CUNA Mutual Funds
Nov. 30, 1994
Tax-Free Intermediate-Term Fund
SemiAnnual Report
For yield, price, last transaction, and current balance, call:
1-800-934-fund (3863)
To request a prospectus for any of the cuna mutual funds, call:
1-800-756-fund (3863)
Cuna Mutual Funds, Inc.
100 East Pratt Street
Baltimore, Maryland 21202
Dear Shareholders
Your Fund's first 11 months of operation have been an extremely difficult time
for the bond market. The chart below shows how far interest rates have risen
on various tax-free securities. As we explained in our first report to you
last May, when interest rates rise bond prices fall, reducing the principal
value of the securities.
Chart 1 - Municipal Bond and Note Yields
Market Review
In 1993 the economy began to benefit from the lowest interest rates in a
generation and has been growing at about a 4% real rate since the middle of
the year. Throughout 1994, the Federal Reserve has been raising the important
federal funds rate to slow the economy to its long-term trend rate of
approximately 2.5%-a level the Fed believes will not lead to higher inflation.
Interest rates on taxable securities are now from one and three-quarters
to three percentage points higher than they were a year ago, with the largest
increases taking place in securities maturing in two to three years. Tax-free
interest rates have also gone up. Yields on bonds maturing in five years
advanced from 4.8% to 5.5% during the past six months. Economic growth was
revised upward from 3.4% to 3.9% in the third quarter, and the fourth quarter
has been showing strong gains in employment and personal income.
Performance Review
Your Fund's share price fell $0.37 to $9.31 during the six months ended
November 30. Income measured by dividends per share amounted to $0.20, not
enough to offset the share-price decline. Total return in percentage terms for
the six-month period was -1.82%.
We are not satisfied with this return even in a difficult economic
environment, but we are pleased that your Fund's performance compared
favorably with the average for its competitors, as shown in the following
table.
Performance Comparison
Six Months Ended 11/30/94
_________________________
CUNA Mutual Tax-Free
Intermediate-Term Fund -1.82%
Lipper Intermediate Municipal
Debt Fund Average -2.26%
Portfolio Review
The Fund's objective is to provide the highest level of tax-free income while
minimizing fluctuations in share price. At present, we are interested in
buying securities with higher coupons (the coupon is a bond's fixed interest
rate) to increase the Fund's income. We also have been keeping the average
credit quality of the portfolio high at a AA level. Your Fund did not have any
exposure to the bankruptcy filing in Orange County, California, which first
came to light in early December.
We maintained a duration of 4.7 years for the Fund as of November 30,
well within our defensive range of 4.5 to 5.0 years. Duration is an effective
way of measuring a fund's sensitivity to interest rate changes. This
relatively short duration reflects our belief that interest rates will most
likely continue to rise, particularly on short- and intermediate-term
securities. By buying securities with short maturities, the Fund is able to
reinvest the proceeds more quickly to generate higher income when interest
rates are going up. We may begin to lengthen these maturities somewhat in
coming months if it becomes apparent that the steady increase in interest
rates is largely over.
Outlook
We expect the economy to keep growing throughout the coming year. The Federal
Reserve will probably continue to raise the federal funds rate until it sees
that economic growth is slowing to a more acceptable level. While money market
rates will most likely climb as well, we believe long-term interest rates will
be more stable than in 1994. Bond yields have already risen close to the
levels of the late 1980s when the economy last saw full employment, so we do
not anticipate a sharp increase from here.
We are cautiously optimistic about the months ahead and will make every
effort to take advantage of attractive opportunities where we find them to
enhance your Fund's performance.
Thank you for investing with the CUNA Mutual Funds.
Respectfully submitted,
Mary J. Miller
Chairman of the Investment
Advisory Committee
December 16, 1994
Key Statistics
Period Ended
Dividend Yield* 11/30/94
________________________________ ____________
6 Months 4.13%
Dividend Per Share
________________________________
6 Months $0.20
Change in Price Per Share
________________________________
6 Months (From $9.68 to $9.31) -$0.37
____________________________________________________________________________
Weighted Average Maturity 6.5 yrs.
Weighted Average Duration 4.7 yrs.
*Dividends earned and reinvested for the periods indicated are annualized and
divided by the average daily net asset values per share for the same period.
