."

        In addition to its underwriting and selling group activities, McDonald
Securities engages in structuring, managing and marketing private offerings of
corporate and municipal securities, and assists in arranging mergers,
acquisitions, divestitures, lease financing and venture capital financing. The
Company provides valuation and financial consulting services for gift and estate
tax purposes, employee stock ownership trusts, mergers, acquisitions, stock
purchase agreements, and other corporate purposes, as well as valuations for
public companies in the process of going private.

        McDonald Securities also markets investments in real estate, primarily
qualified low-income housing tax credit funds, and similar ventures. These
investments generally are in the form of limited partnership interests, which
are primarily marketed to institutional investors. In most cases McDonald
Securities originates such programs, and other subsidiaries of the Company may
act as a general partner.

















                                      - 6 -


<PAGE>   7


ITEM 1.  BUSINESS--Continued

PRINCIPAL TRANSACTIONS
----------------------

        McDonald Securities actively engages in trading as principal in various
phases of the over-the-counter securities business. To facilitate trading by its
customers, McDonald Securities buys, sells and maintains inventories of
municipal bonds, corporate bonds, government bonds, mortgage-backed securities,
common stocks and preferred stocks in order to "make markets" in those
securities. Revenues from principal transactions depend upon the general trend
of prices and level of activity in the securities market, the skill of employees
in market-making areas and the size of the inventories. Activities in trading as
a principal require the commitment of capital and create an opportunity for
profit and risk of loss due to market fluctuations. As of March 28, 1997,
McDonald Securities made markets in the common stock or other equity securities
of approximately 300 NASDAQ-quoted corporations, as well as other corporations
with less actively traded securities. McDonald Securities has acted as a
managing underwriter for and provides research coverage of certain of these
corporations.

        In executing customers' orders to buy or sell in the over-the-counter
market in a security in which it makes a market, McDonald Securities sells to or
purchases from its customers at a price which is approximately equal to the
current inter-dealer market price, plus or minus a markup or markdown.
Alternatively, McDonald Securities may act as agent and execute a customer's
purchase or sale order with another broker-dealer which acts as a market-maker
at the best inter-dealer market price available and charge a commission.

        The Securities and Exchange Commission has recently adopted significant
market structure rules under the Securities and Exchange Act of 1934 involving
the handling and execution of customer limit orders. A market maker in
over-the-counter securities is now required to display in their quote the price
and full size of customer limit orders. In addition, market makers are also
required to display in their quote any better priced orders that the market
maker places into an electronic network such as Selectnet or Instinet, unless an
alternative provided by the rule is available. The effect of these rules will be
to narrow spreads on NASDAQ trades and to reduce the potential for trading
profit on dealer to dealer trades. Approximately 20% of the NASDAQ-quoted
companies in which McDonald Securities makes a market are currently subject to
these rules. Eventually, 100% of these companies will be subject to these rules.
As more companies become subject to these rules, McDonald Securities'
profitability from trading NASDAQ-quoted companies will be reduced.

        McDonald Securities is a dealer in corporate, mortgage-backed, and
government fixed income securities which are carried in inventory primarily for
distribution to individual and institutional customers. McDonald Securities
buys, sells and positions mortgage-derivative securities and structured notes.
Holdings of high-yield securities are not material. McDonald Securities may
enter into short positions in United States Treasury securities in order to
hedge its interest rate risk related to fixed income securities.

        The Company's securities positions are subject to fluctuations in market
value and liquidity. The Company seeks to minimize the risks associated with
owning securities by monitoring its security positions on an ongoing basis. The
Company marks its securities to market daily. In addition, each trading
department adheres to a risk limit and a capital commitment limit determined by
senior management. Senior management regularly reviews the Company's securities
positions to ensure that these limits are not exceeded.

COMMISSIONS
-----------

        In executing customers' orders to buy or sell listed securities and
unlisted stocks and bonds in which it does not make a market, McDonald
Securities generally acts as an agent and charges a commission which is
competitive within the industry.

                                      - 7 -
<PAGE>   8

ITEM 1.  BUSINESS--Continued

INVESTMENT MANAGEMENT FEES
--------------------------

        Revenues from investment management fees include advisory fees from the
Company's mutual funds and money market funds and investment advisory fees
earned related to individual managed accounts.

        Under asset management programs, the Company provides investment
advisory services to individual, corporate and employee benefit plan clients.
Investment advisory fees for the fiscal year ended March 28, 1997 from
individual managed accounts represented approximately 58% of total revenues from
investment management fees.

        As of March 28, 1997, McDonald Securities is the investment advisor to
and the distributor of the following mutual funds: Gradison-McDonald Cash
Reserve Trust, which is comprised of one portfolio, Gradison U.S. Government
Reserves ("GMU", a money market fund investing in U.S. Government Securities),
Gradison Custodian Trust, which is comprised of one portfolio, Gradison
Government Income Fund ("GIF", a U.S. Government Securities income fund),
Gradison-McDonald Municipal Custodian Trust, which is comprised of one
portfolio, Gradison Ohio Tax-Free Income Fund ("GMO", a double tax-free income
fund for Ohio investors), Gradison Growth Trust, which is comprised of four
portfolios, Gradison Established Value Fund ("EST", a common stock fund
investing in large, established companies), Gradison Opportunity Value Fund
("OPP", a common stock fund investing in small companies), Gradison Growth &
Income Fund ("GRI", a common stock fund seeking long-term growth of capital,
current income and growth of income) and Gradison International Fund ("INT", a
common stock fund investing in non-United States companies). INT was established
during the fiscal year ended March 29, 1996. All of these funds are diversified,
open-end management investment companies.

        As of March 29, 1996, McDonald Securities was also the investment
advisor to and sole distributor of Gradison-McDonald Intermediate Municipal
Income Fund ("IMI," an intermediate term municipal income fund), a portfolio in
the Gradison-McDonald Municipal Custodian Trust. IMI, a diversified, open-ended
management investment company, was liquidated on August 16, 1996.

        The following summarizes the number of accounts and the size of each of
the Funds as of March 28, 1997 and March 29, 1996:
<TABLE>
<CAPTION>

                                                              March 28, 1997                      March 29, 1996
                                                      -----------------------------     -------------------------------

Funds                                                    Accounts            $            Accounts             $
-----                                                --------------   -------------    -------------     -------------
                                                                      (in thousands)                     (in thousands)
<S>                                                      <C>            <C>                <C>            <C>      
Gradison-McDonald Cash Reserve Trust
     U.S. Government Reserves                            91,036         1,555,308          85,080         1,414,256

Gradison Custodian Trust
     Government Income Fund                               4,744           155,799           5,337           180,652

Gradison-McDonald Municipal Custodian Trust:
     Ohio Tax-Free Income Fund                            1,464            76,336           1,578            72,100
     Intermediate Municipal Income Fund                    --                --               272            13,594

Gradison Growth Trust:
     Established Value Fund                              15,049           443,385          13,859           363,005
     Opportunity Value Fund                               6,340           117,469           6,151            99,636
     Growth & Income Fund                                 1,783            26,007             876            11,591
     International Fund                                   1,881            24,372           1,196            14,067

                                                        -------         ---------         -------         ---------
Total                                                   122,297         2,398,676         114,349         2,168,901
                                                        =======         =========         =======         =========
</TABLE>


                                      - 8 -
<PAGE>   9


ITEM 1.  BUSINESS--Continued

INVESTMENT MANAGEMENT FEES (cont.)
----------------------------------

        The investment advisory fees received from these funds are directly
related to the amounts invested in the funds. Accordingly, McDonald Securities'
investment advisory fees from the investment companies would be reduced in the
future if the amounts invested in the funds decrease.

