CUFUND
======
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Short-Term Maturity Portfolio
[BULLET]
Adjustable Rate Portfolio
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ANNUAL REPORT
TO
SHAREHOLDERS
5/31/99
THIS INFORMATION MUST BE PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS.
SOUTHWEST CORPORATE FEDERAL CREDIT UNION
INVESTMENT ADVISER
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<PAGE>
CUFUND
THE CREDIT UNION FAMILY OF FUNDS
To Our Shareholders:
CUFUND, the Credit Union Family of Funds, has been serving natural person credit
union investment needs since its inception in June 1992. During this seven year
period, the Short-Term Maturity Portfolio and the Adjustable Rate Portfolio have
given credit unions an excellent investment option.
CUFUND remains unique among mutual funds as it is the only mutual fund to be
advised by a company that is a wholly-owned subsidiary (CUSO) of a credit union
As a result, CUFUND is uniquely positioned to respond to the concerns and
changes of natural person credit unions, as well as the continually changing
regulatory environment. As the regulatory environment becomes more complex, we
believe that the flexibility and investment expertise inherent to the portfolios
of CUFUND will allow credit unions to continue to take advantage of all types of
securities available to them in one easy package.
CUFUND has maintained a strong performance record since its inception. It has
been our pleasure, the adviser, the administrator, and the distributor, to offer
CUFUND. We thank all credit unions for their support of and participation in
CUFUND.
Sincerely
/s/ signature omitted
Mark E. Nagle
President
1
<PAGE>
CUFUND
MANAGEMENT'S DISCUSSION & ANALYSIS OF FUND PERFORMANCE
SHORT-TERM MATURITY PORTFOLIO -- MAURICE KERINS III, ADVISER
SOUTHWEST CORPORATE FEDERAL CREDIT UNION
MAY 31, 1999
The investment objective of the Short-Term Maturity Portfolio is to seek a high
level of income consistent with safety of capital. The primary investment
strategy undertaken by the Adviser has been a modified "buy and hold" strategy.
The assets of the Portfolio are distributed between U.S. Agency and various
mortgage-backed securities (MBS). The average-weighted maturity continues to be
less than three years.
A year ago we wrote that much attention was being given to prepayment rates in
the MBS market. While prepayments have remained relatively high, increasing
interest rates have slowed some of the prepay frenzy of 1998. While the strong
housing market keeps some pressure on prepayments, the proportion of existing
homeowners with loans less than two years old has increased substantially.
Currently the portfolio remains relatively defensively positioned. Cash from
paydowns and interest [approximately $2 million per month] is being accumulated
in short-term PACCMOs to add yield. Approximately $393,000 is in cash or cash
equivalents. During the first quarter $2 million Treasuries were purchased in
an attempt to lengthen duration. With economic pressure mounting on the FOMC to
raise the Federal Funds rate, and the recent back up in the yield curve, the
adviser will continue to judiciously increase the duration in anticipation of
lower rates by the Fall.
Annual total return for the period ending May 31, 1999 was 5.67% and the NAV
closed at $9.88 up from $9.86 on June 1, 1998. The 30 day return for May 31,
1999 was 4.95%.
GRAPH OMITTED
PLOT POINTS AREAS FOLLOWS:
COMPARISON OF CHANGE IN THE VALUE OF A $100,000 INVESTMENT IN THE CUFUND
SHORT-TERM MATURITY PORTFOLIO, VERSUS THE 1 YEAR CONSTANT MATURITY TREASURY,
AND THE LIPPER SHORT U.S. GOVERNMENT FUNDS AVERAGE
AVERAGE ANNUAL TOTAL RETURN
ANNUALIZED ANNUALIZED ANNUALIZED
ONE YEAR THREE FIVE INCEPTION
RETURN YEAR RETURN YEAR RETURN TO DATE*
5.67% 5.91% 6.07% 5.03%
GRAPH OMITTED
PLOT POINTS ARE AS FOLLOWS:
CU CONSTANT LIPPER
JUNE 92 100,000 100,000 100,000
MAY 93 104,078 103,222 105,121
MAY 94 104,317 107,268 106,225
MAY 95 111,536 113,050 113,077
MAY 96 117,927 119,392 118,267
MAY 97 124,885 126,401 125,410
MAY 98 132,590 133,492 132,922
MAY 99 140,108 140,033 139,010S
*Inception date 6/15/92
Past performance is no indication of future performance.
2
<PAGE>
CUFUND
MANAGEMENT'S DISCUSSION & ANALYSIS OF FUND PERFORMANCE
ADJUSTABLE RATE PORTFOLIO -- MAURICE KERINS III, ADVISER
SOUTHWEST CORPORATE FEDERAL CREDIT UNION
MAY 31, 1999
The investment objective of the Adjustable Rate Portfolio is to seek a high
level of income while maintaining principal stability. The primary investment
strategy undertaken by the Adviser continues to emphasize CMO REMIC floating
rate securities, while temporarily avoiding the Pass-Through ARM sector. At May
31, 1999 approximately 25% of the fund was in one-month Libor floating rate
securities, down from 39%; 10% was in six-month CD or LIBOR securities, down
from 17%; 7% was in one-year CMT securities, down from 15%; and 20% was in
Eleventh District COFI securities, up from just over 11%. As well, 30% was in
short term fixed rate and 12% was in cash and cash equivalents.
