UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________
FORM N-CSRS
________
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
INVESTMENT COMPANY ACT FILE NUMBER 811-23080
THE COMMUNITY DEVELOPMENT FUND
(Exact name of registrant as specified in charter)
________
6255 Chapman Field Drive
Miami, Florida 33156
(Address of principal executive offices) (Zip code)
Kenneth H. Thomas. Ph.D.
Community Development Fund Advisors, LLC
6255 Chapman Field Drive
Miami, Florida 33156
(Name and address of agent for service)
Copy To:
John J. O'Brien, Esquire
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 1-844-445-4405
DATE OF FISCAL YEAR END: DECEMBER 31, 2018
DATE OF REPORTING PERIOD: JUNE 30, 2018
ITEM 1. REPORTS TO STOCKHOLDERS.
A copy of the report transmitted to stockholders pursuant to Rule 30e-1 under
the Act (17 CFR Sec. 270.30e-1) is attached hereto.
[GRAPHIC OMITTED]
THE COMMUNITY DEVELOPMENT FUND
SEMI-ANNUAL REPORT
June 30, 2018
The Community Development Fund June 30, 2018
--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
Schedule of Investments 1
Statement of Assets and Liabilities 5
Statement of Operations 6
Statements of Changes in Net Assets 7
Financial Highlights 8
Notes to Financial Statements 9
Disclosure of Fund Expenses 21
The Fund files its complete schedule of investments of fund holdings with the
Securities and Exchange Commission (the "Commission") for the first and third
quarters of each fiscal year on Form N-Q within sixty days of the period end.
The Fund's N-Q forms are available on the Commission's website at
http://www.sec.gov, and may be reviewed and copied at the Commission's Public
Reference Room in Washington, DC. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330.
A description of the policies and procedures that the Fund uses to determine
how to vote proxies relating to fund securities, as well as information
relating to how the Fund voted proxies relating to fund securities will be
available (i) without charge, upon request, by calling 1-844-445-4405; and (ii)
on the Commission's website at http://www.sec.gov.
THIS REPORT HAS BEEN PREPARED FOR SHAREHOLDERS AND MAY BE DISTRIBUTED TO OTHERS
ONLY IF PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
The Community Development Fund June 30, 2018 (Unaudited)
--------------------------------------------------------------------------------
SECTOR WEIGHTINGS+:
FNMA Single Family 28.7%
FHLMC Multifamily 23.2%
FNMA Multifamily 21.3%%
GNMA Single Family 9.3%
Municipal Bonds 5.4%
Asset-Backed Securities 4.9%
GNMA Multifamily 4.0%
Money Market Fund 3.2%
+ PERCENTAGES BASED ON TOTAL INVESTMENTS.
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
FACE MARKET
DESCRIPTION AMOUNT VALUE
----------- ------ ------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 94.1%
FHLMC MULTIFAMILY - 25.3%
K720, IO, 0.54%, 08/25/2022 (a) $5,932,788 $ 106,667
KSMC, IO, 0.72%, 01/25/2023 (a) 1,741,419 45,771
K024, IO, 0.97%, 09/25/2022 (a) 1,887,094 55,444
W5FL, IO, 2.22%, VAR LIBOR USD 1
Month+0.220%05/25/2025 2,000,000 1,999,997
2017-SB42, 2.61%, 09/25/2022 994,995 979,589
2017-SB41, 2.94%, 09/25/2027 (a) 996,150 964,981
2017-SB42, 2.96%, 10/25/2027 (a) 994,980 965,036
Pool Q41874, 3.00%, 07/01/2046 1,729,451 1,676,999
Pool WN0011, 3.38%, 04/01/2030 791,331 777,578
Pool WA0500, 3.48%, 03/01/2047 2,574,178 2,441,103
Pool WA3207, 3.72%, 04/01/2030 2,266,800 2,278,302
----------
12,291,467
----------
FNMA MULTIFAMILY - 23.1%
Pool AM0126, 2.68%, 08/01/2022 1,548,902 1,521,390
Pool AN6185, 2.93%, 07/01/2024 1,330,000 1,308,882
Pool AS7653, 3.00%, 07/01/2046 1,559,989 1,514,363
Pool AN5657, 3.30%, 07/01/2032 384,641 376,438
Pool AM5986, 3.44%, 06/01/2026 1,100,000 1,102,415
Pool 469683, 3.54%, 11/01/2021 400,448 406,373
Pool AM5197, 4.20%, 01/01/2030 555,513 577,136
Pool TBA, 4.50%, 07/01/2037 4,260,000 4,435,762
----------
11,242,759
----------
FNMA SINGLE FAMILY - 31.2%
Pool AS7484, 3.00%, 06/01/2046 975,681 947,878
Pool BC0962, 3.00%, 06/01/2046 1,808,199 1,754,291
Pool AS7476, 3.00%, 07/01/2046 1,025,330 994,762
Pool AS7647, 3.00%, 07/01/2046 1,002,078 972,200
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
1
The Community Development Fund June 30, 2018 (Unaudited)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
--------------------------------------------------------------------------------
FACE MARKET
DESCRIPTION AMOUNT VALUE
----------- ------ ------
Pool AS8262, 3.00%, 10/01/2046 $ 845,731 $ 820,249
Pool BC4723, 3.00%, 10/01/2046 1,722,912 1,671,544
Pool AS8465, 3.00%, 12/01/2046 978,978 949,789
Pool AS8734, 3.50%, 01/01/2047 1,066,214 1,063,978
Pool AS8771, 3.50%, 02/01/2047 880,332 878,894
Pool AS9369, 3.50%, 03/01/2047 1,008,270 1,006,702
Pool AS9360, 3.50%, 04/01/2047 1,834,025 1,830,890
Pool CA0819, 3.50%, 11/01/2047 991,886 989,018
Pool CA1158, 3.50%, 02/01/2048 1,266,627 1,271,884
----------
15,152,079
----------
GNMA MULTIFAMILY - 4.4%
Pool 2017-135, 2.60%, 08/16/2058 989,058 935,989
Pool 2017-74, 2.60%, 09/16/2058 1,257,798 1,189,805
----------
2,125,794
----------
GNMA SINGLE FAMILY - 10.1%
