THE BANC STOCK GROUP FUND
April 27, 1999
Dear Shareholder:
I want to take this annual opportunity to thank you for investing in THE BANC
STOCK GROUP FUND, to discuss the market conditions under which we have been
operating for the past year and to highlight the long-term opportunities that
those same market conditions represent for all of us as we continue to invest in
America's community banks.
From the opening day of THE BANC STOCK GROUP FUND, August 1, 1997, the Fund
moved up rapidly in an environment of growth for bank stocks. Beginning in the
Spring of 1998, as markets do from time to time, bank stocks as a group were
indiscriminately sold off. For instance; from the period April, 1998 to October,
1998 the Nasdaq Bank Index Total Return fell 34.83%. There was little or no
seeming consideration for asset quality, earnings or growth potential. There
were market driven decisions being made about the quality of community banks
which had little basis in economic reality, as far as we could see.
GOOD EARNINGS IN 1999
Through the Fourth Quarter and now into 1999, bank earnings have continued a
steady growth pattern that we expect to continue. After paying a $0.66 dividend
per share in November, 1998, the Fund finished on 2-28-99 with a NAV of $10.72.
A long-term buy and hold strategy recognizes that the market will go through
short-term corrections and rallies that lead to time periods of undervaluation
which create buying opportunities.
The recent market conditions have made it possible for us to buy more community
and regional bank stocks at less cost. More value at less cost is exactly what
each of us looks for in A GOOD SALE in our hometown. We each buy items for our
business and items for everyday life in the same manner. Our shared principles
are sound.
THIS YEAR'S HIGHLIGHTS OF THE BANC STOCK GROUP FUND
o THE FUND PAID A SIXTY-SIX ($0.66) CENT DIVIDEND on November 13, 1998.
o We have engaged Mutual Funds Service Company of Dublin, Ohio to
provide the best service possible to our customers. They will take
care of all your administrative needs.
o We have taken to the airwaves! Mark Allen Davis, Vice President of
Research, who has spent the past twenty-two years researching,
analyzing and recommending bank stocks is becoming a regular,
sought-after guest on financial talk shows around the country. His
views on value-based investing are also being showcased in banking
industry publications. Mark, as many of you know, brings a fresh,
clear perspective to the art and science of finding great values in
bank stocks.
o We systematically review all banks in the Fund for Year 2000
readiness. We are please to report that, in our opinion, our banks
have taken extraordinary steps to meet the very focused and intensive
oversight of regulatory agencies (SEC, NASD, FDIC, OTC and OCC) and
state agencies regarding this issue. The Fund's service suppliers have
ALL RESPONDED FAVORABLY IN WRITING AS TO THEIR Y2K READINESS.
o As of February 28, 1999, The Fund had total assets of $15,719,264 and
investments encompassing 104 banks in 32 states.
SUMMARY
These are the steps we take every day to assure the quality and value of your
Fund. Should you have any questions, please feel free to call me directly at
800/733-2265. I will be delighted to speak with you about our nation's great
banking system.
Finally, I have mentioned Mark Davis' fine contribution to THE BANC STOCK GROUP
FUND. There are two additional mutual fund professionals on staff who spend
their days working on your behalf. They deserve our appreciation for the skills
that they bring to the Fund's management and marketing activities. Lisa R.
Hunter, Vice President for Compliance and a BANC STOCK GROUP FUND Board Member
and Harry J. Ryan, Vice President and Director of Marketing. Each is focused
upon the importance of your investment. As with everyone associated with THE
BANC STOCK GROUP FUND, they are determined to make sure that all shareholders
are provided with the best possible service.
On behalf of the team at THE BANC STOCK GROUP FUND, I assure you that we
appreciate your investment and we look forward to serving you and your family
for many years.
