July 31, 2000
Dear Shareholders:
Few life experiences create the excitement and drama of doing something for the
first time. Whether learning to ride a bike, buying a house, or having a child,
you enter uncharted territory - at least by comparison to your own personal
history.
For the CRA Qualified Investment Fund, the past year provided many instances of
such excitement, as we entered "uncharted territory" - by comparison to anyone's
history.
We are particularly proud of the forward-thinking participation of our charter
investors, and the positive impact their investments may have made in helping
America's communities in need. The CRA Qualified Investment Fund has invested in
whole or in part in securities that support the following projects:
>> An affordable housing project in Southgate, Michigan providing 116
units to low and moderate-income seniors;
>> An inner-city redevelopment project in San Diego, California creating
3,680 new jobs, maintaining 54,971 jobs, and providing housing to
1,700 low and moderate-income families;
>> An affordable housing project in Canton, Georgia providing 144 housing
units;
>> A nursing home offering services to accommodate 200 seniors including
144 Medicaid recipients;
>> An affordable housing project in Amarillo, Texas providing 344 of 861
units to house low and moderate-income families; and
>> An economic development project in New York City where funds support
numerous agencies and programs including the Administration for
Children's Services, Department for the Aging, Department of Homeless
Services, and Housing Preservation & Development.
A UNIQUE YEAR FOR A UNIQUE INVESTMENT
-------------------------------------
This past year proved one of the most unique markets for fixed income securities
in decades. While the Federal Reserve continued to raise interest rates, the
Treasury Department bought back Treasury Bonds and decreased the supply of new
Treasury Bonds. In addition,
<PAGE>
CRA QUALIFIED INVESTMENT FUND PAGE 2
politicians spoke of removing the implied government guarantee of Fannie Mae and
Freddie Mac securities.
Even as the market offered up a variety of obstacles, the CRA Qualified
Investment Fund navigated this tumultuous landscape with positive returns to our
shareholders of 1.3%* and an SEC yield of 6.77%.** While the CRA Custom Index
offered a slightly higher return (2.51%), the discrepancy is attributable to the
Fund's first quarter investments in money market instruments. As the Fund
commenced operations, the advisor did not have specific community development
investments to target.
EVEN MORE EXCITEMENT FOR OUR SOPHOMORE YEAR
-------------------------------------------
While our next year will not have the novelty of learning to ride a bike, it
will hopefully offer many more opportunities to advance the goals of economic
development, to provide current income to our investors, and to help our
shareholders meet the needs of the communities they serve.
We look forward to working with you.
Sincerely,
Todd J. Cohen
President, CRAFund Advisors
* 8/31/99-5/31/00
** 30 Day SEC yield ended 5/31/00
<PAGE>
THE COMMUNITY REINVESTMENT ACT
QUALIFIED INVESTMENT FUND
<TABLE>
<CAPTION>
ANNUAL REPORT
SCHEDULE OF INVESTMENTS MAY 31, 2000
----------------------------------------------------------------------------------------------------------
PRINCIPAL VALUE
--------- -----
AGENCY OBLIGATIONS -- 46.33%
<S> <C> <C>
Federal Home Loan Mortgage Corp., Pool #B30844, 7.00%, 02/01/30 +
(02/07/00, cost $ 265,239) 276,497 263,882
Federal Home Loan Mortgage Corp., Pool #C32453, 7.50%, 11/01/29 +
(11/03/99, cost $ 1,673,184) 1,648,926 1,610,795
Federal National Mortgage Association, Pool #382284, 7.92%, 03/01/18 +
(05/11/00, cost $ 495,697) 499,421 499,343
Federal National Mortgage Association, Southgate TBA, 8.14%, 07/01/18 +
(05/25/00, cost $ 951,911 ) 939,000 955,964
Government National Mortgage Association, Pool #492249, 8.50%, 12/01/27 +
(01/20/00, cost $ 1,145,617) 1,116,102 1,168,417
------------
TOTAL AGENCY OBLIGATIONS (COST $4,522,461) 4,498,401
------------
MUNICIPAL BONDS -- 42.69%
Alabama Incentives Finance Authority Series B, 7.75%, 10/01/19 750,000 738,818
Panhandle Texas Regl Housing Finance Series B, 8.50%, 03/01/03 515,000 513,393
