CU FUND, 497, 1999-10-01

CU FUND
497, 1999-10-01

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<PAGE>

CUFUND
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PROSPECTUS
9/30/99

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SHORT-TERM MATURITY PORTFOLIO

ADJUSTABLE RATE PORTFOLIO
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INVESTMENT ADVISER
CUSOURCE, LLC

These securities have not been approved or disapproved by the
Securities and Exchange Commission nor has the Commission
passed upon the accuracy or adequacy of this prospectus.
Any representation to the contrary is a criminal offense.

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<PAGE>

ABOUT THIS PROSPECTUS
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CUFUND is a mutual fund that offers shares in separate investment portfolios
("Portfolios") solely to federally and state chartered credit unions. The
Portfolios have individual investment goals and strategies. This prospectus
gives you important information about the Portfolios that you should know before
investing. Please read this prospectus and keep it for future reference.

THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN EASILY
REVIEW THIS IMPORTANT INFORMATION. IN THE BOX BELOW, THERE IS SOME GENERAL
INFORMATION YOU SHOULD KNOW ABOUT RISK AND RETURN WHICH IS COMMON TO EACH OF THE
PORTFOLIOS. FOR MORE DETAILED INFORMATION ABOUT EACH PORTFOLIO, PLEASE SEE:

PAGE
PRINCIPAL INVESTMENT STRATEGIES AND RISKS, PERFORMANCE
INFORMATION AND EXPENSES
SHORT-TERM MATURITY PORTFOLIO ...................................... 2
ADJUSTABLE RATE PORTFOLIO ......................................... 4
MORE INFORMATION ABOUT RISK .............................................. 6
MORE INFORMATION ABOUT PORTFOLIO INVESTMENTS ............................. 6
THE INVESTMENT ADVISER ................................................... 6
PORTFOLIO MANAGERS ....................................................... 7
PURCHASING AND SELLING PORTFOLIO SHARES .................................. 7
DIVIDENDS AND DISTRIBUTIONS .............................................. 8
TAXES .................................................................... 8
FINANCIAL HIGHLIGHTS ..................................................... 9
HOW TO OBTAIN MORE INFORMATION ABOUT CUFUND ........................ BACK COVER

RISK/RETURN INFORMATION COMMON TO THE PORTFOLIOS

Each Portfolio is a mutual fund. A mutual fund pools shareholders' money and,
using professional investment managers, invests it in securities.

Each Portfolio has its own investment goal and strategies for reaching that
goal. The investment managers invest Portfolio assets in a way that they believe
will help a Portfolio achieve its goal. Still, investing in each Portfolio
involves risk and there is no guarantee that a Portfolio will achieve its goal.
An investment manager's judgments about the markets, the economy, or companies
may not anticipate actual market movements, economic conditions or company
performance, and these judgments may affect the return on your investment. In
fact, no matter how good a job an investment manager does, you could lose money
on your investment in a Portfolio, just as you could with other investments.

The value of your investment in a Portfolio is based on the market prices of the
securities the Portfolio holds. The prices of the Portfolio's fixed income
securities respond to economic and other developments, particularly interest
rate changes. Generally, the Portfolio's fixed income securities will decrease
in value if interest rates rise and vice versa. Also, longer-term securities
tend to provide higher yields than shorter-term securities but are also
generally more sensitive to interest rate changes, so the average maturity or
duration of these securities affects volatility. Perceptions about the
creditworthiness of individual issuers can also have an effect on fixed income
securities because of the possibility that an issuer will be unable to make
timely payments of either principal or interest.

Both Portfolios invest in mortgage-backed securities. The mortgages underlying
mortgage-backed securities may be paid off early, which makes it difficult to
determine their actual maturity and therefore calculate how they will respond to
changes in interest rates. The Portfolios may have to reinvest prepaid amounts
at lower interest rates. This risk of prepayment is an additional risk of
mortgage-backed securities.

<PAGE>

SHORT-TERM MATURITY PORTFOLIO
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<TABLE>
<CAPTION>
PORTFOLIO SUMMARY
- -------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT GOAL ...................... High level of income consistent with safety of capital

INVESTMENT FOCUS ..................... Short-term fixed income securities

SHARE PRICE VOLATILITY ............... Low

PRINCIPAL INVESTMENT STRATEGY ........ Investing in short-term mortgage-backed securities issued by the
U.S. government or private issuers

INVESTOR PROFILE ..................... Investors seeking a high level of income who are willing to accept
the risks of investing in mortgage-backed securities
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</TABLE>

INVESTMENT STRATEGY OF THE SHORT-TERM MATURITY PORTFOLIO

The Short-Term Maturity Portfolio's assets will be invested exclusively in
obligations that are authorized investments for federal credit unions under the
Federal Credit Union Act. The Short-Term Maturity Portfolio invests primarily
(at least 65% of its assets) in mortgage-backed securities issued or guaranteed
as to payment of principal and interest by the U.S. government, or if backed by
private issuers, rated in one of the top two rating categories by nationally
recognized ratings organizations. The Portfolio may purchase mortgage-backed
securities that are backed or collateralized by fixed, adjustable or floating
rate mortgages. The average maturity of the Portfolio's investments will vary
depending on market conditions, but will typically be between one and three
years.

In selecting securities for the Portfolio, the Adviser considers a security's
current yield, capital appreciation potential, maturity and yield to maturity.
The Adviser will monitor changing economic conditions and trends, including
interest rates, in order to identify opportunities to buy securities which may
enhance the yield of the Portfolio. The Adviser may sell any security prior to
its maturity if other available securities are expected to enhance yield
balanced with the Adviser's judgment as to a desirable portfolio maturity or if
selling a security is believed to be advisable due to other circumstances or
considerations, such as in anticipation of a market decline.

PRINCIPAL RISKS OF INVESTING IN THE SHORT-TERM MATURITY PORTFOLIO

Mortgage-backed securities are fixed income securities representing an interest
in a pool of underlying mortgage loans. The mortgages backing these securities
include conventional fixed rate mortgages, graduated payment mortgages, and
adjustable rate mortgages. Mortgage-backed securities are sensitive to changes
in interest rates, but may respond to these changes differently from other fixed
income securities due to the possibility of prepayment of the underlying
mortgage loans. As a result, it may not be possible to determine in advance the
actual maturity date or average life of a mortgage-backed security. Rising
interest rates tend to discourage refinancings, with the result that the average
life and volatility of the security will increase, exacerbating its decrease in
market price. When interest rates fall, however, mortgage-backed securities may
not gain as much in market value because of the expectation of additional
mortgage prepayments that must be reinvested at lower interest rates. Prepayment
risk may make it difficult to calculate the average maturity of the Portfolio of
mortgage-backed securities and, therefore, to assess the volatility risk of the
Portfolio.

The privately issued mortgage-backed securities that the Portfolio invests in
are not issued or guaranteed by the U.S. government or its agencies or
instrumentalities and may bear a greater risk of nonpayment than securities that
are backed by the U.S. Treasury. However, the timely payment of principal and
interest normally is supported, at least partially, by various credit
enhancements by banks and other financial institutions. There can be no
assurance, however, that such credit enhancements will support full payment of
the principal and interest on such obligations. In addition, changes in the
credit quality of the entity which provides credit enhancement could cause
losses to the Portfolio and affect its share price.

Although the Portfolio's U.S. government securities are considered to be among
the safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. government agencies are
backed by the U.S. Treasury, while others are backed solely by the ability of
the agency to borrow from the U.S. Treasury or by the agency's own resources.

The Portfolio is also subject to the risk that short-term mortgage-backed
securities may underperform other fixed income market segments or the fixed
income markets as a whole.

<PAGE>

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PERFORMANCE INFORMATION

The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Portfolio. Of course, the Portfolio's past
performance does not necessarily indicate how the Portfolio will perform in the
future.

This bar chart shows changes in the Portfolio's performance from year to year.*

<TABLE>
<S> <C>
1993 4.55%
1994 -0.63%
1995 9.90%
1996 5.37%
1997 5.77%
1998 6.07%

BEST QUARTER WORST QUARTER
3.14% -1.02%
(3/31/95) (3/31/94)
</TABLE>

* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE
PORTFOLIO'S PERFORMANCE FROM 1/1/99 TO 6/30/99 WAS 2.11%.

THIS TABLE COMPARES THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1998 TO THOSE OF THE 1 YEAR CONSTANT MATURITY TREASURY.

<TABLE>
<CAPTION>
SINCE
1 YEAR 5 YEARS INCEPTION
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<S> <C> <C> <C>
Short-Term Maturity Portfolio 6.07% 5.24% 5.04%*
1 Year Constant Maturity Treasury 5.17% 5.63% 5.14%**
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</TABLE>
* SINCE 6/15/92
** SINCE 6/30/92

WHAT IS AN INDEX?

An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The 1 Year Constant Maturity Treasury is a widely
recognized indicator of the performance of actively traded U.S. Treasury
securities.

PORTFOLIO FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Portfolio.

<TABLE>
<CAPTION>
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ANNUAL PORTFOLIO OPERATING EXPENSES (EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)
- --------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees ........................................... .32%
Other Expenses ..................................................... .29%
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Total Annual Portfolio
Operating Expenses ............................................ .61%*
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</TABLE>

* THE PORTFOLIO'S TOTAL ACTUAL ANNUAL PORTFOLIO OPERATING EXPENSES FOR THE MOST
RECENT FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER
WAIVED A PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A
SPECIFIED LEVEL. THESE FEE WAIVERS REMAIN IN PLACE AS OF THE DATE OF THIS
PROSPECTUS, BUT THE ADVISER MAY DISCONTINUE ALL OR PART OF THESE WAIVERS AT
ANY TIME. WITH THESE FEE WAIVERS, THE PORTFOLIO'S ACTUAL TOTAL OPERATING
EXPENSES ARE EXPECTED TO BE AS FOLLOWS:

SHORT-TERM MATURITY PORTFOLIO ................................. .39%

For more information about these fees, see "Investment Adviser."

EXAMPLE

This Example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Portfolio for the time periods indicated and that
you sell your shares at the end of the period.

The Example also assumes that each year your investment has a 5% return,
Portfolio operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Portfolio would be:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
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<S> <C> <C> <C>
$62 $195 $340 $762
</TABLE>

<PAGE>

ADJUSTABLE RATE PORTFOLIO
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INVESTMENT FOCUS ..................... Short-term fixed income securities

SHARE PRICE VOLATILITY ............... Low

PRINCIPAL INVESTMENT STRATEGY ........ Investing in short-term mortgage-backed securities issued by the
U.S. government or private issuers

INVESTOR PROFILE ..................... Investors seeking a high level of income who are willing to accept
the risks of investing in adjustable rate mortgage-backed securities
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</TABLE>

INVESTMENT STRATEGY OF THE ADJUSTABLE RATE PORTFOLIO

The Adjustable Rate Portfolio's assets will be invested exclusively in
obligations that are authorized investments for federal credit unions under the
Federal Credit Union Act. The Adjustable Rate Portfolio invests primarily (at
least 65% of its assets) in adjustable rate mortgage-backed securities ("ARMs")
issued or guaranteed as to payment of principal and interest by the U.S.
government or, if backed by private issuers, rated in one of the top two rating
categories by nationally recognized ratings organizations. The Portfolio will
invest at least 25% of its assets in ARMs that are backed by private issuers.
The average maturity of the Portfolio's investments will vary depending on
market conditions, but will typically be between one and five years.

PRINCIPAL RISKS OF INVESTING IN THE ADJUSTABLE RATE PORTFOLIO

Adjustable rate mortgage-backed securities are fixed income securities
representing an interest in a pool of underlying adjustable rate mortgage loans.
These adjustable rate mortgages have interest rates that reset at periodic
intervals of one year or less based upon a specified index and thus may
experience less price volatility due to changes in market interest rates than
fixed rate mortgage-backed securities or other fixed income securities. However,
these securities will still experience some price fluctuations since the
interest rate adjustments may be subject to caps and may not correlate
completely to market interest rates.

