<PAGE>
CORNERCAP GROWTH FUND
SEMI-ANNUAL REPORT TO SHAREHOLDERS
A Series of
The CornerCap Group of Funds
A "Series" Investment Company
FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 1996
CornerCap Growth Fund
Manager's Report to the Shareholders
for the semi-annual period ending September 30, 1996<PAGE>
<PAGE>
Dear Shareholder:
Attached are the portfolio valuation and financial reports for
the semi-annual period ending September 30, 1996. As of that
date, your Fund's net asset value was $10.72. The Fund has
performed very well in 1996. The Fund has continued to grow
since quarter end, showing a valuation on November 22, 1996, of
$11.36. This represents a year-to-date return of 24% and a
return since September 30, 1992 (when Cornerstone Capital assumed
management of the Fund), of 67%, or 13.2% per year. The Fund has
a return of 9.27% since the March 31,1996, fiscal year end.
While we are pleased that we have been able to deliver good
returns this year, we are more pleased that our results have been
relatively consistent over time. When the overall market was
down in 1994, we generated a good, positive return. While the
Fund continued up in 1995, we did not keep up with the
extraordinary returns realized in the market. This year, we are
well ahead of the market, especially the small to mid-cap sector
of the market where our investments are targeted.
Many of our shareholders have never heard the history of this
Fund, and you may find it of interest. Cornerstone Capital took
over the Fund in September 1992 when it was called the Sunshine
Growth Trust. From 1986 to 1990, the Fund was called Wealth
Monitors. We were attracted to the Fund because it was
inexpensive, the current advisor wanted to resign from
management, and the Fund had a substantial tax loss carryforward
that would benefit our taxable investors. The only negative was
that we would have to inherit the Fund's exceptionally poor prior
performance, and this would negate selling the Fund shares to
anyone not familiar with Cornerstone's performance.
We started with 500 shareholders and $0.5 million in late 1992.
Now, we still have 500 shareholders, but our assets have grown 20
fold to $11.2 million. As shown on the price chart on the back
of this report, the price has gone from $6.87 to the recent price
noted above of $11.35. I was just reviewing the mutual fund
research report on our Fund from Morningstar, and it was
interesting to note the progressive improvement of our ranking in
their one (lowest) to five (highest) ranking system. Those
rankings are:
1 Yr - 4 3 Yr - 3 5 Yr - 2 10 Yr - 1
We will do all we can to continue the long term performance of
the Fund. As you know, this is a no-load fund, so there is no
cost to enter or exit the Fund. We will continue our objective
of further reducing the expense ratio for the Fund. Because of
our tax loss carryforward benefits, there will be only modest
taxable gains allocated to shareholders this year, even though
the Fund has generated sizable capital gains.
More important than this historical chronology is what should be
expected for the future. The question everyone keeps asking is,
"can the market keep up the pace". The simple answer is no, but
no investment person worth his salt lets things be that simple.
The two follow-up questions that I think need to be asked are:
<PAGE>
- What is "the market"? -- The significant growth in the
market has been primarily for the years 1995 and 1996. The
growth in the first three quarters of that period was from
technology stocks and the growth since then has been focused
on the larger capitalization stocks. It is in these areas
that we believe a potential market correction will be the most
significant. Our Fund continues to underweight both of these
market sectors, so we believe the Fund's relative growth
potential is yet to be realized.
- Is the current pace necessary? -- If anyone expects the
market to continue compounding as it has over the last two
years (25% a year), then they should be labeled speculators
and not investors. In a world of 3% inflation, the top
investment professionals will advise you that a 9% equity
return is reasonable. That is not what investors want to
hear, but it is the reality; and it is a number that can be
sustained over time. There will be brief market corrections
and more extended bear markets in our future, but no one can
accurately predict if they will occur next year or five years
from now. We help clients to establish their appropriate
level of risk, and to be consistent with their investment
objectives over time.
As we mentioned in an earlier report, Cornerstone will be
offering a new "balanced" mutual fund to our investors in
January. The target equity exposure for the fund will be 60% in
stocks. Like our CornerCap Growth Fund stocks, they will meet our
Fundametrics research valuation criteria, but they will generally
be larger stocks that pay a higher dividend yield. The other 40%
of the fund will be invested in a portfolio of intermediate term
corporate and government bond holdings.
