CORNERCAP
SMALL CAP VALUE FUND
ANNUAL REPORT TO SHAREHOLDERS
A SERIES OF
CORNERCAP GROUP OF FUNDS
A "SERIES" INVESTMENT COMPANY
FOR THE FISCAL YEAR ENDED
MARCH 31, 2000
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 FOR THE SHAREHOLDERS
FOR THE YEAR ENDED MARCH 31, 2000
Dear Shareholder:
For the fiscal year ending March 31, 2000, the Small Cap Value Fund (formerly
the Growth Fund) was up 5.3% and the Balanced Fund was down 2.8%. Over this same
period, the S&P 500, the Value Line, and the Lehman Bros. Intermediate Term
Government/Corporate Indices increased 17.9%, 6.6%, and 2.1%, respectively. This
is the second consecutive year that our funds have been hurt because of the
persistent bear market for value investing. Value investing focuses on earnings
and cash flow in the near term, earnings that are reasonably priced, and, to
some extent, dividends. This philosophy has been dramatically out of favor. In
1999, stocks with positive earnings were down while stocks with negative
earnings were up over 50%. We did not outperform last year because we chose not
to abandon our investment philosophy.
The investment world seemed to turn on a dime in early March, specifically on
March 10. We discussed this momentum shift in our March 31, 2000 report, and it
has continued in that direction. If we use the media's definition of a bear
market (down 20% from the high), the small- and mid-size growth stocks have
already experienced a significant decline. Through May 23, 2000, the tech heavy
<TABLE>
<CAPTION>
RETURNS SINCE MARKET TURN (3/10/00 TO 5/23/00)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
20%
| 13.2%
| |
10% |
| | 8.9%
| | | 5.0% 0.3%
0%______|____________|____________|_________________________________________________________________________|_______
| | | | | | | | | | | | |
| -0.7% | | |
-10% -9.6% | |
| | |
| | |
-20% | |
| | |
| | |
-30% | -24.0%
| |
| -37.3%
-40%
Small Cap Balanced Dow S&P Willshire NASDAQ Russell Value
Value Fund Jones 500 5000 2000 Line
</TABLE>
NASDAQ was down 37% from its high on March 10, 2000, and the Russell 2000 was
down 24%. Recently, the larger growth stocks have started to fall. Our funds are
up nicely since the tide shifted:
Hopefully, this trend in our direction will continue. The market has been driven
by speculation, and this is the only way we know for these excesses to be
reduced. Many investors will be (or have been) hurt, and it may be a permanent
loss of capital. We appreciate our mutual fund clients who on balance have
stayed the course with their investment plan. This is not the norm. The average
investor tends to follow his emotions, which means that he follows the hot
money, a sure path to long-term investment failure.
As we discussed in our March 31, 2000 report, when we file the new prospectus
this summer, we will be offering a new mutual fund, the CornerCap Emerging
Growth Fund. We have been managing this fund as a limited partnership over the
last four years. The fund searches for early stage growth companies and will
invest principally in very small companies. As part of our mutual fund company,
we also offer a number of other no-load funds that CornerCap does not manage,
including international equities, conservative bonds, high yield bonds, etc. Our
objective is to offer high quality investments at a reasonable cost across a
full range of risk and return profiles.
CORNERCAP INVESTMENT COUNSEL
MAY 31, 2000
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES
CORNERCAP SMALL CAP VALUE FUND
ATLANTA, GEORGIA
We have audited the accompanying statement of assets and liabilities of
CornerCap Small Cap Value Fund (formerly CornerCap Growth Fund), including the
portfolio of investments, as of March 31, 2000, 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, 2000, by correspondence with the custodian. 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 Small Cap Value Fund as of March 31, 2000, 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 5, 2000
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ON INTERNAL CONTROL STRUCTURE
SHAREHOLDERS AND BOARD OF TRUSTEES
CORNERCAP GROUP OF FUNDS
ATLANTA, GEORGIA
In planning and performing our audit of the financial statements of CornerCap
Small Cap Value Fund (formerly CornerCap Growth Fund) and the CornerCap Balanced
Fund, each a series of shares of CornerCap Group of Funds, for the year ended
March 31, 2000, we considered their internal control structure, including
procedures for safeguarding securities, in order to determine our auditing
procedures for the purpose of expressing our opinion on the financial statements
and to comply with the requirements of Form N-SAR, not to provide assurance on
the internal control structure.
