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UC INVESTMENT TRUST
UC INVESTMENT FUND
ANNUAL REPORT
May 31, 1999
INVESTMENT ADVISER ADMINISTRATOR
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UNITED INVESTMENT CORPORATION COUNTRYWIDE FUND SERVICES, INC.
P.O. Box 1280 P.O. Box 5354
1005 Glenway Avenue Cincinnati, Ohio 45201-5354
Bristol, Virginia 24203-1280 1.877.823.8637
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<PAGE>
LETTER TO SHAREHOLDERS - THE UC INVESTMENT FUND
The UC Investment Fund (the Fund) closed its fiscal year on May 31, 1999.
Launched June 29, 1998, the Fund grew to a market valuation of $33.3 million
with 263 shareholders and a net asset value of $10.53 on May 31, 1999. We are
very gratified by your confidence as evidenced by the volume of Fund shares
purchased.
The enclosed report covers the period of inception of the Fund to May 31, 1999.
The Fund continued its trend of growth from the first half of its fiscal year.
Significant developments during the period included:
o Net Asset Value --- the Fund opened with a NAV of $10 per share on June 29,
1998, and on May 31, 1999, the NAV was $10.53. As of this writing, the NAV
is $11.34.
o Distributions --- the Fund distributed capital gains and income dividends
totaling $.0588 per share on December 31, 1998.
o Continued asset growth --- the net assets of the Fund have increased from
$26.6 million on November 30, 1998 to $33.3 million on May 31, 1999. As of
this writing, the net assets in the Fund are in excess of $35.7 million.
The Fund was launched in the midst of a very paradoxical and rather turbulent
year for investors. While the Fund did underperform both its peer group, as
measured by the Lipper Growth and Income Funds, and the S&P 500 Index, we feel
that for the longer term the Fund is well-positioned. Since inception, the total
return of the Fund was 5.89% versus 15.83% for the S&P 500 Index.
OUR INVESTMENT APPROACH AND MANAGEMENT PHILOSOPHY
- -------------------------------------------------
We would like to take a moment to tell you about our changes in investment
strategy. There are no changes. We created the Fund as a strong financial option
for long-term investors. News headlines are filled with stories of individuals
who have made phenomenal rates of returns. What those headlines do not highlight
are the people who lost millions speculating. Our philosophy is based on a
strategy built upon research and a long-term perspective.
We believe that domestic equity investments still provide the greatest potential
for substantial and superior returns over the long term. Our fundamental
approach, which might be termed "value investing", is to give very careful
attention to the analysis and selection of companies which meet a set of highly
selective criteria. We do not, as a matter of policy, engage in short-term
trading but, rather, seek to retain investment positions in companies which
possess the qualities necessary to grow earnings, profitability and cash flow
over the business cycle and, especially, over the long term. We constantly
review the changing forces in the national and international economic scene as
well as developments in a given industry or sector of the economy in order to
anticipate the possible impact on our holdings.
1
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Stock selection is critical for successful investment return and the approach of
the UC Investment Fund professionals involves the following key elements:
o Finding companies that may be out of favor, but offer strong, above average
turnaround prospects.
o Identifying companies with promising new products, processes or services.
o Targeting companies with a strong franchise, producing dominant market
share and pricing power.
o Adding selectively to portfolio holdings on a stock-by-stock basis.
The companies selected may aggregate into certain sectors, which may also be
identified as dynamic in terms of overall growth potential. We seek to use a
top-down investment analysis to identify trends, which may develop into
longer-term themes providing new investment opportunities.
SOME FAVORITES
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Our top-down investment analysis has provided an investment direction that has
lead us to overweigh three sectors in the UC Investment Fund portfolio. The
largest sector weighting is financial services. As our population ages, the
financial services industry will benefit from a growing emphasis on retirement
savings and wealth management. The industry's focus on returns, active capital
management and continued consolidation should provide a catalyst for long-term
returns.
Demographics and our aging population also drive our investment in
pharmaceutical and health care companies. The pharmaceutical industry will
benefit from the demographic trends affecting the United States. In addition,
health care companies are committing significant resources to drug research and
development. It seems the industry is on the verge of some major breakthroughs
relating to treatments/cures.
The United States economy has benefited greatly from the use and evolution of
technology. We think significant long-term growth will continue to be recognized
by owning technology companies, as both the public and private sectors benefit
from technological efficiencies in the office and home.
