CROFT-LEOMINSTER
VALUE FUND
ANNUAL REPORT
APRIL 30, 1998
<PAGE>
June 20, 1998
Dear Fellow Shareholder,
We are pleased to report the Fund's performance for the fiscal year
ending 4/30/98. The total returns are as follows*:
FISCAL YEAR
5/1/97-4/30/98
--------------
VALUE FUND + 43.1%
Standard & Poor's 500** + 41.0%
Since the Value Fund's inception, we have seen a rapid ascent of both
stock prices and valuations. This has left many to wonder in which direction is
the market headed. We do not bet on market swings, as it is our belief that
market timing does not work. Instead, we will continue to follow our value
philosophy and our disciplined approach to stock picking. Our efforts focus on
stocks selling at discounts to their inherent value relative to measures such as
future earnings, cash flow and hidden assets. We continue to adhere to our value
philosophy as indicated below:
VALUE FUND S&P 500
---------- -------
Estimated 1999 Price/Earnings 14.9X 21.0X
Estimated Growth Rate 12.5% 8.0%
Current Price/Book Value 3.1X 4.5X
In addition, we are always searching for those companies that are
undervalued in the marketplace and may be out-of-favor with the investment
community. Federal Mogul (6.1%), the Fund's largest holding, is one such
example. When we first purchased the stock, Federal Mogul was in the midst of
restructuring. A new management team was brought in to turnaround the company.
To date, they have been successful in enhancing shareholder value and the market
has begun to recognize the efforts. We continue to have a positive outlook for
Federal Mogul.***
Since our last report, we have increased our holdings in the banking
industry. There has been a wave of consolidations in the industry as banks seek
to expand their business. Two of the Fund's holdings, Washington Mutual and H.F.
Ahmanson recently announced plans to merge. Bank One also offered to purchase
First Chicago NBD (0.9%). Our largest holding in the sector, Mellon Bank (4.4%),
fought off a hostile bid from the Bank of New York. As a whole, the industry has
performed well as these events have increased the overall valuations of banks by
the market. Going forward, we believe the industry will continue to consolidate.
The Value Fund also has experienced its setbacks. The energy sector has
been hurt by the recent decline in the price of oil to near historic lows.
Overproduction leading to excess in supply has been the main contributor to the
decline. However, we view that this price deviation is short
-2-
<PAGE>
term. Our belief remains that most of these companies are trading at discounts
to net asset values and low cash flow multiples. Our analysts have met with the
management of most of these companies and we are confident that these stocks
will rebound.
We thank you for investing in the Croft-Leominster Value Fund and look
forward to serving you in the future.
With kindest regards.
Sincerely yours,
Gordon Croft
- ----------
* Past performance is not indicative of future performance. Investment return
and principal will fluctuate. An investor's shares, when redeemed, may be
worth more or less than the original value.
** The Standard & Poor's 500 is an unmanaged index that is a widely recognized
indicator of general market performance. Figures are presented gross of
fees.
*** This information should not be considered a recommendation to purchase or
sell any security. There is no assurance as of the date of this letter,
that the Value Fund still holds any of these securities in its portfolio.
These securities represent only a small portion of the Value Fund's
holdings.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL PERFORMANCE
FISCAL YEAR SINCE INCEPTION
5/1/97-4/30/98 5/10/95-4/30/98
-------------- ---------------
VALUE FUND +43.1% +26.6%
CUMULATIVE PERFORMANCE COMPARISON
$10,000 INVESTMENT SINCE INCEPTION*
[Performance Graph omitted here]
Graph depicted the comparison of a $10,000 investment between The Croft Value
Fund and the S&P 500 Index from inception of the Fund (May 1995) to April 30,
1998.
