CUFUND
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Short-Term Maturity Portfolio
[BULLET]
Adjustable Rate Portfolio
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SEMI-ANNUAL REPORT
TO
SHAREHOLDERS
11/30/97
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 for the past five years 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 among mutual funds 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 five years it has been our pleasure, Southwest Corporate Federal Credit
Union, the adviser, SEI Fund Resources, the administrator and SEI Investments
Distribution Co., the distributor, to offer CUFUND. We thank all credit unions
for their support of and participation in CUFUND.
Sincerely,
/S/ SIGNATURE
David G. Lee
President
<PAGE>
CUFUND
MANAGEMENT'S DISCUSSION & ANALYSIS OF FUND PERFORMANCE
SHORT-TERM MATURITY PORTFOLIO -- JAMES DYKSTAL, ADVISER
SOUTHWEST CORPORATE FEDERAL CREDIT UNION
NOVEMBER 30, 1997
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 is 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 Portfolio maintain an average-weighted maturity of three years
or less.
Early in 1997, the Federal Reserve Board increased the target rate on loans to
depository institutions (the "Fed Funds rate") from 5.25% to 5.50%. During the
year the economy continued to grow steadily while inflation has been dormant.
While interest rates in the short end of the yield curve have increased, long
term interest rates have decreased. The two year Treasury yield increased from
5.60% in November 1996 to 5.76% in November 1997; the thirty year Treasury yield
decreased from 6.36% to 6.04%, respectively in the same period.
As the economy has continued to show strength in 1997, uncertainty about the
next rate hike by the Federal Open Market Committee (FOMC) has arisen. In
response to this uncertainty with the FOMC and the possibility of increasing
interest rates in the 1st quarter of 1998, the Adviser has maintained a duration
of approximately 1.10 years in the second half of 1997. At November 30th,
approximately 84% of the Portfolio was in MBS and 16% of the Portfolio was in
short-term securities or cash equivalents.
The Net Asset Value (NAV) of the Portfolio was $9.85 on November 30, 1997, the
same as November 30, 1996. The 30 day yield increased to 5.49% on November 30,
1997 from 5.26% on November 30, 1996. In the coming year, the adviser
anticipates maintaining a neutral strategy, focusing on maintaining a stable NAV
and taking advantage of the current interest rate environment when opportunities
arise.
<PAGE>
CUFUND
MANAGEMENT'S DISCUSSION & ANALYSIS OF FUND PERFORMANCE
ADJUSTABLE RATE PORTFOLIO -- MAURICE KERINS III, ADVISER
SOUTHWEST CORPORATE FEDERAL CREDIT UNION
NOVEMBER 30, 1997
The investment objective of the Adjustable Rate Portfolio (the "Portfolio") is
to seek a high level of income from adjustable rate Mortgage-Backed Securities
(MBS) while maintaining principal and effective duration stability. The primary
investment strategy undertaken by the Adviser of the Portfolio has been the
limited addition of securities as paydowns occur. The assets of the Portfolio
were distributed between U.S. Agency and various private label MBS.
Between November 1996 and November 1997, interest rates in the short end of the
yield curve increased while long term interest rates decreased. For example, the
two year Treasury yield increased from 5.60% on November 1996 to 5.76% on
November 1997; the thirty year Treasury yield decreased from 6.36% to 6.04%.
This is generally negative for adjustable rate MBS as homeowners refinance and
replace older adjustable loans with long term fixed rate loans.
At November 30, 1997, the major uncertainty for the adjustable rate MBS market
is the path of prepayments. A continuation of low rates and relative economic
strength would fuel further prepayments. The payoff of four securities in the
fourth quarter was balanced by several liquidations but led to a continued
shortening of effective duration which closed the period at 0.50, down from
0.65. At November 30th, approximately 86% of the Portfolio was in MBS and 14% of
the Portfolio was in short-term securities or cash equivalents.
The Net Asset Value (NAV) of the Portfolio was $10.02 on November 30, 1997, up
from $10.00 on November 30, 1996. The 30 day return decreased to 5.59% on
November 30, 1997 from 5.72% on November 30, 1996. In the coming year, the
adviser will seek to increase duration and ameliorate prepayment risk while
focusing on maintaining NAV and yield.
