CUFUND
======
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Adjustable Rate Portfolio
(BULLET)
Short-Term Maturity Portfolio
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ANNUAL REPORT
TO
SHAREHOLDERS
5/31/96
THIS INFORMATION MUST BE PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS.
SOUTHWEST CORPORATE FEDERAL CREDIT UNION
INVESTMENT ADVISER
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<PAGE>
CUFUND
THE CREDIT UNION FAMILY OF FUNDS
To Our Shareholders:
CUFUND, The Credit Union Family of Funds, has been serving natural person credit
union investment needs since its inception in June, 1992. During this period,
the Adjustable Rate Portfolio and the Short-Term Maturity Portfolio have
provided credit unions with excellent investment options.
CUFUND remains unique in the mutual fund industry as it is the only mutual fund
to be advised by a credit union, Southwest Corporate Federal Credit Union. As a
result, CUFUND is uniquely positioned to respond to the concerns and changes of
natural person credit unions, as well as the continually changing regulatory
environment. As the regulatory environment becomes tighter, we believe that the
flexibility and investment expertise inherent to the Portfolios of CUFUND will
allow credit unions to continue to take advantage of all types of securities
available to them in one easy package.
Over the past four years it has been the pleasure of Southwest Corporate Federal
Credit Union, the adviser, SEI Financial Management Corporation, the
administrator, and SEI Financial Services Company, the distributor, to offer
CUFUND. We thank you for your support and participation in CUFUND.
Sincerely,
/s/David G. Lee
David G. Lee
President
<PAGE>
CUFUND
MANAGEMENT'S DISCUSSION & ANALYSIS
ADJUSTABLE RATE PORTFOLIO-- LINDA K. BOWERS
SOUTHWEST CORPORATE FEDERAL CREDIT UNION
The investment objective of the Adjustable Rate Portfolio (the "Portfolio") is
to seek high current income while reducing principal volatility. The Portfolio's
investment strategy reduces principal volatility by concentrating on securities
whose interest rates reset monthly or semi-annually, based on the one-month and
six-month London Interbank Offered Rate (LIBOR) for U.S. dollar deposits and
certificates of deposit indices, and have relatively high lifetime interest rate
caps. These types of securities tend to have a relatively short effective
duration, thus helping to reduce net asset value (NAV) volatility.
The Federal Reserve Board decreased the target rate on loans to depository
institutions (the"Fed Funds rate") by 25 basis points in February, 1996. The
targeted Fed Funds rate was 5.25% as of May 31, 1996. Interest rates across the
yield curve remained relatively stable throughout the spring and most economists
agreed that the Federal Open Market Committee (FOMC) would continue to hold
rates steady. Recent economic data has pointed toward stronger growth trends,
however inflation has continued to stay in an acceptable range (within 2.50% to
3.50%). Anticipation of the FOMC tightening monetary policy has forced interest
rates upward and the yield curve to steepen. Because the inflation component has
stayed well behaved, we expect rates to trade within a 25 basis points range
throughout the summer, with possible action from the FOMC in late summer or
early fall.
During the latter part of 1995 and the first quarter of 1996, the
adviser concentrated on increasing the ability of the Portfolio to maintain a
stable NAV by increasing the percentage of highly interest rate sensitive
securities. This included the following types of securities: Agency Backed,
monthly LIBOR floaters with high lifetime caps and short average lives and
well-structured Collateralized Mortgage Obligation products. This strategy has
helped reduce the effective duration of the Portfolio in the past year from .83
years to .41 years.
The adviser will continue with this conservative strategy as the threat of
higher interest rates looms on the horizon.
COMPARISON OF CHANGE IN THE VALUE OF A $100,000 INVESTMENT IN THE
ADJUSTABLE RATE PORTFOLIO, VERSUS THE 1 MONTH LIBOR INDEX
Shown immediately following the Advisor's Discussion of Fund Performance are two
line graphs depicting the growth (including reinvestment of dividends and
capital gains) of a hypothetical investment of $100,000 as compared with the
growth of a hypothetical investment of $100,000 in the 1 Month Libor Index.