Date Value Fund S&P 500
---- ---------- -------
May 1995 $10,000.00 $10,000.00
July 1995 10,300.00 10,782.00
October 1995 10,489.52 11,224.08
January 1996 11,613.30 12,347.59
April 1996 11,866.39 12,764.94
July 1996 11,583.54 12,561.98
October 1996 12,848.25 13,926.21
January 1997 14,208.88 15,600.14
April 1997 14,071.05 15,970.00
July 1997 17,145.58 19,096.76
October 1997 17,958.28 18,394.00
January 1998 17,478.79 19,795.62
April 1998 20,139.00 22,521.00
*Past performance is not indicative of future performance. Investment return and
principal will fluctuate. An investor's shares, when redeemed, may be worth more
or less than the original value.
-3-
<PAGE>
<TABLE>
<CAPTION>
CROFT FUNDS CORPORATION
CROFT-LEOMINSTER VALUE FUND
SCHEDULE OF INVESTMENTS
APRIL 30, 1998
- --------------------------------------------------------------------------------
SHARES MARKET VALUE
------ ------------
<C> <S> <C>
COMMON STOCKS - 96.27%
BANKS, S&L'S AND BROKERS - 22.38%
500 Astoria Financial Corp. ............................. $ 29,313
1,400 BankUnited Financial Corp. Cl A ..................... 72,450
2,800 Bay View Capital Corp. .............................. 91,350
1,400 Crestar Financial Corp. ............................. 83,737
2,600 Dime Bancorp Inc. Cl B .............................. 79,788
500 First Chicago NBD Corp. ............................. 46,437
700 H.F. Ahmanson & Co. ................................. 53,375
8,600 Hibernia Corp. Cl A ................................. 175,762
3,200 Mellon Bank Corp. ................................... 230,400
600 Mercantile Bankshares Corp. ......................... 23,025
400 PNC Bank Corp. ...................................... 24,175
2,312 Provident Bankshares Corp. .......................... 75,140
1,400 Resource Bankshares Mortgage Group Inc. ............. 24,850
2,400 Washington Mutual Inc. .............................. 168,150
--------
1,177,952
---------
BUILDING & CONSTRUCTION - 2.09%
2,650 Owens Corning ....................................... 110,141
--------
BUSINESS SERVICES AND TRANSPORTATION - 5.06%
5,900 Kansas City Southern Industries Inc. ................ 266,606
--------
CHEMICALS - 2.20%
1,500 Praxair Inc. ........................................ 75,469
814 Rhone-Poulenc ADR ................................... 40,293
--------
115,762
---------
CLOSED END FUNDS - BRAZIL - .34%
18,000 + Brazilian Smaller Co Investment Trust ............... 17,820
--------
CLOSED END FUNDS - GERMANY - .41%
1,500 Emerging Germany Fund Inc. .......................... 21,469
--------
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
CROFT FUNDS CORPORATION
CROFT-LEOMINSTER VALUE FUND
SCHEDULE OF INVESTMENTS
APRIL 30, 1998
- --------------------------------------------------------------------------------
SHARES MARKET VALUE
------ ------------
CLOSED END FUNDS - GLOBAL - .14% <C>
616 GT Global Eastern Europe Fund ....................... 7,354
--------
CLOSED END FUNDS - INDIA - .50%
534 India Growth Fund Inc. .............................. 5,273
1,400 + Jardine Fleming India Fund .......................... 10,063
600 + Morgan Stanley India Invt. Fund ..................... 5,250
700 + The India Fund Inc. ................................. 5,775
--------
26,361
--------
CLOSED END FUNDS - LATIN AMERICA - .60%
700 Argentina Fund Inc. ................................. 9,231
400 Latin America Equity Fund ........................... 5,375
1,200 Latin America Investment Fund ....................... 17,175
--------
31,781
--------
CONSUMER CYCLICALS - 12.84%
5,000 Federal-Mogul Corp. ................................. 323,438
1,500 Royal Philips Electronics N.V ....................... 135,000
3,000 SPX Corp. ........................................... 217,125
--------
675,563
--------
CONSUMER NON-DURABLES - 4.04%
800 Colgate Palmolive Co. .................................... 71,750
1,400 + Corn Products International Inc. ......................... 49,875
1,300 PepsiCo Inc. ............................................. 51,594
2,000 + USA Detergents Inc. ...................................... 27,625