The management of the Funds is responsible for establishing and maintaining an
internal control structure. In fulfilling this responsibility, estimates and
judgments by management are required to assess the expected benefits and related
costs of internal control structure policies and procedures. Two of the
objectives of an internal control structure are to provide management with
reasonable, but not absolute, assurance that assets are safeguarded against loss
from unauthorized use or disposition, and that transactions are executed in
accordance with management's authorization and recorded properly to permit
preparation of financial statements in conformity with generally accepted
accounting principles.
Because of inherent limitations in any internal control structure, errors or
irregularities may occur and not be detected. Also, projection of any evaluation
of the structure to future periods is subject to the risk that it may become
inadequate because of changes in conditions or that the effectiveness of the
design and operation may deteriorate.
Our consideration of the internal control structure would not necessarily
disclose all matters in the internal control structure that might be material
weaknesses under standards established by the American Institute of Certified
Public Accountants. A material weakness is a condition in which the design or
operation of the specific internal control structure elements does not reduce to
a relatively low level the risk that errors or irregularities in amounts that
would be material in relation to the financial statements being audited may
occur and not be detected within a timely period by employees in the normal
course of performing their assigned functions. However, we noted no matters
involving the internal control structure, including procedures for safeguarding
securities, that we consider to be material weaknesses, as defined above, as of
March 31, 2000.
This report is intended solely for the information and use of management and the
Securities and Exchange Commission, and should not be used for any other
purpose.
/s/ Tait, Weller & Baker
TAIT, WELLER & BAKER
PHILADELPHIA, PENNSYLVANIA
MAY 5, 2000
<PAGE>
CORNERCAP SMALL CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
MARCH 31, 2000
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
VALUE
SHARES (NOTE 1-A)
------ ----------
COMMON STOCKS - 92.85%
----------------------
<C> <S> <C>
AEROSPACE 3.82%
15,300 B.F. Goodrich Co. $ 438,919
------------
APPAREL - 2.38%
15,550 Kellwood Co. 273,097
------------
APPLIANCES - 2.16%
7,500 Maytag Corp. 248,438
------------
AUTOMOTIVES - 2.53%
57,500 TBC Corp. * 291,094
------------
BEVERAGES - 3.68%
8,300 Canadaigua Brands, Inc. Class A * 423,300
------------
BUILDING MATERIALS - 3.34%
6,500 Southdown, Inc. 383,500
------------
CONSTRUCTION - 2.32%
8,600 Fluor Corp. 266,600
------------
DIVERSIFIED - 1.77%
13,100 Standex International Corp. 203,050
------------
EDUCATION SERVICES - 2.70%
19,400 ITT Educational Services, Inc. * 310,400
------------
ELECTRICAL EQUIPMENT - 2.90%
17,300 Ametek Aerospace Products, Inc. 333,025
------------
FINANCIAL SERVICES 8.02%
13,500 Edwards (A.G.) Inc. 540,000
18,800 Pacific Century Financial Corp. 381,875
------------
921,875
------------
FOOD PROCESSING - 2.51%
19,900 Ralcorp Holdings, Inc. * 288,550
------------
FURNITURE - 2.64%
28,600 Haverty Furniture, Inc. 303,875
------------
HOLDINGS COMPANY - 2.81%
13,725 Crane Company 323,395
------------
HOME BUILDERS - 4.46%
34,340 Champion Enterprises, Inc. * 197,455
15,100 Pulte Corp. 315,213
------------
512,668
------------
INDUSTRIAL SERVICES - 5.37%
11,300 ABM Industries, Inc. 265,550
73,000 Health Management Systems, Inc. * 351,312
------------
616,862
------------
-------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
CORNERCAP SMALL CAP VALUE FUND
PORTFOLIO OF INVESTMENTS - (CONTINUED)
MARCH 31, 2000
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
VALUE
SHARES (NOTE 1-A)
------ ----------
COMMON STOCKS - 92.85%
----------------------
<C> <S> <C>
INSURANCE - 3.59%
23,100 Ohio Casualty Corp. $ 412,913
------------