Three of the largest holdings of the UC Investment Fund are Citigroup, King
Pharmaceuticals and Lucent Technologies. Each of these companies fits into one
of our three largest sector holdings. Citigroup, as a large multi-line financial
services provider, is well positioned to take advantage of the demographic
opportunity driving savings and wealth management. King Pharmaceuticals, a
public company based in Bristol, Virginia, is employing a growth strategy that
takes advantage of niche opportunities created by cost containment initiatives
and consolidation among large global pharmaceutical companies. Lucent
Technologies is a company that fits our theme of technology evolution as one of
the world's leading designers, developers and manufacturers of communication
systems, software and products. We think the creativity and capability of Lucent
positions it to be a long-term growth story.
2
<PAGE>
Our task is to know what each company is worth; to have patience to wait; and to
have the discipline to act.
PATIENCE WILL PREVAIL
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As long-term value investors, we are dependent on market conditions such as
these to invest new flows of capital. On the other hand, lower valuations can
lead to short-term underperformance. Such was clearly the case during the past
year as the Fund's performance lagged that of the S&P 500.
Three large positions in the portfolio that underperformed for the period
include First Union, Compaq Computer and Clayton Homes. While these companies
underperformed, we think the long-term prospects for each are good.
First Union has been plagued by integration problems related to its Corestates
Financial acquisition. However, management is focused on the use of technology
to reduce expenses and drive revenue growth. This strategy will reduce reliance
on the traditional bank branch which will also reduce operating costs.
Compaq Computer was also negatively impacted by an acquisition. Difficulty in
integrating the acquisition of Digital Equipment and the intense competition
offered by competitors with alternative delivery strategies caused Compaq's
stock price to suffer for the period. Compaq, the largest seller of personal
computers in the world, is aggressively moving to address the problems with the
board of directors taking an active role.
Sometimes the market appears to mis-price a company. Such is the case, we think,
with Clayton Homes. Clayton has had a phenomenal earnings record since going
public in June 1983. Net income has increased 29 percent since the initial
public offering, while revenues have risen at an annual compound rate of 20
percent. Earnings per share have grown 23 percent annually. The first quarter of
1999 marked the company's 49th consecutive record quarter. We think the
company's fair value provides good upside from current levels, and that the
market has penalized Clayton for problems that its peers have encountered, but
which Clayton management has avoided.
Though patience will be required, we remain confident in the underlying value of
these businesses.
IN CLOSING
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We have repeatedly cautioned about having a short-term time horizon. Our
investment perspective is decidedly long-term. It's important to keep in mind
that stocks are not just certificates with fancy engraving (an increasing rarity
today), but a claim on the earnings and assets of a dynamic company. We view
ourselves as partial owners of businesses, not paper traders.
3
<PAGE>
The economy remains on sound footing. Although a slowdown in the expansion's
pace can be expected, there are opportunities in well-run companies positioned
to move into the next century. There are companies we consider promising; some
poised to benefit from the explosion in information processing and
telecommunications; many with widening profit margins; others that will benefit
from demographic changes; and still more offering a "safe harbor" in the event
of an economic downturn.
We should be reminded of the merits of staying the course during volatility, and
avoiding the pitfalls of trying to time the market. Rather than speculating
about interest rates, investors would do well to focus on company fundamentals.
Strong, well-positioned firms will be able to weather short-term fluctuation and
provide the greatest long-term value.
Amid global turmoil and high market volatility, we have maintained our
conservative investment approach, focusing on quality companies with attractive
valuations, identifiable catalysts, earnings visibility and revenues
predominantly derived from developed economies. Although some of these companies
have not performed in the short term, we believe that for the long term, we have
quality companies that should outperform the markets.
Our strength is not how much is being invested with us - it is how well our
strategy is working. Your Fund's trustees, managers, officers and employees have
committed substantial investment dollars to the Fund and are shareholders with
you. The only way we can be successful is if you are successful. Thank you for
investing with us.
Faithfully yours,
Lois A. Clarke
President
4
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Comparison of the Change in Value since June 29, 1998 of a $10,000 Investment
in the UC Investment Fund and the Standard & Poor's 500 Index
[GRAPHIC OMITTED]
5/31/99
-------
UC Investment Fund $10,589
S&P 500 Index $11,583
------------------------------
UC Investment Fund
Total Return
Since Inception* 10.59%
------------------------------
Past performance is not predictive of future performance.
