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SEMI-ANNUAL REPORT
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Electric City Value Fund
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February 29, 2000
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ELECTRIC CITY VALUE FUND
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LETTER TO SHAREHOLDERS
APRIL 26, 2000
To Our Shareholders:
Thank you!
This is the first shareholder letter that I have had the privilege to write
since the Electric City Value Fund's inception. I would be remiss if I did not
take this opportunity to thank you for placing your trust in us by investing in
the Fund during its first few months of operation. We hope that in the years to
follow we will be able to repay your trust by achieving our objective of
building shareholder wealth.
Portfolio Summary and Performance History
On February 29, 2000 we had 29 holdings in the fund, in addition to cash and
equivalents. A complete list of the fund's holdings is available for your review
on the accompanying Schedule of Investments.
Since the fund's inception through its semi-annual period ending February 29,
2000 the fund depreciated by 1.80% versus a loss of 6.58% for the Standard &
Poor's 500 Index. Through April 25, 2000 the fund appreciated by 5.70% versus a
gain of 0.92% for the Standard & Poor's 500 Index.
In future correspondence we will examine some of the many stock indices that are
available and determine which are most appropriate for us to use as benchmarks.
We will not be regularly comparing ourselves to the NASDAQ (even though we are
outperforming it since our inception)! This is a good transition to the
question:
Bull Market! What Bull Market?
Since the inception of the Fund through February 29, 2000, the major stock
market indices (Standard & Poor's 500, Dow Jones Industrial Average, NASDAQ
Composite) and the companies that they contain continued to perform in a strange
manner, as they have since late 1998. It has been a very narrow advance with the
major indices up substantially during 1999, while the majority of publicly
traded companies were down in value.
In general, newer companies with minimal revenues and no earnings, or even
losses, far outperformed boring old companies that have substantial revenues and
actually make money. Many speculators and aggressive investors have done very
well in this short-term oriented, momentum based market. Conservative and
prudent investors have typically not fared as well.
Will these wide disparities in performance continue? We think not. In fact,
basic economics and common sense dictate that they cannot. We just don't know
when the pendulum will swing the other way.
Recently, since early March, the market has broadened out significantly. Much
air has been let out of the "new economy" bubble and "old economy" stocks have
shown signs of life. Whether this healthy process continues or is just a
temporary phenomenon, no one knows.
However, for the types of shareholders we are interested in working for, the
question isn't when the pendulum will swing in either direction. Obviously, it
will swing back and forth in an entirely unpredictable manner.
<PAGE>
The more appropriate question is: "How can I build wealth in a manner which is
likely to succeed in the long term, is prudent and will allow me to sleep well
at night."
Which leads to the question:
Why in the world would you start a "value" mutual fund now?
The "flavor of the month" approach that the mutual fund industry uses to start
new funds and many investors use to decide what funds to switch into or invest
new money in just doesn't appeal to us. It also doesn't make much sense in the
long run, except from a sales and marketing perspective. More people probably
ignore the statement "past performance is not indicative of future results" than
the warning label on tobacco products!
Our contrarian inclination to "buy straw hats in the winter" is part of the
reason that we believe that now is an opportune time to start a "value" mutual
fund. We are having no problem identifying attractively priced companies for
investment on your behalf.
The value style of investment management has been out of favor and much maligned
during the past couple of years. Even Warren Buffet, probably the most
successful and well-known value investor, has been receiving bad press lately!
If you don't know who Warren Buffett is, then call Berkshire Hathaway, Inc. at
402-346-1400 and ask for an annual report, or go to www.berkshirehathaway.com
and review his recent Chairman's Letters. They are very informative and often
entertaining. The Electric City Value Fund owns Berkshire Hathaway Class B
shares.
The main reason for starting the Electric City Value Fund is that we believe
that being an owner of a prudently managed group of companies which are
purchased at an attractive price is still, and always will be, a great way to
build wealth.
Communication
Investing can be emotional, but reacting to emotion rather than focusing on
fundamentals can be hazardous to your wealth. In addition to our goal of
building shareholder wealth, we are dedicated to communicating with our
shareholders in a manner which will be informative and enhance the likelihood
that their investment decisions are aligned with their investment objectives and
life goals.
