CUNA Mutual Funds
Nov. 30, 1994
Cornerstone 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 has been a challenging time for stock
and bond markets throughout much of the world. We attempt to avoid severe
volatility by investing in a broad variety of stocks and bonds, both domestic
and international. The pie chart on this page shows the percentage of assets
allocated to each type of investment on November 30. Our investment committee
meets regularly to review economic conditions and recommend changes in these
percentages or weightings consistent with the investment objective. The
tendency is to cut back on sectors that have performed well and invest more
heavily in areas that appear to offer better value when this approach seems
justified. We continually try to anticipate the types of investments that will
perform best, and adjust our allocations accordingly.
Market Review
The Federal Reserve has been raising the important federal funds rate
throughout the year in an effort to slow the economy to a rate of growth that
will not lead to higher inflation. Yields on U.S. bonds rose sharply in the
past year, putting downward pressure on prices. The Lehman Brothers Aggregate
Bond Index, a broad measure of U.S. bonds, fell 3.6% for the first 11 months
of the year through November 30. Bond markets in Europe, Japan, and elsewhere
generally followed the U.S. lead.
Stock market performances were more mixed. U.S. stocks produced a total
return of -0.2% for the year through November 30, as measured by the unmanaged
Standard & Poor's 500 Stock Index. The unmanaged EAFE Index, which measures
European, Australian, and Far Eastern stock markets, enjoyed a total return of
7.4% for the same 11-month period. Latin American stocks rallied in late 1993
and early this year, declined sharply in the spring, and recovered strongly in
the latter part of the year.
The dollar's value against the currencies of 10 major trading partners
is now down to the middle of its range since the late 1980s, far below its
peak of the mid 1980s. A weak dollar makes investments in this country less
attractive for foreign investors, but increases returns on foreign securities
for U.S. investors.
Performance and Strategy Review
Our strategy of diversifying among many different investments, both in the
U.S. and in foreign markets, helped your Fund achieve a positive return for
the six-month period ended November 30. The table below shows that your Fund
outperformed the benchmark portfolio since the end of our fiscal year.
Performance Comparison
Six Months Ended 11/30/94
__________________________
CUNA Mutual Cornerstone Fund 0.9%
Combined Index Portfolio* 0.5
*An unmanaged portfolio composed of 60% stocks (S&P 500) and 40% bonds (Lehman
Brothers Aggregate Index).
We achieved this result by maintaining a "balanced" portfolio, with 52%
of the assets allocated to various types of stock investments, 37% to
different types of bonds, and the remaining 11% to money market securities. It
is worth noting that we had a lower percentage of assets in stocks than the
benchmark portfolio. During the next six months, we will probably adjust the
balance as economic conditions evolve
Chart 1 - Security Diversification
throughout the world. Europe is lagging the U.S. in economic growth and could
provide us with opportunities as economies there continue to strengthen. We
will also review the valuations of stocks and bonds both here and abroad in an
effort to find the right balance of securities for your Fund.
Outlook
We expect the economy to keep growing throughout the coming year. While the
Federal Reserve will most likely continue to put upward pressure on short-term
interest rates to reduce the threat of rising inflation, we believe long-term
interest rates will be more stable than in 1994, resulting in favorable
conditions for many of the markets in which we invest. Over the past year,
both domestic and foreign markets reacted sharply to advancing U.S. interest
rates. Much of this volatility now seems to be behind us. We look forward to
less volatile performance here and abroad, with various stock and bond markets
influenced more by strong economic fundamentals than by concerns about
inflation.
Our outlook for the months ahead calls for cautious optimism, and we
will make every effort to take advantage of opportunities where we find them
to enhance your Fund's performance.
Thank you for investing with the CUNA Mutual Funds.