CHART
[GRAPHIC OMITTED]
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Average Annual Return
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Inception
1 Year 3 Year to Date*
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6.29% 4.90% 4.74%
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Adjustable Rate Portfolio
Comparison of change in the value of a $100,000 investment
Period Ended Growth of $100,000 Growth of $100,000
invested in the CuFund invested in the 1 Month
Libor Index
June-92 $100,000 $100,000
May-93 $103,906 $103,110
May-94 $107,221 $106,739
May-95 $112,850 $113,112
May-96 $119,948 $119,740
<PAGE>
CUFUND
MANAGEMENT'S DISCUSSION & ANALYSIS
SHORT-TERM MATURITY PORTFOLIO-- BRUCE M. FOX
SOUTHWEST CORPORATE FEDERAL CREDIT UNION
The investment objective of the Short-Term Maturity Portfolio (the "Portfolio")
is to seek a high level of income consistent with safety of capital. The primary
investment strategy undertaken by the adviser of the Portfolio was a modified
"buy and hold" strategy. The assets of the Portfolio are distributed between
U.S. Agency and various Mortgage-Backed Securities (MBS). Usually, the
securities in the Short-Term Maturity Portfolio maintain an average-weighted
maturity of three years or less.
The Federal Reserve Board decreased the target rate on loans to depository
institutions (the "Fed Funds rate") by 25 basis points in February, 1996.
The targeted Fed Funds rate was 5.25% as of May 31, 1996. The bond market
continued to rally in the first half of the quarter but then backed up since
the middle of February because of stronger economic indicators, particularly
employment and stronger than expected economic growth.
During the 1st quarter of 1996, the adviser adopted a neutral position to
maintain the duration of the Portfolio at approximately 1.6 years. The duration
of the Portfolio was 1.58 years on May 31, 1996. At month end, approximately
87.3% of the Portfolio was in MBS, 7.3% of the Portfolio was in cash or cash
equivalents, and 5.4% of the Portfolio was in Treasuries.
The adviser will continue to maintain a neutral strategy, focusing on
maintaining a 1.5 to 1.7 year duration to take advantage of the current interest
rate environment. If market volatility persists and interest rates increase, a
portion of the available funds will be extended into longer duration holdings.
COMPARISON OF CHANGE IN THE VALUE OF A $100,000
INVESTMENT IN THE SHORT-TERM MATURITY PORTFOLIO, VERSUS THE
1 YEAR CONSTANT MATURITY TREASURY INDEX
Shown immediately following the Advisor's Discussion of Fund Performance are two
line graphs depicting the growth (including reinvestment of dividends and
capital gains) of a hypothetical investment of $100,000 as compared with the
growth of a hypothetical investment of $100,000 in the 1 Year Constant Maturity
Treasury Index.
CHART
[GRAPHIC OMITTED]
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Average Annual Return
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Inception
1 Year 3 Year to Date*
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5.73% 4.25% 4.37%
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Adjustable Rate Portfolio
Comparison of change in the value of a $100,000 investment
Period Ended Growth of $100,000 Growth of $100,000
invested in the CuFund invested in the 1 Year
Constant Maturity
Treasury Index
June-92 $100,000 $100,000
May-93 $104,078 $103,222
May-94 $104,317 $107,268
May-95 $111,536 $113,050
May-96 $117,927 $119,396
<PAGE>
STATEMENT OF NET ASSETS CUFUND
May 31, 1996
Face Market
Amount Value
(000) ADJUSTABLE RATE PORTFOLIO (000)
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U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS (45.2%)
FHLMC
$ 2,649 Class # 1512-M, 5.425%, 05/15/08 (A) CMO ............. $ 2,557
7,282 Class # 1611-G, 5.938%, 05/15/21 (A) CMO ............. 7,309
8,278 Class # 1546-FC, 5.938%, 12/15/21 (A) CMO ............ 8,316
9,857 Class # 1671-J, 5.963%, 12/15/22 (A) CMO ............. 9,868
4,322 Pool # 97003, 7.286%, 01/01/23 (A) (B) ............... 4,387
7,904 Pool # 970021, 7.417%, 01/01/23 (A) (B) .............. 8,022
FNMA
6,008 Class # 94-12 PB, 5.000%, 11/25/00 CMO ............... 5,979
1,292 Class # 92-28F, 5.938%, 05/25/07 (A) CMO ............. 1,297
16,500 Class # 92-112 FC, 6.138%, 06/25/18 (A) CMO .......... 16,684
872 Pool # 165655, 7.555%, 05/01/22 (A) (B) .............. 890
763 Pool # 169164, 7.935%, 06/01/22 (A) (B) .............. 771
3,401 Pool # 166291, 7.414%, 06/01/22 (A) (B) .............. 3,454
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Total U.S. Agency Mortgage-Backed Obligations