Pool G2 AT5238, 3.00%, 06/20/2046 1,018,279 996,845
Pool G2 AU1724, 3.00%, 06/20/2046 896,778 878,018
Pool G2 AU1835, 3.00%, 08/20/2046 819,861 802,759
Pool G2 AS5883, 3.50%, 06/20/2046 941,959 945,967
Pool G2 AU1762, 3.50%, 07/20/2046 1,269,432 1,274,911
----------
4,898,500
----------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(COST $47,679,361) 45,710,599
----------
MUNICIPAL BONDS - 5.9%
MASSACHUSETTS - 2.9%
Massachusetts State, Housing Finance Agency, RB
2.35%, 06/01/2020 1,000,000 988,180
2.60%, 12/01/2039 (b) 120,000 119,135
2.80%, 06/01/2020 305,000 303,926
----------
1,411,241
----------
NEW YORK - 3.0%
New York City, Housing Development Authority, RB
2.20%, 05/01/2020 750,000 741,075
2.35%, 11/01/2020 175,000 172,566
3.02%, 11/01/2022 525,000 519,461
----------
1,433,102
----------
TOTAL MUNICIPAL BONDS
(COST $2,875,000) 2,844,343
----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
2
The Community Development Fund June 30, 2018 (Unaudited)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
--------------------------------------------------------------------------------
FACE MARKET
DESCRIPTION AMOUNT VALUE
----------- ------ ------
ASSET-BACKED SECURITIES - 5.3%
California Republic Auto Receivables Trust
1.55%, 11/15/2019 $ 147,805 $ 147,747
CarMax Auto Owner Trust
1.21%, 11/15/2019 159,318 159,172
Santander Drive Auto Receivables Trust
1.77%, 09/15/2020 2,280,000 2,275,621
----------
TOTAL ASSET-BACKED SECURITIES
(COST $2,582,395) 2,582,540
----------
SHORT-TERM INVESTMENT - 3.5%
MONEY MARKET FUND - 3.5%
Fidelity Institutional Government Portfolio,
Class I, 1.76% (c) 1,692,771 1,692,771
----------
TOTAL SHORT-TERM INVESTMENT
(COST $1,692,771) 1,692,771
----------
TOTAL INVESTMENTS (COST $54,829,527) - 108.8% $52,830,253
----------
OTHER ASSETS AND LIABILITIES - (8.8)% (4,262,996)
----------
NET ASSETS - 100.0% $48,567,257
============
A list of the open futures contracts held by the Fund at June 30, 2018 is as
follows:
--------------------------------------------------------------------------------------------------------------
TYPE OF NUMBER OF EXPIRATION NOTIONAL UNREALIZED
CONTRACT CONTRACTS DATE AMOUNT VALUE DEPRECIATION
--------------------------------------------------------------------------------------------------------------
U.S. 10-Year
Treasury Note (16) Sep-2018 $ (1,906,964) $ (1,923,000) $ (16,036)
U.S. 5-Year
Treasury Note (45) Sep-2018 (5,091,952) (5,112,773) (20,821)
U.S. Long
Treasury Bond (11) Sep-2018 (1,551,920) (1,595,000) (43,080)
Ultra 10-Year U.S.
Treasury Note (25) Sep-2018 (3,164,976) (3,205,859) (40,883)
--------------------------------------------------------
$(11,715,812) $(11,836,632) $(120,820)
========================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
3
The Community Development Fund June 30, 2018 (Unaudited)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONCLUDED)
--------------------------------------------------------------------------------
The Fund has additionally recorded an asset of $1,055 and a liability of $344
related to the current day's variation margin.
(a) Variable or floating rate security, the interest rate of which adjusts
periodically based on changes in current interest rates and prepayments on
the underlying pool of assets.
(b) Variable or floating rate security, the interest rate of which adjusts
periodically based prevailing interest rates.
(c) Rate shown is the 7-day effective yield as of June 30, 2018.
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
GNMA -- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
IO -- INTEREST ONLY FACE AMOUNT REPRESENTS NOTIONAL AMOUNT.
RB -- REVENUE BOND
TBA -- TO BE ANNOUNCED
The following table sets forth information about the level within the fair
value hierarchy at which the Fund's investments and other financial instruments
are measured at June 30, 2018:
-----------------------------------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES Level 1 Level 2 Level 3 Total
-----------------------------------------------------------------------------------------------------------
U.S. Government & Agency Obligations $ - $ 45,710,599 $ - $45,710,599
Municipal Bonds - 2,844,343 - 2,844,343
Asset-Backed Securities - 2,582,540 - 2,582,540
Short-Term Investment 1,692,771 - - 1,692,771
----------- ------------ --------- -------------
Total Investments in Securities $1,692,771 $ 51,137,482 $ - $52,830,253
=========== ============ ========= =============
-----------------------------------------------------------------------------------------------------------
OTHER FINANCIAL INSTRUMENTS Level 1 Level 2 Level 3 Total
-----------------------------------------------------------------------------------------------------------
Futures Contracts+
Unrealized Depreciation $ (120,820) $ - $ - $ (120,820)
----------- ------------ --------- -------------
Total Other Financial Instruments $ (120,820) $ - $ - $ (120,820)
----------- ------------ --------- -------------
+ Futures contracts are valued at the unrealized depreciation on the instrument.
Amounts designated as "-" are $0.