600 Whitman Corp. ............................................ 11,738
--------
212,582
--------
CONSUMER SERVICES - .95%
100 + Midas Inc. .......................................... 1,931
1,858 Viad Corp. .......................................... 47,960
--------
49,891
--------
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
CROFT FUNDS CORPORATION
CROFT-LEOMINSTER VALUE FUND
SCHEDULE OF INVESTMENTS
APRIL 30, 1998
- --------------------------------------------------------------------------------
SHARES MARKET VALUE
------ ------------
FINANCIAL SERVICES - 2.87%
800 Capital One Financial Corp. ......................... 76,850
3,000 + Waddell & Reed Financial Inc Cl A ................... 74,250
--------
151,100
--------
INSURANCE - 7.09%
3,300 Ace Ltd. ............................................ 124,987
300 Aetna Inc. .......................................... 24,244
600 Hartford Financial Services Group Inc. .............. 66,450
1,400 + Highlands Insurance Group Inc. ...................... 37,975
1,950 Travelers Group Inc. ................................ 119,316
--------
372,972
--------
MEDIA & ENTERTAINMENT - 3.18%
4,000 CBS Inc. ............................................ 142,500
825 + Westwood One Inc. ................................... 24,750
--------
167,250
--------
NATURAL GAS - 8.89%
6,600 + Bellwether Exploration Co. .......................... 59,400
2,300 + Comstock Resources Inc. ............................. 29,612
34,500 + Gothic Energy Corp. ................................. 69,000
9,000 + Magnum Hunter Resources Inc. ........................ 61,312
1,300 + Mallon Resources Corp. .............................. 15,600
9,072 + Meridian Resources Corp. ............................ 82,215
12,810 + National Energy Group Inc. .......................... 31,625
24,200 + Panaco Inc. ......................................... 105,875
1,600 + Titan Exploration Inc. .............................. 13,300
--------
467,939
--------
OIL - 6.01%
1,700 + Benton Oil & Gas Co. ................................ 20,719
39,300 + Equity Oil Co. ...................................... 98,250
700 + Oryx Energy Co. ..................................... 18,288
6,000 + Santa Fe Energy Resources Inc. ...................... 61,875
2,300 + Triton Energy Ltd. .................................. 92,287
2,100 Wiser Oil ........................................... 25,200
--------
316,619
--------
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE>
CROFT FUNDS CORPORATION
CROFT-LEOMINSTER VALUE FUND
SCHEDULE OF INVESTMENTS
APRIL 30, 1998
- --------------------------------------------------------------------------------
SHARES MARKET VALUE
------ ------------
PAPER & FOREST PRODUCTS - 6.11%
2,500 Boise Cascade Corp. ................................. 93,906
13,900 + Stone Container Corp. ............................... 227,612
--------
321,518
--------
PHARMACEUTICALS - 3.03%
700 American Home Products Corp. ........................ 65,187
500 Warner Lambert Co. .................................. 94,594
--------
159,781
--------
POLLUTION CONTROL - 2.47%
800 + Culligan Water Technologies Inc. .................... 46,450
17,600 + Infinity Corp. ...................................... 31,350
6,900 + Philip Services Corp. ............................... 52,181
--------
129,981
--------
REAL ESTATE INVESTMENT TRUSTS - .44%
459 Starwood Hotels & Resorts Trust ..................... 23,036
--------
TECHNOLOGY - 1.67%
1,700 + Advanced Micro Devices Inc. ......................... 47,175
2,000 + Fairchild Corp. ..................................... 40,750
--------
87,925
--------
TELEPHONE & CELLULAR - 2.96%
2,200 + LCI International Inc. .............................. 87,450
400 U.S. West Communications Group ...................... 21,100
1,100 + Worldcom Inc. ....................................... 47,059
--------
155,609
--------
TOTAL COMMON STOCK
(Cost $4,097,558) ........................................... 5,067,012
---------
MUTUAL FUNDS - .02%
147 + Schroder All Asia (Cost $1,629) ..................... 1,198
---------
The accompanying notes are an integral part of these financial statements.
