CUFUND
======
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SHORT-TERM MATURITY PORTFOLIO
*
ADJUSTABLE RATE PORTFOLIO
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SEMI-ANNUAL REPORT
TO
SHAREHOLDERS
11/30/96
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
Short-Term Maturity Portfolio and the Adjustable Rate Portfolio have given
credit unions an excellent investment option.
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 more complex, 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.
CUFUND has maintained a strong performance record since its inception. Over the
past four years it has been our pleasure, Southwest Corporate Federal Credit
Union, the adviser, SEI Fund Resources, the administrator and SEI Financial
Services Company, the distributor, to offer CUFUND. We thank you for your
support and participation in CUFUND.
Sincerely,
SIGNATURE
David G. Lee
President
<PAGE>
CUFUND
INVESTMENT ADVISORY REPORT
SHORT-TERM MATURITY PORTFOLIO -- JIM DYKSTAL, MANAGER
SOUTHWEST CORPORATE FEDERAL CREDIT UNION
NOVEMBER 30, 1996
The investment objective of the Short-Term Maturity 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 were 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 has kept the target rate on loans to depository
institutions steady at 5.25% since February, 1996. The economy is showing signs
of slowing down in the third and fourth quarter after it gained strength in the
second quarter. The market has continued to rally as investors come to believe
that the Federal Reserve Board will not tighten interest rates anytime soon. For
example, the two year Treasury yield was 5.58% on November 30, 1996, down from
6.10% on September 30, 1996.
During the period September 30, 1996 to November 30, 1996, the adviser
maintained the duration of the portfolio to approximately 1.20 years. The
duration of the Portfolio was 1.43 years on September 30, 1996. At November 30,
1996, approximately 31% of the Portfolio was in whole loan MBS, 53% of the
Portfolio was in agency MBS, 12% of the Portfolio was in Treasuries and 4% of
the Portfolio was in cash or cash equivalents.
The Net Asset Value of the Portfolio increased from $9.80 on September 30, 1996
to $9.85 on November 30, 1996. The 30 day yield on the Short-Term Maturity
Portfolio decreased from 5.36% on September 30, 1996 to 5.26% on November 30,
1996, reflective of the overall decrease in interest rates. The adviser will
maintain a slightly bullish strategy, focusing on increasing the Portfolios
duration to approximately 1.50 years to take advantage of the current interest
rate environment. If the economy shows signs of strength and interest rates
increase in response, the Portfolio will invest in shorter duration holdings.
<PAGE>
CUFUND
INVESTMENT ADVISORY REPORT
ADJUSTABLE RATE PORTFOLIO -- MAURICE KERINS III, MANAGER
SOUTHWEST CORPORATE FEDERAL CREDIT UNION
NOVEMBER 30, 1996
The investment objective of the Adjustable Rate Portfolio is to seek high
current income while maintaining principal stability. The investment strategy
used to maintain principal stability has been to concentrate 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 (CD) 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 has kept the target rate on loans to depository
institutions steady at 5.25% since February, 1996. The economy showed signs of
slowing down in the third and fourth quarter, through November 30, 1996, after
it gained strength in the second quarter. The market has continued to rally as
investors come to believe that the Federal Reserve Board will not tighten
interest rates anytime soon. For example, the two year Treasury yield was 5.58%
on November 30, 1996, down from 6.10% on September 30, 1996.
During the period September 30, 1996 to November 30, 1996, the adviser adopted a
slightly bullish position and lengthened the duration of the portfolio from 0.45
years to approximately 0.60 years. At November 30, 1996, approximately 46% of
the Portfolio was in one-month LIBOR floating rate securities, 31% of the
Portfolio was in six-month CD and LIBOR floating rate securities, 12% was in
cash or cash equivalents, and the remaining 11% was in securities based on other
types of indices such as the one year Constant Maturity Treasury Index.