San Diego California Redevelopment Agency Series B, 6.25%, 09/01/13 2,000,000 1,772,249
San Diego California Redevelopment Agency Series A, 6.50%, 09/01/08 265,000 243,537
Utica NY Urban Renewal Agency Note Series 1992-A, 7.38%, 08/01/05 225,000 220,538
Utica NY Urban Renewal Agency Note Series 1992-A, 7.72%, 08/01/09 225,000 219,196
Utica NY Urban Renewal Agency Note Series 1992-A, 7.90%, 08/01/12 450,000 437,490
------------
TOTAL MUNICIPAL BONDS (COST $4,252,780) 4,145,221
------------
SHORT-TERM INVESTMENTS --20.55%
Evergreen Money Market Trust Institutional Shares 502,445 502,445
G.E Capital Corp. Commercial Paper, 06/29/00 1,500,000 1,492,475
------------
TOTAL SHORT-TERM INVESTMENTS (COST $1,994,920) 1,994,920
------------
TOTAL INVESTMENTS (COST $10,770,161) -- 109.57% 10,638,542
LIABILITIES IN EXCESS OF OTHER ASSETS -- (9.57%) (929,365)
------------
NET ASSETS -- 100% $ 9,709,177
============
</TABLE>
+ Securities for which market quotations are not readily available are valued
by or at the direction of the Board of Trustees. Parenthetical disclosure
includes the acquisition date and cost of the security. The total fair
value of such securities at May 31,2000 is $4,498,401 which represents
46.33% of total net assets.
See notes to financial statements.
<PAGE>
THE COMMUNITY REINVESTMENT ACT
QUALIFIED INVESTMENT FUND
ANNUAL REPORT
STATEMENT OF ASSETS AND LIABILITIES MAY 31, 2000
--------------------------------------------------------------------------------
ASSETS:
Investments, at market (identified cost $10,770,161) $ 10,638,542
Receivables:
Interest 108,977
------------
Total assets 10,747,519
------------
LIABILITIES:
Payables:
Investment securities purchased 952,973
Due to Advisor 9,913
Accrued distribution fees 8,639
Distributions payable 36,759
Accrued expenses 30,058
------------
Total liabilities 1,038,342
------------
NET ASSETS $ 9,709,177
============
NET ASSETS CONSIST OF:
Paid-in Capital $ 9,865,328
Distributions in excess of net investment income (271)
Accumulated realized loss on investments (24,261)
Net unrealized loss on investments (131,619)
------------
Net Assets (Unlimited shares of no par value
authorized; 993,688 shares outstanding) $ 9,709,177
============
Net Asset Value and offering price per share $ 9.77
============
Redemption price per share (9.77 * .99) $ 9.67
============
See notes to financial statements.
<PAGE>
THE COMMUNITY REINVESTMENT ACT
QUALIFIED INVESTMENT FUND
ANNUAL REPORT
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED MAY 31, 2000*
--------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $ 255,335
---------
Total investment income 255,335
---------
EXPENSES:
Investment advisory fees 17,278
Accounting and administration fees 37,704
Transfer agency fees 7,541
Professional fees 84,507
Insurance expense 44,068
Custodian fees 2,263
Trustee fees 64,917
Printing expense 8,443
Distribution fees 8,639
Other 3,770
---------
Total expenses before fee waivers 279,130
---------
Fees waived and expenses reimbursed by Advisor (244,309)
---------
Total net expenses 34,821
---------
Net investment income 220,514
---------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Net realized loss on investments (24,261)
Net unrealized depreciation on investments (131,619)
---------
(155,880)
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 64,634
=========
* The investment portfolio commenced operations on August 30, 1999.
See notes to financial statements.
<PAGE>
THE COMMUNITY REINVESTMENT ACT
QUALIFIED INVESTMENT FUND
ANNUAL REPORT
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
For the Period
Ended
May 31, 2000*
-------------
INCREASE IN NET ASSETS
Operations:
Net investment income $ 220,514
Net realized loss on investments (24,261)
Net unrealized depreciation on investments (131,619)
-----------
Net increase in net assets resulting from operations 64,634
-----------
Distributions to shareholders from:
Net investment income (220,785)
-----------
Increase in net assets from Fund share transactions(Note 2) 9,765,328
-----------
Increase in net assets 9,609,177
NET ASSETS:
Beginning of period 100,000
-----------
End of period $ 9,709,177
===========
* The investment portfolio commenced operations on August 30, 1999.