Prepayments on Adjustable Rate Mortgages have slowed but not enough to warrant
their relatively high price levels. And, as we stated previously, the percentage
of refinancings into new ARMS has remained moribund. In spite of a slight
steepening of the U.S. Treasury yield curve to 42 basis points between the Two
Year and Thirty Year issues at May 31, 1999, there is still little incentive for
homeowners to opt for adjustable rate financing.
At May 31, 1999, approximately 63% of the Portfolio consisted of variable rate
MBS and 37% in fixed rate investments. Virtually all of the cash deployed [cash
flow from paydowns and interest has averaged $6 million per month] in the CMO
market was in the short average life COFI Floater sector. The adviser still
views this sector favorably. Nonetheless, we do not propose to increase this
sector's holdings substantially above the current 20% level.
The Net Asset Value of the Portfolio was $9.94 on May 31, 1999, down from $10.00
on June 1, 1998. The annual total return for the period was 4.93%. The adviser
will continue to attempt to increase duration and yield in fairly valued sectors
of the adjustable rate market while focusing on maintaining a stable NAV and
minimizing prepayment risk.
COMPARISON OF CHANGE IN THE VALUE OF A $100,000 INVESTMENT IN THE CUFUND
ADJUSTABLE RATE MORTGAGE PORTFOLIO, VERSUS THE 1 MONTH LIBOR INDEX,
AND THE LIPPER ADJUSTABLE-RATE MORTGAGE FUNDS AVERAGE
AVERAGE ANNUAL TOTAL RETURN
ANNUALIZED ANNUALIZED ANNUALIZED
ONE YEAR THREE FIVE INCEPTION
RETURN YEAR RETURN YEAR RETURN TO DATE*
4.93% 5.64% 5.69% 5.12%
GRAPH OMITTED
PLOT POINTS ARE AS FOLLOWS:
CU LIBOR LIPPER
JUNE 92 100,000 100,000 100,000
MAY 93 103,906 103,110 103,688
MAY 94 107,221 106,739 105,607
MAY 95 112,850 113,112 111,119
MAY 96 119,948 119,740 117,153
MAY 97 127,577 126,530 124,932
MAY 98 134,759 133,931 131,466
MAY 99 141,403 141,150 136,843
*Inception date 6/15/92
Past Performance is no indication of future performance.
3
<PAGE>
STATEMENT OF NET ASSETS CUFUND
May 31, 1999
SHORT-TERM MATURITY PORTFOLIO
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Par Value
Description (000) (000)
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U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS (79.3%)
FHLMC Pool # L73564
5.000%, 03/01/01 $ 492 $ 484
FHLMC Pool # L73582
5.000%, 04/01/01 16 16
FHLMC Pool # L73595
5.000%, 03/01/01 248 244
FHLMC Pool # L73633
5.000%, 04/01/01 192 189
FHLMC Series 1496,
Class E CMO
5.500%, 03/15/16 343 343
FHLMC Series 1556,
Class E CMO
5.600%, 10/15/08 1,061 1,061
FHLMC Series 1559
VP CMO
5.500%, 02/15/20 500 493
FHLMC Series 1702,
Class PL CMO
5.000%, 10/15/16 329 328
FHLMC Series 1710,
Class C CMO
6.100%, 02/15/24 258 259
FHLMC Series 1819,
Class A CMO
6.000%, 02/15/06 1,375 1,377
FHLMC Series 1490,
Class PE REMIC
5.750%, 07/15/06 417 418
FHLMC Series 1496,
Class G REMIC
4.000%, 03/15/19 1,120 1,079
FHLMC Series 1640,
Class F REMIC (A)
5.338%, 10/15/07 166 167
FHLMC Series 1678,
Class A REMIC
5.500%, 10/15/07 344 343
FHLMC Series 1679,
Class A REMIC
5.250%, 09/15/06 213 213
FHLMC Series 1734,
Class E REMIC
6.000%, 10/15/06 1,982 1,988
FHLMC Series 2055,
Class OA REMIC
6.000%, 03/15/02 1,000 1,001
FNMA Pool #190634
6.500%, 02/01/04 657 663
FNMA Pool # 263895
6.000%, 12/01/03 773 770
FNMA Pool # 50948
6.000%, 11/01/03 826 823
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Par Value
Description (000) (000)
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FNMA Series 1626,
Class PN CMO
5.800%, 01/15/06 $ 732 $ 733
FNMA Series1627,
Class 4 CMO
6.000%, 05/15/22 166 167
FNMA Series 1992-19,
Class PD CMO
6.500%, 04/25/16 255 254
FNMA Series 1992-150,
Class FV CMO (A)
5.562%, 05/25/21 838 835
FNMA Series 1993-110,
Class E CMO
6.000%, 04/25/19 112 113
FNMA Series 1993-138,
Class E CMO
5.750%, 12/25/16 524 524
FNMA Series 1993-147,
Class PE CMO