(Cost $69,488) ....................................... 69,534
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NON-AGENCY MORTGAGE-BACKED OBLIGATIONS (45.2%)
Capstead Securities IV
2,768 Class # 92-9 A, 6.560%, 07/25/22 (A) (B) ............. 2,747
Citicorp Mortgage Securities
650 Class # 92-9 A4, 6.288%, 04/25/21 (A) CMO ............ 651
DLJ Mortgage Acceptance
3,756 Class # 94-Q1 1A1, 7.190%, 03/25/24 (A) (B) .......... 3,754
Fund America Investors II
2,067 Class # 93-J M, 7.970%, 12/25/23 (A) (B) ............. 2,083
Merrill Lynch Mortgage Investments
7,400 Class # 91-F A2, 6.340%, 06/15/16 (A) (B) ............ 7,351
7,000 Class # 92-C A2, 6.288%, 06/15/17 (A) (B) ............ 7,000
Prudential Home Mortgage Securities
5,477 Class # 93-5 A7, 6.138%, 03/25/00(A) CMO ............. 5,488
Residential Funding Mortgage Securities I
100 Class # 92-S33 A4, 6.288%, 09/25/19 (A) CMO .......... 100
Resolution Trust
2,163 Class # 92-M4 A4, 6.238%, 09/25/21 (A) CMO ........... 2,153
4,794 Class # 92-16 A4, 7.794%, 08/25/22 CMO ............... 4,854
1,946 Class # 92-6 B9, 6.388%, 11/25/26 (A) CMO ............ 1,934
1,770 Class # 92-3 A4, 5.988%, 09/25/30 (A) CMO ............ 1,772
Ryland Mortgage Securities
1,980 Class # 92-L6 A2, 7.500%, 05/25/22 (A) (B) ........... 2,027
1,920 Class # 92-L9 A2, 7.720%, 07/25/22 (A) (B) ........... 1,929
5,000 Class # 92-L9 A1B, 7.780%, 07/25/22 (A) (B) .......... 5,031
Salomon Brothers Mortgage Securities VII
3,382 Class # 92-2 A4, 7.180%, 06/25/22 (A) (B) ............ 3,393
2,206 Class # 92-4 A5, 7.450%, 09/25/22 (A) (B) ............ 2,230
3,461 Class # 92-6 A1, 7.370%, 11/25/22 (A) (B) ............ 3,499
<PAGE>
STATEMENT OF NET ASSETS CUFUND
May 31, 1996
Face Market
Amount Value
(000)/Shares ADJUSTABLE RATE PORTFOLIO (Concluded) (000)
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Saxon Mortgage Securities
$ 546 Class # 92-1 A2, 7.740%, 09/25/22 (A) (B) ..............$ 549
1,925 Class # 92-3 A1, 7.270%, 11/25/22 (A) (B) .............. 1,939
3,773 Class # 93-1 A, 7.820%, 02/25/23 (A) (B) ............... 3,794
Sears Mortgage Securities
1,557 Class # 93-3 F, 6.388%, 07/25/20 (A) CMO ............... 1,560
Securitized Assets Sales
3,626 Class # 93-8 A2, 7.680%, 12/26/23 (A) CMO .............. 3,680
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Total Non-Agency Mortgage-Backed Obligations
(Cost $69,719) ................................... 69,518
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U.S. GOVERNMENT AGENCY OBLIGATIONS (8.8%)
FHLMC Discount Notes
6,900 5.220%*, 06/04/96 ...................................... 6,896
1,250 5.250%*, 06/07/96 ...................................... 1,249
2,695 5.230%*, 06/12/96 ...................................... 2,690
FNMA Discount Notes
700 5.180%*, 06/17/96 ...................................... 698
2,000 5.180%*, 06/17/96 ...................................... 1,995
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Total U.S. Government Agency Obligations
(Cost $13,530) ................................... 13,528
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CASH EQUIVALENT (0.3%)
376 SEI Liquid Asset Trust Treasury Portfolio .................. 376
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Total Cash Equivalent
(Cost $376) ...................................... 376
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TOTAL INVESTMENTS (99.5%)
(COST $153,113) .......................................... 152,956
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OTHER ASSETS AND LIABILITIES (0.5%)
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Total Other Assets and Liabilities, Net ............ 804
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NET ASSETS:
Portfolio shares (unlimited authorization -- no par
value) based on 15,430,968 outstanding shares of
beneficial interest ...................................... 154,614
Distributions in Excess of Net Investment Income ........... (23)
Accumulated Net Realized Loss on Investments ............... (674)
Net Unrealized Depreciation of Investments ................. (157)
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TOTAL NET ASSETS (100.0%) ..........................$153,760
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NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE ......................... $9.96
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* Effective Yield
(A) Adjustable Rate Features. Rate shown on the Statement of Net Assets is the
rate in effect on May 31, 1996.