<PAGE>
STATEMENT OF NET ASSETS CUFUND
November 30, 1997 (Unaudited)
SHORT-TERM MATURITY PORTFOLIO
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Par Value
Description (000) (000)
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U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS (52.8%)
FHLMC Class # 1490 PE CMO
5.750%, 07/15/06 $1,000 $ 997
FHLMC Class # 1640 F CMO
6.150%, 10/15/07 304 304
FHLMC Class # 1590 D CMO
5.500%, 06/15/13 624 622
FHLMC Class # 1706 C CMO
5.250%, 04/15/14 751 750
FHLMC Class # 1611 D CMO
5.250%, 01/15/16 904 900
FHLMC Class # 1671 D CMO
5.750%, 11/15/16 1,000 997
FHLMC Class # 1481 E CMO
6.200%, 11/15/16 1,000 999
FHLMC Class # 1650 D CMO
5.400%, 04/15/24 2,000 1,988
FNMA Class # 94-41 VA CMO
5.500%, 10/25/98 1,754 1,745
FNMA Class # 92-155 E CMO
6.700%, 08/25/04 1,694 1,698
FNMA Class # 92-175 PE CMO
6.500%, 10/25/04 1,175 1,175
FNMA Class # 93-20 C CMO
5.700%, 08/25/12 133 133
FNMA Class # 93-189 PD CMO
5.500%, 04/25/13 936 932
FNMA Class # 92-132 PE CMO
7.250%, 07/25/15 46 46
FNMA Class # 93-203 PD CMO
5.250%, 08/25/15 985 981
FNMA Class # 94-76 C CMO
5.000%, 12/25/17 362 361
GNMA Class # 94-1 PC CMO
7.250%, 12/16/16 964 976
--------
Total U.S. Agency Mortgage-Backed
Obligations
(Cost $15,612) 15,604
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NON-AGENCY MORTGAGE-BACKED OBLIGATIONS (25.7%)
Countrywide Mortgage Securities
Class # 94-D A1 CMO
6.156%, 03/25/24 (A) 498 499
General Electric Mortgage Services
Class # 94-7 A4 CMO
5.500%, 02/25/09 749 745
General Electric Mortgage Services
Class # 94-13 A1 CMO
6.500%, 04/25/24 942 940
Prudential Home Mortgage
Securities Class # 93-43 A1 CMO
5.400%, 10/25/23 595 587
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Par Value
Description (000) (000)
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Prudential Home Mortgage
Securities Class # 93-57
A2 CMO
5.500%, 12/25/23 $1,005 $ 1,000
Prudential Home Mortgage
Securities Class # 93-54
A21 CMO
5.500%, 01/25/24 2,603 2,576
Residential Funding Mortgage
Securities I Class # 93-S40
A1 CMO
6.088%, 11/25/23 709 706
Residential Funding Mortgage
Securities I Class # 93-S45
A3 CMO
6.750%, 12/25/23 557 558
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Total Non-Agency Mortgage-
Backed Obligations
(Cost $7,662) 7,611
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U.S. GOVERNMENT AGENCY OBLIGATIONS (19.6%)
FFCB
5.470%*, 12/15/97 1,714 1,710
5.490%*, 01/21/98 284 282
FHLMC
5.500%*, 12/12/97 860 859
FNMA
5.450%*, 12/18/97 1,950 1,945
6.250%*, 06/16/00 1,000 1,007
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Total U.S. Government
Agency Obligations
(Cost $5,799) 5,803
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U.S. TREASURY OBLIGATION (6.9%)
U.S. Treasury Note
6.500%, 05/31/02 2,000 2,050
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Total U.S. Treasury Obligation
(Cost $2,017) 2,050
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CASH EQUIVALENT (0.7%)
SEI Daily Income Trust
Treasury Fund 206 206
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Total Cash Equivalent
(Cost $206) 206
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TOTAL INVESTMENTS (105.7%)
(Cost $31,296) 31,274
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OTHER ASSETS AND LIABILITIES,
NET (-5.7%) (B) (1,692)
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<PAGE>
STATEMENT OF NET ASSETS CUFUND
November 30, 1997 (Unaudited)
SHORT-TERM MATURITY PORTFOLIO (concluded)
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Value
Description (000)
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NET ASSETS:
Portfolio Shares (unlimited
authorization -- no par
value) based on 3,003,628
outstanding shares of
beneficial interest $30,426
Distributions in excess of net
investment income (2)
Accumulated net realized
loss on investments (820)
Net unrealized depreciation
of investments (22)
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TOTAL NET ASSETS (100.0%) $29,582
=======
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE -- $9.85
=======
* Effective Yield at date of purchase
CMO -- Collateralized Mortgage Obligation
FFCB -- Federal Farm Credit Bank
FHLMC -- Federal Home Loan Mortgage Corporation
FNMA -- Federal National Mortgage Association
GNMA -- Government National Mortgage Association
(A) Adjustable Rate Features. Rate shown on the Statement of Net Assets is the
rate in effect on November 30, 1997.