Respectfully submitted,
Peter Van Dyke
Chairman of the Investment
Advisory Committee
December 16, 1994
Largest Holdings
November 30, 1994
TEN LARGEST STOCK HOLDINGS
Percent of
Net Assets
__________
Monsanto 1.8%
Mobil 1.4
Dayton Hudson 1.3
Alcoa 1.3
Motorola 1.1
BBC Brown Boveri 1.1
Telefonos de Mexico 1.0
British Telecommunications 0.9
Emerson Electric 0.9
Hitachi 0.9
____________________________________________________________________________
Total 11.7%
TEN LARGEST BOND ISSUES
Percent of
Net Assets
__________
GNMA 7.9%
U.S. Treasuries 7.0
ITT Financial 1.6
Overhead Door 1.6
Westinghouse Credit 1.6
Banponce Financial 1.5
French Government 1.5
Gulf Canada Resources 1.5
PacifiCorp 1.4
Methanex 1.2
____________________________________________________________________________
Total 26.8%
Industry Diversification
November 30, 1994
STOCKS*
Percent of
Net Assets
__________
Financial 5.6%
Utilities 6.2
Consumer Nondurables 5.9
Consumer Services 6.0
Consumer Cyclicals 1.9
Technology 3.8
Capital Equipment 3.2
Business Services & Transportation 1.8
Energy 3.2
Process Industries 2.6
Basic Materials 1.3
____________________________________________________________________________
Total Stocks in Portfolio 41.5%
S&P MidCap Futures 10.7
____________________________________________________________________________
Total Stock Market Exposure 52.2%
*Includes foreign securities.
BONDS AND RESERVES
Percent of
Net Assets
__________
U.S. Government and Agencies Bonds:
U.S. Treasury Obligations 7.0%
Mortgages 7.9
Taxable Bonds
Banking 1.5
Building Products 1.6
Exploration & Production 1.5
Electric Utilities 1.4
Finance & Credit 3.6
Specialty Chemicals 2.0
Industrial - Other 0.9
Container 0.8
Aerospace & Defense 0.8
Manufacturing 0.8
Gas & Gas Transmission 0.8
Paper & Paper Products 0.6
Foreign Governments 5.6
Reserves 17.1
____________________________________________________________________________
Total Bonds and Reserves 53.9%
Portfolio of Investments
CUNA Mutual Cornerstone Fund / November 30, 1994 (Unaudited)
Common Stocks - 41.5%
FINANCIAL - 5.6%
Value
________
BANK & TRUST - 3.8%
40 shs. Deutsche Bank (DEM) . . . . . . . . . $ 19,023
300 First Union . . . . . . . . . . . . . 11,963
450 Mellon Bank . . . . . . . . . . . . . 14,906
300 NationsBank . . . . . . . . . . . . . 13,462
200 Societe Generale
de France (FRF) . . . . . . . . . . 22,866
1,300 Toronto-Dominion Bank (CAD) . . . . . 19,260
20 Union Bank of Switzerland (CHF) . . . 17,272
118,752
FINANCIAL SERVICES - 1.2%
400 American Express. . . . . . . . . . . 11,850
800 Travelers . . . . . . . . . . . . . . 26,300
38,150
INSURANCE - 0.6%
200 American International Group. . . . . 18,325
Total Financial 175,227
UTILITIES - 6.2%
TELEPHONE - 4.7%
200 AT&T. . . . . . . . . . . . . . . . . 9,825
500 British Telecommunications, ADR . . . 29,687
500 GTE . . . . . . . . . . . . . . . . . 15,313
300 Pacific Telesis . . . . . . . . . . . 8,700
9,000 Telecom Italia (ITL). . . . . . . . . 23,328
500 Telefonica de Espana, ADS . . . . . . 19,312
600 Telefonos de Mexico, ADS. . . . . . . 31,800
300 U. S. WEST. . . . . . . . . . . . . . 10,575
148,540
ELECTRIC UTILITIES - 1.5%
400 Duke Power. . . . . . . . . . . . . . 16,300
400 Entergy . . . . . . . . . . . . . . . 9,000
1,000 * Public Service of New Mexico. . . . . 12,875
600 SCEcorp . . . . . . . . . . . . . . . 8,400