The Portfolio is also subject to the risk that short to intermediate-term
adjustable rate mortgage-backed securities may underperform other fixed income
market segments or the fixed income markets as a whole.

<PAGE>

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PERFORMANCE INFORMATION

This bar chart shows changes in the Portfolio's performance from year to year.*

<TABLE>
<S> <C>
1993 4.33%
1994 2.37%
1995 8.16%
1996 5.83%
1997 5.93%
1998 5.25%

BEST QUARTER WORST QUARTER
2.42% 0.37%
(3/31/95) (12/31/94)
</TABLE>

* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE
PORTFOLIO'S PERFORMANCE FROM 1/1/99 TO 6/30/99 WAS 2.31%.

THIS TABLE COMPARES THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1998 TO THOSE OF THE 1 MONTH LIBOR INDEX.

<TABLE>
<CAPTION>
SINCE
1 YEAR 5 YEARS INCEPTION
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<S> <C> <C> <C>
Adjustable Rate Portfolio 5.25% 5.49% 5.15%*
1 Month LIBOR Index 5.69% 5.58% 5.07%**
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</TABLE>

* SINCE 6/15/92
** SINCE 6/30/92

WHAT IS AN INDEX?

An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The 1 Month London Interbank Offer Rate is the
interest rate that London banks charge each other on Eurodollar instruments with
a one month duration and is a widely recognized indicator of short term interest
rates.

PORTFOLIO FEES AND EXPENSES

THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE PORTFOLIO.

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ANNUAL PORTFOLIO OPERATING EXPENSES (EXPENSES DEDUCTED FROM PORTFOLIO ASSETS)
- --------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees ........................................... .32%
Other Expenses ..................................................... .28%
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Total Annual Portfolio
Operating Expenses .............................................. .60%*
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</TABLE>

ADJUSTABLE RATE PORTFOLIO ..................................... .39%

For more information about these fees, see "Investment Adviser."

EXAMPLE

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
$61 $192 $335 $750
</TABLE>

<PAGE>

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MORE INFORMATION ABOUT RISK

YEAR 2000 RISK -- The Portfolios depend on the smooth functioning of computer
systems in almost every aspect of their business. Like other mutual funds,
businesses and individuals around the world, the Portfolios could be adversely
affected if the computer systems used by their service providers do not properly
process dates on and after January 1, 2000, and distinguish between the year
2000 and the year 1900. The Portfolios have asked their mission critical service
providers whether they expect to have their computer systems adjusted for the
year 2000 transition, and have sought and received assurances from such service
providers that they are devoting significant resources to prevent material
adverse consequences to the Portfolios. While such assurances have been
received, the Portfolios and their shareholders may experience losses if these
assurances prove to be incorrect or, as a result of year 2000 computer
difficulties experienced by issuers of portfolio securities or third parties,
such as custodians, banks, broker-dealers or others with which the Portfolios do
business.

MORE INFORMATION ABOUT PORTFOLIO INVESTMENTS

In addition to the investments and strategies described in this prospectus, each
Portfolio also may invest in other securities, use other strategies and engage
in other investment practices. These investments and strategies, as well as
those described in this prospectus, are described in detail in our Statement of
Additional Information.

Shares of the Portfolios are designed to qualify as eligible investments for
federally chartered credit unions pursuant to Sections 107(7), 107(8) and
107(15) of the Federal Credit Union Act ("FCUA") and Part 703 of the National
Credit Union Administration ("NCUA") Rules and Regulations ("NCUA Rules"). The
Adviser intends to continually monitor changes in the applicable laws, rules and
regulations governing eligible investments, including new investments, for
federally chartered credit unions and to take such action as may be necessary to
assure that the Portfolios' investments, and, therefore, shares of the
Portfolios, continue to qualify as eligible investments under the FCUA.

Sections 107(7), 107(8) and 107(15) of the FCUA set forth those securities,
deposits and other obligations in which federally chartered credit unions may
invest. The Portfolios' investments consist exclusively of assets designed to
qualify as eligible investments if owned directly by a federally chartered
credit union. Shares of the Portfolios may or may not qualify as eligible
investments for particular state chartered credit unions. Accordingly, CUFUND
encourages, but does not require, each state chartered credit union to consult
qualified legal counsel concerning whether the Portfolios' shares are
permissible investments for that credit union. While the Adviser will attempt to
assure that the Portfolios follow the investment policies set forth herein,
CUFUND cannot be responsible for compliance by participating state chartered
credit unions with limitations on permissible investments to which they may be
subject.

The investments and strategies described in this prospectus are those that we
use under normal conditions. During unusual economic or market conditions, or
for temporary defensive or liquidity purposes, each Portfolio may invest up to
100% of its assets in money market instruments that would not ordinarily be
consistent with a Portfolio's objectives. A Portfolio will do so only if the
Adviser believes that the risk of loss outweighs the opportunity for higher
income. Of course, we cannot guarantee that either Portfolio will achieve its
investment goal.

INVESTMENT ADVISER

The Investment Adviser makes investment decisions for the Portfolios and
continuously reviews, supervises and administers the Portfolios' respective
investment programs. The Board of Trustees of CUFUND supervises the Adviser and
establishes policies that the Adviser must follow in its management activities.

CUSOURCE, LLC ("CUSOURCE") serves as the Adviser to the Portfolios and is
located at 7920 Belt Line Road, Suite 1100, Dallas, TX 75240. CUSOURCE is a
Texas limited liability company of which the sole member is Southwest Corporate
Federal Credit Union a federally chartered corporate credit union. As of May 31,
1999, Southwest Corporate Federal Credit Union had total assets of approximately
$4.4 billion, ranking it as the third largest corporate credit union in the
United States. CUSOURCE was founded in 1998 and registered as an investment
adviser as of January 1, 1999. As of May 31, 1999, CUSOURCE

6
<PAGE>

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had credit union funds under advisement in its Investment Advisory Service of
approximately $1.7 billion. For the fiscal period ended May 31, 1999, CUSOURCE
received advisory fees of:

<TABLE>
<S> <C>
SHORT-TERM MATURITY PORTFOLIO ........ 0.10%
ADJUSTABLE RATE PORTFOLIO ............ 0.11%
</TABLE>

PORTFOLIO MANAGERS

The Portfolios are managed by Bruce M. Fox and Marty L. Robertson. Mr. Fox is
the Chief Investment Officer of CUSOURCE and joined the Adviser in 1990. Mr. Fox
has served as portfolio manager of the Short-Term Maturity Portfolio since
August 1994 and the Adjustable Rate Portfolio since September 1996. He is
responsible for management of CUSOURCE's funds management area.

Mr. Robertson is a Senior Investment Adviser for CUSOURCE and has co-managed
the Portfolios with Mr. Fox since August 1999. He has served as back up
portfolio manager for the Portfolios since 1997. Since joining the Adviser in
1992, Mr. Robertson has been responsible for providing investment advisory
services to approximately 24 credit unions.

PURCHASING AND SELLING PORTFOLIO SHARES

This section tells you how to purchase and sell (sometimes called "redeem")
shares of the Portfolios. Shares of the Portfolios are offered solely to
federally and state chartered credit unions.

HOW TO PURCHASE PORTFOLIO SHARES

To purchase shares directly from us, please call 1-800-538-9683, and place your
trade with an investor services representative.

You may also buy shares through accounts with brokers and other institutions
that are authorized to place trades in Portfolio shares for their customers. If
you invest through an authorized institution, you will have to follow its
procedures, which may be different from the procedures for investing directly.
Your institution may charge a fee for its services, in addition to the fees
charged by the Portfolio. You will also generally have to address your
correspondence or questions regarding a Portfolio to your institution.

GENERAL INFORMATION

You may purchase shares on any day that the New York Stock Exchange and the
Federal Reserve are open for business (a "Business Day").

A Portfolio may reject any purchase order if it is determined that accepting the
order would not be in the best interests of the Portfolio or its shareholders.

The price per share (the offering price) will be the net asset value per share
(NAV) next determined after a Portfolio receives your purchase order.

Each Portfolio calculates its NAV once each Business Day at the
regularly-scheduled close of normal trading on the New York Stock Exchange
(normally, 4:00 p.m., Eastern time). So, for you to receive the current Business
Day's NAV, a Portfolio must generally receive your purchase order before 4:00
p.m., Eastern time and federal funds (readily available funds) before 12:00
p.m., Eastern time on the next Business Day.

HOW WE CALCULATE NAV

NAV for one Portfolio share is the value of that share's portion of the net
assets in the Portfolio.

In calculating NAV, a Portfolio generally values its investment portfolio at
market price. If market prices are unavailable or a Portfolio thinks that they
are unreliable, fair value prices may be determined in good faith using methods
approved by the Board of Trustees.

MINIMUM PURCHASES

To purchase shares for the first time, you must invest at least $100,000 in
either Portfolio. There is no minimum for subsequent investments. A Portfolio
may accept investments of smaller amounts at its discretion.

HOW TO SELL YOUR PORTFOLIO SHARES

If you own your shares directly, you may sell your shares on any Business Day by
contacting an investor services representative directly by telephone at
1-800-538-9683.

If you own your shares through an account with a broker or other institution,
contact that broker or institution to sell your shares. Your broker or
institution may charge a fee for its services.

The sale price of each share will be the next NAV determined after the Portfolio
receives your request.

<PAGE>

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RECEIVING YOUR MONEY

Normally, we will send your sale proceeds as promptly as possible and, in any
event, within seven days after we receive your request. Your proceeds can be
wired to your bank account.

INVOLUNTARY SALES OF YOUR SHARES

If your account balance drops below $100,000 because of redemptions, the
Portfolio may redeem your shares. But, a Portfolio will always give you at least
60 days' written notice to give you time to add to your account and avoid the
sale of your shares.

SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES

A Portfolio may suspend your right to sell your shares if the New York Stock
Exchange restricts trading, the SEC declares an emergency or for other reasons.
More information about this is in our Statement of Additional Information.

TELEPHONE TRANSACTIONS

Purchasing and selling Portfolio shares over the telephone is extremely
convenient, but not without risk. Although the Portfolio has certain safeguards
and procedures to confirm the identity of callers and the authenticity of
instructions, the Portfolio is not responsible for any losses or costs incurred
by following telephone instructions we reasonably believe to be genuine. If you
or your financial institution transact with the Portfolio over the telephone,
you will generally bear the risk of any loss.

DIVIDENDS AND DISTRIBUTIONS

Each Portfolio declares dividends daily and distributes its income monthly. Each
Portfolio makes distributions of capital gains, if any, at least annually. If
you own Portfolio shares on a Portfolio's record date, you will be entitled to
receive the distribution.

You will receive dividends and distributions in the form of additional Portfolio
shares unless you elect to receive payment in cash. To elect cash payment, you
must notify the Portfolio in writing at least 15 days prior to the date of the
distribution. Your election will be effective for dividends and distributions
paid after the Portfolio receives your written notice. To cancel your election,
simply send the Portfolio written notice.

TAXES

PLEASE CONSULT YOUR TAX ADVISER REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL,
STATE AND LOCAL INCOME TAXES. Below we have summarized some important tax issues
that affect the Portfolios and their shareholders. This summary is based on
current tax laws, which may change.

Each Portfolio will distribute substantially all of its income and capital
gains, if any. The dividends and distributions you receive may be subject to
federal, state and local taxation, depending upon your tax situation.
Distributions you receive from a Portfolio may be taxable whether or not you
reinvest them. Income distributions are generally taxable at ordinary income tax
rates. Capital gains distributions are generally taxable at the rates applicable
to long-term capital gains. EACH SALE OF PORTFOLIO SHARES IS A TAXABLE EVENT.

MORE INFORMATION ABOUT TAXES IS IN THE STATEMENT OF ADDITIONAL INFORMATION.