See notes to financial statements.
<PAGE>
THE COMMUNITY REINVESTMENT ACT
QUALIFIED INVESTMENT FUND
ANNUAL REPORT
FINANCIAL HIGHLIGHTS
Per Share Data (For a Share Outstanding from August 30, 1999 through May 31,
2000)
--------------------------------------------------------------------------------
For the Period
Ended
May 31, 2000*
------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
----------
INVESTMENT OPERATIONS:
Net investment income 0.36
Net realized and unrealized loss on
investments (0.23)
----------
Total from investment operations 0.13
----------
Distributions:
From net investment income (0.36)
----------
NET ASSET VALUE, END OF PERIOD $ 9.77
----------
TOTAL RETURN 1.30%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $ 9,709
Ratio of expenses to average net assets:
Before expense reimbursement 8.02% 1
After expense reimbursement 1.00% 1
Ratio of net investment income
to average net assets:
Before expense reimbursement 2.39% 1
After expense reimbursement 6.33% 1
Portfolio turnover rate 98.58%
* The investment portfolio commenced operations on August 30, 1999.
1 Annualized
See notes to financial statements.
<PAGE>
THE COMMUNITY REINVESTMENT ACT QUALIFIED INVESTMENT FUND
ANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS MAY 31, 2000
--------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Community Reinvestment Act Qualified Investment Fund (the "Fund") was
organized as a Delaware business trust on January 15, 1999. The Fund is
registered under the Investment Company Act of 1940 (the "Act"), as amended, as
an open-end investment company. The Fund is a non-diversified fund. The Fund is
organized to offer a single class of shares of beneficial interest. The initial
capitalization of the Fund, $100,000, was provided on June 3, 1999 by CRAFund
Advisors, Inc., (the "Advisor"). The Fund commenced investment operations on
August 30, 1999.
The costs incurred in connection with the organization, initial
registration and public offering of shares have been paid by the Advisor.
Accordingly, no organizational costs have been recorded by the Fund.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies.
SECURITY VALUATION. Investments in securities traded on a national securities
exchange are valued at the last reported bid price. Debt securities are valued
by using market bid quotations or independent pricing services which use bid
prices provided by market makers or estimates of market values obtained from
yield data relating to instruments or securities with similar characteristics.
When market quotations are not readily available, securities and other assets
are valued at fair value as determined in good faith as reviewed by the Board of
Trustees. Short-term obligations having a maturity of 60 days or less are valued
at amortized cost or original cost plus accrued interest, which the Board of
Trustees believes represents fair market value. Discounts and premiums on debt
securities are amortized to income over their prospective lives, using the
interest method.
REPURCHASE AGREEMENTS. The Fund may invest in repurchase agreements from
broker-dealers, banks and other financial institutions, provided that the Fund's
custodian always has possession of the securities serving as collateral for the
repurchase agreements or has proper evidence of book entry receipt of the
securities. In a repurchase agreement, the Fund purchases securities subject to
the seller's simultaneous agreement to repurchase those securities from the Fund
at a specified time and price. The repurchase price reflects an agreed-upon
interest rate during the time of investment. All repurchase agreements entered
into by the Fund must be collateralized by U.S. Government securities, the
market values of which equal or exceed 102% of the principal amount of the
Fund's investment.
INVESTMENT INCOME AND SECURITIES TRANSACTIONS. Security transactions are
accounted for on the date the securities are purchased or sold. Cost is
determined and gains and losses are based on the identified cost basis for both
financial statement and federal income tax purposes. Dividend income is
recognized on the ex-dividend date or as soon as information is available to the
Fund. Interest income is recognized on an accrual basis. Due to the
non-diversified status of the Fund, securities held in certain issues could
represent a concentration of credit risk.