(B) Pass-Through Security
CMO --Collateralized Mortgage Obligation
FHLMC --Federal Home Loan Mortgage Corporation
FNMA --Federal National Mortgage Association
The accompanying notes are an integral part of these financial statements.
<PAGE>
STATEMENT OF NET ASSETS CUFUND
May 31, 1996
Face Market
Amount Value
(000) SHORT-TERM MATURITY PORTFOLIO (000)
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U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS (52.8%)
FHLMC
$ 315 Class # 1275 VK, 7.000%, 01/15/97 CMO .................. $ 316
399 Class # 1640-F, 5.838%, 10/15/07 (A) CMO ............... 399
2,500 Class # 1714 B, 5.250%, 05/15/09 CMO ................... 2,490
1,000 Class # 1611 C, 5.000%, 03/15/13 CMO ................... 988
1,234 Class # 1543 TC, 5.400%, 06/15/13 CMO .................. 1,229
1,000 Class # 1611 D, 5.250%, 01/15/16 CMO ................... 973
1,000 Class # 1671 D, 5.750%, 11/15/16 CMO ................... 979
1,000 Class # 1650 D, 5.400%, 04/15/24 CMO ................... 974
FNMA
226 Class # 92-131 GA, 7.000%, 05/25/97 CMO ................ 227
298 Class # 93-11C, 5.750%, 04/25/02 CMO ................... 296
2,000 Class # 92-155 E, 6.700%, 08/25/04 CMO ................. 1,978
99 Class # 93-99 PB, 4.500%, 06/25/08 CMO ................. 99
536 Class # G 93-9 C, 5.500%, 03/25/10 CMO ................. 534
1,000 Class # 93-207 B, 4.850%, 06/25/10 CMO ................. 985
909 Class # 93-20 C, 5.700%, 08/25/12 CMO .................. 903
728 Class # 92-132 PE, 7.250%, 07/25/15 CMO ................ 731
1,000 Class # 93-203 PD, 5.250%, 08/25/15 CMO ................ 973
129 Class # 92-28 A, 6.250%, 12/25/16 CMO .................. 129
1,000 Class # 94-76-C, 5.000%, 12/25/17 CMO .................. 976
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Total U.S. Agency Mortgage-Backed Obligations
(Cost $16,373) ................................... 16,179
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NON-AGENCY MORTGAGE-BACKED OBLIGATIONS (34.5%)
Countrywide Mortgage Backed Securities
626 Class # 94-D A1, 5.938%, 03/25/24 (A) CMO .............. 617
First Boston Mortgage Securities
74 Class # 93-5 A13, 7.300%, 10/25/97 CMO ................ 74
General Electric Mortgage Services
1,472 Class # 94-7 A4, 5.500%, 02/25/09 CMO .................. 1,451
Housing Securities
256 Class # 94-1 A4, 5.500%, 07/25/02 CMO .................. 255
Prudential Home Mortgage Securities
1,102 Class # 93-43 A1, 5.400%, 10/25/23 CMO ................. 1,075
1,500 Class # 93-57 A2, 5.500%, 12/25/23 CMO ................. 1,483
3,000 Class # 93-54 A21, 5.500%, 01/25/24 CMO ................ 2,927
Residential Funding Mortgage Securities I
225 Class # 92-S30 A5, 7.000%, 04/25/97 CMO ................ 224
1,093 Class # 93-S40 A1, 5.838%, 11/25/23 (A) CMO ............ 1,078
1,157 Class # 93-S45 A3, 6.750%, 12/25/23 CMO ................ 1,153
228 Class # 94-S1 A1, 4.750%, 01/25/24 CMO ................. 226
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Total Non-Agency Mortgage-Backed Obligations
(Cost $10,726) ................................... 10,563
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<PAGE>
STATEMENT OF NET ASSETS CUFUND
May 31, 1996
Face Market
Amount Value
(000)/Shares SHORT-TERM MATURITY PORTFOLIO (Concluded) (000)
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U.S. GOVERNMENT AGENCY OBLIGATIONS (2.5%)
Federal Farm Credit Bank Discount Note
$ 775 5.260%*, 06/05/96 ................................... $ 774
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Total U.S. Government Agency Obligations
(Cost $775) ................................... 774
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U.S. TREASURY OBLIGATIONS (5.4%)
U.S. Treasury Notes
1,000 5.125%, 02/28/98 .................................... 982
700 5.000%, 02/15/99 .................................... 676
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Total U.S. Treasury Obligations
(Cost $1,676) .................................... 1,658
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CASH EQUIVALENTS (4.5%)
799 SEI Liquid Asset Trust Government Portfolio ............. 799
585 SEI Liquid Asset Trust Treasury Portfolio ............... 585
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Total Cash Equivalents
(Cost $1,384) ................................. 1,384
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TOTAL INVESTMENTS (99.7%)
(COST $30,934) ........................................ 30,558
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OTHER ASSETS AND LIABILITIES (0.3%)
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Total Other Assets and Liabilities, Net ......... 75
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NET ASSETS:
Portfolio shares (unlimited authorization -- no
par value) based on 3,139,592 outstanding shares
of beneficial interest ................................ 31,761
Accumulated Net Realized Loss on Investments ............ (752)
Net Unrealized Depreciation of Investments .............. (376)