For the period ended June 30, 2018, there were no transfers between Level 1,
Level 2 and Level 3 assets and liabilities. All transfers, if any, are
recognized by the Fund at the end of the period.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
4
The Community Development Fund June 30, 2018 (Unaudited)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
ASSETS:
Investments (Cost $54,829,527) $ 52,830,253
Cash collateral on futures contracts 155,000
Interest and dividends receivable 124,401
Receivable from Investment Adviser (Note 5) 4,954
Variation margin receivable 1,055
-------------
TOTAL ASSETS 53,115,663
-------------
LIABILITIES:
Payable for investment securities purchased 4,421,622
Distributions Payable 45,693
Audit fees Payable 19,443
Payable due to Administrator (Note 4) 16,250
Insurance fees payable 15,769
CRA servicing fees payable (Note 4) 7,972
Variation margin payable 344
Other accrued expenses 21,313
-------------
TOTAL LIABILITIES 4,548,406
-------------
NET ASSETS $ 48,567,257
=============
NET ASSETS CONSIST OF:
Paid-in capital $ 50,829,270
Distributions in excess of net investment income (56,654)
Accumulated net realized loss on investments (85,265)
Net unrealized depreciation on investments (1,999,274)
Net unrealized depreciation on futures contracts (120,820)
-------------
NET ASSETS $ 48,567,257
=============
NET ASSET VALUE, Offering and Redemption Price Per Share --
Class A shares (unlimited authorization - no par value)
($48,567,257 / 5,165,048 shares) $ 9.40
=============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
5
The Community Development Fund For the period ended
June 30, 2018 (Unaudited)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
INVESTMENT INCOME
Interest $ 607,866
Dividends 11,361
-----------
Total investment income 619,227
-----------
EXPENSES
Accounting and administration fees (Note 4) 89,167
Investment advisory fees (Note 5) 69,585
CRA servicing fees (Note 4) 46,380
Chief Compliance Officer fees (Note 3) 34,712
Trustees' fees and expenses 2,507
Legal fees 22,038
Transfer Agent fees 21,933
Custodian fees 8,528
Printing fees 8,119
Audit fees 6,943
Other 13,898
-----------
TOTAL EXPENSES 323,810
-----------
LESS:
Investment advisory fees waived (Note 5) (69,585)
Reimbursement from Investment Adviser (Note 5) (22,281)
-----------
NET EXPENSES 231,944
-----------
NET INVESTMENT INCOME 387,283
-----------
NET REALIZED GAIN ON:
Investments (50,031)
Futures contracts 385,246
NET CHANGE IN UNREALIZED APPRECIATION/(DEPRECIATION) ON:
Investments (1,267,180)
Futures contracts (150,273)
-----------
NET REALIZED AND UNREALIZED LOSS (1,082,238)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (694,955)
===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
6
The Community Development Fund
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
Six-month
period ended Year ended
June 30, 2018 December 31,
(Unaudited) 2017
-------------- -------------
OPERATIONS:
Net investment income $ 387,283 $ 551,945
Net realized gain on investments and
futures contracts 335,215 1,698
Net change in unrealized appreciation/
(depreciation) on investments and
futures contracts (1,417,453) 42,718
------------ ------------
NET INCREASE/(DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS (694,955) 596,361
------------ ------------
DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (443,937) (774,167)
Return of capital -- (161)
------------ ------------
TOTAL DIVIDENDS AND DISTRIBUTIONS (443,937) (774,328)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Issued 3,000,000 16,500,000
Reinvestment of dividends 182,636 341,479
------------ ------------
INCREASE FROM CAPITAL SHARE TRANSACTIONS 3,182,636 16,841,479
------------ ------------
TOTAL INCREASE IN NET ASSETS 2,043,744 16,663,512
------------ ------------
NET ASSETS:
Beginning of period 46,523,513 29,860,001
------------ ------------
End of period $48,567,257 $46,523,513
============ ============
Distributions in excess of net
investment income $ (56,654) $ --
============ ============
SHARES TRANSACTIONS:
Issued 318,589 1,705,158
Reinvestment of dividends 19,339 35,285
------------ ------------
Net increase in shares outstanding 337,928 1,740,443
============ ============
AMOUNTS DESIGNATED AS "--" ARE $0 OR HAVE BEEN ROUNDED TO $0.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
7
The Community Development Fund
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
---------------------------------------------------------------------------------------------------------
Selected Per Share Data & Ratios
For a Share Outstanding Throughout Each Year/Period
Six-month
period ended For the period
June 30, Year ended ended
2018 December 31, December 31,
(Unaudited) 2017 2016*
------------ ------------ ---------------
Net asset value, beginning of year/period $ 9.64 $ 9.67 $ 10.00
------------ ------------ ---------------
INCOME/(LOSS) FROM OPERATIONS:
Net investment income (1) 0.08 0.13 0.03
Net realized and unrealized gain/(loss) on
investments (0.23) 0.02 (0.22)
------------ ------------ ---------------
Total gain/(loss) from operations (0.15) 0.15 (0.19)
------------ ------------ ---------------
DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.09) (0.18) (0.04)
Net realized gains -- -- (0.10)
Return of capital -- (0.00)^ (0.00)^
------------ ------------ ---------------
Total dividends and distributions (0.09) (0.18) (0.14)
------------ ------------ ---------------
Net asset value, end of year/period $ 9.40 $ 9.64 $ 9.67
============ =========== ===============
TOTAL RETURN+ (1.56)% 1.54% (1.89)%
============ =========== ===============
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of year/period ($ Thousands) $ 48,567 $ 46,524 $ 29,860
Ratio of expenses to average net assets
(including waivers and reimbursements) 1.00%(2) 1.00% 1.00%(2)
Ratio of expenses to average net assets
(excluding waivers and reimbursements) 1.40%(2) 1.48% 1.93%(2)
Ratio of net investment income to average net
assets 1.67%(2) 1.37% 0.47%(2)
Portfolio turnover rate 18%(3) 19% 85%(3)
* THE FUND COMMENCED OPERATIONS ON APRIL 29, 2016.
^ AMOUNT REPRESENTS LESS THAN $(0.005) .
(1) PER SHARE CALCULATIONS WERE PERFORMED USING AVERAGE SHARES FOR THE PERIOD.
(2) ANNUALIZED.
(3) PORTFOLIO TURNOVER IS FOR THE PERIOD INDICATED AND HAS NOT BEEN ANNUALIZED.
+ TOTAL RETURN IS FOR THE PERIOD INDICATED AND HAS NOT BEEN ANNUALIZED.
RETURN SHOWN DOES NOT REFLECT THE DEDUCTIONS OF TAXES THAT A SHAREHOLDER
WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. TOTAL
RETURN WOULD HAVE BEEN LOWER HAD THE ADVISER NOT WAIVED ITS FEE AND/OR
REIMBURSED OTHER EXPENSES.
AMOUNT DESIGNATED AS "--" IS $0.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
8
The Community Development Fund June 30, 2018 (Unaudited)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1. ORGANIZATION
The Community Development Fund (the "Fund") is a diversified, open-end
investment company that was established as a Delaware statutory trust pursuant
to a Certificate of Trust dated August 12, 2011. The Trust's Agreement and
Declaration of Trust permits the Trust to operate separate series
("portfolios") of units of beneficial interest ("shares") and separate classes
of portfolios. Currently, the Trust offers one class of shares. The investment
objectives of the Fund are to provide current income consistent with the
preservation of capital and enable institutional investors that are subject to
regulatory examination under the Community Reinvestment Act of 1977, as
amended, (the "CRA"), to claim favorable regulatory consideration of their
investment. Community Development Fund Advisors, LLC (the "Adviser"), was
organized under the laws of the State of Delaware as a limited liability
company on July 25, 2011, and is also registered with the Securities and
Exchange Commission ("SEC") as an investment adviser under the Investment
Advisors Act of 1940 (the "1940 Act"). Logan Circle Partners L.P. (the
"Sub-Adviser") manages the Fund's assets under the direction of the Adviser.