MACHINERY - 4.98%
19,100 Flowserve Corp. 245,912
17,750 Moog, Inc. * 326,156
------------
572,068
------------
MEDICAL - OUTPATIENT - .99%
4,000 Lincare Holdings, Inc. * 113,500
------------
METALS - 1.60%
11,750 International Aluminum Corp. 183,594
------------
PACKAGING AND CONTAINERS - 2.26%
7,500 Ball Corp. 259,219
------------
PHARMACEUTICALS - 4.41%
18,600 ICN Pharmaceuticals, Inc. 506,850
------------
PUBLISHING - 2.79%
12,100 Deluxe Corp. 320,650
------------
RECREATION - 5.29%
7,600 Anchor Gaming * 288,325
10,600 Polaris Industries, Inc. 319,325
------------
607,650
------------
RESTAURANT - 2.88%
43,400 NPC International, Inc. * 330,925
------------
STEEL - INTEGRATED - 2.79%
20,700 Ryerson Tull, Inc. 320,850
------------
TELECOMMUNICATION EQUIPMENT - 3.97%
4,900 Plantronics, Inc. * 456,619
------------
THRIFT - 2.41%
14,500 Washington Federal, Inc. 276,406
------------
TOBACCO - 1.48%
11,300 Universal Corp. 170,206
------------
TOTAL COMMON STOCKS (COST $11,392,129) 10,670,098
------------
-------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
CORNERCAP SMALL CAP VALUE FUND
PORTFOLIO OF INVESTMENTS - (CONTINUED)
MARCH 31, 2000
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT (NOTE 1-A)
------ ----------
SHORT-TERM INVESTMENTS - 6.68%
------------------------------
<C> <S> <C> <C>
$767,518 Fidelity Money Market Fund
(Cost $767,518) 767,518
------------
TOTAL INVESTMENTS (COST $12,159,647) (a) 99.53% 11,437,616
OTHER ASSETS - NET .47% 54,318
------ ------------
NET ASSETS 100.00% $ 11,491,934
====== ============
* NON INCOME PRODUCING SECURITY
(a) AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSE IS $12,159,647.
At March 31, 2000, unrealized appreciation (depreciation) of
securities for federal income tax purposes is as follows:
Gross unrealized appreciation $ 1,550,829
Gross unrealized depreciation (2,272,860)
------------
Net unrealized depreciation $ (722,031)
============
-------------------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
</TABLE>
<PAGE>
CORNERCAP SMALL CAP VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2000
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments at market value,
(Identified cost $12,159,647) (NOTE 1-A) $ 11,437,616
Cash 39,027
Interest receivable 3,566
Dividends receivable 12,647
Other assets 11,109
--------------
TOTAL ASSETS 11,503,965
--------------
LIABILITIES
Advisory fee payable 7,618
Service fees payable 4,413
--------------
TOTAL LIABILITIES 12,031
--------------
NET ASSETS
(Applicable to 1,296,038 shares outstanding, unlimited shares authorized) $ 11,491,934
==============
NET ASSET VALUE, OFFERING AND REPURCHASE
PRICE PER SHARE
($11,491,934 / 1,296,038 shares) $8.87
=====
NET ASSETS
At March 31, 2000, net assets consisted of:
Paid-in capital $ 13,072,201
Accumulated net realized loss on investments (858,236)
Net unrealized depreciation (722,031)
--------------
$ 11,491,934
-------------------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
</TABLE>
<PAGE>
CORNERCAP SMALL CAP VALUE FUND
STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 2000
<TABLE>
-------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
INCOME
Dividends $ 244,644
Interest income 22,318
-----------
TOTAL INCOME 266,962
-----------
EXPENSES
Management fee (NOTE 2) 131,883
Service fees (NOTE 2) 65,942
-----------
TOTAL EXPENSES 197,825
-----------
NET INVESTMENT INCOME 69,137
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain from security transactions 712,874
Change in unrealized depreciation of investments (179,827)
-----------
NET GAIN ON INVESTMENTS 533,047
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 602,184
===========
-------------------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
</TABLE>
<PAGE>
CORNERCAP SMALL CAP VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
YEARS ENDED MARCH 31, 2000 AND 1999
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
2000 1999
---- ----
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment income $ 69,137 $ 33,790
Net realized gain (loss) on investments 712,874 (6,658)
Change in unrealized depreciation of investments (179,827) (4,653,062)
