<PAGE>
As filed with the Securities and Exchange Commission on November 29, 1995.
1933 Act Registration No. 33-18781
1940 Act Registration No. 811-5407
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-------------
Form N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 ( X )
Post-Effective Amendment No. 16 ( X )
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 ( X )
Amendment No. 19 ( X )
(Check appropriate box or boxes)
-------------
Trust for Credit Unions
(Exact name of registrant as specified in charter)
4900 Sears Tower
Chicago, Illinois 60606-6303
(Address of principal executive offices)
Registrant's Telephone Number,
including Area Code 800-621-2550
-------------
Michael J. Richman
Goldman, Sachs & Co.
85 Broad Street - 12th Floor
New York, New York 10004
212-902-0841
(Name and address of agent for service)
____________
It is proposed that this filing will become effective (check appropriate box).
( ) immediately upon filing pursuant to paragraph (b) of Rule 485
( X ) On December 1, 1995 pursuant to paragraph (b) of Rule 485
( ) 60 days after filing pursuant to paragraph (a)(i) of Rule 485 or earlier
upon acceleration of the effective date by the Commission
( ) on (date) pursuant to paragraph (a)(i) of Rule 485
( ) 75 days after filing pursuant to paragraph (a)(ii) of Rule 485 or
earlier upon acceleration of the effective date by the Commission
( ) on (date) pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
( ) this Post-Effective Amendment designates a new effective date for a
previously filed Post-Effective Amendment.
-------------
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant has
registered an indefinite number of units of beneficial interest under the
Securities Act of 1933. Registrant filed a Rule 24f-2 Notice for the most recent
fiscal year on October 31, 1995. Registrant continues its election to register
an indefinite number of units of beneficial interest pursuant to Rule 24f-2
under the Investment Company Act of 1940, as amended
The Index to Exhibits is located at page _______.
Page 1 of _______ total pages.
<PAGE>
TRUST FOR CREDIT UNIONS
-----------
CROSS REFERENCE SHEET
(as required by Rule 495)
Part A Caption
- ------ -------
1. Cover Page Outside Front Cover Page
2. Synopsis Highlights
3. Condensed Financial Financial Highlights
Information
4. General Description Outside Front Cover Page; of Highlights;
Registrant Investment Objective; Description of
Investments; Other Investment Practices,
Policies and Restrictions
5. Management of the Fund Highlights; Management
5a. Management's Discussion of Not Applicable
Fund Performance
6. Capital Stock and Reports to Unitholders; Income;
Other Securities Taxes; Management; Exchange Privilege;
Additional Information
7. Purchase of Securities Outside Front Cover Page;
Being Offered Highlights; Purchase of Units;
Net Asset Value; Management
8. Redemption or Repurchase Highlights; Redemption of Units
9. Pending Legal Proceedings Not Applicable
Part B
- ------
10. Cover Page Outside Front Cover Page
11. Table of Contents Outside Front Cover Page
12. General Information and Not Applicable
History
<PAGE>
13. Investment Objectives Introduction; Adjustable and
and Policies Fixed Rate Mortgage Loans and
Mortgage-Related Securities;
Investment Restrictions
14. Management of the Fund Management
15. Control Persons and Description of Units; Management
Principal Holders of
Securities
16. Investment Advisory and Introduction; Advisory and
Other Services Other Services
17. Brokerage Allocation and Advisory and Other Services
Other Services
18. Capital Stock and Description of Units
Other Securities
19. Purchase, Redemption and Not Applicable
Pricing of Securities
Being Offered
20. Tax Status Not Applicable
21. Underwriters Advisory and Other Services
22. Calculation of Performance Calculation of Performance
Data Quotations
23. Financial Statements Financial Statements
Part C
- ------
Information required to be included in Part C is set forth under the appropriate
Item, so numbered in Part C to this Registration Statement
<PAGE>
TRUST
-----
for Credit Unions
Prospectus
December 1, 1995
MONEY MARKET PORTFOLIO
GOVERNMENT SECURITIES PORTFOLIO
and
MORTGAGE SECURITIES PORTFOLIO
<PAGE>
TRUST FOR CREDIT UNIONS
----------------
Trust for Credit Unions (the "Fund") is an open-end diversified, management
investment company (commonly known as a "mutual fund") offered only to state
and federally chartered credit unions. The Fund seeks to achieve a high level
of income to the extent consistent with the investment objectives of its in-
vestment portfolios, which include: the Money Market Portfolio, the Government
Securities Portfolio, the Mortgage Securities Portfolio, the Target Maturity
Portfolio (1996), the Target Maturity Portfolio (Feb 97) and the Target Matu-
rity Portfolio (May 97). This Prospectus relates to the offering of units of
the Fund's Money Market Portfolio, Government Securities Portfolio and the
Mortgage Securities Portfolio (individually, a "Portfolio" and collectively,
the "Portfolios"). The Money Market Portfolio's objective is to maximize cur-
rent income to the extent consistent with the preservation of capital and the
maintenance of liquidity. The Money Market Portfolio invests in high quality
money market instruments authorized under the Federal Credit Union Act. The
Government Securities Portfolio's objective is to achieve a high level of cur-
rent income, consistent with low volatility of principal. The Government Secu-
rities Portfolio invests primarily in obligations of the United States Govern-
ment ("U.S. Government"), its agencies, instrumentalities or sponsored enter-
prises authorized under the Federal Credit Union Act with a maximum duration
equal to that of a two-year U.S. Treasury security and a target duration to be
no shorter than that of a 6-month U.S. Treasury security and no longer than
that of a 1-year U.S. Treasury security. The Mortgage Securities Portfolio's
objective is to achieve a high level of current income, consistent with rela-
tively low volatility of principal. The Mortgage Securities Portfolio invests
primarily in privately issued mortgage-related securities rated, at the time
of purchase, in one of the two highest rating categories by a nationally rec-
ognized statistical rating organization ("NRSRO") and in mortgage-related se-
curities issued or guaranteed by the U.S. Government, its agencies, instrumen-
talities or sponsored enterprises. The Mortgage Securities Portfolio's maximum
duration will not exceed that of a 3-year U.S. Treasury security and its tar-
get duration will be equal to that of a 2-year U.S. Treasury security. With
respect to the Government Securities Portfolio and the Mortgage Securities
Portfolio, it is expected that over the long term the volatility of each Port-
folio will be low in relation to longer-term bond funds; however, there may be
a loss of principal.
(continued on next page)
UNITS OF THE PORTFOLIOS ARE NOT ENDORSED BY, INSURED BY, GUARANTEED BY,
OBLIGATIONS OF OR OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, ANY CREDIT UNION
OR BY THE NATIONAL CREDIT UNION SHARE INSURANCE FUND, THE NATIONAL CREDIT
UNION ADMINISTRATION OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN THE
PORTFOLIOS INVOLVES RISK INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE MONEY
MARKET PORTFOLIO SEEKS TO MAINTAIN ITS NET ASSET VALUE PER UNIT AT $1.00,
ALTHOUGH THERE CAN BE NO ASSURANCE THAT IT WILL BE ABLE TO DO SO ON A
CONTINUOUS BASIS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
(continued from previous page)
Goldman, Sachs & Co., through Goldman Sachs Asset Management, a separate op-
erating division, serves as the Fund's investment adviser. Goldman, Sachs &
Co. also serves as the transfer agent. Callahan Credit Union Financial Serv-
ices Limited Partnership serves as the Fund's administrator. Callahan Finan-
cial Services, Inc., the general partner of Callahan Credit Union Financial
Services Limited Partnership, and Goldman, Sachs & Co. serve as the Fund's co-
distributors. This Prospectus dated December 1, 1995, which sets forth con-
cisely the information about the Fund that a prospective investor ought to
know before investing, should be retained for future reference.
A Statement of Additional Information (the "Additional Statement") dated the
same date, containing further information about the Fund which may be of
interest to investors, has been filed with the Securities and Exchange
Commission (the "SEC"), is incorporated herein by reference in its entirety,
and may be obtained without charge from Goldman, Sachs & Co. or Callahan
Credit Union Financial Services Limited Partnership by calling the applicable
telephone number listed below.
GOLDMAN, SACHS & CO. Toll Free.......................800-342-5828
Adviser and Co-Distributor (800-DIAL-TCU)
One New York Plaza
New York, New York 10005
CALLAHAN CREDIT UNION FINANCIAL Toll Free.......................800-237-5678
SERVICES LIMITED PARTNERSHIP
Administrator
c/o Callahan Financial Services, Inc.