(B) Other Assets and Liabilities representing greater than five percent of
total net assets include the following:
Payable for securities $(1,745)
The accompanying notes are an integral part of these financial statements.
<PAGE>
STATEMENT OF NET ASSETS CUFUND
November 30, 1997 (Unaudited)
ADJUSTABLE RATE PORTFOLIO
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Par Value
Description (000) (000)
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U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS (54.6%)
FHLMC Class # 1457 PD CMO
6.500%, 07/15/02 $ 114 $ 115
FHLMC Class # 1512 M CMO
5.354%, 05/15/08 (A) 1,726 1,665
FHLMC Class # 1671 C CMO
5.250%, 01/15/14 (A) 351 351
FHLMC Class # 1611 G CMO
6.250%, 05/15/21 (A) 5,094 5,125
FHLMC Class # 1546 FC CMO
6.250%, 12/15/21 (A) 6,219 6,278
FHLMC Class # 1671 J CMO
6.150%, 12/15/22 (A) 6,707 6,728
FHLMC Pool # 970003
7.399%, 01/01/23 (A) 3,253 3,275
FHLMC Pool # 970021
7.439%, 01/01/23 (A) 5,921 6,114
FNMA Class # 92-28 F CMO
6.219%, 05/25/07 (A) 852 859
FNMA Class # 94-87 F CMO
6.169%, 03/25/09 (A) 1,690 1,701
FNMA Class # G93-8 PD CMO
5.750%, 04/25/13 554 552
FNMA Class # G93-15 B CMO
5.500%, 05/25/13 750 747
FNMA Class # 92-112 FC CMO
6.419%, 06/25/18 (A) 16,323 16,395
FNMA Pool # 165655
7.430%, 05/01/22 (A) 791 825
FNMA Pool # 166291
7.455%, 06/01/22 (A) 2,576 2,699
FNMA Pool # 169164
7.818%, 06/01/22 (A) 506 519
FNMA Pool # 354900
7.878%, 08/01/26 (A) 4,611 4,714
FNMA Pool # 359751
7.496%, 09/01/26 (A) 3,275 3,385
FNMA Pool # 364612
7.067%, 11/01/26 (A) 4,554 4,639
FNMA Class # 97-20 F CMO
6.182%, 03/25/27 (A) 4,301 4,296
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Total U.S. Agency Mortgage-Backed
Obligations (Cost $70,532) 70,982
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NON-AGENCY MORTGAGE-BACKED OBLIGATIONS (31.6%)
Citicorp Mortgage Securities
Class # 92-9 A4 CMO
6.600%, 04/25/21 (A) 6 7
DLJ Mortgage Acceptance
Class # 94-Q1 1A1 CMO
8.191%, 03/25/24 (A) 1,759 1,793
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Par Value
Description (000) (000)
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Fund America Investors II
Class # 93-J M CMO
8.176%, 11/25/23 (A) $1,203 $ 1,201
Merrill Lynch Mortgage
Investments Class # 91-F
A2 CMO
6.528%, 06/15/16 (A) 7,399 7,534
Merrill Lynch Mortgage
Investments Class # 92-C
A2 CMO
6.538%, 06/15/17 (A) 6,572 6,698
Prudential Home Mortgage
Securities Class # 93-5
A7 CMO
6.388%, 03/25/00 (A) 5,477 5,477
Resolution Trust Class # 92-M4
A4 CMO
6.550%, 09/25/21 (A) 1,655 1,657
Resolution Trust Class # 92-16
A4 CMO
7.686%, 08/25/22 (A) 3,163 3,187
Resolution Trust Class # 92-6
B9 CMO
6.610%, 11/25/26 (A) 1,945 1,949
Resolution Trust Class # 92-3
A4 CMO
6.238%, 09/25/30 (A) 1,117 1,117
Salomon Brothers Mortgage
Securities VII Class # 92-2
A4 CMO
7.485%, 06/25/22 (A) 2,318 2,329
Salomon Brothers Mortgage
Securities VII Class # 92-4
A5 CMO
7.685%, 09/25/22 (A) 1,555 1,568
Salomon Brothers Mortgage
Securities VII Class # 92-6
A1 CMO
7.705%, 11/25/22 (A) 2,282 2,291
Saxon Mortgage Securities
Class # 92-1 A2 CMO
8.038%, 09/25/22 (A) 214 215
Saxon Mortgage Securities
Class # 92-3 A1 CMO
7.728%, 11/25/22 (A) 912 915
Sears Mortgage Securities
Class # 93-3 F CMO
6.638%, 07/25/20 (A) 825 828
Securitized Assets Sales
Class # 93-8 A2 CMO
8.058%, 12/26/23 (A) 2,180 2,227
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Total Non-Agency Mortgage-Backed
Obligations (Cost $40,618) 40,993
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<PAGE>
STATEMENT OF NET ASSETS CUFUND
November 30, 1997 (Unaudited)
ADJUSTABLE RATE PORTFOLIO (concluded)
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Par Value
Description (000) (000)
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U.S. GOVERNMENT AGENCY OBLIGATIONS (11.3%)
FHLMC
5.490%*, 12/01/97 $ 420 $ 420
FNMA
5.480%*, 12/11/97 6,735 6,725
5.540%*, 12/11/97 7,595 7,583
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Total U.S. Government Agency Obligations
(Cost $14,728) 14,728
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CASH EQUIVALENT (2.9%)
SEI Daily Income Trust
Treasury Fund 3,735 3,735
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Total Cash Equivalent
(Cost $3,735) 3,735
