CORNERCAP BALANCED 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
NASDAQ was down 37% from its high on March 10, 2000, and the Russell 2000 was
<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>
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 BALANCED FUND
ATLANTA, GEORGIA
We have audited the accompanying statement of assets and liabilities of
CornerCap Balanced 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 and the financial highlights for the periods
indicated thereon. 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 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 Balanced Fund as of March 31, 2000, the results of its operations for
the year then ended, the changes in its net assets and the financial highlights
for the periods indicated above 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 BALANCED FUND
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
March 31, 2000
---------------------------------------------------------------------------------------------
<C> <S> <C>
Value
Shares (Note 1-A)
COMMON STOCKS - 57.46%
-------------
Aerospace - 3.19%
2,300 Goodrich BF Co. $ 65,981
1,800 Rockwell International Corp. 75,263
-----------
141,244
-----------
AUTOMOTIVE - 4.77%
1,800 Ford Motor Co. Del 82,688
2,200 TRW, Inc. 128,700
-----------
211,388
-----------
BANK - 1.85%
2,200 First Union Corp. 81,950
-----------
BEVERAGES - 1.83%
1,300 Anheuser-Busch Companies, Inc. 80,925
-----------
BUILDING MATERIALS - 1.89%
1,600 PPG Industries, Inc. 83,700
-----------
COMMUNICATIONS - 2.42%
1,600 Telefonos de Mexico ADR 107,200
-----------
DIVERSIFIED - 3.94%
2,700 ITT Industries, Inc. 83,869
4,300 National Service Industries, Inc. 90,569
-----------
174,438
-----------
ELECTRIC LIGHTING AND WIRING EQUIPMENT - 2.17%
1,750 Johnson Controls, Inc. 96,044
-----------
ELECTRICAL UTILITIES - 4.02%
3,400 First Energy Corp. 70,125
4,600 Reliant Energy, Inc. 107,813
-----------
177,938
-----------
FINANCIAL SERVICES - 2.38%
800 JP Morgan & Co., Inc. 105,400
-----------
INSURANCE 2.34%
5,800 Ohio Casualty Corp. 103,675
-----------
MACHINERY - 3.14%
1,600 Briggs & Stratton 65,800
5,700 Flowserve Corporation 73,387
-----------
139,187
-----------
MEDICAL SUPPLIES - 3.59%
1,400 Bausch & Lomb, Inc. 73,062
3,000 Mallinckrodt, Inc. 86,250
-----------
159,312
-----------
---------------------------------------------------------------------------------------------
<PAGE>
CORNERCAP BALANCED FUND
PORTFOLIO OF INVESTMENTS - (Continued)
March 31, 2000
---------------------------------------------------------------------------------------------
VALUE
SHARES (NOTE 1-A)
------ ----------
COMMON STOCKS - 57.46%
METALS - 3.48%
1,600 Phelps Dodge Corp. 76,000
4,800 Timken Co. 78,000
-----------
154,000
-----------
MINING - 2.81%
589 Arch Coal, Inc. 3,939
1,800 Reynolds Metals Co. 120,375
-----------
124,314
-----------
OIL INDUSTRY - 1.81%
2,400 Ashland, Inc. 80,250
-----------
PAPER & FOREST PRODUCTS - 2.82%
8,400 Abitibi Consolidated, Inc. 80,325
4,200 Glatfelter P.H. Co. 44,625
-----------
124,950
-----------
PUBLISHING - 2.45%
4,100 Deluxe Corp. 108,650
-----------
RETAIL - SPECIALTY - 1.10%
6,900 Enesco Group, Inc. 48,731
-----------
STEEL INTERGRATED - 1.69%
3,000 USX-U.S. Steel Group 75,000
-----------
TEXTILE - 2.14%
2,500 Spring Industries, Inc. 95,000
-----------
THRIFT - 1.63%
3,800 Washington Federal, Inc. 72,437
-----------
TOTAL COMMON STOCKS (COST $2,696,583) 2,545,733
-----------
---------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
CORNERCAP BALANCED FUND
PORTFOLIO OF INVESTMENTS - (Continued)
MARCH 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1-A)
------ ----------
<C> <S> <C>
CORPORATE BONDS - 32.28%
COMMUNICATIONS - 4.08% AT&T Corp.