1001 Connecticut Ave., N.W., Suite 1022
Washington, D.C. 20036-5504
CALLAHAN FINANCIAL SERVICES, INC. Toll Free.......................800-237-5678
Co-Distributor
1001 Connecticut Ave., N.W., Suite 1022
Washington, D.C. 20036-5504
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HIGHLIGHTS................................................................. 1
FEES AND EXPENSES.......................................................... 5
FINANCIAL HIGHLIGHTS....................................................... 7
INVESTMENT OBJECTIVES AND PORTFOLIOS....................................... 10
DESCRIPTION OF INVESTMENTS................................................. 12
OTHER INVESTMENT PRACTICES, POLICIES AND RESTRICTIONS...................... 20
REPORTS TO UNITHOLDERS..................................................... 24
PURCHASE OF UNITS.......................................................... 24
REDEMPTION OF UNITS........................................................ 25
EXCHANGE PRIVILEGE......................................................... 27
INCOME..................................................................... 27
NET ASSET VALUE............................................................ 28
TAXES...................................................................... 29
MANAGEMENT................................................................. 30
PERFORMANCE AND YIELD INFORMATION.......................................... 33
ADDITIONAL INFORMATION..................................................... 34
</TABLE>
i
<PAGE>
(This Page Intentionally Left Blank)
<PAGE>
HIGHLIGHTS
INTRODUCTION
The Fund is an open-end, diversified, management investment company
(commonly known as a "mutual fund") offered solely to state and federally
chartered credit unions. Units of each of the Fund's 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, Part 703 of the National Credit Union Administration ("NCUA") Rules and
Regulations and NCUA Letter Number 155. The Fund intends to review changes in
the applicable laws, rules and regulations governing eligible investments for
federally chartered credit unions, and to take such action as may be necessary
so that the investments of the Fund qualify as eligible investments under the
Federal Credit Union Act and the regulations thereunder. Units of the
Portfolios, however, may or may not qualify as eligible investments for
particular state chartered credit unions. The Fund encourages each state
chartered credit union to consult qualified legal counsel concerning whether
the Portfolios are permissible investments under the laws applicable to it.
INVESTMENT OBJECTIVES AND PORTFOLIOS
Pages 10 through 12
The Fund seeks to achieve a high level of income to the extent consistent
with the investment objectives of the Portfolios offered in this Prospectus.
Money Market Portfolio--seeks to maximize current income to the extent
consistent with the preservation of capital and the maintenance of
liquidity by investing in high quality money market instruments authorized
under the Federal Credit Union Act. The Money Market Portfolio invests
exclusively in (a) securities issued or guaranteed as to principal and
interest by the U.S. Government or by its agencies, instrumentalities or
sponsored enterprises, (b) U.S. dollar denominated obligations issued or
guaranteed by U.S. banks with total assets exceeding $1 billion (including
obligations issued by foreign branches of such banks) but only to the
extent permitted under the Federal Credit Union Act and the rules and
regulations promulgated thereunder, (c) repurchase agreements pertaining
thereto and (d) federal funds.
Government Securities Portfolio--seeks to achieve a high level of current
income, consistent with low volatility of principal, by investing in
obligations authorized under the Federal Credit Union Act with a maximum
duration equal to that of a two-year U.S. Treasury security and a target
duration to be no shorter than that of a 6-month U.S. Treasury security and
no longer than that of a 1-year U.S. Treasury security. The Government
Securities Portfolio invests exclusively in (a) securities issued or
guaranteed as to principal and interest by the U.S. Government or by its
agencies, instrumentalities or sponsored enterprises, (b) repurchase
agreements pertaining thereto and (c) short-term obligations that are
permitted investments for the Money Market Portfolio. Under normal market
and interest rate conditions, at least 65% of the total assets of the
Government Securities Portfolio will consist of adjustable rate mortgage-
backed obligations issued or guaranteed by the U.S. Government, its
agencies, instrumentalities or sponsored enterprises. While there will be
fluctuations in the net asset value of the Government Securities Portfolio,
the Portfolio is expected to have less interest rate risk and asset value
fluctuation than funds investing primarily in longer-term mortgage-backed
securities paying a fixed rate of interest.
1
<PAGE>
Mortgage Securities Portfolio--seeks to achieve a high level of current
income, consistent with relatively low volatility of principal, by
investing in obligations authorized under the Federal Credit Union Act with
a maximum duration not to exceed that of a 3-year U.S. Treasury security
and a target duration equal to that of a 2-year U.S. Treasury security.
Under normal circumstances, the Mortgage Securities Portfolio will invest
primarily (and at least 65% of its assets) in privately-issued mortgage-
related securities rated, at the time of purchase, in one of the two
highest rating categories by an NRSRO and in mortgage-related securities
issued or guaranteed by the U.S. Government, its agencies,
instrumentalities or sponsored enterprises. These securities will include
both adjustable rate and fixed rate mortgage pass-through securities,
collateralized mortgage obligations and other multiclass mortgage-related
securities (collectively, "CMOs") as well as other securities that are
collateralized by or represent direct or indirect interests in mortgage-
related securities or mortgage loans. The Mortgage Securities Portfolio may
also invest in (a) other securities issued or guaranteed as to principal
and interest by the U.S. Government or by agencies, instrumentalities or
sponsored enterprises thereof, (b) repurchase agreements pertaining thereto
and (c) short-term obligations that are permitted investments for the Money
Market Portfolio. The Mortgage Securities Portfolio seeks to provide
investors with a higher level of current income than they could receive
from a money market fund, and although the Portfolio's net asset value will
fluctuate more than that of a portfolio of money market securities, it will
attempt, through the purchase of securities with short or negative
durations, to limit the effect of interest rate fluctuations on the
Portfolio's net asset value. See "Risk Factors."
Each Portfolio is represented by a separate series of units of beneficial
interest and investors may elect to invest in any or all three Portfolios.
PURCHASE OF UNITS
Pages 24 and 25
Purchases of units of any Portfolio may be made only by Federal Reserve
wire. There is no minimum for initial or subsequent investments nor are
minimum balances required.
Orders for Money Market Portfolio units received before 2:30 p.m., New York
time on a Business Day (as such term is defined under "Additional
Information") earn same day income if federal funds are received that day.
Orders for Government Securities Portfolio and Mortgage Securities Portfolio
units received before 4:00 p.m., New York time, on a Business Day earn income
commencing the next Business Day provided that federal funds have been
received by the next Business Day.
REDEMPTION OF UNITS
Pages 25 through 27
Redemptions of units of the Portfolios may be made at the net asset value
next determined after the request therefor has been received by the Fund.
Redemption requests with respect to Money Market Portfolio units so received
before 2:30 p.m., New York time on a Business Day normally provide same day
federal funds at the unitholder's designated account. Redemption requests with
respect to Government Securities Portfolio and Mortgage Securities Portfolio
units so received before 4:00 p.m., New York time, normally provide federal
funds on the next Business Day at the unitholder's designated account.
INCOME AND CAPITAL GAINS DISTRIBUTION POLICY
Pages 27 and 28
Dividends from net investment income are declared daily and paid monthly by
each Portfolio of the Fund. The Fund intends that net realized capital gains,
if any, after offset by any available capital
2
<PAGE>
loss carryforwards from prior years of each Portfolio will be declared at
least annually as a dividend. In the case of the Money Market Portfolio, net
short-term capital gains, if any, may be reflected in daily dividend
declarations. In the case of the Government Securities Portfolio and the
Mortgage Securities Portfolio, over the course of the fiscal year, dividends
accrued and paid will constitute all or substantially all of the Portfolio's
net investment income. In addition, from time to time in order to enhance
stability of principal and to stabilize the monthly rate of distributions to
unitholders, a portion of such dividends may constitute a return of capital.
Unitholders of each Portfolio will receive dividends in additional units of
that Portfolio or may elect to receive cash.
NET ASSET VALUE
Page 28 and 29
The net asset value per unit of each Portfolio is determined by dividing the
excess of the value of all securities and other assets over liabilities by the
number of units outstanding. The Money Market Portfolio is valued on the basis
of amortized cost, and will normally maintain a net asset value per unit of
$1.00; however, there can be no assurance that the Money Market Portfolio will
be able at all times to maintain a net asset value per unit of $1.00. The net
asset value per unit of the Government Securities Portfolio and the Mortgage
Securities Portfolio will fluctuate as the value of each Portfolio's assets
changes in response to changing market rates of interest, principal
prepayments and other factors.
INVESTMENT ADVISER
Pages 30 and 31
Goldman, Sachs & Co., one of the largest international investment banking
and brokerage firms in the United States, serves as the Fund's investment
adviser and also provides certain administrative services. Goldman, Sachs &
Co. provides its advisory services through Goldman Sachs Asset Management
("GSAM"), a separate operating division.
ADMINISTRATOR
Pages 31 and 32
Callahan Credit Union Financial Services Limited Partnership ("CUFSLP"), a
Delaware limited partnership in which 37 major credit unions are limited
partners, acts as the administrator of the Fund. In this capacity, CUFSLP
periodically reviews the performance of the investment adviser, the transfer
agent, the distributors and the custodian of the Fund and provides other
administrative services to the Fund.
DISTRIBUTORS
Page 32
Callahan Financial Services, Inc. ("CFS"), the general partner of CUFSLP,
and Goldman, Sachs & Co. serve as co-distributors of units in each of the
Fund's Portfolios.
