THE BANC STOCK
GROUP FUND
Investing in America through
America's community banks
SEMI-ANNUAL REPORT
August 31, 1997
(UNAUDITED)
1150 Schrock Road
Suite 437
Columbus, Ohio 43229
<PAGE>
THE BANC STOCK GROUP FUND
Investing in America through America's Community Banks
Dear Shareholder:
August 1, 1997, marks the day we invited the nation to invest in independent
community bank stocks. Almost two years in the making, THE BANC STOCK GROUP FUND
offers investors of every means the opportunity to build their wealth prudently
and patiently. Please accept my personal appreciation for your investment in the
fund.
As of October 7, 1997, the NAV of the fund was $11.16. During the period August
1, 1997 through October 7, 1997, the Banc Stock Group Fund had increased in
value by 11.1% while the NYSE composite index had increased only 4.17%, the S&P
500 by 3.02% and the Dow Jones Industrial Average had decreased by .77%. As you
can see, we are off to a terrific start.
I would also like you to know that we have wonderful professional support for
the fund. A special thanks goes to the following: Donald Mendelsohn and JoAnn
Strasser, attorneys at Brown, Cummins & Brown Co., L.P.A., counsel to the Fund;
Michael Miola at American Data Services, Inc., transfer agent / administrator;
James McCurdy at McCurdy and Associates, Auditors; Lawrence Woodcock of Star
Bank, N.A., Custodial Services; and Laurence Sturtz, at Carlile Patchen &
Murphy, general counsel to the Adviser.
As advocates of community bank stocks for more than twenty years, we know the
value of long-term investing. We also know the value of happy customers...
please tell your friends that they can request a prospectus by calling 888-BANK
595 (888-226-5595). Finally, if you have any questions, you are always welcome
to call me directly at 800-733-2265.
Sincerely,
BANC STOCK GROUP FUND
/s/ Michael E. Guirlinger
MICHAEL E. GUIRLINGER
President
P.S. The fund is an ideal gift for family members or for your IRA contribution.
1
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THE BANC STOCK GROUP FUND
SCHEDULE OF INVESTMENTS
AUGUST 31, 1997
(UNAUDITED)
_______________________________________________________________________________
MARKET
SHARES VALUE
- ------ -----
COMMON STOCKS - 92.21%
2,000 Abington Bancorp, Inc. .................. $61,000
5,000 Access Anytime Banco, Inc. .............. 34,375
2,000 Andover Bancorp, Inc. ................... 61,000
4,000 Atlantic Bank, Inc. ..................... 54,500
2,000 Bank of Commerce, Inc. .................. 39,000
1,250 Banknorth Group, Inc. ................... 62,500
5,000 Bankunited Financial Corp. .............. 60,000
1,000 Bar Harbor Bancshare .................... 46,500
2,000 Bay Area Bancshares, Inc. ............... 46,250
4,000 BNC Corp. ............................... 53,000
1,650 BT Financial Corp. ...................... 64,762
3,000 Capital Corp of the West, Inc. .......... 40,500
2,500 Carnegie Bancorp, Inc. .................. 55,000
2,000 Cathay Bancorp, Inc. .................... 53,000
2,000 Central Cooperative Bank, Inc. .......... 39,000
500 Century Bancorp, Inc. ................... 39,750
2,000 CFX Corp. ............................... 40,500
1,000 Coast Bancorp, Inc. ..................... 29,250
2,000 Coastal Bancorp, Inc. ................... 59,000
2,000 Cobancorp, Inc. ......................... 54,500
1,500 Commercial Federal, Inc. ................ 63,094
1,000 Community Bancshares Inc., VA ........... 20,750
2,000 Community Trust Bancorp, Inc. ........... 51,000
7,000 Comstock Bancorp, Inc. .................. 45,500
1,000 Covest Bancshares, Inc. ................. 23,125
1,250 Crestar Financial ....................... 55,859
3,000 D&N Financial Corp., HNCK ............... 55,875
3,000 DCB Financial, Inc. ..................... 65,250
400 DBNF Financial, Inc. .................... 17,400
500 First Citizens Bancshares, Inc. ......... 44,750
1,500 First Citizens Corp. .................... 48,000
3,000 First Coastal Corp. ..................... 32,625
3,000 First Financial Corp. ................... 45,750
2,000 First Keystone Financial ................ 55,500
2,000 First Liberty Financial ................. 45,000
1,500 First Long Island, Inc. ................. 67,875
3,000 First Saving Bancorp .................... 61,875
1,000 First Virginia Banks .................... 68,125
4,000 FNB Rochester Corp. ..................... 66,000
MARKET
SHARES VALUE
------ -----
3,000 Franklin Bank, Inc. .................... $48,000
1,900 Heritage Oaks Bancorp, Inc. ............ 31,113
3,000 Hingham Institution for Savings, Inc. .. 72,750
1,500 Home Federal, Inc. ..................... 45,000
2,000 Iroquois Bancorp Inc. .................. 50,000