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TOTAL NET ASSETS (100.0%) ....................... $30,633
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NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE ................... $9.76
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* Effective Yield
(A) Adjustable Rate Features. Rate shown on the Statement of Net Assets is the
rate in effect on May 31, 1996.
CMO --Collateralized Mortgage Obligation
FHLMC --Federal Home Loan Mortgage Corporation
FNMA --Federal National Mortgage Association
The accompanying notes are an integral part of these financial statements.
<PAGE>
STATEMENT OF OPERATIONS CUFUND
For the year ended 5/31/96
(IN THOUSANDS)
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ADJUSTABLE SHORT-TERM
RATE MATURITY
PORTFOLIO PORTFOLIO
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Investment Income .................................. $ 9,944 $ 1,920
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Expenses:
Investment Advisory Fees ........................ 505 109
Waiver of Investment Advisory Fees .............. (222) (78)
Administrator Fees .............................. 176 38
Custodian Fees .................................. 14 4
Professional Fees ............................... 60 19
Registration Fees ............................... 8 2
Insurance Fees .................................. 1 --
Trustee Fees .................................... 38 11
Printing Fees ................................... 13 7
Amortization of Deferred Organizational Costs ... 11 11
Other ........................................... 10 5
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Total Expenses .............................. 614 128
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Net Investment Income .............................. 9,330 1,792
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Net Realized Loss on Investments ................ (21) (32)
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Net Unrealized Appreciation on Investments ...... 472 150
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Net Realized and Unrealized Gain on Investments .... 451 118
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Net Increase in Net Assets Resulting from Operations $ 9,781 $ 1,910
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Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS CUFUND
(IN THOUSANDS)
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ADJUSTABLE RATE SHORT-TERM MATURITY
PORTFOLIO PORTFOLIO
---------------------- ----------------------
6/1/95 6/1/94 6/1/95 6/1/94
TO 5/31/96 TO 5/31/95 TO 5/31/96 TO 5/31/95
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<S> <C> <C> <C> <C> <C>
Investment Activities:
Net Investment Income ......................................... $ 9,330 $ 9,086 $ 1,792 $ 2,114
Net Realized Loss on Investments .............................. (21) (638) (32) (599)
Net Unrealized Appreciation on Investments .................... 472 78 150 999
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Net Increase in Net Assets Resulting from Operations ............. 9,781 8,526 1,910 2,514
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Distributions to Shareholders:
Net Investment Income ......................................... (9,334) (9,024) (1,790) (2,115)
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Capital Share Transactions:
Proceeds from Shares Issued ................................... 5,000 5,700 600 8,200
Shares Issued in Lieu of Cash Distributions ................... 662 1,004 151 579
Cost of Shares Redeemed ....................................... (14,496) (27,545) (5,288) (15,865)
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Decrease in Net Assets from Capital Share Transactions ........... (8,834) (20,841) (4,537) (7,086)
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Total Decrease in Net Assets ............................. (8,387) (21,339) (4,417) (6,687)
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Net Assets:
Beginning of Period ........................................... 162,147 183,486 35,050 41,737
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End of Period (1) ............................................. $153,760 $162,147 $30,633 $35,050
===================================================================================================================
Capital Share Transactions:
Shares Issued ................................................. 502 574 62 855
Shares Issued in Lieu of Cash Distributions ................... 66 101 15 61
Shares Redeemed ............................................... (1,451) (2,782) (541) (1,663)
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Net Capital Share Transactions ................................... (883) (2,107) (464) (747)
===================================================================================================================
<FN>
Amounts designated as "--" are either $0 or have been rounded to $0.