Income return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
Quality Diversification
Percent of Net Assets
_______________________
TRPA Quality Rating* 5/31/94 11/30/94
_____________________ __________ __________
1 24% 34%
2 38 35
3 25 18
4 13 13
____________________________________________________________________________
Weighted Average 2.3 2.1
*On a scale of 1 to 10, with Grade 1 representing highest quality.
Sector Diversification
Percent of Net Assets
______________________
5/31/94 11/30/94
__________ __________
Pre-Refunded Bonds 31% 28%
Air & Sea Transportation Revenue 18 12
Dedicated Tax Revenue 0 9
Housing Finance Revenue 5 9
General Obligation - Local 9 9
Lease Revenue 4 6
Industrial & Pollution Control Revenue 0 4
Pooled Loan Revenue 5 4
Miscellaneous Revenue 5 4
Water & Sewer Revenue 4 4
Nuclear Revenue 4 4
General Obligation - State 4 2
Hospital Revenue 13 0
Electric Revenue 5 0
Other Assets Less Liabilities -7 5
____________________________________________________________________________
Total 100% 100%
Portfolio of Investments
T. Rowe Price CUNA Tax-Free Intermediate-Term Fund / November 30, 1994
(Unaudited)
Face Amount Value
______________ ______________
ARIZONA - 4.2%
Phoenix Airport, (MBIA Insured),
5.25%, 7/1/00. . . . . . . . . . . . $ 100,000 $ 96,249
CALIFORNIA - 6.5%
California Public Works Board,
Dept. Of Corrections,
(MBIA Insured),
6.00%, 11/1/05 . . . . . . . . . . . 50,000 48,825
Los Angeles County, Marina Del Ray,
COP, 5.25%, 7/1/96 . . . . . . . . . 100,000 99,605
FLORIDA - 23.3%
Jacksonville Electric Auth.,
Bulk Power Supply, 6.75%, 10/1/21
(Pre-refunded 10/1/00!). . . . . . . 500,000 529,825
GEORGIA - 4.4%
Georgia Hosp. Equipment Fin. Auth.,
Pooled Hospital Loan,
(MBIA Insured),
VRDN (Currently 3.65%) . . . . . . . 100,000 100,000
ILLINOIS - 3.9%
Chicago - O'Hare Int'l. Airport,
International Terminal,
7.50%, 1/1/05* . . . . . . . . . . . 85,000 88,731
MASSACHUSETTS - 2.2%
Massachusetts, GO, (FGIC Insured),
6.30%, 11/1/05 . . . . . . . . . . . 50,000 49,996
MICHIGAN - 3.7%
Wayne County, Detroit Metropolitan
Wayne County Airport, (MBIA Insured),
4.90%, 12/1/05 . . . . . . . . . . . 100,000 83,732
NEW HAMPSHIRE - 4.2%
New Hampshire Housing Fin. Auth.,
Single Family,
6.00%, 1/1/02 *. . . . . . . . . . . 100,000 96,530
NEW JERSEY - 8.2%
New Jersey, Waste Water Treatment Trust,
6.875%, 6/15/05 . . . . . . . . . . . 90,000 92,799
New Jersey Economic Development Auth.,
Market Transition Fac.,
(MBIA Insured),
5.40%, 7/1/02. . . . . . . . . . . . 100,000 94,630
NEW YORK - 8.5%
Dormitory Auth. of the State of
New York, City Univ.,
4.75%, 7/1/00. . . . . . . . . . . . 100,000 90,080
New York City, GO,
7.50%, 2/1/04. . . . . . . . . . . . 100,000 104,080
PENNSYLVANIA - 4.4%
Pennsylvania Intergovernmental
Cooperative Auth.,
Philadelphia Funding,
(FGIC Insured),
6.00%, 6/15/00 . . . . . . . . . . . 100,000 100,932
SOUTH CAROLINA - 8.4%
Dorchester County School Dist. No. 2,
GO, (MBIA Insured),
6.70%, 7/1/04. . . . . . . . . . . . 85,000 87,448
South Carolina Public Service Auth.,
Santee Cooper, (AMBAC Insured),
6.50%, 7/1/24
(Pre-refunded 7/01/02!). . . . . . . 100,000 104,406
CUNA Mutual Tax-Free Intermediate-Term Fund / Portfolio of Investments
(cont'd)
VIRGINIA - 4.3%
Virginia Housing Dev. Auth.,
Commonwealth Mortgage,
5.90%, 1/1/00* . . . . . . . . . . . $ 100,000 $ 98,915
WASHINGTON - 4.0%
Washington Public Power Supply System,
Nuclear Project Number 2,
6.50%, 7/1/03. . . . . . . . . . . . 90,000 90,286
WYOMING - 4.4%
Kemmerer County PCR, Exxon, VRDN
(Currently 3.55%) . . . . . . . . . . 100,000 100,000
Total Investments in Securities -
94.6% of Net Assets
(Cost - $2,227,461). . . . . . . . . 2,157,069
* - Interest subject to alternative minimum tax
! - Used in determining portfolio maturity
AMBAC - AMBAC Indemnity Corp.