The Net Asset Value of the Portfolio increased from $9.98 on September 30, 1996
to $10.00 on November 30, 1996. The 30 day yield on the Adjustable Rate
Portfolio increased to 5.72% on November 30, 1996 from 5.67% on September 30,
1996. The pickup in yield is due to investing cash into Adjustable Rate Mortgage
Securities. The adviser will maintain a slightly bullish strategy, focusing on
increasing the Portfolios duration to approximately 0.65 years to take advantage
of the current interest rate environment. If the economy shows signs of strength
and interest rates increase in response, the Portfolio will invest in shorter
duration holdings.
<PAGE>
STATEMENT OF NET ASSETS CUFUND
November 30, 1996 (Unaudited)
SHORT-TERM MATURITY PORTFOLIO
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Par Value
Description (000) (000)
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U.S. Agency Mortgage-Backed Obligations--52.4%
FHLMC Class # 1275 VK CMO
7.000%, 01/15/97 $ 64 $ 63
FHLMC Class # 1465-C
6.000%, 02/15/03 1,000 997
FHLMC Class # 1490-Pe
5.750%, 07/15/06 1,000 995
FHLMC Class # 1640-F CMO
5.838%, 10/15/07 (A) 366 366
FHLMC Class # 1714 B CMO
5.250%, 05/15/09 845 843
FHLMC Class # 1543 TC CMO
5.400%, 06/15/13 770 768
FHLMC Class # 1611 C CMO
5.000%, 03/15/13 1,000 995
FHLMC Class # 1611 D CMO
5.250%, 01/15/16 1,000 988
FHLMC Class # 1671 D CMO
5.750%, 11/15/16 1,000 995
FHLMC Class # 1650 D CMO
5.400%, 04/15/24 1,000 993
FNMA Class # 92-131 GA CMO
7.000%, 05/25/97 107 107
FNMA Class # 93-11C CMO
5.750%, 04/25/02 171 171
FNMA Class # 92-155 E CMO
6.700%, 08/25/04 2,000 2,008
FNMA Class # 92-175 PE
6.500%, 10/25/04 1,250 1,251
FNMA Class # G 93-9 C CMO
5.500%, 03/25/10 63 63
FNMA Class # 93-207 B CMO
4.850%, 06/25/10 935 929
FNMA Class # 93-20 C CMO
5.700%, 08/25/12 630 628
FNMA Class # 92-132 PE CMO
7.250%, 07/25/15 485 486
FNMA Class # 93-203 PD CMO
5.250%, 08/25/15 1,000 988
FNMA Class # 94-76-C CMO
5.000%, 12/25/17 1,000 989
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Total U.S. Agency Mortgage-
Backed Obligations
(Cost $15,667) 15,623
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Par Value
Description (000) (000)
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Non-Agency Mortgage-Backed Obligations--30.8%
Countrywide Mortgage Backed
Securities Class # 94-D
A1 CMO
5.906%, 03/25/24 (A) $ 587 $ 585
First Boston Mortgage Securities
Class # 93-5 A13 CMO
7.300%, 10/25/97 49 49
General Electric Mortgage Services
Class # 94-7 A4 CMO
5.500%, 02/25/09 1,237 1,229
Prudential Home Mortgage
Securities Class # 93-43
A1 CMO
5.400%, 10/25/23 947 932
Prudential Home Mortgage
Securities Class # 93-54
A21 CMO
5.500%, 01/25/24 3,000 2,963
Prudential Home Mortgage
Securities Class # 93-57
A2 CMO
5.500%, 12/25/23 1,500 1,491
Residential Funding Mortgage
Securities I Class # 93-S40
A1 CMO
5.838%, 11/25/23 (A) 983 977
Residential Funding Mortgage
Securities I Class # 93-S45
A3 CMO
6.750%, 12/25/23 955 961
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Total Non-Agency Mortgage-
Backed Obligations
(Cost $9,252) 9,187
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U.S. Government Agency Obligations--3.7%
FHLMC
5.324%*, 12/12/96 600 599
FNMA
5.290%*, 12/06/96 500 499
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Total U.S. Government
Agency Obligations
(Cost $1,099) 1,098
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<PAGE>
STATEMENT OF NET ASSETS CUFUND
November 30, 1996 (Unaudited)