(1) Including distributions in excess of net investment income (000) of $(23)
and $(19) for Adjustable Rate Portfolio, $(0) and $(2) for Short-Term Maturity
Portfolio at May 31, 1996 and May 31, 1995, respectively.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS CUFUND
FOR THE PERIODS ENDED MAY 31,
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
NET
NET REALIZED AND NET
ASSET UNREALIZED DIVIDENDS ASSET
VALUE NET GAINS FROM NET CAPITAL VALUE
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT GAINS END OF TOTAL
OF PERIOD INCOME INVESTMENTS INCOME DISTRIBUTIONS PERIOD RETURN
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Adjustable Rate Portfolio
1996 $ 9.94 0.59 0.02 (0.59) -- $ 9.96 6.29%
1995 $ 9.96 0.53 (0.02) (0.53) -- $ 9.94 5.25%
1994 $10.02 0.37 (0.06) (0.37) -- $ 9.96 3.19%
1993(1) $10.00 0.38 0.02 (0.38) -- $10.02 4.22%
Short-Term Maturity Portfolio
1996 $ 9.73 0.52 0.03 (0.52) -- $ 9.76 5.73%
1995 $ 9.59 0.50 0.14 (0.50) -- $ 9.73 6.92%
1994 $10.00 0.41 (0.38) (0.41) (0.03) $ 9.59 0.23%
1993(1) $10.00 0.44 0.01 (0.45) -- $10.00 4.77%
============================================================================================
</TABLE>
<TABLE>
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
NET RATIO OF NET EXPENSES INCOME
ASSETS RATIO OF INVESTMENT TO AVERAGE TO AVERAGE
END OF EXPENSES INCOME NET ASSETS NET ASSETS PORTFOLIO
PERIOD TO AVERAGE TO AVERAGE (EXCLUDING (EXCLUDING TURNOVER
(000) NET ASSETS NET ASSETS WAIVERS) WAIVERS) RATE
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<S> <C> <C> <C> <C> <C> <C>
Adjustable Rate Portfolio
1996 $153,760 0.39% 5.92% 0.53% 5.78% 23%
1995 $162,147 0.38% 5.34% 0.51% 5.21% 4%
1994 $183,486 0.38% 3.70% 0.51% 3.57% 67%
1993(1) $172,593 0.39% 3.94% 0.55% 3.78% 71%
Short-Term Maturity Portfolio
1996 $ 30,633 0.38% 5.27% 0.61% 5.04% 42%
1995 $ 35,050 0.38% 5.24% 0.51% 5.11% 53%
1994 $ 41,737 0.38% 4.23% 0.55% 4.06% 148%
1993(1) $ 20,288 0.39% 4.69% 0.64% 4.44% 188%
=====================================================================================
<FN>
Amounts designated as "--" are either $0 or have been rounded to $0.
(1) The Adjustable Rate Portfolio and Short-Term Maturity Portfolio commenced
operations on June 15, 1992. Ratios and total returns for this period have been
annualized.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS CUFUND
May 31, 1996
1. Organization:
CUFUND (the "Trust") was organized as a Massachusetts business trust under a
Declaration of Trust dated November 22, 1991 and had no operations through June
14, 1992 other than those related to organizational matters and the sale of
initial shares of beneficial interest to SEI Financial Management Corporation
(the "Administrator") on January 16, 1992.
The Trust is registered under the Investment Company Act of 1940, as amended, as
a diversified open-end investment company with two portfolios: the Adjustable
Rate Portfolio and the Short-Term Maturity Portfolio (the "Portfolios"). The
Trust's prospectus provides a description of each Portfolio's investment
objectives, policies and strategies.
2. Significant Accounting Policies:
The following is a summary of significant accounting policies followed by the
Trust in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles.