2. SIGNIFICANT ACCOUNTING POLICIES
The following are significant accounting policies, which are consistently
followed in the preparation of the financial statements of the Fund. The Fund
is an investment company that applies the accounting and reporting guidance
issued in Topic 946 by the U.S. Financial Accounting Standards Board ("FASB").
USE OF ESTIMATES -- The preparation of financial statements in conformity
with U.S. generally accepted accounting principles ("U.S. GAAP") requires
management to make estimates and assumptions that affect the fair value of
assets, the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements
and the reported amount of increases and decreases in net assets from
operations during the reporting period. Actual results could differ from
those estimates and such differences could be material.
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
values obtained from yield data relating to instruments or securities with
similar characteristics.
Futures are valued at the settlement price established each day by the
board of exchange on which they are traded. The daily settlement prices for
financial futures are provided by an independent source. On days when there
is excessive volume, market volatility or the future does not end trading
by the time a Fund calculates its NAV, the settlement price may not be
available at the time at which the Fund calculates its NAV. On such days,
the best available price (which is typically the last sales price) may be
used to value a Fund's futures position.
9
The Community Development Fund June 30, 2018 (Unaudited)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
The Fund's board of trustees has adopted methods for valuing securities
including in circumstances in which market quotes are not readily
available, and has delegated authority to the Fund's investment adviser to
apply those methods in making fair value determinations, subject to board
oversight. The investment adviser has established a Valuation Committee
(the "Valuation Committee") to administer, implement, and oversee the fair
valuation process, and to make fair value decisions. The Valuation
Committee regularly reviews its own fair value decisions, as well as
decisions made under its standing instructions to the investment adviser's
valuation teams. The Valuation Committee reviews changes in fair value
measurements from period to period and may, as deemed appropriate, update
the fair valuation guidelines to better reflect the results of comparisons
of fair value determinations with actual trade prices and address new or
evolving issues. The Valuation Committee reports any changes to the fair
valuation guidelines to the board of trustees with supplemental information
to support the changes. The Fund's board and audit committee also regularly
review reports that describe fair value determinations and methods.
The Fund utilizes various methods to measure the fair value of most of its
investments on a recurring basis. GAAP establishes a hierarchy prioritizes
inputs to valuation techniques used to measure fair value. The three levels
of inputs are as follows:
Level 1 -- Unadjusted quoted prices in active markets for identical assets
or liabilities that the Fund has the ability to access.
Level 2 -- Observable inputs other than quoted prices included in Level 1
that are observable for the asset or liability either directly or
indirectly. These inputs may include quoted prices for the identical
instrument on an inactive market, prices for similar instruments, interest
rates, prepayment speeds, credit risk, yield curves, default rates, and
similar data.
Level 3 -- Unobservable inputs for the asset or liability to the extent
that relevant observable inputs are not available, representing the Fund's
own assumptions about the assumptions that a market participant would use
in valuing the asset or liability, and that would be based on the best
information available.
The availability of observable inputs can vary from security to security
and is affected by a wide variety of factors, including, for example, the
type of security, whether the security is new and not yet established in
the marketplace, the liquidity of markets, and other characteristics
particular to the security. To the extent that valuation is based on models
or inputs that are less observable or unobservable in the market, the
determination of fair value requires more judgment. Accordingly, the degree
of judgment exercised in determining fair value is greatest for instruments
categorized in Level 3.
10
The Community Development Fund June 30, 2018 (Unaudited)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
The inputs used to measure fair value may fall into different levels of the
fair value hierarchy. In such cases, for disclosure purposes, the level in
the fair value hierarchy within which the fair value measurement falls in
its entirety is determined based on the lowest level input that is
significant to the fair value measurement in its entirety.
For the year ended June 30, 2018, there have been no significant changes to
the Fund's fair valuation methodology.
MORTGAGE-BACKED TO-BE-ANNOUNCED SECURITIES -- The Fund may enter into
mortgage-backed to-be-announced securities ("TBAs"). These derivative
financial instruments are subject to varying degrees of market and credit
risk. TBAs provide for the delayed delivery of the underlying instrument.
The contractual or notional amounts related to these financial instruments
adjusted for unrealized market valuation gains or losses are recorded on a
trade date basis. The credit risk related to settlements is limited to the
unrealized market valuation gains or losses recorded in the statement of
operations. Market risk is substantially dependent upon the value of the
underlying financial instruments and is affected by market forces such as
volatility and changes in interest rates.
FUTURES CONTRACTS -- The Fund may use futures contracts for tactical
hedging purposes as well as to enhance the Fund's returns. Initial margin
deposits of cash or securities are made upon entering into futures
contracts. The contracts are marked to market daily and the resulting
changes in value are accounted for as unrealized gains and losses (see
Statement of Operations). Variation margin payments are paid or received
(see Statement of Assets and Liabilities), depending upon whether
unrealized gains or losses are incurred. When the contract is closed, the
Fund records a realized gain or loss (see Statement of Operations) equal to
the difference between the proceeds from (or cost of) the closing
transaction and the amount invested in the contract.
Risks of entering into futures contracts include the possibility that there
will be an imperfect price correlation between the futures and the
underlying securities. Second, it is possible that a lack of liquidity for
futures contracts could exist in the secondary market, resulting in an
inability to close a position prior to its maturity date. Third, the
futures contract involves the risk that the Fund could lose more than the
original margin deposit required to initiate a futures transaction.
Finally, the risk exists that losses could exceed amounts disclosed on the
Statement of Assets and Liabilities. Refer to the Fund's Schedule of
Investments for details regarding open futures contracts as of June 30,
2018.
11
The Community Development Fund June 30, 2018 (Unaudited)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
The following table discloses the volume of the Fund's futures contracts
activity during the period ended June 30, 2018:
Interest Rate Contracts
-----------------------
Futures Contracts:
Average Notional Balance Long $ --
Average Notional Balance Short (11,907,263)
Ending Notional Balance Long --
Ending Notional Balance Short (11,715,813)
SECURITY TRANSACTIONS, DIVIDEND AND INVESTMENT INCOME -- Security
transactions are accounted for on the date the securities are purchased or
sold. Realized gains and losses on sales of investments are determined on
the basis of the identified cost 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.
Amortization and accretion are calculated using the effective interest
method. Amortization of premiums and discounts are included in interest
income.
