CORNERCAP BALANCED FUND
SEMI-ANNUAL REPORT TO SHAREHOLDERS
A Series of
CornerCap Group of Funds
A "Series" Investment Company
FOR THE FOUR MONTHS ENDED
SEPTEMBER 30, 1997
The Peachtree, Suite 1700 Advisor: (800) 728-0670
1355 Peachtree Street NE Administrator: (888) 81 FUNDS
Atlanta, GA 30309 Telecopier: (404) 892-9353
<PAGE>
CornerCap Balanced Fund
Manager's Report to the Shareholders
for the annual period ending September 30, 1997
Dear Shareholder:
Attached are the portfolio valuation and financial reports for
the semi-annual period ending September 30, 1997. As of this
date, the shares of the CornerCap Balanced Fund were valued at
$11.41. This respresents the first full quarter for the
CornerCap Balanced Fund, and the Fund was up 5.1% for the
quarter. Combined with the 2.4% return for the last 37 days of
the second quarter 1997, the Fund has returned 7.6% since
inception. While the Fund has a short history to this point, we
are pleased with the early performance.
While the majority of the return was driven by the equity
investments, the balanced nature of this Fund provides some
relief from the periodic downside volatility associated with the
equity markets. We have all enjoyed the exceptional market
returns of the last few years, but along with that appreciation
comes market volalitity and increasingly higher equity
valuations. One of the goals of the CornerCap Balanced Fund is
to reduce volatility or risk by investing a percentage of the
assets in high quality fixed income instruments. So while the
Fund may not fully participate in the type of equity market
appreciation experienced in recent years, over the long term we
believe it should provide exceptional risk adjusted returns.
Since the end of the quarter, the Fund has experienced some
volatility as a result of the volatlilty in the overall market.
However, the relative fluctuation in the value of the CornerCap
Balanced Fund was low when compared to more aggressive
strategies. While many reasons exist for the overall market
volatility, such as recent fluctuations in the Asian markets,
investors will be best served by not attempting to predict these
external factors. Instead, investors should identify their
individual risk tolerance and choose the appropriate investment
products.
The CornerCap Balanced Fund is appropriate for those investors
whose risk tolerance and objectives are less aggressive than a
fund invested in equities only, such as our CornerCap Growth
Fund. The balanced nature of the investments will allow for
growth, but dampens the effects of a market down turn.
Thank you for your investment in the CornerCap Balanced Fund,
and for your continued support of your investment advisor,
Cornerstone Capital. Please let us know if we can be of further
service to you or someone you know.
Cornerstone Capital Corp.
November 18, 1997
<PAGE>
CORNERCAP BALANCED FUND
PORTFOLIO OF INVESTMENTS
September 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Value
Shares (Note 1-A)
------ ----------
COMMON STOCKS - 56.75
<C> <S> <C>
Automotive - 4.86%
1,050 Ford Motor Co. $ 47,513
1,600 ITT Industries, Inc. 53,100
----------
100,613
Banks - 2.29%
400 Chase Manhattan Corp. 47,200
Beverage (Alcoholic) - 1.96%
900 Anheuser-Busch Cos. 40,613
Chemicals - 4.03%
4,250 Ethyl Corp. 39,578
700 PPG Industries, Inc. 43,881
83,459
Containers - 2.19%
1,300 Ball Corp. 45,256
Diversified-Industrial - 2.16%
900 Johnson Ctls, Inc. 44,606
Electronics - 2.00%
2,000 EG&G Inc. 41,375
Financial Services-Non-Banking - 4.43%
600 Beneficial Corp. 45,712
1,550 Washington Fed Inc. 45,919
91,631
Machinery - 2.02%
1,400 Durco, Int'l. 41,825
Mining and Smelting- 1.86%
1,600 Cyprus Amax Minerals 38,400
</TABLE>
<PAGE>
CORNERCAP BALANCED FUND
PORTFOLIO OF INVESTMENTS - (Continued)
September 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Value