-7-
<PAGE>
CROFT FUNDS CORPORATION
CROFT-LEOMINSTER VALUE FUND
SCHEDULE OF INVESTMENTS
APRIL 30, 1998
- --------------------------------------------------------------------------------
SHARES MARKET VALUE
------ ------------
SHORT TERM INVESTMENTS - 3.98%
100,000 General Electric Capital Corp, 5.52%, due 05/28/98 .. 100,000
109,252 Star Treasury Fund .................................. 109,252
---------
(Cost $209,252) ................................. 209,252
---------
TOTAL INVESTMENTS (Cost $4,308,439)...................... 100.27% 5,277,462
Liabilities in excess of other assets ................... (0.27%) (14,225)
------- -----------
TOTAL NET ASSETS......................................... 100.00% $ 5,263,237
======= ===========
<FN>
(1) Federal Tax Information: At April 30, 1998 the net unrealized
appreciation based on cost for Federal Income tax purposes of
$4,308,439 was as follows:
Aggregate gross unrealized appreciation for all investments
for which there was an excess of value over cost.............. $ 1,121,479
Aggregate gross unrealized depreciation for all investments for
which there was an excess of cost over value.................... (152,456)
----------
Net unrealized appreciation....................................$ 969,023
==========
+ Non-income producing security
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements
-8-
<PAGE>
CROFT FUNDS CORPORATION
CROFT-LEOMINSTER VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998
- --------------------------------------------------------------------------------
ASSETS:
Investments in securities, at value (cost $4,308,439) (Note 2) ... $5,277,462
Dividends and interest receivable ................................ 4,741
Other assets ..................................................... 1,060
----------
Total Assets ............................................... 5,283,263
----------
LIABILITIES:
Payables:
Accrued advisory fee (Note 3)..................... 3,755
Accrued expenses .................................$ 16,271
----------
Total Liabilities .......................................... 20,026
----------
Net Assets ................................................. $5,263,237
==========
NET ASSETS CONSIST OF:
Additional paid in capital ................................. $4,188,337
Undistributed net investment income ........................ 175
Accumulated net realized gain from
investment transactions .................................. 105,702
Net unrealized appreciation on
investments .............................................. 969,023
----------
Net Assets ................................................. $5,263,237
==========
Net asset value and redemption price per share
($5,263,237/308,974 shares
of capital stock outstanding) (Note 4) ..................... $ 17.03
==========
The accompanying notes are an integral part of these financial statements
-9-
<PAGE>
CROFT FUNDS CORPORATION
CROFT-LEOMINSTER VALUE FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED APRIL 30, 1998
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends ...................................................... $ 37,309
Interest ....................................................... 17,063
-----------
54,372
EXPENSES:
Investment advisory fee (Note 3) ............................... $ 33,964
Distribution fee (Note 3) ...................................... 3,613
Administration fee ............................................. 19,253
Transfer agent fee ............................................. 10,194
Audit fee ...................................................... 6,599
Insurance ...................................................... 6,249
Custody fee .................................................... 6,098
Registration ................................................... 5,123
Printing ....................................................... 4,079
Legal fee ...................................................... 2,238
Other .......................................................... 2,339
-----------
Total expenses .......................................... 99,749
Less: Expense reinbursement ............................ (45,552)
-----------
Net expenses ............................................ 54,197
-----------
Net investment income ................................... 175
-----------
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
(Note 2)
Net realized gain from investment transactions ................. 393,287
Net change in unrealized appreciation of investments ........... 773,296
-----------
Net realized and unrealized gain on investments ......... 1,166,583
-----------
Net increase in net assets resulting from operations .... $ 1,166,758
===========
The accompanying notes are an integral part of these financial statements
-10-
<PAGE>
<TABLE>
<CAPTION>
CROFT FUNDS CORPORATION
CROFT-LEOMINSTER VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------------------
FOR THE YEAR FOR THE YEAR
ENDED ENDED
APRIL 30, 1998 APRIL 30, 1997
------------------- ------------------
<S> <C> <C>
