Investment Company Act file number 811-08652
Croft Funds Corporation
(Exact name of registrant as specified in charter)
Canton House, 300 Water Street
Baltimore, Maryland 21202
(Address of principal executive offices)
(Zip code)
Mr. Kent Croft
Canton House, 300 Water Street
Baltimore, Maryland 21202
(Name and address of agent for service)
With copy to:
JoAnn M. Strasser, Esquire
Thompson Hine LLP
312 Walnut Street, 14th Floor
Cincinnati, OH 45202
Registrant's telephone number, including area code: (410) 576-0100
Date of fiscal year end: April 30
Date of reporting period: April 30, 2009
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.
![[croftncsr001.jpg]](https://capedge.com/proxy/N-CSR/0001162044-09-000356/croftncsr001.jpg)
Croft Value Fund
&
Croft Income Fund
ANNUAL REPORT
April 30, 2009
CROFT VALUE FUND
MANAGERS COMMENTARY
APRIL 30, 2009
June 30, 2009
Dear Shareholder:
The Croft Value Fund continues to employ our value-oriented and somewhat contrarian investment philosophy in an effort to provide above-average returns for our shareholders. For the fiscal year ended April 30, 2009, our underperformance was due, in part, to holdings in the energy and commodity sectors. Since our fiscal year end, these sectors have recovered nicely. Our strategy is based on the generation of stock ideas that lead to committed investments for the long term. We seek undervalued stocks of varied market capitalizations that generally tend to fall into one of three categories: 1) companies that have a potential catalyst for appreciation that the market has not fully valued; 2) companies that have price-to earnings (P/E) ratios lower than the market, but we believe will have above average long term earnings growth; and 3) contrarian ideas, which occur when a company has fallen out of favor with the market but still has good underlying prospects.
We continued to experience historic levels of volatility in the markets during the first four months of 2009. While there will always be periods of uncertainty, times like these present opportunities to invest for the long term. The macroeconomic picture has recently shown signs of improvement. Broad measures of credit risk have improved--one such indicator that compares interbank lending rates to treasury rates, the three month TED spread, has declined from 4.5% at the peak of the credit crisis to 0.5%, approximately where it was prior to the failure of Lehman Brothers in September, 2008. Access to capital is better as well, with $19.5 billion of high yield bonds issued in the first four months of 2009 vs. $4.4 billion in the last four months of 2008. Corporate earnings have been better than feared, with 70% of companies in the S&P 500 beating analysts’ estimates for the first quarter. Pending home sales have increased in four out of the last five months, with May’s report showing a 6.7% increase, the largest gain in 7 years. The average rate on a fixed 30-year mortgage fell to a 38-year low of 4.78% as of April 20, 2009, further helping to stabilize house prices. There is also ample cash on the sidelines, with U.S. investors holding more cash than stocks for the first time in 20 years, as of April 2009. The global economic situation has also shown improvement. The Chinese Purchasing Managers Index, a broad measure of manufacturing activity, has been above 50 (indicating growth) for the last three months.
While we are encouraged by these indicators, there is still good reason for caution. U.S. unemployment was 9.4% as of May 2009, the highest level in 25 years. 345,000 jobs were lost in the month, and while the figure was better
CROFT VALUE FUND
MANAGERS COMMENTARY (CONTINUED)
APRIL 30, 2009
than expected and an improvement from recent months, it was still worse than any monthly loss in the last three recessions. Oil prices have also increased from $33 in March to $72 today, with the potential to act as a drag on consumer spending.
Thank you for your investment in the Croft Value Fund.
Sincerely,
Kent Croft
President
CROFT INCOME FUND
MANAGERS COMMENTARY
APRIL 30, 2009
June 30, 2009
Dear Shareholder:
As of April 30, 2009, approximately 11% of the Income Fund’s assets were invested in short term, high-quality securities. This is a decline from a reserves allocation of over 40% one year ago. As recent economic turmoil and credit market dysfunction drove corporate bond yields to historically high spreads above government bonds, we have opportunistically deployed the Fund’s capital. Over the last 9 months we have purchased bonds at yields we believe to be significantly higher than warranted by the issuers’ ability to service the debt. We have also increased the credit quality of the Fund’s holdings, reducing non-investment grade holdings from 20% to 15%. While we will continue to evaluate and take advantage of opportunities to deploy the Fund’s capital, we view the current allocation to reserves as a necessary hedge against the poten tial for increased inflation and rising interest rates in the medium term. For the fiscal year ended April 30, 2009, our underperformance was a result of a massive flight to treasuries during the worst of the economic crisis. However, this situation has improved markedly since our fiscal year end.
While the global economy is by no means healthy, the macroeconomic picture has recently shown signs of improvement. Broad measures of credit risk have improved- one such indicator that compares interbank lending rates to treasury rates, the three month TED spread, has declined from 4.5% at the peak of the credit crisis to 0.5%, approximately where it was prior to the failure of Lehman Brothers in September, 2008. Access to capital is better as well, with $19.5 billion of high yield bonds issued in the first four months of 2009 vs. $4.4 billion in the last four months of 2008. While we are encouraged by these indicators, there is still good reason for caution. U.S. unemployment was 9.4% as of May 2009, the highest level in 25 years. 345,000 jobs were lost in the month, and while the figure was better than expected and an improvement from recent months, it was still worse than any monthly loss in the last three recessions. Oil prices have also increased from $33 in March to approximately $72 as of June 10, 2009, with the potential to act as a drag on consumer spending. We believe that current asset allocation of the Income Fund reflects both the risks and the opportunities in the current interest rate environment.
As of April 30, 2009, the Income Fund had the following characteristics: net yield of approximately 4.6%, weighted average yield to maturity of 5.3%, weighted average duration (measure of sensitivity to interest rates) of 5.1 years, and weighted average maturity of 7.3 years. We continue to manage our credit risk through industry diversification and individual company
CROFT INCOME FUND
MANAGERS COMMENTARY (CONTINUED)
APRIL 30, 2009
analysis. As of June 10, 2009, we held 97 corporate bond issues in 21 different sectors. Additionally, 85% of the Fund’s assets were rated investment grade.
Thank you for your investment in the Croft Income Fund.
Sincerely,
Kent Croft
President
CROFT VALUE FUND
GRAPHICAL ILLUSTRATION
APRIL 30, 2009
Cumulative Performance Comparison $10,000 Investment Since May 1, 1999*
![[croftncsr002.jpg]](https://capedge.com/proxy/N-CSR/0001162044-09-000356/croftncsr002.jpg)
Average Annual Total Returns |
For the Periods Ended April 30, 2009 |
| |
| | Croft Value Fund | S&P 500 Index |
1 Year | -38.35% | -35.31% |
3 Year | -8.49% | -10.87% |
5 Year | 1.34% | -2.78% |
10 Year | 1.42% | -1.16% |
*This chart assumes an initial investment of $10,000 made on May 1, 1999.
Past Performance does not guarantee future results.
Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost.
Returns shown do not reflect taxes that a shareholder would pay on fund distributions or on the redemption of fund shares.
Current performance may be lower or higher than the performance data quoted. To obtain performance data current to the most recent month end, please call (800) 746-3322.
Annual Fund Operating Expenses:**
Operating Expenses 1.59%
Less Waivers/Reimbursements* (0.10)%
Net Annual Fund Operating Expenses 1.49%
** The Adviser has agreed to waive its advisory fees and/or reimburse fund expenses (excluding brokerage, commissions, underlying fund fees and expenses or extraordinary expenses) through August 30, 2009 to limit total annual fund operating expenses for the Value Fund to 1.47%.
CROFT INCOME FUND
GRAPHICAL ILLUSTRATION
APRIL 30, 2009
Cumulative Performance Comparison $10,000 Investment Since May 1, 1999*
![[croftncsr003.jpg]](https://capedge.com/proxy/N-CSR/0001162044-09-000356/croftncsr003.jpg)
Average Annual Total Return |
For the Periods Ended April 30, 2009 |
| |
| | Croft Income Fund | Lehman Brothers Int. Govt. / Corp. Bond Index. |
1 Year | -3.58% | 3.19% |
3 Year | 1.35% | 5.73% |
5 Year | 2.31% | 4.27% |
10 Year | 4.30% | 5.43% |
*This chart assumes an initial investment of $10,000 made on May 1, 1999.
Past Performance does not guarantee future results.
Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost.
Returns shown do not reflect taxes that a shareholder would pay on fund distributions or on the redemption of fund shares.
Current performance may be lower or higher than the performance data quoted. To obtain performance data current to the most recent month end, please call (800) 746-3322.
Annual Fund Operating Expenses:**
Operating Expenses* 2.04%
Less Waivers/Reimbursements** (0.94)%
Net Annual Fund Operating Expenses 1.10%
** The Adviser has agreed to waive its advisory fees and/or reimburse fund expenses (excluding brokerage, commissions, underlying fund fees and expenses or extraordinary expenses) through August 30, 2009 to limit total annual fund operating expenses for the Income Fund to 1.10%.