DETERMINATION OF NET ASSET VALUE AND CALCULATION OF EXPENSES -- In
calculating the net asset value ("NAV") per share of the Fund, investment
income, realized and unrealized gains and losses, and expenses are
allocated daily to each share based upon the proportion of net assets of
each share.
FEDERAL INCOME TAXES -- It is the Fund's intention to qualify as a
regulated investment company for Federal income tax purposes by complying
with the appropriate provisions of Subchapter M of the Code. Accordingly,
no provision for Federal income taxes has been made in the financial
statements.
The Fund evaluates tax positions taken or expected to be taken in the
course of preparing the Fund's tax returns to determine whether it is
"more-likely-than-not" (i.e., greater than 50-percent) that each tax
position will be sustained upon examination by a taxing authority based on
the technical merits of the position. Tax positions deemed to meet the
more-likely-than-not threshold are recorded as a tax benefit in the current
year. The Fund did not record any tax provision in the current period.
However, management's conclusions regarding tax positions taken may be
subject to review and adjustment at a later date based on factors
including, but not limited to, examination by tax authorities (i.e., the
initial open tax year end and current tax year end, as applicable),
on-going analysis of and changes to tax laws, regulations and
interpretations thereof.
12
The Community Development Fund June 30, 2018 (Unaudited)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
As of and during the period ended June 30, 2018, the Fund did not have a
liability for any unrecognized tax benefits. The Fund recognizes interest
and penalties, if any, related to unrecognized tax benefits as income tax
expense in the Statement of Operations. During the period ended June 30,
2018, the Fund did not incur any interest or penalties.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends from net
investment income are declared and paid monthly. 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 distributions are determined in accordance with income tax
regulations, which may differ from U.S. GAAP.
SECURITIES PURCHASED ON A DELAYED DELIVERY BASIS -- The Fund may purchase
securities on a delayed delivery basis, with payment and delivery scheduled
for a future date. These transactions are subject to market fluctuations
and are subject to the risk that the value at delivery may be more or less
than the trade date purchase price. Although the Fund will generally
purchase these securities with the intention of holding the securities, it
may sell the securities before the settlement date. The Fund will set aside
liquid assets, or engage in other appropriate measures, to cover its
obligations with respect to these securities.
3. TRANSACTIONS WITH AFFILIATES
Certain officers of the Trust are also officers of SEI Investments Global Funds
Services (the "Administrator"), a wholly owned subsidiary of SEI Investments
Company, and/or Foreside Fund Officer Services, LLC, an affiliate of the
Distributor. Such officers are paid no fees by the Trust, other than the Chief
Compliance Officer ("CCO"), as described below, for serving as officers of the
Trust.
A portion of the services provided by the CCO and his staff, who are employees
of Foreside Fund Officer Services, LLC, are paid for by the Trust as incurred.
The services include regulatory oversight of the Trust's advisors and service
providers, as required by SEC regulations. The CCO's services and fees have
been approved by and are reviewed by the Board.
4. ADMINISTRATION, CRA SERVICING, DISTRIBUTION, CUSTODIAN AND TRANSFER AGENT
AGREEMENTS
The Fund and the Administrator are parties to an Administration Agreement under
which the Administrator provides administrative services to the Fund. For these
services, the Administrator is paid an asset based fee, which will vary
depending on the number of share classes and the average daily net assets of
the Fund, subject to a minimum. For the period ended June 30, 2018, the Fund
paid $89,167 for these services.
13
The Community Development Fund June 30, 2018 (Unaudited)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
The Fund has adopted a CRA servicing plan (the "CRA Servicing Plan") with
respect to Class A Shares that allows such shares to pay the Adviser a fee in
connection with the ongoing CRA recordkeeping and compliance services provided
to shareholders at an annual rate of up to 0.20% of average daily net assets of
the Class A Shares. For the period ended June 30, 2018, the Class A Shares
incurred $46,380 of CRA servicing fees, an effective rate of 0.20% .
The Fund has adopted a Distribution Plan pursuant to Rule 12b-1 under the 1940
Act, with respect to its Class A Shares. The Distribution Plan allows the Fund
to pay fees for the sale and distribution of Class A Shares and for shareholder
services provided to the holders of Class A Shares. Under the Distribution
Plan, the Fund may pay its distributor up to 0.25% per year of the Fund's
average daily net assets attributable to its Class A Shares. For the period
ended June 30, 2018, the Class A Shares did not incur any Distribution fees.
UMB Bank, N.A., (the "Custodian"), serves as the Fund's Custodian pursuant to a
custody agreement. UMB Fund Services, Inc. (the "Transfer Agent"), serves as
the Fund's Transfer Agent pursuant to a transfer agency agreement.
5. INVESTMENT ADVISORY AGREEMENT
Under the terms of an investment advisory agreement, the Adviser provides or
arranges for a third-party sub-adviser to provide investment advisory services
to the Fund. For its advisory services, the Adviser receives a fee, which is
calculated daily and paid monthly, at an annual rate of 0.30% of the Fund's
average daily net assets. The Adviser has contractually agreed to reduce fees
and reimburse expenses to the extent necessary to keep Total Annual Fund
Operating Expenses (excluding interest, taxes, brokerage commissions, and other
costs and expenses relating to the securities that are purchased and sold by
the Fund, acquired fund fees and expenses, and other non-routine expenses not
incurred in the ordinary course of such Fund's business (collectively,
"excluded expenses")) from exceeding 1.00% of the Fund's average daily net
assets until April 30, 2019 (the "expense cap"). In addition, if at any point
Total Annual Fund Operating Expenses (not including excluded expenses) are
below the expense cap, the Adviser may recover all or a portion of its fee
reductions or expense reimbursements within a three-year period from the year
in which the Adviser reduced its fee or reimbursed expenses if the Fund's Total
Annual Fund Operating Expenses are below the expense cap that was in place at
the time of such fee reductions or expense reimbursements. This agreement may
be terminated: (i) by the Board for any reason at any time; or (ii) by the
Adviser, upon ninety (90) days' prior written notice to the Trust, effective as
of the close of business on April 30, 2019. For period ended June 30, 2018, the
Fund paid $69,585 for these services. As of June 30, 2018, fees which were
previously waived and/or reimbursed by the Adviser which may be subject to
possible future reimbursement, up to the expense cap in place at the time the
expenses were waived and/or reimbursed to the Adviser were $91,866, $192,207
and $167,597, expiring in 2021, 2020 and 2019, respectively.
14
The Community Development Fund June 30, 2018 (Unaudited)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
The Adviser pays the Sub-Adviser a fee out of its advisory fee which is based
on a percentage of the average monthly market value of the assets managed by
the Sub-Adviser.