*Initial public offering of shares was June 29, 1998.
5
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UC INVESTMENT FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1999
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ASSETS
Investment securities:
At acquisition cost ........................................ $ 30,391,523
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At market value (Note 1) ................................... $ 32,350,731
Dividends receivable ........................................... 56,019
Receivable for securities sold ................................. 3,035,050
Receivable for securities sold short ........................... 84,375
Receivable for capital shares sold ............................. 1,700
Organization costs, net (Note 1) ............................... 69,048
Other assets ................................................... 6,182
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TOTAL ASSETS ............................................... 35,603,105
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LIABILITIES
Payable for securities purchased ............................... 2,181,818
Securities sold short (proceeds $84,375) ....................... 89,375
Payable to Adviser (Note 3) .................................... 38,965
Payable to Administrator (Note 3) .............................. 7,500
Other accrued expenses and liabilities ......................... 17,478
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TOTAL LIABILITIES .......................................... 2,335,136
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NET ASSETS ..................................................... $ 33,267,969
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Net assets consist of:
Paid-in capital ................................................ $ 31,225,278
Undistributed net investment income ............................ 77,984
Accumulated net realized gains from security transactions ...... 10,499
Net unrealized appreciation on investments ..................... 1,954,208
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Net assets ..................................................... $ 33,267,969
============
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) ................. 3,160,538
============
Net asset value, offering price and
redemption price per share (Note 1) ........................ $ 10.53
============
See accompanying notes to financial statements.
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UC INVESTMENT FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED MAY 31, 1999 (A)
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INVESTMENT INCOME
Dividends .................................................. $ 595,846
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EXPENSES
Investment advisory fees (Note 3) .......................... 241,912
Administration fees (Note 3) ............................... 35,638
Distribution expenses (Note 3) ............................. 24,370
Accounting services fees (Note 3) .......................... 22,000
Trustees' fees and expenses ................................ 18,169
Registration fees .......................................... 17,697
Transfer agent fees (Note 3) ............................... 16,500
Insurance expense .......................................... 16,200
Amortization of organization costs (Note 1) ................ 15,501
Professional fees .......................................... 14,600
Custodian fees ............................................. 9,192
Postage and supplies ....................................... 6,445
Other expenses ............................................. 1,182
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TOTAL EXPENSES ........................................ 439,406
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NET INVESTMENT INCOME .......................................... 156,440
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REALIZED AND UNREALIZED GAINS ON
INVESTMENTS
Net realized gains from security transactions .............. 91,119
Net change in unrealized appreciation/
depreciation on investments ............................. 1,954,208
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NET REALIZED AND UNREALIZED
GAINS ON INVESTMENTS ....................................... 2,045,327
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NET INCREASE IN NET ASSETS FROM
OPERATIONS ................................................. $ 2,201,767
============
(a) Represents the period from the initial public offering of shares (June 29,
1998) through May 31, 1999.
See accompanying notes to financial statements.
7
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UC INVESTMENT FUND
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED MAY 31, 1999 (a)
================================================================================
FROM OPERATIONS:
Net investment income .................................... $ 156,440
Net realized gains from security transactions ............ 91,119
Net change in unrealized appreciation/depreciation
on investments ........................................ 1,954,208
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Net increase in net assets from operations ................... 2,201,767
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DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ............................... (78,456)
From net realized gains from security transactions ....... (80,620)
------------
Decrease in net assets from distributions to shareholders .... (159,076)
------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold ................................ 33,333,524
Net asset value of shares issued in reinvestment of
distributions to shareholders ......................... 152,387
Payments for shares redeemed ............................. (2,360,633)
------------
Net increase in net assets from capital share transactions ... 31,125,278
------------
TOTAL INCREASE IN NET ASSETS ................................. 33,167,969
NET ASSETS:
Beginning of period (Note 1) ............................. 100,000
------------
End of period ............................................ $ 33,267,969
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UNDISTRIBUTED NET INVESTMENT INCOME .......................... $ 77,984
============
CAPITAL SHARE ACTIVITY:
Shares sold .............................................. 3,363,134
Shares reinvested ........................................ 14,499
Shares redeemed .......................................... (227,095)
------------
Net increase in shares outstanding ....................... 3,150,538
Shares outstanding, beginning of period (Note 1) ......... 10,000
------------
Shares outstanding, end of period ........................ 3,160,538
============
(a) Represents the period from the initial public offering of shares (June 29,
1998) through May 31, 1999.