SHORT-TERM MATURITY PORTFOLIO (concluded)
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Par Value
Description (000) (000)
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U.S. Treasury Obligations--12.4%
U.S. Treasury Notes
5.375%, 11/30/97 $1,000 $ 999
5.125%, 02/28/98 1,000 995
6.000%, 05/31/98 1,000 1,007
5.000%, 02/15/99 700 691
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Total U.S. Treasury Obligations
(Cost $3,675) 3,692
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Cash Equivalents--0.5%
SEI Daily Income Trust
Government Fund 68 68
SEI Daily Income Trust
Treasury Fund 89 89
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Total Cash Equivalents
(Cost $157) 157
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Total Investments--99.8%
(Cost $29,850) 29,757
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Other Assets and Liabilities, Net--0.2% 59
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Value
Description (000)
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Net Assets:
Portfolio Shares (unlimited
authorization -- no par
value) based on 3,027,463
outstanding shares of
beneficial interest $30,661
Distributions in Excess of Net
Investment Income (2)
Accumulated Net Realized
Loss on Investments (750)
Net Unrealized Depreciation
of Investments (93)
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Total Net Assets--100.0% $29,816
=======
Net Asset Value, Offering Price and
Redemption Price Per Share $ 9.85
=======
* Effective Yield at date of purchase
CMO -- Collateralized Mortgage Obligation
FHLMC -- Federal Home Loan Mortgage Corporation
FNMA -- Federal National Mortgage Association
(A) Adjustable Rate Features. Rate shown on the Statement of Net Assets is the
rate in effect on November 30, 1996.
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF NET ASSETS CUFUND
November 30, 1996 (Unaudited)
ADJUSTABLE RATE PORTFOLIO
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Par Value
Description (000) (000)
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U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS--47.6%
FHLMC Class # 1512-M CMO
5.289%, 05/15/08 (A) $ 2,298 $ 2,215
FHLMC Class # 1546-FC CMO
5.938%, 12/15/21 (A) 7,533 7,580
FHLMC Class # 1611-G CMO
5.938%, 05/15/21 (A) 6,503 6,527
FHLMC Class 1671-J CMO
5.838%, 12/15/22 (A) 8,751 8,761
FHLMC Pool # 970021
7.160%, 01/01/23 (A) (B) 7,393 7,564
FHLMC Pool # 97003
7.036%, 01/01/23 (A) (B) 3,594 3,653
FNMA Class # 92-28F CMO
5.906%, 05/25/07 (A) 1,135 1,141
FNMA Class # 92-112 FC CMO
6.106%, 06/25/18 (A) 16,500 16,634
FNMA Pool # 165655
6.930%, 05/01/22 (A) (B) 866 895
FNMA Pool # 166291
7.030%, 06/01/22 (A) (B) 2,910 2,981
FNMA Pool # 169164
7.389%, 06/01/22 (A) (B) 611 620
FNMA Pool # 354900
5.878%, 08/01/26 (A) 6,872 7,015
FNMA Pool # 359751
5.520%, 10/01/26 (A) 4,847 5,041
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Total U.S. Agency Mortgage-
Backed Obligations
(Cost $70,392) 70,627
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NON-AGENCY MORTGAGE-BACKED OBLIGATIONS--40.7%
Citicorp Mortgage Securities
Class # 92-9 A4 CMO
6.875%, 04/25/21 (A) 366 368
DLJ Mortgage Acceptance
Class # 94-Q1 1A1
7.749%, 03/25/24 (A) (B) 2,892 2,932
Fund America Investors II
Class # 93-J M
7.820%, 11/25/23 (A) (B) 1,747 1,764
Merrill Lynch Mortgage Investments
Class # 91-F A2
6.278%, 06/15/16 (A) (B) 7,400 7,451
Merrill Lynch Mortgage
Investments Class # 92-C A2