CROFT VALUE FUND
PORTFOLIO ILLUSTRATION
APRIL 30, 2009 (UNAUDITED)
The following chart gives a visual breakdown of the Fund by the industry sectors the underlying securities represent as a percentage of the portfolio of investments.
![[croftncsr005.jpg]](https://capedge.com/proxy/N-CSR/0001162044-09-000356/croftncsr005.jpg)
CROFT INCOME FUND
PORTFOLIO ILLUSTRATION
APRIL 30, 2009 (UNAUDITED)
The following chart gives a visual breakdown of the Fund by the investment grade as a percentage of the portfolio of investments.
![[croftncsr007.jpg]](https://capedge.com/proxy/N-CSR/0001162044-09-000356/croftncsr007.jpg)
CROFT VALUE FUND
SCHEDULE OF INVESTMENTS
APRIL 30, 2009
Shares | | | Value |
| | | | |
COMMON STOCKS - 95.09% | |
| | | | |
Agricultural - 3.63% | |
10,417 | | Archer-Daniels-Midland Co. | $ 256,467 |
7,204 | | CF Industries Holdings, Inc. | 519,047 |
11,311 | | Monsanto Company | 960,191 |
9,085 | | Potash Corp. of Saskatchewan, Inc. | 785,762 |
| | | | 2,521,467 |
Aircraft & Parts - 0.64% | |
29,547 | | AAR Corp. * | 445,273 |
| | | | |
Banks, S&Ls and Brokers - 1.12% | |
26,384 | | Bank of New York Mellon Corp. | 672,264 |
12,087 | | Bank of America Corp. | 107,937 |
| | | | 780,201 |
Building & Construction - 1.77% | |
56,919 | | Foster Wheeler Ltd. * | 1,225,466 |
| | | | |
Capital Equipment - 8.03% | |
49,624 | | Baldor Electric Co. | 1,151,277 |
15,860 | | Caterpillar, Inc. | 564,298 |
29,414 | | Deere & Co. | 1,213,622 |
11,921 | | Flowserve Corp. | 809,436 |
47,274 | | Terex Corp. * | 652,381 |
24,214 | | United Technologies Corp. | 1,182,612 |
| | | | 5,573,626 |
Chemicals - 1.76% | | |
43,908 | | E.I. du Pont de Nemours & Co. | 1,225,033 |
| | | | |
Consumer Non-Durables - 2.96% | |
30,428 | | Philip Morris International, Inc. | 1,101,494 |
19,277 | | Procter & Gamble Co. | 953,054 |
| | | | 2,054,548 |
Energy - 0.55% | | | |
14,917 | | Suncor Energy Inc. | 378,295 |
* Non-income producing during the period.
The accompanying notes are an integral part of these financial statements.
CROFT VALUE FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 2009
Shares | | | Value |
Financial Services - 2.06% | |
18,475 | | American Express, Co. | 465,940 |
16,931 | | Citigroup, Inc. | 51,640 |
61,698 | | Invesco Ltd. ADR | 908,194 |
| | | | 1,425,774 |
Forester Products - 5.00% | |
25,525 | | Potlatch Corp. | 750,690 |
29,100 | | Plum Creek Timber Co., Inc. | 1,004,532 |
48,687 | | Weyerhaeuser Co. | 1,716,704 |
| | | | 3,471,926 |
Gas & Gas Transmission - 2.39% | |
78,802 | | Williams Companies, Inc. | 1,111,108 |
34,292 | | Southern Union Co. | 545,586 |
| | | | 1,656,694 |
Healthcare - 7.15% | | |
28,233 | | Aetna Inc. | 621,408 |
38,925 | | CVS Caremark Corp. | 1,237,037 |
10,578 | | Edwards Lifesciences Corp. * | 670,434 |
48,044 | | Qiagen N.V. * | 791,765 |
16,563 | | Stryker Corp. | 641,154 |
42,610 | | Unitedhealth Group, Inc. | 1,002,187 |
| | | | 4,963,985 |
Home Improvement Stores - 1.61% | |
51,763 | | Lowes Companies, Inc. | 1,112,905 |
| | | | |
Industrial Goods - 2.51% | |
8,274 | | Valmont Industries | 527,716 |
15,963 | | Allegheny Technologies, Inc. | 522,469 |
48,847 | | ABB Ltd. - ADR | 694,604 |
| | | | 1,744,789 |
Insurance Agents & Brokers - 1.50% | |
49,525 | | Marsh & McLennan Companies, Inc. | 1,044,482 |
| | | | |
International Oil & Gas - 4.44% | |
19,901 | | Crescent Point Energy Trust | 469,469 |
47,237 | | Nexen, Inc. | 902,227 |
ADR - American Depository Receipt
* Non-income producing during the period.
The accompanying notes are an integral part of these financial statements.
CROFT VALUE FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 2009
Shares | | | Value |
18,895 | | Penn West Energy Trust | 207,278 |
68,913 | | Petrobank Energy & Resources Ltd. * | 1,501,876 |
| | | | 3,080,850 |
Life Insurance - 2.20% | |
15,659 | | MetLife, Inc. | 465,855 |
36,766 | | Prudential Financial, Inc. | 1,061,802 |
| | | | 1,527,657 |
Media & Entertainment - 3.11% | |
52,732 | | Cablevision Systems Corp. - NY Group Class A | 904,881 |
51,486 | | Liberty Media Corp. - Entertainment - Class A * | 1,253,684 |
| | | | 2,158,565 |
Metals & Mining - 1.80% | |
29,290 | | Freeport McMoran Copper & Gold, Inc. | 1,249,219 |
| | | | |
Multi-Industry - 4.73% | |
42,375 | | General Electric Co. | 536,044 |
42,527 | | Honeywell International, Inc. | 1,327,268 |
20,596 | | ITT Corp. | 844,642 |
24,291 | | Tyco International, Inc. | 577,154 |
| | | | 3,285,108 |
Natural Gas - 2.95% | |
11,600 | | Petrohawk Energy Corp. * | 273,760 |
31,356 | | Southwestern Energy Co. * | 1,124,426 |
15,164 | | Ultra Petroleum Corp. * | 649,019 |
| | | | 2,047,205 |
Oil - 0.12% | | | |
27,335 | | Gulfport Energy Corp. * | 81,185 |
| | | | |
Pharmaceuticals - 7.56% | |
9,077 | | Cephalon, Inc. * | 595,542 |
9,075 | | Genzyme Corp. * | 483,970 |
25,554 | | ICON PLC. - ADR * | 404,775 |
23,370 | | Johnson & Johnson | 1,223,653 |
10,145 | | Merck & Co. Inc. | 245,915 |
30,859 | | Pfizer, Inc. | 412,276 |
32,126 | | Pharmaceutical Product Development, Inc. | 629,991 |
ADR - American Depository Receipt
* Non-income producing during the period.
The accompanying notes are an integral part of these financial statements.
CROFT VALUE FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 2009
Shares | | | Value |
23,426 | | Schering-Plough Corp. | 539,267 |
16,793 | | Wyeth | 712,023 |
| | | | 5,247,412 |
Property & Casualty Insurance - 3.45% | |
36,415 | | Allstate Corp. | 849,562 |
33,380 | | Ace Ltd. | 1,546,162 |
| | | | 2,395,724 |
Real Estate - 1.16% | | |
107,383 | | CB Richard Ellis Group Inc. - Class A | 805,373 |
| | | | |
Retail Stores - 1.39% | |
66,653 | | Collective Brands, Inc. * | 967,802 |
| | | | |
Specialty Chemicals - 4.69% | |
21,719 | | 3M Co. | 1,251,014 |
20,556 | | Albemarle Corp. | 551,312 |
29,802 | | FMC Corp. | 1,452,252 |
| | | | 3,254,578 |
Technology - 6.24% | | |
71,005 | | Cisco Systems, Inc. * | 1,371,817 |
123,725 | | Flextronics International Ltd. * | 480,053 |
19,986 | | Verisign, Inc. * | 411,312 |
30,937 | | Altera Corp. | 504,582 |
45,857 | | Corning, Inc. | 670,429 |
73,075 | | Applied Materials, Inc. | 892,246 |
| | | | 4,330,439 |
Telecommunications - 3.92% | |
44,660 | | Amdocs Ltd. * | 934,734 |
65,820 | | General Cable Corp. * | 1,786,355 |
| | | | 2,721,089 |
Transportation - 2.03% | |
2,773 | | Burlington Northern Santa Fe Corp. | 187,122 |
15,403 | | Canadian National Railway Co. | 622,589 |
16,841 | | Norfolk Southern Corp. | 600,887 |
| | | | 1,410,598 |
Utilities - 2.62% | | | |
49,205 | | Calpine Corp. * | 399,053 |
* Non-income producing during the period.
The accompanying notes are an integral part of these financial statements.