Please don't hesitate to call us if you have any questions about your account or
want to discuss the fund. Our Shareholder Services Department can be reached by
calling 1-800-453-6556. I can be reached at 518-370-0289.
Again, we appreciate your trust and confidence.
James W. Denny
Portfolio Manager
Electric City Value Fund
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Electric City Value Fund
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Schedule of Investments
February 29, 2000
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<CAPTION>
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Shares/Principal Amount Market Value % of Assets
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<S> <C> <C>
COMMON STOCKS
Commercial Economic, Sociological Research
135 Dun & Bradstreet 3,535 2.12%
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Commercial Printing, Lithographic
200 Valassis Communications * 5,537 3.32%
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Computer Peripheral Equipment
175 Seagate Technology * 8,728 5.23%
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Computers and Computer Peripheral Equipment and
Software
700 ATEC Group * 3,063 1.84%
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Deep Sea Foreign Transportation
200 Alexander & Baldwin 4,093 2.45%
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Department Stores
200 BJ's Wholesale Club * 6,200 3.72%
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Electronic Coils, Transformers, and Other
Conductors
210 Bel Fuse Class B 3,806 2.28%
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Fire, Marine, and Casualty Insurance
75 Chubb 3,689 2.21%
3 Berkshire Hathaway Class B * 4,320 2.59%
-------------------- -----
8,009 4.80%
Footwear
800 Stride Rite 4,400 2.64%
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Grocery Stores
700 Grand Union * 3,500 2.10%
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Hobby, Toy, and Game Shops
340 Toys-R-Us * 4,208 2.52%
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Home Health Care Services
100 Hooper Holmes 3,075 1.84%
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Investment Advice
1,000 Lexington Global Asset Managers * 8,500 5.10%
200 United Asset Management 2,988 1.79%
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11,488 6.89%
Lace and Warp Knit Fabric Mills
400 Fab Industries 4,700 2.82%
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Motion Picture and Video Tape Production
170 Disney (Walt) 5,695 3.41%
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<PAGE>
Motor Vehicles and Passenger Car Bodies
100 General Motors 7,606 4.56%
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Natural, Processed, and Imitation Cheese
1,200 Galaxy Foods * 4,575 2.74%
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Pharmaceutical Preperations
150 Abbott Laboratories 4,913 2.95%
70 Merck 4,309 2.58%
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9,222 5.53%
Radio-TV Broadcasting
200 Regent Communications * 2,374 1.42%
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Stationary Stores
800 OfficeMax * 5,650 3.39%
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Telephone Communications
70 GTE 4,130 2.48%
125 Southwestern Bell 4,750 2.85%
80 Telefonos De Mexico ADS 5,260 3.15%
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14,140 8.48%
Real Estate
325 Tejon Ranch 8,166 4.90%
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Women's Misses' and Juniors' Outerwear
200 Liz Claiborne 7,488 4.49%
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Total for Common Stock 139,258 83.49%
Closed-End Funds
1,500 Oppenheimer Multi-Sector 11,250 6.75%
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Cash and Equivalents
7,506 Firstar Treasury Fund 4.90% 7,506 4.50%
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Total Investments (cost $163,019) 158,014 94.74%
Other Assets Less Liabilities 8,775 5.26%
Net Assets 166,789 100.00%
</TABLE>
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Electric City Value Fund
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Statement of Assets and Liabilities
February 29, 2000
Assets:
Investment Securities at Market Value $ 158,014
(Identified Cost - 163,019)
Cash 23,505
Receivables:
Dividends and Interest 383
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Total Assets 181,902
Liabilities
Accrued Expenses 353
Due for Securities Purchased 14,760
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Total Liabilities 15,113
Net Assets $166,789
Net Assets Consist of:
Capital Paid In 169,005
Accumulated Undistributed Net Investment Income 183
Accumulated Undistributed Realized Gain (Loss) on Investments - Net 2,606
Unrealized Depreciation in Value
of Investments Based on Identified Cost - Net (5,005)