6. INVESTMENT TRANSACTIONS
The aggregate purchases and sales and maturities of investments, excluding
short-term investments, by the Fund for the period ended June 30, 2018, were as
follows:
--------------------------------------------------------------------------------
PURCHASES:
--------------------------------------------------------------------------------
U.S. Government $9,343,994
--------------------------------------------------------------------------------
Other 6,310,614
--------------------------------------------------------------------------------
SALES AND MATURITIES:
--------------------------------------------------------------------------------
U.S. Government $3,910,633
--------------------------------------------------------------------------------
Other 4,310,674
--------------------------------------------------------------------------------
7. FEDERAL TAX INFORMATION
The amount and character of income and capital gain distributions to be paid,
if any, are determined in accordance with Federal income tax regulations, which
may differ from U.S. GAAP. As a result, net investment income/(loss) and net
realized gain/ (loss) on investment transactions for a reporting period may
differ significantly from distributions during such period. These book/tax
differences may be temporary or permanent. To the extent these differences are
permanent in nature, they are charged or credited to undistributed net
investment income/(loss), accumulated net realized gain/(loss) or paid-in
capital, as appropriate, in the period that the differences arise.
The tax character of dividends and distributions declared during the last two
fiscal years were as follows:
Return of
Ordinary Income Capital Total
--------------- ------- ---------
2017 $ 774,167 $ 161 $ 774,328
2016 424,761 -- 424,761
As of December 31, 2017, the components of accumulated losses on a tax basis
were as follows:
Capital Loss Carryforwards Short-Term $ (309,106)
Capital Loss Carryforwards Long-Term (81,858)
Unrealized Depreciation (732,157)
------------
Total Accumulated Losses $(1,123,121)
------------
15
The Community Development Fund June 30, 2018 (Unaudited)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
For Federal income tax purposes, capital losses may be carried forward and
applied against future capital gains. Net capital losses earned may be carried
forward indefinitely and must retain the character of the original loss.
The Federal tax cost and aggregate gross unrealized appreciation and
depreciation for the investments held by the Fund at June 30, 2018, were as
follows:
Aggregate Gross Aggregate Gross Net
Federal Unrealized Unrealized Unrealized
Tax Cost Appreciation Depreciation Depreciation
----------- --------------- --------------- ------------
$45,129,434 $20,053 $(4,155,866) $(4,135,813)
8. RISKS ASSOCIATED WITH FINANCIAL INSTRUMENTS
As with investing in all mutual funds, investing in the Fund involves risk, and
there is no guarantee that the Fund will achieve the Fund's investment goals.
An institutional investor could lose money on its investment in the Fund, just
as an institutional investor could with other investments. As described in the
Fund's Prospectus, the Fund is subject to the following risks noted below, any
of which may adversely affect the Fund's net asset value and ability to meet
the Fund's investment objective:
ASSET-BACKED SECURITIES RISK -- Payment of principal and interest on
asset-backed securities is dependent largely on the cash flows generated by
the assets backing the securities. Securitization trusts generally do not
have any assets or sources of funds other than the receivables and related
property they own, and asset-backed securities are generally not insured or
guaranteed by the related sponsor or any other entity. Asset-backed
securities may be more illiquid than more conventional types of fixed
income securities that the Fund may acquire.
CONVERTIBLE SECURITIES RISK -- Convertible securities have many of the same
characteristics as stocks, including many of the same risks. In addition,
convertible securities may be more sensitive to changes in interest rates
than stocks.
CORPORATE FIXED INCOME SECURITIES RISK -- Corporate fixed income securities
respond to economic developments, especially changes in interest rates, as
well as perceptions of the creditworthiness and business prospects of
individual issuers.
CRA-QUALIFIED INVESTMENTS RISK -- The Adviser believes that shares of the
Fund will be deemed qualified investments under the CRA and will cause
financial institutions to receive CRA credit with respect to shares of the
Fund owned by them; however, there is no guarantee that an investor will
receive CRA credit for an investment in the Fund. The Fund's goals of
holding debt securities and other debt instruments that will allow shares
of the Fund to be
16
The Community Development Fund June 30, 2018 (Unaudited)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
deemed qualified under the CRA will cause the Adviser (or the Fund's
sub-adviser, Logan Circle Partners L.P. (the "Sub-Adviser")) to take this
factor into account in determining which debt securities or other debt
instruments the Fund will purchase and sell. Accordingly, portfolio
decisions will not be exclusively based on the investment characteristics
of the securities or instruments, which may or may not have an adverse
effect on the Fund's investment performance. For example, the Fund may hold
short-term investments that produce relatively low yields pending the
selection of longer-term investments believed to be CRA-qualified. Also,
CRA-qualified investments in geographic areas sought by the Fund may not
provide as favorable return as CRA-qualified investments in other
geographic areas. In addition, the Fund may sell investments for CRA
purposes at times when such sales may not be desirable for investment
purposes. Such sales could occur, for example, if a financial institution
redeems its shares of the Fund, or if investments that have been explicitly
earmarked for CRA-qualifying purposes to specific financial institution
shareholders are ultimately determined not to be, or to have ceased to be,
CRA-qualifying.
CREDIT RISK -- The risk that the issuer of a security or the counterparty
to a contract will default or otherwise become unable to honor a financial
obligation.
DERIVATIVES RISK -- The Fund's use of derivatives is subject to market
risk, leverage risk, correlation risk, credit risk, valuation risk and
liquidity risk. Credit risk is described above. Leverage risk, liquidity
risk and market risk are described below. Correlation risk is the risk that
changes in the value of the derivative may not correlate perfectly with the
underlying asset, rate or index. Valuation risk is the risk that the
derivative may be difficult to value and/or valued incorrectly. Each of
these risks could cause the Fund to lose more than the principal amount
invested in a derivative. The Fund's use of derivatives may also increase
the amount of taxes payable by shareholders. Both U.S. and non-U.S.
regulators are in the process of adopting and implementing regulations
governing derivatives markets, the ultimate impact of which remains
unclear.
EXCHANGE-TRADED FUNDS RISK -- The risks of owning shares of an ETF
generally reflect the risks of owning the underlying securities the ETF is
designed to track, although lack of liquidity in an ETF could result in its
value being more volatile than the underlying portfolio securities. When
the Fund invests in an ETF, in addition to directly bearing the expenses
associated with its own operations, it will bear a pro rata portion of the
ETF's expenses.