SECURITIES VALUATION--Investment securities of the Portfolios which are
listed on a securities exchange for which market quotations are available
are valued at the last quoted sales price for such securities on each
business day, or, if there is no such reported sales price on the valuation
date, at the most recently quoted bid price. Unlisted securities for which
market quotations are readily available are valued at the most recently
quoted price. Debt obligations with sixty days or less remaining until
maturity may be valued at their amortized cost. Under this valuation
method, purchase discounts and premiums are accreted and amortized ratably
to maturity and are included in interest income. Securities for which
quotations are not readily available are valued at fair value using methods
determined in good faith by the Board of Trustees.
SECURITY TRANSACTIONS AND RELATED INCOME--Security transactions are
accounted for on the trade date of the security purchase or sale. Costs
used in determining net realized capital gains and losses on the sale of
securities are those of the specific securities sold, adjusted for the
accretion and amortization of purchase discounts and premiums during the
respective holding period. Gains and losses realized on sales of securities
are determined on a first-in first-out (FIFO) basis. Interest income and
expenses are recognized on the accrual basis. Purchase discounts and
premiums are accreted and amortized over the life of each security and
recorded as interest income using a method which approximates the effective
interest method.
DISTRIBUTIONS TO SHAREHOLDERS--Distributions of net investment income for
each Portfolio are declared daily and paid monthly on the first business
day. Any net realized capital gains will be distributed at least annually.
FEDERAL INCOME TAXES--The Trust's policy is to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies
and to distribute all of its taxable income and net capital gains to its
shareholders. Accordingly, no provision for Federal income taxes is
required in the financial statements.
ORGANIZATION COSTS--The Trust incurred organization costs in connection
with its start-up. These costs have been deferred in the accounts of the
Portfolios and are being amortized on a straight-line basis over a period
of sixty months commencing with operations. In the event that any of the
initial shares of the Trust are redeemed by any holder thereof during the
period that the Trust is amortizing its organizational costs, the
redemption proceeds payable to the holder thereof by the Trust will be
reduced by the unamortized organizational costs in the same ratio as the
number of initial shares being redeemed bears to the number of initial
shares outstanding at the time of redemption.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued) CUFUND
May 31, 1996
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS--The
preparation of financial statements, in conformity with generally accepted
accounting principles, requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those
estimates.
OTHER--Expenses that are directly related to one of the Portfolios are
charged directly to that Portfolio. Other operating expenses of the Trust
are prorated to the Portfolios on the basis of relative net assets.
3. Administrative and Distribution Agreements:
The Trust and the Administrator are parties to an administrative agreement dated
May 1, 1992, under which the Administrator provides services for a fee that is
computed daily and payable monthly, at an annual rate which is the greater of
.09% of the average daily net assets of the Trust up to $750 million, and .0725%
of the average daily net assets of the Trust exceeding $750 million, or
$214,000. Certain officers of the Trust are also officers of the Administrator
and/or Distributor. Such officers are paid no fees by the Trust for serving in
their respective roles.
SEI Financial Services Company (the "Distributor") acts as the distributor of
the shares of the Trust. No compensation is paid to the Distributor for
distribution services.
4. Investment Advisory and Custodian Agreements:
The Trust and Southwest Corporate Federal Credit Union (the "Adviser") are
parties to an investment advisory agreement dated May 1, 1992, under which the
Adviser receives an annual fee, which is calculated daily and paid monthly, at
an annual rate of .32% of the average daily net assets of each Portfolio. The
Adviser has voluntarily agreed to waive its fee and reimburse the Trust for
other expenses to the extent necessary to limit the annual operating expenses of
each Portfolio to .39% of average daily net assets.
The Trust and CoreStates Bank, N.A. (the "Custodian") are parties to a custodial
agreement dated May 1, 1992 under which the Custodian holds cash, securities and
other assets of the Trust as required by the Investment Company Act of 1940. The
Custodian plays no role in determining the investment policies of the Trust or
which securities are to be purchased or sold in the Portfolios.
5. Investment Transactions:
For the period ended May 31, 1996, purchases and sales of investment securities
and United States Government Obligations (other than short-term securities) were
as follows (000):
U.S. GOVERNMENT OTHER INVESTMENT
SECURITIES SECURITIES
---------------- -----------------
PURCHASES SALES PURCHASES SALES
---------------- -----------------
Adjustable
Rate
Portfolio $18,400 $14,447 $10,248 $28,722
Short-Term
Maturity
Portfolio 8,321 9,949 1,412 2,086
The total cost of securities held for Federal income tax purposes at May 31,
1996 for the Adjustable Rate Portfolio and the Short-Term Maturity Portfolio was
not materially different from amounts reported for financial reporting purposes.