CROFT VALUE FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 2009
Shares | | | Value |
8,310 | | FirstEnergy Corp. | 339,879 |
10,047 | | FPL Group, Inc. | 540,428 |
14,575 | | PG&E Corp. | 541,024 |
| | | | 1,820,384 |
| | | | |
TOTAL FOR COMMON STOCKS (Cost $83,921,124) - 95.09% | $ 66,007,652 |
| | | | |
SHORT TERM INVESTMENTS - 5.06% | |
3,514,994 | | AIM Short-term Investment Company Prime Portfolio 2.94% ** (Cost $3,514,994) | 3,514,994 |
| | | | |
TOTAL FOR SHORT TERM INVESTMENTS (Cost $3,514,994) - 5.06% | $ 3,514,994 |
| | | | |
TOTAL INVESTMENTS (Cost $87,436,118) - 100.15% | $ 69,522,646 |
| | | | |
LIABILITIES IN EXCESS OF OTHER ASSETS - (0.15)% | (105,764) |
| | | | |
NET ASSETS - 100.00% | $ 69,416,882 |
| | | | |
** Variable Rate Security; the coupon rate shown represents the rate at April 30, 2009.
The accompanying notes are an integral part of these financial statements.
CROFT INCOME FUND
SCHEDULE OF INVESTMENTS
APRIL 30, 2009
Shares/Principal | | Value |
| | | | |
CLOSED END MUTUAL FUNDS - 1.85% | |
| | | | |
Taxable Bond Funds - 1.85% | |
6,200 | | AllianceBernstein Global High Income Fund * | $ 59,396 |
9,600 | | Templeton Emerging Markets Income Fund * | 94,176 |
4,500 | | Western Asset Worldwide Income Fund * | 42,660 |
| | | | 196,232 |
| | | | |
TOTAL FOR CLOSED END MUTUAL FUNDS (Cost $227,527) - 1.85% | $ 196,232 |
| | | | |
CORPORATE BONDS - 85.27% | |
| | | | |
Accident & Health Insurance - 0.20% | |
22,000 | | Unumprovident Corp., 7.625%, 3/1/11 | $ 21,681 |
| | | | |
Bituminous Coal & Lignite Surface Mining - 0.47% | |
50,000 | | Massey Energy Co., 6.625%, 11/15/10 | 50,000 |
| | | | |
Building Materials & Housing - 2.23% | |
115,000 | | Plum Creek Timber Co., 5.875%, 11/15/15 | 96,601 |
140,000 | | Weyerhaeuser Co., 6.75%, 3/15/12 | 139,716 |
| | | | 236,317 |
Business Equipment - 5.37% | |
80,000 | | Goodyear Tire & Rubber Co., 7.857%, 8/15/11 | 74,400 |
182,000 | | Hewlett-Packard Co., 5.500%, 3/1/18 | 190,795 |
45,000 | | Hewlett-Packard Co., 6.125%, 3/1/14 | 49,484 |
160,000 | | Pitney Bowes, Inc., 4.750%, 5/15/18 | 147,577 |
105,000 | | United Technology Corp., 5.375%, 12/15/17 | 106,520 |
| | | | 568,776 |
Business Services - 1.42% | |
145,000 | | United Parcel Services, 5.50%, 1/15/18 | 150,361 |
| | | | |
Cable TV & Cellular Telephone - 0.99% | |
100,000 | | Tele-Communications, Inc. Senior Debentures, 7.875%, 8/1/13 | 104,724 |
* Closed-end security
The accompanying notes are an integral part of these financial statements.
CROFT INCOME FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 2009
Shares/Principal | | | Value |
Capital Goods - 3.02% | |
150,000 | | Caterpillar, Inc., 7.00%, 12/15/13 | 161,312 |
75,000 | | General Dynamics Corp., 5.25%, 2/1/14 | 79,600 |
80,000 | | Thermo Fisher Science, Inc., 6.75%, 8/15/14 | 79,497 |
| | | | 320,409 |
Chemicals - 2.37% | |
75,000 | | Agrium, Inc. Debentures (Yankee), 7.800%, 2/1/27 | 66,768 |
150,000 | | Dupont EI De Nemours, 6.000% 7/15/18 | 154,035 |
30,000 | | IMC Global, Inc. Senior Debentures, 9.450%, 12/15/11 | 30,027 |
| | | | 250,830 |
Education - 0.38% | |
40,000 | | Duke University, 5.15%, 4/1/19 | 40,245 |
| | | | |
Electric & Gas Utilities - 1.61% | |
100,000 | | Dominion Resources, Inc. 6.250%, 6/30/12 | 104,960 |
67,000 | | El Paso Corp. Senior Notes, 7.000%, 5/15/11 | 65,614 |
| | | | 170,574 |
Electronic Instruments and Controls - 1.67% | |
40,000 | | Arrow Electronics, Inc. Senior Debentures, 6.875%, 6/1/18 | 34,645 |
60,000 | | Arrow Electronics, Inc. Debentures, 7.500%, 1/15/27 | 43,692 |
130,000 | | General Cable Corp., 1.00%, 10/15/12 | 98,475 |
| | | | 176,812 |
Energy and Energy Services - 10.22% | |
120,000 | | Anadarko Petroleum 7.625%, 3/15/14 | 123,073 |
140,000 | | BP Capital Markets PLC, 5.25%, 11/7/13 | 150,944 |
100,000 | | Baker Hughes, Inc. 7.5%, 11/15/18 | 112,541 |
30,000 | | Baker Hughes, Inc. 6.5%, 11/15/13 | 32,960 |
30,000 | | Conocophillips Corp., 4.75%, 2/1/14 | 31,636 |
100,000 | | Conocophillips Corp., 5.20%, 5/15/18 | 98,095 |
60,000 | | Tosco Corp., 7.80%, 1/1/27 | 63,248 |
65,000 | | Global Marine, Inc., Notes, 7.000%, 6/1/28 | 58,690 |
135,000 | | Occidental Petroleum, 6.75%, 1/15/12 | 144,144 |
60,000 | | Petrohawk Energy Corp., 9.125%, 7/15/13 | 58,800 |
100,000 | | Shell International Finance BV, 4.00%, 3/21/14 | 103,123 |
105,000 | | Weatherford International, Inc., 5.95%, 6/15/12 | 105,056 |
| | | | 1,082,310 |
The accompanying notes are an integral part of these financial statements.
CROFT INCOME FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 2009
Shares/Principal | | | Value |
| | | | |
Environmental Service/Pollution Control - 0.48% | |
50,000 | | Waste Management, Inc. Debentures, 7.650%, 3/15/11 | 51,231 |
| | | | |
Federal & Federally-Sponsored Credit Agencies - 9.54% | |
100,000 | | Fannie Mae, 4.50%, 12/18/17 | 100,094 |
90,000 | | Fannie Mae, 4.50%, 5/28/15 | 90,225 |
43,000 | | Fannie Mae, 4.50%, 6/11/18 | 43,040 |
105,000 | | Fannie Mae, 4.81%, 6/30/16 | 105,656 |
200,000 | | Fannie Mae, 5.00%, 7/24/18 | 200,188 |
125,000 | | Federal Farm Credit Bank, 5.41%, 11/7/16 | 131,680 |
60,000 | | Federal Home Loan Bank, 3.20%, 12/18/12 | 60,656 |
121,000 | | Freddie Mac, 4.55%, 3/15/18 | 121,048 |
158,000 | | Freddie Mac, 5.00%, 7/23/20 | 158,064 |
| | | | 1,010,651 |
Financial Services - 4.12% | |
160,000 | | Berkshire Hathaway Financial Corp. 4.625%, 10/15/13 | 163,354 |
60,000 | | CIGNA Corp. Debentures, 7.875%, 5/15/27 | 46,069 |
55,000 | | General Electric Capital Corp., 3.00%, 12/9/11 | 56,742 |
55,000 | | Goldman Sachs Group, 3.25%, 6/15/12 | 57,324 |
55,000 | | JP Morgan Chase & Co., 3.125%, 12/1/11 | 56,702 |
55,000 | | Wells Fargo & Co., 3.00%, 12/9/11 | 56,671 |
| | | | 436,862 |
Food & Drug Producers - 5.45% | |
100,000 | | Archer-Daniels Midland Co. 5.45%, 3/15/18 | 101,964 |
70,000 | | Bunge, Ltd., 5.35%, 4/15/14 | 62,639 |
100,000 | | Glaxosmithkline PLC., 4.375%, 4/15/14 | 101,935 |
160,000 | | Pepsico, Inc., 7.90%, 11/1/18 | 193,100 |
110,000 | | Pfizer, Inc., 5.35%, 3/15/15 | 118,248 |
| | | | 577,886 |
Gas & Gas Transmission - 2.62% | |
100,000 | | KN Energy, Inc. Senior Debentures, 7.250%, 3/1/28 | 69,000 |
115,000 | | Pacific Energy Partners L.P., 7.125%, 6/15/14 | 110,789 |
100,000 | | Panhandle Eastern Pipeline, 6.05%, 8/15/13 | 98,181 |
| | | | 277,970 |
Home Improvement Stores - 0.29% | |
30,000 | | Home Depot, Inc. 5.20%, 3/1/11 | 30,570 |
The accompanying notes are an integral part of these financial statements.