Shares (Note 1-A)
------ ----------
<C> <S> <C>
Paper & Forest Products - 2.47%
2,300 Glatfelter Co., P.H. $ 51,031
Printing and Publishing - 4.19%
1,200 Deluxe Corp. 40,275
1,550 Readers Digest Class A 46,500
-------
86,775
Steel-General - 2.02%
1,200 USX-U.S. Steel Group 41,700
Steel-Integrated - 2.15%
900 Carpenter Technology 44,550
Telecom Services - 4.18%
800 Sprint Corp. 40,000
900 Telephonos de Mexico 46,575
-------
86,575
Textile - 1.9%
750 Springs Industries 39,375
Tobacco - 3.8%
900 Philip Morris 37,406
1,350 UST, Inc. 41,260
-------
78,666
Transportation - 1.81%
1,450 Alexander & Baldwin Inc. 37,519
Utilities-Electric - 2.0%
1,900 Houston Ind Inc. 41,325
Utilities-Gas and Electric - 2.34%
1,800 New York State Electric & Gas Corp. 48,375
Video, Broadcasting, Cable - 2.09%
650 British Telecommunications 43,306
- ---------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost $1,058,949) $1,174,175
==========
/TABLE
<PAGE>
CORNERCAP BALANCED FUND
PORTFOLIO OF INVESTMENTS - (Continued)
May 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount
---------
GOVERNMENT BONDS - 26.8%
- --------------------------------
<C> <S> <C> <C>
U.S. Treasury
$210,000 6.250%, Due 05/31/00 $ 211,969
210,000 6.625%, Due 04/30/02 215
120,000 7.250%, Due 05/15/04 127,500
----------
Total Government Bonds (Cost $544,367) $ 554,522
----------
SHORT -TERM INVESTMENTS - 15.4%
- ---------------------------------------
$318,535 Wachovia Bank Short-Term Authorized Demand Notes $ 318,535
(Cost $318,535) ----------
Total Investments (Cost $1,921,851) (a) 98.95% 2,047,232
Other assets in excess of liabilities - net 1.05% 21,623
------------------------
Net assets 100.0% $2,068,855
========================
(a) Aggregate cost for federal income tax purposes is $1,921,851.
At September 30, 1997, unrealized appreciation (depreciation) of
securities for federal income tax purposes is as follows:
Unrealized appreciation $ 130,199
Unrealized depreciation (4,818)
Net unrealized appreciation $ 125,381
</TABLE>
See accompanying notes to financial statement<PAGE>
CORNERCAP BALANCED FUND
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments at market value,
(Identified cost $1,921,851) (Note 1-A ) $ 2,047,232
Cash 8,573
Dividends receivable 1,131
Interest receivable 14,559
---------
Total assets 2,071,495
---------
LIABILITIES
Payable for capital stock redeemed 2,282
Accrued expenses 358
--------
Total liabilities 2,640
--------
NET ASSETS
(Applicable to shares outstanding,
No par value, unlimited shares authorized) 2,068,855
=========
NET ASSET VALUE AND REPURCHASE PRICE PER SHARE
($2,068,855 divided by 181,384 shares) 11.41
=====
NET ASSETS
At May 31, 1997, net assets consisted of:
Paid-in capital 1,697,045
Accumulated net investment income(loss) 17,689
Accumulated net realized gains on investments 228,740
Unrealized appreciation of investments 125,381
---------
$ 2,068,855
===========
</TABLE>
See accompanying notes to financial statements<PAGE>
CORNERCAP BALANCED FUND
STATEMENT OF OPERATIONS
June 1, 1997 To September 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME
Income
Dividends $ 12,223
Interest 15,197
--------
Total income 27,420
Expenses
Advisory fee (Note 2) 6,114
Miscellaneous 10,508
-------
Total expenses 16,622
Less expenses waived (Note 2) (6,114)
--------
Net expenses 10,508
-------
Net investment income 16,912
-------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized gain from security transactions 22,945
Increase in unrealized appreciation of investments 118,470
-------
Net realized and unrealized loss on investments 141,415
-------
Net increase in net assets resulting from operations $ 158,327
=======
</TABLE>
See accompanying notes to financial statements<PAGE>
CORNERCAP BALANCED FUND
STATEMENT OF CHANGES IN NET ASSETS