2,000 ITLA Capital Corp. ..................... 35,500
2,000 Klamath First Bancorp .................. 39,250
1,500 Lake Ariel Bancorp Inc. ................ 35,625
2,000 Mahaska Investment Co. ................. 53,000
3,000 Mechanics Savings Bank, Inc. ........... 67,500
2,000 Northern Empire, Inc. .................. 52,500
2,600 Orange National Bancorp ................ 54,925
2,000 Pacific West Capital Inc. .............. 30,000
2,000 Parkvale Financial, Inc. ............... 58,500
2,000 Peoples Bancshares, Inc. ............... 33,500
3,000 Prestige Bancorp Inc. .................. 51,000
4,000 River Valley Bancorp ................... 66,000
2,000 Skaneateles Bancorp, Inc. .............. 45,500
5,000 Skyland Community Bank ................. 43,125
2,000 Summit Bank Corp. ...................... 33,000
1,000 Tomkins County Trust, Inc. ............. 35,875
1,000 Union Planters Corp. ................... 51,250
3,000 United Security Bancorp ................ 46,875
3,000 Westerfed Financial Corp ............... 64,125
3,000 WSFS Financial, Inc. ................... 45,375
-----------
Total Common Stocks (cost $3,114,051) ............... 3,116,028
-----------
REPURCHASE AGREEMENT - 1.57%
PRINCIPAL
AMOUNT
- ------
$53,000 Star Bank Repurchase Agreement, 4.90%, dated
8/29/97, due 9/2/97, collateralized by $55,000
GNMA II, 7.00%, due 1/20/24 (value at collateral
is $56,186) (proceeds $53,029)(cost $53,000).... 53,000
---------
SEE NOTES TO FINANCIAL STATEMENTS
2
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THE BANC STOCK GROUP FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 1997
(UNAUDITED)
-----------------------------------
TOTAL INVESTMENTS
(Cost $3,167,051) (1)............................93.78% 3,169,028
OTHER INVESTMENTS LESS
LIABILITIES...................................... 6.21% 210,052
---- -------
TOTAL NET ASSETS...................................100.0% $ 3,379,080
====== ===========
(1) Federal Tax Information: At August 31, 1997 the net
unrealized appreciation based on cost for Federal
Income tax purposes of $3,167,051 was as follows:
Aggregate gross unrealized appreciation for all
investments in which there was an excess of value
over cost............................................ $ 54,952
Aggregate gross unrealized depreciation for all
investments in which there was an excess of cost
over value........................................... (52,975)
-----------
Net unrealized appreciation.......................... $ 1,977
===========
THE BANC STOCK GROUP FUND
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1997
(UNAUDITED)
-----------------------------------
ASSETS:
Investments in securities, at value
(cost $3,167,051) (Note 2) ............... $3,169,028
Cash ....................................... 28
Receivables:
Fund shares sold ...............$213,372
Dividends and interest .......... 1,460 214,832
-----
Deferred organization expenses ............. 0
---------
Total Assets ........................... 3,383,888
LIABILITIES:
Due to investment advisor ......$ 4,808
--------
Total Liabilities ........................ 4,808
---------
Net Assets ................................. $3,379,080
---------
NET ASSETS CONSIST OF:
Capital stock, no par value;
unlimited shares authorized;
339,427 shares outstanding .............. $3,375,801
Net investment income ..................... 1,302
Unrealized appreciation on
investments ............................... 1,977
---------
Net Assets ................................ $3,379,080
---------
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE
($3,379,080 / 339,427 shares
of capital stock outstanding)
(Note 5 ) ............................. $ 9.96
----------
COMPUTATION OF OFFERING PRICE PER SHARE
(Net asset value $9.96 / 0.96) ........ $ 10.38
----------
SEE NOTES TO FINANCIAL STATEMENTS
3
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THE BANC STOCK GROUP FUND
STATEMENT OF OPERATIONS
For the period August 1, 1997
(inception of operations)
through August 31, 1997
(UNAUDITED)
-----------------------------
INVESTMENT INCOME:
Dividends ................................ $1,967
Interest ................................. 4,143
-----
Total income ............................. 6,110
Expenses:
Operating expenses (Note 4) .............. 4,808
-----
Total expenses ........................... 4,808
-----
Net investment income .................... 1,302
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
(Note 2)
Net realized gain (loss) from
investment transactions................. -0-
Net unrealized appreciation of
investments.............................. 1,977
-----
Net realized and unrealized gain
on investments............................ 1,977
-----
