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Previous: STATE STREET RESEARCH INCOME TRUST, N-30D, 1999-12-03 |
Next: CORNERCAP GROUP OF FUNDS /VA/, N-30D, 1999-12-03 |
CORNERCAP BALANCED FUND
SEMI-ANNUAL REPORT TO SHAREHOLDERS
A SERIES OF
CORNERCAP GROUP OF FUNDS
A "SERIES" INVESTMENT COMPANY
FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 1999
The Peachtree, Suite 1700 Advisor:
(800) 728-0670
1355 Peachtree Street, NE Administrator:
(888) 81-FUNDS
Atlanta, Georgia 30309 Telecopier:
(404) 870-0770
<PAGE>
CORNERCAP GROUP OF FUNDS
MANAGER'S REPORT TO THE SHAREHOLDERS
FOR THE SEMIANNUAL PERIOD ENDED SEPTEMBER 30, 1999
Dear Shareholder:
Attached are the portfolio valuation and financial reports for the semiannual
period ended September 30, 1999. As of this date, the shares of the CornerCap
Growth Fund were valued at $11.20, and the shares of the CornerCap Balanced Fund
were valued at $11.99. In this letter, we would like to cover two areas: first,
the year-to-date performance of our mutual funds and, second, a few recent
activities of our fund company about which we would like to keep you informed.
During the inflationary 1970s, investors closely scrutinized their real estate
returns. In the 1990s, investor focus is on stock returns. Like real estate,
which includes houses, hotels, shopping centers, office buildings, raw land,
etc., stocks come in as many flavors. They can be large stocks, small stocks,
something in between, or some blending of these sizes .... growth stocks or
value stocks .... US stocks or non-US stocks .... Internet retail stocks or
Internet infrastructure stocks ... etc.
The ideal mutual fund would be the one that could consistently predict the next
flavor of the month moving correctly from one flavor to the next over time. That
fund does not exist. At CornerCap, rather than continually trying to chase that
latest investment fad, we believe investors will be more successful if they
select an investment approach that is consistent with their long-term objectives
and has performed well over time.
The "flavor" that we use for the CornerCap Growth Fund is to be fully invested
in small- to mid-capitalization stocks that are primarily value-oriented. This
approach is somewhat volatile, but it has realized higher returns over the
years. Our more conservative CornerCap Balanced Fund is also value-oriented, but
we limit the equity commitment to approximately 60% of the portfolio (40% in
bonds), and the equities are primarily in the large- to mid-capitalization area.
Using the Wilshire 5000 Index, which breaks down 5,000 stocks into a variety of
style characteristics, we thought you might be interested in how our mutual fund
returns compare.
<TABLE>
<CAPTION>
YTD 9/30/99 6/30/99 3/31/99
<S> <C> <C> <C> <C>
FUNDS
CornerCap Growth Fund 7.8% -5.1% 23.4% -8.0%
CornerCap Balanced Fund 0.0% -5.7% 9.6% -3.2%
WILSHIRE INDICES
Wilshire 5000 4.5% -6.6% 7.8% 3.8%
Styles:
Value:
Large 1.4% -10.1% 11.7% 0.9%
Mid -1.0% -10.2% 16.9% -5.6%
Small -15.3% -10.8% 1.2% -6.2%
Growth:
Large 7.0% -3.3% 2.8% 7.6%
Mid 14.0% -2.0% 15.9% 0.4%
Small 10.6% -3.0% 13.6% 0.4%
</TABLE>
<PAGE>
What do the above numbers tell us? With regard to both of our funds, value
investing continues to be out of favor, much as it was in 1998. With regard to
our Growth Fund, small-capitalization value stocks were even more seriously
punished by the market in 1999, down 15.3%. Our fund was up 7.8% over this
period, so we were in the wrong pond, but at least we caught the most fish. With
regard to our Balanced Fund, our zero year-to-date return is in line with the
average of the large- and mid-capitalization value stocks, especially when you
consider that bonds have actually realized negative returns this year.
During 1999, we have been busy on other matters with regard to our mutual funds
to improve services to our shareholders. As we have reported in the past, we are
continuing with our action plan to ensure that there are no problems with the
valuation and administration of our funds when January 2000 arrives, i.e., the
"Y2K" issue. We believe all of our hardware and software should operate normally
on January 2000, and we have established manual procedures for administering our
funds if problems should still occur.
At the start of this year, we changed custodians to United Missouri Bank (UMB),
and it is doing an excellent job. We have also negotiated a lower commission
schedule with the majority of the brokers whom we use to execute trades for our
funds. We use a portion of these commission dollars, approximately 20%, to
purchase investment research data and services that we believe will be value
adding to our funds. Of course, since we self distribute our funds, we charge no
fees for contributions or withdrawals.
Thank you for being one of our valued shareholders and for the referrals that
many of you have made to our mutual fund family.