        McDonald Securities also receives reimbursements from the Gradison Funds
for providing such funds with data processing, shareholder services and other
miscellaneous services.

INTEREST AND DIVIDENDS
----------------------

        A significant portion of the Company's pretax income is derived from
interest income net of interest expense. The amount of interest and dividend
income is directly impacted by the level of securities owned and customer margin
account balances, and by general fluctuations in interest rates. Approximately
57% of interest and dividend income represents interest charged to customers on
the amount borrowed to finance margin transactions. The rate of interest charged
to customers is based on the broker's call money rate (the interest rate on bank
loans to brokers secured by firm and customers' margin account securities) to
which an additional amount, up to 2.5%, is added depending on the size of the
debit balance. Approximately 33% of the Company's interest and dividend income
is generated from securities owned. Of the remaining 10% of the Company's
interest and dividend income, approximately 8%, is generated from securities
borrowed and approximately 2% represents dividend income.

OTHER
-----

        During the fiscal year ended March 28, 1997, approximately 29% of other
income represents service fees, IRA administration fees, and other
retail-related revenues compared to 27% and 37%, respectively, for the fiscal
years ended in March 1996 and 1995. Approximately 44% of other income represents
transfer agent fees and other fees derived from the Company's money market and
mutual funds compared to 36% and 49%, respectively, for the fiscal 1996 and 1995
years. For the fiscal year ended March 28, 1997, 17% of other income represented
revenues related to certain venture capital investments, compared to 24% in
fiscal 1996 and 6% in fiscal 1995. The Company periodically invests in venture
capital and other investments in the form of limited partnerships, general
partnerships and equity positions. Miscellaneous income represented 10%, 13% and
8% of other income, respectively, in the fiscal years ended March 1997, 1996 and
1995.

RETAIL BUSINESS
---------------

        During the fiscal year ended March 28, 1997, approximately 72% of the
Company's total revenues from customers were from individuals. During the fiscal
year ended March 28, 1997, approximately 28% of the revenues from individual
accounts were derived from agency transactions in listed and unlisted
securities. Individual commission rates on agency transactions are based upon a
schedule which is competitive within the securities industry. Discounts from the
schedule may be granted to retail customers on large trades.

        Approximately 29% of revenues from individual customers were derived
from propriety and nonpropriety mutual funds. These revenues include sales
charges, fees received from the funds under Section 12(b)(1), and advisory fees
and other fee income related to the propriety mutual funds. Approximately 20% of
retail-related revenues are derived from principal transactions in equity and
debt securities. The remaining 23% of retail-related revenues include revenues
from the sale of investment banking products and revenues from the sale of
annuities, life insurance and other products.

                                      - 9 -
<PAGE>   10


ITEM 1.  BUSINESS--Continued

INSTITUTIONAL BUSINESS
----------------------

        During the fiscal year ended March 28, 1997, approximately 28% of the
Company's total revenues from customers were from institutions. Institutional
customers include banks, insurance companies, thrift institutions, pension
funds, mutual funds and money managers. During the fiscal year ended March 28,
1997, approximately 50% of the revenues from institutional accounts were derived
from principal transactions, 31% from investment banking and 19% from agency
transactions. Commissions charged on agency transactions on behalf of
institutional customers are on a negotiated basis and represent a significant
discount from the Company's retail commission schedule.

MARGIN ACCOUNTS
---------------

        Customers' transactions in securities are effected on either a cash or
margin basis. Purchases and sales on a cash basis require full payment or
delivery of securities by the designated settlement date, generally the third
business day following the transaction date. McDonald Securities is at risk in
the event a customer fails to settle a trade and the value of the securities
declines, for a customer purchase or increases, for a customer sale, subsequent
to the transaction date. In a margin account, the customer pays a portion of the
cost of securities purchased and the broker-dealer makes a loan for the balance,
secured by the securities purchased or other securities owned by the investor.
The amount of the loan is subject to the margin regulations (Regulation T) of
the Board of Governors of the Federal Reserve System, NYSE margin requirements
and McDonald Securities' internal policies, which in some instances are more
stringent than Regulation T or NYSE margin requirements. Currently, in most
transactions Regulation T limits the amount loaned to a customer for the
purchase of a particular security to 50% of the purchase price. In the event of
a decline in the market value of the securities in a customer's margin account,
a member firm, under NYSE rules, is required to have the customer deposit cash
or additional securities so that the loan to the customer is no greater than 75%
of the value of collateral securities in the account. In permitting customers to
purchase securities on margin, McDonald Securities is subject to the risk of a
market decline which could reduce the value of its collateral below the
customers' indebtedness.

SECURITY REPURCHASE ACTIVITIES
------------------------------

        McDonald Securities acts as principal in the purchase and sale to its
customers of securities of the United States Government and its agencies,
including repurchase agreements in such securities. McDonald Securities may
match purchases and sales of these securities and is at risk to the extent that
it does not properly match the contracts or their customers are unable to meet
their obligations, especially during periods of rapidly changing interest rates
and fluctuations in market conditions. All positions are collateralized.
McDonald Securities generally takes physical possession of securities purchased
under agreements to resell. Such agreements provide McDonald Securities with the
right to maintain the relationship between the market value of the collateral
and the receivable. Typically, these contracts are entered into only with
clients of substantial size and credit-worthiness. McDonald Securities also
utilizes securities sold under repurchase agreements as a means of financing
portions of its trading inventories and facilitating hedging transactions.

                                     - 10 -
<PAGE>   11


ITEM 1.  BUSINESS--Continued

SECURITIES BORROWING AND LENDING ACTIVITIES
-------------------------------------------

        McDonald Securities borrows securities from other brokers and dealers to
facilitate short sales and clearance and delivery of securities that have been
sold by their customers when such customers fail to deliver securities prior to
settlement date. McDonald Securities also borrows securities to cover short
positions in NASDAQ securities in the ordinary course of business in its
over-the-counter trading operations. McDonald Securities pays to the lending
broker a cash deposit generally equal to 102 percent of the market value of the
securities borrowed and receives interest on the cash deposit. McDonald
Securities is at risk to the extent that the securities it borrows decline in
value and the loaning broker fails to return McDonald Securities' cash deposit.