We appreciate your investment in the Fund and your referral of
new potential shareholders. You are our primary source of new
clients for the Fund. If you know someone who would like to make
an investment, please request a Fund Prospectus by calling the
Fund at (800) 728-0670.
Thomas E. Quinn, President
November 27, 1996<PAGE>
[PERFORMANCE GRAPH APPEARS HERE]
Performance Graph ( September 1992 - September 1996 )
<TABLE>
<CAPTION>
Quarterly
Data
-------
Quarter $ % % (*)
Ending
------ ----- ---- -----
<C> <C> <S> <C>
4th Qtr. 92 $0.53 7.7% 13.6%
1st Qtr. 93 $0.17 2.3% 2.3%
2nd Qtr. 93 $0.03 0.4% 0.4%
3rd Qtr. 93 ($0.00) -0.1% -0.1%
4th Qtr. 93 $0.19 2.8% 2.8%
1st Qtr. 94 ($0.09) -1.2% -1.2%
2nd Qtr. 94 $0.18 2.3% 2.3%
3rd Qtr. 94 $0.29 3.7% 3.7%
4th Qtr. 94 $0.23 3.1% 3.1%
1st Qtr. 95 $0.22 2.6% 2.6%
2nd Qtr. 95 $0.21 2.4% 2.4%
3rd Qtr. 95 $0.19 2.2% 2.2%
4th Qtr. 95 $0.14 2.2% 2.2%
1st Qtr. 96 $0.66 7.2% 7.2%
2nd Qtr. 96 $0.87 8.9% 8.9%
3rd Qtr. 96 $0.04 0.4% 0.4%
4th Qtr. 96 $0.64 6.0% 6.0%
9/30/92 - $2.28 67.22% 76.40%
09/30/96
Annualized 11/22/96 13.2%
Return
Annualized 11/22/96 13.2%
Return
</TABLE>
<PAGE>
CORNERCAP GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
September 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Shares Common Stocks - 97.75% Value (Note 1-A)
- ------ ---------------------- ----------------
<C> <S> <C>
AUTO PARTS: 2.02%
7,000 SPX Corp * $ 209,125
BUILDING MATERIALS: 2.55%
10,700 Southdown, Inc.* 264,825
CHEMICALS: 2.06%
12,200 Wellman 213,500
COMMUNICATIONS: 4.79%
6,400 Sprint Communicatins 248,800
4,450 Telefonia De Espana ADR 247,531
-------
496,311
-------
COMPUTERS: 2.55%
12,750 Bantec, Inc.* 264,562
ELECTRICAL EQUIPMENT: 7.05%
13,000 Amtek, Inc. 245,375
13,200 EG&G, Inc. 235,950
12,400 Watkins Johnson 249,550
-------
730,875
-------
ENTERTAINMENT: 2.34%
30,800 NPC International Corp.* 242,550
-------
FINANCIAL: 2.31%
5,250 Salomon, Inc. 239,531
-------
FOOD PROCESSING: 2.64%
23,800 Morningstar Group, Inc.* 273,700
-------
FURNITURE: 2.85%
21,100 Culp, Inc. 295,400
-------
HOLDING COMPANIES: 2.61%
6,100 Crane Co. 270,688
HOMEBUILDERS: 5.23%
10,600 Pulte Corporation 271,625
18,100 Ryland Group, Inc. 269,238
540,863
-------
</TABLE>
<PAGE>
CORNERCAP GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS - (Continued)
September 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Shares Common Stocks - 97.75% Value (Note 1-A)
- ------ ---------------------- ----------------
<C> <S> <C>
INSURANCE: 9.99%
5,650 American Banker 282,500
22,742 Gainsco, Inc. 233,105
4,700 Orion Capital Corp. 242,637
6,450 Providian 277,350
---------
1,035,593
---------
MACHINERY/DIVERSIFIED: 3.79%
4,300 Duriron Co.* 113,950
9,300 Standex International Corp. 279,000
---------
392,950
---------
MANUFACTURING: 3.08%
12,450 Furon Company 312,806
MEDICAL SUPPLIES: 2.46%
15,000 VWR Scientific Products* 255,000
---------
METALS: 17.86%
12,700 Commercial Intertech 146,050
12,700 Cuno Inc* 196,850
11,100 Cyprus Amax Minerals Co.* 238,650
14,100 Handy & Harman 252,037
14,200 Inland Steel Industries, Inc 253,825
9,050 International Aluminum Co. 221,725
17,100 Oregon Steel* 262,913
12,540 Varlen Corp* 279,799
---------
1,851,849
---------
RESTAURANTS: 2.33%
11,300 Wendys International, Inc.* 241,537
---------
RETAIL: 8.10%
19,800 Helen of Troy Corp.* 297,000
20,800 Huffy Corporation 280,800
16,500 Shopko Store, Inc. 261,938
---------
839,738
---------
TEXTILES: 4.90%
14,950 Kellwood Co. 248,544