46,575
Total Utilities 195,115
CONSUMER NONDURABLES - 5.9%
BEVERAGES - 0.4%
400 PepsiCo . . . . . . . . . . . . . . . 14,150
FOOD PROCESSING - 2.0%
700 shs. Cadbury Schweppes, ADR . . . . . . . $ 18,812
400 CPC International . . . . . . . . . . 20,500
200 General Mills . . . . . . . . . . . . 10,750
500 Sara Lee. . . . . . . . . . . . . . . 12,188
62,250
PHARMACEUTICALS - 2.8%
400 * Amgen . . . . . . . . . . . . . . . . 23,350
1,000 Astra 'B' (SEK) . . . . . . . . . . . 26,821
300 Pfizer. . . . . . . . . . . . . . . . 23,212
500 SmithKline Beecham,
equity units, ADR . . . . . . . . . 15,563
88,946
MISCELLANEOUS CONSUMER
PRODUCTS - 0.4%
200 Procter & Gamble. . . . . . . . . . . 12,500
HOSPITAL SUPPLIES/HOSPITAL
MANAGEMENT - 0.3%
300 Abbott Laboratories . . . . . . . . . 9,562
Total Consumer Nondurables . . . . . . . . . . . . . . . 187,408
CONSUMER SERVICES - 6.0%
GENERAL MERCHANDISERS - 1.3%
500 Dayton Hudson . . . . . . . . . . . . 40,813
SPECIAL MERCHANDISERS - 1.1%
100 Ito Yokado, ADR . . . . . . . . . . . 21,200
400 * Toys "R" Us . . . . . . . . . . . . . 14,650
35,850
ENTERTAINMENT & LEISURE - 0.6%
600 McDonald's. . . . . . . . . . . . . . 17,025
MEDIA & COMMUNICATIONS - 3.0%
200 Capital Cities/ABC. . . . . . . . . . 16,350
2,000 Elsevier (NLG). . . . . . . . . . . . 19,927
300 McGraw-Hill . . . . . . . . . . . . . 20,362
600 Reuters, ADR. . . . . . . . . . . . . 27,525
300 Time Warner . . . . . . . . . . . . . 10,125
94,289
Total Consumer Services 187,977
CONSUMER CYCLICALS - 1.9%
AUTOMOBILES & RELATED - 0.8%
300 GM. . . . . . . . . . . . . . . . . . 11,437
200 TRW . . . . . . . . . . . . . . . . . 12,700
24,137
BUILDING & REAL ESTATE - 0.7%
25,630 Hopewell Holdings (HKD) . . . . . . . 22,204
MISCELLANEOUS CONSUMER
DURABLES - 0.4%
300 shs. Eastman Kodak . . . . . . . . . . . . $ 13,688
Total Consumer Cyclicals 60,029
TECHNOLOGY - 3.8%
ELECTRONIC COMPONENTS - 1.7%
300 Intel . . . . . . . . . . . . . . . . 18,937
600 Motorola. . . . . . . . . . . . . . . 33,825
52,762
TELECOMMUNICATIONS - 0.2%
100 LM Ericsson, ADR. . . . . . . . . . . 5,550
AEROSPACE & DEFENSE - 0.8%
400 Allied-Signal . . . . . . . . . . . . 13,050
200 Boeing. . . . . . . . . . . . . . . . 8,950
300 * Teledyne. . . . . . . . . . . . . . . 5,175
27,175
INFORMATION PROCESSING - 0.9%
300 Hitachi, ADR. . . . . . . . . . . . . 29,250
ELECTRONIC SYSTEMS - 0.2%
200 Honeywell . . . . . . . . . . . . . . 5,850
Total Technology 120,587
CAPITAL EQUIPMENT - 3.2%
ELECTRICAL EQUIPMENT - 3.2%
40 BBC Brown Boveri (CHF). . . . . . . . 33,608
500 Emerson Electric. . . . . . . . . . . 29,500
500 GE. . . . . . . . . . . . . . . . . . 23,000
300 Hubbell (Class B) . . . . . . . . . . 16,425
102,533
Total Capital Equipment 102,533
BUSINESS SERVICES & TRANSPORTATION - 1.8%
COMPUTER SERVICE & SOFTWARE - 0.6%
300 * Microsoft . . . . . . . . . . . . . . 18,863
AIRLINES - 0.6%
3,000 Swire Pacific 'A' (HKD) . . . . . . . 19,977
RAILROADS - 0.3%
200 Conrail . . . . . . . . . . . . . . . 10,400
MISCELLANEOUS BUSINESS SERVICES - 0.3%
300 WMX Technologies. . . . . . . . . . . 7,725
Total Business Services & Transportation . . . . . . . . 56,965
ENERGY - 3.2%
ENERGY SERVICES - 0.4%
400 Helmerich & Payne . . . . . . . . . . 11,200
INTEGRATED PETROLEUM -
INTERNATIONAL - 2.0%
500 shs. Mobil . . . . . . . . . . . . . . . . $ 42,625