5.000%, 08/25/23 302 301
FNMA Series 1993-201,
Class G CMO
3.500%, 05/25/19 500 471
FNMA Series 1993-204,
Class PD CMO
5.600%, 05/25/18 627 626
FNMA Series 1994-12,
Class PE CMO
5.750%, 04/25/07 373 373
FNMA Series 1997-53,
Class PA CMO
6.500%, 10/18/15 1,019 1,026
FNMA Series 2031,
Class PA CMO
5.750%, 02/15/07 391 390
FNMA Series 1992-155,
Class E REMIC
6.700%, 08/25/04 37 37
FNMA Series 1992-175,
Class PE REMIC
6.500%, 10/25/04 192 192
FMNA Series 1993-10,
PE REMIC
6.500%, 10/25/04 665 666
FNMA Series 1993-199,
Class E REMIC
5.850%, 05/25/19 606 606
FNMA Series 1993-212,
Class C REMIC
6.000%, 11/25/00 443 444
FNMA Series 1993-212,
Class E REMIC
5.300%, 11/25/00 1,149 1,143
4
<PAGE>
STATEMENT OF NET ASSETS CUFUND
May 31, 1999
SHORT-TERM MATURITY PORTFOLIO (concluded)
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Par Value
Description (000) (000)
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FNMA Series 1994-27,
Class PK REMIC
6.500%, 06/25/00 $ 481 $ 482
FNMA Series 1994-72,
Class E REMIC
6.000%, 11/25/17 488 490
FNMA Series 1994-86,
Class PD REMIC
6.000%, 06/25/04 5 6
GNMA Series 1994-1,
Class PC REMIC
7.250%, 12/16/16 316 317
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Total U.S. Agency Mortgage-
Backed Obligations
(Cost $22,498) 22,455
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NON-AGENCY MORTGAGE-BACKED OBLIGATIONS (10.7%)
Countrywide Mortgage Securities
Series 1994-D,
Class A1 REMIC (A)
5.438%, 03/25/24 160 161
General Electric Mortgage
Services Series 1994-13,
Class A1 REMIC
6.500%, 04/25/24 405 406
General Electric Mortgage
Services Series 1994-8,
Class A3 REMIC
6.000%, 02/25/24 1,265 1,262
Prudential Home Mortgage
Securities Series 1993-43,
Class A1 REMIC
5.400%, 10/25/23 174 173
Prudential Home Mortgage
Securities Series 1993-54,
Class A21 REMIC
5.500%, 01/25/24 730 728
Residential Funding Mortgage
Securities Series 1993-S40,
Class A1 REMIC (A)
5.338%, 11/25/23 287 287
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Total Non-Agency Mortgage-
Backed Obligations
(Cost $3,023) 3,017
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U.S. GOVERNMENT AGENCY OBLIGATIONS (5.3%)
FNMA
4.680%, 06/01/99 500 500
6.250%, 06/16/00 1,000 1,009
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Par/Shares Value
Description (000) (000)
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Total U.S. Government
Agency Obligations
(Cost $1,501) $ 1,509
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U.S. TREASURY OBLIGATIONS (3.3%)
U.S. Treasury Notes
4.250%, 11/15/03 $1,000 945
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Total U.S. Treasury Obligations
(Cost $968) 945
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CASH EQUIVALENTS (1.4%)
SEI Daily Income Trust
Treasury Fund 393 393
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Total Cash Equivalents
(Cost $393) 393
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TOTAL INVESTMENTS (100.0%)
(Cost $28,383) 28,319
=======
OTHER ASSETS AND LIABILITIES,
NET (0.0%) 7
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NET ASSETS:
Portfolio Shares -- (unlimited
authorization -- no par value)
based on 2,867,476 outstanding
shares of beneficial interest 29,071
Distributions in Excess of
net investment income (19)
Accumulated net realized loss
on investments (662)
Net unrealized depreciation
of investments (64)
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Total Net Assets (100.0%) 28,326
=======
Net Asset Value and Redemption
Price Per Share $9.88
=======
CMO -- Collateralized Mortgage Obligation
FHLMC -- Federal Home Loan Mortgage Corporation
FNMA -- Federal National Mortgage Association
GNMA -- Government National Mortgage Association
REMIC -- Real Estate Mortgage Investment Conduit
(A) Adjustable Rate Features. Rate shown on the Statement of Net Assets is the
rate in effect on May 31, 1999.