        When engaging in securities lending activities, McDonald Securities
lends excess customer margin securities to the borrowing broker and collects
cash deposits that collateralize the securities loaned. In securities lending
transactions, McDonald Securities is at risk to the extent that it does not
maintain the relationship between the market value of securities loaned and the
value of the cash deposit held.


RESEARCH SERVICES
-----------------

        McDonald Securities maintains both an equity and fixed income research
staff which concentrates its efforts on regional research services for both
retail and institutional customers. McDonald Securities employs 26 equity
analysts who cover approximately 250 companies, a majority of which maintain
their headquarters in the Midwest. 9 of the 26 analysts are Chartered Financial
Analysts.

       Research services are made available generally without charge to
customers. Research services include the review and analysis of the economy,
general market conditions, industries and specific companies; recommendation of
specific action with regard to industries and specific companies; review of
customer portfolios; the furnishing of information to retail and institutional
customers; and responses to inquiries from customers and investment brokers. In
addition, McDonald Securities purchases several outside research services which
provide its customers with research more national in scope.

        Management believes that a significant portion of its institutional
equity business is attributable to research services. McDonald Securities
provides services to a nationwide institutional base as well as to institutional
clients in Canada, England, Scotland, Germany, Switzerland and the Far East.


COMPETITIVE FACTORS
-------------------

       Considerable consolidation has occurred in the securities industry as
numerous securities firms have either ceased operation or been acquired by other
securities firms, in many cases resulting in firms with greater financial
resources than firms such as McDonald Securities. In addition, a number of
substantial companies (mostly commercial banks) not previously engaged in the
securities business have made investments in and acquired securities firms.
These developments have resulted in significant additional competition for
McDonald Securities. Increasing competitive pressures in the securities industry
are requiring regional firms such as McDonald Securities to offer to their
customers many of the financial services which are provided by much larger
securities firms that have substantially greater resources and may have greater
operating efficiencies than McDonald Securities.

                                     - 11 -
<PAGE>   12


ITEM 1.  BUSINESS--Continued

COMPETITIVE FACTORS (cont.)
---------------------------

       McDonald Securities competes with other securities firms and with banks,
insurance companies, and other financial institutions principally on the basis
of service, product selection, price, location and reputation in local markets.
McDonald Securities operates at a price disadvantage to discount brokerage firms
that do not offer equivalent services. These firms generally effect transactions
at lower commission rates on an "execution only" basis, without offering other
services such as investment advice and research which are provided by
"full-service" brokerage firms such as McDonald Securities. In addition, some
discount brokerage firms have increased the range of services which they offer.
The existence of and anticipated continued increase in the number of discount
brokerage firms and services provided by such firms may adversely affect the
Company.

       Certain institutions, notably commercial banks and thrift institutions,
have become a competitive factor by offering certain investment banking and
corporate and individual financial services traditionally provided only by
securities firms. With the prior approval of the Federal Reserve, securities
subsidiaries of bank holding companies may now underwrite and deal in corporate
debt and equity securities, provided that they comply with certain firewalls and
that the revenues from such activities do not exceed 25 percent of the
securities subsidiary's total revenues. Legislative proposals currently under
consideration would eliminate this limit on such activities and would permit
banks, bank holding companies and their subsidiaries and affiliates to offer
additional services which have traditionally been provided only by securities
and money management firms. While it is presently not possible to predict the
type and extent of competitive services which banks and other institutions
ultimately may offer or the extent to which administrative or legislative
barriers will be repealed or modified, to the extent that such services are
offered on a large scale, securities firms such as McDonald Securities may be
adversely affected.

EMPLOYEES
---------

       The Company has 1,291 employees, of whom 18 have senior managerial
responsibilities, 403 are full-time investment brokers, 250 are engaged in other
production areas, including trading, research, investment banking, and
investment advisory, and 620 are employed in processing securities transactions,
accounting, management information systems, mutual fund services, personnel and
other administrative services.

       Competition among securities firms and other competitors for successful
investment brokers, securities traders, investment bankers and research analysts
is intense. The Company recognizes the importance of hiring, training and
retaining investment brokers. The Company trains new investment brokers who are
required to take examinations given by the NYSE, the NASD and various states in
order to be registered and qualified. The Company also provides ongoing training
programs for investment brokers. The Company has experienced a relatively low
rate of turnover of investment brokers. From time to time, however, the Company
experiences the loss of valuable personnel.

       The Company considers its employee relations to be good and believes that
its compensation and employee benefits, which include medical, life and
disability insurance, and a 401(k) defined contribution and profit-sharing plan,
are competitive with those offered by other securities firms. None of the
Company's employees is covered by a collective bargaining agreement.

                                     - 12 -
<PAGE>   13


ITEM 1.  BUSINESS--Continued

REGULATION
----------

       The securities industry in the United States is subject to extensive
regulation under federal and state laws. The Securities and Exchange Commission
(the "Commission") is the federal agency charged with administration of the
federal securities laws. Much of the regulation of broker-dealers, however, has
been delegated to self-regulatory organizations, principally the NASD and the
national securities exchanges. These self-regulatory organizations adopt rules
(which are subject to approval by the Commission) which govern the industry and
conduct periodic examinations of member broker-dealers. Securities firms are
also subject to examination by state securities commissions in the states in
which they are registered. McDonald Securities is currently registered as a
broker-dealer in all states. In addition, McDonald Securities is registered as a
broker-dealer with the Commission.

       The regulations to which broker-dealers are subject cover all aspects of
the securities business, including sales methods, trade practices among
broker-dealers, capital structure of securities firms, record-keeping and the
conduct of directors, officers and employees. Additional legislation, changes in
rules promulgated by the Commission and by self-regulatory organizations, or
changes in the interpretation or enforcement of existing laws and rules often
directly affect the method of operation and profitability of broker-dealers. The
Commission and the self-regulatory organizations may conduct administrative
proceedings which can result in censure, fine, suspension or expulsion of a
broker-dealer, its officers or employees. The principal purpose of regulation
and discipline of broker-dealers is the protection of customers and the
securities market rather than protection of creditors and stockholders of
broker-dealers.

        The Company anticipates regulation of the securities industry to
increase and for compliance with regulations to become more difficult. At
present the Company is unable to predict the extent of changes that may be
enacted, or the effect on the Company's business.

       McDonald Securities' Compliance Committee has the responsibility of
performing reviews to provide reasonable assurance that the officers, directors,
and employees comply with the regulatory requirements of the Commission,
self-regulatory agencies, and McDonald Securities' internal requirements.

        McDonald Securities is required by federal law to belong to the SIPC.
When the SIPC fund falls below a certain minimum amount, members are required to
pay annual assessments to restore the fund. The SIPC fund provides protection
for securities held in customer accounts up to $500,000 per customer, with a
limitation of $100,000 on claims for cash balances.