CROFT INCOME FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 2009
Shares/Principal | | | Value |
| | | | |
Home Lawn & Garden Equipment - 0.75% | |
100,000 | | Toro Company Debentures, 7.800%, 6/15/27 | 79,648 |
| | | | |
Industrial Goods - 3.23% | |
75,000 | | Cummins Engine Company, Inc. Debentures, 6.750%, 2/15/27 | 54,666 |
90,000 | | Honeywell International, Inc., 4.25%, 3/1/13 | 93,440 |
136,000 | | General Electric Co., 5.25%, 12/6/17 | �� 128,697 |
65,000 | | Nalco Company., 8.875%, 11/15/13 | 65,325 |
| | | | 342,128 |
Insurance Agents, Brokers & Service - 1.00% | |
120,000 | | Marsh & McLennan Co., 5.750%, 9/15/15 | 106,341 |
| | | | |
International Gas & Oil - 1.55% | |
175,000 | | Nexen, Inc. 5.05%. 11/20/13 | 164,165 |
| | | | |
Life Insurance - 1.23% | |
160,000 | | Prudential Financial, Inc. 4.5% 7/15/13 | 130,172 |
| | | | |
Media & Entertainment - 2.71% | |
170,000 | | Time Warner, Inc. Debentures, 9.150%, 2/1/23 | 175,995 |
110,000 | | Washington Post Co., 7.25%, 2/1/19 | 110,975 |
| | | | 286,970 |
Metal & Mining - 5.20% | |
100,000 | | Arch Western Finance 6.75%, 7/1/13 | 87,250 |
165,000 | | BHP Biliton Ltd. 5.5%, 4/1/14 | 173,723 |
75,000 | | Freeport McMoran, 8.375%, 4/1/17 | 73,500 |
125,000 | | Peabody Energy Corp., 6.875%, 3/15/13 | 122,500 |
125,000 | | U.S. Steel Corp., 7.000%, 2/1/18 | 92,846 |
| | | | 549,819 |
Miscellaneous Consumer Goods & Services - 2.63% | |
90,000 | | Brown-Forman Corp., 5.00% 2/1/14 | 92,511 |
90,000 | | Proctor & Gamble Co., 4.60% 1/15/14 | 95,309 |
100,000 | | Tenneco Packaging, Inc. Debentures, 8.125% 6/15/17 | 90,286 |
| | | | 278,106 |
Miscellaneous Manufacturing Industries - 0.24% | |
25,000 | | Blyth, Inc., 7.90%, 10/1/09 | 25,125 |
The accompanying notes are an integral part of these financial statements.
CROFT INCOME FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 2009
Shares/Principal | | | Value |
| | | | |
Pipelines - 1.40% | |
150,000 | | Sonat Inc. Notes, 7.625%, 7/15/11 | 148,493 |
| | | | |
Plastic Materials, Synthetic Resins & Nonvulcan Elastomers - 1.17% | |
150,000 | | Albemarle Corp., 5.100%, 2/1/15 | 124,467 |
| | | | |
Printing & Publishing - 1.35% | |
165,000 | | News America Holdings, Inc. Senior Debentures, 7.750%, 2/1/24 | 143,168 |
| | | | |
Retail Stores - 1.98% | |
55,000 | | Albertson's Medium-Term, Inc. Notes, 6.520%, 4/10/28 | 24,750 |
70,000 | | Auto Zone Inc., 6.95%, 6/15/16 | 67,855 |
55,000 | | Sears Roebuck Co., 7.500%, 10/15/27 | 18,569 |
90,000 | | Staples, Inc., 9.75%, 1/15/14 | 98,763 |
| | | | 209,937 |
Security & Protection Services - 1.10% | |
115,000 | | L-3 Communications Corp., 7.625%, 6/15/12 | 116,150 |
| | | | |
Semiconductors - 0.26% | |
30,000 | | Flextronics International, 9.875%, 7/1/10 | 27,735 |
| | | | |
Steel & Iron - 2.75% | |
185,000 | | Carpenter Technology, 7.625%, 8/15/11 | 189,618 |
100,000 | | Nucor Corp., 5.750%, 12/1/17 | 101,891 |
| | | | 291,509 |
Telephones & Communications - 2.82% | |
95,000 | | Alltel Corp., 7.875% Due 7/1/32 | 99,928 |
186,000 | | Liberty Media, LLC., 8.25%, 2/1/30 | 117,964 |
75,000 | | AT&T Corp., 4.85%, 2/15/14 | 77,773 |
3,141 | | Nynex Corp Amort Debentures, 9.55%, 5/1/10 | 3,131 |
| | | | 298,796 |
Technology - 1.45% | |
145,000 | | Cisco Systems, Inc., 5.50%, 2/22/16 | 153,437 |
| | | | |
TOTAL FOR CORPORATE BONDS (Cost $8,992,383) - 85.27% | $ 9,034,375 |
The accompanying notes are an integral part of these financial statements.
CROFT INCOME FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 2009
Shares/Principal | | | Value |
| | | | |
SHORT TERM INVESTMENTS - 11.55% | |
1,222,995 | | AIM Short-term Investment Company Prime Portfolio 2.94% ** (Cost $1,222,995) | 1,222,995 |
| | | | |
TOTAL SHORT TERM INVESTMENTS (Cost $1,222,995) - 11.55% | $ 1,222,995 |
| | | | |
TOTAL INVESTMENTS (Cost $10,442,905) - 98.67% | $ 10,453,602 |
| | | | |
OTHER ASSETS LESS LIABILITIES - 1.33% | 141,186 |
| | | | |
NET ASSETS - 100.00% | $ 10,594,788 |
| | | | |
** Variable Rate Security; the coupon rate shown represents the rate at April 30, 2009.
The accompanying notes are an integral part of these financial statements.
CROFT FUNDS
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2009
Assets: | | Value Fund | Income Fund |
Investments in Securities, at Value | | |
(Cost $87,436,118 and $10,442,905, respectively) | $ 69,522,646 | $ 10,453,602 |
| | | | |
Receivables: | | |
Fund Shares Sold | 232,680 | - |
Dividends and Interest | 84,548 | 165,676 |
Prepaid Expenses | 9,419 | 7,967 |
Total Assets | 69,849,293 | 10,627,245 |
Liabilities: | | | |
Due to Custodian Bank | 80 | 105 |
Payables: | | | |
Fund Shares Redeemed | 227,748 | 149 |
Accrued Management Fees | 33,301 | 67 |
Dividends Payable | - | 15,196 |
Other Accrued Expenses | 20,604 | 16,940 |
Securities Purchased | 150,678 | - |
Total Liabilities | 432,411 | 32,457 |
Net Assets | | $ 69,416,882 | $ 10,594,788 |
| | | | |
Net Assets Consist of: | | |
Paid In Capital | $ 98,560,043 | $ 11,561,735 |
Accumulated Undistributed Net Investment Income | 20,350 | 30,608 |
Accumulated Realized Loss on Investments | (11,250,039) | (1,008,252) |
Unrealized Appreciation/(Depreciation) in Value of Investments | (17,913,472) | 10,697 |
Net Assets (30,000,000 shares authorized, $0.001 par value for the Croft | | |
Funds Corporation, which includes the Value Fund and the | | |
Income Fund), for 4,521,192 and 1,179,282 Shares Outstanding. | $ 69,416,882 | $ 10,594,788 |
| | | | |
Net Asset Value and Offering Price Per Share | $ 15.35 | $ 8.98 |
| | | | |
Short-term Redemption Price Per Share ($15.35 x 0.98 and $8.98 x 0.98) * | $ 15.04 | $ 8.80 |
| | | | |
* The Funds will deduct a 2% redemption fee for redemption proceeds if purchased and redeemed within 30 days. |
| | | | |
The accompanying notes are an integral part of these financial statements. |
| | | | |
CROFT FUNDS
STATEMENT OF OPERATIONS
For the year ended APRIL 30, 2009
| | | | |
| | | Value Fund | Income Fund |
Investment Income: | | |
Dividends (net of foreign witholding taxes of $11,769 and $0, respectively) | $ 1,013,187 | $ 26,022 |
Interest | | 124,302 | 527,690 |
Total Investment Income | 1,137,489 | 553,712 |
| | | | |
Expenses: | | | |
Advisory Fees (Note 4) | 595,220 | 79,045 |
Distribution Fees | 158,306 | 25,014 |
Transfer Agent and Fund Accounting Fees | 49,904 | 29,249 |
Custody Fees | 43,658 | 7,281 |
Registration Fees | 24,410 | 23,038 |
Audit Fees | 14,699 | 14,101 |
Insurance Fees | 13,698 | 3,023 |
Legal Fees | 11,214 | 11,178 |
Miscellaneous Fees | 8,222 | 4,987 |
Printing and Mailing Fees | 6,434 | 6,043 |
Trustee Fees | 1,026 | 975 |
Total Expenses | 926,791 | 203,934 |
Fees Waived and Reimbursed by the Advisor (Note 4) | - | (93,871) |
Net Expenses | 926,791 | 110,063 |
| | | | |
Net Investment Income | 210,698 | 443,649 |
| | | | |
Realized and Unrealized Loss on Investments: | | |
Realized Loss on Investments | (11,189,644) | (726,101) |
Net Change in Unrealized Appreciation/(Depreciation) on Investments | (23,415,610) | (71,587) |
Net Realized and Unrealized (Loss) on Investments | (34,605,254) | (797,688) |
| | | | |
Net Decrease in Net Assets Resulting from Operations | $ (34,394,556) | $ (354,039) |
| | | | |
| | | | |
| | | | |
The accompanying notes are an integral part of these financial statements. |
| | | | |
CROFT VALUE FUND
STATEMENTS OF CHANGES IN NET ASSETS
| | | For the Years |
| | | Ended |
| | | 4/30/2009 | 4/30/2008 |
Increase (Decrease) in Net Assets From Operations: | | |
Net Investment Income | $ 210,698 | $ 95,675 |
Net Realized Gain (Loss) on Investments | (11,189,644) | 1,011,131 |
Net Change in Unrealized Appreciation/Depreciation on Investments | (23,415,610) | 1,252,227 |
Net Increase (Decrease) in Net Assets Resulting from Operations | (34,394,556) | 2,359,033 |
| | | | |
Distributions to Shareholders from: | | |
Net Investment Income | (216,487) | (85,119) |
Realized Gains | (384,866) | (921,353) |
Net Change in Net Assets from Distributions | (601,353) | (1,006,472) |
| | | | |
Capital Share Transactions: | | |
Proceeds from Sale of Shares | 85,642,758 | 40,049,704 |
Shares Issued on Reinvestment of Dividends | 589,865 | 970,999 |