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
STATEMENT OF NET ASSETS CUFUND
May 31, 1999
ADJUSTABLE RATE PORTFOLIO
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Par Value
Description (000) (000)
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U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS (72.7%)
FHLMC Pool # l80052
6.000%, 01/01/01 $1,158 $ 1,148
FHLMC Pool # M80302
6.000%, 12/01/00 1,544 1,531
FHLMC Pool # 970003 (A)
6.827%, 01/01/23 1,821 1,830
FHLMC Pool # 970021 (A)
6.939%, 01/01/23 2,922 2,959
FHLMC Series 1422,
Class F (A)
5.462%, 11/15/99 1,005 1,003
FHLMC Series 1353,
Class F CMO
5.019%, 08/15/07 1,557 1,536
FHLMC Series 1491,
Class E CMO
5.000%, 02/15/17 93 93
FHLMC Series1559,
VP CMO
5.500%, 02/15/20 1,000 985
FHLMC Series 1595,
Class F CMO (A)
5.290%, 10/15/13 1,247 1,248
FHLMC Series 1604,
Class FH CMO
5.462%, 11/15/08 2,097 2,087
FHLMC Series 1625,
Class EA CMO
5.750%, 03/15/07 3,641 3,646
FHLMC Series 1663,
Class PE CMO
5.850%, 09/15/19 453 454
FHLMC Series 1393,
Class C REMIC
6.000%, 01/15/04 277 277
FHLMC Series 1476,
Class F REMIC (A)
5.312%, 02/15/08 2,717 2,673
FHLMC Series 1500,
Class E REMIC
6.000%, 08/15/16 421 422
FHLMC Series 1506,
Class PE REMIC
5.650%, 07/15/05 235 235
FHLMC Series 1512,
Class M REMIC (A)
5.010%, 05/15/08 464 457
FHLMC Series 1541,
Class KM REMIC (A)
5.462%, 08/15/22 138 136
FHLMC Series 1546,
Class FC REMIC (A)
5.438%, 12/15/21 4,466 4,496
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Par Value
Description (000) (000)
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FHLMC Series 1598,
Class E REMIC
5.600%, 11/15/05 $ 600 $ 601
FHLMC Series 1611,
Class G REMIC (A)
5.438%, 05/15/21 3,289 3,305
FHLMC Series 1671,
Class J REMIC (A)
5.338%, 12/15/22 6,724 6,749
FHLMC Series 1695,
Class AK REMIC (A)
5.338%, 01/15/24 268 269
FHLMC Series 2055,
Class OA REMIC
6.000%, 03/15/02 2,000 2,001
FNMA Pool # 50759
6.000%, 07/01/00 1,203 1,192
FNMA Pool # 50968
6.000%, 01/01/04 1,614 1,605
FNMA Pool # 165655 (A)
7.180%, 05/01/22 471 480
FNMA Pool # 166291 (A)
6.878%, 06/01/22 1,613 1,655
FNMA Pool # 169164 (A)
7.345%, 06/01/22 257 263
FNMA Pool # 354900 (A)
7.597%, 08/01/26 131 135
FNMA Pool # 359751 (A)
7.152%, 09/01/26 615 626
FNMA Pool # 364612 (A)
7.127%, 11/01/26 331 341
FNMA Series 1993,
Class 204 CMO
5.500%, 10/25/02 500 492
FNMA Series 1993,
Class C CMO
6.500%, 09/25/08 1,000 1,001
FNMA Series 1993-168,
Class FG CMO (A)
5.620%, 09/25/23 819 818
FNMA Series 1993-201,
Class G CMO
3.500%, 05/25/19 1,000 943
FNMA Series 1992-28,
Class F REMIC (A)
5.438%, 05/25/07 477 479
FNMA Series 1992-150,
Class FV REMIC (A)
5.562%, 05/25/21 1,676 1,670
FNMA Series 1992-175,
Class PE REMIC
6.500%, 10/25/04 308 308
FNMA Series 1993-14,
Class G REMIC
6.000%, 06/25/19 941 940
6
<PAGE>
STATEMENT OF NET ASSETS CUFUND
May 31, 1999
ADJUSTABLE RATE PORTFOLIO (continued)
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Par Value
Description (000) (000)
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FNMA Series 1993-58,
Class E REMIC
5.500%, 07/25/18 $ 215 $ 214
FNMA Series 1993-72,
Class F REMIC (A)
5.462%, 05/25/08 1,000 976
FNMA Series 1993-95,
Class PD REMIC
6.000%, 12/25/06 741 741
FNMA Series 1993-115,
Class E REMIC
5.500%, 04/25/19 565 564
FNMA Series 1993-116,
Class FA REMIC (A)
5.062%, 07/25/22 3,939 3,870
FNMA Series 1993-127,
Class EA REMIC
5.650%, 10/25/16 613 612
FNMA Series 1993-138,
Class E REMIC
5.750%, 12/25/16 1,102 1,101
FNMA Series 1993-168,
Class PE REMIC
6.000%, 08/25/17 1,496 1,496
FNMA Series 1993-209,
Class E REMIC
5.750%, 07/25/05 310 310
FNMA Series 1993-209,
Class FG REMIC (A)
5.462%, 08/25/08 2,521 2,496
FNMA Series 1993-210,
Class FB REMIC
5.338%, 10/25/22 2,332 2,338
FNMA Series 1993-212,
Class E REMIC
5.300%, 11/25/00 2,298 2,285
FNMA Series 1993-221,
Class F REMIC (A)