Net investment income ............................... $ 175 $ 5,656
Net realized gain from investment transactions ...... 393,287 182,830
Net change in unrealized appreciation of investments 773,296 89,965
----------- -----------
Net increase in net assets resulting from operations 1,166,758 278,451
Distributions from net investment income ............ 0 (8,262)
Distributions from net gain on investments .......... (414,496) (67,829)
Net capital share transactions (Note 4) ............. 2,446,934 606,252
----------- -----------
Net increase in net assets .......................... 3,199,196 808,612
NET ASSETS:
Beginning of year ................................... 2,064,041 1,255,429
----------- -----------
End of year (including undistributed net investment
income of $175 and $0, respectively) .............. $ 5,263,237 $ 2,064,041
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
-11-
<PAGE>
CROFT FUNDS CORPORATION
CROFT-LEOMINSTER VALUE FUND
NOTES TO FINANCIAL STATEMENTS
April 30, 1998
- --------------------------------------------------------------------------------
NOTE 1. ORGANIZATION
The Croft-Leominster Value Fund (the "Fund"), a managed portfolio
of the Croft Funds Corporation, is registered under the Investment Company Act
of 1940, as amended, as a diversified, open-end management company. The Fund is
one of a series of Funds of the Croft Funds Corporation, which also includes the
Croft-Leominster Income Fund. The Fund's investment objective is to seek growth
of capital. It invest primarily (under normal market conditions, at least 65% of
its total assets) in common stocks which are believed by the Manager to be
undervalued and have good prospects for capital appreciation.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies
followed by the Fund in the preparation of its financial statements.
SECURITY VALUATION-Securities which are traded on any exchange or on
the NASDAQ over-the-counter market are valued at the last quoted sale price.
Investments for which no sale is reported are valued at the last bid price.
FEDERAL INCOME TAXES-The Fund intends to comply with requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its net investment income as dividends to its
shareholders. The Fund intends to distribute its net long-term capital gains and
its net short-term capital gains at least once a year. Therefore no provision
for income taxes is required.
OTHER-The Fund follows industry practice and records security
transactions on the trade date. The specific identification method is used for
determining gains or losses for financial statement and income tax purposes.
Dividend income is recorded on the ex-dividend date and interest income is
recorded on an accrual basis.
ESTIMATES-The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NOTE 3. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund retains Croft-Leominster Inc. (the "Adviser") as its
investment adviser. Under the terms of the management agreement, the Adviser
receives a fee, computed daily and payable monthly at the annual rate of .94% of
the Fund's average daily net asset value. Until December 31, 2001, the Adviser
guarantees that the overall expense ratio for the Fund, which exclude ordinary
brokerage commission incurred in the purchase or sale of portfolio securities,
will not exceed 1.50%. As a result, for the year ended April 30, 1998, the
Adviser accrued reimbursements to the Fund of $45,552.
-12-
<PAGE>
CROFT FUNDS CORPORATION
CROFT-LEOMINSTER VALUE FUND
NOTES TO FINANCIAL STATEMENTS
April 30, 1998
- --------------------------------------------------------------------------------
Pursuant to a plan of Distribution the Fund pays a distribution fee
of up to .25% of the average daily net assets to broker-dealers for distribution
assistance, and to financial institutions and intermediaries such as banks,
savings and loan associations, insurance companies and investment counselors as
compensation for services rendered or expenses incurred in connection with
distribution assistance. For the year ended April 30, 1998 the Fund accrued
distribution fees of $3,613.
NOTE 4. CAPITAL SHARE TRANSACTIONS
At April 30, 1998 there was 30,000,000, $0.001 par value shares of
capital stock authorized for the Croft Funds Corporation, and capital paid-in
amounted to $4,188,337 for the Fund.
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
APRIL 30, 1998 APRIL 30, 1997
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares sold .................... 131,285 $ 2,117,741 43,426 $ 549,286
Shares issued in reinvestment of
dividends .................... 26,843 399,689 5,654 70,681
Shares redeemed ................ (4,150) (70,496) (1,148) (13,715)
----------------------- --------------------
Net increase ................... 153,978 $ 2,446,934 48,050 $ 606,252
======================= ====================
</TABLE>
NOTE 5. INVESTMENT TRANSACTIONS
Purchases and sales, excluding short term securities, for the year
ended April 30, 1998 aggregated $4,690,604, and $2,701,831, respectively for the
Fund.