Net increase in net assets resulting
from operations........................... $3,279
------
THE BANC STOCK GROUP FUND
STATEMENT OF CHANGES IN NET ASSETS
For the period August 1, 1997
(inception of operations)
through August 31, 1997
----------------------------------
Net investment income..................... $1,302
Net realized gain/(loss) from investment
transactions............................. -0-
Net unrealized appreciation of
investments.............................. 1,977
---------
Net increase in net assets resulting
from operations.......................... 3,279
Net capital share transactions (Note 5 ).. 3,275,801
---------
Net increase in net assets................ 3,279,080
NET ASSETS:
Beginning of period....................... 100,000
End of period (including accumulated
net investment income of $1,302).......... $3,379,080
----------
SEE NOTES TO FINANCIAL STATEMENTS
4
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THE BANC STOCK GROUP FUND
FINANCIAL HIGHLIGHTS
(For a fund share outstanding throughout the period)
For the period August 1, 1997 (inception of operations)
through August 31, 1997
(UNAUDITED)
-------------------------------------------------------
Net asset value, beginning of period ...................... $ 10.00
Income (loss) from investment operations
Net investment income ..................................... 0
Net realized and unrealized gain (loss) on
investments .............................................. (0.04)
-----
Total from investment operations .......................... (0.04)
-----
Less distributions
Dividends from net investment income ...................... 0
Distribution from realized gains from security
transactions ............................................. 0
-----
Total distributions ....................................... 0
-----
Net asset value, end of period ............................ 9.96
-----
Total return** ............................................ (4.62%)*
Ratios/supplemental data
Net assets end of period (in 00Os) ........................ 3,379
Ratio of expenses to average net assets ................... 2.50%)*
Ratio of net investment income (loss)
to average net assets .................................... 0.68%)*
Portfolio turnover rate ................................... 0.00%
Average commission rate paid .............................. 0.3605
* Annualized
** Based on net asset value per share
SEE NOTES TO FINANCIAL STATEMENTS
THE BANC STOCK GROUP FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1997
(UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 1. ORGANIZATION
The Banc Stock Group Fund (the "Fund") is a series of the BSG Funds, an
Ohio business trust (the "Trust"), organized on January 14, 1997. The Fund is an
open-end, diversified management investment company under the Investment Company
Act of 1940, authorized to issue an unlimited number of shares of capital stock
in separate series, with each series representing interests in a separate
portfolio of securities and other assets, each with its own investment
objectives and policies. The investment objective of the Fund is to provide
long-term capital appreciation. The Fund seeks to achieve its objective by
investing primarily in equity securities of community banks, lending
institutions and financial services companies. The Fund is the only current
series of the BSG Funds.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies followed
by the Fund in the preparation of its financial statements. These policies are
in conformity with generally accepted accounting principles for investment
companies. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenue and
expenses during the period. Actual results could differ from these estimates.
Security Valuation - Securities which are traded on any exchange or on the
NASDAQ over-the-counter market are valued at the last quoted sale price. Lacking
a last sale price, a security is valued at its last bid price on such exchanges,
or at the last bid price in the over-the-counter market except when, in the
Adviser's opinion, the last bid price does not accurately reflect
5
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THE BANC STOCK GROUP FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
August 31, 1997
(UNAUDITED)
- --------------------------------------------------------------------------------
the current Securities for which market quotations are not readily available, or
when the Adviser determines the last bid price does not accurately reflect the
current value or when restricted securities are being valued, are valued as
determined in good faith by the Adviser, subject to review by the Board of
Trustees of the Trust.