See accompanying notes to financial statements.
8
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UC INVESTMENT FUND
FINANCIAL HIGHLIGHTS
FOR THE PERIOD ENDED MAY 31, 1999 (a)
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PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD:
Net asset value at beginning of period ...................... $ 10.00
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Income from investment operations:
Net investment income ................................... 0.05
Net realized and unrealized gains on investments ........ 0.54
----------
Total from investment operations ............................ 0.59
----------
Less distributions:
Dividends from net investment income .................... (0.03)
Distributions from net realized gains ................... (0.03)
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Total distributions ......................................... (0.06)
----------
Net asset value at end of period ............................ $ 10.53
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Total return ................................................ 5.89%(b)
==========
RATIOS AND SUPPLEMENTAL DATA:
Net assets at end of period (000's) ......................... $ 33,268
==========
Ratio of net expenses to average net assets ................. 1.81%(c)
Ratio of net investment income to average net assets ........ 0.64%(c)
Portfolio turnover rate ..................................... 67%(c)
(a) Represents the period from the initial public offering of shares (June 29,
1998) through May 31, 1999.
(b) Not annualized.
(c) Annualized.
See accompanying notes to financial statements.
9
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UC INVESTMENT FUND
PORTFOLIO OF INVESTMENTS
MAY 31, 1999
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MARKET
COMMON STOCKS - 96.2% SHARES VALUE
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CONSUMER PRODUCTS - 12.1%
DaimlerChrysler AG ............................. 5,000 $ 437,187
Clayton Homes, Inc. ............................ 75,000 857,812
Delphi Automotive Systems Corp. ................ 2,796 54,866
Ford Motor Co. ................................. 15,000 855,938
General Electric Co. ........................... 12,000 1,220,250
General Motors Corp. ........................... 4,000 276,000
PepsiCo, Inc. .................................. 9,000 322,313
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4,024,366
------------
DEPOSITARY RECEIPTS - 3.1%
Energy Select Sector SPDR ...................... 18,000 497,250
Standard and Poor's 500 Depositary Receipts .... 4,000 521,250
------------
1,018,500
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ELECTRIC UTILITIES - 4.6%
Entergy Corp. .................................. 15,000 486,562
FirstEnergy Corp. .............................. 15,000 477,188
FPL Group, Inc. ................................ 10,000 581,875
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1,545,625
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FINANCIAL & INSURANCE - 29.3%
Bank of America Corp. .......................... 10,000 646,875
Bank One Corp. ................................. 10,000 565,625
Citigroup Inc. ................................. 19,000 1,258,750
Equitable Companies Inc. ....................... 20,000 1,403,750
First American Corp. ........................... 15,000 612,187
First Tennessee National Corp. ................. 15,000 617,812
First Union Corp. .............................. 20,000 921,250
Fleet Financial Group, Inc. .................... 14,000 575,750
Mercantile Bankshares Corp. .................... 10,000 359,375
Morgan Keegan, Inc. ............................ 23,000 424,063
North Fork Bancorporation, Inc. ................ 20,000 426,250
One Valley Bancorp, Inc. ....................... 13,000 499,688
PNC Bank Corp. ................................. 10,000 572,500
SunTrust Banks, Inc. ........................... 3,840 259,200
Wells Fargo Co. ................................ 15,000 600,000
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9,743,075
------------
HEALTH CARE - 14.9%
Bristol-Myers Squibb Co. ....................... 16,000 1,098,000
Johnson & Johnson .............................. 2,000 185,250
King Pharmaceuticals, Inc.* .................... 70,000 1,662,500
Merck & Co., Inc. .............................. 17,000 1,147,500
Pfizer Inc. .................................... 8,000 856,000
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4,949,250
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10
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UC INVESTMENT FUND
PORTFOLIO OF INVESTMENTS
MAY 31, 1999
================================================================================
OIL/ENERGY - 3.7%
Coastal Corp. .................................. 15,000 $ 578,437
Questar Corp. .................................. 35,000 667,188
------------
1,245,625
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RETAIL STORES - 2.1%
Albertson's, Inc. .............................. 8,000 428,000
Sonic Corp.* ................................... 10,000 275,313
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703,313
------------
TECHNOLOGY - 19.0%