Cost of Shares Redeemed | (43,200,771) | (2,960,981) |
Net Increase from Shareholder Activity | 43,031,852 | 38,059,722 |
| | | | |
Net Assets: | | | |
Net Increase in Net Assets | 8,035,943 | 39,412,283 |
Beginning of Period | 61,380,939 | 21,968,656 |
End of Period (Including Accumulated Undistributed Net | | |
Investment Income of $20,350 and $26,139, respectively) | $ 69,416,882 | $ 61,380,939 |
| | | | |
Share Transactions: | | |
Shares Sold | 4,644,266 | 1,615,881 |
Shares Issued on Reinvestment of Dividends | 40,906 | 37,274 |
Shares Redeemed | (2,602,702) | (119,698) |
Net Increase in Shares | 2,082,470 | 1,533,457 |
Outstanding at Beginning of Period | 2,438,722 | 905,265 |
Outstanding at End of Period | 4,521,192 | 2,438,722 |
| | | | |
| | | | |
The accompanying notes are an integral part of these financial statements. |
| | | | |
CROFT INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
| | | For the Years |
| | | Ended |
| | | 4/30/2009 | 4/30/2008 |
Increase (Decrease) in Net Assets From Operations: | | |
Net Investment Income | $ 443,649 | $ 532,809 |
Net Realized Loss on Investments | (726,101) | (120,791) |
Net Change in Unrealized Appreciation/Depreciation on Investments | (71,587) | (241,420) |
Net Increase (Decrease) in Net Assets Resulting from Operations | (354,039) | 170,598 |
| | | | |
Distributions to Shareholders: | | |
Net Investment Income | (437,520) | (526,766) |
Net Change in Net Assets from Distributions | (437,520) | (526,766) |
| | | | |
Capital Share Transactions: | | |
Proceeds from Sale of Shares | 1,745,067 | 584,809 |
Shares Issued on Reinvestment of Dividends | 390,189 | 443,801 |
Cost of Shares Redeemed | (1,199,443) | (1,243,403) |
Net Increase/(Decrease) from Shareholder Activity | 935,813 | (214,793) |
| | | | |
Net Assets: | | | |
Net Increase (Decrease) in Net Assets | 144,254 | (570,961) |
Beginning of Period | 10,450,534 | 11,021,495 |
End of Period (Including Accumulated Undistributed Net | | |
Investment Income of $30,608 and $24,479, respectively) | $ 10,594,788 | $ 10,450,534 |
| | | | |
Share Transactions: | | |
Shares Sold | 193,554 | 58,851 |
Shares Issued on Reinvestment of Dividends | 42,982 | 45,065 |
Shares Redeemed | (130,870) | (124,835) |
Net Increase/(Decrease) in Shares | 105,666 | (20,919) |
Outstanding at Beginning of Period | 1,073,616 | 1,094,535 |
Outstanding at End of Period | 1,179,282 | 1,073,616 |
| | | | |
| | | | |
The accompanying notes are an integral part of these financial statements. | | |
| | | | |
CROFT VALUE FUND
FINANCIAL HIGHLIGHTS
Selected data for a share outstanding throughout the period. |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | For the Years Ended |
| | | 4/30/2009 | | 4/30/2008 | 4/30/2007 | 4/30/2006 | 4/30/2005 |
| | | | | | | | |
Net Asset Value, at Beginning of Period | $ 25.17 | | $ 24.27 | $ 21.94 | $ 18.57 | $ 17.62 |
| | | | | | | | |
Income (Loss) From Investment Operations: | | | | | | |
Net Investment Income (Loss) * | 0.06 | | 0.08 | 0.13 | 0.03 | 0.08 |
Net Gain (Loss) on Securities (Realized and Unrealized) | (9.72) | | 1.72 | 3.27 | 4.80 | 1.65 |
Total from Investment Operations | (9.66) | | 1.80 | 3.40 | 4.83 | 1.73 |
| | | | | | | | |
Distributions: | | | | | | | |
Net Investment Income | (0.06) | | (0.08) | (0.11) | (0.06) | (0.06) |
Realized Gains | (0.10) | | (0.82) | (0.96) | (1.40) | (0.72) |
Total from Distributions | (0.16) | | (0.90) | (1.07) | (1.46) | (0.78) |
| | | | | | | | |
Proceeds from Redemption Fees | - | *** | - | - | - | - |
| | | | | | | | |
Net Asset Value, at End of Period | $ 15.35 | | $ 25.17 | $ 24.27 | $ 21.94 | $ 18.57 |
| | | | | | | | |
Total Return ** | | (38.35)% | | 7.28% | 15.86% | 26.77% | 10.01% |
| | | | | | | | |
Ratios/Supplemental Data: | | | | | | |
Net Assets at End of Period (Thousands) | $ 69,417 | | $ 61,381 | $ 21,969 | $ 11,024 | $ 7,341 |
Before Waivers | | | | | | |
Ratio of Expenses to Average Net Assets | 1.46% | | 1.57% | 1.66% | 1.76% | 2.01% |
Ratio of Net Investment Income (Loss) to Average Net Assets | 0.33% | | 0.22% | 0.43% | (0.12)% | (0.10)% |
After Waivers | | | | | | | |
Ratio of Expenses to Average Net Assets | 1.46% | | 1.48% | 1.50% | 1.50% | 1.50% |
Ratio of Net Investment Income to Average Net Assets | 0.33% | | 0.31% | 0.59% | 0.13% | 0.41% |
Portfolio Turnover | 15.49% | | 24.20% | 19.46% | 21.97% | 47.54% |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
* Per share net investment income has been determined on the basis of average shares outstanding during the period. |
** Total return in the above table represents the rate that the investor would have earned or lost on an investment in the Fund assuming reinvestment of dividends, and is not annualized for periods of less than one year. |
*** Proceeds from redemption fees were less than $0.005 per share. | | | | | |
| | | | | | | | |
The accompanying notes are an integral part of these financial statements. |
| | | | | | | | |
CROFT INCOME FUND
FINANCIAL HIGHLIGHTS
Selected data for a share outstanding throughout the period. |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | For the Years Ended |
| | | 4/30/2009 | 4/30/2008 | 4/30/2007 | 4/30/2006 | 4/30/2005 |
| | | | | | | |
Net Asset Value, at Beginning of Period | $ 9.73 | $ 10.07 | $ 9.98 | $ 10.21 | $ 10.12 |
| | | | | | | |
Income (Loss) From Investment Operations: | | | | | |
Net Investment Income * | 0.41 | 0.50 | 0.53 | 0.49 | 0.45 |
Net Gain (Loss) on Securities (Realized and Unrealized) | (0.76) | (0.34) | 0.08 | (0.24) | 0.09 |
Total from Investment Operations | (0.35) | 0.16 | 0.61 | 0.25 | 0.54 |
| | | | | | | |
Distributions: | | | | | | |
Net Investment Income | (0.40) | (0.50) | (0.52) | (0.48) | (0.45) |
Realized Gains | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
Total from Distributions | (0.40) | (0.50) | (0.52) | (0.48) | (0.45) |
| | | | | | | |
Net Asset Value, at End of Period | $ 8.98 | $ 9.73 | $ 10.07 | $ 9.98 | $ 10.21 |
| | | | | | | |
Total Return ** | (3.58)% | 1.63% | 6.27% | 2.43% | 5.42% |
| | | | | | | |
Ratios/Supplemental Data: | | | | | |
Net Assets at End of Period (Thousands) | $ 10,595 | $ 10,451 | $ 11,021 | $ 10,040 | $ 8,786 |
Before Waivers and Reimbursements | | | | | |
Ratio of Expenses to Average Net Assets | 2.04% | 1.97% | 1.66% | 1.67% | 1.68% |
Ratio of Net Investment Income to Average Net Assets | 3.50% | 4.17% | 4.71% | 4.28% | 3.79% |
After Waivers and Reimbursements | | | | | |
Ratio of Expenses to Average Net Assets | 1.10% | 1.10% | 1.10% | 1.10% | 1.10% |
Ratio of Net Investment Income to Average Net Assets | 4.43% | 5.04% | 5.27% | 4.85% | 4.36% |
Portfolio Turnover | 16.70% | 5.03% | 15.04% | 14.61% | 1.76% |
| | | | | | | |
| | | | | | | |
| | | | | | | |
* Per share net investment income has been determined on the basis of average shares outstanding during the period. | | |
** Total return in the above table represents the rate that the investor would have earned or lost on an investment in the Fund assuming reinvestment of dividends, and is not annualized for periods of less than one year. |
The accompanying notes are an integral part of these financial statements. |
| | | | | | | |
CROFT FUNDS
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2009
Note 1. Organization
The Croft Value Fund (the “Value Fund”) and the Croft Income Fund (the “Income Fund”) were organized as managed portfolios of the Croft Funds Corporation (the “Corporation”) under the laws of the State of Maryland pursuant to Articles of Incorporation dated July 20, 1994, and are registered under the Investment Company Act of 1940, as amended, as diversified, open-end investment companies. The Funds commenced operations on May 4, 1995. The Value Fund’s investment objective is to seek growth of capital. It invests primarily in common stocks of companies believed by Croft-Leominster, Inc. (the “Advisor”) to be undervalued and have good prospects for capital appreciation. The Income Fund seeks a high level of current income with moderate risk to principal. The Advisor seeks to achieve this by investing primarily in a diversified portf olio of U.S. traded investment grade fixed-income securities.