EXTENSION RISK -- The risk that rising interest rates may extend the
duration of a fixed income security, typically reducing the security's
value.
FIXED INCOME MARKET RISK -- The prices of the Fund's fixed income
securities respond to economic developments, particularly interest rate
changes, as well as to perceptions about the credit-worthiness of
individual issuers, including governments and their agencies. Generally,
the Fund's fixed income securities
17
The Community Development Fund June 30, 2018 (Unaudited)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
will decrease in value if interest rates rise and vice versa. In a low
interest rate environment, risks associated with rising rates are
heightened. Declines in dealer market-making capacity as a result of
structural or regulatory changes could decrease liquidity and/or increase
volatility in the fixed income markets. In response to these events, the
Fund's value may fluctuate and/or the Fund may experience increased
redemptions from shareholders, which may impact the Fund's liquidity or
force the Fund to sell securities into a declining or illiquid market.
INTEREST RATE RISK -- The risk that a rise in interest rates will cause a
fall in the value of fixed income securities, including U.S. Government
Securities, in which the Fund invests. Although U.S. Government Securities
are considered to be among the safest investments, they are not guaranteed
against price movements due to changing interest rates. A low interest rate
environment may present greater interest rate risk, because there may be a
greater likelihood of rates increasing and rates may increase more rapidly.
INVESTMENT STYLE RISK -- The risk that U.S. fixed income securities may
underperform other segments of the fixed income markets or the fixed income
markets as a whole.
LEVERAGE RISK -- The Fund's use of derivatives may result in the Fund's
total investment exposure substantially exceeding the value of its
portfolio securities and the Fund's investment returns depending
substantially on the performance of securities that the Fund may not
directly own. The use of leverage can amplify the effects of market
volatility on the Fund's share price and may also cause the Fund to
liquidate portfolio positions when it would not be advantageous to do so in
order to satisfy its obligations. The Fund's use of leverage may result in
a heightened risk of investment loss.
LIQUIDITY RISK -- The risk that certain securities may be difficult or
impossible to sell at the time and the price that the Fund would like. The
Fund may have to accept a lower price to sell a security, sell other
securities to raise cash, or give up an investment opportunity, any of
which could have a negative effect on Fund management or performance.
MARKET RISK -- The risk that the market value of an investment may move up
and down, sometimes rapidly and unpredictably.
MORTGAGE-BACKED SECURITIES RISK -- Mortgage-backed securities are affected
significantly by the rate of prepayments and modifications of the mortgage
loans backing those securities, as well as by other factors such as
borrower defaults, delinquencies, realized or liquidation losses and other
shortfalls. Mortgage-backed securities are particularly sensitive to
prepayment risk, which is described below, given that the term to maturity
for mortgage loans is generally substantially longer than the expected
lives of those securities; however, the
18
The Community Development Fund June 30, 2018 (Unaudited)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
timing and amount of prepayments cannot be accurately predicted. The timing
of changes in the rate of prepayments of the mortgage loans may
significantly affect the Fund's actual yield to maturity on any
mortgage-backed securities, even if the average rate of principal payments
is consistent with the Fund's expectation. Along with prepayment risk,
mortgage-backed securities are significantly affected by interest rate
risk, which is described above. In a low interest rate environment,
mortgage loan prepayments would generally be expected to increase due to
factors such as refinancings and loan modifications at lower interest
rates. In contrast, if prevailing interest rates rise, prepayments of
mortgage loans would generally be expected to decline and therefore extend
the weighted average lives of mortgage-backed securities held or acquired
by the Fund.
PREPAYMENT RISK -- The risk that, in a declining interest rate environment,
fixed income securities with stated interest rates may have the principal
paid earlier than expected, requiring the Fund to invest the proceeds at
generally lower interest rates.
REGIONAL FOCUS RISK -- To the extent that it focuses its investments in a
particular geographic region for CRA accreditation purposes, the Fund may
be more susceptible to economic, political, regulatory or other events or
conditions affecting issuers and states or municipalities within that
region. As a result, the Fund may be subject to greater price volatility
and risk of loss than a fund holding more geographically diverse
investments.
REPURCHASE AGREEMENT RISK -- Although repurchase agreement transactions
must be fully collateralized at all times, they generally create leverage
and involve some counterparty risk to the Fund whereby a defaulting
counterparty could delay or prevent the Fund's recovery of collateral.
U.S. GOVERNMENT SECURITIES RISK -- Although U.S. Government Securities are
considered to be among the safest investments, they are not guaranteed
against price movements due to changing interest rates. Obligations issued
by some U.S. Government agencies are backed by the U.S. Treasury, while
others are backed solely by the ability of the agency to borrow from the
U.S. Treasury or by the agency's own resources.
9. INDEMNIFICATIONS
In the normal course of business, the Fund enters into contracts that provide
general indemnifications. The Fund's maximum exposure under these arrangements
is dependent on future claims that may be made against the Fund and, therefore,
cannot be established; however, based on experience, the risk of loss from such
claims is considered remote.
19
The Community Development Fund June 30, 2018 (Unaudited)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
10. UNDERLYING INVESTMENT IN OTHER INVESTMENT COMPANIES
The Fund currently invests a portion of its assets in the Fidelity
Institutional Government Portfolio, Class I (the "Fidelity Fund"). The Fidelity
Fund invests at least 99.5% of its total assets in cash, U.S. Government
securities, and/or repurchase agreements that are collateralized fully. The
investment objective of the Fidelity Fund is current income with liquidity and
stability of principal. The Fund may redeem its investment from the Fidelity
Fund at any time if the Advisor determines that it is in the best interest of
the Fund and its shareholders to do so.
The performance of the Fund may be directly affected by the performance of the
Fidelity Fund. The financial statements of the Fidelity Fund, including the
portfolio of investments, can be found at the Security and Exchange
Commission's website www.sec.gov and should be read in conjunction with the
Fund's financial statements. As of June 30, 2018, the percentage of the Funds'
net assets invested in the Fidelity Fund was 3.5% .
11. OTHER
At June 30, 2018, 53% of total shares outstanding were held by 3 record
shareholders each owning 10% or greater of the aggregate total shares
outstanding. These shareholders were comprised of omnibus accounts that were
held on behalf of various shareholders.
12. SUBSEQUENT EVENTS
The Fund has evaluated the need for disclosures and/or adjustments resulting
from subsequent events through the date the financials were issued. Based on
this evaluation, no disclosures and/or adjustments were required to the
financial statements.