200 Royal Dutch Petroleum, ADR. . . . . . 21,725
64,350
INTEGRATED PETROLEUM -
DOMESTIC - 0.8%
200 Phillips Petroleum. . . . . . . . . . 6,600
1,000 USX-Marathon. . . . . . . . . . . . . 18,000
24,600
Total Energy 100,150
PROCESS INDUSTRIES - 2.6%
DIVERSIFIED CHEMICALS - 1.8%
800 Monsanto. . . . . . . . . . . . . . . 57,600
PAPER & PAPER PRODUCTS - 0.5%
200 International Paper . . . . . . . . . 14,300
SPECIALTY CHEMICALS - 0.3%
200 3M. . . . . . . . . . . . . . . . . . 10,250
Total Process Industries 82,150
BASIC MATERIALS - 1.3%
METALS - 1.3%
500 Alcoa . . . . . . . . . . . . . . . . 40,812
Total Basic Materials 40,812
Total Common Stocks (Cost - $1,342,708). . . . . . . . . 1,308,953
Bonds and Reserves - 53.9%
CORPORATE BONDS - 16.3%
$ 25,000 Agriculture Minerals and Chemicals,
10.75%, 9/30/03 . . . . . . . . . . . 25,063
25,000 Ametek, 9.75%, 3/15/04 . . . . . . . . 25,312
50,000 Banponce Financial,
6.00%, 4/15/97. . . . . . . . . . . 47,673
10,000 Commercial Credit,
8.125%, 3/1/97. . . . . . . . . . . 10,031
20,000 Container Corporation of America,
11.25%, 5/1/04. . . . . . . . . . . . 20,200
25,000 Ferrellgas, 10.00%, 8/1/01 . . . . . . 24,250
28,000 GMAC, 7.75%, 4/15/97 . . . . . . . . . 27,653
50,000 Gulf Canada Resources,
9.25%, 1/15/04. . . . . . . . . . . 45,750
25,000 IMO Industries, 12.00%, 11/1/01. . . . 25,469
50,000 ITT Financial, 9.875%, 4/15/97 . . . . 51,823
40,000 Methanex, 8.875%, 11/15/01 . . . . . . 38,200
CUNA Mutual Cornerstone Fund / Portfolio of Investments (cont'd)
CORPORATE BONDS (cont'd)
$ 50,000 Overhead Door, 12.25%, 2/1/00. . . . . $ 51,000
25,000 Owens-Illinois, 11.00%, 12/1/03. . . . 25,625
50,000 Pacificorp, 6.75%, 4/1/05. . . . . . . 44,239
50,000 Westinghouse Credit,
9.06%, 6/3/98. . . . . . . . . . . . 49,948
Total Corporate Bonds (Cost - $539,403). . . . . . . . . 512,236
FOREIGN GOVERNMENT OBLIGATIONS/
AGENCIES - 5.6%
15,000 (CAD) Canadian Government Bonds,
6.50%, 6/1/04 . . . . . . . . . . . . 9,094
15,000 (NLG) Dutch Government Bonds,
5.75%, 1/15/04. . . . . . . . . . . . 7,598
100,000 (FRF) French Government Bonds,
8.50%, 4/25/23. . . . . . . . . . . . 18,865
150,000 (FRF) French Government Notes,
BTAN, 8.50%, 3/12/97. . . . . . . . . 28,769
3,000,000 (JPY) International Bank for Reconstruction
& Development, 6.75%, 3/15/00 . . . . 33,571
35,000,000 (ITL) Italian Government Bonds,
BTP, 11.50%, 3/1/03 . . . . . . . . . 21,462
3,500,000 (JPY) Japanese Government Bonds,
4.50%, 6/20/03. . . . . . . . . . . . 35,174
14,000 (GBP) United Kingdom Treasury
Note, 9.00%, 3/3/00 . . . . . . . . . 22,469
Total Foreign Government Obligations/Agencies
(Cost - $176,075) 177,002
U.S. GOVERNMENT MORTGAGE-BACKED
SECURITIES - 7.9%
Government National
Mortgage Assn., I,
40,527 6.50%, 10/15/23 . . . . . . . . . . . 34,754
50,857 7.50%, 5/15/24. . . . . . . . . . . . 46,863
123,406 8.00%, 2/15/17 - 6/15/22. . . . . . . 119,488
32,770 9.50%, 9/15/20. . . . . . . . . . . . 33,940
12,727 10.00%, 11/15/09. . . . . . . . . . . 13,597
Total U.S. Government Mortgage-Backed Securities
(Cost - $256,970) . . . . . . . . . . . . . . . . . . . 248,642
U.S. GOVERNMENT OBLIGATIONS - 7.0%
U.S. Treasury Bonds,
$65,000 7.125%, 2/15/23 . . . . . . . . . . . $ 58,317
100,000 7.50%, 11/15/24 . . . . . . . . . . . 94,375
U.S. Treasury Notes,
20,000 4.25%, 11/30/95 . . . . . . . . . . . 19,485