The Adjustable Rate Portfolio had net unrealized depreciation of ($156,996),
which was composed of gross unrealized appreciation of $308,098 and gross
unrealized depreciation of ($465,094) for tax purposes. The Short-Term Maturity
Portfolio had net unrealized depreciation of ($376,199), which was composed of
gross unrealized appreciation of $9,043 and gross unrealized depreciation of
($385,242) for tax purposes.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Concluded) CUFUND
May 31, 1996
6. Capital Loss Carryforwards:
The capital loss carryforwards at May 31, 1996 for Federal income tax purposes
are as follows:
EXPIRATION
AMOUNT DATE
------- ----------
Adjustable Rate
Portfolio $ 4,605 2001
10,425 2002
558,430 2003
37,771 2004
Short-Term
Maturity Portfolio 383,533 2003
337,054 2004
Subsequent to 10/31/95 the Adjustable Rate Portfolio and the Short-Term Maturity
Portfolio recognized net capital losses for tax purposes that have been deferred
to 1996 of $62,774 and $31,213, respectively. The capital loss carryforwards and
post 10/31/95 deferred losses can be used to offset future net realized gains.
7. Variable Rate Financial Instruments:
The Adjustable Rate Portfolio's investment policies include investing, under
normal circumstances, at least 65% of its assets in adjustable rate mortgage
securities or other adjustable rate securities that have interest rates that
reset at periodic intervals. Such securities may experience less price
volatility due to changes in market interest rates than other debt securities.
These investments include securities subject to interest rate caps as well as
certain securities that adjust based upon an index whose movements may not
correlate directly with market movements. Both of these items may influence the
pricing of the security. As with other securities, the market values are
adjusted on a daily basis.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees of CUFUND:
We have audited the accompanying statements of net assets of the Adjustable Rate
and Short-Term Maturity Portfolios of CUFUND (the "Trust") as of May 31, 1996,
and the related statements of operations, changes in net assets, and financial
highlights for the periods presented. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 1996, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Adjustable Rate and Short-Term Maturity Portfolios of CUFUND as of May 31, 1996,
the results of their operations, changes in their net assets, and financial
highlights for the periods presented, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Philadelphia, Pa.
July 3, 1996
<PAGE>
NOTICE TO SHAREHOLDERS
(Unaudited)
For Taxpayers filing on a calendar year basis, this notice is for informational
purposes only.
Dear CUFUND Shareholders:
For the fiscal year ended May 31, 1996, each Portfolio is designating long term
capital gains, qualifying dividends and exempt income with regard to
distributions paid during the fiscal year as follows:
<TABLE>
<CAPTION>
(A) (B)
LONG TERM ORDINARY (C) (E)
CAPITAL GAINS INCOME TOTAL (D) TAX (F)
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS QUALIFYING EXEMPT FOREIGN
PORTFOLIO (TAX BASIS) (TAX BASIS) (TAX BASIS) DIVIDENDS(1) INTEREST TAX CREDIT
- ------------------- -------------- ------------- ------------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Adjustable Rate 0% 100% 100% 0% 0% 0%
Short-Term Maturity 0% 100% 100% 0% 0% 0%
<FN>
- ----------
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction.
* Items (A) and (B) are based on a percentage of the Portfolio's total distributions.
** Items (D), (E) and (F) are based on a percentage of ordinary income distributions of the Portfolio.
Please consult your tax adviser for proper treatment of this information.
</FN>
</TABLE>
<PAGE>
NOTES
<PAGE>
NOTES
<PAGE>
INVESTMENT ADVISER
Southwest Corporate Federal Credit Union
7920 Belt Line Road, Suite 1100
Dallas, TX 75240
ADMINISTRATOR
SEI Financial Management Corporation
680 East Swedesford Road
Wayne, PA 19087-1658
DISTRIBUTOR
SEI Financial Services Company
680 East Swedesford Road
Wayne, PA 19087-1658
LEGAL COUNSEL
Morgan, Lewis & Bockius
2000 One Logan Square
Philadelphia, PA 19103
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
1601 Market Street
Philadelphia, PA 19103-2499
CUF-F-006-04