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TOTAL INVESTMENTS (100.4%)
(Cost $129,613) 130,438
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OTHER ASSETS AND LIABILITIES, NET (-0.4%) (500)
--------
NET ASSETS:
Portfolio Shares (unlimited
authorization -- no par
value) based on 12,964,267
outstanding shares of
beneficial interest 129,929
Distributions in excess of net
investment income (142)
Accumulated net realized
loss on investments (674)
Net unrealized appreciation
of investments 825
--------
TOTAL NET ASSETS (100.0%) $129,938
========
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE -- $10.02
========
* Effective Yield at date of purchase
CMO -- Collateralized Mortgage Obligation
DLJ -- Donaldson, Lufkin, & Jenrette
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, 1997.
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS CUFUND
For the period ended November 30, 1997 (Unaudited)
(IN THOUSANDS)
------------------------------------
SHORT-TERM MATURITY ADJUSTABLE RATE
PORTFOLIO PORTFOLIO
<S> <C> <C>
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Investment Income $856 $3,990
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Expenses:
Investment Advisory Fees 48 217
Waiver of Investment Advisory Fees (28) (130)
Administrator Fees 18 89
Custodian Fees 1 7
Professional Fees 8 36
Registration Fees -- 2
Trustee Fees 5 23
Printing Fees 3 13
Other 2 6
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Total Expenses 57 263
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Net Investment Income 799 3,727
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Net Realized Loss on Investments -- (16)
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Net Unrealized Appreciation of Investments 143 311
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Net Realized and Unrealized Gain on Investments 143 295
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Net Increase in Net Assets Resulting from Operations 942 4,022
=================================================================================================================
<FN>
Amounts designated as "--" are either $0 or have been rounded to $0.
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS CUFUND
(Unaudited)
(IN THOUSANDS)
------------------------------------------------
SHORT-TERM MATURITY ADJUSTABLE RATE
PORTFOLIO PORTFOLIO
------------------------------------------------
06/01/97 06/01/96 06/01/97 06/01/96
TO 11/30/97 TO 05/31/97 TO 11/30/97 TO 05/31/97
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net Investment Income $ 799 $ 1,608 $ 3,727 $ 8,452
Net Realized Gain/(Loss) on Investments -- (68) (16) 16
Net Unrealized Appreciation of Investments 143 211 311 671
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Net Increase in Net Assets Resulting from Operations 942 1,751 4,022 9,139
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Distributions to Shareholders:
Net Investment Income (800) (1,609) (3,832) (8,466)
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Capital Share Transactions:
Proceeds from Shares Issued -- 3,000 400 2,100
Shares Issued in Lieu of Cash Distributions 58 121 287 595
Cost of Shares Redeemed (286) (4,228) (19,899) (8,168)
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Decrease in Net Assets from Capital Share Transactions (228) (1,107) (19,212) (5,473)
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Total Decrease in Net Assets (86) (965) (19,022) (4,800)
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Net Assets:
Beginning of Period 29,668 30,633 148,960 153,760
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End of Period (1) $29,582 $29,668 $129,938 $148,960
==================================================================================================================
Capital Share Transactions:
Shares Issued -- 306 40 210
Shares Issued in Lieu of Cash Distributions 6 12 28 60
Shares Redeemed (29) (431) (1,986) (819)
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Net Capital Share Transactions (23) (113) (1,918) (549)
==================================================================================================================
<FN>
Amounts designated as "--" are either $0 or have been rounded to $0.