15,000 5.75%, 8/15/03. . . . . . . . . . . . 12,970
35,000 6.875%, 10/31/96. . . . . . . . . . . 34,688
Total U.S. Government Obligations
(Cost - $225,653) . . . . . . . . . . . . . . . . . . . 219,835
SHORT-TERM INVESTMENTS - 17.1%
BANK DEPOSIT - 0.2%
34,629 Chase Manhattan Bank (FRF),
2 Day Notice Account,
3.81%, 12/2/94. . . . . . . . . . . . 6,437
COMMERCIAL PAPER - 2.1%
67,000 Harvard University,
5.75%, 12/1/94. . . . . . . . . . . . 66,989
U.S. GOVERNMENT OBLIGATIONS - 14.8%
470,000U.S. Treasury Bills,
4.72 - 4.825%, 12/22/94 . . . . . . . 466,219
Total Short-Term Investments
(Cost - $539,168) 539,645
Total Bonds and Reserves (Cost - $1,737,269) 1,697,360
Total Investments in Securities - 95.4%
(Cost - $3,079,977) 3,006,313
* Non-income producing
(CAD) Canadian dollar denominated
(CHF) Swiss franc denominated
(DEM) German deutschemark denominated
(FRF) French franc denominated
(GBP) British sterling denominated
(HKD) Hong Kong dollar denominated
(ITL) Italian lira denominated
(JPY) Japanese yen denominated
(NLG) Dutch guilder denominated
(SEK) Swedish krona denominated
The accompanying notes are an integral part of these financial statements.
Statement of Assets and Liabilities
CUNA Mutual Cornerstone Fund / November 30, 1994 (Unaudited)
ASSETS
Investments in securities at value
(Cost - $3,079,977). . . . . . . . . . . $3,006,313
Cash (including foreign
currencies). . . . . . . . . . . . . . . 42,226
Receivable for investment
securities sold. . . . . . . . . . . . . 89,533
Other assets . . . . . . . . . . . . . . . 56,966
__________
Total assets $3,195,038
LIABILITIES
Total liabilities. . . . . . . . . . . . . 42,775
__________
Net Assets Consisting of:
Accumulated net investment income -
net of distributions . . . . . . . . . . 19,114
Accumulated realized gain/losses -
net of distributions . . . . . . . . . . 4,779
Net unrealized loss on investments . . . . (90,212)
Paid-in-capital applicable to
324,670 shares of $0.0001 par value
capital stock outstanding;
1,000,000,000 shares
authorized . . . . . . . . . . . . . . . 3,218,582
__________
Net Assets . . . . . . . . . . . . . . . . . $3,152,263
__________
__________
Net Asset Value Per Share. . . . . . . . . . $9.71
_____
_____
Statement of Operations
CUNA Mutual Cornerstone Fund / Six Months Ended November 30, 1994 (Unaudited)
INVESTMENT INCOME
Income
Dividends. . . . . . . . . . . . . . . . . $ 15,038
Interest . . . . . . . . . . . . . . . . . 51,091
________
Total income . . . . . . . . . . . . . . . $ 66,129
Expenses
Investment management and
administrative fees . . . . . . . . . . . 18,333
12b-1 fees . . . . . . . . . . . . . . . . 3,667
________
Total expenses . . . . . . . . . . . . . . 22,000
________
Net investment income. . . . . . . . . . . . 44,129
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss)
Securities . . . . . . . . . . . . . . . . (2,003)
Foreign currency transactions. . . . . . . 11,084
Futures. . . . . . . . . . . . . . . . . . (10,651)
________
Net realized loss. . . . . . . . . . . . . (1,570)
Change in net unrealized
gain or loss . . . . . . . . . . . . . . . (20,167)
________
Net loss on investments. . . . . . . . . . . (21,737)
________
INCREASE IN NET ASSETS
FROM OPERATIONS. . . . . . . . . . . . . . $ 22,392
________
________
The accompanying notes are an integral part of these financial statements.