NET CAPITAL REQUIREMENTS
------------------------

       As a broker-dealer and member of the NYSE, McDonald Securities is subject
to the Uniform Net Capital Rule promulgated by the Commission (Rule 15c3-1)
which provides that a broker-dealer doing business with the public shall not
permit its aggregate indebtedness (as defined) to exceed 15 times its net
capital (as defined) or, alternatively, that its net capital shall not be less
than 2% of aggregate debit balances (primarily receivables from customers)
computed in accordance with Rule 15c3-3. The Rule is designed to measure the
general financial integrity and liquidity of a broker-dealer and the minimum net
capital deemed necessary to meet the broker-dealer's continuing commitments to
its customers. Management believes that the alternative method is more directly
related to the level of customer business, therefore McDonald Securities
computes its net capital under the alternative method.

                                     - 13 -
<PAGE>   14


ITEM 1.  BUSINESS--Continued

NET CAPITAL REQUIREMENTS (cont.)
--------------------------------

        A broker-dealer may be required to reduce its business if its net
capital is less than 4% of aggregate debit balances and may be prohibited from
expanding its business or declaring cash dividends if its net capital is less
than 5% of aggregate debit balances. In addition, a broker-dealer may be subject
to disciplinary action by the Commission and self-regulatory agencies, such as
the NYSE, including fines, censure, suspension or expulsion.

        Under Rule 15c3-1 a broker-dealer is required to provide advance written
notice to the Commission of any loan, unsecured advance, or withdrawal of equity
capital which exceeds, in any 30 day period, 30% of excess net capital.
Additionally, written notice must be given to the Commission of any loan,
unsecured advance, or withdrawal of equity capital which exceeds, in any 30 day
period, 20% of excess net capital, within two business days subsequent to the
transaction.

     In computing net capital, various adjustments are made to net worth with a
view to excluding assets which are not readily convertible into cash and to a
conservative statement of the other assets such as a firm's position in
securities. Compliance with the Uniform Net Capital Rule may limit those
operations of a firm which require the use of its capital for purposes of
maintaining the inventory required for trading in securities, underwriting
securities and financing customer margin account balances. A significant
operating loss or an extraordinary charge against net capital could adversely
affect the ability of a broker-dealer to expand or even maintain its present
level of business. Net capital and aggregate debit balances change from day to
day. At March 28, 1997, McDonald Securities' net capital was $78,724,000 which
was 39% of its aggregate debit balances and $74,686,000 in excess of the minimum
required net capital.

       McDonald Securities has outstanding $25,000,000 in aggregate principal
amount of 8.24% Subordinated Notes due January 15, 2002. McDonald Securities is
required to prepay principal amounts of $5,000,000 on January 15 in each year
beginning in 1998. The notes are subordinated in right of payment to all senior
indebtedness and general creditors of McDonald Securities. The principal amount
of the notes has been approved by the New York Stock Exchange Inc. for inclusion
in the regulatory capital of McDonald Securities.

(d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES

             Not Applicable.

                                      -14 -
<PAGE>   15


ITEM 2.  PROPERTIES.

        The Company has a total of 42 offices in 11 states, all of which are
leased under lease agreements expiring from 1997 to 2009. Certain of these
leases have renewal options. The table below sets forth the location of each of
the Company's offices and the number of full-time investment brokers in each
office:
<TABLE>
<S>                                <C>                             <C>

HEADQUARTERS                       Mansfield (4)                   KENTUCKY
------------                       Pepper Pike (22)                   Crestview Hills (4)   
     Cleveland (55)                Rocky River (19)                                        
                                   Sandusky (3)                    MASSACHUSETTS           
                                   Strongsville (5)                   Boston (4)     
DIVISIONS                          Toledo (4)                         
---------                          Willoughby Hills (11)     
Gradison Division                                                
   Cincinnati, Ohio                
S. J. Wolfe Division                                               MICHIGAN
   Dayton, Ohio                                                       Ann Arbor (7)
                                                                      Battle Creek (2)
BRANCHES                        CALIFORNIA                            Birmingham (21)
--------                           Los Angeles (4)                    East Lansing (6)       
     OHIO                                                             Grand Rapids (15)      
         Akron (11)             FLORIDA                               Grosse Pointe Woods (7)
         Canfield (7)              Naples (9)                         Holland (2)            
         Canton (6)                                                                          
         Chillicothe (1)                                           NEW JERSEY                
         Cincinnati (46)        GEORGIA                               Jersey City (19)       
         Columbus (6)              Atlanta (4)                                               
         Dayton (6)                                                                          
         Dublin (6)             ILLINOIS                           TENNESSEE                 
         Elyria (9)                Chicago (7)                        Memphis (10)           
         Findlay (5)                                                                         
         Hudson (4)             INDIANA                                                      
         Kenwood (10)              Elkhart (6)                                               
         Kettering (5)             Fort Wayne (6)                                            
         Lancaster (3)             Indianapolis (12)                                         
         Lima (2)                  Indianapolis North (8)                                    
</TABLE>
                                

        The Company's executive office and largest sales office is located in
Cleveland, Ohio. The Company's order entry, trading, investment banking,
research, operations and accounting activities are primarily centralized in the
Cleveland office. The office, which occupies approximately 158,500 square feet
of space, is operated under a lease expiring in 2009. The Gradison Division of
McDonald Securities is located in Cincinnati, Ohio. The Gradison Division
office, which occupies approximately 48,000 square feet of space, is operating
under a lease expiring in 2008. Personnel at the Gradison Division are primarily
involved in the mutual fund and investment advisory operations, retail sales,
management, and also certain accounting and administrative functions. The S. J.
Wolfe Division was opened in December, 1990 when the Company acquired certain
assets and the business of S. J. Wolfe & Co., a stock brokerage firm. The S. J.
Wolfe Division has an over-the-counter trading operation.

        The Company believes that at the present time its administrative and
sales office space is adequate and is suitably utilized.

                                     - 15 -
<PAGE>   16


ITEM 3.  LEGAL PROCEEDINGS.

        As is the case with many firms in the securities industry, McDonald
Securities is a defendant or co-defendant in a number of lawsuits alleging
damages, which are ordinary and routine litigation, incidental to the securities
and investment banking business. The Company is contesting the allegations of
the complaints in these cases and believes that there are meritorious defenses
in each of these lawsuits. Some of the proceedings relate to public
underwritings of securities in which McDonald Securities participated as a
member of the underwriting syndicate. The Company is also aware of litigation
against certain underwriters of offerings in which McDonald Securities was a
participant, but where McDonald Securities is not now a defendant. In these
latter cases, it is possible that McDonald Securities may be called upon to
contribute to settlements or judgments.