Sincerely,
/s/ Michael E. Guirlinger
Michael E. Guirlinger
President
The BSG Funds
<PAGE>
COMPARISON OF A $10,000++ INVESTMENT
IN THE BANC STOCK GROUP FUND
(SINCE INCEPTION OF 98/01/97, AFTER SALES CHARGE)
TO THE S&P 500 INDEX AND THE RUSSELL 2000 INDEX
INCLUDING REINVESTMENT OF DIVIDENDS
ANNUALIZED RETURN
1 Year Since Inception
------ ---------------
-10.79% 8.49%
[GRAPH] The following information was presented as a line graph:
DATE BANC STOCK FUND S&P 500 INDEX RUSSELL 2000 INDEX
- ---- --------------- ------------- ------------------
Inception $9,600 10,000 10,000
Aug-97 $9,562 9,511 10,232
Sep-97 $10,445 10,031 10,978
Oct-97 $10,704 9,697 10,491
Nov-97 $10,954 10,144 10,420
Dec-97 $11,904 10,317 10,606
Jan-98 $11,760 10,430 10,446
Feb-98 $12,240 11,176 11,224
Mar-98 $12,941 11,743 11,693
Apr-98 $13,680 11,860 11,756
May-98 $13,718 11,659 11,131
Jun-98 $13,286 12,126 11,163
Jul-98 $13,104 11,999 10,261
Aug-98 $10,646 10,290 8,296
Sep-98 $10,646 10,938 8,928
Oct-98 $10,579 11,810 9,288
Nov-98 $11,021 12,513 9,770
Dec-98 $10,817 13,220 10,369
Jan-99 $10,858 13,763 10,501
Feb-99 $10,919 13,343 9,670
The maximum initial sales charge payable on an investment in the Fund was 4.00%
on February 28, 1999. At public offering price of $10,000, the net investment in
the Fund would be $9,600 assuming no waiver or reduction of sales charges. The
performance information shown represents past performance and should not be
interpreted as indicative of the Funds future performance. Return and share
price will fluctuate so that shares, when redeemed, may be worth more or less
than their original cost. The Fund's return is net of all fees. The index does
not include fees.
++ Not covered by Report of Independent Accountants.
2
<PAGE>
THE BANC STOCK GROUP FUND
SCHEDULE OF INVESTMENTS
FEBRUARY 28, 1999
MARKET
SHARES VALUE
- -------------- ---------------
COMMON STOCKS - 98.14%
COMMERCIAL BANKS-CENTRAL U.S.- 8.56%
2,000+ BNCCORP Inc.....................................$ 18,875
2,500 BancFirst Corp.................................. 83,125
5,900 Bay Bancshares Inc.............................. 72,644
9,960 Capitol Bancorp Limited......................... 184,260
6,500 Cass Commercial Corp............................ 160,062
500 Community Financial Corp........................ 5,250
3,210 DCB Financial Corp.............................. 52,965
850 First Commerce Bancshares, Inc.................. 22,313
9,000 First Oak Brook Bancshares, Inc................. 162,000
17,425 Franklin Bank NA................................ 165,537
5,333 Mahaska Investment Co........................... 87,328
1,963 MetroBanCorp.................................... 15,949
1,000+ National City Bancorp........................... 21,813
5,500 Peoples Bank Corporation of Indianapolis........ 178,063
4,500 Southside Bancshares Corp....................... 52,875
1,000 State Financial Services Corp................... 13,000
2,500 Summit Bancshares Inc........................... 43,750
300 UnionBancorp, Inc............................... 4,538
---------------
1,344,347
---------------
COMMERCIAL BANKS-EASTERN U.S.- 15.42%
61,500+ Atlantic Bank & Trust Co.................... 738,000
500 Banknorth Group, Inc........................ 13,375
11,600 Bar Harbor Bancshares....................... 237,800
100 CNB Financial Corp.......................... 1,700
8,000 Columbia Bancorp............................ 120,000
2,000 Community Bank System, Inc.................. 52,375
1,400 Community Independent Bank Inc.............. 20,125
1,102 DNB Financial Corp.......................... 32,234
10,460 F.N.B. Corp................................. 239,926
4,000 First Financial Corp........................ 51,500
2,700 Interchange Financial Services Corp......... 44,212
5,000 Long Island Financial Corp.................. 58,750
3,800 North Fork Bancorporation................... 83,600
24,325 Skylands Community Bank..................... 282,778
4,000 Suffolk Bancorp............................. 110,000
1,850 Tompkins County Trustco Inc................. 63,825
3,000 UST Corp.................................... 62,812
6,900 Webster Financial Corp...................... 210,881
---------------
2,423,893
---------------
COMMERCIAL BANKS-SOUTHERN U.S.- 9.92%
8,300 ABC Bancorp................................. 100,638