$200,000 6.000%, Due 03/15/09 $ 180,757
-----------
ELECTRICAL UTILITIES - 3.27%
National Rural Utilities Cooperative Finance Group
150,000 6.375%, Due 10/15/04 144,882
-----------
ELECTRONIC COMPONENTS - 3.30%
Sony Corp.
150,000 6.125%, Due 03/04/03 145,929
-----------
ENTERTAINMENT - 4.40%
Walt Disney Co.
200,000 6.750%, Due 03/30/06 194,966
-----------
FINANCIAL SERVICE - 17.23%
General Motors Acceptance Corp.
150,000 6.700%, Due 04/03/01 149,377
Merrill Lynch & Co., Inc.
150,000 6.375%, Due 10/15/08 137,608
Nations Bank Corp.
200,000 6.375%, Due 05/15/05 189,324
Norwest Financial, Inc.
150,000 6.250%, Due 12/15/07 138,242
Walmart Stores, Inc.
150,000 6.750%, Due 05/15/02 148,896
-----------
763,447
TOTAL CORPORATE BONDS (COST $1,537,319) 1,429,981
-----------
U.S. GOVERNMENT BONDS - 5.46%
---------------------
U.S. Treasury Notes
$ 140,000 6.50%, Due 08/15/05 $ 140,875
100,000 6.50%, Due 10/15/06 101,000
-----------
TOTAL GOVERNMENT BONDS (COST $254,746) 241,875
-----------
--------------------------------------------------------------------------------------------------
<PAGE>
</TABLE>
CORNERCAP BALANCED FUND
PORTFOLIO OF INVESTMENTS - (Continued)
MARCH 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1-A)
------ ----------
<C> <S> <C> <C>
SHORT-TERM INVESTMENTS - 3.89%
----------------------
Wachovia Bank Short-Term Authorized Demand Notes
$ 172,248 (Cost $172,248) 172,248
-----------
TOTAL INVESTMENTS (COST $4,660,896) (A) 99.09% 4,389,837
OTHER ASSETS AND LIABILITIES, NET 0.91% 40,204
------ -----------
NET ASSETS 100.00% $ 4,430,041
====== ===========
ADR - AMERICAN DEPOSITORY RECEIPT
(a) AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSE IS $4,660,896.
At March 31, 2000, unrealized appreciation (depreciation) of
securities for federal income tax purposes is as follows:
Gross unrealized appreciation $ 224,646
Gross unrealized depreciation (495,705)
----------
NET UNREALIZED DEPRECIATION $ (271,059)
==========
-------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
</TABLE>
<PAGE>
CORNERCAP BALANCED FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2000
<TABLE>
--------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments at market value,
(Identified cost $4,660,896) (Note 1-A) 4,389,837
Cash 34,542
Interest receivable 31,371
Dividends receivable 5,753
Other assets 1,515
-----------
TOTAL ASSETS 4,463,018
-----------
LIABILITIES
Payable for investment securities purchased 28,466
Advisory fee payable 3,638
Service fees payable 873
-----------
TOTAL LIABILITIES 32,977
-----------
NET ASSETS
(Applicable to 413,801 shares outstanding,
unlimited number of shares authorized) 4,430,041
===========
NET ASSET VALUE, offering and repurchase
PRICE PER SHARE
($4,430,041 / 413,801 shares) $10.71
======
NET ASSETS
At March 31, 2000, net assets consisted of:
Paid-in capital 4,746,881
Undistributed net investment income 74,200
Accumulated net realized loss on investments (119,981)
Net unrealized depreciation (271,059)
-----------
4,430,041
-------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
</TABLE>
<PAGE>
CORNERCAP BALANCED FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 2000
<TABLE>
------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Dividends $ 105,481
Interest 119,518
-----------
TOTAL INCOME 224,999
-----------
EXPENSES
Management fee (Note 2) 50,382
Service costs (Note 2) 15,114
Taxes other than federal income tax 750
-----------
TOTAL EXPENSES 66,246
-----------
NET INVESTMENT INCOME 158,753
-----------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss from security transactions (93,481)
Change in unrealized depreciation of investments (261,379)
-----------
NET LOSS ON INVESTMENTS (354,860)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (196,107)
===========
------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
</TABLE>
<PAGE>
CORNERCAP BALANCED FUND
STATEMENT OF CHANGES IN NET ASSETS