8
<PAGE>

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FINANCIAL HIGHLIGHTS

The tables that follow present performance information about each Portfolio.
This information is intended to help you understand each Portfolio's financial
performance for the past five years. Some of this information reflects financial
information for a single Portfolio share. The total returns in the tables
represent the rate that you would have earned (or lost) on an investment in a
Portfolio, assuming you reinvested all of your dividends and distributions. This
information has been audited by Arthur Andersen LLP, independent public
accountants. Their report, along with each Portfolio's financial statements,
appears in the annual report that accompanies our Statement of Additional
Information. You can obtain the annual report, which contains more performance
information, at no charge by calling 1-800-538-9683.

FOR THE YEARS 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>
Short-Term Maturity Portfolio
1999 $ 9.86 0.52 0.03 (0.53) -- $ 9.88 5.67%
1998 9.80 0.53 0.06 (0.53) -- 9.86 6.17
1997 9.76 0.52 0.04 (0.52) -- 9.80 5.90
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

Adjustable Rate Portfolio
1999 $ 10.00 0.54 (0.06) (0.54) -- $ 9.94 4.93%
1998 10.01 0.56 (0.01) (0.56) -- 10.00 5.63
1997 9.96 0.57 0.05 (0.57) -- 10.01 6.36
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
- ------------------------------------------------------------------------------------------------------------

<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
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Short-Term Maturity Portfolio
1999 $ 28,326 0.39% 5.28% 0.61% 5.06% 130%
1998 29,545 0.39 5.37 0.59 5.17 76
1997 29,668 0.39 5.33 0.58 5.14 63
1996 30,633 0.38 5.27 0.61 5.04 42
1995 35,050 0.38 5.24 0.51 5.11 53

Adjustable Rate Portfolio
1999 $117,581 0.39% 5.44% 0.60% 5.23% 35%
1998 125,398 0.39 5.58 0.59 5.38 31
1997 148,960 0.39 5.66 0.56 5.49 17
1996 153,760 0.39 5.92 0.53 5.78 23
1995 162,147 0.38 5.34 0.51 5.21 4
- ------------------------------------------------------------------------------------------------

</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0.

9
<PAGE>

NOTES

<PAGE>

NOTES

<PAGE>

NOTES

<PAGE>

- --------------------------------------------------------------------------------

CUFUND
------
------

INVESTMENT ADVISER
CUSOURCE, LLC
7920 Belt Line Road
Suite 1100
Dallas, TX 75240

DISTRIBUTOR
SEI Investments Distribution Co.
One Freedom Valley Drive
Oaks, Pennsylvania 19456

LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
1800 M Street, N.W.
Washington, DC 20036

More information about CUFUND is available
without charge through the following:

STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI dated September 30, 1999, includes detailed information
about CUFUND. The SAI is on file with the SEC and is incorporated by
reference into this prospectus. This means that the SAI, for legal
purposes, is a part of this prospectus.

ANNUAL AND SEMI-ANNUAL REPORTS
These reports list each Portfolio's holdings and contain information from
the Portfolio's managers about strategies, and recent market conditions and
trends and their impact on Portfolio performance. The reports also
contain detailed financial information about the Portfolios.

TO OBTAIN AN SAI, ANNUAL OR SEMI-ANNUAL REPORT,
OR MORE INFORMATION:

BY TELEPHONE:
Call 1-800-538-9683

BY MAIL: Write to us
CUSOURCE, LLC
7920 Belt Line Road
Suite 1100
Dallas, TX 75240

FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual
reports, as well as other information about CUFUND, from the SEC's website
("http://www.sec.gov"). You may review and copy documents at the SEC Public
Reference Room in Washington, DC (for information call 1-800-SEC-0330).
You may request documents by mail from the SEC, upon payment of a
duplicating fee, by writing to: Securities and Exchange Commission,
Public Reference Section, Washington, DC 20549-6009.
CUFUND's Investment Company Act registration number is 811-6488.

CUF-F-010-04
<PAGE>

CUFUND
INVESTMENT ADVISER:
CUSOURCE, LLC

This Statement of Additional Information is not a prospectus. It is intended to
provide additional information regarding the activities and operations of CUFUND
(the "Trust") and should be read in conjunction with the Trust's Prospectus for
the Short-Term Maturity Portfolio and the Adjustable Rate Portfolio dated
September 30, 1999, as may be amended or supplemented from time to time.
Capitalized terms used in this Statement of Additional Information have the same
meaning as defined in the prospectus. A Prospectus may be obtained through the
Distributor, SEI Investments Distribution Co., Oaks, PA 19456, or by calling
1-800-538-9683.

TABLE OF CONTENTS

<TABLE>

<S> <C>
The Trust................................................................................. S-2
Investment Objectives and Policies of the Short-Term Maturity Portfolio................... S-2
Investment Objectives and Policies of the Adjustable Rate Portfolio....................... S-3
General Portfolio Management Practices.................................................... S-3
Description of Permitted Investments And Risk Factors .................................... S-5
Investment Limitations.................................................................... S-9
The Adviser............................................................................... S-12
The Administrator......................................................................... S-13
The Shareholder Servicing Agent........................................................... S-14
The Distributor........................................................................... S-14
Trustees and Officers of the Trust........................................................ S-14
Purchase and Redemption of Shares......................................................... S-16
Dividends................................................................................. S-17
Determination of Net Asset Value.......................................................... S-18
Performance............................................................................... S-18
Computation of Yield...................................................................... S-18
Calculation of Total Return............................................................... S-19
Federal Taxes............................................................................. S-19
State Taxes............................................................................... S-20
General Information....................................................................... S-21
Experts................................................................................... S-25
Financial Statements...................................................................... S-25
Appendix.......................................................................... ....... A- 1
Description of Ratings ................................................................... A- 1
</TABLE>

September 30, 1999
[CUF-_-___-__]

S-1
<PAGE>

THE TRUST

CUFUND (the "Trust") is a diversified, open-end management investment company,
which was organized as a Massachusetts business trust on November 22, 1991. The
Trust offers units of beneficial interest ("shares") in two portfolios
("Portfolios"), the Short-Term Maturity Portfolio and the Adjustable Rate
Portfolio. Each share of each Portfolio represents an undivided, proportionate
interest in that Portfolio. Shares of the Trust are sold without a sales charge.

The Trust is offered solely to federally and state chartered credit unions.
Shares of the Trust are designed to qualify as eligible investments for federal
chartered credit unions pursuant to Sections 107(7), 107(8) and 107(15) of the
Federal Credit Union Act (FCUA) and Part 703 of the National Credit Union
Administration (NCUA) Rules and Regulations (NCUA Rules). The Trust intends to
continually monitor changes in the applicable laws, rules and regulations
governing eligible investments, including new investments, for federally
chartered credit unions and to take such action as may be necessary to assure
that the Trust's's investments, and, therefore, shares of the Trust, continue to
qualify as eligible investments under the FCUA.

Sections 107(7), 107(8) and 107(15) of the FCUA set forth those securities,
deposits and other obligations in which federally chartered credit unions may
invest. The Trust's investments consist exclusively of assets designed to
qualify as eligible investments if owned directly by a federally chartered
credit union. Shares of the Trust may or may not qualify as eligible investments
for particular state chartered credit unions. Accordingly, the Trust encourages,
but does not require, each state chartered credit union to consult qualified
legal counsel concerning whether the Trust's shares are permissible investments
for the credit union. While the Adviser will attempt to assure that the Trust
follows the investment policies set forth herein, the Trust cannot be
responsible for compliance by participating state chartered credit unions with
limitations to which they may be subject.

The Trust is designed as a convenient and economic vehicle for federally and
state chartered credit unions seeking to obtain the yields available on
short-term and adjustable rate investments authorized under the FCUA. The Trust
offers credit unions an alternative to direct investments in eligible
investments, with the intended financial advantage of quantity purchases. For
example, a higher yield may be available when eligible investments are bought in
substantial amounts. Investment in the Trust will relieve the credit unions of
any of the investment and administrative problems usually associated with the
direct purchase and investment management of these eligible investments, such as
scheduling maturities and reinvestments, safekeeping of securities, surveying
the market for the best price at which to buy and sell, and separate principal
and interest record keeping.

INVESTMENT OBJECTIVE AND POLICIES OF THE SHORT-TERM MATURITY PORTFOLIO

The Short-Term Maturity Portfolio seeks a high level of income consistent with
safety of capital. There is no assurance that the Portfolio's investments
objective will be met.

S-2
<PAGE>

The Short-Term Maturity Portfolio's assets will be invested exclusively in
obligations that are authorized investments for federal credit unions under the
FCUA, consisting of: obligations issued or fully guaranteed as to principal and
interest by the United Sates Government and its agencies or instrumentalities;
certificates of deposit, bankers' acceptances and time deposits issued or
guaranteed by United Sates banks with total assets exceeding $1 billion,
including comparable U.S. dollar denominated obligations of foreign branches of
such banks; mortgage-backed securities; share certificates issued by corporate
credit unions that operate in compliance with Part 704 of the NCUA Rules and are
examined by the NCUA; repurchase agreements and reverse repurchase agreements
involving securities that constitute permissible investments for the Portfolio;
and federal funds. When market conditions are favorable, the Portfolio will be
predominantly invested in mortgage-backed securities. See "General Portfolio
Management Policies." For additional information regarding permitted investments
of the Portfolio, see "Description of Permitted Investments and Risk Factors."

Under normal circumstances, the Short-Term Maturity Portfolio will maintain an
average weighted maturity of three years or less. The measure of maturity will
be the expected life of securities held by the Portfolio. See "Description of
Permitted Investments and Risk Factors."

INVESTMENT OBJECTIVE AND POLICIES OF THE ADJUSTABLE RATE PORTFOLIO

The Adjustable Rate Portfolio seeks higher levels of current income while
reducing principal volatility. There is no assurance that the Portfolio's
investment objective will be met.

The Adjustable Rate Portfolio's assets will be invested exclusively in
obligations authorized under the FCUA. The Adjustable Rate Portfolio will, under
normal circumstances, invest at least 65% of its assets in adjustable rate
mortgage securities (ARMs) or other adjustable rate securities that have
interest rates which reset at periodic intervals. ARMs are pass-through
certificates representing interest in a pool of adjustable rate mortgages .
These adjustable rate mortgages and other adjustable rate securities have
interest rates that reset at periodic intervals of one year or less based upon a
specified index and thus may experience less price volatility due to changes in
market interest rates than other debt securities. However, these securities will
still experience some price fluctuations since the interest rate adjustments may
be subject to caps and may not correlate completely to market interest rates.
For a description of the Portfolio's permitted investments, see "Description of
Permitted Investments and Risk Factors."

Under normal circumstances, the Adjustable Rate Portfolio expects to maintain an
average weighted maturity of less than 5 years. The measure of maturity will be
the expected life of securities held by the Portfolio. See "Description of
Permitted Investments and Risk Factors."

GENERAL PORTFOLIO MANAGEMENT POLICIES

The Adviser will seek to enhance the yield of each Portfolio by taking advantage
of yield disparities or other factors that occur in the government securities
and money markets. The Trust may dispose of any portfolio security prior to its
maturity if such disposition and reinvestment of the proceeds are expected to
enhance yield consistent with the Adviser's judgment as to a desirable portfolio
maturity structure or if such disposition is believed to be advisable due to
other circumstances or considerations.

S-3
<PAGE>

Mortgage-backed securities purchased by a Portfolio will be issued or guaranteed
as to payment of principal and interest by the U.S. Government, its agencies or
instrumentalities or, if backed by private issuers, rated in one of the two
highest rating categories by a nationally recognized statistical rating
organization (an NRSRO). The principal governmental issuers or guarantors of
mortgage-backed securities are the Government National Mortgage Association
(GNMA), Fannie Mae, and Federal Home Loan Mortgage Corporation (FHLMC).
Obligations of GNMA are backed by the full faith and credit of the U.S.
Government while obligations of Fannie Mae and FHLMC are supported by the
respective agency only. Guarantees of each Portfolio's securities by the U.S.
Government, its agencies or instrumentalities guarantee only the payment of
principal and interest on the guaranteed securities, and do not guarantee the
securities' yield or value or the yield or value of the Portfolio's shares. Each
portfolio may purchase mortgage-backed securities that are backed or
collateralized by fixed, adjustable or floating rate mortgages.