20
The Community Development Fund June 30, 2018 (Unaudited)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
DISCLOSURE OF FUND EXPENSES
--------------------------------------------------------------------------------
All mutual funds have operating expenses. As a shareholder of a mutual fund,
your investment is affected by these ongoing costs, which include (among
others) costs for fund management, administrative services, and shareholder
reports like this one. It is important for you to understand the impact of
these costs on your investment returns.
Operating expenses such as these are deducted from the mutual fund's gross
income and directly reduce its final investment return. These expenses are
expressed as a percentage of the mutual fund's average net assets; this
percentage is known as the mutual fund's expense ratio.
The following examples use the expense ratio and are intended to help you
understand the ongoing costs (in dollars) of investing in your Fund and to
compare these costs with those of other mutual funds. The examples are based on
an investment of $1,000 made at the beginning of the period shown and held for
the entire period from January 1, 2018 to June 30, 2018.
The table on the next page illustrates your Fund's costs in two ways:
ACTUAL FUND RETURN. This section helps you to estimate the actual expenses
after fee waivers that your Fund incurred over the period. The "Expenses Paid
During Period" column shows the actual dollar expense cost incurred by a $1,000
investment in the Fund, and the "Ending Account Value" number is derived from
deducting that expense cost from the Fund's gross investment return.
You can use this information, together with the actual amount you invested in
the Fund, to estimate the expenses you paid over that period. Simply divide
your ending starting account value by $1,000 to arrive at a ratio (for example,
an $8,600 account value divided by $1,000 = 8.6), then multiply that ratio by
the number shown for your Fund under "Expenses Paid During Period."
HYPOTHETICAL 5% RETURN. This section helps you compare your Fund's costs with
those of other mutual funds. It assumes that the Fund had an annual 5% return
before expenses during the year, but that the expense ratio (Column 3) for the
period is unchanged. This example is useful in making comparisons because the
Securities and Exchange Commission requires all mutual funds to make this 5%
calculation. You can assess your Fund's comparative cost by comparing the
hypothetical result for your Fund in the "Expenses Paid During Period" column
with those that appear in the same charts in the shareholder reports for other
mutual funds.
21
The Community Development Fund June 30, 2018 (Unaudited)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
DISCLOSURE OF FUND EXPENSES
--------------------------------------------------------------------------------
NOTE: Because the return is set at 5% for comparison purposes -- NOT your
Fund's actual return -- the account values shown may not apply to your specific
investment.
--------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT ANNUALIZED PAID
VALUE VALUE EXPENSE DURING
1/1/18 6/30/18 RATIOS PERIOD
--------------------------------------------------------------------------------
ACTUAL FUND RETURN
Class A Shares $1,000.00 $ 984.40 1.00% $4.92
HYPOTHETICAL 5% RETURN
Class A Shares 1,000.00 1,019.84 1.00 5.01
* Expenses are equal to the Fund's annualized expense ratio multiplied by
the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
22
FUND INFORMATION
REGISTERED OFFICE P.O. Box 2175
Milwaukee, WI 53201
INVESTMENT ADVISER Community Development Fund Advisors, LLC
6255 Chapman Field Drive
Miami, Florida 33156
DISTRIBUTOR Foreside Fund Services, LLC
Three Canal Plaza, Suite 100
Portland, ME 04101
ADMINISTRATOR SEI Investments Global Funds Services
One Freedom Valley Drive
Oaks, PA 19456
LEGAL COUNSEL Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
CUSTODIAN UMB Bank, N.A.
1010 Grand Avenue
Kansas City, Missouri 64106
TRANSFER AGENT UMB Fund Services, Inc.
235 West Galena Street
Milwaukee, WI 53212
INDEPENDENT REGISTERED Tait, Weller & Baker LLP
PUBLIC ACCOUNTING FIRM 1818 Market Street, Suite 2400
Philadelphia, PA 19103
www.CommunityDevelopmentFund.com
[GRAPHIC OMITTED] 6255 Chapman Field Drive, Miami, FL 33156
T: 305.663.0100 800.203.0209 F: 305.665.2203
ITEM 2. CODE OF ETHICS.
Not applicable for semi-annual report.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable for semi-annual report.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable for semi-annual report.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to open-end management investment companies.
ITEM 6. SCHEDULE OF INVESTMENTS.
Schedule of Investments is included as part of the Report to Shareholders filed
under Item 1 of this form.
Item 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to open-end management investment companies.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable. Effective for closed-end management investment companies for
fiscal years ending on or after December 31, 2005
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT COMPANY AND
AFFILIATED PURCHASERS.
Not applicable to open-end management investment companies.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no changes to the procedures by which shareholders may
recommend nominees to the Registrant's Board of Trustees during the period
covered by this report.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The Registrant's principal executive and principal financial officers, or
persons performing similar functions, have concluded that the Registrant's
disclosure controls and procedures (as defined in Rule 30a-3(c) under the Act
(17 CFR 270.30a-3(c))) as of a date within 90 days of the filing date of the
report, are effective based on the evaluation of these controls and procedures
required by Rule 30a-3(b) under the Act (17 CFR 270.30a-3(b)) and Rules
13a-15(b) or 15d-15(b) under the Exchange Act (17 CFR 240.13a-15(b) or
240.15d-15(b)).
(b) There has been no change in the Registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d))
that occurred during the second fiscal quarter of the period covered by this
report that has materially affected, or is reasonably likely to materially
affect, the Registrant's internal control over financial reporting.
ITEM 12. DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT
INVESTMENT COMPANIES.
Not applicable.
ITEMS 13. EXHIBITS.
(a)(1) Not applicable for semi-annual report.
(a)(2) A separate certification for the principal executive officer and the
principal financial officer of the Registrant as required by Rule 30a-2(a)
under the Investment Company Act of 1940, as amended (17 CFR 270.30a-2(a)), are
filed herewith.
(b) Officer certifications as required by Rule 30a-2(b) under the Investment
Company Act of 1940, as amended (17 CFR 270.30a-2(b)) also accompany this
filing as an Exhibit.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) The Community Development Fund
By (Signature and Title) /s/ Kenneth H. Thomas, Ph.D.
-------------------------------
Kenneth H. Thomas, Ph.D.
President
Date: September 6, 2018
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title) /s/ Kenneth H. Thomas, Ph.D.
-------------------------------
Kenneth H. Thomas, Ph.D.
President
Date: September 6, 2018
By (Signature and Title) /s/ Eric Kleinschmidt
-------------------------------
Eric Kleinschmidt
Treasurer & CFO
Date: September 6, 2018