48,300 Tultes Corporation* 259,612
---------
508,156
---------
TRANSPORTATION: 1.96%
28,550 OMI Corp.* 203,419
---------
</TABLE>
<PAGE>
CORNERCAP GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS - (Continued)
September 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Shares Common Stocks - 97.75% Value (Note 1-A)
- ------ ---------------------- ----------------
<C> <S> <C>
TOBACCO: 4.34%
9,000 Universal Corporation* 229,500
7,450 United States Tobacco, Inc. 220,706
----------
450,206
----------
Total Common Stocks ( Cost $ 8,999,802) 10,135,544
</TABLE>
<TABLE>
<CAPTION>
Amount Short Term Investments - 2.23% Value (Note 1-A)
- ------ ------------------------------ ----------------
<C> <S> <C> <C>
1 Wachovia Bank Short Term Demand Note 228,878
1 Fidelity Bond - Investment Compnay Institute 2,340
----------
Total Investments (Cost $9,231,020)(a) 99.98% 10,364,422
Other Assets in Excess of Liabilities - Net .02% 1,907
----- ----------
Net Assets 100% $10,366,329
===== ==========
* Non - Income Producing Security
ADR - Security represented is held by the custodian bank in the
form of an American Depository Receipt.
</TABLE>
See Notes to Financial Statements<PAGE>
CORNERCAP GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
<S> <C>
Assets
Investments at Market Value $ 10,133,204
Cash Equivalents 231,218
Dividends Receivable 10,699
Interest Receivable 4,811
----------
Total Assets 10,379,933
----------
Liabilities
Operating Expenses 13,603
----------
Total Liabilites 13,603
----------
Net Assets (967,005.012 shares outstanding) $ 10,366,329
==========
Net Assets Value Per Share ( $10,366,329 / 967,005.012) 10.72
=====
Net Assets
At September 30, 1996, net assets consisted of:
Paid - in Capital 9,237,954
Accumulated Undistributed Net Income (28,331)
Accumulated Undistributed Realized Gain 23,304
Net Unrealized Appreciation 1,133,402
----------
Net Assets $ 10,366,329
==========
See Notes to Financial Statements<PAGE>
CORNERCAP GROWTH FUND
STATEMENT OF OPERATIONS
Period Ended September 30, 1996 (Unaudited)
Investment Income
Dividends $ 87,439
Interest 10,104
-------
Total Investment Income 97,543
-------
Expenses
Advisory Fee 32,000
Administration Fees 11,000
Transfer Agent Fees 8,169
Custodian Fees 4,000
Trustees Fees 3,000
Registration and Filing Fees 7,000
Fund Accounting Fees 9,000
Audit Fees 9,000
Legal Fees 2,000
Miscellaneous Fees 4,000
-------
Total Expenses 89,169
-------
Net Investment Income 8,374
-------
Realized and Unrealized Gain on Investments
Net Realized Gain on Investments 808,188
Unrealized Gain on Investments 35,126
-------
Net Realized and Unrealized Gain on Investments 843,314
-------
Net Increase In Assets Resulting From Operations $ 851,688
=======
</TABLE>
See Notes to Financial Statements<PAGE>
CORNERCAP GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
September 30, 1996 Year Ended
(Unaudited) March 31, 1996
------------------ --------------
<S> <C> <C>
Operations
Net Investment Income $ 8,374 $ 40,178
Net Realized Gain on Investment 808,188 201,707
Increase in Unrealized Appreciation
of Investments 35,126 862,129
----------- -----------
Net Increase in Net Assets Resulting
from Operations 851,688 1,104,014
Distributions to Shareholders From
Net Investment Income
($-0- and $.06, respectively) -0- (51,322)
Capital Share Transactions(a)
Increase in net assets resulting from
capital share transactions 1,141,171 19,909
----------- -----------
Total Increase in Net Assets 1,992,859 1,072,601