RISK FACTORS
Investments made by the Money Market Portfolio, the Government Securities
Portfolio and the Mortgage Securities Portfolio entail certain risks. These
include the possible failure of an obligor or
3
<PAGE>
counter-party (parties to whom a Portfolio has credit or performance exposure)
to meet its commitments, adverse interest rate changes, adverse economic, real
estate or unemployment trends, possible failure in the processing of
transactions, risks associated with investments in foreign branches of U.S.
banks, and the effects of prepayments on mortgage-related or other debt
instruments. Mortgage-related securities, in particular, typically have
frequent interest and principal payments, and are subject to principal
prepayments. As a result, mortgage-related securities may be less effective
than other types of debt securities as a means of "locking in" interest rates.
Moreover, the rate of principal prepayments will frequently accelerate during
periods of declining interest rates. As a result, when a Portfolio reinvests
amounts representing scheduled and unscheduled payments of principal, it may
receive a lower rate of interest.
Each Portfolio's investments are interest rate sensitive. The Portfolios'
performance will, therefore, depend in large part upon the ability of the
investment adviser to respond to fluctuations in market interest rates and to
utilize appropriate strategies to maximize returns, while attempting to
minimize the associated risks to investment capital. Operating results will
also depend upon the availability of opportunities for the investment of the
Portfolio's assets, including purchases and sales of suitable securities. The
market value of securities held by the Portfolios, including mortgage-related
securities, will generally decline during periods of increasing interest
rates, and increase during periods of declining interest rates (although many
mortgage-related securities will have less potential for capital appreciation
during periods of declining rates than other debt securities).
In the case of the Mortgage Securities Portfolio, privately-issued mortgage-
related securities typically are not guaranteed by the U.S. Government, its
agencies, instrumentalities or sponsored enterprises, but such securities
generally are structured with one or more types of credit enhancement such as
guarantees, insurance policies or letters of credit obtained by the issuer or
sponsor from third parties, through various means of structuring the
transaction or through a combination of such approaches. In addition,
concentration in pools of mortgage-related securities sponsored by the same
sponsor or serviced by the same servicer may involve certain risks. Servicers
of mortgage-related pools collect payments on the underlying mortgage assets
for pass-through to the pool on a periodic basis. Upon insolvency of the
servicer, the pool may be at risk with respect to collections received by the
servicer but not yet delivered to the pool.
Some mortgage-related securities acquired by the Portfolios will be issued
or guaranteed by the U.S. Government, its agencies, instrumentalities or
sponsored enterprises; however, under certain interest rate and prepayment
scenarios a Portfolio may nevertheless fail to recoup fully its investment in
certain of these securities. In the case of the Government Securities
Portfolio and the Mortgage Securities Portfolio, Goldman, Sachs & Co., in
accordance with guidelines and standards adopted by the Board of Trustees, may
determine that certain interest-only and principal-only fixed mortgage-backed
securities issued by the U.S. Government, its agencies, instrumentalities or
sponsored enterprises may not be readily marketable. If so, these securities
will be considered illiquid for purposes of each Portfolio's limitation on
investments in illiquid securities. The yields on a class of stripped
mortgage-backed securities that receives all or most of the interest (i.e.,
IO's) are generally higher than the prevailing market yields on other
mortgage-related securities because they are extremely sensitive to the rate
of principal payments, including prepayments. Prepayments can result in a
Portfolio's failure to recoup its initial investment even though the stripped
mortgage-backed securities are issued or guaranteed by the U.S. Government.
Each Portfolio may engage in various investment practices that
4
<PAGE>
involve special risks, such as repurchase agreements and (with respect to the
Government Securities Portfolio and the Mortgage Securities Portfolio)
securities lending and mortgage dollar rolls. As indicated, one or more of the
Fund's Portfolio's may, to the extent consistent with the Rules and
Regulations of the National Credit Union Administration, invest in stripped
mortgage-backed securities, zero coupon bonds, collateralized mortgage
obligations and other multi-class mortgage-related securities which present
certain risks. See "Description of Investments" and "Other Investment
Practices, Policies and Restrictions" for further information.
The involvement of Goldman, Sachs & Co., and its affiliates, partners and
officers, in the investment activities and business operations of the Fund may
present certain potential conflicts-of-interest, as described under
"Management--Investment Adviser and Transfer Agent."
FEES AND EXPENSES
The following table illustrates all expenses and fees that unitholders of
the Fund incur.
UNITHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Sales Load Imposed on Purchases...................................... None
Sales Load Imposed on Reinvested Dividends........................... None
Redemption Fees...................................................... None
Exchange Fees........................................................ None
</TABLE>
ANNUAL PORTFOLIO OPERATING EXPENSES
(as a percentage of average daily net assets after fee waivers and expense
limitations)
<TABLE>
<CAPTION>
GOVERNMENT MORTGAGE
MONEY MARKET SECURITIES SECURITIES
PORTFOLIO PORTFOLIO PORTFOLIO
------------ ---------- ----------
<S> <C> <C> <C>
Investment Advisory Fee (after fee waiv-
ers)...................................... .11% .20% .18%
Administration Fee (after fee waivers)..... .05 .10 .05
Other Expenses (after expense limitations). .04 .05 .06
--- --- ---
Total Portfolio Operating Expenses (af-
ter fee waivers and expense limita-
tions)................................ .20% .35% .29%
=== === ===
</TABLE>
The purpose of this table is to assist the investor in understanding the
various expenses that an investor in the Fund will bear directly or
indirectly. The information is based on estimated expenses that the Portfolios
expect to incur during the current fiscal year. During the last fiscal year,
the Money Market Portfolio, Government Securities Portfolio and Mortgage
Securities Portfolio incurred the following expenses (expressed as a
percentage of average net assets after fee waivers and expense limitations):
investment advisory fees of .15%, .20% and .15%; administration fees of .04%,
.10% and .05%; and other expenses of .01%, .04% and .06%, for total operating
expenses of .20%, .34% and .26%, respectively. Had there been no fee waivers
and expense limitations, the fees and expenses for the Money Market Portfolio
and Mortgage Securities Portfolio for the last fiscal year would have been
(expressed as a percentage of average net assets): investment advisory fees of
.20% and .20%; administration fees of .10% and .05%; and other expenses of
.03% and .07%, for total operating expenses of .33% and .32%, respectively.
Management fees for the Money Market Portfolio currently consist of an
investment advisory fee to Goldman, Sachs & Co. payable monthly at annual
rates equal to .20% of the first $300 million and
5
<PAGE>
.15% over $300 million of the average daily net assets of such Portfolio and
an administration fee to CUFSLP payable monthly at an annual rate equal to
.10% of the average daily net assets of such Portfolio. Effective July 1,
1995, Goldman, Sachs & Co. has voluntarily agreed to limit its advisory fee to
.12% of the first $250 million, .10% of the next $250 million, .09% of the
next $250 million and .08% over $750 million of the average daily net assets
of such Portfolio and CUFSLP has voluntarily agreed to limit its
administration fee to .05% of the first $250 million, .05% of the next $250
million, .04% of the next $250 million and .03% over $750 million of the
average daily net assets of such Portfolio. Goldman, Sachs & Co. and CUFSLP
have no current intention to, but may in the future discontinue or modify any
of such limitations at their discretion. For the period from September 2, 1994
to June 30, 1995, Goldman, Sachs & Co. limited all expenses of the Money
Market Portfolio other than the fees of Goldman, Sachs & Co. and CUFSLP and
extraordinary expenses. Effective July 1, 1995, CUFSLP will limit all such
expenses of the Money Market Portfolio to the extent the total annualized
operating expenses exceed 0.20% of its average daily net assets.
Management fees for the Government Securities Portfolio consist of an
investment advisory fee to Goldman, Sachs & Co. and an administration fee to
CUFSLP payable monthly at annual rates equal to .20% and .10%, respectively,
of the average daily net assets of such Portfolio. The Government Securities
Portfolio bears the fees of Goldman, Sachs & Co. and CUFSLP referred to above
as well as other expenses incurred in its operations. CUFSLP and Goldman,
Sachs & Co. have each voluntarily agreed to limit the other ordinary operating
expenses of the Government Securities Portfolio such that CUFSLP will
reimburse expenses that exceed .05% up to .10% of the Portfolio's average net
assets, and Goldman, Sachs & Co. will reimburse expenses that exceed .10% up
to .15% of the Portfolio's average net assets. For the year ended August 31,
1995, no expenses were required to be reimbursed by CUFSLP or Goldman, Sachs &
Co. under this voluntary agreement.
Management fees for the Mortgage Securities Portfolio consist of an
investment advisory fee to Goldman, Sachs & Co. and an administration fee to
CUFSLP payable monthly at annual rates equal to .20% and .05%, respectively,
of the average daily net assets of the Portfolio. The Mortgage Securities
Portfolio bears the fees of Goldman, Sachs & Co. and CUFSLP referred to above
as well as other expenses incurred in its operations. During the last fiscal
year, Goldman, Sachs & Co., however, did not impose a portion of its advisory
fee for the Portfolio.
