<PAGE>
Dear Shareholder:
For the six month period ending November 30, 1995, The Atlanta Growth Fund
appreciated 10.34%. In a stock market that showed extraordinary strength,
particularly the technology sector, broader market averages such as the Standard
& Poor's 500 Index were up 14.86%.
As inherently conservative, value oriented investors, the management team of
The Atlanta Growth Fund becomes cautious whenever things appear too easy in the
marketplace. The last half of 1995 was a rewarding period for almost all
fixed-income and equity investors, with the differentiation coming between
"good" and "outstanding" performance. Most indices for the bond and equity
markets posted first-quartile performance. Such performance, while indicative of
lower interest rates, a positive economic tone and accelerating corporate
earnings, adds a cautionary element to accessing the potential for greater gains
in 1996.
An encouraging trend and excellent investment opportunity, is the theme of
domestic and international industry integration and consolidation. In banking,
insurance, health care, media and technology, merger activity continues unabated
as managers seek to take advantage of greater economies of scale while reducing
overhead through the use of technology. The often stated rationale for such
mergers, "synergies", is attractive. These synergies in many instances are
overstated. However, many opportunities for these pairings exist in the Atlanta
and Georgia marketplace and were capitalized upon by the management team of the
The Atlanta Growth Fund. While egos may have been the driving force for many of
the often disjointed conglomerates of the past, technology is the force driving
rivals to become partners as the new millennia approaches. Technology provides
the vehicle by which greater efficiency and productivity is wrung out of merging
companies by eliminating duplicative overhead. During 1995, the management team
has done a good job of assessing and over-weighting the Atlanta- and
Georgia-based companies that make the most efficient use of technology in their
product offerings and day-to-day operations. Firms in this category include
Total System Services, Inc., HBO & Co., First Financial Management, LXE, Inc.
and Synovus Financial Corporation.
The management team also successfully over-weighted issues of companies that
have assets that are worth significantly more to a strategic acquirer than their
value in the marketplace on a standalone basis. The Southeast remains an
attractive target, as managers look to extend their geographical, product and
service reach. Atlanta-and Georgia-based companies often represent a bullseye on
the target of corporate chieftains seeking synergies with emerging, well
positioned, under-valued companies. Numerous announcements of mergers and
buyouts occurred during 1995, thereby unlocking greater shareholder value and
continuing the trend toward greater integration and consolidation. In 1995,
mergers or buyouts were initiated with BankSouth by NationsBank, Turner
Broadcasting System by Time Warner Inc., First Financial Management by First
Data Corporation, Contel Cellular by GTE and Riverwood International by an
investor group that includes Clayton, Dubilier & Rice, Inc. and the EXOR Group,
S.A.
The coming year promises to offer more merger activity if interest rates
remain low and stock prices are firm. Industry consolidation will continue in
health care, insurance, media and technology and banking, to a lesser extent.
The management team of The Atlanta Growth Fund will diligently work to
identify profitable investment opportunities for shareholders in 1996. My
colleagues and I will work hard to reward the trust you have place in us. If you
should have comments about this report or questions regarding this report or the
portfolio, please let The Atlanta Growth Fund hear from you.
Sincerely,
Michael L. Lucas
President
<PAGE>
THE ATLANTA GROWTH FUND, INC.