4,000 American National Bankshares, Inc........... 117,000
2,784 C&F Financial Corp.......................... 52,200
500 Century South Banks, Inc.................... 12,125
5,000 Colony Bankcorp Inc......................... 121,250
4,900 Community Bankshares Inc.................... 113,313
10,800 Compass Bancshares Inc...................... 395,550
2,600 First Charter Corp.......................... 48,588
2,300 ISB Financial Corp.......................... 44,850
1,600+ Republic Bancshares, Inc.................... 28,400
4,000 Seacoast Banking Corp of Florida............ 107,500
7,000+ Southeast Commerce Holding Co............... 63,000
4,300 Southern Financial Bancorp, Inc............. 87,075
11,700 Summit Bank Corp............................ 179,887
2,800 Virginia Commonwealth Financial Corp........ 86,800
---------------
1,558,176
---------------
COMMERCIAL BANKS-WESTERN U.S.- 37.13%
50,175 BYL Bancorp................................. 727,537
31,700 Bank of Commerce............................ 598,337
5,628 Bank Petaluma............................... 125,927
7,968 Bay Area Bancshares......................... 313,740
12,437 California Independent Bancorp.............. 292,270
3,150 Capital Corp of the West.................... 29,925
500 Cathay Bancorp, Inc......................... 19,500
2,070 Coast Bancorp............................... 40,365
2,500 Columbia Bancorp............................ 21,250
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
3
<PAGE>
MARKET
SHARES VALUE
- -------------- ---------------
45,950 Comstock Bancorp............................ 505,450
19,186 Fallbrook National Bank..................... 155,886
10,000 First State Bancorp......................... 192,500
4,100 GBC Bancorp................................. 87,125
7,412+ Hanmi Bank.................................. 111,180
2,964 Heritage Oaks Bancorp....................... 41,496
9,369+ Nara Bank National Assoc.................... 98,374
47,878+ Northern Empire Bancshares.................. 933,621
11,025 Northrim Bank............................... 137,812
4,000 Orange National Bancorp..................... 110,500
3,687 Saratoga Bancorp............................ 57,609
10,912 SierraWest Bancorp.......................... 332,816
19,800+ Silicon Valley Bancshares................... 379,912
13,000+ Union Bankshares Ltd........................ 136,500
4,923+ United Security Bancorp..................... 71,376
320 Western Bancorp............................. 9,860
24,377+ Wilshire State Bank......................... 304,713
---------------
5,835,581
---------------
SAVINGS&LOAN/THRIFT-CENTRAL U.S.- 2.07%
9,270 Coastal Bancorp, Inc........................ 148,320
391 Commercial Federal Corp..................... 8,529
6,100+ Hallmark Capital Corp....................... 61,763
250 Home Federal Bancorp........................ 5,750
2,000 MFB Corp.................................... 45,500
4,500+ PVF Capital Corp............................ 55,125
---------------
324,987
---------------
SAVINGS&LOAN/THRIFT-EASTERN U.S.- 4.19%
1,700 Albion Banc Corp............................ 15,937
11,700 Alliance Bancorp of New England, Inc........ 121,388
4,000 American Bank of Connecticut, Waterbury..... 84,250
2,000 Andover Bancorp, Inc........................ 60,000
4,500+ First Coastal Corp.......................... 43,313
4,500 Hingham Institution for Savings............. 67,500
3,000 Home Port Bancorp, Inc...................... 70,500
12,200 Ipswich Savings Bank........................ 131,150
4,830 Prestige Bancorp, Inc....................... 64,903
---------------
658,941
---------------
SAVINGS&LOAN/THRIFT- SOUTHERN U.S.- 0.52%
8,900 BankUnited Financial Corp................... 62,856
500 Community Financial Corp.................... 5,625
700 First Liberty Financial Corp................ 13,737
---------------
82,218
---------------
SAVINGS&LOAN/THRIFT- WESTERN U.S.- 20.33%
14,660 Access Anytime Bancorp...................... 98,955
3,500+ FirstFed Financial Corp..................... 59,281
30,900+ First Republic Bank......................... 745,463
16,000 Golden State Bancorp, Inc................... 285,000
52,475+ ITLA Capital Corp........................... 813,363
33,499+ MCB Financial Corp.......................... 259,617
13,105 Pacific Crest Capital, Inc.................. 196,575