Statement of Changes in Net Assets
CUNA Mutual Cornerstone Fund (Unaudited)
December 30, 1993
(Commencement
Six Months Ended of Operations) to
Nov. 30, 1994 May 31, 1994
_______________ ________________
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income. . . . . . . . . $ 44,129 $ 20,908
Net realized gain (loss) . . . . . . . (1,570) 6,350
Change in net unrealized
gain or loss . . . . . . . . . . . . (20,167) (70,045)
__________ __________
Increase (decrease) in net
assets from operations . . . . . . . 22,392 (42,787)
__________ __________
Distributions to shareholders
Net investment income. . . . . . . . . (38,246) (11,214)
__________ __________
Capital share transactions
Sold 127,791 and
249,627 shares. . . . . . . . . . . . 1,248,915 2,486,248
Distributions reinvested
of 3,200 and 1,146 shares . . . . . . 31,126 11,162
Redeemed 60,843 and
251 shares. . . . . . . . . . . . . . (596,432) (2,438)
__________ __________
Increase in net assets from
capital share transactions . . . . . 683,609 2,494,972
Net equalization . . . . . . . . . . . . 2,565 972
__________ __________
Total increase . . . . . . . . . . . . . 670,320 2,441,943
NET ASSETS
Beginning of period. . . . . . . . . . 2,481,943 40,000
__________ __________
End of period. . . . . . . . . . . . . $3,152,263 $ 2,481,943
__________ __________
__________ __________
The accompanying notes are an integral part of these financial statements.
Notes To Financial Statements
CUNA Mutual Cornerstone 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 Cornerstone Fund (the Fund) is one of the portfolios
established by the Corporation.
A) Valuation - Equity securities listed or regularly traded on a securities
exchange are valued at the last quoted sales price on the day the valuations
are made. A security which is listed or traded on more than one exchange is
valued at the quotation on the exchange determined to be the primary market
for such security. Other equity securities and those listed securities that
are not traded on a particular day are valued at a price within the limits of
the latest bid and asked prices deemed by the Board of Directors, or by
persons delegated by the Board, best to reflect fair value.
Debt securities are generally traded in the over-the-counter market and
are valued at a price deemed best to reflect fair value as quoted by dealers
who make markets in these securities or by an independent pricing service.
Short-term debt securities are valued at their cost which, when combined with
accrued interest, approximates fair value. Financial futures contracts are
valued at closing settlement prices.
For purposes of determining the Fund's net asset value per share, all
assets and liabilities initially expressed in foreign currencies are converted
into U.S. dollars at the mean of the bid and offer prices of such currencies
against U.S. dollars quoted by a major bank.
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) Currency translation - Foreign currency amounts are translated into U.S.
dollars at prevailing exchange rates as follows: assets and liabilities at the
rate of exchange at the end of the respective period, purchases and sales of
securities, and income and expenses at the rate of exchange prevailing on the
dates of such transactions. The effect of changes in foreign exchange rates on
realized and unrealized security gains or losses is reflected as a component
of such gains or losses.
C) Discounts and Premiums - Discounts and premiums on debt securities are
amortized for both financial and tax reporting purposes.
D) 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. Dividend income and 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. The Fund follows the practice of equalization under which
undistributed net investment income per share is unaffected by Fund shares
sold or redeemed.
Note 2 - Financial Instruments
As part of its investment program, the Fund engages in the following
activities, the nature and risk of which are set forth more fully in the
Fund's Prospectus and Statement of Additional Information.
A) Futures Contracts - A futures contract provides for the future sale by one
party and purchase by another party of a specified amount of a specific
financial instrument at a specific price, date, time and place designated at
the time the contract is made. Risks arise from the possible illiquidity of
the futures market and from movements in security values. At November 30,
1994, the Fund had a long position in four S&P MidCap futures contracts which
expire in December, 1994, and which have a contract value of $337,400. Net
unrealized losses of $17,100 on these contracts at November 30, 1994 is
included in the accompanying financial statements. U.S. Treasury Bills having
a market value of $20,000 were pledged as initial margin on these contracts.
B) Other - Purchases and sales of portfolio securities, other than short-term
and U.S. Government securities, aggregated $932,475 and $326,851,
respectively, for the six months ended November 30, 1994. Purchases and sales
of U.S. Government securities aggregated $257,457 and $47,275, 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
qualify as a regulated investment company and distribute all of its taxable
income.