The following example illustrates the expenses that an investor would pay on
a $1,000 investment over various time periods based on the information
presented above and assuming (a) a 5% annual rate of return and (b) redemption
at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Money Market Portfolio.................... $2 $ 6 $11 $26
Government Securities Portfolio........... $4 $11 $20 $44
Mortgage Securities Portfolio............. $3 $ 9 $16 $37
</TABLE>
This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or lesser than those
shown in the Table.
6
<PAGE>
FINANCIAL HIGHLIGHTS
The following information with respect to a unit of the Money Market
Portfolio, Government Securities Portfolio and the Mortgage Securities
Portfolio outstanding during the periods indicated has been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report,
incorporated by reference into the Additional Statement, from the Fund's
annual report to unitholders for the fiscal year ended August 31, 1995 (the
"Annual Report"), and should be read in conjunction with the financial
statements and related notes appearing in the Annual Report. This Annual
Report also contains other performance information and is available upon
request and without charge by writing to either of the addresses on the inside
cover of this Prospectus.
TRUST FOR CREDIT UNIONS
MONEY MARKET PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A UNIT OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INCOME FROM DISTRIBUTIONS TO
INVESTMENT OPERATIONS UNITHOLDERS
------------------------- ---------------------------------
RATIO OF
NET NET RATIO OF NET
ASSET NET IN EXCESS FROM NET ASSET NET INVESTMENT
VALUE AT NET REALIZED FROM NET OF NET REALIZED VALUE EXPENSES INCOME TO
BEGINNING INVESTMENT GAIN ON INVESTMENT INVESTMENT GAIN ON AT END OF TOTAL TO AVERAGE AVERAGE
OF PERIOD INCOME INVESTMENTS(A) INCOME INCOME INVESTMENTS PERIOD RETURN(B) NET ASSETS NET ASSETS
--------- ---------- -------------- ---------- ---------- ----------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Year ended:
8/31/95......... $1.00 $0.0555 $ -- $(0.0553) $ -- $ -- $1.00 5.56% 0.20% 5.55%
8/31/94......... 1.00 0.0329 0.0002 (0.0342) (0.0001) (0.0002) 1.00 3.50 0.25 3.29
8/31/93......... 1.00 0.0305 0.0004 (0.0305) -- (0.0005) 1.00 3.14 0.25 3.05
8/31/92......... 1.00 0.0416 0.0008 (0.0416) -- (0.0007) 1.00 4.39 0.25 4.16
8/31/91......... 1.00 0.0641 -- (0.0641) -- -- 1.00 6.93 0.25 6.41
8/31/90......... 1.00 0.0824 -- (0.0824) -- -- 1.00 8.58 0.25 8.24
8/31/89......... 1.00 0.0899 -- (0.0899) -- -- 1.00 9.28 0.25 8.99
5/17/88(c) to
8/31/88......... 1.00 0.0214 -- (0.0214) -- -- 1.00 7.40(d) 0.25(d) 7.27(d)
<CAPTION>
RATIO INFORMATION
ASSUMING NO WAIVER
OF FEES OR EXPENSE
REIMBURSEMENTS
----------------------
RATIO OF
NET NET
ASSETS RATIO OF INVESTMENT
AT END OF EXPENSES TO INCOME
PERIOD AVERAGE NET TO AVERAGE
(000'S) ASSETS NET ASSETS
--------- ----------- ----------
<S> <C> <C> <C>
Year ended:
8/31/95......... $382,096 0.33% 5.42%
8/31/94......... 216,989 0.34 3.20
8/31/93......... 616,229 0.33 2.97
8/31/92......... 864,924 0.29 4.12
8/31/91......... 654,977 0.25 6.41
8/31/90......... 258,304 0.25 8.24
8/31/89......... 167,331 0.25 8.99
5/17/88(c) to
8/31/88......... 106,739 0.25(d) 7.27(d)
</TABLE>
- ----
(a) May include balancing effect of calculating per share amounts.
(b) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions and a complete redemption
of the investment at the net asset value at the end of the period.
(c) Commencement of operations.
(d) Annualized.
7
<PAGE>
TRUST FOR CREDIT UNIONS
GOVERNMENT SECURITIES PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A UNIT OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT
OPERATIONS DISTRIBUTIONS TO UNITHOLDERS
----------------- -------------------------------------
RATIO OF
NET NET
REALIZED FROM IN EXCESS INVEST-
NET AND IN NET OF NET NET MENT
ASSET UNREAL- FROM EXCESS REAL- REAL- ASSET RATIO OF INCOME
VALUE AT NET IZED GAIN NET OF NET IZED IZED VALUE NET TO
BEGIN- INVEST- (LOSS) ON INVEST- INVEST- GAIN ON GAIN ON AT EXPENSES AVERAGE
NING OF MENT INVEST- MENT MENT INVEST- INVEST- END OF TOTAL TO AVERAGE NET
PERIOD INCOME MENTS(A) INCOME INCOME MENTS MENTS PERIOD RETURN(B) NET ASSETS ASSETS
-------- ------- --------- -------- -------- ------- --------- ------ --------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Year ended:
8/31/95......... $ 9.78 $0.5515 $(0.0011) $(0.5582) $(0.0122) $ -- $ -- $ 9.76 5.82% 0.34% 5.65%
8/31/94......... 9.97 0.4286 (0.1974) (0.4212) -- -- -- 9.78 2.33 0.35 4.25
8/31/93......... 10.03 0.4641 (0.0599) (0.4630) (0.0012) -- -- 9.97 4.06 0.34 4.58
8/31/92......... 10.00 0.5588 0.0311 (0.5594) -- -- -- 10.03 6.68 0.36 5.91
7/10/91(d) to
8/31/91......... 10.00 0.0873 (0.0016) (0.0857) -- -- -- 10.00 7.02(e) 0.48(e) 7.16(e)
<CAPTION>
RATIO INFORMATION
ASSUMING NO WAIVER
OF FEES OR EXPENSE
REIMBURSEMENTS
----------------------
RATIO OF
NET NET
ASSETS RATIO OF INVESTMENT
PORTFOLIO AT END OF EXPENSES TO INCOME
TURN-OVER PERIOD AVERAGE NET TO AVERAGE
RATE(C) (000'S) ASSETS NET ASSETS
--------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Year ended:
8/31/95......... 70.58% $ 529,659 0.34% 5.65%
8/31/94......... 42.27 594,331 0.37 4.23
8/31/93......... 67.38 1,122,484 0.47 4.45
8/31/92......... 195.53 1,153,410 0.59 5.68
7/10/91(d) to
8/31/91......... 3.56 94,139 0.73(e) 6.91(e)
</TABLE>
- ----
(a) Includes balancing effect of calculating per share amounts.
(b) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions and a complete redemption
of the investment at the net asset value at the end of the period.
(c) May include effect of mortgage dollar roll transactions.
(d) Commencement of operations.
(e) Annualized.
8
<PAGE>
TRUST FOR CREDIT UNIONS
MORTGAGE SECURITIES PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A UNIT OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT
OPERATIONS DISTRIBUTIONS TO UNITHOLDERS
----------------- ---------------------------------------
RATIO OF
NET NET
REALIZED IN EXCESS INVEST-
NET AND IN OF NET NET MENT
ASSET UNREAL- FROM EXCESS REAL- ASSET RATIO OF INCOME
VALUE AT NET IZED GAIN NET OF NET IZED VALUE NET TO
BEGIN- INVEST- (LOSS) ON INVEST- INVEST- GAIN ON FROM AT EXPENSES AVERAGE
NING OF MENT INVEST- MENT MENT INVEST- PAID-IN END OF TOTAL TO AVERAGE NET
PERIOD INCOME MENTS(A) INCOME INCOME MENTS CAPITAL PERIOD RETURN(B) NET ASSETS ASSETS
-------- ------- --------- -------- -------- --------- -------- ------ --------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Year ended:.....
8/31/95......... $ 9.62 $0.6075 $0.1539 $(0.6075) $(0.0175) $ -- $(0.0164) $ 9.74 8.20% 0.26% 6.36%
8/31/94......... 10.13 0.5533 (0.4530) (0.5719) (0.0340) (0.0044) -- 9.62 1.00 0.28 5.66
10/9/92(d)
to 8/31/93...... 10.00 0.4895 0.1144 (0.4702) -- -- -- 10.13 6.27 0.33(e) 5.64(e)
<CAPTION>
RATIO INFORMATION
ASSUMING NO WAIVER
OF FEES OR EXPENSE
REIMBURSEMENTS
----------------------
NET RATIO OF
PORT- ASSETS NET
FOLIO AT END RATIO OF INVESTMENT
TURN- OF EXPENSES TO INCOME
OVER PERIOD AVERAGE NET TO AVERAGE
RATE(C) (000'S) ASSETS NET ASSETS
-------- -------- ----------- ----------
<S> <C> <C> <C> <C>
Year ended:.....
8/31/95......... 130.98% $264,409 0.32% 6.30%
8/31/94......... 188.58 283,886 0.29 5.65
10/9/92(d)
to 8/31/93...... 146.24 213,510 0.38(e) 5.59(e)
</TABLE>
- ----
(a) Includes balancing effect of calculating per share amounts.