45,262+ Quaker City Bancorp, Inc.................... 676,101
3,500+ Sterling Financial Corp..................... 60,813
---------------
3,195,168
---------------
TOTAL COMMON STOCK
(Cost $17,116,845) 15,423,311
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
4
<PAGE>
SHORT-TERM INVESTMENTS- 3.49%
548,120 Star Bank Treasury Fund
(Cost $548,120) 548,120
---------------
TOTAL INVESTMENTS
(Cost $17,664,965)......................... 101.63% 15,971,431
LIABILITIES LESS OTHER ASSETS ................. (1.63%) (255,743)
---------- ---------------
TOTAL NET ASSETS............................... 100.00% $ 15,715,688
========== ===============
(1) Federal Tax Information: At February 28, 1999 the net unrealized
appreciation based on cost for Federal Income tax purposes of $17,664,965
was as follows:
Aggregate gross unrealized appreciation for all investments
for which there was an excess of value over cost........... $ 573,196
Aggregate gross unrealized depreciation for all investments
for which there was an excess of cost over value........... (2,266,730)
--------------
Net unrealized depreciation................................ $(1,693,534)
==============
+ Non-income producing security
THE BANC STOCK GROUP FUND
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1999
ASSETS:
Investments in securities, at value
(cost $17,664,965) (Note 2)........................ $ 15,971,431
Receivable for securities sold.......................... 38,559
Receivable for fund shares sold......................... 5,319
Receivable from interest and dividends.................. 15,215
---------------
Total Assets....................................... 16,030,524
---------------
LIABILITIES:
Payables:
Fund shares redeemed................... $ 18,998
Investment securities purchased........ 265,993
Advisory fees (Note 4)................. 29,845
-----------
Total Liabilities...................... 314,836
-------------
Net Assets.................................. $ 15,715,688
===============
NET ASSETS CONSIST OF:
Additional paid in capital......................... $ 17,409,222
Accumulated net realized gain from
investment transactions (Note 6 )................ 72,533
Net unrealized depreciation on
investments...................................... (1,693,534)
---------------
Net Assets.............................................. $ 15,715,688
===============
Net asset value and redemption
price per share
($15,715,688/1,466,609 shares
of capital stock outstanding)
(Note 6 ).......................................... $ 10.72
===============
Maximum offering price per share
(net asset value plus sales charge of 4.00%)....... $ 11.17
===============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
5
<PAGE>
THE BANC STOCK GROUP FUND
STATEMENT OF OPERATIONS
For the year ended February 28, 1999
INVESTMENT INCOME:
Dividend.......................................... $ 198,423
Interest.......................................... 14,706
-----------
213,129
Expenses:
Operating Expenses........................... $ 435,072
Total Expenses............................... 435,072
Net Investment Loss.......................... (221,943)
NET REALIZED AND
UNREALIZED GAINS (LOSSES)
ON INVESTMENTS
(Note 2)
Net realized gain from investment transactions.... 684,434
Net change in unrealized depreciation of
investments.................................... (3,108,740)
Net realized and unrealized loss on investments... (2,424,306)
Net decrease in net assets resulting from
operations..................................... $(2,646,249)
============
THE BANC STOCK GROUP FUND
STATEMENT OF CHANGES IN NET ASSETS
For the period
August 1, 1997
(Commencement
For the of Operations)
year ended through
February 28, 1999 February 28, 1998
----------------- -----------------
Net investment loss.................... $ (221,943) $ (47,249)
Net realized gain from
investment transactions............. 684,434 429,132
Net change in unrealized
depreciation of investments......... (3,108,740) 1,415,206
----------------- -----------------
Net decrease in net assets
resulting from operations........... (2,646,249) 1,797,089
Distributions from
net investment income............... 0 0
Distributions from
net realized gains.................. (993,784) 0
Net capital share
transactions (Note 5 ).............. 5,653,745 11,804,887