Under normal circumstances, the Adjustable Rate Portfolio will invest at least
25% of its total assets in privately issued mortgage-backed securities
(securities that are not issued or guaranteed by the U.S. Government, its
agencies or instrumentalities), including securities nominally issued by a
governmental entity (such as the Resolution Trust Corporation) that is not
responsible for the payment of principal and interest on such securities. While
such securities are not obligations of a governmental entity and thus may bear a
greater risk of nonpayment, the timely payment of principal and interest
normally is supported, at least partially, by various forms of insurance or
guarantees. There can be no assurance, however, that such credit enhancements
will support full payment of the principal and interest on such obligations. As
stated above, each Portfolio intends to invest in privately issued,
mortgage-backed securities only if they are rated in one of the two highest
rating categories.

For temporary defensive purposes when the Adviser determines that market
conditions warrant, each Portfolio may invest up to 100% of its assets in the
money market instruments described above and in the "Description of Permitted
Investments and Risk Factors," and may hold a portion of its assets in cash.
While each Portfolio expects to invest primarily in mortgage-backed securities,
the Adviser may decide to reduce either Portfolio's holdings at a time when it
believes mortgage-backed securities are trading at a high premium, experiencing
high levels of prepayments, trading at historically narrow effective margins, or
are otherwise less attractive investments with a risk of capital depreciation.

For the fiscal years ended May 31, 1999 and May 31, 1998, the portfolio turnover
rates for the Short-Term Maturity Portfolio were 130% and 76% respectively, and
for the Adjustable Rate Portfolio were 35% and 31%, respectively.

The Portfolios will not purchase any obligation of any bank or savings and loan
association that does not qualify as a "Section 107(8) institution" under the
FCUA and regulations thereunder.

Fluctuations in the price of securities held by a Portfolio will cause
fluctuations in the net asset value of that Portfolio's shares.

Some of the permitted investments for the Portfolios may not be permitted
investments for the particular state chartered credit unions. See "The Trust."

S-4
<PAGE>

DESCRIPTION OF PERMITTED INVESTMENTS AND RISK FACTORS

The following is a description of the permitted investments for the Portfolios:

BANKERS' ACCEPTANCES-Bankers' acceptances are bills of exchange or time drafts
drawn on and accepted by a commercial bank. Bankers' acceptances are used by
corporations to finance the shipment and storage of goods. Maturities are
generally six months or less.

CERTIFICATES OF DEPOSIT; SHARE CERTIFICATES-Certificates of deposit are interest
bearing instruments with a specific maturity. They are issued by banks and
savings and loan associations in exchange for the deposit of funds and normally
can be traded in the secondary market prior to maturity. Each Portfolio may also
purchase share certificates issued by certain credit unions which cannot be
traded in a secondary market. Such share certificates are considered to be
illiquid securities and neither Portfolio may invest more than 15% of its net
assets in illiquid securities. See "Non-Fundamental Policies."

FEDERAL FUNDS-Federal funds are funds held by a regional Federal Reserve Bank
for the account of a bank that is a member of such Federal Reserve Bank. A loan
of federal funds is an unsecured loan at a negotiated interest rate for a
negotiated time period, generally overnight. Unsecured loans of federal funds
may be made to U.S. banks and other Section 107(8) institutions, provided that:
1) the accounts of such banks are federally insured; 2) the interest received is
at the market rate for federal funds transactions and 3) the transaction has a
specified maturity or the Portfolio is able to require repayment at any time.
Federal funds investments maturing in more than seven days are considered to be
illiquid; a Portfolio will not invest more than 15% of its net assets in
illiquid securities. See "Non-Fundamental Policies."

Loans of federal funds are not federally insured. In the event the borrower of
federal funds enters into a bankruptcy or other insolvency proceedings, the
lending Portfolio could experience delays and incur expenses in recovering cash.
Further, the possibility exists that, in such an instance, the borrowing
institution may not be able to repay the borrowed funds. A Portfolio will limit
federal funds lending to those banks and other Section 107(8) institutions whose
creditworthiness has been reviewed and found satisfactory by the Adviser.

MORTGAGE-BACKED SECURITIES-Mortgage-backed securities are instruments that
entitle the holder to a share of all interest and principal payments from
mortgages underlying the security. The mortgages backing these securities
include conventional fixed rate mortgages, graduated payment mortgages, and
adjustable rate mortgages. During periods of declining interest rates,
prepayment of mortgages, underlying mortgage-backed securities can be expected
to accelerate. Prepayment of mortgages which underlie securities purchased at a
premium often results in capital losses, while prepayment of mortgages purchased
at a discount often results in capital gains. Because of these unpredictable
prepayment characteristics, it is often not possible to predict accurately the
average life or realized yield of a particular issue.

GOVERNMENT PASS-THROUGH SECURITIES: These are securities that are
issued or guaranteed by a U.S. Government agency representing an interest
in a pool of mortgage loans. The primary issuers or guarantors of these
mortgage-backed securities are GNMA, Fannie Mae and FHLMC. Fannie Mae and
FHLMC obligations are not backed by the full faith and credit of the U.S.

S-5
<PAGE>

Government as GNMA certificates are, but Fannie Mae and FHLMC securities
are supported by the instrumentalities' right to borrow from the U.S.
Treasury. GNMA, Fannie Mae and FHLMC each guarantees timely distributions
of interest to certificate holders. GNMA and Fannie Mae also each
guarantees timely distributions of scheduled principal. FHLMC in the past
guaranteed only the ultimate collection of principal of the underlying
mortgage loan; however, FHLMC now issues mortgage-backed securities (FHLMC
Gold PCS) which also guarantee timely payment of monthly principal
reductions. Government and private guarantees do not extend to the
securities' value, which is likely to vary inversely with fluctuations in
interest rates.

PRIVATE PASS-THROUGH SECURITIES: These are mortgage-backed securities
issued by a non-governmental entity, such as a trust. These securities
include CMOs and REMICs that are rated in one of the top two rating
categories. While they are generally structured with one or more types of
credit enhancement, private pass-through securities typically lack a
guarantee by an entity having the credit status of a governmental agency or
instrumentality.

CMOs: CMOs are debt obligations or multi-class pass-through
certificates issued by agencies or instrumentalities of the U.S. Government
or by private originators or investors in mortgage loans. In a CMO, series
of bonds or certificates are usually issued in multiple classes. Principal
and interest paid on the underlying mortgage assets may be allocated among
the several classes of a series of a CMO in a variety of ways. Each class
of a CMO, often referred to as a "tranche," is issued with a specific fixed
or floating coupon rate and has a stated maturity or final distribution
date. Principal payments on the underlying mortgage assets may cause CMOs
to be retired substantially earlier than their stated maturities or final
distribution dates, resulting in a loss of all or part of any premium paid.
One or more classes of CMOs may have coupon rates that reset periodically
based on an index, such as the London Interbank Offered Rate (LIBOR). The
Trust may purchase fixed, adjustable or "floating" rate CMOs: (i) that are
collateralized by fixed rate or adjustable rate mortgages that are
guaranteed as to payment of principal and interest by an agency or
instrumentality of the U.S. Government: (ii) that are directly guaranteed
as to payment of principal and interest by the issuer, which guarantee is
collateralized by U.S. Government securities; (iii) that are collateralized
by privately issued fixed rate or adjustable rate mortgages adhering to
sufficient credit enhancements to achieve the highest rating by an NRSRO;
(iv) whose price is estimated to change not more than 17 percent, due to an
immediate and sustained parallel shift in the yield curve of plus or minus
300 basis points; (v) whose expected average life is not greater than 10
years; (vi) whose average life would not extend by more than 4 years,
assuming an immediate and sustained parallel shift in the yield curve of
plus 300 basis points; and (vii) whose average life would not shorten by
more than 6 years, assuming an immediate and sustained parallel shift in
the yield curve of minus 300 basis points.

REMICS: A REMIC is a CMO that qualifies for special tax treatment
under the Code and invests in certain mortgages principally secured by
interests in real property. Investors may purchase beneficial interests in
REMICS, which are known as "regular" interests, or "residual" interests.
The Portfolios will not invest in residual REMICs. Guaranteed REMIC
pass-through certificates (REMIC Certificates) issued by Fannie Mae, FHLMC
or GNMA represent beneficial ownership interests in a REMIC trust
consisting principally of mortgage loans or Fannie Mae, FHLMC or
GNMA-guaranteed mortgage pass-through certificates. For FHLMC REMIC
Certificates, FHLMC guarantees the timely payment of interest, and also
guarantees the payment of principal as payments are required to be made on
the underlying mortgage participation

S-6
<PAGE>

certificates. Fannie Mae REMIC Certificates are issued and guaranteed
as to timely distribution of principal and interest by Fannie Mae. GNMA
REMIC certificates are supported by the full faith and credit of the U.S.
Treasury.

PARALLEL PAY SECURITIES, PAC BONDS: Parallel pay CMOs and REMICs are
structured to provide payments of principal on each payment date to more
than one class. These simultaneous payments are taken into account in
calculating the stated maturity date or final distribution date of each
class, which must be retired by its stated maturity date or final
distribution date, but may be retired earlier. Planned Amortization Class
CMOs (PAC Bonds) generally require payments of a specified amount of
principal on each payment date. PAC Bonds are always parallel pay CMOs with
the required principal payment on such securities having the highest
priority after interest has been paid to all classes.

ESTIMATED AVERAGE LIFE: Due to the possibility of prepayments of the
underlying mortgage instruments, mortgage-backed securities generally do
not have a known maturity. In the absence of a known maturity, market
participants generally refer to an estimated average life. An average life
estimate is a function of an assumption regarding anticipated prepayment
patterns, based upon current interest rates, current conditions in the
relevant housing markets and other factors. The assumption is necessarily
subjective, and thus different market participants can produce different
average life estimates with regard to the same security. There can be no
assurance that estimated average life will be a security's actual average
life. The Adviser performs median prepayment estimates in accordance with
Section 703 of the revised NCUA Rules.

REPURCHASE AGREEMENTS-Repurchase agreements are agreements by which a Portfolio
obtains a security and simultaneously commits to return the security to the
seller at an agreed upon price on an agreed upon date within a number of days
from the date of purchase. The Custodian will hold the security as collateral
for the repurchase agreement. A Portfolio bears a risk of loss in the event the
other party defaults on its obligations and the Portfolio is delayed or
prevented from exercising its right to dispose of the collateral or if the
Portfolio realizes a loss on the sale of the collateral. A Portfolio will enter
into repurchase agreements only with financial institutions deemed to present
minimal risk of bankruptcy during the term of the agreement based on established
guidelines. Repurchase agreements are considered loans under the 1940 Act,
although they are not considered to be loans under Section 107 of the FCUA,
which generally limits federal credit unions to making loans only to members.

REVERSE REPURCHASE AGREEMENTS-Reverse repurchase agreements are agreements by
which a Portfolio sells securities to financial institutions and simultaneously
agrees to repurchase those securities at a mutually agreed-upon date and price.
At the time a Portfolio enters into a reverse repurchase agreement, the
Portfolio will place liquid assets having a value equal to the repurchase price
in a segregated custodial account and monitor this account to ensure equivalent
value is maintained. Reverse repurchase agreements involve the risk that the
market value of securities sold by the Portfolio may decline below the price at
which the Portfolio is obligated to repurchase the securities. Reverse
repurchase agreements are considered to be borrowings by a Portfolio under the
1940 Act, and would also be considered to be borrowings under Section 107 of the
FCUA.

TIME DEPOSITS-Time deposits are nonnegotiable receipts issued by a bank in
exchange for a deposit of funds. Like certificates of deposit, they earn a
specified rate of interest over a definite period of time;

S-7
<PAGE>

however, they cannot be traded in the secondary market. Time deposits with a
withdrawal penalty or that mature in more than seven days are considered to be
illiquid securities.