        McDonald Securities is a defendant in STEPHANIE TUBBS JONES ET. AL. V.
MCDONALD & CO. SECURITIES, INC., ET. AL. (the "Jones Litigation"), a lawsuit    
currently pending in Cuyahoga County, Ohio, Court of Common Pleas. The action
arose out of losses allegedly incurred by Cuyahoga County's Secured Assets Fund
Earnings Program ("SAFE"). McDonald Securities and six other defendants have
been named in the lawsuit. The complaint alleges that, in breach of various
legal duties allegedly owed to the plaintiff, McDonald Securities and/or the
other defendants enabled, facilitated and/or assisted the County's investment
staff to engage in unsuitable and inappropriate investment and trading
activities and practices. The plaintiff seeks to hold each of the defendants
liable for compensatory and consequential damages. In addition, the complaint
contains allegations of fraud and negligent misrepresentation against McDonald
Securities and another defendant arising out of their respective roles as
underwriters of two issuances of tax and current revenue anticipation notes
("TANS/CRANS") during 1993 and 1994. The plaintiff seeks to hold McDonald
Securities liable for compensatory, consequential and punitive damages as a
result of its role as an underwriter of the TANS/CRANS offerings. In June 1996,
the court denied motions to dismiss the plaintiff's claims filed by McDonald
Securities and various other defendants. In February 1997, the court granted
defendants' motion to disqualify the Cuyahoga County Prosecutor's Office from
the case. That ruling is currently being appealed by the plaintiff. In April
1997, pursuant to a stipulation entered into between the plaintiff and McDonald
Securities' co-defendant in the allegations related to the TANS/CRANS
offerings, the plaintiff dismissed its TANS/CRANS claims against the
co-defendant, without prejudice.

        On December 23, 1996, McDonald Securities filed an answer denying the
allegations of liability made by the plaintiff and raising a number of
affirmative defenses to the plaintiff's allegations. McDonald Securities also
filed counterclaims against the Cuyahoga County Board of Commissioners (the
"Board"). McDonald Securities' counterclaims consist of a breach of contract
claim arising out of representations and warranties made by the Board concerning
the absence of material misstatements or omissions in the Official Statements
for the TANS/CRANS offerings, and an estoppel claim arising out of McDonald
Securities' justifiable reliance on assurance provided by the Board concerning,
among other things, the investment experience of the Board's agents, the
authorizations of the transactions in question by the Board's Investment
Committee and the conformity of such transactions with the County's investment
policies and procedures. The case is currently in the discovery stage and no
trial date has been set. Based on the facts known to date, the Company believes
that the plaintiff's claims against McDonald Securities are without merit, and
intends to contest vigorously the allegations in the complaint.

        On February 29, 1996, the Company filed an application (the
"Application") with the Securities and Exchange Commission pursuant to Section
9(c) of the Investment Company Act of 1940 (the "Investment Company Act") for a
Temporary Order and a Permanent Order exempting it from the provisions of
Section 9(a)(1) of the Investment Company Act. That section prohibits, among
other things, any person convicted of a misdemeanor arising out of such person's
conduct as a broker-dealer from serving as an investment advisor to, or
principal underwriter for, any registered investment company. The Application
was prompted by the decision of the Franklin County Court of Common Pleas that
the Company violated Section 101.41(C) of the Ohio Revised Code by failing to
accurately report certain lawful expenditures (i.e., payments of honoraria to
speakers at Company-sponsored meetings) during 1993. The Company has been
granted temporary exemptions by the SEC, and its application for a Permanent
Order exempting it from Section 9(a)(1) is currently pending. Based upon its
discussions with the staff of the SEC and the treatment of similarly situated
persons in prior proceedings, the Company has no reason to believe that its
application for a permanent exemption will not be granted.

                                     - 16 -
<PAGE>   17

ITEM 3.  LEGAL PROCEEDINGS - Continued

         In view of the number and diversity of claims against the Company and
the inherent difficulty of predicting the outcome of litigation and other
claims, the Company cannot state with certainty what the eventual outcome of
pending litigation or other claims will be. The Company provides for costs
relating to these matters when a loss is probable and the amount can be
reasonably estimated. The effect of the outcome of these matters on the
Company's future results of operations cannot be predicted because any such
effect depends on future results of operations and the amount and timing of the
resolution of such matters. While it is not possible to predict with certainty,
management believes that the ultimate resolution of such matters will not have a
material adverse effect on the consolidated financial position, liquidity, or
results of operations of the Company.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

           None.

                                     - 17 -
<PAGE>   18
EXECUTIVE OFFICERS OF THE REGISTRANT.

   (Included pursuant to Instruction 3 to Item 401(b) of Regulation S-K)

The following table sets forth the executive officers of the Company and certain
other information with respect to each individual, including the years certain
individuals were partners in the Partnership, the predecessor to the Company's
business. Except for Mr. Weston, each of the executive officers listed below is
a Director of McDonald Securities.

        NAME                AGE                PRINCIPAL OCCUPATION
        ----                ---                --------------------

Thomas M. O'Donnell         61      Chairman of the Company since April 1, 1989;
                                    Director of the Company since June 7, 1983;
                                    Chairman of McDonald Securities from April
                                    1, 1989 to August 1, 1995; Chief Executive
                                    Officer of the Company from April 1, 1989 to
                                    January 1, 1994; President of the Company
                                    and McDonald Securities from July 23, 1984
                                    to April 1, 1989; Secretary of the Company
                                    from June 7, 1983 to July 23, 1984; Managing
                                    Director (Corporate Finance and Special
                                    Products) and Secretary of McDonald
                                    Securities from June 7, 1983 to July 23,
                                    1984; Partner from 1968 to 1990 and Managing
                                    Partner from 1989 to 1990.

William B. Summers, Jr.     47      Director of the Company since June 7, 1983;
                                    Chief Executive Officer of the Company and
                                    McDonald Securities since January 1, 1994;
                                    President of the Company since April 1,
                                    1989; Chairman of McDonald Securities since
                                    August 2, 1995; President of McDonald
                                    Securities from April 1, 1989 to August 1,
                                    1995; Executive Vice President of the
                                    Company and McDonald Securities from
                                    November 1, 1988 to April 1, 1989; Managing
                                    Director (Fixed Income Institutional Sales)
                                    of McDonald Securities from June 7, 1983 to
                                    November 1, 1988; Partner from 1975 to 1990.

Robert T. Clutterbuck       46      Director of the Company since August 7,
                                    1996; President and Chief Operating Officer
                                    of McDonald Securities since August 2, 1995;
                                    Treasurer of the Company since January 1,
                                    1994; Chief Financial Officer of McDonald
                                    Securities from January 1, 1994 to June 14,
                                    1996; Executive Managing Director of
                                    McDonald Securities from January 1, 1994 to
                                    August 1, 1995; Senior Managing Director
                                    (Municipal Bond Trading and Underwriting) of
                                    McDonald Securities from June 1, 1992 to
                                    December 31, 1993; Managing Director from
                                    May 1, 1987 to May 31, 1992; Senior Vice
                                    President from May 1, 1984 to April 30,
                                    1987; First Vice President from June 7, 1983
                                    to April 30, 1984; Partner from 1978 to
                                    1990.

Daniel F. Austin            45      Vice Chairman of McDonald Securities since
                                    August 2, 1995; Senior Managing Director
                                    (Corporate and Public Finance) of McDonald
                                    Securities from June 1, 1992 to August 1,
                                    1995; Managing Director from January 4, 1991
                                    to May 31, 1992; Senior Vice President from
                                    May 1, 1986 to January 3, 1991; First Vice
                                    President from May 1, 1985 to April 30,
                                    1986.