----------------- -----------------
Net increase in net assets............. 2,013,712 13,601,976
NET ASSETS:
Beginning of period.................... 13,701,976 100,000
----------------- -----------------
End of period.......................... $ 15,715,688 $ 13,701,976
================= =================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
6
<PAGE>
THE BANC STOCK GROUP FUND
FINANCIAL HIGHLIGHTS
(FOR A FUND SHARE OUTSTANDING THROUGHOUT THE PERIOD)
For the period
August 1, 1997
(commencement
For the of operations)
year ended through
February 28,1998 February 28,1998
Net asset value, beginning of period.... $ 12.75 $ 10.00
---------------- ----------------
INCOME (LOSS) FROM INVESTMENT
OPERATIONS
Net investment loss..................... (0.15) (0.07)
Net realized and unrealized gain on
investments........................ (1.22) 2.82
---------------- ----------------
Total from investment operations........ (1.37) 2.75
---------------- ----------------
LESS DISTRIBUTIONS
Dividends from net investment income.... 0.00 0.00
Distribution from realized gains from
security transactions................ (0.66) 0.00
---------------- ----------------
Total distributions..................... (0.66) 0.00
---------------- ----------------
Net asset value, end of period.......... $ 10.72 $ 12.75
================ ================
Total return**.......................... (10.79%) 52.24%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (in 000's)..... 15,716 13,702
Ratio of expenses to average net assets. 2.50% 2.50%
Ratio of net investment income (loss)
to average net assets................ (1.27%) (1.07%)
Portfolio turnover rate................. 54.07% 26.65%
* Annualized
** Based on net asset value per share
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
THE BANC STOCK GROUP FUND
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1999
NOTE 1. ORGANIZATION
The Banc Stock Group Fund (the "Fund") was organized as a series of the BSG
Funds , an Ohio business trust (the "Trust") on January 14, 1997 and commenced
operations on August 1, 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 Fund's
investment objective is to provide shareholders with 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 believed by the Adviser to offer superior prospects for long
term growth. 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 the current
value of the security. 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
7
<PAGE>
THE BANC STOCK GROUP FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
FEBRUARY 28, 1999
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.
Organization expenses- During its organization and initial registration
with the Securities and Exchange Commission (the "SEC"), the Fund incurred
organization expenses. The Adviser was obligated to incur these expenses.
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 accrual basis. Discount and premium on securities
purchased are amortized over the life of the respective securities.
NOTE 3. PURCHASES AND SALES OF SECURITIES
Investment transactions (other than short term investments) for the year
ended February 28, 1999 were as follows:
Purchases........................ $13,283,088
Sales............................ 9,172,258
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 year ended February 28, 1999, the Adviser earned advisory fees of
$435,072. For this same time period, the Adviser paid all fees and expenses
relating to non-interested person trustees, and will not seek reimbursement from
the Fund.
The Trust had agreements with American Data Services, Inc. (the
"Administrator") to provide shareholder servicing , fund accounting and
administrative services to the Fund. The services to be provided under the
agreements include day-to-day administration of matters related to the corporate
existence of the Fund (other than rendering investment advice), maintenance of
8
<PAGE>
THE BANC STOCK GROUP FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
FEBRUARY 28, 1999
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. The Administrator, receives a monthly
fee from the Adviser equal to an annual average rate of 0.25% of the Fund's
average daily net assets. Effective March 1, 1999, Mutual Funds Services, Co.
assumed the duties of administrator.