6.350%, 06/15/17 (A) (B) 7,000 7,000
Prudential Home Mortgage
Securities Class # 93-5
A7 CMO
6.138%, 03/25/00 (A) 5,477 5,472
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Par Value
Description (000) (000)
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Resolution Trust
Class # 92-M4 A4 CMO
6.175%, 09/25/21 (A) $1,874 $1,878
Resolution Trust
Class # 92-16 A4 CMO
7.513%, 08/25/22 4,129 4,196
Resolution Trust
Class # 92-6 B9 CMO
6.298%, 11/25/26 (A) 1,946 1,951
Resolution Trust
Class # 92-3 A4 CMO
5.988%, 09/25/30 (A) 1,541 1,541
Ryland Mortgage Securities
Class # 92-L6 A2
7.471%, 05/25/22 (A) (B) 1,447 1,455
Ryland Mortgage Securities
Class # 92-L9 A1B
7.483%, 07/25/22 (A) (B) 5,000 5,034
Ryland Mortgage Securities
Class # 92-L9 A2
7.480%, 07/25/22 (A) (B) 1,552 1,561
Salomon Brothers Mortgage
Securities VII Class # 92-2 A4
7.092%, 06/25/22 (A) (B) 2,989 3,005
Salomon Brothers Mortgage
Securities VII Class # 92-4 A5
7.374%, 09/25/22 (A) (B) 1,974 1,999
Salomon Brothers Mortgage
Securities VII Class # 92-6 A1
7.329%, 11/25/22 (A) (B) 3,010 3,045
Saxon Mortgage Securities
Class # 92-1 A2
7.559%, 09/25/22 (A) (B) 401 403
Saxon Mortgage Securities
Class # 92-3 A1
7.423%, 11/25/22 (A) (B) 1,478 1,489
Saxon Mortgage Securities
Class # 93-1 A
7.577%, 02/25/23 (A) (B) 3,316 3,340
Sears Mortgage Securities
Class # 93-3 F CMO
6.325%, 07/25/20 (A) 1,330 1,334
Securitized Assets Sales
Class # 93-8 A2 CMO
7.816%, 12/26/23 (A) 3,155 3,220
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Total Non-Agency Mortgage-
Backed Obligations
(Cost $60,344) 60,438
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<PAGE>
STATEMENT OF NET ASSETS CUFUND
November 30, 1996 (Unaudited)
ADJUSTABLE RATE PORTFOLIO (concluded)
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Par Value
Description (000) (000)
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U.S. GOVERNMENT AGENCY OBLIGATIONS--11.0%
FHLMC
5.324%*, 12/12/96 $4,400 $ 4,392
FNMA
5.290%*, 12/06/96 5,000 4,995
FRM
5.340%*, 12/16/96 7,000 6,983
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Total U.S. Government
Agency Obligations
(Cost $16,374) 16,370
-------
CASH EQUIVALENTS--0.6%
SEI Daily Income Trust
Government Fund 421 421
SEI Daily Income Trust
Treasury Fund 505 505
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Total Cash Equivalents
(Cost $926) 926
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TOTAL INVESTMENTS--99.9%
(Cost $148,036) 148,361
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OTHER ASSETS AND LIABILITIES, NET--0.1% 67
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Value
Description (000)
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NET ASSETS:
Portfolio Shares (unlimited
authorization -- no par value)
based on 14,847,825
outstanding shares of
beneficial interest $148,805
Distributions in Excess of Net
Investment Income (16)
Accumulated Net Realized Loss
on Investments (686)
Net Unrealized Appreciation of
Investments 325
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TOTAL NET ASSETS--100.0% $148,428
========
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE $ 10.00
========
* Effective Yield at date of purchase
CMO -- Collateralized Mortgage Obligation
FHLMC -- Federal Home Loan Mortgage Corporation
FNMA -- Federal National Mortgage Association
FRM -- Farmer Mac Discount Note
(A) Adjustable Rate Features. Rate shown on the Statement of Net Assets is the
rate in effect on November 30, 1996.