Note 2. Significant Accounting Policies
The following is a summary of significant accounting policies followed by the Funds in the preparation of their financial statements.
Security Valuation: The Funds’ portfolio securities for which market quotations are readily available are valued at market value, which is determined by using the last reported sale price. If there are no sales reported, as in the case of certain securities traded over-the-counter, the Funds’ portfolio securities will be valued by using the last reported bid price. Many debt securities, including U.S. Government Securities, are traded in the over-the counter market. Obligations having remaining maturities of 60 days or less are valued at amortized cost which the Corporation’s Directors have determined to approximate their market value. The ability of issuers of debt securities held by the Funds to meet their obligations may be affected by economic and political developments in a specific country or region.
The amortized cost value of a security is determined by valuing it at cost originally and thereafter amortizing any discount or premium from its face value at a constant rate until maturity, regardless of the effect of fluctuating interest rates on the market value of the instrument. Although the amortized cost method provides certainty in valuation, it may result at times in determinations of value that are higher or lower than the price the Funds would receive if the instruments were sold. Consequently, changes in the market value of such portfolio instruments during periods of rising or falling interest rates will not be reflected in the computation of the Funds’ net asset value.
Certain securities and assets of the Funds may be valued at fair value as determined in good faith by the Board of Directors or by persons acting at their direction in accordance with guidelines established by the Board of Directors. The fair value of any restricted securities from time to time held by the Funds are determined by the Advisor according to procedures approved by the Board of Directors. Such valuations and procedures are reviewed periodically by the Board of Directors. The fair value of these securities is generally determined as the amount which the Funds could reasonably expect to realize from an orderly disposition of such securities over a reasonable period of time. Method
CROFT FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
APRIL 30, 2009
which are in accord with this principle may, for example, be based on (i) a multiple of earnings; (ii) a discount from market of a similar freely traded security (including a derivative security or a basket of securities trade on other markets, exchanges or among dealers); or (iii) yield to maturity with respect to debt issues, or a combination of these and other methods.
Federal Income Taxes: Each Fund’s policy is to continue to comply with requirements of Subchapter M 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 Funds intend to distribute their net long-term capital gains and their net short-term capital gains at least once a year. Therefore, no provision for federal income taxes is required. Federal income tax loss carryforwards generated in prior years will be used to offset a portion of current year’s net realized gains.
As of and during the fiscal year ended April 30, 2009 the Funds did not have a liability for any unrecognized tax benefits. The Funds recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense on the statement of operations. During the period, the Funds did not incur any interest or penalties. The Funds are not subject to examination by the U.S. Federal tax authorities for tax years before 2005.
Distributions to Shareholders: Distributions to shareholders, which are determined in accordance with income tax regulations, are recorded on the ex-dividend date. The treatment for financial reporting purposes of distributions made to shareholders during the year from net investment income or net realized capital gains may differ from their ultimate treatment for federal income taxes purposes. These differences are caused primarily by differences in the timing of the recognition of certain components of income, expense or realized capital gain for federal income tax purposes. Where such differences are permanent in nature, they are reclassified in the components of the net assets based on their ultimate characterization for federal income tax purposes. Any such reclassifications will have no effect on net assets, results of operations or net asset value per share of the Funds. At April 30, 20 09, expired capital loss carryforwards in the amount of $404,798 were reclassified to paid-in capital and $2,337 was reclassified from accumulated net realized losses to paid-in capital for other book/tax differences for the Income Fund.
Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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.
Other: The Funds record security transactions on the trade date. The specific identification method is used for determining gains or losses for financial statement and
CROFT FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
APRIL 30, 2009
income tax purposes. Dividend income is recognized on the ex-dividend date. Interest income is recognized on an accrual basis. Discounts and premiums on securities purchased are amortized over the lives of the respective securities. Withholding taxes on foreign dividends have been provided for in accordance with the Funds’ understanding of the appropriate country’s rules and rates.
Fair Value Measurements: The Funds adopted Financial Accounting Standards Board (“FASB”) Statement on Financial Accounting Standards (“SFAS”) No. 157 "Fair Value Measurements," effective May 1, 2008. This standard establishes a single authoritative definition of fair value, sets out a framework for measuring fair value and requires additional disclosure about fair value measurements. SFAS No. 157 applies to fair value measurements already required or permitted by existing standards. In accordance with SFAS No. 157, fair value is defined as the price that would be received by the Funds upon selling an asset or paid by the Funds to transfer a liability in an orderly transaction between market participants at the measurement date. In the absence of a principal market for the asset or liability, the assumption is that the transaction occurs on the most advantageous market for the asset or liability. SFAS No. 157 established a three-tier fair value hierarchy that prioritizes the assumptions, also known as "inputs", to valuation techniques used by market participants to measure fair value. The term "inputs" refers broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk (for example, the risk inherent in a particular valuation technique used to measure fair value (such as a pricing model) and/or the risk inherent in the inputs to the valuation technique). Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity's own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The valuation techniques used to measure fair value should maximize the use of observable inputs and minimize the use of unobservable inputs. The three-tier hierarchy of inputs is summarized in three levels with the highest priority given to Level 1 and the lowest priority given to Level 3: Level 1 - quoted prices in active markets for identical securities, Level 2 - other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) and Level 3 - significant unobservable inputs (including the Funds’ own assumptions in determining the fair value of investments). The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in these securities. The following is a summary of the inputs used as of April 30, 2009 in valuing the Funds’ assets carried at fair value:
CROFT FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
APRIL 30, 2009
Value Fund
Investments Other Financial
Valuation Inputs: In Securities Instruments (1)
Level 1 – Quoted Prices $69,522,646 $ -
Level 2 – Significant Other Observable Inputs - -
Level 3 – Significant Unobservable Inputs - -
Total $69,522,646 $ -
Income Fund
Investments Other Financial
Valuation Inputs: In Securities Instruments (1)
Level 1 – Quoted Prices $1,419,227 $ -
Level 2 – Significant Other Observable Inputs 9,034,375 -
Level 3 – Significant Unobservable Inputs - -
Total $10,453,602 $ -
(1) Other financial instruments are derivative instruments not reflected in the Schedule of Investments, such as written options, short sales, currency contracts, futures, forward contracts and swap contracts.
For the year ended April 30, 2009, the Funds did not have significant unobservable inputs (Level 3) used in determining fair value. Therefore, a reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining fair value is not applicable.
Note 3. New Accounting Pronouncements – In March 2008, FASB issued Statement on Financial Accounting Standards No. 161, “Disclosure about Derivative Instruments and Hedging Activities” (SFAS 161), effective for fiscal years and interim periods beginning after November 15, 2008. SFAS 161 requires enhanced disclosures about the Funds’ derivative and hedging activities, including how such activities are accounted for and their effect on the Funds’ financial position, performance and cash flows. Management is currently evaluating the impact the adoption of SFAS 161 will have on the Funds’ financial statements and related disclosures.
In April 2009, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position No. 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP 157-4”). FSP 157-4 provides additional guidance for estimating fair value in accordance with FAS 157, when the volume and level of activity for the asset or liability have significantly decreased as well as guidance on identifying circumstances that indicate a transaction is not orderly. FSP 157-4 is effective for fiscal years and interim periods ending after June 15, 2009. Management is currently evaluating the impact the adoption of FSP 157-4 will have on the Funds’ future financial statement and related disclosures.