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 year ended February 28,
1999, the Distributor earned underwriter fees and brokerage commissions in the
amount of $17,762 and $72,070, respectively. In addition, Banc Stock Financial
Services, Inc. received brokerage commissions for the execution of portfolio
purchase and sale transactions in the amount of $204,558.
NOTE 5. FUND SHARE TRANSACTIONS
At February 28, 1999 there were an unlimited number of shares of capital
stock authorized. Transactions in capital stock were as follows:
For the period
August 1, 1997(1)
(commencement of
For the operations)
year ended through February
February 28,1999 28, 1998
- --------------------------------------------------------------------------------
Shares Amount Shares Amount
------ ------ ------ ------
Shares sold..................... 591,261 $7,940.884 1,105,271 $12,287,553
Shares issued for reinvestment
dividends and distribution
from realized gains........... 86,932 940,605 0 0
Shares redeemed................. (286,593) (3,227,744) (40,262) (482,666)
--------- ----------- ---------- -----------
Net increase.................... 391,600 $5,653,745 1,065,009 $11,804,887
========= =========== ========== ===========
(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.
NOTE 6. RECLASSIFICATION OF CAPITAL ACCOUNTS
The Fund has adopted Statement of Position 93-2, Determination, Disclosure
and Financial Statement Presentation of Income, Capital Gain and Return of
Capital Distributions by Investment Companies. As a result of this statement,
the Fund changed the classification of distributions to shareholders to better
disclose the differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, undistributed
net investment loss has been adjusted to Accumulated Undistributed Net Realized
Gain, and Additional Paid in Capital as of February 28, 1999 in the following
amounts. These restatements did not affect net investment income, net realized
gain (loss) or net assets for the year ended February 28, 1999.
Undistributed Net Additional Paid Undistributed Net
REALIZED GAIN IN CAPITAL INVESTMENT LOSS
------------- ---------- ---------------
($72,533) ($149,410) $221,943
9
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To The Shareholders and
Board of Trustees
Banc Stock Group Fund:
We have audited the accompanying statement of assets and liabilities of Banc
Stock Group Fund, including the schedule of portfolio investments, as of
February 28, 1999, and the related statement of operations for the year then
ended, the statement of changes in net assets, and financial highlights for the
year then ended and for the period from August 1, 1997 (commencement of
operations) to February 28, 1998 in the period then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments and cash held by
the custodian as of February 28, 1999, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Banc
Stock Group Fund as of February 28, 1999, the results of its operations for the
year then ended, the changes in its net assets, and the financial highlights for
the year then ended and for the period from August 1, 1997 (commencement of
operations) to February 28, 1998 in the period then ended, in conformity with
generally accepted accounting principles.
McCurdy & Associates CPA's, Inc.
Westlake, Ohio
March 17, 1999
10
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RESULTS OF THE SPECIAL MEETING OF SHAREHOLDERS OF
THE BANC STOCK GROUP FUND
FEBRUARY 26, 1999
With respect to approval of a Distribution Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended, the following votes were cast:
For Approval: 1,154,907
Against Approval: 13,015
Abstain: 24,866
Approval of the New Management Agreement between the Trust and Heartland
Advisory Group, Inc. the following votes were cast:
For Approval: 1,160,642
Against Approval: 7,019
Abstain: 25,128
Ratification of the appointment of McCurdy & Associates CPA's, Inc. as
independent accountants of the Trust for the fiscal year ending February 28,
2000 the following votes were cast:
For Approval: 1,171,191
Against Approval: 1,549
Abstain: 20,048
Not covered by report if Independent Accountants
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THE BANC STOCK
GROUP FUND
Investing in America through
America's community banks
ANNUAL REPORT
February 28, 1999
THE BANC STOCK
GROUP FUND
1105 Schrock Road 1105 Schrock Road
Suite 437 Suite 437
Columbus, Ohio 43229 Columbus, Ohio 43229