(B) Pass-Through Security
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF OPERATIONS CUFUND
For the period ended November 30, 1996 (Unaudited)
(IN THOUSANDS)
-------------------------------------
SHORT-TERM MATURITY ADJUSTABLE RATE
PORTFOLIO PORTFOLIO
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Investment Income $ 858 $4,530
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Expenses:
Investment Advisory Fees 49 240
Waiver of Investment Advisory Fees (28) (117)
Administrator Fees 19 88
Custodian Fees 1 7
Professional Fees 6 29
Registration Fees -- 2
Insurance Fees -- 1
Trustee Fees 4 18
Printing Fees 2 8
Amortization of Deferred
Organizational Costs 7 7
Other 1 4
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Total Expenses 61 287
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Net Investment Income 797 4,243
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Net Realized Gain/(Loss) on Investments 2 (12)
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Net Unrealized Appreciation of Investments 283 482
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Net Realized and Unrealized Gain on Investments 285 470
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Net Increase in Net Assets Resulting
from Operations $1,082 $4,713
================================================================================
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS CUFUND
(Unaudited)
<TABLE>
<CAPTION>
(IN THOUSANDS)
------------------------------------------------
SHORT-TERM MATURITY ADJUSTABLE RATE
PORTFOLIO PORTFOLIO
----------------------- -----------------------
06/01/96 06/01/95 06/01/96 06/01/95
TO 11/30/96 TO 05/31/96 TO 11/30/96 TO 05/31/96
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Activities:
Net Investment Income $ 797 $ 1,792 $ 4,243 $ 9,330
Net Realized Gain/(Loss) on Investments 2 (32) (12) (21)
Net Unrealized Appreciation of Investments 283 150 482 472
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Net Increase in Net Assets Resulting from Operations 1,082 1,910 4,713 9,781
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Distributions to Shareholders:
Net Investment Income (799) (1,790) (4,236) (9,334)
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Capital Share Transactions:
Proceeds from Shares Issued -- 600 -- 5,000
Shares Issued in Lieu of Cash Distributions 66 151 294 662
Cost of Shares Redeemed (1,166) (5,288) (6,103) (14,496)
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Decrease in Net Assets from Capital Share Transactions (1,100) (4,537) (5,809) (8,834)
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Total Decrease in Net Assets (817) (4,417) (5,332) (8,387)
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Net Assets:
Beginning of Period 30,633 35,050 153,760 162,147
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End of Period (1) $29,816 $30,633 $148,428 $153,760
====================================================================================================================================
Capital Share Transactions:
Shares Issued 0 62 0 502
Shares Issued in Lieu of Cash Distributions 7 15 30 66
Shares Redeemed (119) (541) (613) (1,451)
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Net Capital Share Transactions (112) (464) (583) (883)
====================================================================================================================================
Amounts designated as "--" are either $0 or have been rounded to $0.
<FN>
(1) Including distributions in excess of net investment income (000) of $(2) and
$(0) for Short-Term Maturity Portfolio, $(16) and $(23) for Adjustable Rate
Portfolio at November 30, 1996 and May 31, 1996, respectively.
The accompanying notes are an integral part of the financial statements.