(b) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions and a complete redemption
of the investment at the net asset value at the end of the period.
(c) May include effect of mortgage dollar roll transactions.
(d) Commencement of operations.
(e) Annualized.
9
<PAGE>
INVESTMENT OBJECTIVES AND PORTFOLIOS
INTRODUCTION
The Fund is an open-end, diversified, management investment company
(commonly known as a "mutual fund") organized on September 24, 1987 as a
Massachusetts business trust. The Fund seeks to achieve a high level of income
to the extent consistent with the investment objectives of its investment
portfolios. The Fund presently maintains six investment portfolios--the Money
Market Portfolio, the Government Securities Portfolio, the Mortgage Securities
Portfolio, the Target Maturity Portfolio (1996), the Target Maturity Portfolio
(Feb 97) and the Target Maturity Portfolio (May 97). This Prospectus relates
to the offering of units of the Fund's Money Market Portfolio, Government
Securities Portfolio and Mortgage Securities Portfolio (individually, a
"Portfolio" and collectively, the "Portfolios").
The Fund is offered solely to state and federally chartered credit unions.
Units of each of the Fund's 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, Part 703 of the National
Credit Union Administration ("NCUA") Rules and Regulations and NCUA Letter
Number 155. The Fund intends to review changes in the applicable laws, rules
and regulations governing eligible investments for federally chartered credit
unions, and to take such action as may be necessary so that the investments of
the Fund qualify as eligible investments under the Federal Credit Union Act
and the regulations thereunder.
Sections 107(7), 107(8) and 107(15) of the Federal Credit Union Act set
forth those securities, deposits and other obligations in which federally
chartered credit unions may invest. Included are mortgage-related securities,
securities issued or fully guaranteed as to principal and interest by the U.S.
Government, its agencies, instrumentalities or sponsored enterprises, accounts
in specified federally insured financial institutions and other specified
investments.
The Fund's investments consist exclusively of assets intended to qualify as
eligible investments if owned directly by a federally chartered credit union.
Units of the Fund, however, may or may not qualify as eligible investments for
particular state chartered credit unions. The Fund encourages each state
chartered credit union to consult qualified legal counsel concerning whether
the Fund's units are permissible investments under the laws applicable to it.
MONEY MARKET PORTFOLIO
The Money Market Portfolio seeks to maximize current income to the extent
consistent with the preservation of capital and the maintenance of liquidity
by investing in high quality money market instruments authorized under the
Federal Credit Union Act.
The Money Market Portfolio invests exclusively in:
--securities issued or guaranteed as to principal and interest by the
U.S. Government or by its agencies, instrumentalities or sponsored
enterprises;
--U.S. dollar denominated obligations issued or guaranteed by U.S. banks
with total assets exceeding $1 billion (including obligations issued
by foreign branches of such banks) but only to the extent permitted
under the Federal Credit Union Act and the rules and regulations
promulgated thereunder;
--repurchase agreements pertaining thereto; and
--federal funds.
10
<PAGE>
The Money Market Portfolio is managed so that the average maturity of all
instruments in the Portfolio (on a dollar-weighted basis) will not exceed
ninety days. In no event will the Money Market Portfolio purchase any
securities which are deemed to mature more than thirteen months from the date
of purchase.
It is the intent of the Fund that more than 25% of the value of the total
assets of the Money Market Portfolio will be invested in bank obligations,
except that if adverse economic conditions prevail in the banking industry the
Money Market Portfolio may, for defensive purposes, temporarily invest less
than 25% of the value of its total assets in bank obligations. See
"Description of Investments--Bank Obligations."
Pursuant to an SEC order, the Money Market Portfolio, may enter into
principal transactions in certain taxable money market instruments, including
repurchase agreements, with Goldman, Sachs & Co. or its affiliate, Goldman
Sachs Money Market, L.P.
Investments by the Money Market Portfolio must present minimal credit risk
and be rated within the highest rating category for short-term debt
obligations by at least two nationally recognized statistical rating
organizations ("NRSROs") assigning a rating to the security or issuer, or if
only one NRSRO has assigned a rating, by that NRSRO. Purchases of securities
which are unrated or rated by only one NRSRO must be approved or ratified by
the Trustees. The Money Market Portfolio may only purchase "First Tier
Securities" as defined herein. First Tier Securities are securities which are
rated (or that have been issued by an issuer that is rated with respect to a
class of short-term debt obligations, or any security within that class,
comparable in priority and quality with such securities) in the highest short-
term rating category by at least two NRSROs, or if only one NRSRO has assigned
a rating, by that NRSRO. Securities which are unrated may be purchased only if
they are deemed to be of comparable quality to First Tier rated securities.
NRSROs include Standard & Poor's Ratings Group, Moody's Investors Service,
Inc., Fitch Investors Services, Inc., Duff and Phelps, Inc., IBCA Limited and
its affiliate IBCA Inc. and Thomson BankWatch, Inc. For a description of each
NRSRO's rating categories, see the Additional Statement.
GOVERNMENT SECURITIES PORTFOLIO
The Government Securities Portfolio seeks to achieve a high level of current
income, consistent with low volatility of principal, by investing in
obligations authorized under the Federal Credit Union Act.
The Government Securities Portfolio invests exclusively in:
--securities issued or guaranteed as to principal and interest by the
U.S. Government or by its agencies, instrumentalities or sponsored
enterprises;
--repurchase agreements pertaining thereto; and
--short-term obligations that are permitted investments for the Money
Market Portfolio.
Under normal market and interest rate conditions, at least 65% of the total
assets of the Government Securities Portfolio will consist of adjustable rate
mortgage-related securities issued or guaranteed by the U.S. Government, its
agencies, instrumentalities or sponsored enterprises. The Government
Securities Portfolio intends to maintain a maximum duration equal to that of a
two-year
11
<PAGE>
U.S. Treasury security and a target duration to be no shorter than that of a
6-month U.S. Treasury security and no longer than that of a 1-year U.S.
Treasury security (computed using the method described herein). Duration
measures the price sensitivity of the Portfolio including expected cash flows
and mortgage prepayments under a wide range of interest rate scenarios.
MORTGAGE SECURITIES PORTFOLIO
The Mortgage Securities Portfolio seeks to achieve a high level of current
income, consistent with relatively low volatility of principal, by investing
in obligations authorized under the Federal Credit Union Act.
The Mortgage Securities Portfolio invests exclusively in:
--privately-issued mortgage-related securities, rated at the time of
purchase, in one of the two highest rating categories by an NRSRO and in
mortgage-related securities issued or guaranteed by the U.S. Government,
its agencies, instrumentalities or sponsored enterprises;
--other securities issued or guaranteed as to principal and interest by the
U.S. Government or by its agencies, instrumentalities or sponsored
enterprises;
--repurchase agreements pertaining thereto; and
--short-term obligations that are permitted investments for the Money
Market Portfolio.
Under normal circumstances, the Mortgage Securities Portfolio will invest
primarily in mortgage-related securities. The Portfolio's maximum duration
will not exceed that of a 3-year U.S. Treasury security and its target
duration will be equal to that of a 2-year U.S. Treasury security.
----------------
The investment objective of each Portfolio (which is set forth in the first
sentence under each Portfolio) may not be changed without the approval of the
holders of a majority of the outstanding units of that Portfolio, as described
under "Additional Information." There can be no assurance that the objective
of each Portfolio will be realized. In seeking its objective, a Portfolio may
not always purchase securities offering the highest yield.
DESCRIPTION OF INVESTMENTS
MORTGAGE-RELATED SECURITIES
Mortgage-related securities are securities that directly or indirectly
represent participations in, or are collateralized by and payable from
payments on, mortgage loans secured by real property. These securities include
both adjustable rate and fixed rate mortgage pass-through securities,
collateralized mortgage obligations and other multiclass mortgage-related
securities as well as other securities that are collateralized by or represent
direct or indirect interests in mortgage-related securities or mortgage loans.
The issuers of certain mortgage-related securities may elect to have the pool
of mortgage loans (or indirect interests in mortgage loans) underlying the
securities treated as a real estate mortgage investment conduit ("REMIC"),
which is subject to special federal income tax rules. A description of the
types of mortgage-related securities in which the Government Securities
Portfolio and the Mortgage Securities Portfolio may invest is provided below.
The descriptions are general and summary in nature, and do not detail every
possible variation of the types of mortgage-related securities that are
permissible for the Portfolios.
12
<PAGE>
1. INVESTMENT CHARACTERISTICS OF MORTGAGE-RELATED SECURITIES
In general, changes in both prepayment rates on mortgage-related securities
and interest rates and the volume of transactions in units of the Government
Securities Portfolio and the Mortgage Securities Portfolio will affect each
Portfolio's return. A predominant factor affecting the prepayment rate on a
pool of mortgage loans is the difference between the interest rates on
outstanding mortgage loans and prevailing mortgage loan interest rates (giving
consideration to the cost of any refinancing). In general, if mortgage loan
interest rates fall sufficiently below the interest rates on fixed rate
mortgage loans underlying mortgage-related securities, the rate of prepayment
would be expected to increase. Prepayments of adjustable rate mortgage loans
may also increase in a declining interest rate environment as borrowers seek
to "lock-in" low rates. Conversely, if mortgage loan interest rates rise above
the interest rates on outstanding mortgage loans, the rate of prepayment may
be expected to decrease. Due to these factors, mortgage-related securities may
be less effective than U.S. Treasury securities of similar maturity at
maintaining yields during periods of declining interest rates, since the
mortgage payments will normally be reinvested in instruments with lower yields
reflecting prevailing market conditions.