COP - Certificates of Participation
FGIC - Financial Guaranty Insurance Company
GO - General Obligation
MBIA - Municipal Bond Investors Assurance Corp.
PCR - Pollution Control Revenue
VRDN - Variable Rate Demand Note
Statement of Assets and Liabilities
CUNA Mutual Tax-Free Intermediate-Term Fund / November 30, 1994 (Unaudited)
ASSETS
Investments in securities at value
(Cost - $2,227,461). . . . . . . . . $2,157,069
Receivable for investment
securities sold. . . . . . . . . . . 90,302
Other assets . . . . . . . . . . . . . 33,867
__________
Total assets . . . . . . . . . . . . . $2,281,238
LIABILITIES. . . . . . . . . . . . . . 1,967
__________
Net Assets Consisting of:
Accumulated realized gains/losses -
net of distributions . . . . . . . . (86,027)
Net unrealized loss. . . . . . . . . . (70,392)
Paid-in-capital applicable to
244,930 shares of $0.0001 par value
capital stock outstanding;
1,000,000,000 shares
authorized . . . . . . . . . . . . . 2,435,690
__________
Net Assets . . . . . . . . . . . . . . $2,279,271
__________
__________
Net Asset Value Per Share. . . . . . . $9.31
_____
_____
The accompanying notes are an integral part of these financial statements.
Statement of Operations
CUNA Mutual Tax-Free Intermediate-Term Fund / Six Months Ended
November 30, 1994 (Unaudited)
INVESTMENT INCOME
Interest income. . . . . . . . . . . . $58,090
Expenses
Investment management and
administrative fees. . . . . . . . $ 8,539
12b-1 fees . . . . . . . . . . . . . 2,846
________
Total expenses . . . . . . . . . . . 11,385
________
Net investment income. . . . . . . . . 46,705
REALIZED AND UNREALIZED LOSS
Net realized loss . . . . . . . . . . (62,100)
Change in net unrealized loss. . . . . (28,606)
________
Net loss on investments. . . . . . . . (90,706)
________
DECREASE IN NET ASSETS FROM OPERATIONS $(44,001)
________
________
Statement Of Changes In Net Assets
CUNA Mutual Tax-Free Intermediate-Term Fund (Unaudited)
Dec. 30, 1993
(Commencement
Six Months Ended of Operations) to
November 30, 1994 May 31, 1994
_________________ _______________
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income. . . . . . . . $ 46,705 $ 30,214
Net realized loss. . . . . . . . . . (62,100) (23,927)
Change in net unrealized gain
or loss. . . . . . . . . . . . . . (28,606) (41,787)
_________ _________
Decrease in net assets from
operations. . . . . . . . . . . . . (44,001) (35,500)
_________ _________
Distributions to shareholders
Net investment income. . . . . . . . (46,705) (30,214)
_________ _________
Capital share transactions
Sold 71,484 and
222,671 shares . . . . . . . . . . 672,750 2,221,017
Distributions reinvested of 3,922
and 2,798 shares . . . . . . . . . . 37,476 27,345
Redeemed 58,694 and
251 shares . . . . . . . . . . . . (550,497) (2,400)
_________ _________
Increase in net assets from capital
share transactions . . . . . . . . 159,729 2,245,962
_________ _________
Total increase . . . . . . . . . . . . 69,023 2,180,248
NET ASSETS
Beginning of period. . . . . . . . . 2,210,248 30,000
_________ _________
End of period. . . . . . . . . . . . $2,279,271 $2,210,248
_________ _________
_________ _________
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements
CUNA Mutual Tax-Free Intermediate-Term Fund / November 30, 1994 (Unaudited)
Note 1 - Significant Accounting Policies
CUNA Mutual Funds Inc. (the Corporation) is registered under the Investment
Company Act of 1940 as a diversified, open-end management investment company.
