CORNERCAP GROWTH FUND
ANNUAL REPORT TO SHAREHOLDERS
A Series of
CornerCap Group of Funds
A "Series" Investment Company
FOR THE FISCAL YEAR ENDED
MARCH 31, 1999
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CORNERCAP GROUP OF FUNDS
MANAGER'S REPORT FOR THE SHAREHOLDERS
FOR THE YEAR ENDED MARCH 31, 1999
Dear Shareholder:
The fiscal year ended March 31, 1999, was probably the most unusual 12-month
period in our history of investing. This is not because of the overall
returns delivered in the market but because of the extremes and the
narrowness of the market. The only stocks that performed well were the
technology/internet stocks and a few giant companies, which tended to drive
the returns of the major indices. All other stocks, which are the vast
majority, were down significantly over this 12-month period.
In early April 1999, the above extremes reversed themselves. This
represents a market leadership change for 1999 that we had predicted in our
December 31, 1998, report, and we believe this recent shift in the market
will remain intact. The technology sector has dropped dramatically in
recent weeks, and the larger growth-oriented stocks have gone nowhere. Our
value-oriented approach to investing, which was stampeded by the herd last
year, is now being hoisted to new heights. These extreme near-term shifts
in the market have clearly been reflected in the recent returns of our
mutual funds, especially our all-equity CornerCap Growth Fund.
<TABLE>
<CAPTION>
------12 Months Ending----- Current Qtr
3/31/97 3/31/98 (Through 5/21/99)
------- ------- -----------------
<S> <C> <C> <C>
CornerCap Growth Fund 47.8% -26.0% 19.2%
CornerCap Balanced Fund 18.4%* - 0.5% 11.0%
* 10-month return
</TABLE>
We realize that fiscal year 1998 was a difficult period for our
shareholders. We encourage you to always think long-term and to avoid the
temptation of reacting to short-term events. The financial news media are
bringing more information to us than ever before, and this is a good thing.
However, we have to manage the information being presented and not let the
media manage us. The media are not successful unless they can react quickly
to events and arouse the emotions of their audience. Emotionally reacting
to recent events is the best way we know to lose money in the market.
As a long-term investor, the most important thing to do is to use competent
investment counsel, and we believe that CornerCap Investment Counsel meets
those criteria. Of equal importance, you must set the appropriate level of
risk for your long-term investments. Over time, and assuming competent
investment decisions, higher risk will be rewarded with higher returns.
These higher long-term returns will also come at a price, which is higher
near-term volatility. That risk/return tradeoff is clearly illustrated by
the returns (see above) from our all-equity growth fund versus our balanced
fund, which has targeted a 40% investment in the bond market. Please call
and talk with us if you would like to discuss this tradeoff in more detail.
We would like to report on some other activities relating to your mutual
fund company. Effective March 31, 1998, your Board of Trustees approved
changing the Funds to a Unified Fee Structure. The effect of this is that
the investment advisor, CornerCap Investment Counsel, is responsible for all
expenses of the Funds. The advisor is paid a flat annualized fee for the
CornerCap Balanced Fund and the CornerCap Growth Fund of 1.3% and 1.5%,
respectively. There are no load charges, 12(b)1 fees, or other selling
costs associated with our Funds.
Our fund company and the service providers for our mutual funds are
continuing to implement the Year 2000 (Y2K) compliance project. We have
made significant progress on all internal operations, and the Y2K readiness
plan is on schedule to meet our deadline. The current focus is on
evaluating the compliance efforts of third-party service providers with whom
we do business. We have also developed a comprehensive contingency plan
designed to ensure continuing business operations in the event a Y2K problem
does occur. We are currently testing and evaluating the contingency plan.
Although there are no guarantees, we believe that the steps we are taking
will protect the Funds' investment portfolios, as much as possible, from
problems related to the Year 2000.
CORNERCAP INVESTMENT COUNSEL
MAY 28, 1999
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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES
CORNERCAP GROWTH FUND
ATLANTA, GEORGIA
We have audited the accompanying statement of assets and liabilities
of CornerCap Growth Fund, including the portfolio of investments, as
of March 31, 1999, and the related statement of operations for the
year then ended, the statement of changes in net assets for each of
the two years in the period then ended, and the financial highlights
for each of the five years in the period then ended. These financial
statements are the responsibility of the Trust'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 securities owned as of March 31, 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 CornerCap Growth Fund as of March 31, 1999, the
results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended, and the
financial highlights for each of the five years in the period then
ended in conformity with generally accepted accounting principles.