Because the Portfolios' investments are interest rate sensitive, each
Portfolio's performance will depend in large part upon the ability of the
Portfolio to anticipate and respond to fluctuations in market interest rates
and to utilize appropriate strategies to maximize returns to the Portfolio,
while attempting to minimize the associated risks to its investment capital.
Prepayments may have a disproportionate effect on certain mortgage-related
securities such as stripped mortgage-backed and certain other multiple class
pass-through securities, which are discussed below.
Generally, to the extent mortgage-related securities are purchased at a
premium, a faster than anticipated rate of unscheduled principal prepayments
will result in a lower than anticipated yield. On the other hand, if the
securities are purchased at a discount, a faster than anticipated rate of
unscheduled prepayment of principal will result in a higher than anticipated
yield.
2. PRIVATE MORTGAGE PASS-THROUGH SECURITIES
The Mortgage Securities Portfolio may invest in privately-issued mortgage
pass-through securities ("Mortgage Pass-Throughs") which represent interests
in pools of mortgage loans that are issued by trusts formed by originators of
and institutional investors in mortgage loans (or represent interests in
custodial arrangements administered by such institutions). These originators
and institutions include commercial banks, savings and loans associations,
credit unions, savings banks, mortgage bankers, insurance companies,
investment banks or special purpose subsidiaries of the foregoing. For federal
income tax purposes, such trusts are generally treated as grantor trusts or
REMICs and, in either case, are generally not subject to any significant
amount of federal income tax at the entity level.
The mortgage pools underlying Mortgage Pass-Throughs consist of private
mortgage loans evidenced by promissory notes secured by first mortgages or
first deeds of trust or other similar security instruments creating a first
lien on residential, residential multi-family and mixed residential/commercial
properties. Mortgage Pass-Throughs (whether fixed or adjustable rate) provide
for monthly payments that are a "pass-through" of the monthly interest and
principal payments (including any prepayments) made by the individual
borrowers on the pooled mortgage loans, net of any fees or other amounts paid
to any guarantor, administrator and/or servicer of the underlying
13
<PAGE>
mortgage loans. A trust fund with respect to which a REMIC election has been
made may include regular interests in other REMICs which in turn will
ultimately evidence interests in mortgage loans.
Mortgage Pass-Throughs generally offer a higher yield than Government
Mortgage-Related Securities (as defined below) because of the absence of any
direct or indirect government or agency payment guarantees. However, timely
payment of interest and principal on mortgage loans in these pools may be
supported by various forms of insurance or guarantees, including individual
loan, pool and hazard insurance, subordination and letters of credit. The
insurance and guarantees are issued by government entities, private insurers,
banks and mortgage poolers. Mortgage-related securities without insurance or
guarantees may be purchased by the Mortgage Securities Portfolio if they have
the required rating from an NRSRO. Although the market for such securities is
becoming increasingly liquid, some mortgage-related securities issued by
private organizations may not be readily marketable. Types of credit support
are discussed further in the Additional Statement.
3. GOVERNMENT MORTGAGE-RELATED SECURITIES
The Fund's Portfolios may invest in mortgage-related securities issued or
guaranteed by the U.S. Government and its agencies, instrumentalities or
sponsored enterprises ("Government Mortgage-Related Securities"). These
securities include Government National Mortgage Association ("GNMA") mortgage-
backed certificates ("GNMA Certificates"), which are mortgage-backed
securities of the modified pass-through type where both interest and principal
payments (including prepayments) are passed through monthly to the holder of
the certificate whether or not they are paid by the underlying mortgagor. The
National Housing Act provides that the full faith and credit of the United
States is pledged to the timely payment of principal and interest by GNMA of
amounts due on these GNMA Certificates. Each GNMA Certificate evidences an
interest in a specific pool of mortgage loans (frequently one-to-four family
residential loans) insured by the Federal Housing Administration or the
Farmers Home Administration or guaranteed by the Veterans Administration.
Government Mortgage-Related Securities also include securities issued by the
Federal National Mortgage Association ("FNMA") and by the Federal Home Loan
Mortgage Corporation ("FHLMC"). FNMA, a federally chartered and stockholder-
owned corporation, issues pass-through securities which are guaranteed as to
timely payment of principal and interest by FNMA. FHLMC, also a federally
chartered corporation, issues pass-through securities which are guaranteed as
to timely payment of interest and ultimate collection of principal by FHLMC.
Securities issued or guaranteed by FNMA and FHLMC are not backed by the full
faith and credit of the United States.
The Government Securities Portfolio and Mortgage Securities Portfolio may
purchase "stripped" securities issued or guaranteed by U.S. Government
agencies or instrumentalities that evidence ownership in the future interest
payments or the future principal payments on Government Mortgage-Related
Securities. Stripped mortgage-backed securities ("SMBS") are usually
structured with two classes that receive different proportions of the interest
and principal distributions from a pool of Government Mortgage-Related
Securities. A common type of SMBS will have one class receiving all of the
interest, while the other class will receive all of the principal. However, in
some instances, one class will receive some of the interest and most of the
principal while the other class will receive most of the interest and the
remainder of the principal. If the underlying obligations experience different
than anticipated prepayments of principal, a Portfolio may fail to recoup
fully its initial investment in these
14
<PAGE>
securities. Although the market for such securities is increasingly liquid,
Goldman, Sachs & Co., in accordance with guidelines and standards adopted by
the Board of Trustees, may determine that certain interest-only and principal-
only fixed mortgage-backed securities issued by the U.S. Government, its
agencies, instrumentalities or sponsored enterprises are not readily
marketable. If so, these securities will be considered illiquid for purposes
of the Fund's limitation on investments in illiquid securities. The yields on
a class of SMBS that receives all or most of the interest are generally higher
than prevailing market yields on other Government Mortgaged-Related Securities
because they are extremely sensitive to the rate of principal payments,
including prepayments. Prepayments can result in a Portfolio's failure to
recoup its initial investment even though the SMBS are issued or guaranteed by
the U.S. Government. Consistent with the Rules and Regulations of the National
Credit Union Administration, the Government Securities Portfolio and the
Mortgage Securities Portfolio will purchase SMBS solely to reduce the interest
rate risk of their holdings (although this policy will not reduce the risk of
loss on the SMBS themselves that are held by the Portfolios) and will not
purchase SMBS issued by private issuers.
4. MULTICLASS MORTGAGE SECURITIES AND COLLATERALIZED MORTGAGE OBLIGATIONS
Mortgage-related securities acquired by the Portfolios may include
collateralized mortgage obligations and other multiclass mortgage-related
securities (collectively, "CMOs") issued by FNMA, FHLMC or other U.S.
Government agencies, instrumentalities or sponsored enterprises, as well as by
private issuers in the case of the Mortgage Securities Portfolio. CMOs provide
an investor with a specified interest in the cash flow of a pool of underlying
mortgages or other mortgage-related securities. Issuers of CMOs frequently
elect to be taxed as REMICs. CMOs are issued in multiple classes, each with a
specified fixed or floating interest rate and a final scheduled distribution
date. The relative payment rights of the various CMO classes may be structured
in many ways. In many cases, payments of principal are applied to the CMO
classes in the order of their respective stated maturities, so that no
principal payments will be made on a CMO class until all other classes having
an earlier stated maturity date are paid in full. Sometimes, however, CMO
classes are "parallel pay," i.e. payments of principal are made to two or more
classes concurrently. In accordance with the Rules and Regulations of the
National Credit Union Administration, unless the purchase is made solely to
reduce interest rate risk or the instrument is a floating or adjustable rate
CMO class described below, the Fund will not invest in any CMO class that
meets any of the following three tests using prevailing market-interest rates
and prepayment speeds: (1) the CMO class has an expected average life greater
than 10 years; (2) the average life of the CMO class extends by more than 4
years assuming an immediate and sustained parallel shift in the yield curve of
300 basis points, or shortens by more than 6 years assuming an immediate and
sustained parallel shift in the yield curve of minus 300 basis points; or (3)
the estimated change in the price of the CMO class is more than 17% due to an
immediate and sustained parallel shift in the yield curve of plus or minus 300
basis points. For these purposes, "average life" means the weighted average
time to principal repayment, with the amount of the principal paydowns (both
scheduled and unscheduled) as the weights. The expected average life and
average life sensitivity tests described above do not apply to a floating or
adjustable rate CMO class, irrespective of whether it has been purchased to
reduce interest rate risk, if (a) the interest rate is reset at least
annually, (b) the interest rate is below the contractual cap of the CMO class
at the time of purchase or a subsequent testing date, (c) the index upon which
the interest rate is based is a widely-used market interest rate index such as
the London Interbank Offered Rate (LIBOR) and (d) the interest rate of the
instrument varies directly (not inversely) with the index upon which it is
based and is not reset as a multiple of the change in the index. If an
instrument is a floating or adjustable rate CMO
15
<PAGE>
class which passes the requirements described in (a) through (d) above, the
Portfolio will nevertheless not invest in any such floating or adjustable rate
CMO class that using prevailing market-interest rates and prepayment speeds
meets the price sensitivity test listed above, unless the security is
purchased to reduce interest rate risk. CMOs may exhibit more or less price
volatility and interest rate risk than other types of mortgage-related
obligations. Although the market for CMOs is generally liquid, Goldman Sachs &
Co. may determine that certain CMOs are not readily marketable. If so, these
CMOs will be considered illiquid for purposes of the Fund's limitations on
investments in illiquid securities. CMOs are discussed further in the
Additional Statement under "Adjustable and Fixed Rate Mortgage Loans and
Mortgage-Related Securities."