NET ASSETS
Beginning of the period 8,373,470 7,298,648
----------- -----------
End of period 10,366,329 8,371,249
========== ===========
</TABLE>
<TABLE>
<CAPTION>
(a) Summary of Capital Share Activity:
Six Months Ended Year Ended
September 30, 1996 March 31, 1996
------------------ --------------
Shares Value Shares Value
<S> <C> <C> <C> <S>
Shares Sold 175,970 $ 1,797,926 211,232 $ 1,880,260
Shares Redeemed (62,632) (656,755) (210,768) (1,911,007)
Shares Reinvested -0- -0- 5,691 50,656
Net Increase 113,338 $ 1,141,171 6,155 $ 19,909
</TABLE>
<PAGE>
CORNERCAP GROWTH FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
Six Months Ended
September 30,1996 Years Ended March 31,
(Unaudited) 1996 1995 1994 1993 1992
----------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, beginning of period $ 9.81 $8.61 $7.69 $7.58 $7.60 $6.45
---- ---- ---- ---- ---- ----
Income from investment operations
Net investment (loss) 0.00 0.04 0.05 0.02 0.23 (0.08)
Net realized and unrealized gain
(loss) on investment 0.91 1.22 0.89 0.11 (0.25) 1.23
---- ---- ---- ---- ----- ----
Total from investment income 0.91 1.26 0.94 0.13 (0.02) 1.15
---- ---- ---- ---- ----- ----
Less distributions -
Distributions from net investment income 0.00 0.06 0.02 0.02 0.00 0.00
---- ---- ---- ---- ----- ----
Net Asset Value, end of period $10.72 $9.81 $8.61 $7.69 $7.58 $7.60
===== ==== ==== ==== ==== ====
Total Return 9.27% 14.64% 12.25% 1.71% (.26)% 17.83%
Ratios/Supplement Data
Net assets, end of period (000's) 10,366 8,371 7,299 4,229 3,042 1,084
Ratios to average net assets
Expenses .89% 1.75% 1.87% 2.00% 2.00% 2.14%
Net investment income (loss) 0.00% 0.49% 0.70% 0.13% 0.40% (.29)%
Portfolio turnover rate 23.86% 40.83% 55.12% 35.58% 83.40% 91.62%
</TABLE>
See accompanying notes to financial statements<PAGE>
CORNERCAP GROWTH FUND
NOTES TO THE FINANCIAL STATEMENTS
September 30, 1996
_________________________________________________________________
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CornerCap Growth Fund (the "Fund") was organized on January
6, 1986, as a Massachusetts Business Trust and is registered
under the Investment Company Act of 1940 as a diversified
open-end management investment company. Investment
operations commenced on July 17, 1986. The following is a
summary of significant accounting policies followed by the
Fund in the preparation of the financial statements. The
policies are in conformity with generally accepted
accounting principles.
A. Security Valuation: Portfolio securities that are
------------------
listed on national securities exchanges or the NASDAQ
National Market System are valued at the last sale
price as of 4:15 p.m. Eastern time, or in the absence
of recorded sales, at the average of readily available
closing bid and asked prices on such exchanges or such
system. Unlisted securities that are not included in
such system are valued at the mean of the quoted bid
and asked prices in the over-the-counter market.
Securities and other assets for which market quotations
are not readily available are valued at fair value as
determined in good faith by the Advisor under
procedures established by and under the general
supervision and responsibility of the Fund's Board of
Trustees. Short-term investments are valued at
amortized cost, if their original maturity was 60 days
or less, or by amortizing the values as of the 61st day
prior to maturity, if their original term to maturity
exceeded 60 days.