/S/ TAIT, WELLER & BAKER
TAIT, WELLER & BAKER
PHILADELPHIA, PENNSYLVANIA
MAY 6, 1999
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CORNERCAP GROWTH FUND
PORTFOLIO OF INVESTMENTS
MARCH 31, 1999
______________________________________________________________________________
VALUE
SHARES (NOTE 1-A)
- ------ ----------
COMMON STOCKS - 96.98%
----------------------
APPAREL - 2.38%
54,300 Kellwood Co. $ 287,916
---------
AUTOMOTIVES - 2.88%
57,500 TBC Corp. * 348,593
---------
AUTO PARTS - 2.70%
20,100 Standard Products Company 326,625
---------
BEVERAGES - 3.46%
8,300 Canadaigua Brands, Inc. Class A * 418,113
---------
BUILDING MATERIALS - 2.89%
6,500 Southdown, Inc. 348,969
---------
CHEMICAL - SPECIALTY - 2.60%
24,900 Furon Company 314,362
---------
COMPUTERS - 2.63%
25,850 Banctec, Inc. * 318,278
---------
CONSTRUCTION - 1.92%
8,600 Flour Corp. 232,200
---------
DIVERSIFIED - 2.37%
13,100 Standex International Corp. 286,563
---------
ELECTRICAL EQUIPMENT - 2.61%
17,300 Ametek, Inc. 315,725
---------
FOOD PROCESSING - 3.13%
19,900 Ralcorp Holdings * 378,100
---------
FURNITURE - 3.00%
14,300 Haverty Furniture 362,862
---------
HOLDINGS COMPANY - 2.75%
13,725 Crane Company 331,973
---------
HOME BUILDERS - 2.15%
12,500 Pulte Corp 260,156
---------
INSURANCE - 2.43%
9,400 Orion Capital Corp 293,750
---------
INDUSTRIAL SERVICES - 4.42%
11,300 ABM Industries 344,650
40,000 Health Management Systems * 190,000
---------
534,650
---------
MACHINERY - 4.67%
19,100 Flowserve Corporation 297,244
10,600 Kulicke & Soffa Industries * 267,650
---------
564,894
---------
_______________________________________________________________________________
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CORNERCAP GROWTH FUND
PORTFOLIO OF INVESTMENTS - (Continued)
MARCH 31, 1999
_______________________________________________________________________________
VALUE
SHARES (NOTE 1-A)
- ------ ----------
COMMON STOCKS - 96.98%
----------------------
MARITIME - 0.71%
43,050 New OMI Corp. * 86,100
---------
Metals - 5.50%
11,750 International Aluminum, Inc. 292,281
16,950 Varlen Corp. 372,900
---------
665,181
---------
OIL AND GAS - 5.56%
32,400 Ensco International, Inc. 431,325
67,600 Parker Drilling Co. * 240,825
---------
672,150
---------
PACKAGING AND CONTAINERS - 4.27%
11,000 Ball Corp. 516,313
---------
PUBLISHING - 2.92%
12,100 Deluxe Corp. 352,413
---------
RECREATION - 8.10%
7,600 Anchor Gaming * 332,500
25,800 Huffy Corp. 309,600
10,600 Polaris Industries 336,550
---------
978,650
---------
RESTAURANT - 6.35%
37,400 Piccadilly Cafeterias, Inc. 397,375
23,700 NPC International * 370,313
---------
767,688
---------
RETAIL - 1.77%
13,600 Blair Corporation 214,200
---------
STEEL - INTEGRATED 2.51%
20,700 Ryerson Tull 304,031
---------
TEXTILES - 2.61%
54,300 Culp, Inc. 315,619
---------
TOBACCO - 5.17%
12,850 United States Tobacco, Inc. 335,706
11,300 Universal Corporation 288,856
---------
624,562
---------
THRIFT - 2.52%
14,500 Washington Federal, Inc. 304,500
---------
Total Common Stocks (Cost $12,267,340) 11,725,136
---------
_______________________________________________________________________________
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CORNERCAP GROWTH FUND
PORTFOLIO OF INVESTMENTS - (Continued)
MARCH 31, 1999
________________________________________________________________________________
PRINCIPAL VALUE
AMOUNT (NOTE 1-A)
- --------- ----------
SHORT-TERM INVESTMENTS - 3.65%
------------------------------
$441,013 Wachovia Bank Short-Term Authorized Demand Notes
(Cost $441,013) 441,013
-----------
Total Investments (Cost $12,708,353) (a) 100.63% 12,166,149
Liabilities in Excess of Other Assets - Net (0.63)% (76,006)
------- -----------
Net Assets 100.00% $ 12,090,143
===========
* Non income producing security
(a) Aggregate cost for federal income tax purpose is
$12,708,353.