CROFT FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
APRIL 30, 2009
Note 4. Investment Advisory Fee and Other Transactions with Affiliates
The Funds retain the Advisor as their investment advisor. Under the terms of the management agreement, subject to such policies as the Board of Directors of the Corporation may determine, the Advisor, at its expense, will continuously furnish an investment program for the Funds, will make investment decisions on behalf of the Funds, and place all orders for the purchase and sale of portfolio securities subject always to applicable investment objectives, policies and restrictions. Pursuant to the management agreement and subject to the general oversight of the Board of Directors, the Advisor also manages, supervises and conducts the other affairs and business of the Funds, furnishes office space and equipment, provides bookkeeping and certain clerical services and pays all fees and expenses of the officers of the Funds. For the Advisor’s services, the Funds pay a fee, com puted daily and payable monthly at the annual rate of 0.94% of the Value Fund’s average daily net assets and at the annual rate of 0.79% of the Income Fund’s average daily net assets.
For the year ended April 30, 2009, the Advisor earned fees from the Value Fund of $595,220 before the waiver/reimbursement described below. For the period of May 1, 2008 through August 24, 2008, the Advisor had contractually agreed to waive management fees and/or reimburse expenses to the Value Fund to limit the overall expense ratio to 1.48%. Effective August 25, 2008 through August 30, 2009, the Advisor contractually agreed to an expense limitation of 1.47% of the Value Fund’s average net assets (excluding ordinary brokerage commissions, underlying Fund fees and extraordinary expenses). At April 30, 2009, the Value Fund owed the Advisor $33,301.
For the fiscal year ended April 30, 2009, the Advisor earned fees from the Income Fund of $79,045 before the waiver/reimbursement described below. Through August 30, 2009, the Advisor has contractually agreed to waive management fees and/or reimburse expenses to the Income Fund to limit the overall expense ratio to 1.10% (excluding ordinary brokerage commissions and extraordinary expenses) of the Income Fund’s average net assets. At April 30, 2009 the Income Fund owed the Advisor $67.
Pursuant to a plan of distribution, the Funds may pay a distribution fee of up to 0.25% 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 fiscal year ended April 30, 2009, the Value Fund and the Income Fund incurred distribution fees of $158,306 and $25,014, respectively.
A director and certain officers of the Corporation are also officers and owners of the Advisor. Each “non-interested” Director is entitled to receive an annual fee of $1,500 plus expenses for services related to the Corporation.
CROFT FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
APRIL 30, 2009
Note 5. Capital Share Transactions
At April 30, 2009, there were 30,000,000, $0.001 par value shares of capital stock authorized for the Croft Funds Corporation (which includes the Value Fund and the Income Fund), and paid in capital amounted to $98,560,043 for the Value Fund and $11,561,735 for the Income Fund.
Note 6. Investments
Value Fund
For the fiscal year ended April 30, 2009, the cost of purchases and the proceeds from sales, other than U.S. Government Securities and short-term securities, aggregated $56,080,325 and $8,776,423, respectively. For federal income tax purposes, as of April 30, 2009, the gross unrealized appreciation for all securities totaled $2,115,196 and the gross unrealized depreciation for all securities totaled $26,829,459, for a net unrealized depreciation of $24,714,263. The aggregate cost of securities for federal income tax purposes at April 30, 2009 was $94,236,909.
Income Fund
For the fiscal year ended April 30, 2009, the cost of purchases and the proceeds from the sales, other than U.S. Government securities and short-term securities, aggregated $5,165,462 and $1,175,952, respectively. For the fiscal year ended April 30, 2009, the cost of purchases and the proceeds from the sales on U.S. Government securities aggregated $0 and $0, respectively. For federal income tax purposes, as of April 30, 2009, the gross unrealized appreciation for all securities totaled $389,345 and the gross unrealized depreciation for all securities totaled $958,247, for a net unrealized depreciation of $568,902. The aggregate cost of securities for federal income tax purposes at April 30, 2009 was $11,022,504.
The difference between book cost and tax cost represents the difference between the original cost and market value of portfolio securities at the time of conversion from a partnership to a regulated investment company on May 4, 1995.
Note 7. Distributions to Shareholders
VALUE FUND
The Value Fund makes distributions annually. During the fiscal year ended April 30, 2009, distributions of $0.16 per share, or $601,353 in the aggregate, were declared and paid from net investment income and long-term capital gains.
The tax character of distributions paid during the fiscal years ended April 30, 2009 and 2008 were as follows:
Distributions paid from: | 4/30/2009 | 4/30/2008 |
Ordinary Income | $216,487 | $85,119 |
Long Term Capital Gain | 384,866 | 921,353 |
| | $601,353 | $ 1,006,472 |
CROFT FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
APRIL 30, 2009
As of April 30, 2009, the components of distributable earnings/(accumulated losses) on a tax basis were as follows:
Undistributed Ordinary Income | $ 19,911 |
Capital Loss Carryforward | (4,448,809) |
Unrealized Appreciation/ (Depreciation) | (24,714,263) |
| $ (29,143,161) |
The difference between book basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses of wash sales and post-October losses. The Value Fund elected to defer post-October losses in the amount of $6,740,835.
INCOME FUND
The Income Fund makes quarterly income distributions. During the fiscal year ended April 30, 2009, distributions of $0.40 per share, or $437,520 in the aggregate, were declared and paid from net investment income.
The tax character of distributions paid during the fiscal years ended April 30, 2009 and 2008 were as follows:
Distributions paid from: | April 30, 2009 | April 30, 2008 |
Ordinary Income | $ 437,520 | $ 526,766 |
| | $ 437,520 | $ 526,766 |
As of April 30, 2009 the components of distributable earnings/ (accumulated losses) on a tax basis were as follows:
Undistributed Ordinary Income | $30,608 |
Capital Loss Carryforward | (420,958) |
Unrealized Appreciation/ (Depreciation) | (568,902) |
| | $(959,252) |
The difference between book basis and tax-basis unrealized appreciation (depreciation) is attributable to the difference in original cost and market value of securities at the time of conversion from a partnership to a regulated investment company on May 4, 1995 and due to the deferral of post-October losses. The Income Fund elected to defer post-October losses in the amount of $589,631.
CROFT FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
APRIL 30, 2009
Note 8. Control Ownership
The beneficial ownership, either directly or indirectly, or more than 25% of the voting securities of a fund creates a presumption of control of the fund, under Section 2 (a) (a) of the Act. As of April 30, 2009, Charles Schwab, Inc. held in omnibus accounts for the benefit of others approximately 66% of the voting securities of the Value Fund and may be deemed to control the Value Fund.
Note 9. Capital Loss Carryforwards
At April 30, 2009, the Income Fund had available for federal tax purposes an unused capital loss carryforward of $420,958, of which $139,760 expires in 2010, $21,085 expires in 2011, $120,791 expires in 2016 and $139,322 expires in 2017. Capital loss carryforwards in the amount of $404,798 expired during the year ended April 30, 2009. At April 30, 2009, the Value Fund had available for federal income tax purposes an unused capital loss carryforward of which $4,448,809 expires in 2017. To the extent that these carryforwards are used to offset future capital gains, it is possible that the amount which is offset will not be distributed to shareholders.
CROFT FUNDS
AUDITOR’S OPINION
APRIL 30, 2009
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To The Shareholders and Board of Directors
Croft Funds Corporation
We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Croft Funds Corporation (the “Funds”), comprising the Croft Value Fund and Croft Income Fund as of April 30, 2009, and the related statements of operations for the year then ended, the statements 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 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 the standards of the Public Company Accounting Oversight Board (United States). 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 April 30, 2009, by correspondence with the Funds’ 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 each of the funds constituting the Croft Funds Corporation as of April 30, 2009, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and their financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
COHEN FUND AUDIT SERVICES, LTD.
Westlake, Ohio
June 26, 2009
CROFT FUNDS
EXPENSE ILLUSTRATION
APRIL 30, 2009 (UNAUDITED)
Expense Example
As a shareholder of the Croft Funds, you incur ongoing costs which consist of management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period, November 1, 2008 through April 30, 2009.