Fixed income securities generally are valued by using market quotations,
but may be valued on the basis of prices furnished by an independent pricing
service which uses prices based upon yields or prices of comparable securities,
indications as to values from dealers, and general market conditions, when the
Adviser believes such prices accurately reflect the fair market value of the
security.
Short term investments in fixed income securities with maturities of less
than 60 days when acquired, or which subsequently are within 60 days of
maturity, are valued by using the amortized cost method of valuation, which the
Board has determined will represent fair value.
FEDERAL INCOME TAXES - The Fund intends to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its net investment income and any realized
capital gain. Therefore, no federal income tax provision is required.
DIVIDENDS AND DISTRIBUTIONS - The Fund intends to distribute substantially
all of its net investment income as dividends to its shareholders on an annual
basis. The Fund intends to distribute its net long term capital gains and its
net short term capital gains at least once a year. Income and capital gain
distributions to shareholders are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
Those differences are primarily due to differing treatments for net operating
losses and deferral of wash sale losses.
SECURITY TRANSACTIONS - The Fund follows industry practice and records
security transactions on the trade date. The specific identification method is
used for determining gains or losses for financial statements and income tax
purposes. Dividend income is recorded on the ex-dividend date and interest
income is recorded on an accrued basis. Discount and premium on securities
purchased are amortized over the life of the respective securities.
NOTE 3. PURCHASES AND SALES OF SECURITIES
Purchases and sales of investment securities, during the period August 1,
1997 (commencement of operations) through August 31, 1997, aggregated $3,114,051
and $0 respectively.
Note 4. INVESTMENT ADVISORY AGREEMENT AND OTHER RELATED PARTY TRANSACTIONS
The Trust has an agreement with Heartland Advisory Group, Inc. (the
"Adviser"), with whom certain officers and trustees of the Trust are affiliated,
to serve as investment adviser to the Fund. Under the terms of the agreement, a
monthly fee is paid to the Adviser at an annual rate of 2.50% of the average
daily net assets of the Fund. The Adviser pays all of the operating expenses of
the Fund except brokerage, taxes, interest, fees and expenses of non-interested
person trustees and extraordinary expenses. After the initial two years, this
advisory agreement is subject to an annual approval by the Trustees of the
Trust.
For the period August 1, 1997 (commencement of operations) through August
31, 1997, the Adviser earned fees of $4,808.
The Trust has agreements with American Data Services, Inc. (the
"Administrator") to provide transfer agent, administrative and fund accounting
services to the Fund. The services to be provided under the agreements include
day-to-day administration of the Fund (other than rendering investment advice),
maintenance of its records, preparation of reports, supervision of the Fund's
arrangement with its custodian and assistance in the preparation of the Fund's
registration statement under federal and state laws. For its services, the
Administrator receives a monthly fee from the Adviser
6
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THE BANC STOCK GROUP FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
August 31, 1997
(UNAUDITED)
equal to an average annual rate of 0.25%. For the period August 1, 1997
(commencement of operations) through August 31, 1997, the Administrator earned
fees of $481.
The Trust has an agreement with Banc Stock Financial Services, Inc. (the
"Distributor"), with whom certain officers and trustees of the Trust are
affiliated, to act as the principal underwriter of the Fund's shares. The
Distributor also receives brokerage commissions from the Fund for executing
portfolio purchase and sale transactions. Both the Adviser and the Distributor
are wholly owned by The Banc Stock Group, Inc. For the period August 1, 1997
(commencement of operations) through August 31, 1997 the Distributor earned
underwriter fees and brokerage commissions in the amount of $0, and $53,324,
respectively.
Note 5. CAPITAL STOCK
At August 31, 1997 there were an unlimited number of shares of no-par value
capital stock authorized. Transactions in capital stock during the period August
1, 1997 (commencement of operations) (1) through August 31, 1997 were as
follows:
Shares Amount
------ ------
Shares Sold...................... 329,427 $3,275,801
Shares issued for reinvestment
dividends and distribution
from realized gains............. -0- -0-
Shares redeemed.................. -0- -0-
------- ---------
Net increase..................... 329,427 $3,275,801
======= ==========
(1) The only transaction prior to August 1, 1997 occurred on April 22, 1997 when
the Adviser purchased 10,000 shares of the Fund at $10.00 per share to
establish the Trust.
7
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THE BANC STOCK
GROUP FUND
1105 Schrock Road
Suite 437
Columbus, Ohio 43229