STATEMENT OF NET ASSETS
NOVEMBER 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
----------- ------------
<S> <C> <C>
COMMON STOCK -- 91.2%
ACCIDENT & HEALTH INSURANCE -- 3.1%
AFLAC, Inc....................................................................... 1,000 $ 40,750
Capsure Holdings Corp.*.......................................................... 6,000 84,000
Omni Insurance Group, Inc.*...................................................... 1,000 8,000
------------
132,750
------------
AGRICULTURE PRODUCTS-LIVESTOCK & ANIMAL -- 0.5%
Golden Poultry Co., Inc.......................................................... 2,481 20,778
------------
AIR TRANSPORTATION, SCHEDULED -- 3.9%
Atlantic Southeast Airlines, Inc................................................. 2,000 52,500
Delta Air Lines, Inc............................................................. 1,500 116,438
------------
168,938
------------
BAKERY PRODUCTS -- 0.7%
Flowers Industries, Inc.......................................................... 2,250 28,969
------------
BOTTLED & CANNED SOFT DRINKS -- 6.6%
Coca-Cola Enterprises, Inc....................................................... 3,200 92,800
The Coca-Cola Co................................................................. 2,500 189,375
------------
282,175
------------
CARPETS AND RUGS -- 1.6%
Mohawk Industries, Inc.*......................................................... 3,000 53,250
Shaw Industries, Inc............................................................. 1,000 15,625
------------
68,875
------------
COMMERCIAL BANKS -- 4.4%
First Union Corp................................................................. 984 53,751
SunTrust Banks, Inc.............................................................. 2,000 136,500
------------
190,251
------------
COMMERCIAL PRINTING -- 2.1%
Graphic Industries, Inc.......................................................... 2,900 30,088
John H. Harland Co............................................................... 3,000 61,875
------------
91,963
------------
COMMUNICATIONS EQUIPMENT -- 0.6%
LXE, Inc.*....................................................................... 3,200 25,600
------------
ELECTRIC SERVICES -- 2.1%
The Southern Co.................................................................. 4,000 91,500
------------
</TABLE>
2
<PAGE>
THE ATLANTA GROWTH FUND, INC.
STATEMENT OF NET ASSETS -- (CONTINUED)
NOVEMBER 30, 1995
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
----------- ------------
<S> <C> <C>
ELECTRICAL LIGHTING & WIRING EQUIPMENT -- 1.1%
National Services Industries, Inc................................................ 1,400 $ 45,500
------------
ELECTROMEDICAL APPARATUS -- 3.4%
Healthdyne, Inc.*................................................................ 2,200 17,050
Healthdyne Information Enterprises*.............................................. 2,200 3,025
Healthdyne Technologies, Inc.*................................................... 1,431 15,562
Medaphis Corp.*.................................................................. 3,400 110,500
------------
146,137
------------
ELECTRONIC COMPONENTS -- 1.1%
Electromagnetic Sciences, Inc.*.................................................. 4,400 47,300
------------
FARM MACHINERY & EQUIPMENT -- 1.5%
AGCO Corp........................................................................ 1,500 64,688
------------
IN VITRO DIAGNOSTIC SUBSTANCES -- 0.2%
International Murex Technologies Corp.*.......................................... 3,500 10,500
------------
INDUSTRIAL INORGANIC CHEMICALS -- 1.7%
Georgia Gulf Corp................................................................ 2,100 74,812
------------
INSURANCE AGENTS, BROKERS & SERVICES -- 1.9%
Crawford & Co. Class B........................................................... 3,200 50,800
Fuqua Enterprises, Inc.*......................................................... 1,400 29,050
------------
79,850
------------
KNIT OUTERWEAR MILLS -- 2.2%
Oxford Industries, Inc........................................................... 5,000 93,750
------------
LAND SUBDIVIDERS & DEVELOPERS -- 1.7%
IRT Property Co.................................................................. 7,800 72,150
------------
MANIFOLD BUSINESS FORMS -- 0.8%
American Business Products, Inc. Ga.............................................. 1,400 32,725
------------
NATURAL GAS DISTRIBUTION -- 1.3%
Atlanta Gas Light Co............................................................. 1,500 57,375
------------
OIL & GAS FIELD EQUIPMENT -- 0.7%
RPC, Inc.*....................................................................... 3,700 29,600
------------
PAPER MILLS -- 3.6%
Georgia-Pacific Corp............................................................. 2,000 155,500
------------
</TABLE>
3
<PAGE>
THE ATLANTA GROWTH FUND, INC.