YEARS ENDED MARCH 31, 2000 AND 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
---- ----
INCREASE (DECREASE) IN NET ASSETS FROM
<S> <C> <C>
OPERATIONS
Net investment income $ 158,753 $ 85,806
Net realized gain (loss) on investments (93,481) 196,394
Change in unrealized depreciation of investments (261,379) (286,479)
------------ -------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS (196,107) (4,279)
------------ -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income
($0.37 and $0.07 per share, respectively) (158,480) (19,152)
Capital gains
($0.24 and $0.47 per share, respectively) (102,470) (122,292)
------------ -------------
(260,950) (141,444)
------------ -------------
CAPITAL SHARE TRANSACTIONS (a)
Increase in net assets resulting from capital
share transactions 389,089 2,349,542
------------ -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (67,968) 2,203,819
NET ASSETS
Beginning of year 4,498,009 2,294,190
------------ -------------
END OF YEAR
(Including undistributed net investment income of
$74,200 and $73,927, respectively) $ 4,430,041 $ 4,498,009
============ =============
</TABLE>
(a) SUMMARY OF CAPITAL SHARE ACTIVITY FOLLOWS:
<TABLE>
<CAPTION>
2000 1999
----------------------------- ---------------------------
SHARES VALUE SHARES VALUE
------ ----- ------ -----
<S> <C> <C> <C> <C>
Shares sold 107,546 $ 1,317,619 231,516 $ 2,735,803
Shares issued on reinvestment of distributions 23,199 260,063 11,916 139,421
---------- ------------- --------- ------------
130,745 1,577,682 243,432 2,875,224
Shares redeemed (104,080) (1,188,593) (44,201) (525,682)
---------- ------------- --------- ------------
NET INCREASE 26,665 $ 389,089 199,231 $ 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 The For The For The Period For The Period
Year Ended Year Ended June 1, 1997 To May 24, 1997* To
March 31, 2000 March 31, 1999 March 31, 1998(a) May 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 .36 .21 .24 .01
Net realized and unrealized gain (loss)
on investments (.66) (.26) 2.20 (.22)
-------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS (.30) (.05) 2.44 (.21)
------- ------- ------- -------
Less distributions from -
Net investment income (.37) (.07) (.19) -
Realized gains (.24) (.47) (23.03) -
------- ------- ------- -------
TOTAL DISTRIBUTIONS (.61) (.54) (23.22) -
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 10.71 $ 11.62 $ 12.21 $ 32.99
======= ======= ======= =======
TOTAL RETURN (2.89)% (.46)% 19.13% (.60)%
RATIOS/SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD ($000) $4,430 $4,498 $2,294 $2,093
RATIOS TO AVERAGE NET ASSETS (B)
Expenses 1.32% 1.30% 1.53%** 2.00%**
Net investment income 3.16% 2.91% 2.80%** 4.50%**
PORTFOLIO TURNOVER RATE 16.38% 38.47% 13.38% 98.90%
* COMMENCEMENT OF OPERATIONS
** ANNUALIZED
</TABLE>
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.
(a) The Fund changed its year-end from May 31st to March 31st.
(b) Fee waivers reduced the expense ratio and increased the net investment
income ratio by 1.25% in 1998.
--------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>
CORNERCAP BALANCED FUND
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
--------------------------------------------------------------------------------
(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.
The Fund had net realized capital losses of approximately $153,000
during the period 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, 2001. 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 BALANCED 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 .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 year ended March 31, 2000, the cost of purchases and the proceeds
from sales of securities, excluding short-term securities, were $1,199,232
and $771,888, 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.
--------------------------------------------------------------------------------