Cisco Systems, Inc.* ........................... 13,000 1,415,375
Compaq Computer Corp. .......................... 35,000 829,062
Intel Corp. .................................... 10,000 540,625
International Business Machines Corp. .......... 6,000 697,875
Lucent Technologies Inc. ....................... 26,000 1,478,750
Microsoft Corp.* ............................... 6,000 484,125
Oracle Corp.* .................................. 35,000 868,438
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6,314,250
------------
TELECOMMUNICATIONS - 6.6%
AT&T Corp. ..................................... 12,000 666,000
MCI WorldCom, Inc.* ............................ 18,000 1,554,750
------------
2,220,750
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TRANSPORTATION - 0.8%
Arkansas Best Corp.* ........................... 29,000 257,375
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TOTAL COMMON STOCKS (COST $30,062,921) $ 32,022,129
CASH EQUIVALENTS - 1.0%
Fountain Square U.S. Treasury Obligation Fund
(Cost $328,602) ............................. 328,602
------------
TOTAL COMMON STOCKS AND
CASH EQUIVALENTS (COST $30,391,523) - 97.2% $ 32,350,731
OTHER ASSETS IN EXCESS OF LIABILITIES - 2.8% ... 917,238
------------
NET ASSETS - 100.0% ............................ $ 33,267,969
============
* Non-income producing security.
ADR - American Depository Receipt.
SPDR - Standard and Poor's 500 Depositary Receipt.
See accompanying notes to financial statements.
11
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UC INVESTMENT FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1999
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES
The UC Investment Fund (the Fund) is a no-load, diversified series of the UC
Investment Trust (the Trust), an open-end management investment company
registered under the Investment Company Act of 1940. The Trust was organized as
an Ohio business trust on February 27, 1998. The Fund was capitalized on May 21,
1998 when United Investment Corporation (the Adviser) purchased the initial
10,000 shares of the Fund at $10.00 per share. The initial public offering of
shares of the Fund commenced on June 29, 1998. The Fund had no operations prior
to the public offering of shares except for the initial issuance of shares.
The Fund seeks long-term total return, from a combination of capital growth and
growth of income, by investing primarily in common stocks.
The following is a summary of the Fund's significant accounting policies:
Securities valuation -- The Fund's portfolio securities are valued as of the
close of the regular session of trading on the New York Stock Exchange (normally
4:00 p.m., Eastern time). Securities which are traded on stock exchanges or are
quoted by NASDAQ are valued at the last reported sale price or, if not traded on
a particular day, at the closing bid price. Securities traded in the
over-the-counter market, and which are not quoted by NASDAQ, are valued at the
last sale price, if available, otherwise, at the last quoted bid price.
Securities for which market quotations are not readily available are valued at
fair value as determined in good faith in accordance with consistently applied
procedures established by and under the general supervision of the Board of
Trustees.
Share valuation -- The net asset value per share of the Fund is calculated daily
by dividing the total value of the Fund's assets, less liabilities, by the
number of shares outstanding, rounded to the nearest cent. The offering and
redemption price per share of the Fund is equal to the net asset value per
share.
Investment income -- Dividend income is recorded on the ex-dividend date.
Interest income is accrued as earned.
Distributions to shareholders -- Dividends arising from net investment income,
if any, are declared and paid annually to shareholders of the Fund. Net realized
short-term capital gains, if any, may be distributed throughout the year and net
realized long-term capital gains, if any, are distributed at least once each
year. Income dividends and capital gain distributions are determined in
accordance with income tax regulations.
Security transactions -- Security transactions are accounted for on trade date.
Securities sold are determined on a specific identification basis.
Organization costs -- Costs incurred by the Fund in connection with its
organization and registration of shares, net of certain expenses, have been
capitalized and are being amortized on a straight-line basis over a five year
period beginning with the commencement of operations. In the event any of the
initial shares of the Fund are redeemed during the five year amortization
period, redemption proceeds will be reduced by any unamortized organization
expenses in the same proportion as the number of initial shares redeemed bears
to the number of initial shares outstanding at the time of the redemption.
12
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UC INVESTMENT FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1999
================================================================================
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 at
the date of the financial statements and the reported amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates.