B. Security Transactions, Investment Income and Other:
---------------------------------------------------
Security transactions are recorded on the next business
date after trade date. Realized gains and losses on
sales of investments are calculated on the identified
cost basis. Dividend income is recorded on the ex-
dividend date and interest income is recorded on the
accrual basis.
(2) TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENTS
The Fund has an investment advisory agreement with the
Advisor, pursuant to which the Advisor receives a fee,
computed daily and payable monthly, at an annual rate of
1.0% of the Average daily net assets.
The Advisor provides continuous supervision of the
investment portfolio and pays the cost of compensation of
the officers of the Fund, occupancy and certain clerical and
administrative costs involved in the day-to-day operations
of the Fund. The Fund bears all other costs and expenses.
<PAGE>
Under the investment advisory agreement, if the aggregate
expenses of the Fund (including the fees to the Advisor but
excluding taxes, interest, brokerage fees and commissions,
distribution fee and extraordinary expenses) exceed the
limitations imposed by state securities administrators, the
Advisor will reduce its fee by the amount of such excess.
In addition, the Advisor has undertaken to pay fund expenses
in excess of 2.0% of average net assets for the period ended
September 30, 1996. For the period ended September 30,
1996, the Advisor waived the Advisory fee of $17,817.
DISTRIBUTION AGREEMENT AND PLAN
The Fund has adopted a Distribution Plan pursuant to which
the Fund reimburses the Advisor for marketing expenses
incurred in distributing shares of the Fund, primarily the
cost of printing sales material. This expense is limited to
1/4 of 1.0% of the Fund's average net assets. For the
period ending September 30, 1996, no such reimbursements
were made.
(3) PURCHASES AND SALES OF SECURITIES
For the period ended September 30, 1996, the costs of
purchases and proceeds from sales of securities, excluding
short-term securities, were $3,460,352 and $2,377,494,
respectively.
(4) FEDERAL INCOME TAXES
It is the Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable net income to
its shareholders. In addition, the Fund intends to pay
distributions as required to avoid imposition of excise tax.
Therefore, no federal income tax provision is required.
The Fund will distribute annual capital gains to the extent
net capital gains are realized in excess of available
carryovers.
(2) TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENTS
The Fund has an investment advisory agreement with the
Advisor, pursuant to which the Advisor receives a fee,
computed daily and payable monthly, at an annual rate of
1.0% of the Average daily net assets.
The Advisor provides continuous supervision of the
investment portfolio and pays the cost of compensation of
the officers of the Fund, occupancy and certain clerical and
administrative costs involved in the day-to-day operations
of the Fund. The Fund bears all other costs and expenses.
Under the investment advisory agreement, if the aggregate
expenses of the Fund (including the fees to the Advisor but
excluding taxes, interest, brokerage fees and commissions,
distribution fee and extraordinary expenses) exceed the
limitations imposed by state securities administrators, the
Advisor will reduce its fee by the amount of such excess.
<PAGE>
In addition, the Advisor has undertaken to pay fund expenses
in excess of 2.0% of average net assets for the period ended
September 30, 1996. For the period ended September 30,
1996, the Advisor waived the Advisory fee of $17,817.
DISTRIBUTION AGREEMENT AND PLAN
The Fund has adopted a Distribution Plan pursuant to which
the Fund reimburses the Advisor for marketing expenses
incurred in distributing shares of the Fund, primarily the
cost of printing sales material. This expense is limited to
1/4 of 1.0% of the Fund's average net assets. For the
period ending September 30, 1996, no such reimbursements
were made.
(3) PURCHASES AND SALES OF SECURITIES
For the period ended September 30, 1996, the costs of
purchases and proceeds from sales of securities, excluding
short-term securities, were $3,460,352 and $2,377,494,
respectively.
(4) FEDERAL INCOME TAXES
It is the Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable net income to
its shareholders. In addition, the Fund intends to pay
distributions as required to avoid imposition of excise tax.
Therefore, no federal income tax provision is required.
The Fund will distribute annual capital gains to the extent
net capital gains are realized in excess of available
carryovers.