Actual Expenses
The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on these Funds actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not these Funds actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in these Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
CROFT FUNDS
EXPENSE ILLUSTRATION (CONTINUED)
APRIL 30, 2009 (UNAUDITED)
Value Fund |
| | Beginning Account Value | Ending Account Value | Expenses Paid During the Period * |
| | November 1, 2008 | April 30, 2009 | November 1, 2008 to April 30, 2009 |
Actual | $1,000.00 | $969.85 | $7.13 |
Hypothetical (5% Annual | | | |
Return before expenses) | $1,000.00 | $1,017.55 | $7.30 |
* Expenses are equal to the Fund's annualized expense ratio of 1.46%, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). |
Income Fund |
| | Beginning Account Value | Ending Account Value | Expenses Paid During the Period * |
| | November 1, 2008 | April 30, 2009 | November 1, 2008 to April 30, 2009 |
| | | | |
Actual | $1,000.00 | $1,062.44 | $5.63 |
Hypothetical (5% Annual | | | |
Return before expenses) | $1,000.00 | $1,019.34 | $5.51 |
* Expenses are equal to the Fund's annualized expense ratio of 1.10%, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). |
CROFT FUNDS
TRUSTEES AND OFFICERS
APRIL 30, 2009 (UNAUDITED)
Information about Directors who are “interested persons” of the Corporation as defined under the 1940 Act, including their principal occupations during the past five years, is as follows:
Name, Address1 and Year of Birth | Principal Occupation(s) During last five years and Position held with Corporation | Number of Portfolios overseen by Director | Other Directorships held by Director or Officer | Length of Time Served |
Kent G. Croft2
Age: 46 | Director, President, CCO, and Secretary of the Corporation. President, Croft-Leominster, Inc. since 1989. | 2 | Croft-Leominster Inc., Wildfowl Trust of North America, St. Paul’s School | 14 years |
L. Gordon Croft2
Age: 76 | Vice President of the Corporation. Vice President, Chief Investment Officer and Director of Croft-Leominster, Inc. since 1989. | N/A | Croft-Leominster Inc. | 14 years |
Phillip Vong
Age: 34 | Assistant Vice President, Treasurer and Chief Financial Officer of the Corporation. Employee of Croft-Leominster, Inc. since 1997. | N/A | None | 5 Years |
George Russell Croft2
Age: 35
| Vice President of the Corporation, Vice President of Croft Leominster, Inc. since 2001 | N/A | Croft Leominster Inc. |
2 Year |
1 The mailing address of each officer and Director is: c/o Croft Funds Corporation, Canton House, 300 Water Street, Baltimore, Maryland 21202.
2 L. Gordon Croft is the father of Kent G. Croft and Russell G. Croft. They are “interested persons” of the Corporation because they are a director and/or officers of the Corporation. In addition, they may be deemed to be “interested persons” of the Corporation because they are officers of the Fund’s adviser.
CROFT FUNDS
TRUSTEES AND OFFICERS (CONTINUED)
APRIL 30, 2009 (UNAUDITED)
Information about Directors who are not “interested persons” of the Corporation as defined under the 1940 Act, including their principal occupations during the past five years, is as follows:
Name, Address1 and Year of Birth | Principal Occupation(s) During last five years and Position held with Corporation | Number of Portfolios overseen by Director | Other Directorships held by Director or Officer | Length of Time Served |
George D. Edwards, II
Age: 71 | Director (and Chairman) of the Corporation. Past Chairman of the Board of the Omega Organization Inc., a financial services consulting firm, from 1995-2003. President and Chief Executive Officer, Hottman Edwards Advertising, Inc., 1971-1995. | 2 | None | 14 years (Chairman 8 years) |
Charles Jay McLaughlin
Age: 46 | Director of the Corporation. President, Orion Safety Products as of January 1999. Attorney, Oppenheimer Wolff & Donnelly (law firm, 1989-1995). | 2 | Orion Safety Products | 10 years |
1 The mailing address of each officer and Director is: c/o Croft Funds Corporation, Canton House,
300 Water Street, Baltimore, Maryland 21202.
CROFT FUNDS
ADDITIONAL INFORMATION
APRIL 30, 2009 (UNAUDITED)
Information Regarding Proxy Voting
A description of the policies and procedures that these Funds use to determine how to vote proxies relating to portfolio securities and information regarding how these Funds voted proxies during the most recent 12-month period ended June 30, are available without charge upon request by (1) calling the Funds at (800) 746-3322 and (2) from Fund documents filed with the Securities and Exchange Commission ("SEC") on the SEC's website at www.sec.gov.
Information Regarding Portfolio Holdings
The Funds file a complete schedule of investments with the SEC for the first and third quarter of each fiscal year on Form N-Q. The Funds’ first and third fiscal quarters end on July 31 and January 31. The Funds’ Form N-Q’s are available on the SEC’s website at http://sec.gov, or they may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC (call 1-800-732-0330 for information on the operation of the Public Reference Room). You may also obtain copies by calling the Funds at 1-800-746-3322.
Information Regarding Statement of Additional Information
The Statement of Additional Information includes additional information about the Directors and is available without charge upon request, by calling toll free at 1-800-746-3322.
![[croftncsr008.jpg]](https://capedge.com/proxy/N-CSR/0001162044-09-000356/croftncsr008.jpg)
1-800-746-3322
This report is provided for the general information of the shareholders of the Croft Funds Corporation. This report is not intended for distribution to prospective investors in these Funds, unless preceded or accompanied by an effective Prospectus.
Item 2. Code of Ethics.
(a)
As of the end of the period covered by this report, the registrant has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party.
(b)
For purposes of this item, “code of ethics” means written standards that are reasonably designed to deter wrongdoing and to promote:
(1) Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
(2) Full, fair, accurate, timely, and understandable disclosure in reports and documents that a registrant files with, or submits to, the Commission and in other public communications made by the registrant;
(3) Compliance with applicable governmental laws, rules, and regulations;
(4) The prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and
(5) Accountability for adherence to the code.
(c) Amendments:
During the period covered by the report, there have not been any amendments to the provisions of the code of ethics.
(d)
Waivers:
During the period covered by the report, the registrant has not granted any express or implicit waivers from the provisions of the code of ethics.
For purposes of this paragraph:
(a) The term "waiver" means the approval by the registrant of a material departure from a provision of the code of ethics; and
(b) The term "implicit waiver" means the registrant's failure to take action within a reasonable period of time regarding a material departure from a provision of the code of ethics that has been made known to an executive officer, as defined in Rule 3b-7 under the Exchange Act (17 CFR 240.3b-7), of the registrant.
Item 3. Audit Committee Financial Expert.
(a) The registrant’s board of directors has determined that the registrant does not have an audit committee financial expert. This is because the Board has determined that in view of the nature of the publicly traded stock and cash nature of the holdings and unitary fee approach to expenses taken by the Fund, the financial experience and expertise of the Board members is adequate.
Item 4. Principal Accountant Fees and Services.
(a)
Audit Fees
FY 2009
$ 23,000
FY 2008
$ 23,945
(b)
Audit-Related Fees
Registrant
FY 2009
$ 0
FY 2008
$ 0
Nature of the fees:
N/A
(c)
Tax Fees
Registrant
FY 2009
$ 5,000
FY 2008
$ 3,000
Nature of the fees:
Federal and State Tax Returns. The 2009 amount is an estimate and has not been billed yet.
(d)
All Other Fees
Registrant
FY 2009
$ 1,380
FY 2008
$ 0
Nature of the fees:
Out of pocket expenses and consents
(e)
(1)
Audit Committee’s Pre-Approval Policies
Independent Board members pre-approve all work done by the outside auditors before the work is performed. The independent Board members select the independent audit firm at the beginning of the fiscal year and shortly thereafter the proposed work for the fiscal year is presented in writing by the audit firm, approved by the Adviser, and approved by the independent Board members.
(2)
Percentages of Services Approved by the Audit Committee
Registrant
Audit-Related Fees:
100 %
Tax Fees:
100 %
All Other Fees:
N/A %
(f)
During audit of registrant's financial statements for the most recent fiscal year, less than 50 percent of the hours expended on the principal accountant's engagement were attributed to work performed by persons other than the principal accountant's full-time, permanent employees.
(g)
The aggregate non-audit fees billed by the registrant's accountant for services rendered to the registrant, and rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant:
Registrant
FY 2009
$ 6,380
FY 2008
$ 3,000
Part of the 2009 amount is an estimate and has not been billed yet.
(h)
The registrant's audit committee has not considered whether the provision of non-audit services to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant, that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, is compatible with maintaining the principal accountant's independence. All non audit services were pre-approved by the audit committee.
Item 5. Audit Committee of Listed Companies. Not applicable.
Item 6. Schedule of Investments.
Not applicable – schedule filed with Item 1.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Funds. Not applicable.
Item 8. Portfolio Managers of Closed-End Funds. Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Funds. Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
The registrant has not adopted procedures by which shareholders may recommend nominees to the registrant's board of directors.
Item 11. Controls and Procedures.
(a)
Based on an evaluation of the registrant’s disclosure controls and procedures as of July 1, 2009, the disclosure controls and procedures are reasonably designed to ensure that the information required in filings on Forms N-CSR is recorded, processed, summarized, and reported on a timely basis.
(b)
There were no significant changes in the registrant’s internal control over financial reporting that occurred during the registrant’s second fiscal half-year that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Exhibits.
(a)(1)
EX-99.CODE ETH. Filed herwith.
(a)(2)
EX-99.CERT. Filed herewith.
(a)(3)
Any written solicitation to purchase securities under Rule 23c-1 under the Act (17 CFR 270.23c-1) sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. Not applicable.
(b)
EX-99.906CERT. Filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Croft Funds Corporation
By /s/Kent Croft, CEO
*Kent Croft CEO
Date July 8, 2009
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By Kent Croft, CEO
*Kent Croft CEO
Date July 8, 2009
By Phillip Vong, Treasurer
*Phillip Vong, Treasurer
Date July 8, 2009
* Print the name and title of each signing officer under his or her signature.