OTHER GOVERNMENT SECURITIES
Each Portfolio may acquire other securities issued or guaranteed as to
principal and interest by the U.S. Government or by its agencies,
instrumentalities or sponsored enterprises ("Government Securities"). These
securities, in general, include a variety of U.S. Treasury obligations,
consisting of bills, notes and bonds, which principally differ only in their
interest rates, maturities and times of issuance, and obligations issued or
guaranteed by the U.S. Government, its agencies, instrumentalities or
sponsored enterprises which are supported by (a) the full faith and credit of
the U.S. Treasury (such as GNMA participation certificates), (b) the limited
authority of the issuer to borrow from the U.S. Treasury (such as securities
of the Student Loan Marketing Association), (c) the authority of the U.S.
Government to purchase certain obligations of the issuer (such as securities
of the FNMA), or (d) only the credit of the issuer. No assurance can be given
that the U.S. Government will provide financial support to U.S. Government,
its agencies, instrumentalities or sponsored enterprises as described in
clauses (b) or (c) in the future, other than as set forth above, since it is
not obligated to do so by law.
Government Securities are deemed to include (to the extent consistent with
the Investment Company Act of 1940) securities for which the payment of
principal and interest is backed by an irrevocable letter of credit issued by
the U.S. Government, its agencies, instrumentalities or sponsored enterprises.
Government Securities are also deemed to include (to the extent consistent
with the Investment Company Act of 1940) participations in loans made to
foreign governments or their agencies that are guaranteed as to principal and
interest by the U.S. Government or its agencies, instrumentalities or
sponsored enterprises. The secondary market for certain of these
participations is extremely limited. In the absence of a substantial secondary
market, such participations will therefore be regarded as illiquid.
Each Portfolio may invest in separately traded principal and interest
components of securities, including mortgage-related securities, issued or
guaranteed by the United States Government, its agencies, instrumentalities or
sponsored enterprises. In the case of securities issued or guaranteed by the
United States Government, the principal and interest components of selected
securities are traded independently under the Separate Trading of Registered
Interest and Principal of Securities program ("STRIPS"). Under the STRIPS
program, the principal and interest components are individually numbered and
separately issued by the U.S. Treasury at the request of depository financial
institutions, which then trade the component parts independently.
Each Portfolio may invest in zero coupon bonds, which are debt obligations
issued or purchased at a significant discount from face value provided that
such bonds do not have maturity dates of more than 10 years from settlement.
Each Portfolio will only purchase zero coupon bonds which are
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<PAGE>
Government Securities. The discount approximates the total amount of interest
the bonds will accrue and compound over the period until maturity or the first
interest payment date at a rate of interest reflecting the market rate of the
security at the time of issuance. Zero coupon bonds do not require the
periodic payment of interest. Such investments benefit the issuer by
mitigating its need for cash to meet debt service, but some also require a
higher rate of return to attract investors who are willing to defer receipt of
such cash. Such investments may experience greater volatility in market value
than debt obligations which provide for regular payments of interest. Each
Portfolio will accrue income on such investments for tax and accounting
purposes, as required, which is distributable to shareholders and which,
because no cash is received at the time of accrual, may require the
liquidation of other portfolio securities to satisfy the Portfolio's
distribution obligations.
GOVERNMENT RELATED OBLIGATIONS
Although they are not considered obligations of the U.S. Government for
certain securities law purposes, and therefore do not qualify as U.S.
Government Securities, each Portfolio may also acquire securities issued or
guaranteed as to principal and interest by the U.S. Government, its agencies,
instrumentalities or sponsored enterprises in the form of custodial receipts
that evidence ownership of future interest payments, principal payments or
both on certain notes or bonds issued by the U.S. Government, its agencies,
instrumentalities or sponsored enterprises.
REPURCHASE AGREEMENTS
When a Portfolio purchases securities, it may enter into a repurchase
agreement with the seller wherein the seller agrees, at the time of sale, to
repurchase the securities at a mutually agreed upon time and price. A
Portfolio may enter into repurchase agreements with broker-dealers and with
banks. Although the securities subject to the repurchase agreement might bear
maturities exceeding one year, settlement for the repurchase would never be
more than one year after the Portfolio's acquisition of the securities and
normally would be within a shorter period of time. The Portfolios generally
intend to enter into repurchase agreements which terminate within seven days
notice by a Portfolio. Except as provided under "Other Portfolio Management
Policies," if a Portfolio were to enter into repurchase agreements which
provide for a notice period greater than seven days, the Portfolio would do so
only if such investment, together with other illiquid securities, did not
exceed 15% (10% in the case of the Money Market Portfolio) of the Portfolio's
net assets. The resale price will be in excess of the purchase price,
reflecting an agreed-upon market rate effective for the period of time the
Portfolio's money will be invested in the securities, and will not be related
to the coupon rate of the purchased securities. During the term of the
repurchase agreement, Goldman, Sachs & Co. will require the seller to maintain
the value of the securities subject to the agreement in an amount that exceeds
the repurchase price. In the event the seller of the repurchase agreement
enters a bankruptcy or other insolvency proceeding, or in the event of the
failure of the seller to repurchase the underlying securities as agreed upon,
the Portfolio could, however, experience losses that include (a) possible
decline in the value of the underlying securities during the period while the
Portfolio seeks to enforce its rights thereto and possible delay in
enforcement of those rights, (b) possible loss of all or a part of the income
or proceeds of the repurchase, (c) additional expenses to the Portfolio for
enforcing those rights and (d) possible delay in the disposition of the
underlying securities pending court action or possible loss of rights in such
securities. The percentage of each Portfolio's assets invested in repurchase
agreements may vary from time to time depending upon Goldman, Sachs & Co.'s
evaluation of market trends and other conditions. The Fund will enter into
repurchase transactions only with parties that meet creditworthiness standards
approved by the Fund's Trustees. Goldman, Sachs & Co. monitors the
creditworthiness of such parties under the Trustees' general supervision. In
addition, the Fund,
17
<PAGE>
together with other registered investment companies having advisory agreements
with the Investment Adviser, may transfer uninvested cash balances into a
single joint account, the daily aggregate balance of which will be invested in
one or more repurchase agreements.
SHORT-TERM OBLIGATIONS
1. BANK OBLIGATIONS
The Portfolios may invest in United States dollar-denominated obligations
issued or guaranteed by United States banks with total assets exceeding $1
billion (including obligations issued by foreign branches of such banks) but
only to the extent permitted under the Federal Credit Union Act and the rules
and regulations promulgated thereunder. Such obligations will be rated in the
highest rating category by an NRSRO or, if unrated, determined to be of
comparable quality by Goldman, Sachs & Co. and may include certificates of
deposit, bankers' acceptances, bank notes, deposit notes, and other
obligations. Bank obligations may be general obligations of the parent bank or
may be limited to the issuing branch by the terms of the specific obligations
or by government regulation.
Obligations of foreign branches of United States banks include fixed time
deposits. Fixed time deposits are payable at a stated maturity date and bear a
fixed rate of interest. Generally, fixed time deposits are not payable until
maturity, but may permit early withdrawal subject to penalties which vary
depending upon market conditions and the remaining maturity of the
obligations. Fixed time deposits do not have a market, and those fixed time
deposits with maturities over seven days will be regarded as illiquid.
However, there are no contractual restrictions on the right to transfer a
beneficial interest in the deposit to a third party.
Bank notes and bankers acceptances rank junior to domestic deposit
liabilities of the bank and pari passu with other senior, unsecured
obligations of the bank. Bank notes are classified as "other borrowings" on a
bank's balance sheet, while deposit notes and certificates of deposit are
classified as deposits. Bank notes are not insured by the Federal Deposit
Insurance Corporation or any other insurer. Deposit notes are insured by the
Federal Deposit Insurance Corporation only to the extent of $100,000 per
depositer per bank.