5.462%, 03/25/08 2,266 2,225
FNMA Series 1994-42,
Class FN REMIC (A)
5.062%, 03/25/23 3,150 3,060
FNMA Series 1994-86,
Class PD REMIC
6.000%, 06/25/04 11 11
FNMA Series 1994-87,
Class F REMIC (A)
5.388%, 03/25/09 1,060 1,067
FNMA Series 1997-20,
Class F REMIC (A)
5.524%, 03/25/27 7,727 7,618
GNMA Series 31,
Class FC REMIC (A)
5.338%, 08/25/23 1,449 1,455
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Par Value
Description (000) (000)
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Total U.S. Agency Mortgage-
Backed Obligations
(Cost $85,766) $85,528
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NON-AGENCY MORTGAGE-BACKED OBLIGATIONS (12.4%)
DLJ Mortgage Acceptance
Series 1994-Q1,
Class 1A1 REMIC (A)
7.369%, 03/25/24 $ 852 877
Fund America Investors II
Series 1993-J,
Class M REMIC (A)
7.507%, 11/25/23 546 545
General Electric Mortgage
Services Series 1994-8,
Class A3 REMIC
6.000%, 02/25/24 1,813 1,807
Merrill Lynch Mortgage
Investments Series 1991-F,
Class A2 REMIC (A)
5.903%, 06/15/16 2,172 2,201
Merrill Lynch Mortgage
Investments Series 1992-C,
Class A2 REMIC (A)
5.850%, 06/15/17 2,350 2,351
Prudential Home Mortgage
Securities Series 1993-5,
Class A7 REMIC (A)
5.638%, 03/25/00 2,563 2,595
Resolution Trust Series 1992-3,
Class A4 REMIC (A)
5.488%, 09/25/30 459 460
Resolution Trust Series 1992-M4,
Class A4 REMIC (A)
5.738%, 09/25/21 524 524
Salomon Brothers Mortgage
Securities VII Series 1992-2,
Class A4 REMIC (A)
7.248%, 06/25/22 963 970
Salomon Brothers Mortgage
Securities VII Series 1992-4,
Class A5 REMIC (A)
7.016%, 09/25/22 491 482
Salomon Brothers Mortgage
Securities VII Series 1992-6,
Class A1 REMIC (A)
6.899%, 11/25/22 1,245 1,246
Securitized Assets Sales
Series 1993-8,
Class A2 REMIC (A)
7.121%, 12/26/23 550 555
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7
<PAGE>
STATEMENT OF NET ASSETS CUFUND
May 31, 1999
ADJUSTABLE RATE PORTFOLIO (concluded)
- -------------------------------------------------------
Par/Shares Value
Description (000) (000)
- -------------------------------------------------------
Total Non-Agency Mortgage-
Backed Obligations
(Cost $14,539) $14,613
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U.S. GOVERNMENT AGENCY OBLIGATIONS (9.8%)
FHLB
4.700%, 06/02/99 $8,501 $ 8,500
FHLMC
4.700%, 08/05/99 627 622
4.770%, 09/09/99 1,000 987
SLMA (A)
4.901%, 11/18/99 1,350 1,350
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Total U.S. Government
Agency Obligations
(Cost $11,459) 11,459
-------
U.S. TREASURY OBLIGATIONS (1.6%)
U.S. Treasury Notes
4.250%, 11/15/03 2,000 1,890
-------
Total U.S. Treasury Obligations
(Cost $1,935) 1,890
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CASH EQUIVALENTS (4.4%)
SEI Daily Income Trust
Treasury Fund 5,154 5,154
-------
Total Cash Equivalents
(Cost $5,154) 5,154
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TOTAL INVESTMENTS (100.9%)
(Cost $118,853) 118,644
========
OTHER ASSETS AND LIABILITIES,
NET (-0.9%) (1,063)
-------
NET ASSETS:
Portfolio Shares -- (unlimited
authorization -- no par value)
based on 11,823,033 outstanding
shares of beneficial interest 118,498
Distributions in Excess of net
investment income (32)
Accumulated net realized loss
on investments (676)
Net unrealized depreciation
of investments (209)
--------
TOTAL NET ASSETS (100.0%) $117,581
========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE $9.94
========
CMO -- Collateralized Mortgage Obligation
DLJ -- Donaldson, Lufkin, & Jenrette
FHLB -- Federal Home Loan Bank
FHLMC -- Federal Home Loan Mortgage Corporation
FNMA -- Federal National Mortgage Association
GNMA -- Government National Mortgage Association
REMIC -- Real Estate Mortgage Investment Conduit
SLMA -- Student Loan Marketing Association
(A) Adjustable Rate Features. Rate shown on the Statement of Net Assets is the
rate in effect on May 31, 1999.