At March 31, 1999, unrealized appreciation
(depreciation) of securities for federal income
tax purposes is as follows:
Gross unrealized appreciation $ 1,667,455
Gross unrealized depreciation (2,209,659)
----------
Net unrealized depreciation $ (542,204)
==========
See accompanying notes to financial statements
_______________________________________________________________________________
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CORNERCAP GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1999
_______________________________________________________________________________
ASSETS
Investments at market value,
(Identified cost $12,708,353) (Note 1-A) $12,166,149
Cash 644
Receivable for investment securities sold 568,222
Interest receivable 1,938
Dividends receivable 12,050
Other assets 11,109
----------
Total assets 12,760,112
----------
LIABILITIES
Payable for investment securities purchased 653,304
Payable for fund shares redeemed 2,500
Advisory fee payable 8,907
Service fees payable 5,258
----------
Total liabilities 669,969
----------
NET ASSETS
(Applicable to 1,264,947 shares outstanding, unlimited shares
authorized) $12,090,143
NET ASSET VALUE OFFERING AND REPURCHASE
PRICE PER SHARE
($12,090,143 ) 1,264,947 shares) $9.56
=====
NET ASSETS
At March 31, 1999, net assets consisted of:
Paid-in capital $12,803,939
Undistributed net investment income 33,790
Accumulated net realized loss on investments (205,382)
Net unrealized depreciation (542,204)
----------
$12,090,143
==========
See accompanying notes to financial statements
_______________________________________________________________________________
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CORNERCAP GROWTH FUND
STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 1999
_______________________________________________________________________________
INVESTMENT INCOME
Income
Dividends $ 228,528
Interest income 27,588
-----------
Total income 256,116
-----------
Expenses
Management fee (Note 2) 148,217
Service fees (Note 2) 74,109
-----------
Total expenses 222,326
-----------
Net investment income 33,790
-----------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss from security transactions (6,658)
Change in unrealized appreciation of investments (4,653,062)
-----------
Net loss on investments (4,659,720)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(4,625,930)
===========
See accompanying notes to financial statements
_______________________________________________________________________________
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CORNERCAP GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
YEARS ENDED MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
___________________________________________________________________________________________________
1999 1998
---- ----
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment income $ 33,790 $ 26,275
Net realized gain (loss) on investments (6,658) 3,153,012
Increase (decrease) in unrealized appreciation
of investments (4,653,062) 2,778,761
----------- -----------
Net increase (decrease) in net assets
resulting from operations (4,625,930) 5,958,048
----------- -----------
Distributions to shareholders from
Net investment income ($0.22 per share) - (37,280)
Realized gains ($1.48 and $1.87 per share, respectively) (1,763,462) (2,070,572)
----------- -----------
Total distributions (1,763,462) (2,107,852)
----------- -----------
Capital share transactions (a)
Increase in net assets resulting from
capital share transactions 537,716 1,235,326
----------- -----------
Total increase (decrease) in net assets (5,851,676) 5,085,522
NET ASSETS
Beginning of year 17,941,819 12,856,297
End of year
----------- -----------
(including undistributed net investment income of
$33,790 and $11,435, respectively) $ 12,090,143 $ 17,941,819
=========== ===========
</TABLE>
(a) Summary of capital share activity follows:
<TABLE>
<CAPTION>
1999 1998
-------------------------- --------------------------
Shares Value Shares Value
------ ----- ----- -----
<S> <C> <C> <C> <C>
Shares sold 159,957 $ 1,965,699 204,161 $ 2,857,683
Shares issued on
reinvested of distributions 176,112 1,736,461 159,748 2,067,145
-------- ---------- -------- ----------
336,069 3,702,160 363,909 4,924,828
Shares redeemed (279,339) (3,164,444) (254,409) (3,689,502)
-------- ---------- -------- ----------
Net increase 56,730 $ 537,716 109,500 $ 1,235,326
======== ========== ======== ==========
__________________________________________________________________________________________________________
</TABLE>
See accompanying notes to financial statements
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CORNERCAP GROWTH FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR)
<TABLE>
<CAPTION>
_______________________________________________________________________________________________________________________
YEARS ENDED MARCH 31,
-------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of year $ 14.85 $ 11.68 $ 9.81 $ 8.61 $ 7.69
------ ------ ------ ----- -----
Income from investment operations -
Net investment income .04 .21 .02 .04 .05
Net realized and unrealized gain (loss)
on investments (3.85) 5.05 1.93 1.22 .89
------ ------ ------ ----- -----
Total from investment operations (3.81) 5.26 1.95 1.26 .94
------ ------ ------ ----- -----
Less distributions from
Net investment income - (.22) (.01) (.06) (.02)
Realized gains (1.48) (1.87) (.07) - -
------ ------ ------ ----- -----
Total distributions (1.48) (2.09) (.08) (.06) (.02)
------ ------ ------ ----- -----
Net asset value, end of year $ 9.56 $ 14.85 $ 11.68 $ 9.81 $ 8.61
====== ====== ====== ===== =====
Total Return (25.98)% 47.69% 19.94% 14.64% 12.25%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year ($000) $12,090 $17,942 $12,856 $8,371 $7,299
Ratios to average net assets
Expenses 1.50% 1.56% 1.71% 1.75% 1.87%
Net investment income .23% .17% .19% .49% .70%
Portfolio turnover rate 39.16% 48.82% 37.13% 40.83% 55.12%
_________________________________________________________________________________________________________________________
See accompanying notes to financial statements
</TABLE>
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CORNERCAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
_______________________________________________________________________________
(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 Standard 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. 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.
D. 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.
_______________________________________________________________________________
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CORNERCAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 31, 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 .50% 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 year ended March 31, 1999, the cost of purchases and the
proceeds from sales of securities, excluding short-term securities,
were $5,556,761 and $5,631,789 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 share-holders. In
addition, the Fund intends to pay distributions as required to
avoid imposition of excise tax. Therefore, no federal income tax
provision is required.