At November 30, 1994, the aggregate cost of investments for federal
income tax and financial reporting purposes was $3,079,977 and net unrealized
losses aggregated $73,664, of which $58,031 related to appreciated investments
and $131,695 to depreciated 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 1.25%. Services provided under the agreement include investment
management, shareholder servicing, transfer agency, fund accounting and
investment custody. The agreement provides
Notes to Financial Statements (cont'd)
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%.
During the six months ended November 30, 1994, the Fund, in the ordinary
course of business, paid commissions of $251 to, and placed security purchase
and sale orders aggregating $24,819 with, certain affiliates of the Manager in
connection with the execution of various portfolio transactions.
Financial Highlights
CUNA Mutual Cornerstone Fund (Unaudited)
For a share outstanding throughout the period
_________________________________________________
From December 30, 1993
(Commencement
Six Months Ended of Operations)
Nov. 30, 1994 to May 31, 1994
________________ _____________________
NET ASSET VALUE,
BEGINNING OF
PERIOD . . . . . . . . . . . $ 9.75 $ 10.00
Investment Activities
Net investment income. . . . 0.15 0.08
Net realized
and unrealized
loss. . . . . . . . . . . . (0.06) (0.28)
________ ________
Total from Investment
Activities . . . . . . . . . 0.09 (0.20)
Distributions
Net investment
income. . . . . . . . . . . (0.13) (0.05)
________ ________
NET ASSET VALUE,
END OF PERIOD. . . . . . . . $ 9.71 $ 9.75
________ ________
________ ________
RATIOS / SUPPLEMENTAL DATA
Total Return . . . . . . . . . 0.93% (2.00)%
Ratio of Expenses
to Average
Net Assets . . . . . . . . . 1.50%! 1.50%!
Ratio of Net Investment
Income to Average
Net Assets . . . . . . . . . 3.01%! 2.23%!
Portfolio Turnover
Rate . . . . . . . . . . . . 34.6%! 308.5%!
Net Assets,
End of Period . . . . . . . . $ 3,152,263 $ 2,481,943
!Annualized.
Glossary of Terms
bond - A debt security (an IOU) issued by a company, government, or a
government agency o raise money. The borrower promises to pay the buyer
(investor) interest over the life of the loan and repay the face value of the
bond at maturity.
coupon - The interest rate a bond issuer promises to pay to the bond investor
over the life of the bond. It is expressed as an annual percentage of the
bond's face or par value, e.g., a $1,000 bond with a 10% coupon pays $100 of
interest a year.
credit quality - Refers to a bond issuer's likelihood of repaying principal
and making all scheduled interest payments to the bondholder.
income - Interest or dividends earned from an investment.
investment-grade bonds - A term used to describe bonds that are considered to
be of generally high quality, in contrast to bonds that carry a significantly
greater risk of default.
liquidity - Refers to the ability to convert financial assets into cash
quickly with minimal potential loss. For example, money market securities are
much more liquid than real estate.
maturity - Refers to the date when the debt represented by a bond is fully
repaid. Because mutual funds invest in many different bonds, they have no
single maturity date, but they do have a dollar-weighted average maturity.
When a mutual fund investing in bonds is described as "short-term,"
"intermediate-term," or "long-term," the reference is to the fund's weighted
average maturity.
mortgage-backed securities - Mortgage lenders pool individual home mortgages
with similar characteristics to back a certificate or bond, which is sold to
investors such as mutual funds.
mutual fund - A pool of money from many investors who have the same investment
objective. The money is invested by professional money managers.
principal - The money you invest in securities or a mutual fund. It does not
include earnings on that amount. A mutual fund's "principal stability" (the
degree to which its value fluctuates) is a measure of the safety of your
investment.
share-price volatility - Refers to the fluctuation in the value of a share.
total return - The amount by which your mutual fund investment increases or
decreases as a result of a fund's performance for a specific time period. It
reflects any reinvested dividends and changes in the fund's share price.
yield - The current income for a given time period (expressed as an annual
amount) paid by a bond or bond fund divided by the bond's current price or
fund's share price. Yield is not the same as total return.
Chart 1 - Security Diversification
Pie chart for CUNA Cornerstone Fund report (Nov. 30, 1994)
Entitled "Security Diversification": Shows International Stocks 13%, Treasury
& Agency Bonds 7%, Mortgage-backed Securities 8%, Corporate Bonds 16%, Foreign
Government Obligations 6%, Large-cap Stocks 29%, Futures 10%, Net Cash
Reserves 11%
APPENDIX
Chart 1 - Security Diversification