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
STATEMENT OF OPERATIONS CUFUND
For the period ended May 31, 1999
(IN THOUSANDS)
------------------------------------
SHORT-TERM MATURITY ADJUSTABLE RATE
PORTFOLIO PORTFOLIO
- --------------------------------------------------------------------------------
Investment Income $1,635 $6,997
- --------------------------------------------------------------------------------
Expenses:
Investment Advisory Fees 92 384
Waiver of Investment Advisory Fees (65) (257)
Administrator Fees 48 187
Custodian Fees 4 16
Professional Fees 17 69
Registration Fees 1 3
Trustee Fees 7 31
Printing Fees 6 24
Transfer Agent Fees 1 3
Other 2 8
- --------------------------------------------------------------------------------
Total Expenses 113 468
- --------------------------------------------------------------------------------
Net Investment Income 1,522 6,529
- --------------------------------------------------------------------------------
Net Realized Gain/(Loss) on Investments 158 (2)
- --------------------------------------------------------------------------------
Net Unrealized Depreciation of Investments (78) (659)
- --------------------------------------------------------------------------------
Net Realized and Unrealized Gain/(Loss)
on Investments 80 (661)
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting
from Operations 1,602 5,868
================================================================================
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS CUFUND
<TABLE>
<CAPTION>
(IN THOUSANDS)
-------------------------------------------------
SHORT-TERM MATURITY ADJUSTABLE RATE
PORTFOLIO PORTFOLIO
----------------------- ------------------------
06/01/98 06/01/97 06/01/98 06/01/97
TO 05/31/99 TO 05/31/98 TO 05/31/99 TO 05/31/98
- -------------------------------------------------------------------------------------------------------------------
Investment Activities:
<S> <C> <C> <C> <C>
Net Investment Income $ 1,522 $ 1,590 $ 6,529 $ 7,282
Net Realized Gain/(Loss) on Investments 158 -- (2) (16)
Net Unrealized Appreciation/(Depreciation) of Investments (78) 179 (659) (64)
- -------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations 1,602 1,769 5,868 7,202
- -------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders:
Net Investment Income (1,534) (1,596) (6,511) (7,295)
- -------------------------------------------------------------------------------------------------------------------
Capital Share Transactions:
Proceeds from Shares Issued -- -- -- 900
Shares Issued in Lieu of Cash Distributions 76 114 575 565
Cost of Shares Redeemed (1,363) (410) (7,749) (24,934)
- -------------------------------------------------------------------------------------------------------------------
Decrease in Net Assets from Capital Share Transactions (1,287) (296) (7,174) (23,469)
- -------------------------------------------------------------------------------------------------------------------
Total Decrease in Net Assets (1,219) (123) (7,817) (23,562)
- -------------------------------------------------------------------------------------------------------------------
Net Assets:
Beginning of Period 29,545 29,668 125,398 148,960
- -------------------------------------------------------------------------------------------------------------------
End of Period (1) $28,326 $29,545 $117,581 $125,398
===================================================================================================================
Capital Share Transactions:
Shares Issued -- -- -- 90
Shares Issued in Lieu of Cash Distributions 8 12 58 56
Shares Redeemed (137) (42) (774) (2,488)
- -------------------------------------------------------------------------------------------------------------------
Net Capital Share Transactions (129) (30) (716) (2,342)
===================================================================================================================
Amounts designated as "--" are either $0 or have been rounded to $0.
(1) Including undistributed net investment income (distributions in excess of
net investment income) (000) of $(19) and $(7) for Short-Term Maturity
Portfolio, $(32) and $(50) for Adjustable Rate Portfolio at May 31, 1999 and
May 31, 1998, respectively.