CornerCap Investment Counsel
November 19, 1999
<PAGE>
CORNERCAP BALANCED FUND
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Value
Shares (Note 1-A)
------ ----------
COMMON STOCKS - 58.78%
-------------
<C> <S> <C>
AIR TRANSPORTATION - 1.23%
1,150 British Airway PLC ADR $ 65,694
-----------
AUTOMOTIVE - 3.76%
1,800 Ford Motor Co. Del 90,338
2,200 TRW Inc. 109,450
-----------
199,788
-----------
AEROSPACE - 4.51%
2,300 Goodrich BF Co. 66,700
1,800 Rockwell International Corp. 94,500
4,300 Gencorp, Inc. 78,744
-----------
239,944
-----------
BANK - 1.47%
2,200 First Union Corp. 78,237
-----------
BEVERAGES - 1.71%
1,300 Anheuser-Busch Companies, Inc. 91,082
-----------
BUILDING MATERIALS - 1.80%
1,600 PPG Industries, Inc. 96,000
-----------
COMMUNICATIONS - 2.01%
1,500 Telefonos de Mexico 106,875
-----------
DIVERSIFIED - 3.09%
2,700 ITT Industries, Inc. 85,895
2,500 National Service Industries, Inc. 78,750
-----------
164,645
ELECTRIC LIGHTING AND WIRING EQUIPMENT - 1.56%
1,250 Johnson Ctls., Inc. 82,891
-----------
ELECTRICAL UTILITIES - 3.11%
3,400 First Energy Corp. 86,700
2,900 Reliant Energy, Inc. 78,481
-----------
165,181
-----------
FINANCIAL SERVICES - 1.72%
800 JP Morgan & Co., Inc. 91,400
-----------
INSURANCE 1.84%
5,800 Ohio Casualty Corp. 97,875
-----------
MACHINERY - 3.54%
1,600 Briggs & Stratton 93,400
5,700 Flowserve Corporation 94,762
-----------
188,162
-----------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
CORNERCAP BALANCED FUND
PORTFOLIO OF INVESTMENTS - (CONTINUED)
SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Value
Shares (Note 1-A)
------ ----------
<C> <S> <C>
COMMON STOCKS - 58.78%
-------------
MARITIME - 1.75%
3,900 Alexander & Baldwin 93,112
-----------
MEDICAL SUPPLIES - 3.44%
1,400 Bausch & Lomb, Inc. 92,313
3,000 Mallinckrodt, Inc. 90,564
-----------
182,877
-----------
METALS - 1.45%
4,800 Timken Co. 77,400
-----------
MINING - 3.70%
1,800 Reynolds Metals 108,675
1,600 Phelps Dodge Corp. 88,101
-----------
196,776
-----------
OIL INDUSTRY - 1.14%
2,400 Ashland, Inc. 80,700
-----------
PACKAGING & CONTAINERS - 1.74%
2,100 Ball Corp. 92,532
-----------
PAPER & FOREST PRODUCTS - 3.20%
8,400 Abitibi Consolidated 101,325
4,200 Glatfelter P.H. Co. 69,038
-----------
170,363
-----------
PUBLISHING - 1.47%
2,300 Deluxe Corp. 78,200
-----------
RETAIL - SPECIALTY - 1.21%
4,200 Enesco Group, Inc. 64,575
-----------
STEEL INTERGRATED - 2.00%
1,200 Carpenter Technology 29,400
3,000 USX-U.S. Steel Group 77,250
-----------
106,650
-----------
TOBACCO - 3.07%
2,400 Philip Morris Companies, Inc. 82,051
2,700 US Tobacco, Inc. 81,508
-----------
163,559
-----------
TEXTILE - 1.59%
2,500 Spring Ind. 84,845
-----------
THRIFT - 1.66%
3,800 Washington Fed. 88,114
-----------
TOTAL COMMON STOCKS (COST $3,107,854) 3,147,466
-----------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
CORNERCAP BALANCED FUND
PORTFOLIO OF INVESTMENTS - (CONTINUED)
SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Principal Value
Amount (Note 1-A)
- --------- ------------
<C> <S> <C>
CORPORATE BONDS - 34.90%
---------------
ELECTRONIC COMPONENTS - 2.79%
$150,000 Sony, 6.125%, Due 03/04/03 $ 148,293
-----------
ELECTRICAL UTILITIES - 2.79%
National Rural Utilities
150,000 6.375%, Due 10/15/04 148,277
-----------
FINANCIAL SERVICE - 17.46%
GMAC
150,000 6.700%, Due 04/03/01 150,887
Merrill Lynch
150,000 6.375%, Due 10/15/08 141,421
Nations Bank
200,000 6.375%, Due 05/15/05 193,317
Norwest Financial
150,000 6.250%, Due 12/15/07 143,257
Walmart
150,000 6.750%, Due 05/15/02 151,643
-----------
780,525
-----------
MULTIMEDIA- 3.74%
200,000 Disney Corp. 6.75%, Due 03/30/06 198,843
-----------
TELECOMMUNICATIONS - 3.49%
200,000 AT&T 6.00%, Due 03/15/09 185,829
-----------
TOTAL CORPORATE BONDS (COST $1,538,787) 1,461,767
-----------
U.S. GOVERNMENT BONDS - 7.42%
---------------------
U.S. Treasury
$150,000 5.75%, Due 08/15/03 $ 149,531
140,000 6.50%, Due 08/15/05 143,237
100,000 6.50%, Due 10/15/06 102,219
-----------
TOTAL GOVERNMENT BONDS (COST $410,500) 394,987
-----------
- -------------------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
</TABLE>
<PAGE>
CORNERCAP BALANCED FUND
PORTFOLIO OF INVESTMENTS - (CONTINUED)
SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 4.93%
----------------------
<C> <S> <C> <C>
Wachovia Bank Short-Term Authorized Demand Notes
$275,756 (Cost $269,886) 269,886
-----------