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 602,184 (4,625,930)
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income ($.06 per share) (76,271) -
Realized gains ($1.15 and $1.48 per share, respectively) (1,432,888) (1,763,462)
-------------- --------------
TOTAL DISTRIBUTIONS (1,509,159) (1,763,462)
-------------- --------------
CAPITAL SHARE TRANSACTIONS (A)
Increase in net assets resulting from
capital share transactions 308,766 537,716
-------------- --------------
TOTAL DECREASE IN NET ASSETS (598,209) (5,851,676)
NET ASSETS
Beginning of year 12,090,143 17,941,819
-------------- --------------
END OF YEAR
(including undistributed net investment income of
$0 and $33,790, respectively) $ 11,491,934 $ 12,090,143
============== ==============
</TABLE>
(a) SUMMARY OF CAPITAL SHARE ACTIVITY FOLLOWS:
<TABLE>
<CAPTION>
2000 1999
------------------------------ ------------------------------
SHARES VALUE SHARES VALUE
<S> <C> <C> <C> <C>
Shares sold 171,424 $ 1,809,754 159,957 $ 1,965,699
Shares issued on reinvested of distributions 166,795 1,492,812 176,112 1,736,461
--------- ------------- ---------- --------------
338,219 3,302,566 336,069 3,702,160
Shares redeemed (307,128) (2,993,800) (279,339) (3,164,444)
--------- ------------- ---------- --------------
NET INCREASE 31,091 $ 308,766 56,730 $ 537,716
========= ============= ========== ==============
---------------------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
</TABLE>
<PAGE>
CORNERCAP SMALL CAP VALUE FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
YEARS ENDED MARCH 31,
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
NET ASSET VALUE, BEGINNING OF YEAR $ 9.56 $ 14.85 $ 11.68 $ 9.81 $ 8.61
------- -------- -------- -------- -------
INCOME FROM INVESTMENT OPERATIONS -
Net investment income .06 .04 .21 .02 .04
Net realized and unrealized gain .46 (3.85) 5.05 1.93 1.22
(loss) on investments ------- ------- -------- -------- -------
TOTAL FROM INVESTMENT OPERATIONS .52 (3.81) 5.26 1.95 1.26
------- ------- -------- -------- -------
LESS DISTRIBUTIONS FROM
Net investment income (.06) - (.22) (.01) (.06)
Realized gains (1.15) (1.48) (1.87) (.07) -
------- ------- -------- -------- -------
TOTAL DISTRIBUTIONS (1.21) (1.48) (2.09) (.08) (.06)
------- ------- -------- -------- -------
NET ASSET VALUE, END OF YEAR $ 8.87 $ 9.56 $ 14.85 $ 11.68 $ 9.81
======= ======== ======== ======== =======
TOTAL RETURN 5.30% 25.98)% 47.69% 19.94% 14.64%
RATIOS/SUPPLEMENTAL DATA
NET ASSETS, END OF YEAR ($000) $11,492 $12,090 $17,942 $12,856 $8,371
RATIOS TO AVERAGE NET ASSETS
Expenses 1.50% 1.50% 1.56% 1.71% 1.75%
Net investment income .53% .23% .17% .19% .49%
PORTFOLIO TURNOVER RATE 37.13% 39.16% 48.82% 37.13% 40.83%
-----------------------------------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
</TABLE>
<PAGE>
CORNERCAP SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
--------------------------------------------------------------------------------
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CornerCap Small Cap Value Fund (formerly 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. 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 had net realized capital losses of approximately $956,000
during the period from November 1, 1999 through March 31, 2000 which
are treated for federal income tax purposes as arising during the
Fund's tax year ending March 31, 2000. These "post-October" losses
may be utilized in future years to offset net realized capital
gains.
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.
--------------------------------------------------------------------------------
<PAGE>
CORNERCAP SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MARCH 31, 2000
--------------------------------------------------------------------------------
(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, 2000, the cost of purchases and the proceeds
from sales of securities, excluding short-term securities, were $4,676,164
and $6,264,249 respectively.
--------------------------------------------------------------------------------