Jack N. Aydin               56      Managing Director (Resident Manager - Jersey
                                    City, New Jersey) of McDonald Securities
                                    since May 1, 1988; Senior Vice President
                                    from May 1, 1986 to April 30, 1988; First
                                    Vice President from June 7, 1983 to April
                                    30, 1986; Partner from 1977 to 1990.

                                     - 18 -


<PAGE>   19
EXECUTIVE OFFICERS OF THE REGISTRANT (cont.)

             NAME           AGE                PRINCIPAL OCCUPATION
             ----           ---                --------------------

Eugene H. Bosart III        54      Senior Managing Director (Regional Sales
                                    Manager - Michigan) of McDonald Securities
                                    since June 15, 1996; Managing Director from
                                    May 1, 1987 to June 14, 1996; Senior Vice
                                    President from June 7, 1983 to April 30,
                                    1987; Partner from 1972 to 1990.

Thomas G. Clevidence        47      Senior Managing Director (Human Resources
                                    and Community Affairs) of McDonald
                                    Securities since June 15, 1996; Managing
                                    Director (Human Resources and Community
                                    Affairs) from January 2, 1996 to June 14,
                                    1996; Managing Director (Human Resources)
                                    from July 1, 1992 to June 14, 1996; Vice
                                    President - Corporate Employment, Society
                                    Corporation/Ameritrust Corporation, from
                                    October 1989 to June 30, 1992; Senior
                                    Manager, Ernst & Young, from 1982 to October
                                    1989.

Ralph Della Ratta           43      Senior Managing Director (Corporate Finance)
                                    of McDonald Securities since June 1, 1996;
                                    Managing Director from June 1, 1992 to May
                                    31, 1996; Senior Vice President from June 1,
                                    1991 to May 31, 1992; First Vice President
                                    from June 1, 1990 to May 31, 1991; Vice
                                    President from October 12, 1987 to May 31,
                                    1990.

Dennis J. Donnelly          47      Senior Managing Director (Operations) of
                                    McDonald Securities since June 1, 1992;
                                    Managing Director from May 1, 1987 to May
                                    31, 1992; Senior Vice President from May 1,
                                    1984 to April 30, 1987; First Vice President
                                    from June 7, 1983 to April 30, 1984; Partner
                                    from 1980 to 1990.

David W. Ellis, III         41      Managing Director (Gradison-McDonald Asset
                                    Management) Gradison Division of McDonald
                                    Securities, since June 15, 1996; Senior Vice
                                    President, Gradison Division of McDonald
                                    Securities, from October 4, 1991 to June 14,
                                    1996; Director of Gradison & Company
                                    Incorporated from January 1, 1987 to October
                                    3, 1991; Senior Vice President, Gradison &
                                    Company Incorporated from September 1, 1988
                                    to October 3, 1991; Vice President from
                                    September 1, 1980 to August 31, 1988.

Patricia J. Jamieson        42      Senior Managing Director (Chief Financial
                                    Officer) of McDonald Securities since June
                                    1, 1997; Managing Director and Chief
                                    Financial Officer from June 15, 1996 to May
                                    31, 1997; Chief Accounting Officer of
                                    McDonald Securities from August 2, 1995 to
                                    June 14, 1996; Senior Vice President since
                                    June 1, 1991; First Vice President from May
                                    1, 1985 to May 31, 1991; Vice President from
                                    August 15, 1984 to April 30, 1985; Associate
                                    Vice President from October 3, 1983 to
                                    August 14, 1984.

David W. Knall              52      Senior Managing Director (Resident Manager -
                                    Indianapolis, Indiana) of McDonald
                                    Securities since June 15, 1996; Managing
                                    Director from June 7, 1983 to June 14, 1996;
                                    Partner from 1973 to 1990.

                                     - 19 -
<PAGE>   20

EXECUTIVE OFFICERS OF THE REGISTRANT (cont.)

             NAME           AGE               PRINCIPAL OCCUPATION
             ----           ---               --------------------

Thomas M. McDonald          50      Senior Managing Director (Private Client
                                    Group) of McDonald Securities since June 1,
                                    1997; Managing Director from June 1, 1993 to
                                    May 31, 1997; Senior Vice President from
                                    September 27, 1991 to May 31, 1993; Senior
                                    Vice President of Prescott Ball & Turben, a
                                    division of Kemper Securities Group, Inc.
                                    from February 1988 to September 26, 1991.

Lawrence T. Oakar           62      Managing Director (Private Client Group) of
                                    McDonald Securities since June 15, 1996;
                                    Senior Vice President from May 1, 1986 to
                                    June 14, 1996; First Vice President from
                                    July 20, 1983 to April 30, 1986; Partner
                                    from 1979 to 1990.

John F. O'Brien             60      Senior Managing Director (Private Client
                                    Group) of McDonald Securities since June 1,
                                    1992; Managing Director from June 17, 1983
                                    to May 31, 1992; Partner from 1971 to 1990.

James C. Redinger           60      Senior Managing Director (Equity
                                    Institutional Sales and Trading) of McDonald
                                    Securities since June 1, 1992; Managing
                                    Director from May 1, 1987 to May 31, 1992;
                                    Senior Vice President from May 1, 1984 to
                                    April 30, 1987; First Vice President from
                                    June 7, 1983 to April 30, 1984; Partner from
                                    1980 to 1990.

David D. Sutcliffe          36      Managing Director (Fixed Income Sales) of
                                    McDonald Securities since June 15, 1996;
                                    Senior Vice President from May 1, 1989 to
                                    June 14, 1996; First Vice President from May
                                    1, 1987 to April 30, 1989; Vice President
                                    from 1984 to April 30, 1987.

Bradley E. Turner           38      Senior Managing Director (Gradison-McDonald
                                    Asset Management) of McDonald Securities
                                    since June 15, 1996; Managing Director
                                    (Gradison-McDonald Asset Management) of
                                    McDonald Securities from June 1, 1995 to
                                    June 14, 1996; Senior Vice President
                                    (Portfolio Strategies Group) from June 1,
                                    1992 to May 31, 1995; First Vice President
                                    (Portfolio Strategies Group) from June 1,
                                    1990 to May 31, 1992; Vice President from
                                    May 1, 1988 to May 31, 1990; Associate Vice
                                    President from May 1, 1986 to April 30,
                                    1988.

Donald E. Weston            61      Director of the Company since October 4,
                                    1991; Chairman and Chief Executive Officer
                                    of the Gradison Division of McDonald
                                    Securities since October 4, 1991; Chairman
                                    of the Board and Chief Executive Officer of
                                    Gradison & Company Incorporated from
                                    January, 1982 to October 4, 1991; Trustee
                                    and Chairman of the Board of the
                                    Gradison-McDonald Cash Reserves Trust since
                                    August, 1982; of the Gradison Growth Trust
                                    since August, 1983; of the Gradison
                                    Custodian Trust since September, 1987 and of
                                    the Gradison-McDonald Municipal Custodian
                                    Trust since September, 1992.