TOTAL INVESTMENTS (COST $5,589,430) (A) 98.61% 5,274,107
OTHER ASSETS IN EXCESS OF LIABILITIES 1.39% 38,674
------ -----------
NET ASSETS 100.00% $ 5,312,781
====== ===========
(A) AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSE IS $4,602,026.
At September 30, 1999, unrealized appreciation (depreciation)
of securities for federal income tax purposes is as follows:
Gross unrealized appreciation $ 327,627
Gross unrealized depreciation (376,533)
----------
NET UNREALIZED DEPRECIATION $ (48,906)
==========
- -------------------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
</TABLE>
<PAGE>
CORNERCAP BALANCED FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments at market value,
(Identified cost $3,107,854) (NOTE 1-A) $ 5,004,221
Cash 269,886
Interest receivable 35,546
Dividends receivable 6,112
Insurance Reserve 1,515
-----------
TOTAL ASSETS 5,317,280
-----------
LIABILITIES
Payable for investment securities purchased $ 0
Payable for fund shares redeemed 0
Management fee payable 4,501
Administration fees payable 1,350
24F-2 Fee and Corporate Tax (1,352)
-----------
TOTAL LIABILITIES 4,499
-----------
NET ASSETS
(Applicable to 443,288 shares outstanding,
unlimited number of shares authorized) $ 5,312,781
===========
NET ASSET VALUE OFFERING AND REPURCHASE
PRICE PER SHARE
($5,312,781 / 443,288 shares) $ 11.99
===========
NET ASSETS
At September 30, 1999, net assets consisted of:
Paid-in capital $ 5,784,604
Undistributed net investment income (569,538)
Accumulated net realized gains on investments 146,621
Net unrealized depreciation (48,906)
-----------
$ 5,312,781
===========
- -------------------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
</TABLE>
<PAGE>
CORNERCAP BALANCED FUND
STATEMENT OF OPERATIONS
FOR THE SIX-MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Dividends $ 50,070
Interest 80,655
Extraordinary Income 234
-----------
TOTAL INCOME 130,959
-----------
EXPENSES
Management fee (NOTE 2) 26,043
Service costs (NOTE 2) 7,813
-----------
TOTAL EXPENSES 33,856
-----------
NET INVESTMENT INCOME 97,103
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain from security transactions 59,238
Change in unrealized appreciation of investments (35,646)
-----------
NET GAIN ON INVESTMENTS 23,592
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 120,695
===========
- -------------------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
</TABLE>
<PAGE>
CORNERCAP BALANCED FUND
STATEMENT OF CHANGES IN NET ASSETS
PERIOD ENDED SEPTEMBER 30, 1999 AND YEAR ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
PERIOD ENDED YEAR ENDED
SEPTEMBER 30, MARCH 31,
1999 1999
------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment income $ 80,128 $ 85,806
Net realized gain on investments 59,238 196,394
Increase (decrease) in unrealized appreciation
of investments (39,219) (286,479)
------------- ------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 100,147 (4,279)
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income
($0.00 and $0.19 per share, respectively) 0 (19,152)
Capital gains
($0.00 and $23.03 per share, respectively) 0 (122,292)
------------- ------------
CAPITAL SHARE TRANSACTIONS (A)
Increase in net assets resulting from capital
share transactions 714,625 2,349,542
------------- ------------
TOTAL INCREASE IN NET ASSETS 814,772 2,203,819
NET ASSETS
Beginning of period 4,498,009 2,294,190
------------- ------------
END OF PERIOD
(Including undistributed net investment income of
$146,622 and $73,927, respectively) $ 5,312,781 $ 4,498,009
============= ============
</TABLE>
(A) SUMMARY OF CAPITAL SHARE ACTIVITY FOLLOWS:
<TABLE>
<CAPTION>
SIX-MONTH PERIOD ENDED YEAR ENDED
SEPTEMBER 30, 1999 MARCH 31, 1999
-----------------------------------------------------------
SHARES VALUE SHARES VALUE
------ ----- ------ -----
<S> <C> <C> <C> <C>
Shares sold 82,380 $ 1,036,234 231,516 $ 2,735,803
Shares issued on
reinvestment of distributions 0 0 11,916 139,421
--------- ------------ --------- -------------
82,380 1,036,234 243,432 2,875,224
Shares redeemed (25,449) (321,609) (44,201) (525,682)
--------- ------------ --------- -------------
NET INCREASE 56,881 $ 714,625 199,231 $ 2,349,542
========= ============ ========= =============
- -------------------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
</TABLE>
<PAGE>
CORNERCAP BALANCED FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