STATEMENT OF NET ASSETS -- (CONTINUED)
NOVEMBER 30, 1995
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
----------- ------------
<S> <C> <C>
PAPERBOARD CONTAINERS & BOXES -- 4.5%
Caraustar Industries, Inc........................................................ 6,100 $ 120,475
Riverwood International Corp..................................................... 4,000 73,500
------------
193,975
------------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES -- 0.9%
Metromedia International Group, Inc.*............................................ 2,200 39,600
------------
PRIMARY PRODUCTION OF ALUMINUM -- 2.0%
Alumax, Inc.*.................................................................... 2,600 86,450
------------
RADIO & TV BROADCASTING EQUIPMENT -- 1.0%
Scientific-Atlanta, Inc.......................................................... 2,600 41,275
------------
REAL ESTATE INVESTMENT TRUST -- 2.1%
Cousins Properties, Inc.......................................................... 4,500 82,687
Post Properties, Inc............................................................. 200 6,050
------------
88,737
------------
RETAIL -- FURNITURE STORES -- 0.7%
Haverty Furniture Cos., Inc...................................................... 2,100 29,925
------------
RETAIL -- LUMBER & BUILDING MATERIALS -- 2.7%
The Home Depot, Inc.............................................................. 2,600 115,375
------------
SERVICES -- COMPUTER PROCESSING -- 8.8%
First Data Corp.................................................................. 2,854 202,634
National Data Corp............................................................... 2,750 67,031
Total System Services, Inc....................................................... 4,000 107,500
------------
377,165
------------
SERVICES -- CONSUMER CREDIT REPORTING -- 2.0%
Equifax, Inc..................................................................... 2,000 83,750
------------
SERVICES -- DWELLINGS & OTHER BUILDINGS -- 1.0%
Rollins, Inc..................................................................... 2,050 42,537
------------
SERVICES -- EQUIPMENT RENTAL & LEASING -- 1.9%
Aaron Rents, Inc. Class B Non-Voting*............................................ 4,610 82,404
------------
SERVICES -- NURSING FACILITIES -- 0.9%
Health Images, Inc............................................................... 5,000 38,750
------------
SERVICES -- PREPACKAGED SOFTWARE -- 2.6%
HBO & Co......................................................................... 1,500 112,125
------------
</TABLE>
4
<PAGE>
THE ATLANTA GROWTH FUND, INC.
STATEMENT OF NET ASSETS -- (CONCLUDED)
NOVEMBER 30, 1995
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- ----------
<S> <C> <C>
STATE COMMERCIAL BANKS -- 4.6%
Bank South Corp............................................................... 4,000 $ 125,000
Savannah Bank Corp............................................................ 2,200 38,500
Synovus Financial Corp........................................................ 1,250 36,250
----------
199,750
----------
SUGAR & CONFECTIONERY PRODUCTS -- 0.3%
Savannah Foods & Industries, Inc.............................................. 1,000 12,375
----------
TELEPHONE & TELEGRAPH APPARATUS -- 0.8%
American Telephone & Telegraph Co............................................. 500 33,000
----------
TELEPHONE COMMUNICATIONS -- 3.6%
BellSouth Corp................................................................ 4,000 155,500
----------
TELEVISION BROADCASTING SYSTEMS -- 2.1%
Turner Broadcasting System, Inc. Class B...................................... 3,200 89,600
----------
WHOLESALE -- MOTOR VEHICLE SUPPLIES -- 1.9%
Genuine Parts Co.............................................................. 2,000 80,750
----------
TOTAL COMMON STOCK INVESTMENTS (COST $2,565,400).............................................. 3,914,729
----------
SHORT-TERM INVESTMENTS -- 8.1%
Temporary Investment Fund, Inc. Class B (Cost $347,356)....................... 347,356 347,356
----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS (Cost $2,912,756+)................................................. 99.3% 4,262,085
OTHER ASSETS IN EXCESS OF LIABILITIES................................................ 0.7% 28,953
----- ----------
NET ASSETS (Equivalent to $11.10 per share based on 386,417 shares outstanding)...... 100.0% $4,291,038
----- ----------
----- ----------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE.................................................... $ 11.10
----------
----------
MAXIMUM OFFERING PRICE PER SHARE ($11.10 DIVIDED BY .9625)....................................... $ 11.53
----------
----------
</TABLE>
- ------------
* Non-income producing.