UNITED STATES GOVERNMENT AGENCIES-Obligations issued or guaranteed by agencies
of the U.S. Government, including, among others, the Federal Farm Credit Bank,
the Federal Housing Administration and the Small Business Administration, and
obligations issued or guaranteed by instrumentalities of the U.S. Government,
including, among others, FHLMC, the Federal Land Banks and the U.S. Postal
Service. Some of these securities are supported by the full faith and credit of
the U.S. Treasury, others are supported by the right of the issuer to borrow
from the Treasury, while still others are supported only by the credit of the
instrumentality. Guarantees of principal by agencies or instrumentalities of the
U.S. Government may be a guarantee of payment at the maturity of the obligation
so that in the event of a default prior to maturity there might not be a market
and thus no means of realizing on the obligation prior to maturity. Guarantees
as to the timely payment of principal and interest do not extend to the value or
yield of these securities nor to the value of a Portfolio's shares.

UNITED STATES TREASURY OBLIGATIONS-U.S Treasury obligations consist of bills,
notes and bonds issued by the U.S. Treasury and separately traded interest and
principal component parts of such obligations that are transferable through the
federal book-entry system known as Separately Traded Registered Interest and
Principal Securities (STRIPS).

VARIABLE AND FLOATING RATE INSTRUMENTS-Certain obligations purchased by each
Portfolio may carry variable or floating rates of interest, and may involve a
conditional or unconditional demand feature. Such instruments bear interest at
rates which are not fixed, but which vary with changes in specified market rates
or indices such as the Federal Reserve Composite Index. The interest rates on
these securities may be reset daily, weekly, quarterly or some other reset
period, and may have a floor or ceiling on interest rate changes. There is a
risk that the current interest rate on such obligations may not accurately
reflect existing market interest rates. A demand instrument with a demand notice
exceeding seven days may be considered illiquid if there is no secondary market
for such security.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES-The Portfolios may individually
purchase or sell portfolio securities in when-issued or delayed delivery
transactions. When-issued or delayed delivery basis transactions involve the
purchase of an instrument with payment and delivery taking place in the future.
Delivery of and payment for these securities may occur a month or more after the
date of the purchase commitment. Each Portfolio will maintain with the Custodian
a separate account with liquid assets in an amount at least equal to these
commitments. The interest rate realized on these securities is fixed as of the
purchase date and no interest accrues to the Portfolio before settlement. These
securities are subject to market fluctuation due to changes in market interest
rates and it is possible that the market value at the time of settlement could
be higher or lower than the purchase price if the general level of interest
rates has changed. Although a Portfolio generally purchases securities on a
when-issued or forward commitment basis with the intention of actually acquiring
securities for its portfolio, a Portfolio may dispose of a when-issued security
or forward commitment prior to settlement if it deems appropriate.

S-8
<PAGE>

INVESTMENT LIMITATIONS

The investment objective and the following investment limitations are
"fundamental policies" of each Portfolio. Fundamental policies cannot be changed
with respect to a Portfolio without the consent of the holders of a majority of
the Portfolio's outstanding shares. The term "majority of the Portfolio's
outstanding shares" means the vote of (i) 67% or more of the Portfolio's shares
present at a meeting, if more than 50% of the outstanding shares of the
Portfolio are present or represented by proxy, or (ii) more than 50% of the
Portfolio's outstanding shares, whichever is less.

Each Portfolio may not:

1. Purchase securities of any issuer (except securities issued or guaranteed
as to principal and interest by the U.S. Government, its agencies or
instrumentalities and repurchase agreements involving, such securities) if as a
result of such purchase more than 5% of the total assets of the Portfolio would
be invested in the securities of such issuer. This restriction applies to 75% of
the Portfolio's total assets.

2. Purchase any securities which would cause more than 25% of the total
assets of the Portfolio to be invested in the securities of one or more issuers
conducting their principal business activities in the same industry; provided
that this limitation does not apply to securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities, or repurchase agreements
involving such securities; and further provided that the Adjustable Rate
Portfolio will invest at least 25% of the value of its total assets in
mortgage-backed securities which are not issued or guaranteed by the U.S.
Government as described in the Prospectus, except when investing for temporary
defensive purposes.

3. Borrow money except for temporary or emergency purposes and then only
in an amount not exceeding one-third of the value of its total assets, except
that each Portfolio may enter into reverse repurchase agreements. Any borrowing
will be done from a credit union, corporate credit union or bank (any borrowing
over 5% will be from a bank) and, to the extent that such borrowing exceeds 5%
of the value of the Portfolio's assets, asset coverage of at least 300% is
required. In the event that such asset coverage shall at any time fall below
300%, the Portfolio shall, within three days thereafter or such longer period as
the SEC may prescribe by rules and regulations, reduce the amount of its
borrowings to such an extent that the asset coverage of such borrowings shall be
at least 300%. This borrowing provision is included solely to facilitate the
orderly sale of portfolio securities to accommodate heavy redemption requests if
they should occur and is not for investment purposes. All borrowings in excess
of 5% of a Portfolio's total assets will be repaid before the Portfolio makes
additional investments and any interest paid on such borrowings will reduce
income.

4. Make loans, except that (a) a Portfolio may purchase or hold debt
instruments in accordance with its investment objective and policies; and (b) a
Portfolio may enter into repurchase agreements.

5. Pledge, mortgage or hypothecate assets, except to secure temporary
borrowings permitted by paragraph (3) above in aggregate amounts not to exceed
10% of total assets taken at current value at the time of the incurrence of such
loan.

6. Purchase or sell real estate, real estate limited partnership interests,
futures contracts, commodities or commodities contracts, provided that this
limitation shall not prohibit the purchase of

S-9
<PAGE>

securities of issuers that may invest in such obligations and debt securities
secured by real estate or interests therein.

7. Make short sales of securities, maintain a short position or purchase
securities on margin, except that the Trust may obtain short-term credits as
necessary for the clearance of security transactions.

8. Act as an underwriter of securities of other issuers except as it may be
deemed an underwriter in selling a Portfolio security.

9. Purchase securities of other investment companies except for money market
funds, collateralized mortgage obligations (CMOs) and real estate mortgage
investment conduits (REMICs) and then only as permitted by the 1940 Act and the
rules and regulations thereunder. Under these rules and regulations, the
Portfolios are prohibited from acquiring the securities of other investment
companies if, as a result of such acquisition, the Portfolios own more than 3%
of the total voting stock of the company; securities issued by any one
investment company represent more than 5% of the total assets of either
Portfolio; or securities (other than treasury stock) issued by all investment
companies represent more than 10% of the total assets of either Portfolio.
Investment companies typically incur fees that are separate from those fees
incurred directly by the Portfolio. A Portfolio's purchase of such investment
company securities results in the layering of expenses, such that Shareholders
would indirectly bear a proportionate share of the operating expenses of such
investment companies, including advisory fees.

It is the position of the SEC's Staff that certain nongovernmental issuers of
CMOs and REMICs constitute investment companies pursuant to the 1940 Act and
that investments in instruments issued by such entities are subject to the
limitations set forth above unless the issuers of such instruments have received
orders from the SEC exempting such instruments from the definition of investment
company.

10. Issue senior securities (as defined in the 1940 Act) except in connection
with permitted borrowings as described above or as permitted by rule,
regulations or order of the SEC.

11. Purchase or retain securities of an issuer if, to the knowledge of the
Trust, an officer, Trustee, partner or director of the Trust or any investment
adviser of the Trust owns beneficially more than 1% of the shares or securities
of such issuer and all such officers, Trustees, partners and directors owning
more than 1% of such shares or securities together own more than 5% of such
shares or securities.

12. Invest in interests in oil, gas or other mineral exploration or development
programs or oil, gas or mineral leases.

13. Purchase securities of any company which has (with predecessors) a record
of less than three years' continuing operations, except (i) obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities, or (ii)
municipal securities which are rated by at least two NRSROs, if, as a result,
more than 5% of the total assets (taken at fair market value) of the Portfolio
would be invested in such securities.

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In addition,

14. CUFUND is not insured or insurable by the National Credit Union Share
Insurance Fund.

15. CUFUND is not supervised or examined by NCUA and is not subject to NCUA
oversight. It is the responsibility of each credit union investing in CUFUND to
evaluate the appropriateness of the investment and the suitable level of
concentration risk on their balance sheets.

16. Except for the initial shareholder, CUFUND investors are restricted to only
credit unions. CUFUND will refuse all offers of investment arising from other
non-credit union parties.

17. Each Portfolio of CUFUND will only invest in investments and engage in
transactions permitted for natural person federal credit unions under Sections
107(7), 107(8) and 107(15) of the FCUA and Part 703 of the NCUA Rules and
Regulations.

18. Any amendments, modifications or changes to these fundamental policies must
be approved by the NCUA before becoming effective.

NON-FUNDAMENTAL POLICIES

Non-fundamental policies can be changed without Shareholder approval.

Each Portfolio may not:

1. Invest in warrants.

2. Invest in illiquid securities in an amount exceeding, in the aggregate, 15%
of the Portfolio's net assets. An illiquid security is a security which cannot
be disposed of promptly (within seven days) and in the usual course of business
at a price that approximates its carrying value by the Portfolio, and includes
repurchase agreements maturing in excess of seven days, time deposits with a
withdrawal penalty, non-negotiable instruments and instruments for which no
market exists.

3. Write or purchase puts, calls, options or combinations thereof.

4. Acquire more than 10% of the voting securities of any one issuer.

5. Invest in companies for the purpose of exercising control.

Credit unions that seek an independent certified accountant's opinion on their
financial statements in accordance with generally accepted accounting principles
(GAAP) are required to account for investments in mutual funds such as CUFUND in
accordance with Statements of Accounting Standards 115, Accounting for Certain
Debt and Equity Securities. This disclosure is intended to comply with the
substance of an NCUA requirement that the Adviser disclose the proper accounting
treatment for Shareholders investing in the Trust.

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The foregoing percentages concerning the investment limitations and
non-fundamental policies of the Portfolios will apply at the time of the
purchase of a security and shall not be considered violated unless an excess
occurs or exists immediately after and as a result of a purchase of such
security.

THE ADVISER

The Trust and CUSOURCE, LLC (the Adviser) have entered into an investment
advisory agreement (the Advisory Agreement). Under the Advisory Agreement, the
Adviser makes the investment decisions for each Portfolio and continuously
reviews, supervises and administers each Portfolio's investment programs,
subject to the supervision of, and policies established by, the Trustees of the
Trust. Each Portfolio may also execute brokerage or other agency transactions
through an affiliate of the Adviser for which the affiliate receives
compensation.

The Adviser is a Texas limited liability company located at 7920 Belt Line Road,
Suite 1100, Dallas, TX 75240. The sole member of the limited liability company
is Southwest Corporate Federal Credit Union, the third largest corporate credit
union in the United States. Founded in 1975, the Adviser provides credit unions
with investment products and services; payment systems services; correspondent
financial services; financial management information; and credit services. The
Adviser registered as an investment adviser in 1989 and, as of May 31, 1999, had
credit union funds under advisement in its Investment Advisory Service of
approximately $1.83 billion.

The Adviser is entitled to a 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.

For the Short-Term Maturity Portfolio, for the fiscal years ended May 31, 1999,
May 31, 1998 and May 31, 1997, the fees paid to the Adviser were $92,279,
$94,844 and $96,481, respectively, of which $64,568, $58,416, and $57,725, were
waived, respectively. For the Adjustable Rate Portfolio, for the fiscal years
ended May 31, 1999, May 31, 1998 and May 31, 1997, the fees paid to the Adviser
were $383,888, $417,610 and $477,404, respectively, of which $257,017, $258,218,
and $159,760, were waived, respectively.

The Advisory Agreement provides that the Adviser shall not be protected against
any liability to the Trust or its Shareholders by reason of willful misfeasance,
bad faith or gross negligence on its part in the performance of its duties or
from reckless disregard of its obligation or duties under the Advisory
Agreement.