FOR PERIOD FOR THE FOR PERIOD FOR PERIOD
4/1/1999 TO YEAR ENDED 6/1/1997 TO 5/24/1997* TO
9/30/1999 3/31/1999 7/30/1998<F1> 5/31/1997
----------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.62 $ 12.21 $ 32.99 $ 33.20
------- -------- ------- ---------
INCOME FROM INVESTMENT OPERATIONS -
Net investment income .19 .21 .24 .01
Net realized and unrealized gain
(loss) on investments .18 (.26) 2.20 (.22)
------ ------- -------- --------
Total from investment operations 0.37 (.05) 2.44 (.21)
------ ------- -------- --------
Less distributions from -
Net investment income - (.07) (.19) -
Realized gains - (.47) (23.03) -
----- ------- ------ ---------
Total distributions - (.54) (23.22) -
----- ------- ------ ---------
Net asset value, end of period $11.99 $ 11.62 $ 12.21 $ 32.99
====== ======= ======== ========
Total Return 3.18% (.46)% 19.13% (.60)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period ($000) $5,312 $4,498 $2,294 $2,093
Ratios to average net assets <F2>
Expenses 0.65 1.30% 1.53%** 2.00%**
Net investment income 1.54 2.91% 2.80%** 4.50%**
Portfolio turnover rate 48.10% 38.47% 13.38% 98.90%
* COMMENCEMENT OF OPERATIONS
** ANNUALIZED
Per share amounts have been adjusted for the year ended May 31, 1997 to reflect
a 1 for 4 reverse stock split effective June 30, 1997. On June 14, 1997, a
capital gain distribution of $22.91 per share ($5.73 per share on a pre-split
basis) was paid to shareholders. The net asset value per share on June 30, 1997,
after the payment of the capital gain distribution and the effect of the 1 for 4
reverse split, was $10.86 per share.
<FN>
<F1> Fund has changed its year-end from May 31st to September 30st.
<F2> Fee waivers reduced the expense ratio and increased the net investment
income ratio by 1.25% in 1998.
</FN>
- -------------------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
</TABLE>
<PAGE>
CORNERCAP BALANCED FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
(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 (NOTE 4). 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 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.
D. DISTRIBUTIONS TO SHAREHOLDERS - Distributions from net investment
income and realized gains, if any, are recorded on the ex-dividend
date. Income distributions and capital gain distributions are
determined in accordance with income tax regulations which may differ
from generally accepted accounting principles.
E. ACCOUNTING ESTIMATES - In preparing financial statements in
conformity with generally accepted accounting principles, management
makes estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements, as
well as the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
- --------------------------------------------------------------------------------
CORNERCAP BALANCED FUND
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
(2) TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENTS The Fund has an
investment advisory agreement with CornerCap Investment Counsel, Inc. (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.
In addition, the Fund has a service agreement with the Advisor, pursuant
to which the Advisor receives a fee, computed daily and payable monthly at
an annual rate of .30% of average net assets.
The Advisor will provide day-to-day operational services to the Fund
including, but not limited to, providing or arranging to provide
accounting, administrative, legal (except litigation), dividend
disbursing, transfer agent, registrar, custodial, shareholder reporting,
sub accounting and recordkeeping services. All fees and expenses
associated with these and other functions including, but not limited to,
expenses of legal compliance, shareholder communication and meetings of
the Shareholders and the Board of Trustees will be paid by the Advisor.
(3) PURCHASES AND SALES OF SECURITIES
For the six-month period ended September 30, 1999, the cost of purchases
and the proceeds from sales of securities, excluding short-term
securities, were $972,590 and $137,414, respectively.
(4) STOCK SPLIT
Effective June 30, 1997, the Fund had a reverse stock split of 1 share for
every 4 shares owned. The financial highlights for the period ended May
31, 1997 have been adjusted retroactively to reflect this split.
- -------------------------------------------------------------------------------
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