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Net Assets, for 16,984 Shares Outstanding $ 166,789
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Net Asset Value and Redemption Price
Per Share ($166,789/16,984 shares) 9.82
Offering Price Per Share 9.82
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Electric City Value Fund
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Statement of Operations
For the period of Dec 30, 1999 (commencement of operations)
through Feb 29, 2000
Investment Income:
Dividends 291
Interest 245
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Total Investment Income 536
Expenses
Management Fees (Note 2) 203
Administrative Fees 150
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Total Expenses 353
Net Investment Income 183
Realized and Unrealized Gain (Loss) on Investments:
Realized Gain (Loss) on Investments 2,606
Unrealized Appreciation (Depreciation) on Investments (5,005)
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Net Realized and Unrealized Gain (Loss) on Investments (2,399)
Net Increase (Decrease) in Net Assets from Operations (2,216)
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Electric City Value Fund
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Statement of Changes in Net Assets 12/30/1999*
to
2/29/00
From Operations:
Net Investment Income 183
Net Realized Gain (Loss) on Investments 2,606
Net Unrealized Appreciation (Depreciation) (5,005)
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Increase (Decrease) in Net Assets from Operations (2,216)
From Distributions to Shareholders
Net Investment Income 0
Net Realized Gain (Loss) from Security Transactions 0
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Net Increase (Decrease) from Distributions 0
From Capital Share Transactions:
Proceeds From Sale of Shares 69,005
Shares Issued on Reinvestment of Dividends 0
Cost of Shares Redeemed 0
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Net Increase from Shareholder Activity 69,005
Net Increase in Net Assets 66,789
Net Assets at Beginning of Period 100,000
Net Assets at End of Period (including accumulated undistributed net
investment income of $183) 166,789
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Share Transactions:
Issued 6,984
Reinvested -
Redeemed -
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Net increase (decrease) in shares 6,984
Shares outstanding beginning of period 10,000
Shares outstanding end of period 16,984
*commencement of operations
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Electric City Value Fund
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Financial Highlights
Selected data for a share outstanding throughout the period: 12/30/1999**
to
2/29/00
Net Asset Value -
Beginning of Period 10.00
Net Investment Income 0.01
Net Gains or Losses on Securities
(realized and unrealized) (0.19)
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Total from Investment Operations (0.18)
Dividends
(from net investment income) 0.00
Distributions (from capital gains) 0.00
Return of Capital 0.00
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Total Distributions 0.00
Net Asset Value -
End of Period 9.82
Total Return -1.80%
Ratios/Supplemental Data
Net Assets - End of Period (Thousands) 167
Ratio of Expenses to Average Net Assets * 1.65%
Ratio of Net Income to Average Net Assets * 0.85%
Portfolio Turnover Rate * 29.98%
* Annualized
** commencement of operations.
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ELECTRIC CITY VALUE FUND
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NOTES TO FINANCIAL STATEMENTS
FEBRUARY 29, 2000
1.)SIGNIFICANT ACCOUNTING POLICIES
Electric City Funds Inc. is an open-end management investment company. The
Company was organized in Maryland as a corporation and may offer shares of
beneficial interest in a number of separate series, each series
representing a distinct fund with its own investment objectives and
policies. At present, there is only one series authorized by the Trust,
which series has been designated as Electric City Value Fund (the "Fund").
The Fund's primary investment objective is to build shareholder wealth by
maximizing the Total Return of the Fund's portfolio. Total Return is
derived by combining the total changes in the principal value of all the
Fund's investment with the total dividends and interest paid to the fund.
Significant accounting policies of the Fund are presented below:
SECURITY VALUATION:
The Fund intends to invest in a wide variety of equity and debt securities.
The investments in securities are carried at market value. The market
quotation used for common stocks, including those listed on the NASDAQ
National Market System, is the last sale price on the date on which the
valuation is made or, in the absence of sales, at the closing bid price.