+ Aggregate cost for Federal income tax purposes. The aggregate gross unrealized
appreciation (depreciation) for all securities is as follows:
<TABLE>
<S> <C>
Excess of value over tax cost............................................................. $1,434,406
Excess of tax cost over value............................................................. (85,077)
----------
$1,349,329
----------
----------
</TABLE>
See Accompanying Notes to Financial Statements.
5
<PAGE>
THE ATLANTA GROWTH FUND, INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
NOVEMBER 30, 1995
-----------------
<S> <C>
INVESTMENT INCOME:
Dividends.................................................................................. $ 42,196
Interest................................................................................... 361
-----------------
Total Income............................................................................. 42,557
-----------------
EXPENSES:
Investment advisory fee.................................................................... 12,653
Administration fee......................................................................... 49,800
Distribution expenses...................................................................... 5,858
Directors fees............................................................................. 12,000
Custodian fees............................................................................. 9,770
Transfer agent fee......................................................................... 27,150
Legal fees................................................................................. 46,400
Audit fees................................................................................. 10,610
Registration fees.......................................................................... 9,212
Amortization of organizational costs....................................................... 19,764
Printing................................................................................... 15,350
Insurance.................................................................................. 10,400
Miscellaneous.............................................................................. 4,090
-----------------
Total Expenses........................................................................... 233,057
Less fees waived........................................................................... (24,653)
-----------------
Net Expenses............................................................................. 208,404
-----------------
NET INVESTMENT LOSS.......................................................................... (165,847)
-----------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from security transactions............................................... 523,292
Net unrealized appreciation of investments................................................. 118,194
-----------------
Net gain on investments.................................................................... 641,486
-----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS......................................... $ 475,639
-----------------
-----------------
</TABLE>
See Accompanying Notes to Financial Statements.
6
<PAGE>
THE ATLANTA GROWTH FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
NOVEMBER 30, MAY 31,
1995 1995
-------------- ----------
(UNAUDITED)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment loss......................................... $ (165,847) $ (256,492)
Net realized gain from security transactions................ 523,292 224,743
Net unrealized appreciation of investments.................. 118,194 377,011
-------------- ----------
Increase in net assets resulting from operations.......... 475,639 345,262
-------------- ----------
Distributions to Shareholders:
Net realized gain on investments............................ (467,804) (187,475)
-------------- ----------
Total distributions....................................... (467,804) (187,475)
-------------- ----------
Capital Share Transactions:
Proceeds from sale of shares................................ 180,534 196,787
Value of shares issued in reinvestment...................... 253,325 99,944
Cost of shares repurchased.................................. (1,101,192) (2,086,031)
-------------- ----------
Decrease in net assets from capital share transactions...... (667,333) (1,789,300)
-------------- ----------
Total decrease in net assets.............................. (659,498) (1,631,513)
-------------- ----------
NET ASSETS:
Beginning of period......................................... 4,950,536 6,582,049
-------------- ----------
End of period............................................... $ 4,291,038 $4,950,536
-------------- ----------
-------------- ----------
</TABLE>
See Accompanying Notes to Financial Statements.