(1) Including distributions in excess of net investment income (000) of $(2) and $(1) for Short-Term Maturity
Portfolio, $(142) and $(37) for Adjustable Rate Portfolio at November 30, 1997 and May 31, 1997, respectively.
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS CUFUND
(Unaudited)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
NET
NET REALIZED AND NET NET RATIO OF NET
ASSET UNREALIZED DIVIDENDS ASSET ASSETS RATIO OF INVESTMENT
VALUE NET GAINS FROM NET CAPITAL VALUE END OF EXPENSES INCOME
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT GAINS END OF TOTAL PERIOD TO AVERAGE TO AVERAGE
OF PERIOD INCOME INVESTMENTS INCOME DISTRIBUTIONS PERIOD RETURN (000) NET ASSETS NET ASSETS
----------------------------------------------------------------------------------------------------------------------
Short-Term Maturity Portfolio
For the six month period ended November 30,:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997* $ 9.80 0.27 0.05 (0.27) -- $ 9.85 3.25%+ $29,582 0.39% 5.37%
For the years ended May 31,:
1997 9.76 0.52 0.04 (0.52) -- 9.80 5.90 29,668 0.39 5.33
1996 9.73 0.52 0.03 (0.52) -- 9.76 5.73 30,633 0.38 5.27
1995 9.59 0.50 0.14 (0.50) -- 9.73 6.92 35,050 0.38 5.24
1994 10.00 0.41 (0.38) (0.41) (0.03) 9.59 0.23 41,737 0.38 4.23
1993(1) 10.00 0.44 0.01 (0.45) -- 10.00 4.77 20,288 0.39 4.69
Adjustable Rate Portfolio
For the six month period ended November 30,:
1997* $10.01 0.28 0.02 (0.29) -- $10.02 2.97%+ $129,938 0.39% 5.48%
For the years ended May 31,:
1997 9.96 0.57 0.05 (0.57) -- 10.01 6.36 148,960 0.39 5.66
1996 9.94 0.59 0.02 (0.59) -- 9.96 6.29 153,760 0.39 5.92
1995 9.96 0.53 (0.02) (0.53) -- 9.94 5.25 162,147 0.38 5.34
1994 10.02 0.37 (0.06) (0.37) -- 9.96 3.19 183,486 0.38 3.70
1993(1) 10.00 0.38 0.02 (0.38) -- 10.02 4.22 172,593 0.39 3.94
==================================================================================================================================
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME
TO AVERAGE TO AVERAGE
NET ASSETS NET ASSETS PORTFOLIO
(EXCLUDING (EXCLUDING TURNOVER
WAIVERS) WAIVERS) RATE
---------------------------------------
Short-Term Maturity Portfolio
For the six month period ended November 30,:
<S> <C> <C> <C> <C>
1997* 0.57% 5.55% 20%
For the years ended May 31,:
1997 0.58 5.14 63
1996 0.61 5.04 42
1995 0.51 5.11 53
1994 0.55 4.06 148
1993(1) 0.64 4.44 188
Adjustable Rate Portfolio
For the six month period ended November 30,:
1997* 0.58% 5.67% 2%
For the years ended May 31,:
1997 0.56 5.49 17
1996 0.53 5.78 23
1995 0.51 5.21 4
1994 0.51 3.57 67
1993(1) 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.
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS CUFUND
November 30, 1997 (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 or obtainable 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.
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.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Concluded) CUFUND
November 30, 1997 (Unaudited)
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 Investments Distribution Co. (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 all or a portion of its fees and
reimburse expenses in order to limit the total operating expenses of each
Portfolio to not more than .39% of each Portfolio's average daily net assets.
The Adviser reserves the right, in its sole discretion, to terminate this
voluntary fee waiver at any time.
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 six month period ended November 30, 1997, 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 $3,022 $ 2,404 $0 $ 1,977
Adjustable
Rate
Portfolio $1,843 $12,955 $0 $13,265
The total cost of securities held for federal income tax purposes at November
30, 1997 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
($21,826), which was composed of gross unrealized appreciation of $57,108 and
gross unrealized depreciation of ($78,934) for tax purposes. The Adjustable Rate
Portfolio had net unrealized appreciation of $824,912, which was composed of
gross unrealized appreciation of $921,584 and gross unrealized depreciation of
($96,672) 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
One Freedom Valley Drive
Oaks, PA 19456
DISTRIBUTOR
SEI Investments Distribution Co.
One Freedom Valley Drive
Oaks, PA 19456
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, PA 19103-6993
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
1601 Market Street
Philadelphia, PA 19103-2499
CUF-F-009-02