The continuance of the Advisory Agreement, must be specifically approved at
least annually (i) by the vote of the Trustees, and (ii) by the vote of a
majority of the Trustees who are not parties to the Advisory Agreement or
"interested persons" of any party thereto, cast in person at a meeting called
for the purpose of voting on such approval. The Advisory Agreement will
terminate automatically in the event of its assignment, and is terminable at any
time without penalty by the Trustees of the Trust or, with respect to each
Portfolio, by a majority of the outstanding shares of that Portfolio, on not
less than 30 days' nor

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<PAGE>

more than 60 days' written notice to the Adviser, or by the Adviser on 90 days'
written notice to the Trust.

THE ADMINISTRATOR

SEI Investments Mutual Funds Services (the Administrator) and the Trust are
parties to an administration agreement (the Administration Agreement). Under the
terms of the Administration Agreement, the Administrator provides the Trust with
overall administrative services (other than investment advisory services)
including all necessary office space, equipment, personnel and facilities.

The Trust pays the Administrator a fee, which is calculated at an annual rate
which is the greater of: (i) $250,000, or (ii) .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.

For the Short-Term Maturity Portfolio, for the fiscal years ended May 31, 1999,
May 31, 1998 and May 31, 1997, the fees paid to the Administrator and
Shareholder Servicing Agent by the Portfolio, were $47,919, $39,341 and $35,873,
respectively. For the Adjustable Rate Portfolio, for the fiscal years ended May
31, 1999, May 31, 1998 and May 31, 1997, (i) the fees paid to the Administrator
and Shareholder Servicing Agent by the Portfolio, were $187,484, $174,659 and
$178,127, respectively.

The Administration Agreement provides that the Administrator shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Trust in connection with the matters to which the Administration Agreement
relates, except a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of the Administrator in the performance of its duties or
from reckless disregard by it of its duties and obligations under the
Administration Agreement.

The Administration Agreement shall continue in effect for successive periods of
one year subject to review by the Trustees of the Trust.

The Administrator, a Delaware business trust, has its principal business offices
at Oaks, PA 19456. SEI Investments Management Corporation (SIMC), a wholly-owned
subsidiary of SEI Investments Company (SEI Investments), is the owner of all
beneficial interest in the Administrator. SEI Investments and its subsidiaries
and affiliates, including the Administrator, are leading providers of funds
evaluation services, trust accounting systems, and brokerage and information
services to financial institutions, institutional investors and money managers.
The Administrator and its affiliates also serve as administrator or
sub-administrator to the following other mutual funds: The Achievement Funds
Trust, The Advisors' Inner Circle Fund, Alpha Select Funds, The Arbor Fund, ARK
Funds, Armada Funds, Bishop Street Funds, Boston 1784 Funds-Registered
Trademark-, CNI Charter Funds, CrestFunds, Inc., The Expedition Funds, First
American Funds, Inc., First American Investment Funds, Inc., First American
Strategy Funds, Inc., HighMark Funds, Huntington Funds, The Nevis Fund, Inc.,
Oak Associates Funds, The Parkstone Advantage Fund, The PBHG Funds, Inc., PBHG
Insurance Series Fund, Inc., The Pillar Funds, SEI Asset Allocation Trust, SEI
Daily Income Trust, SEI Index Funds, SEI Institutional International Trust, SEI
Institutional Investments Trust, SEI Institutional Managed Trust, SEI Liquid
Asset Trust, SEI Tax Exempt Trust, STI Classic Funds, STI Classic Variable
Trust, TIP Funds and UAM Funds, Inc. II.

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<PAGE>

THE SHAREHOLDER SERVICING AGENT

SEI Investments Mutual Funds Services acts as the transfer agent, dividend
disbursing agent and shareholder servicing agent for the Trust. Compensation for
these services is paid under the Administration Agreement. See "The
Administrator."

THE DISTRIBUTOR

SEI Investments Distribution Co. (the "Distributor"), a registered broker-dealer
that is a wholly-owned subsidiary of SEI Investments, and the Trust are parties
to a distribution agreement (the "Distribution Agreement"). Each Portfolio may
also execute brokerage or other agency transactions through the Distributor for
which the Distributor receives compensation.

The Distribution Agreement appoints the Distributor as the exclusive distributor
of the Trust's shares and provides that the Trust's shares be sold without a
minimum sales quota. The Distribution Agreement is renewable annually and may be
terminated at any time by the Distributor, Trustees who are not "interested
persons" of the Trust as that term is defined in the Investment Company Act of
1940, as amended (the "1940 Act"), and who have no direct or indirect financial
interest in the operation of a Distribution Plan or in any agreements related
thereto (Qualified Trustees) or by a majority vote of the outstanding securities
of the Trust upon not more than 60 days' written notice by either party.

No compensation is paid to the Distributor for distribution services.

TRUSTEES AND OFFICERS OF THE TRUST

The management and affairs of the Trust are supervised by the Trustees under the
laws governing business trusts in the Commonwealth of Massachusetts. The
Trustees have approved contracts under which, as described above, certain
companies provide essential services to the Trust. The Trustees and executive
officers of the Trust, their respective dates of birth and principal occupations
for the last five years are set forth below. Unless otherwise indicated, the
address of each Trustee and executive officer is SEI Investments, Oaks, PA
19456.

JAMES L. BRYAN --61, (7/13/38)-- Trustee--777 E. Campbell Road, Suite 731,
Richardson, Texas 75081. President of Texans Credit Union, Richardson, Texas
(1974-present).

GARY L. JANACEK --48, (3/30/51)--Trustee--2401 S. 31st Street, Temple, Texas
76508. President of Scott and White Employees Credit Union, Temple, Texas
(1977-present).

ARNO J. EASTERLY* --64, (3/25/35)-- Trustee--2701 Village Lane, Bossier City,
Louisiana 71112. President of Barksdale Federal Credit Union, Barksdale AFB,
Louisiana (1984-present).

DR. MARTHA ROMAYNE SEGER --78, (2/17/21)-- Trustee-4810 E. Scarlett Street,
Tucson, Arizona 85711. John M. Olin Distinguished Fellow in the Eller Center for
the Study of the Private Market Economy at The University of Arizona, Tucson
(1991-present).

MARK E. NAGLE --39, (10/20/59)--President and Chief Executive Officer--President
and Senior Vice President of Fund Accounting and Administration of the
Administrator since 1998. Vice President of

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<PAGE>

Fund Accounting and Administration of the Administrator, 1996-1998. Vice
President of the Distributor since December 1997. Vice President, Fund
Accounting, BISYS Fund Services, September 1995-November 1996. Senior Vice
President and Site Manager, Fidelity Investments (1981-September 1995).

JOHN LEVEN -- 42, (1/2/57)--Controller and Chief Financial Officer--Controller
and Chief Financial Officer of the Administrator and the Distributor since 1999.
First Data Corp. (1998-1999). FPS Services (1995-1998). Fund/Plan Services, Inc.
(1982-1995).

RICHARD W. GRANT --53, (10/25/45)--Secretary--1701 Market Street, Philadelphia,
Pennsylvania 19103. Partner of Morgan, Lewis & Bockius LLP (law firm) since
1989, counsel to the Trust, the Administrator, and the Distributor.

FRANCIS C. LEE --50, (12/3/48)--Vice President, Assistant Secretary--President
and CEO of Southwest Corporate Federal Credit Union since 1995. Senior Vice
President of Operations, Western Corporate Federal Credit Union (1981-1995).

KEVIN P. ROBINS --38, (4/15/61)--Vice-President and Assistant Secretary--Senior
Vice President and General Counsel of SEI Investments, the Administrator and the
Distributor since 1994. Assistant Secretary of SEI Investments since 1992;
Secretary of the Administrator since 1994. Vice President, General Counsel and
Assistant Secretary of the Administrator and the Distributor, 1992-1994.

SANDRA K. ORLOW --45, (10/18/53)--Vice President, Assistant Secretary--Vice
President and Assistant Secretary of the Administrator and the Distributor since
1988.

TODD B. CIPPERMAN --33, (2/14/66)--Vice President and Assistant Secretary--Vice
President and Assistant Secretary of SEI Investments, the Administrator and the
Distributor since 1995. Associate, Dewey Ballantine (law firm), (1994-1995).
Associate, Winston & Strawn (law firm), (1991-1994).

LYDIA A. GAVALIS --35, (6/5/64)--Vice President and Assistant Secretary--Vice
President and Assistant Secretary of SEI Investments, the Administrator and the
Distributor since 1998. Assistant General Counselor and Director of Arbitration,
Philadelphia Stock Exchange, 1989-1998.

LYNDA J. STRIEGEL --50, (10/30/48)--Vice President and Assistant Secretary--Vice
President and Assistant Secretary of SEI Investments, the Administrator and the
Distributor since 1998. Senior Asset Management Counsel, Barnett Banks, Inc.,
1997-1998. Partner, Groom and Nordberg, Chartered, 1996-1997. Associate General
Counsel, Riggs Bank, N.A., 1991-1995.

KATHY HEILIG --40, (12/21/58)--Vice President and Assistant Secretary--Treasurer
of SEI Investments since 1997; Vice President of SEI Investments since 1991.
Vice President and Treasurer of the Administrator since 1997. Assistant
Controller of SEI Investments and Vice President of the Distributor since 1995;
Director of Taxes of SEI Investments, 1987-1991. Tax Manager, Arthur Andersen
LLP prior to 1987.

JAMES R. FOGGO --35, (6/30/64)--Vice President and Assistant Secretary--Vice
President and Assistant Secretary of SEI Investments since 1998. Vice President
and Assistant Secretary of the Administrator and the Distributor since May 1999.
Associate, Paul Weiss, Rifkind, Wharton & Garrison

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<PAGE>

(law firm), 1998. Associate, Baker & McKenzie (law firm), 1995-1998. Associate,
Battle Fowler L.L.P. (law firm), 1993-1995. Operations Manager, The Shareholder
Services Group, Inc., 1986-1990.

The Trustees and officers of the Trust own less than 1% of the outstanding
shares of the Trust. The Trust pays the fees for Trustees. Compensation of
officers of the Trust is paid by the Administrator. The following table shows
Trustee compensation for the fiscal year ended May 31, 1999.

<TABLE>
<CAPTION>
AGGREGATE PENSION OR
COMPENSATION FROM RETIREMENT
REGISTRANT FOR BENEFITS ESTIMATED
THE FISCAL ACCRUED AS ANNUAL TOTAL COMPENSATION FROM REGISTRANT
YEAR ENDED PART OF FUND BENEFITS UPON AND FUND COMPLEX PAID TO TRUSTEES
MAY 31, 1999 EXPENSES RETIREMENT FOR THE FISCAL YEAR ENDED MAY 31,
NAME OF PERSON 1999
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dr. M. R. Seger $24,000 N/A N/A $24,000 for service on 1 board
- -----------------------------------------------------------------------------------------------------------------
J. L. Bryan $4,000 N/A N/A $4,000 for service on 1 board
- -----------------------------------------------------------------------------------------------------------------
A.J. Easterly $4,000 N/A N/A $4,000 for service on 1 board
- -----------------------------------------------------------------------------------------------------------------
G.L. Janacek $4,000 N/A N/A $4,000 for service on 1 board
- -----------------------------------------------------------------------------------------------------------------
</TABLE>

PURCHASE AND REDEMPTION OF SHARES

Purchase and redemption of shares of either Portfolio may be made on any day on
which both the NYSE and the Federal reserve wire system are open for business (a
Business Day) by placing orders with the Distributor.

The minimum initial investment in either Portfolio of the Trust is $100,000.
There is no minimum for subsequent investments.

A purchase order will be effective as of the day received by the Distributor if
the Distributor receives the order before 4:00 p.m., Eastern time, and the
Custodian receives federal funds before 12:00 p.m., Eastern time on the next
Business Day.

The purchase price of shares of a Portfolio is the net asset value next
determined after a purchase order is received by the Trust. The net asset value
per share of a Portfolio is determined by dividing the total market value of a
Portfolio's investments and other assets, less any liabilities, by the total
outstanding shares of the Portfolio. Net asset value per share is determined as
of the regularly-scheduled close of normal trading on the NYSE (normally, 4:00
p.m., Eastern time) on each Business Day. See "Determination of Net Asset
Value." Purchases will be made in full and fractional shares of a Portfolio
calculated to three decimal places.