7
<PAGE>
THE ATLANTA GROWTH FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR FOR THE YEAR FOR THE PERIOD
MONTHS ENDED ENDED ENDED JUNE 22, 1992(1) TO
NOVEMBER 30, 1995 MAY 31, 1995 MAY 31, 1994 MAY 31, 1993
------------------ --------------- --------------- -------------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 11.29 $ 10.92 $ 11.12 $ 10.00
------------------ --------------- --------------- -------------------
Income from investment operations:
Net investment loss................... (.42) (.50) (.33) (.04)
Net realized and unrealized gain on
investments......................... 1.56 1.24 .59 1.20
------------------ --------------- --------------- -------------------
Total from investment operations........ 1.14 .74 .26 1.16
------------------ --------------- --------------- -------------------
Less distributions:
Dividends to shareholders from net
investment income................... -- -- -- (.02)
Dividends to shareholders from net
capital gains....................... (1.33) (.37) (.46) (.02)
------------------ --------------- --------------- -------------------
Total distributions..................... (1.33) (.37) (.46) (.04)
------------------ --------------- --------------- -------------------
Net asset value, end of period.......... $ 11.10 $ 11.29 $ 10.92 $ 11.12
------------------ --------------- --------------- -------------------
------------------ --------------- --------------- -------------------
Total return:........................... 10.34% 7.10% 2.24% 12.40%(2)
Ratios/Supplemental Data:
Net assets, end of period $ (000)....... $ 4,291 $ 4,951 $ 6,582 $ 9,122
Ratio of expenses to average net assets
(3)................................... 8.87%(2) 6.49% 4.82% 2.53%(2)
Ratio of net investment loss to average
net assets............................ (7.06%)(2) (4.56%) (2.89%) (.36%)(2)
Portfolio turnover rate................. .00%(2) .11% 11.56% 8.70%(2)
</TABLE>
- -------------
(1) Commencement of operations.
(2) Annualized
(3) Without the voluntary fee waivers, the ratio of expenses to average daily
net assets would have been 9.95% (annualized) for the six months ended
November 30, 1995, 7.65% and 5.85%, respectively, for each of the years
ended May 31, 1995 and 1994, and 4.85% (annualized) for the period ended May
31, 1993.
See Accompanying Notes to Financial Statements.
8
<PAGE>
THE ATLANTA GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
The Atlanta Growth Fund, Inc. ("the Fund") is a non-diversified, open-end
management investment company registered under the Investment Company Act of
1940, as amended, and seeks as its objective long-term growth of capital through
investments in certain publicly traded companies concentrated in the
metropolitan area of Atlanta, Georgia. The Fund commenced operations on June 22,
1992.
A. SECURITY VALUATION -- Securities listed on a national securities
exchange are valued at last sale price. Over-the-counter securities and listed
securities for which a sales price is not available are valued at the last
quoted bid price. When market quotations are not readily available, securities
are valued based on prices received from recognized broker-dealers in the same
or similar securities. Debt securities with a maturity of less than 60 days are
valued at amortized cost, which approximates market value.
B. SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. The cost of investments sold is determined by
use of the specific identification method for both financial reporting and
Federal income tax purposes. Dividends are recorded on the ex-dividend date.
Interest income is recorded on the accrual basis.
C. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The policy of the Fund is
to pay dividends from net investment income, if any, and make distributions of
net realized capital gains, if any, at least annually. Income distributions and
capital gain distributions are determined in accordance with U.S. Federal Income
tax regulations which may differ from generally accepted accounting principles.
D. FEDERAL INCOME TAXES -- No provision is made for Federal taxes since the
Fund intends to continue to qualify as a regulated investment company and to
make the requisite distributions to its shareholders, which will be sufficent to
relieve it from Federal income and excise taxes.
E. ORGANIZATION COSTS -- Costs incurred by the Fund in connection with its
organization, registration and initial public offering of shares have been
deferred and are being amortized using the straight-line method for a five-year
period beginning with commencement of operations.