June 1, 1997 To September 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN NET ASSETS FROM 4 Months Ended Year End
September 30, 1997 May 31, 1997
------------------ ------------
<S> <C> <C>
Operations
Net investment income $ 16,912 $ 777
Net realized gain on investments 22,945 1,252,034
Decrease in unrealized appreciation of investments 118,470 (1,266,712)
---------- -----------
Net increase in net assets resulting from operations 158,327 (13,901)
Distributions to shareholders from
Realized gains ($5.728) (1,416,572) __
Capital share transactions (a)
Increase in net assets resulting from capital share transactions 1,233,659 2,107,342
---------- -----------
Total decrease in net assets (24,586) 2,093,441
NET ASSETS
Beginning of year 2,093,441 __
End of year
(including undistributed net investment income of $17,689) 2,068,855 2,093,441
---------- ----------
</TABLE>
<TABLE>
<CAPTION>
a) Summary of capital share activity follows:
Period Ending September 30, 1997 Period Ending May 31, 1997
-------------------------------- --------------------------
1997 1997 1997 1997
Shares Value Shares Value
------------------------ ---------------------
<S> <C> <C> <C> <C>
Shares issued from reorganization --- 00 257,038 $ 2,134,139
Shares purchased 58,502 466,986 -- 00
Shares reinvested 518,226 1,394,028 -- 00
Shares redeemed (69,787) (627,355) (3,243) (26,797)
Reverse Split (579,352) 00 -- 00
-------- ----------- ------- ----------
Net increase (decrease) (72,411) $ 1,233,659 253,795 $2,107,342
======== =========== ======= ==========
</TABLE>
See accompanying notes to financial statements<PAGE>
CORNERCAP BALANCED FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding for the period June 1, 1997 to September 30, 1997)
<TABLE>
<CAPTION>
<S> <C>
Per Share Operating Performance
Net asset value, beginning of period $ 32.99
Income from investment operations -
Net investment income .14
Net realized and unrealized gain (loss) on investments 1.19
Total from investment operations 1.33
Distributions to shareholder ( 22.91)
--------
Net asset value, end of period 11.41
-----
Total Return 8.23%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year ($000) $ 2,069
Ratios to average net assets
Expenses 1.5%**
Net investment income 2.45%**
Portfolio turnover rate 10%
Average commissions per share $ .12
** Annualized
</TABLE>
See accompanying notes to financial statements
<PAGE>
CORNERCAP BALANCED FUND
NOTES TO FINANCIAL STATEMENTS
September 30, 1997 (Unaudited)
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CornerCap Balanced Fund (the "Fund") is a series of shares of
the CornerCap Group of Funds and is registered under the
Investment Company Act of 1940 as a diversified open-end
management investment company. Investment operations
commenced on May 24, 1997 as a result of the reorganization of
the Atlanta Growth Fund. The investment objective of the Fund
is to obtain capital appreciation and current income. 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.
C. 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.
(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
administration 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. For
the period June 1, 1997 to September 30, 1997, the Advisor waived
the Advisory fee of $6114.
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% of the Fund's average net assets. For the period
June 1, 1997 to September 30, 1997, no such reimbursements
were made.
(3) PURCHASES AND SALES OF SECURITIES
For the period June 1, 1997 to September 30, 1997, the cost of
purchases and the proceeds from sales of securities, excluding
short-term securities, were $40,581 and $181,013,
respectively.
(4) STOCK SPLIT
Effective June 30, 1997, the Fund had a reverse stock split of
1 share for every 4 shares owned.