<PAGE>
THE COMMUNITY REINVESTMENT ACT QUALIFIED INVESTMENT FUND
ANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS MAY 31, 2000
--------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)
FEDERAL INCOME TAXES. It is the policy of the Fund to comply with all
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no Federal income tax provision is required. Cost of
securities for tax purposes is substantially the same as for financial reporting
purposes.
DISTRIBUTIONS TO SHAREHOLDERS. Dividends from net investment income are declared
and paid monthly and distributable net realized capital gains, if any, are
declared and distributed at least annually. Distributions to shareholders are
recorded on the ex-dividend date. Income and capital gain distribution are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principals.
USE OF ESTIMATES. In preparing financial statements in conformity with generally
accepted accounting principles, management makes estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements, as well as the reported amount of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
NOTE 2 - CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Fund for the period ended May 31, 2000 were as
follows:
SHARES AMOUNT
Shares sold ................................. 999,875 $ 9,924,088
Shares reinvested ........................... 9,498 93,488
Redeemed .................................... (25,685) (252,248)
----------- -----------
Net Increase ................................ 983,688 $ 9,765,328
=========== ===========
NOTE 3 - INVESTMENT TRANSACTIONS
The aggregate purchases and sales of investments, excluding short-term
investments, by the Fund for the period ended May 31, 2000, were as follows:
Purchases:
U.S. Government ............................................. $ 0
Other ....................................................... 13,109,306
Sales:
U.S. Government ............................................. 0
Other ....................................................... 4,309,416
<PAGE>
THE COMMUNITY REINVESTMENT ACT QUALIFIED INVESTMENT FUND
ANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS MAY 31, 2000
--------------------------------------------------------------------------------
NOTE 3 - INVESTMENT TRANSACTIONS (CONTINUED)
At May 31, 2000, gross unrealized appreciation (depreciation) of
investments for tax purposes were as follows:
Appreciation ................................................. $ 29,496
Depreciation ................................................. (161,115)
---------
Net depreciation on investments .............................. $(131,619)
=========
NOTE 4 - ADVISORY FEES AND OTHER RELATED PARTY TRANSACTIONS
The Fund has entered into an Advisory Agreement with CRAFund Advisors, Inc., a
registered investment advisor, to provide the Fund with investment management
services. Pursuant to the Advisory Agreement, the Advisor is entitled to receive
a fee, calculated daily, and paid monthly at the annual rate of 0.50% as applied
to the Funds' daily net assets. For the period ended May 31, 2000, the Advisor
voluntarily waived their advisory fees which amounted to $17,278.
The Fund has adopted a distribution plan (the "Plan"), pursuant to Rule
12b-1 under the Act which permits the Fund to pay certain expenses associated
with the distribution of its shares. The Plan provides that the Fund will
reimburse SunCoast Capital Group, Ltd., (the "Distributor"), the Fund's sole
underwriter and distributor, for actual distribution and shareholder servicing
expenses incurred by the Distributor not exceeding, on an annual basis, 0.25% of
the Fund's average daily net assets. For the period ended May 31, 2000, the Fund
reimbursed the Distributor $8,639 for distribution costs incurred.
For the period ended May 31, 2000 the Advisor voluntarily agreed to
reimburse the Fund to the extent total annualized expenses exceed 1.00% of the
Fund's average daily net assets. For the period ended May 31, 2000, the Fund
incurred $227,031 of expenses (other than advisory) reimbursable by the Advisor.
Certain trustees and officers of the Fund are affiliated with the Advisor.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees
The Community Reinvestment Act Qualified Investment Fund:
We have audited the accompanying statement of assets and liabilities of The
Community Reinvestment Act Qualified Investment Fund (the Fund), including the
schedule of investments, as of May 31, 2000 and the related statements of
operations and changes in net assets and financial highlights for the period
from August 30, 1999 (commencement of operations) through May 31, 2000. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements and
financial highlights. Our procedures included confirmation of securities owned
as of May 31, 2000, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Community Reinvestment Act Qualified Investment Fund as of May 31, 2000, the
results of its operations, the changes in its net assets and the financial
highlights for the period from August 30, 1999 (commencement of operations)
through May 31, 2000, in conformity with generally accepted accounting
principles.
July 7, 2000