The CUNA Mutual Tax-Free Intermediate-Term Fund (the Fund) is one of the
portfolios established by the Corporation.
A) Security valuation - Debt securities are generally traded in the
over-the-counter market. Investments in securities with remaining maturities
of one year or more are stated at fair value as furnished by dealers who make
markets in such securities or by an independent pricing service, which
considers yield or price of bonds of comparable quality, coupon, maturity, and
type, as well as prices quoted by dealers who make markets in such securities.
Securities with remaining maturities less than one year are stated at fair
value which is determined by using a matrix system that establishes a value
for each security based on money market yields.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair value
as determined in good faith by, or under the supervision of, the officers of
the Fund, as authorized by the Board of Directors.
B) Discounts and Premiums - Premiums on municipal securities are amortized
for both financial and tax reporting purposes. Discounts, other than original
issue, are not amortized for financial reporting purposes.
C) Other - Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses
are reported on an identified cost basis. Distributions to shareholders are
recorded by the Fund on the ex-dividend date. Income and capital gain
distributions are determined in accordance with federal income tax regulations
which may differ from generally accepted accounting principles.
Note 2 - Portfolio Transactions
Purchases and sales of portfolio securities, other than short-term securities,
aggregated $1,923,668 and $2,033,010 respectively, for the six months ended
November 30, 1994.
Note 3 - Federal Income Taxes
No provision for federal income taxes is required since the Fund intends to
continue to qualify as a regulated investment company and distribute all of
its income.
At November 30, 1994, the aggregate cost of investments for federal
income tax and financial reporting purposes was $2,227,461 and net unrealized
losses aggregated $70,392 of which $2,598 related to unrealized gains on
investments and $72,990 to unrealized losses on investments.
Note 4 - Related Party Transactions
The Fund is managed by CMC-T. Rowe Price Management, L.L.C. (the "Joint
Venture"), which is a joint venture of subsidiaries of CUNA Mutual Insurance
Society, Credit Union National Association, Inc. and T. Rowe Price Associates,
Inc., under a joint venture agreement. The investment management and
administrative agreement between the Fund and the Joint Venture provides for
an all-inclusive investment management fee, computed daily and paid monthly,
based on the Fund's daily net assets. The effective annual all-inclusive fee
rate is 0.75%. Services provided under the agreement include investment
management, shareholder servicing, transfer agency, fund accounting and
investment custody. The agreement provides that the Fund pay its own interest,
taxes, brokerage commissions and extraordinary expenses.
The distribution plan adopted by the Fund provides for a distribution fee
(12b-1 fee), computed daily and paid monthly, based on the Fund's daily net
assets. The effective annual 12b-1 fee rate is 0.25%.
Financial Highlights
CUNA Mutual Tax-Free Intermediate-Term Fund (Unaudited)
For a share outstanding throughout the period
_____________________________________________
December 30, 1993
(Commencement
Six Months Ended of Operations)
November 30, 1994 to May 31, 1994
________________ _____________________
NET ASSET VALUE,
BEGINNING OF PERIOD. . . . . . . $ 9.68 $ 10.00
Investment Activities
Net investment
income . . . . . . . . . . . . 0.20 0.14
Net realized and
unrealized loss. . . . . . . . (0.37) (0.32)
________ ________
Total from Investment
Activities . . . . . . . . . . . (0.17) (0.18)
Distributions
Net investment income. . . . . . . (0.20) (0.14)
________ ________
NET ASSET VALUE, END
OF PERIOD. . . . . . . . . . . . $ 9.31 $ 9.68
________ ________
________ ________
RATIOS/SUPPLEMENTAL DATA
Total Return . . . . . . . . . . . (1.82)% (1.79)%
Ratio of Expenses to Average Net
Assets . . . . . . . . . . . . . 1.00%! 1.00%!
Ratio of Net Investment
Income to Average
Net Assets . . . . . . . . . . . 4.10%! 3.47%!
Portfolio Turnover
Rate . . . . . . . . . . . . . . 179.4%! 139.4%!
Net Assets,
End of Period. . . . . . . . . . $2,279,271 $2,210,248
!Annualized.
Chart 1 - Municipal Bond and Note Yields
Line Graph for CUNA Tax-Free Intermediate-Term Funds report (Nov. 30, 1994)
Entitled "Municipal Bond and Note Yields": shows yields on 30-year AAA GO
bonds, Five-year AAA GO bonds, and One-year MIG 1 Notes from 11/30/93 through
11/30/94