Shares may be offered only to residents of those states in which such shares are
eligible for purchase.

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<PAGE>

Shareholders who desire to redeem shares of either Portfolio must place their
redemption orders prior to 4:00 p.m., Eastern time on any Business Day for the
order to be accepted on that Business Day. The redemption price of the shares is
the net asset value of the Portfolio next determined after receipt by the
Distributor of the redemption order. Payment on redemption will be made as
promptly as possible and, in any event, within seven days after the redemption
order is received, as required by the 1940 Act. It is currently the Trust's
policy to pay for redemptions in cash.

The Trust reserves the right to suspend the right of redemption and/or to
postpone the date of payment upon redemption for any period on which trading on
the NYSE is restricted, or during the existence of an emergency (as determined
by the SEC by rule or regulation) as a result of which disposal or valuation of
the Portfolio's securities is not reasonably practicable, or for such other
periods as the SEC has by order permitted. The Trust also reserves the right to
suspend sales of shares of a Portfolio for any period during which the NYSE, the
Adviser, the Administrator and/or the Custodian are not open for business for
any reason. The New York Stock Exchange will not open in observance of the
following holidays: New Year's Day; Martin Luther King, Jr., Day; Presidents'
Day; Good Friday; Memorial Day; Independence Day; Labor Day; Thanksgiving; and
Christmas. In addition, the Federal Reserve observes the following holidays:
Columbus Day and Veterans' Day.

Purchase and redemption orders may be placed by telephone. The Trust, its
transfer agent or sub-agent will not be responsible for any loss, liability,
cost or expense for acting upon wire instructions or upon telephone instructions
that it reasonably believes to be genuine. The Trust, its transfer agent and
sub-agent may each employ reasonable procedures to confirm that instructions
communicated by telephone are genuine, including requiring a form of personal
identification prior to acting upon instructions received by telephone and
recording telephone instructions. The Trust, the Trust's transfer agent or
sub-agent may be liable for losses resulting from fraudulent or unauthorized
instructions if it does not employ these procedures. If market conditions are
extraordinarily active, or other extraordinary circumstances exist, Shareholders
who experience difficulties placing redemption orders by telephone may wish to
consider placing their redemption orders by other means.

DIVIDENDS

Substantially all of the net investment income (not including capital gains) of
each Portfolio is distributed in the form of monthly dividends to Shareholders.
Net investment income consists of accrued interest and any general income of the
Trust allocated to a Portfolio, less the estimated expenses of such Portfolio
and the general expenses of the Trust allocated to such Portfolio during a
particular period. Dividends are declared daily, just prior to a determination
of net asset value. If a purchase order is placed on the preceding Business Day,
shares begin earning dividends on the Business Day federal funds payment is
received by the Custodian. If a purchase order and federal funds are received
the same Business Day, shares begin earning dividends on the next Business Day.
Currently, capital gains of a Portfolio, if any, will be distributed at least
annually.

Shareholders automatically receive all income dividends and capital gain
distributions in additional shares at the net asset value next determined unless
the Shareholder has elected at the time of initial investment to take such
payments in cash. Shareholders may change their election by providing written
notice to the Administrator at least 15 days prior to the change. Dividends and
distributions of each Portfolio are paid on a per share basis.

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<PAGE>

DETERMINATION OF NET ASSET VALUE

As described previously, the net asset value per share of each Portfolio is
calculated by adding the value of securities and other assets, subtracting
liabilities and dividing by the number of outstanding shares.

Pursuant to policies established by the Board of Trustees of the Trust, the
Administrator values the securities of each Portfolio based upon valuations
provided by brokers or an independent pricing service. The pricing service
relies primarily on prices of actual market transactions as well as trader
quotations. However, the service may also use a matrix system to determine
valuations of fixed income securities, which system considers such factors as
security prices, yields, maturities, call features, ratings and developments
relating to specific securities in arriving at valuations. The procedures of the
pricing service and its valuations are reviewed by the officers of the Trust
under the general supervision of the Board of Trustees. Securities and other
assets for which market prices are either (i) not readily available or not
obtained, or (ii) deemed by the Adviser to be materially inaccurate, are valued
at fair value as determined in good faith under procedures established by the
Board of Trustees.

PERFORMANCE

From time to time, each Portfolio may advertise its yield and total return.
These figures will be based on historical earnings and are not intended to
indicate future performance. The 30-day yield of a Portfolio refers to the
annualized income generated by an investment in the Portfolio over a specified
30-day period. The 30-day yield is calculated by assuming that the income
generated by the investment during that period is generated over one year and is
shown as a percentage of the investment. See "Computation of Yield."

The total return of a Portfolio refers to the average compounded rate of return
to a hypothetical investment, for designated time periods (including, but not
limited to, the period from which the Portfolio commenced operations through the
specified date), assuming that the entire investment is redeemed at the end of
each period and assuming the reinvestment of all dividend and capital gain
distributions. See "Calculation of Total Return."

Each Portfolio's performance may from time to time be compared to other mutual
funds tracked by mutual fund rating services, to broad groups of comparable
mutual funds or to unmanaged indices which may assume reinvestment of dividends
but generally do not reflect deductions for administrative and management costs.
Indices that may be used include: for the Short-Term Maturity Portfolio, Lipper
Short Term U.S. Government Index and 1 year Constant Maturity Treasury
Adjustable Rate (CMT); and for the Adjustable Rate Portfolio, Lipper Adjustable
Rate Mortgage Index, 1 month London Interbank Offered Rate (LIBOR), 1 year CMT,
Effective Fed Funds Rate and 30-day Donoghue Index.

COMPUTATION OF YIELD

The 30-day yield for a Portfolio is calculated by assuming that the income
generated by the Portfolio's investment during that 30-day period is generated
each period over one year and is shown as a percentage of the investment. In
particular, yield will be calculated according to the following formula:
Yield = 2[((a - b)/(cd)+ 1) TO THE POWER OF 6 - 1] where a = dividends and
interest earned during the period; b = expenses accrued for the period (net
of reimbursement); c = the average daily number of shares outstanding during

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<PAGE>

the period that were entitled to receive dividends; and d = the maximum offering
price per share on the day of the period.

For the 30-day period ended May 31, 1999, the yield for each Portfolio was:
Short-Term Portfolio, 4.95% and Adjustable Rate Portfolio, 4.93%.

CALCULATION OF TOTAL RETURN

Total return will be calculated according to the following formula: P(l + T) TO
THE POWER OF n = ERV, where P = a hypothetical initial payment of $1,000; T =
average annual total return; n = number of years; and ERV = ending redeemable
value of a hypothetical $1,000 payment made at the beginning of the designated
time period as of the end of such period. For the fiscal year ended May 31,
1999, the total return for each Portfolio was: Short-Term Maturity Portfolio,
5.67% and Adjustable Rate Portfolio, 4.93%. For the five year period ended
May 31, 1999, the average annual total return for each portfolio was: Short-Term
Maturity Portfolio, 6.07% and Adjustable Rate Portfolio, 5.69%. For the period
from June 15, 1992 (commencement of operations) through May 31, 1999, the
average annual total return for each Portfolio was: Short-Term Maturity
Portfolio, 5.03% and Adjustable Rate Portfolio, 5.12%.

FEDERAL TAXES

The following discussion of certain federal income tax consequences is based on
the Internal Revenue Code of 1986, as amended (the Code) and the regulations
issued thereunder as in effect on the date of this Statement of Additional
Information. New legislation, as well as administrative changes or court
decisions, may significantly change the conclusions expressed herein, and may
have a retroactive effect with respect to the transactions contemplated herein.

No attempt has been made to present a detailed explanation of the federal, state
or local income tax treatment of the Portfolios or their Shareholders. Credit
unions generally are exempt from federal income taxation on income, dividends
and capital gains realized as a result of purchasing, holding or redeeming
shares of the Trust. Shareholders are, however, urged (but not required) to
consult their tax advisors regarding specific questions as to federal, state and
local income taxes including, without limitation, issues relating to unrelated
business income taxes.

Tax Status of the Portfolios:

Each Portfolio is treated as a separate entity for federal income tax purposes
and is not combined with the Trust's other Portfolio. Each Portfolio intends to
qualify for the special tax treatment afforded regulated investment companies
(RICs) under the Code, so that it will be relieved of federal income tax on that
part of its net investment income and net capital gains (the excess of long-term
capital gain over short-term capital loss) which is distributed to Shareholders.

Tax Status of Distributions:

Each Portfolio will distribute all of its net investment income (including, for
this purpose, net short-term capital gain) to Shareholders. Dividends from net
investment income will be taxable to Shareholders as ordinary income whether
received in cash or in additional shares. Any net capital gain will be
distributed annually and will be taxed to Shareholders as long-term capital
gain, regardless of how long the

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<PAGE>

Shareholder has held shares. Each Portfolio will make annual reports to
Shareholders of the federal income tax status of all distributions.

In order to qualify for treatment as a RIC under the Code, each Portfolio must
distribute annually to its Shareholders at least the sum of 90% of its net
investment income excludable from gross income plus 90% of its investment
company taxable income (generally, net investment income plus net short-term
capital gain) and also must meet several additional requirements. Among these
requirements are the following: (i) at least 90% of the Portfolio's gross income
each taxable year must be derived from dividends, interest, payments with
respect to securities loans, and gains from the sale or other disposition of
stock or securities. or certain other income; (ii) at the close of each quarter
of the Portfolio's taxable year, at least 50% of the value of its total assets
must be represented by cash and cash items, United States Government securities,
securities of other RICs and other securities, with such other securities
limited, in respect to any one issuer, to an amount that does not exceed 5% of
the value of the Portfolio's assets and that does not represent more than 10% of
the outstanding voting securities of such issuer; and (iii) at the close of each
quarter of the Portfolio's taxable year, not more than 25% of the value of its
assets may be invested in securities (other than United States Government
securities or the securities of other RICs) of any one issuer or two or more
issuers which the Portfolio controls and which are engaged in the same, similar
or related trades or businesses. The Adviser may reimburse the Trust for certain
costs incurred. If for any taxable year a Portfolio does not qualify for the
special tax treatment afforded RICs, all of its taxable income will be subject
to federal income tax at corporate rates without any deduction for distributions
to its Shareholders.

Notwithstanding the distribution requirement described above, which only
requires a Portfolio to distribute at least 90% of its annual investment company
taxable income and does not require any minimum distribution of net capital gain
(the excess of net long-term capital gain over net short-term capital loss), a
Portfolio will be subject to a nondeductible 4% federal excise tax to the extent
it fails to distribute by the end of any calendar year 98% of its ordinary
income for that year and 98% of its capital gain net income (the excess of short
and long-term capital gains over short and long-term capital losses) for the
one-year period ending on October 31 of that year, plus certain other amounts.

Each Portfolio intends to make sufficient distributions prior to the end of each
calendar year to avoid liability for federal excise tax.

Dividends declared by a Portfolio in October, November or December of any year
and payable to Shareholders of record on a date in that month will be deemed to
have been paid by the Portfolio and received by the Shareholder on December 31
of that year, if paid by the Portfolio at any time during the immediately
succeeding January.

Sale, exchange or redemption of Portfolio shares is a taxable event to the
Shareholder.

STATE TAXES

Income received on direct U.S. obligations is exempt from tax at the state level
when received directly and may be exempt, depending on the state, when received
by a Shareholder from a Portfolio provided certain conditions are satisfied.
Interest received on repurchase agreements may not be exempt from state
taxation. Each Portfolio will inform Shareholders annually of the percentage of
income and distributions derived from direct U.S. obligations. Shareholders
should consult the tax advisors to

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determine whether any portion of the income dividends received from a Portfolio
is considered tax exempt in their particular states.

Each Portfolio is not liable for any income or franchise tax in Massachusetts if
it qualifies as a RIC for federal income tax purposes. See "Federal Taxes."