                                     - 20 -


<PAGE>   21



                                     PART II
                                     -------

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
               MATTERS.

         The information required by this item is included herein at Exhibit
99(a) to this Form 10-K Annual Report set forth under the caption "Supplementary
Financial Data - Quarterly Data (Unaudited)".

ITEM 6.  SELECTED FINANCIAL DATA.

         The information required by this item is included herein at Exhibit
99(b) to this Form 10-K Annual Report.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS.

         The information required by this item is included herein at Exhibit
99(c) to this Form 10-K Annual Report.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         The information required by this item is included herein at Exhibit
99(d) to this Form 10-K Annual Report.

ITEM 9.  DISAGREEMENTS WITH ACCOUNTANTS ON FINANCIAL DISCLOSURE.

         None.

                                     - 21 -


<PAGE>   22



                                    PART III
                                    --------

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

         The information regarding Directors appearing under the caption of
"Election of Directors" in the registrant's definitive Proxy Statement to be
used in connection with Annual Meeting of Stockholders to be held on July 30,
1997 (the "1997 Proxy Statement") is incorporated herein by reference.
Information regarding executive officers of the Registrant is set forth in Part
I of this Form 10-K Annual Report.

ITEM 11.  EXECUTIVE COMPENSATION.

         The information required by this item is incorporated herein by
reference to "Executive Compensation" in the 1997 Proxy Statement.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         The information required by this item is incorporated by reference to
"Stock Ownership of Principal Holders and Management" in the 1997 Proxy
Statement.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         The information required by this item is incorporated herein by
reference to "Certain Transactions" in the 1997 Proxy Statement.

                                     - 22 -


<PAGE>   23



                                     PART IV
                                     -------

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a)  DOCUMENT LIST

1.  Financial Statements

         The following financial statements and other information are filed as
part of this Form 10-K Annual Report herein at Exhibit 99(d).

McDonald & Company Investments, Inc. and Subsidiaries:
------------------------------------------------------

         (i)     Consolidated Statements of Income--fiscal years ended 
                 March 28, 1997, March 29, 1996 and March 31, 1995

         (ii)    Consolidated Statements of Financial Condition--March 28, 
                 1997 and March 29, 1996

         (iii)   Consolidated Statements of Changes in Stockholders' 
                 Equity--fiscal years ended March 28, 1997, March 29, 1996 
                 and March 31, 1995

         (iv)    Consolidated Statements of Cash Flows--fiscal years ended 
                 March 28, 1997, March 29, 1996 and March 31, 1995

         (v)     Notes to Consolidated Financial Statements--March 28, 1997

         (vi)    Report of Independent Auditors

2.  Supplementary Data and Financial Statement Schedules

         (i)     Supplementary data entitled "Supplementary Financial Data-
                 Quarterly Data (Unaudited)" is filed as part of this Form 10-K 
                 Annual Report herein at Exhibit 99(a).

             All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and therefore have
been omitted.

                                     - 23 -


<PAGE>   24



ITEM 14(a)  DOCUMENT LIST -- Continued

3.  Exhibits Required by Securities and Exchange Commission
    Regulation S-K

(a)  The following exhibits are filed as part of this Report:
<TABLE>
<CAPTION>

        Exhibit                                                                                   Sequential Page
        -------                                                                                   ---------------

        <S>            <C>                                                                                    <C>
         11            Statement Re: Computation of Per Share Earnings                                        29
         21            Subsidiaries of the Registrant.....................................................    30
         23            Consent of Independent Auditors....................................................    32
         27            Financial Data Schedule BD
         99(a)         Supplementary Financial Data - Quarterly Data
                         (Unaudited)......................................................................    33
         99(b)         Selected Financial Data............................................................    34
         99(c)         Management's Discussion and Analysis of Results of
                         Operations and Financial Condition...............................................    35
         99(d)         Consolidated Financial Statements of the Company and Independent Auditors'
                         Report thereon listed under Item 14(a)(1)........................................    41

(b)  The following exhibits are incorporated herein by reference:

         2(a): Agreement and Plan of Reorganization dated as of July 24, 1991 by
         and among the Registrant, McDonald & Company Securities, Inc. and
         Gradison & Company Incorporated (incorporated by reference to Exhibit
         2.1 to the Company's Amendment No. 1 to Form S-4 Registration Statement
         (Reg. No. 33-42566), which became effective on September 13, 1991)

         2(b): Form of First Amendment to the Agreement and Plan of
         Reorganization by and among the Registrant, McDonald & Company
         Securities, Inc. and Gradison & Company Incorporated (incorporated by
         reference to Exhibit 2.2 to the Company's Amendment No. 1 to Form S-4
         Registration Statement (Reg. No. 33-42566), which became effective on
         September 13, 1991)

         2(c): Form of Agreement of Merger by and among the Registrant, McDonald
         & Company Securities, Inc. and Gradison & Company Incorporated
         (incorporated by reference to Exhibit 2.3 to the Company's Amendment
         No. 1 to Form S-4 Registration Statement (Reg. No. 33-42566), which
         became effective on September 13, 1991)

         3(a): Certificate of Incorporation of the Company (incorporated by
         reference to Exhibit 4(a) to the Company's Form S-8 Registration
         Statement (Reg. No. 33-11335), which became effective on February 2,
         1987)

         3(b): By-Laws of the Company (incorporated by reference to Exhibit 4(b)
         to the Company's Form S-8 Registration Statement (Reg. No. 33-11335),
         which became effective on February 2, 1987)

         3(c): Certificate of Amendment to the Company's Certificate of
         Incorporation (incorporated by reference to Exhibit 3(c) to the
         Company's Form 10-K for the fiscal year ended March 26, 1993)

         4(a): Specimen Stock Certificate (incorporated by reference to Exhibit
         4 to the Company's Form S-1 Registration Statement (Reg. No. 2-84300),
         which became effective on July 20, 1983)
</TABLE>

                                     - 24 -


<PAGE>   25




ITEM 14(a)  DOCUMENT LIST -- Continued

                                                                             
         10(a): Stock Option Plan (incorporated by reference to Exhibit 4(b) to
         the Company's Form S-8 Registration Statement (Reg. No. 33-ll335),
         which became effective on February 2, 1987)*

         10(b): 1990 Stock Option Plan for Outside Directors (incorporated by
         reference to Exhibit 4.4 to the Company's Form S-8 Registration
         Statement (Reg. No. 33-37603), which became effective on November 5,
         1990)*

         10(c): Documents reflecting lines of credit with First National Bank of
         Chicago ($25,000,000), and the Bank of Tokyo ($45,000,000)
         (incorporated by reference to Exhibit 10(p) to the Company's Form 10-K
         for the fiscal year ended March 27, 1992)

         10(d): Documents reflecting line of credit with The Northern Trust
         Company ($10,000,000) (incorporated by reference to Exhibit 10(p) to
         the Company's Form 10-K for the fiscal year ended March 29, 1991)