Federal income tax -- It is the Fund's policy to comply with the special
provisions of the Internal Revenue Code (the Code) available to regulated
investment companies. As provided therein, in any fiscal year in which the Fund
so qualifies and distributes at least 90% of its taxable net income, the Fund
(but not the shareholders) will be relieved of federal income tax on the income
distributed. Accordingly, no provision for income taxes has been made.
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also the Fund's intention to declare as dividends in
each calendar year at least 98% of its net investment income (earned during the
calendar year) and 98% of its net realized capital gains (earned during the
twelve months ended October 31) plus undistributed amounts from prior years.
As of May 31, 1999, net unrealized appreciation on investments was $1,954,208
based on a federal income tax cost basis of $30,307,148, of which $3,032,973
related to appreciated securities and $1,078,765 related to depreciated
securities.
2. INVESTMENT TRANSACTIONS
During the period ended May 31, 1999, cost of purchases and proceeds from sales
of portfolio securities, other than short-term investments, amounted to
$42,386,725 and $12,414,924, respectively.
3. TRANSACTIONS WITH AFFILIATES
The Chairman of the Trust is also Chairman and Chief Executive Officer of the
Adviser. The President of the Trust is also President and a Director of the
Adviser. The Vice President of the Trust is also an employee of the Adviser.
Certain other officers of the Trust are also officers of Countrywide Fund
Services, Inc. (CFS), the administrative services agent, shareholder servicing
and transfer agent and accounting services agent for the Trust, or of CW Fund
Distributors, Inc. (the Distributor), the principal underwriter for the Fund and
exclusive agent for the distribution of shares of the Fund.
ADVISORY AGREEMENT
The Fund's investments are managed by the Adviser pursuant to the terms of an
Advisory Agreement. Under the Advisory Agreement, the Fund pays the Adviser a
fee, computed and accrued daily and paid monthly, at an annual rate of 1.00% of
the Fund's average daily net assets.
13
<PAGE>
UC INVESTMENT FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1999
================================================================================
ADMINISTRATION AGREEMENT
Under the terms of an Administration Agreement, CFS supplies non-investment
related statistical and research data, internal regulatory compliance services
and executive and administrative services for the Fund. CFS supervises the
preparation of tax returns, reports to shareholders of the Fund, reports to and
filings with the Securities and Exchange Commission and state securities
commissions and materials for meetings of the Board of Trustees. For these
services, CFS receives a monthly fee at an annual rate of 0.15% on the Fund's
average daily net assets up to $25 million; 0.125% on such net assets between
$25 million and $50 million; and 0.10% on such net assets in excess of $50
million, subject to a $1,000 minimum monthly fee.
ACCOUNTING SERVICES AGREEMENT
Under the terms of an Accounting Services Agreement, CFS calculates the daily
net asset value per share and maintains the financial books and records of the
Fund. For these services, CFS receives a fee, based on current asset levels, of
$2,000 per month from the Fund. In addition, the Fund reimburses CFS for
out-of-pocket expenses related to the pricing of the Fund's portfolio
securities.
TRANSFER AGENT AGREEMENT
Under the terms of a Transfer, Dividend Disbursing, Shareholder Service and Plan
Agency Agreement, CFS maintains the records of each shareholder's account,
answers shareholders' inquiries concerning their accounts, processes purchases
and redemptions of the Fund's shares, acts as dividend and distribution
disbursing agent and performs other shareholder service functions. For these
services, CFS receives a monthly fee from the Fund at an annual rate of $20 per
shareholder account, subject to a $1,500 minimum monthly fee. In addition, the
Fund reimburses CFS for out-of-pocket expenses including, but not limited to,
postage and supplies.
DISTRIBUTION PLAN
The Fund has adopted a Plan of Distribution (the Plan) under which the Fund may
directly incur or reimburse the Adviser or the Distributor for expenses related
to the distribution and promotion of Fund shares. The annual limitation for
payment of such expenses under the Plan is 0.25% of the Fund's average daily net
assets. The Fund incurred distribution expenses of $24,370 under the Plan during
the period ended May 31, 1999.
14
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Trustees
UC Investment Trust
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of portfolio investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the UC Investment Fund at May 31,
1999, and the results of its operations, changes in its net assets, and
financial highlights for the eleven month period ended May 31, 1999, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the UC Investment Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit, which includes confirmation of securities at May 31,
1999 by correspondence with the custodian, provides a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
Columbus, Ohio
July 21, 1999
15