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
FINANCIAL HIGHLIGHTS CUFUND
FOR THE YEARS ENDED MAY 31,
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
NET RATIO OF
NET REALIZED AND NET NET RATIO OF NET EXPENSES
ASSET UNREALIZED DIVIDENDS ASSET ASSETS RATIO OF INVESTMENT TO AVERAGE
VALUE NET GAINS FROM NET CAPITAL VALUE END OF EXPENSES INCOME NET ASSETS
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT GAINS END OF TOTAL PERIOD TO AVERAGE TO AVERAGE (EXCLUDING
OF PERIOD INCOME INVESTMENTS INCOME DISTRIBUTIONS PERIOD RETURN (000) NET ASSETS NET ASSETS WAIVERS)
-------------------------------------------------------------------------------------------------------------------------
Short-Term Maturity Portfolio
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1999 $ 9.86 0.52 0.03 (0.53) -- $ 9.88 5.67% $ 28,326 0.39% 5.28% 0.61%
1998 9.80 0.53 0.06 (0.53) -- 9.86 6.17 29,545 0.39 5.37 0.59
1997 9.76 0.52 0.04 (0.52) -- 9.80 5.90 29,668 0.39 5.33 0.58
1996 9.73 0.52 0.03 (0.52) -- 9.76 5.73 30,633 0.38 5.27 0.61
1995 9.59 0.50 0.14 (0.50) -- 9.73 6.92 35,050 0.38 5.24 0.51
Adjustable Rate Portfolio
1999 $10.00 0.54 (0.06) (0.54) -- $ 9.94 4.93% $117,581 0.39% 5.44% 0.60%
1998 10.01 0.56 (0.01) (0.56) -- 10.00 5.63 125,398 0.39 5.58 0.59
1997 9.96 0.57 0.05 (0.57) -- 10.01 6.36 148,960 0.39 5.66 0.56
1996 9.94 0.59 0.02 (0.59) -- 9.96 6.29 153,760 0.39 5.92 0.53
1995 9.96 0.53 (0.02) (0.53) -- 9.94 5.25 162,147 0.38 5.34 0.51
</TABLE>
RATIO OF NET
INVESTMENT
INCOME
TO AVERAGE
NET ASSETS PORTFOLIO
(EXCLUDING TURNOVER
WAIVERS) RATE
------------------------
Short-Term Maturity Portfolio
1999 5.06% 130%
1998 5.17 76
1997 5.14 63
1996 5.04 42
1995 5.11 53
1999 5.23% 35%
1998 5.38 31
1997 5.49 17
1996 5.78 23
1995 5.21 4
- --------------------------------------------------------------------------------
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS CUFUND
May 31, 1999
1. Organization:
CUFUND (the "Trust") was organized as a Massachusetts business trust under a
Declaration of Trust dated November 22, 1991 and had no operations through June
14, 1992 other than those related to organizational matters and the sale of
initial shares of beneficial interest to SEI Investments Mutual Funds Services
(the "Administrator") on January 16, 1992.
The Trust is registered under the Investment Company Act of 1940, as amended, as
a diversified open-end investment company with two portfolios: the Short-Term
Maturity Portfolio and the Adjustable Rate Portfolio (the "Portfolios"). The
Trust's prospectus provides a description of each Portfolio's investment
objectives, policies and strategies.
2. Significant Accounting Policies:
The following is a summary of significant accounting policies followed by the
Trust in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles.
SECURITIES VALUATION--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 services rely 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 considers such factors as security prices, yields,
maturities, call features, ratings and developments relating to specific
securities in arriving at valuation. Debt obligations with sixty days or
less remaining until maturity may be valued at their amortized cost.
Investment securities 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.
SECURITY TRANSACTIONS AND RELATED INCOME--Security transactions are
accounted for on the trade date of the security purchase or sale. Costs
used in determining net realized capital gains and losses on the sale of
securities are those of the specific securities sold, adjusted for the
accretion and amortization of purchase discounts and premiums during the
respective holding period. Gains and losses realized on sales of securities
are determined on a first-in first-out (FIFO) basis. Interest income and
expenses are recognized on the accrual basis. Purchase discounts and
premiums are accreted and amortized over the life of each security and
recorded as interest income using a method which approximates the effective
interest method.
DISTRIBUTIONS TO SHAREHOLDERS--Distributions of net investment income for
each Portfolio are declared daily and paid monthly on the first business
day. Any net realized capital gains will be distributed at least annually.
FEDERAL INCOME TAXES--The Trust's policy is to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income and net
capital gains to its shareholders. Accordingly, no provision for Federal
income taxes is required in the financial statements.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS--The
preparation of financial statements, in conformity with generally accepted
accounting principles, requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those
estimates.
OTHER--Expenses that are directly related to one of the Portfolios are
charged directly to that Portfolio. Other operating expenses of the Trust
are prorated to the Portfolios on the basis of relative net assets.
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded) CUFUND
May 31, 1999
3. Administrative and Distribution Agreements:
The Trust and the Administrator are parties to an administrative agreement
dated May 1, 1992, under which the Administrator provides services for a fee
that is computed daily and payable monthly, at an annual rate which is the
greater of .09% of the average daily net assets of the Trust up to $750 million,
and .0725% of the average daily net assets of the Trust exceeding $750 million,
or $214,000. Effective October 26, 1998, the minimum annual fee of $214,000 was
increased to $250,000. Certain officers ofthe Trust are also officers of the
Administrator and/or distributor. Suchofficers are paid no fees by the Trust
for serving in their respective roles. SEI Investments Distribution Co. (the
"Distributor") acts as the distributor of the shares of the Trust. No
compensation is paid to the Distributor fordistribution services.
4. Investment Advisory and Custodian Agreements:
The Trust and Southwest Corporate Federal Credit Union (the "Adviser") are
parties to an investment advisory agreement dated May 1, 1992, under which the
Adviser receives an annual fee, which is calculated daily and paid monthly, at
an annual rate of .32% of the average daily net assets of each Portfolio. The
Adviser has voluntarily agreed to waive all or a portion of its fees and
reimburse expenses in order to limit the total operating expenses of each
Portfolio to not more than .39% of each Portfolio's average daily net assets.