         10(e): Documents reflecting lines of credit with Bankers Trust Company
         ($50,000,000), and Huntington National Bank ($25,000,000) (incorporated
         by reference to Exhibit 10(p) to the Company's Form 10-K for the fiscal
         year ended March 26, 1993)

         10(f): Documents reflecting lines of credit with National City Bank
         ($25,000,000) and Star Bank ($20,000,000) (incorporated by reference to
         Exhibit 10(m) to the Company's Form 10-Q for the fiscal quarter ended
         September 24, 1993)

         10(g): 1993 Restricted Stock Bonus Plan (incorporated herein by
         reference to the Company's Definitive Proxy Statement for its Annual
         Meeting held on July 27, 1993)*

         10(h): Form of Note Purchase Agreement between McDonald & Company
         Securities, Inc. and the Purchasers listed therein, dated as of January
         15, 1993, relating to $25,000,000 principal amount of 8.24%
         Subordinated Notes (incorporated by reference to Exhibit 10 of the
         Company's Form 8-K filed with the Securities and Exchange Commission on
         February 5, 1993)

         10(i): McDonald & Company Securities, Inc. Retirement Savings Trust and
         Plan (incorporated by reference to Exhibit 10(n) to the Company's Form
         10-Q for the fiscal quarter ended September 24, 1993)*

         10(j): Documents reflecting lines of credit with Bank of New York
         ($90,000,000) (incorporated by reference to Exhibit 10(m) to the
         Company's Form 10-K for the fiscal year ended March 25, 1994)

         10(k): Lease Agreement dated July 21, 1994 for the Company's executive
         offices, which became effective April 1, 1994 (incorporated by
         reference to Exhibit 10(k) to the Company's Form 10-K for the fiscal
         year ended March 31, 1995)

         10(l): 1995 Stock Bonus Plan (incorporated by reference to the
         Company's Definitive Proxy Statement for its Annual Meeting held on
         August 2, 1995)*

         10(m): 1995 Key Employees Stock Option Plan (incorporated by reference
         to the Company's Definitive Proxy Statement for its Annual Meeting held
         on August 2, 1995)*

         10(n): 1995 Stock Option Plan for Non-Officer Directors (incorporated
         by reference to the Company's Definitive Proxy Statement for its Annual
         Meeting held on August 7, 1996)*

* Management contract or compensatory plan or arrangement identified pursuant to
Item 14(c) of this Form 10-K.

                                     - 25 -


<PAGE>   26



ITEM 14(a)   DOCUMENT LIST--Continued

         10(o): Lease Agreement dated May 21, 1996 for the Company's Gradison
         Division, which became effective July 1, 1996 (incorporated by
         reference to Exhibit 10(p) to the Company's Form 10-Q for the fiscal
         quarter ended September 27, 1996)

         10(p): Documents reflecting line of credit with Star Bank ($20,000,000)
         (incorporated by reference to Exhibit 10(q) to the Company's Form 10-Q
         for the fiscal quarter ended December 31, 1996)

         10(q): First Amendment to the Stock Bonus Plan, which became effective
         March 30, 1996 (incorporated by reference to the Company's Definitive
         Proxy Statement for its Annual Meeting to be held on July 30, 1997)*

ITEM 14(b)   REPORTS ON FORM 8-K.

         The Company did not file a current Report on Form 8-K during the fiscal
quarter ended March 28, 1997.

OTHER
-----

         On February 9, 1995, the Company announced the continuation of an open
market repurchase program originally instituted in July 1987. The current
program allows the Company to purchase up to 1,000,000 shares of its Common
Stock at an aggregate price not to exceed $25,000,000. Treasury shares may be
used to satisfy options exercised under the Company's stock option plans and
shares awarded under the Company's 1995 Stock Bonus Plan.

         During the fiscal year ended March 28, 1997 the Company purchased
176,803 shares of the Company's Common Stock at an average price of $18.716 per
share. During the fiscal year ended March 28, 1997, the Company utilized 83,362
shares of the Company's Common Stock held in treasury to satisfy options
exercised under the Company's stock option plans.







* Management contract or compensatory plan on arrangement identified pursuant to
Item 14(c) of this Form 10-K.

                                     - 26 -


<PAGE>   27



                                   SIGNATURES
                                   ----------

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized at Cleveland, Ohio on
this 20th day of June, 1997.

                                McDONALD AND COMPANY INVESTMENTS, INC.

                                By:  /s/ William B. Summers, Jr.
                                   ---------------------------------------
                                    William B. Summers, Jr., President and
                                    Chief Executive Officer

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on                  .
<TABLE>
<CAPTION>

Signature                                           Title:
---------                                           ------

<S>                                                 <C>    
/s/ William B. Summers, Jr.                         President and Director
--------------------------------------              (Principal Executive Officer)
William B. Summers, Jr.                             

/s/ Robert T. Clutterbuck                           Treasurer and Director (Principal
--------------------------------------              Financial and Accounting Officer)
Robert T. Clutterbuck                               

/s/ Thomas M. O'Donnell                             Chairman and Director                                               
--------------------------------------                                       
Thomas M. O'Donnell                                                          
                                                                             
/s/ Rena J. Blumberg                                Director                                                            
--------------------------------------                                       
Rena J. Blumberg                                                             
                                                                             
 /s/ Jeanette Grasselli Brown                       Director                                                            
--------------------------------------                                       
Jeanette Grasselli Brown                                                     
                                                                             
/s/ Edward Fruchtenbaum                             Director                                                            
--------------------------------------                                       
Edward Fruchtenbaum                                                          
                                                                             
/s/ James A. Karman                                 Director                                                            
--------------------------------------                                       
James A. Karman                                                              
                                                                             
/s/ David N. McCammon                               Director                                                            
--------------------------------------                                       
David N. McCammon                                                            
                                                                             
/s/ Frederick R. Nance                              Director                                                            
--------------------------------------                                       
Frederick R. Nance                                                           
                                                                             
/s/ Donald E. Weston                                Director                                                            
--------------------------------------              
Donald E. Weston
</TABLE>




                                     - 27 -
<PAGE>   28





                      McDonald & Company Investments, Inc.

          Report on FORM 10-K for the Fiscal Year ended March 28, 1997

                                  EXHIBIT INDEX
                                  -------------
<TABLE>
<CAPTION>

Exhibit No.       Description                                                           Sequential Page
-----------       -----------                                                           ---------------

                                                                
  <S>             <C>                                                                        <C>
    11            Statement Re: Computation of
                  Per Share Earnings.....................................................    29

    21            Subsidiaries of the Registrant.........................................    30

    23            Consent of Independent
                    Auditors.............................................................    32

    27            Financial Data Schedule BD

    99(a)         Supplementary Financial Data
                    Quarterly Data (Unaudited)...........................................    33

    99(b)         Selected Financial Data................................................    34

    99(c)         Management's Discussion and
                    Analysis of Results of Operations
                    and Financial Condition..............................................    35

    99(d)         Consolidated Financial Statements of the Company and Independent
                    Auditors' Report thereon listed under Item 14(a)(1)..................    41

</TABLE>





                                     - 28 -