</FN>
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS CUFUND
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD (Unaudited)
<TABLE>
<CAPTION>
NET
NET REALIZED AND NET NET
ASSET UNREALIZED DIVIDENDS ASSET ASSETS
VALUE NET GAINS FROM NET CAPITAL VALUE END OF
BEGINNING INVESTMENT (LOSSES)ON INVESTMENT GAINS END OF TOTAL PERIOD
OF PERIOD INCOME INVESTMENTS INCOME DISTRIBUTIONS PERIOD RETURN (000)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Short-Term Maturity Portfolio
For the six month period ended November 30,:
1996* $ 9.76 0.26 0.09 (0.26) -- $ 9.85 3.61%+ $ 29,816
For the years ended May 31,:
1996 9.73 0.52 0.03 (0.52) -- 9.76 5.73 30,633
1995 9.59 0.50 0.14 (0.50) -- 9.73 6.92 35,050
1994 10.00 0.41 (0.38) (0.41) (0.03) 9.59 0.23 41,737
1993(1) 10.00 0.44 0.01 (0.45) -- 10.00 4.77 20,288
Adjustable Rate Portfolio
For the six month period ended November 30,:
1996* $ 9.96 0.28 0.04 (0.28) -- $10.00 3.28%+ $148,428
For the years ended May 31,:
1996 9.94 0.59 0.02 (0.59) -- 9.96 6.29 153,760
1995 9.96 0.53 (0.02) (0.53) -- 9.94 5.25 162,147
1994 10.02 0.37 (0.06) (0.37) -- 9.96 3.19 183,486
1993(1) 10.00 0.38 0.02 (0.38) -- 10.02 4.22 172,593
===================================================================================================
</TABLE>
<TABLE>
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
RATIO OF NET EXPENSES INCOME
RATIO OF INVESTMENT TO AVERAGE TO AVERAGE
EXPENSES INCOME NET ASSETS NET ASSETS PORTFOLIO
TO AVERAGE TO AVERAGE (EXCLUDING (EXCLUDING TURNOVER
NET ASSETS NET ASSETS WAIVERS) WAIVERS) RATE
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Short-Term Maturity Portfolio For the six month period ended November 30,:
1996* 0.40% 5.24% 0.59% 5.05% 26%
For the years ended May 31,:
1996 0.38 5.27 0.61 5.04 42
1995 0.38 5.24 0.51 5.11 53
1994 0.38 4.23 0.55 4.06 148
1993(1) 0.39 4.69 0.64 4.44 188
Adjustable Rate Portfolio
For the six month period ended November 30,:
1996* 0.38% 5.66% 0.54% 5.50% 14%
For the years ended May 31,:
1996 0.39 5.92 0.53 5.78 23
1995 0.38 5.34 0.51 5.21 4
1994 0.38 3.70 0.51 3.57 67
1993(1) 0.39 3.94 0.55 3.78 71
============================================================================
<FN>
Amounts designated as "--" are either $0 or have been rounded to $0.
(1) The Short-Term Maturity Portfolio and Adjustable Rate Portfolio commenced
operations on June 15, 1992. Ratios and total returns for this
period have been annualized.
* Ratios for the period have been annualized.
+ Returns are for the period indicated and have not been annualized.
The accompanying notes are an integral part of the financial statements.
</FN>
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS CUFUND
November 30, 1996 (Unaudited)
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 Fund Resources (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 Short-Term
Maturity Portfolio and the Adjustable Rate 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 (Concluded) CUFUND
November 30, 1996 (Unaudited)
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 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 November 30, 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
--------------- ----------- --------------- -----------
Short-Term
Maturity
Portfolio $ 5,218 $ 3,939 $7 $1,483
Adjustable
Rate
Portfolio $16,126 $15,199 $0 $9,242
The total cost of securities held for Federal income tax purposes at November
30, 1996 for the Short-Term Maturity Portfolio and the Adjustable Rate Portfolio
was not materially different from amounts reported for financial reporting
purposes. The Short-Term Maturity Portfolio had net unrealized depreciation of
$(92,808), which was composed of gross unrealized appreciation of $43,412 and
gross unrealized depreciation of $(136,220) for tax purposes. The Adjustable
Rate Portfolio had net unrealized appreciation of $325,179, which was composed
of gross unrealized appreciation of $497,700 and gross unrealized depreciation
of $(172,521) for tax purposes.
6. 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>
INVESTMENT ADVISER
Southwest Corporate Federal Credit Union
7920 Belt Line Road, Suite 1100
Dallas, TX 75240
ADMINISTRATOR
SEI Fund Resources
530 East Swedesford Road
Wayne, PA 19087-1658
DISTRIBUTOR
SEI Financial Services Company
530 East Swedesford Road
Wayne, PA 19087-1658
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, PA 19103
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
1601 Market Street
Philadelphia, PA 19103-2499
CU-F-009-01