The Adviser reserves the right, in its sole discretion, to terminate this
voluntary fee waiver at any time. At May 31, 1999, the Adviser is the record
owner of 84.10% and 89.82% of the outstanding shares of the Short-Term Maturity
and Adjustable Rate Portfolios, respectively.
The Trust and First Union National Bank, (the "Custodian") are parties to a
custodial agreement dated May 1, 1992 under which the Custodian holds cash,
securities and other assets of the Trust as required by the Investment Company
Act of 1940. The Custodian plays no role in determining the investment policies
of the Trust or which securities are to be purchased or sold in the Portfolios.
5. Investment Transactions:
For the period ended May 31, 1999, purchases and sales of investment securities
and United States Government Obligations (other than short-term securities) were
as follows (000):
U.S. GOVERNMENT OTHER INVESTMENT
SECURITIES SECURITIES
--------- ------- --------- -------
PURCHASES SALES PURCHASES SALES
--------- ------- --------- -------
Short-Term
Maturity
Portfolio $16,272 $15,897 $1,420 $ 5,172
Adjustable
Rate
Portfolio $18,740 $31,155 $ -- $16,728
The total cost of securities held for federal income tax purposes at May 31,
1999 for the Short-Term Maturity Portfolio and the Adjustable Rate Portfolio was
not materially different from amounts reported for financial reporting purposes.
The Short-Term Maturity Portfolio had net unrealized depreciation of $(63,744),
which was composed of gross unrealized appreciation of $23,498 and gross
unrealized depreciation of $(87,242) for tax purposes. The Adjustable Rate
Portfolio had net unrealized depreciation of $(208,817), which was composed of
gross unrealized appreciation of $259,197 and gross unrealized depreciation of
$(468,014) for tax purposes.
6. Capital Loss Carryforwards:
The capital loss carryforwards at May 31, 1999 for federal income tax purposes
are as follows:
EXPIRATION
AMOUNT DATE
-------- ----------
Short-Term
Maturity Portfolio $225,461 2003
337,054 2004
32,759 2005
66,614 2006
Adjustable Rate
Portfolio $556,310 2003
37,771 2004
46,794 2005
33,108 2007
<PAGE>
7. Variable Rate Financial Instruments:
The Adjustable Rate Portfolio's investment policies include investing, under
normal circumstances, at least 65% of its assets in adjustable rate mortgage
securities or other adjustable rate securities that have interest rates that
reset at periodic intervals. Such securities may experience less price
volatility due to changes in market interest rates than other debt securities.
These investments include securities subject to interest rate caps as well as
certain securities that adjust based upon an index whose movements may not
correlate directly with market movements. Both of these items may influence the
pricing of the security.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees of CUFUND:
We have audited the accompanying statements of net assets of the Adjustable Rate
and Short-Term Maturity Portfolios of CUFUND (the "Trust") as of May 31, 1999,
and the related statements of operations, changes in net assets and financial
highlights for the periods presented. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of May 31, 1999, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Adjustable Rate and Short-Term Maturity Portfolios of CUFUND as of May 31, 1999,
the results of their operations, changes in their net assets, and financial
highlights for the periods presented, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Philadelphia, PA
July 7, 1999
15
<PAGE>
NOTICE TO SHAREHOLDERS
(Unaudited)
For Taxpayers filing on a calendar year basis, this notice is for informational
purposes only.
Dear CUFUND Shareholders:
For the fiscal year ended May 31, 1999, each Portfolio is designating long term
capital gains, qualifying dividends and exempt income with regard to
distributions paid during the fiscal year as follows:
<TABLE>
<CAPTION>
(A) (B)
LONG TERM ORDINARY (C) (E)
CAPITAL GAINS INCOME TOTAL (D) TAX (F)
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS QUALIFYING EXEMPT FOREIGN
PORTFOLIO (TAX BASIS) (TAX BASIS) (TAX BASIS) DIVIDENDS(1) INTEREST TAX CREDIT
--------- ------------- ------------- ------------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Adjustable Rate 0% 100% 100% 0% 0% 0%
Short-Term Maturity 0% 100% 100% 0% 0% 0%
</TABLE>
- -----------
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction.
* Items (A) and (B) are based on a percentage of the Portfolio's total
distributions.
** Items (D), (E) and (F) are based on a percentage of ordinary income
distributions of the Portfolio.
Please consult your tax adviser for proper treatment of this information.
16
<PAGE>
NOTES
<PAGE>
INVESTMENT ADVISER
Southwest Corporate Federal Credit Union
7920 Belt Line Road, Suite 1100
Dallas, TX 75240
ADMINISTRATOR
SEI Investments Mutual Funds Services
One Freedom Valley Drive
Oaks, PA 19456
DISTRIBUTOR
SEI Investments Distribution Co.
One Freedom Valley Drive
Oaks, PA 19456
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, PA 19103-6993
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
1601 Market Street
Philadelphia, PA 19103-2499
CUF-F-010-03
<PAGE>