Over-the-counter securities will be valued on the basis of the bid price at
the close of each business day. Short-term investments are valued at
amortized cost, which approximates market. Securities for which market
quotations are not readily available will be valued at fair value as
determined in good faith pursuant to procedures established by the Board of
Directors.
Fixed income securities generally are valued by using market quotations,
but may be valued on the basis of prices furnished by a pricing service
when the Adviser believes such prices accurately reflect the fair market
value of such securities. A pricing service utilizes electronic data
processing techniques based on yield spreads relating to securities with
similar characteristics to determine prices for normal institutional-size
trading units of debt securities without regard to sale or bid prices. When
prices are not readily available from a pricing service, or when restricted
or illiquid securities are being valued, securities are valued at fair
value as determined in good faith by the Adviser, subject to review of the
Board of Trustees. 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.
SECURITY TRANSACTION TIMING:
Security transactions are recorded on the dates transactions are entered
into (the trade dates). Dividend income and distributions to shareholders
are recorded on the ex-dividend date. Interest income is recorded as
earned. The Fund uses the identified cost basis in computing gain or loss
on sale of investment securities. Discounts and premiums on securities
purchased are amortized over the life of the respective securities.
INCOME TAXES:
It is the Fund's policy to distribute annually, prior to the end of the
calendar year, dividends sufficient to satisfy excise tax requirements of
the Internal Revenue Service. This Internal Revenue Service requirement may
cause an excess of distributions over the book year-end accumulated income.
In addition, it is the Fund's policy to distribute annually, after the end
of the fiscal year, any remaining net investment income and net realized
capital gains.
ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
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2.)INVESTMENT ADVISORY AGREEMENT
The Fund has entered into an investment advisory and administration
agreement with Mohawk Asset Management, Inc. The Fund is authorized to pay
the Adviser a fee equal to an annual average rate of 0.95% for investment
adviser services and a fee equal to an annual average rate of 0.70% for
administrative fees. As a result of the above calculation, for the period
of December 30, 1999 (commencement of operations) through February 29,
2000, the advisor received management fees totaling $203 and administrative
fees totaling $150.
3.)RELATED PARTY TRANSACTIONS
Control persons of Mohawk Asset Management, Inc. (the "Advisor") also serve
as directors of the Company. These individuals receive benefits from the
Advisor resulting from management fees paid to the Advisor of the Fund.
4.)CAPITAL STOCK AND DISTRIBUTION
At February 29, 2000, the Company was authorized to issue 100,000,000
shares of capital stock ($.0001 par value). The Company has classified and
registered for sale up to 25,000,000 shares of the Fund. Paid in capital at
February 29,2000 was $169,005.
5.)PURCHASES AND SALES OF SECURITIES
During the year ending February 29, 2000, purchases and sales of investment
securities other than U.S. Government obligations and short-term
investments aggregated $157,012 and $4,106 respectively. Purchases and
sales of U.S. Government obligations aggregated $0 and $0 respectively.
6.)SECURITY TRANSACTIONS
For Federal income tax purposes, the cost of investments owned at February
29, 2000 was the same as identified cost. At February 29, 2000, the
composition of unrealized appreciation (the excess of value over tax cost)
and depreciation (the excess of tax cost over value) was as follows:
Appreciation (Depreciation) Net Appreciation (Depreciation)
6,850 (11,855) (5,005)
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Board of Directors
James W. Denney
Bill R. Werner
Michael J. Massey
Albert P. Jurczynski
Joseph D. Condon
Investment Adviser
Mohawk Asset Management, Inc.
One North Church Street
Schenectady, NY 12305
Dividend Paying Agent,
Shareholders' Servicing Agent,
Transfer Agent
Mutual Shareholder Services
1301 E. 9th St., Suite 1005
Cleveland, Ohio 44114
Custodian
Firstar Bank, N.A.
P.O. Box 640994
Cincinnati, Ohio 45264-0994
Counsel
David Jones & Assoc., P.C.
4747 Research Forest Drive
Suite 180, #303
The Woodlands, TX 77381
Independent Auditors
McCurdy & Associates CPA's, Inc.
27955 Clemens Rd
Westlake, Ohio 44145
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