F. REPURCHASE AGREEMENTS -- The Fund may purchase money market instruments,
subject to the seller's agreement to repurchase them at an agreed upon date and
price. The seller will be required on a daily basis to maintain the value of the
securities subject to the agreement at not less than the repurchase price. The
agreements are conditioned upon collateral being deposited under the Federal
Revenue book-entry system or with the Fund's custodian or a third party
sub-custodian.
NOTE 2. INVESTMENT ADVISORY, DISTRIBUTOR AND OTHER RELATED PARTY TRANSACTIONS
The Fund has entered into investment advisory agreements with Wedgewood
Equities, Inc. ("Wedgewood") and Astrop Advisory Corporation ("Astrop
Advisory"). For the advisory services provided, Wedgewood and Astrop Advisory,
in the aggregate, were entitled to receive from the Fund a fee, computed daily
and payable monthly, at an annual rate of .54% of the average daily net assets
of the Fund. The advisors may, at their discretion, voluntarily waive all or any
portion of their advisory fees. For the six months ended November 30, 1995, the
advisors waived their fee in total, which amounted to $12,653.
9
<PAGE>
THE ATLANTA GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONCLUDED)
The Fund has adopted a plan of distribution with Pryor, McClendon, Counts &
Co., Inc., an affiliate of Wedgewood, whereby the Fund may reimburse the
distributor in an amount up to 0.25% per annum of the Fund's average daily net
assets.
For the six months ended November 30, 1995, the funds directors waived fees
totalling $12,000.
NOTE 3. PURCHASES AND SALES OF SECURITIES
For the six months ended November 30, 1995, purchases and sales of
securities, other than short-term investments, were $0 and $1,635,099,
respectively.
NOTE 4. CAPITAL SHARES
On November 30, 1995 there were 500 million shares of common stock
authorized at no par value per share.
Transactions in capital shares of the Fund were are follows:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
NOVEMBER 30, 1995 MAY 31, 1995
----------------- ------------
<S> <C> <C>
Shares sold........................................................... 16,438 18,437
Shares redeemed....................................................... (91,711) (192,470)
Shares reinvested..................................................... 23,348 9,601
-------- ------------
Net decrease in shares................................................ (51,925) (164,432)
Shares outstanding:
Beginning of the period............................................. 438,342 602,774
-------- ------------
End of period....................................................... 386,417 438,342
-------- ------------
-------- ------------
</TABLE>
NOTE 5. NET ASSETS
At November 30, 1995, net assets consisted of the following:
<TABLE>
<S> <C>
Paid-in capital....................................................... $2,886,855
Accumulated net investment loss....................................... (165,847)
Accumulated net realized gain......................................... 220,701
Net unrealized appreciation of investments............................ 1,349,329
----------
Total Net Assets.................................................... $4,291,038
----------
----------
</TABLE>
10
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DIRECTORS
Michael L. Lucas, PRESIDENT
Sidney Feldman
George D. Overend
Ronald L. Krise
William M. Bauman
OFFICERS
Michael L. Lucas, PRESIDENT
INVESTMENT ADVISERS
Wedgewood Equities, Inc.
1100 Peachtree Street, N.E.
Suite 1661
Atlanta, Georgia 30309
Astrop Advisory Corporation
1100 Peachtree Street
Suite 1661
Atlanta, Georgia 30309
ADMINISTRATOR
PFPC Inc.
P.O. Box 7488
Wilmington, Delaware 19805-7488
DISTRIBUTOR
Pryor, McClendon, Counts & Co., Inc.
1100 Peachtree Street
Suite 1660
Atlanta, Georgia 30309
TRANSFER AGENT
PFPC Inc.
P.O. Box 8950
Wilmington, Delaware 19885-9628
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors unless
accompanied or preceded by a current effective prospectus of the Fund, which
contains information concerning the investment policies of the Fund as well as
other pertinent information.
THE ATLANTA
GROWTH FUND, INC.
SEMI ANNUAL REPORT
NOVEMBER 30, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