NOTE 6. DISTRIBUTIONS TO SHAREHOLDERS
During the fiscal year ended April 30, 1998, distributions of $1.78
aggregating $414,497 were declared from net realized gains (including $.81
applicable to short-term gains that are taxable to shareholders as ordinary
income dividends) of the Fund.
NOTE 7. FINANCIAL INSTRUMENT DISCLOSURE
There are no reportable financial instruments that have any off
balance sheet risk as of April 30, 1998.
-13-
<PAGE>
<TABLE>
<CAPTION>
CROFT FUNDS CORPORATION
CROFT-LEOMINSTER VALUE FUND
FINANCIAL HIGHLIGHTS
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
- --------------------------------------------------------------------------------
FOR THE FOR THE MAY 4, 1995
YEAR ENDED YEAR ENDED THROUGH
APRIL 30, 1998 APRIL 30, 1997 APRIL 30, 1996*
------------- --------------- ----------------
<S> <C> <C> <C>
Net asset value, beginning of period ............................ $ 13.32 $ 11.74 $ 10.00
----------- ----------- ---------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net investment income ...................................... 0.00 0.04 0.10
Net realized and unrealized gain on
investments ............................................. 5.49 2.11 1.75
----------- ----------- ---------
Total from investment operations ........................... 5.49 2.15 1.85
----------- ----------- ---------
LESS DISTRIBUTIONS
Dividends from net investment income ....................... 0.00 (0.05) (0.07)
Distribution from realized gains from security
transactions ............................................. (1.78) (0.52) (0.04)
----------- ----------- ---------
Total distributions ........................................ (1.78) (0.57) (0.11)
----------- ----------- ---------
Net asset value, end of period .................................. $ 17.03 $ 13.32 $ 11.74
=========== =========== =========
Total return** .................................................. 43.14% 18.71% 18.57%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (in 000's) ........................ 5,263 2,064 1,255
Ratio of expenses to average net assets before reimbursement 2.75% 5.40% 1.50%++
Ratio of expenses to average net assets after reimbursement 1.50% 1.50% 1.50%++
Ratio of net investment income (loss) to average
net assets ............................................... 0.00% 0.34% 0.89%++
Portfolio turnover rate .................................... 80.98% 105.72% 65.38%
Average commission rate paid+ .............................. 0.1059 0.1096 --
<FN>
- ----------
* Commencement of operations
** Based on net asset value per share
+ Disclosure of this rate is required by the SEC on a prospective basis
beginning with the Fund's 1996 fiscal year end.
++ Annualized
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements
-14-
<PAGE>
INDEPENDENT AUDITOR'S REPORT
----------------------------
To The Shareholders and
Board of Directors
Croft-Leominster Value Fund
We have audited the accompanying statement of assets and liabilities, including
the schedule of portfolio investments, of the Croft-Leominster Value Fund (one
of a series constituting the Croft Funds Corporation), as of April 30, 1998, and
the related statement of operations for the year then ended, and the statement
of changes in net assets for each of the two years in the period then ended, and
financial highlights for each of the two years then ended, and for the period
from May 4, 1995 (commencement of operations) to April 30, 1996 in the period
then ended. These financial statements and financial highlights are the
responsibility of the Funds' 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 investments and cash held by
the custodian as of April 30, 1998, 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 the
Croft-Leominster Value Fund of the Croft Funds Corporation as of April 30,
1998, 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 two years in the period then ended, and for the
period from May 4, 1995 (commencement of operations) to April 30, 1996 in the
period then ended, in conformity with generally accepted accounting principles.
McCurdy & Associates CPA's, Inc.
Westlake, Ohio 44145
May 19, 1998
-15-
<PAGE>
CROFT-LEOMINSTER
VALUE FUND
1-800-746-3322