GENERAL INFORMATION

THE TRUST

The Declaration of Trust under which the Trust was organized permits the Trust
to offer separate portfolios of shares. All consideration received by the Trust
for shares of any portfolio and all assets of such portfolio belong only to that
portfolio and would be subject only to liabilities related thereto.

Each Portfolio pays its expenses, including fees of its service providers, audit
and legal expenses, expenses of preparing prospectuses, proxy solicitation
material and reports to shareholders, costs of custodial services, registering
the shares under federal securities laws, and making notice filings under state
securities laws, pricing, insurance expenses, litigation and other extraordinary
expenses, brokerage costs, interest charges, taxes and organization expenses.

DESCRIPTION OF SHARES

The Declaration of Trust authorizes the issuance of an unlimited number of
shares of a Portfolio, each of which represents an equal proportionate interest
in that Portfolio with each other share of the Portfolio. Shares are entitled
upon liquidation to a pro rata share in the net assets of the respective
Portfolio. Shareholders have no preemptive rights. The Declaration of Trust
provides that the Board of Trustees of the Trust may create additional series of
shares. All consideration received by the Trust for shares of any additional
series and all assets in which such consideration is invested would belong to
that series and would be subject to the liabilities related thereto. Share
certificates representing shares will not be issued.

SHAREHOLDER LIABILITY

The Trust is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a trust could, under
certain circumstances, be held personally liable as partners for the obligations
of the trust. Even if, however, the Trust were held to be a partnership, the
possibility of the Shareholders incurring financial loss for that reason appears
remote because (i) the Trust's Declaration of Trust contains an express
disclaimer of Shareholder liability for obligations of the Trust and requires
that notice of such disclaimer be given in each agreement, obligation or
instrument entered into or executed by or on behalf of the Trust or the
Trustees, and (ii) the Declaration of Trust provides for indemnification out of
the Trust property for any Shareholder held personally liable for the
obligations of the Trust.

LIMITATION OF TRUSTEES' LIABILITY

The Declaration of Trust provides that a Trustee shall be liable for his or her
own willful defaults and shall not be liable for any neglect or wrongdoing of
any officer, agent, employee, investment adviser,

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administrator, principal underwriter or custodian. The Declaration of Trust also
provides that the Trust will indemnify its Trustees and officers against
liabilities and expenses incurred in connection with actual or threatened
litigation in which they may be involved because of their offices with the
Trust, unless it is determined in the manner provided in the Declaration of
Trust that they have not acted in good faith in the reasonable belief that their
actions were in the best interests of the Trust. However, nothing in the
Declaration of Trust shall protect or indemnify a Trustee against any liability
for his or her willful misfeasance, bad faith, gross negligence or reckless
disregard of his or her duties.

VOTING RIGHTS

Each share of a Portfolio held entitles the Shareholder of record to one vote on
all matters voted on by the Shareholders of such Portfolio Each Portfolio will
vote separately on matters relating solely to that Portfolio. As a Massachusetts
business trust, the Trust is not required to hold annual meetings of
Shareholders but approval will be sought for certain changes in the operation of
the Trust and for the election of Trustees under certain circumstances. In
addition, a Trustee may be removed by a majority vote of the remaining Trustees
or by a majority vote of Shareholders at a special meeting called upon written
request of Shareholders owning at least 10% of the outstanding shares of the
Trust. In the event that such a meeting is requested, the Trust will provide
appropriate assistance and information to the Shareholders requesting the
meeting. Voting by proxy is permitted.

REPORTING

The Trust will send to its Shareholders annual and semi-annual reports; the
financial statements appearing in annual reports are audited by independent
public accountants. The Trust furnishes proxy statements and other reports to
Shareholders of record.

SHAREHOLDER INQUIRIES

Shareholder inquiries should be directed to the Adviser, 7920 Belt Line Road,
Suite 1100, Dallas, TX 75240.

PORTFOLIO TRANSACTIONS

The Adviser selects brokers or dealers to execute transactions for the purchase
or sale of portfolio securities on the basis of its judgment of their
professional capability to provide the service. The primary consideration is to
have brokers or dealers execute transactions at best price and execution. Best
price and execution refers to many factors, including the price paid or received
for a security, the transaction cost, the promptness and reliability of
execution, the confidentiality and placement accorded the order and other
factors affecting the overall benefit obtained by the account on the
transaction. The determination of what are reasonably competitive rates is based
upon the professional knowledge of the Adviser as to rates paid and charged for
similar transactions throughout the securities industry. In some instances, the
Trust may pay a minimal transaction cost when the transaction presents no
difficulty. Trades are generally made on a net basis where the Trust either buys
securities directly from the dealer or sells them to the dealer. In these
instances, there is no direct commission charged but there is a spread (the
difference between the buy and sell price) which is the equivalent of a
commission.

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The money market securities in which the Portfolios invest are traded primarily
in the over-the-counter market. Longer term debt securities are usually traded
over-the-counter, but may be traded on an exchange. Where possible, the Adviser
will deal directly with the dealers who make a market in the securities involved
except in those circumstances where better prices and execution are available
elsewhere. Such dealers usually are acting as principal for their own account.
On occasion, securities may be purchased directly from the issuer. Money market
securities are generally traded on a net basis and do not normally involve
either brokerage commissions or transfer taxes. The cost of executing portfolio
securities transactions of the Trust will primarily consist of dealer spreads.

The Adviser may place a combined order for two or more accounts or Portfolios
engaged in the purchase or sale of the same security if, in its judgment, joint
execution is in the best interest of each participant and will result in best
price and execution. Transactions involving commingled orders are allocated in a
manner deemed equitable to each account or Portfolio. It is believed that the
ability of the accounts to participate in volume transactions will generally be
beneficial to the accounts and Portfolios. Although it is recognized that, in
some cases, the joint execution of orders could adversely affect the price or
volume of the security that a particular account or trust may obtain, it is the
opinion of the Adviser and the Board of Trustees that the advantages of combined
orders outweigh the possible disadvantages.

Consistent with the Conduct Rules of the National Association of Securities
Dealers, Inc., and subject to seeking best price and execution, the Adviser may
place orders with broker/dealers which have agreed to defray certain Trust
expenses such as custodian fees.

It is expected that the Portfolios may execute brokerage or other agency
transactions through the Distributor, a registered broker-dealer, or the Adviser
in conformity with the 1940 Act, the Securities Exchange Act of 1934, as
amended, and rules promulgated by the SEC. Under these provisions, the
Distributor or the Adviser is permitted to receive and retain compensation for
effecting portfolio transactions for the Trust on an exchange if a written
contract is in effect between the Distributor or the Adviser and the Trust
expressly permitting the Distributor or the Adviser to receive and retain such
compensation. These rules further require that commissions paid to the
Distributor or the Adviser by the Trust for exchange transactions not exceed
"usual and customary" brokerage commissions. The rules define "usual and
customary" commissions to include amounts which are "reasonable and fair
compared to the commission, fee or other remuneration received or to be received
by other brokers in connection with comparable transactions involving similar
securities being purchased or sold on a securities exchange during a comparable
period of time." In addition, the Trust may direct business to one or more
designated broker/dealers in connection with such broker/dealer's provision of
services to the Trust or payment of certain Trust expenses (e.g., custody,
pricing and professional fees). The Trustees, including those who are not
"interested persons" of the Trust, have adopted procedures for evaluating the
reasonableness of compensation paid to the Distributor or the Adviser and will
review these procedures periodically.

The Trust is required to identify any securities of its "regular broker or
dealers" (as such term is defined in the Investment Company Act) which the Trust
has acquired during its most recent fiscal year.

5% SHAREHOLDERS

As of September 3, 1999, the following persons were the only persons who were
record owners (or to the knowledge of the Trust, beneficial owners) of 5% or
more of the shares of the Portfolios. The Trust

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believes that most of the shares referred to below were owned by the indicated
entities both of record and beneficially.

ADJUSTABLE RATE PORTFOLIO

Southwest Corporate Federal Credit Union
Attn: Accounting Department
7920 Belt Line Road, Suite 1100
Dallas, TX 75240, 89.72%

SHORT-TERM MATURITY PORTFOLIO

Southwest Corporate Federal Credit Union
Attn: Accounting Department
7920 Belt Line Road, Suite 1100
Dallas, TX 75240, 84.06%

Dyess Federal Credit Union
Attn: Wilson R. Little
P.O. Box 631
Abilene, TX 79604, 10.42%

As of September 3, 1999, Southwest Corporate Federal Credit Union owned of
record 89.72% and 84.06% of the outstanding voting securities of the Adjustable
Rate Portfolio and the Short-Term Maturity Portfolio, respectively. Southwest
Corporate Federal Credit Union has voting or investment power with respect to
such voting securities. Consequently, under the 1940 Act, Southwest Corporate
Federal Credit Union may be deemed to be a controlling person of the Adjustable
Rate Portfolio and Short-Term Maturity Portfolio. To the best of the knowledge
of the Trust, Southwest Corporate Federal Credit Union's ownership of such
voting securities is for investment only, not for purposes of control, but may
materially affect the voting rights of other Shareholders.

COUNSEL AND INDEPENDENT ACCOUNTANTS

Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania serves as counsel to the
Trust. Arthur Andersen LLP, Philadelphia, Pennsylvania, serves as the
independent public accountants of the Trust.

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CUSTODIAN

First Union National Bank (the "Custodian"), Broad and Chestnut Streets, P.O.
Box 7618, Philadelphia, Pennsylvania 19101, acts as custodian of the Trust. The
Custodian holds cash, securities and other assets of the Trust as required by
the 1940 Act.

EXPERTS

The financial statements of the Trust, incorporated by reference into this
Statement of Additional Information, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are incorporated by reference herein in reliance upon the authority
of said firm as experts in giving said report.

FINANCIAL STATEMENTS

The Trust's audited financial statements and the notes thereto and the Report of
the Independent Public Accountants dated July 7, 1999 for the fiscal year ended
May 31, 1999, relating to the financial statements and financial highlights of
the Trust are incorporated by reference herein. A copy of the Trust's 1999
Annual Report to Shareholders must accompany delivery of this Statement of
Additional Information.

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APPENDIX

DESCRIPTION OF RATINGS

DUFF & PHELPS RATING DEFINITIONS

AAA Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.

AA High credit quality. Protection factors are strong. Risk is modest but may
vary slightly from time to time because of economic conditions.

FITCH RATING DEFINITIONS

AAA Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably
foreseeable events.

AA Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated 'AAA'. Because bonds rated in
the 'AAA' and 'AA' categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is
generally rated 'F-1+'.

IBCA RATING DEFINITIONS

AAA Obligations for which there is the lowest expectation of investment risk.
CAPACITY FOR TIMELY REPAYMENT OF PRINCIPAL AND INTEREST IS SUBSTANTIAL,
SUCH THAT ADVERSE CHANGES IN BUSINESS, ECONOMIC OR FINANCIAL CONDITIONS ARE
UNLIKELY TO INCREASE INVESTMENT RISK SUBSTANTIALLY.

AA Obligations for which there is a very low expectation of investment risk.
CAPACITY FOR TIMELY REPAYMENT OF PRINCIPAL AND INTEREST IS SUBSTANTIAL.
ADVERSE CHANGES IN BUSINESS, ECONOMIC OR FINANCIAL CONDITIONS MAY INCREASE
INVESTMENT RISK, ALBEIT NOT VERY SIGNIFICANTLY.

MOODY'S RATING DEFINITIONS

Aaa Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.

Aa Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long-term risk appear somewhat larger than
the Aaa securities.

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STANDARD & POOR'S RATINGS GROUP DEFINITIONS

AAA Debt rated 'AAA' has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.

AA Debt rated 'AA' has a very strong capacity to pay interest and repay
principal and differs from the highest rated debt only in small degree.

THOMSON BANKWATCH RATING DEFINITIONS

AAA The highest category; indicates that the ability to repay principal and
interest on a timely basis is very high.

AA The second-highest category; indicates a superior ability to repay
principal and interest on a timely basis, with limited incremental risk
compared to issues rated in the highest category.

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