Banks are subject to extensive but different governmental regulations which
may limit both the amount and types of loans which may be made and interest
rates which may be charged. In addition, the profitability of the banking
industry is largely dependent upon the availability and cost of funds for the
purpose of financing lending operations under prevailing money market
conditions. General economic conditions as well as exposure to credit losses
arising from possible financial difficulties of borrowers play an important
part in the operations of this industry.
Obligations of foreign branches of United States banks involve investment
risks in addition to those of domestic obligations of domestic issuers,
including the possibility that liquidity could be impaired because of future
political and economic developments, that the obligations may be less
marketable than comparable domestic obligations of domestic issuers, that a
foreign jurisdiction might impose withholding taxes on interest income payable
on those obligations, that deposits may be seized or nationalized, that
foreign governmental restrictions such as exchange controls may be adopted
which might adversely affect the payment of principal and interest on those
obligations, or that there may be difficulties in obtaining or enforcing a
judgment against a foreign branch.
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<PAGE>
2. FEDERAL FUNDS
The Portfolios may make unsecured loans of federal funds to United States
banks with total assets exceeding $1 billion (including obligations issued by
foreign branches of such banks) to the extent permitted by the Federal Credit
Union Act and the rules and regulations promulgated thereunder, provided that
(i) the accounts of such banks are insured by the Federal Deposit Insurance
Corporation, (ii) the interest received therefrom is at the market rate for
federal funds transactions, and (iii) the transaction has a maturity of one or
more business days or the Fund is able to require repayment at any time.
Except as provided under "Other Portfolio Management Policies," the Fund
considers federal funds investments maturing in more than seven days to be
illiquid, and therefore will limit such transactions along with all other
illiquid investments to 15% (10% in the case of the Money Market Portfolio) of
the value of a Portfolio's net assets.
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 "Fed Member
Bank"). A loan of federal funds is an unsecured loan at a negotiated interest
rate for a negotiated time period, generally overnight, of federal funds by
one Fed Member Bank to another. Since, pursuant to an exemption, the borrowing
Fed Member Bank is not required to maintain reserves on the borrowed federal
funds, the interest rate it pays on such loans is generally higher than the
rate it pays on other deposits of comparable size and maturity that are
subject to reserve requirements. In addition, a "depository institution" or
other exempt institution such as the Fund may under Regulation D of the Board
of Governors of the Federal Reserve System in effect make loans of federal
funds by instructing a correspondent or other willing Fed Member Bank at which
it maintains an account to loan federal funds on its behalf. Loans of federal
funds are not insured by the Federal Deposit Insurance Corporation.
In the event the borrower of federal funds enters a bankruptcy or other
insolvency proceeding, the Fund could experience delays and incur expense in
recovering cash. Further, the possibility exists that in such an instance, the
borrowing institution may not be able to repay the loaned funds. Loans of
federal funds rank junior to domestic deposit liabilities of the bank and pari
passu with other senior, unsecured obligations of the bank. With regard to the
solvency of the borrowing institution, the Fund will limit federal funds
lending to those member banks of the Federal Reserve System whose
creditworthiness has been reviewed and found by Goldman, Sachs & Co. to be
comparable in quality to securities rated high quality by an NRSRO.
Creditworthiness is of particular importance given the unsecured nature of
federal funds borrowings.
3. OTHER INVESTMENT COMPANIES
As a means of maintaining short-term liquidity, the Mortgage Securities
Portfolio reserves the right to invest up to 10% of its total assets,
calculated at the time of purchase, in the securities of other investment
companies. The Portfolio may not invest more the 5% of its total assets in the
securities of any one investment company or acquire more than 3% of the voting
securities of any other investment company. The Portfolio and ultimately its
unitholders will indirectly bear a proportionate share of the expenses paid by
investment companies in which it invests in addition to the Portfolio's own
expenses. Pursuant to an exemptive order obtained from the SEC, other
investment companies in which the Portfolio may invest include money market
funds which GSAM, Goldman, Sachs & Co. or any of their affiliates serves as
investment adviser, administrator or distributor.
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<PAGE>
OTHER INVESTMENT PRACTICES, POLICIES AND RESTRICTIONS
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
Each Portfolio may purchase or sell portfolio securities in when-issued or
delayed delivery transactions. In such transactions, instruments are bought or
sold with payment and delivery taking place in the future in order to secure
what is considered to be an advantageous yield or price to a Portfolio at the
time of entering into the transactions. However, the yield on a comparable
security available when delivery takes place may vary from the yield on the
security at the time that the when-issued or delayed delivery transaction was
entered into. When the Fund engages in when-issued and delayed delivery
transactions, the Fund relies on the seller or buyer, as the case may be, to
consummate the transaction. Failure to consummate the transaction may result
in the Fund missing the opportunity of obtaining a price or yield considered
to be advantageous. In such transactions the payment obligation and the
interest rate are fixed on the trade date, although no interest accrues to the
purchaser prior to the settlement date. The settlement date for such
transactions will take place no more than 120 days after the trade date.
Consistent with the requirements of the Investment Company Act of 1940,
securities purchased on a when-issued or delayed delivery basis are recorded
as an asset (with the purchase price being recorded as a liability) and are
subject to changes in value based upon changes in the general level of
interest rates. At the time of delivery of the security, the value may be more
or less than the transaction price. To the extent that a Portfolio remains
substantially fully invested at the same time that it has entered into such
transactions, which it would normally expect to do, there will be greater
fluctuations in the market value of its net assets than if such Portfolio set
aside cash to satisfy its purchase commitment. However, the Portfolio will
maintain designated liquid assets at least equal in value to commitments for
when-issued or delayed delivery securities, and such assets will be segregated
in an account earmarked specifically for the settlement of such commitments. A
Portfolio will only make commitments to purchase portfolio securities on a
when-issued or delayed delivery basis with the intention of actually acquiring
the securities and not for the purpose of investment leverage.
LENDING OF PORTFOLIO SECURITIES
The Government Securities Portfolio and the Mortgage Securities Portfolio
may seek to increase their income by lending portfolio securities to
institutions, such as banks and broker-dealers. These loans will be
continuously collateralized by cash, cash equivalents or Government Securities
in an amount at least equal to the market value of the securities loaned. Each
Portfolio will have the right to call a loan and obtain the securities loaned
at any time on five days notice. For the duration of a loan, each Portfolio
will continue to receive the equivalent of the interest paid by the issuer on
the securities loaned and will also receive compensation from investment of
the collateral. Each Portfolio will not have the right to vote any securities
having voting rights during the existence of the loan, but each Portfolio will
call the loan in anticipation of an important vote to be taken among holders
of the securities or the giving or withholding of their consent on a material
matter affecting the investment. As with other extensions of credit, there are
risks of delay in recovering, or even loss of rights in, the collateral should
the borrower of the securities fail financially. However, the loans will be
made only to firms deemed by Goldman, Sachs & Co. to be of good standing, and
when, in its judgment, the consideration which can be earned currently from
securities loans of this type justifies the attendant risk. If Goldman, Sachs
& Co. determines to make securities loans, it is intended that the value of
the securities loaned will not exceed one-third of the value of the total
assets of a Portfolio.
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<PAGE>
MORTGAGE DOLLAR ROLLS
The Government Securities Portfolio and the Mortgage Securities Portfolio
may enter into mortgage "dollar rolls" in which each Portfolio sells
securities for delivery in the current month and simultaneously contracts with
the same counterparty to repurchase similar (same type, coupon and maturity)
but not identical securities on a specified future date not exceeding 120
days. During the roll period, a Portfolio loses the right to receive principal
and interest paid on the securities sold. However, the Portfolio would benefit
to the extent of any difference between the price received for the securities
sold and the lower forward price for the future purchase (often referred to as
the "drop") or fee income plus the interest earned on the cash proceeds of the
securities sold until the settlement date of the forward purchase. Unless such
benefits exceed the income, capital appreciation and gain or loss due to
mortgage prepayments that would have been realized on the securities sold as
part of the mortgage dollar roll, the use of this technique will diminish the
investment performance of a Portfolio compared with what such performance
would have been without the use of mortgage dollar rolls. All cash proceeds
will be invested in instruments that are permissible investments for each
Portfolio. Such Portfolio will hold and maintain in a segregated account until
the settlement date cash, U.S. Government Securities or other liquid, high
grade debt securities in an amount equal to the forward purchase price. All
mortgage dollar rolls will be settled in accordance with the National Credit
Union Administration Rules and Regulations.
For financial reporting and tax purposes, each Portfolio proposes to treat
mortgage dollar rolls as two separate transactions; one involving the purchase
of a security and a separate transaction involving a sale. Neither Portfolio
currently intends to enter into mortgage dollar rolls that are accounted for
as a financing.
Mortgage dollar rolls involve the following risks: if the broker-dealer to
whom a Portfolio sells the security becomes insolvent, the Portfolio's right
to purchase or repurchase the mortgage-related securities may be restricted
and the instrument which the Portfolio is required to repurchase may be worth
less than an instrument which the Portfolio originally held. Successful use of
mortgage dollar rolls may depend upon the investment adviser's ability to
predict correctly interest rates and mortgage prepayments. For these reasons,
there is no assurance that mortgage dollar rolls can be successfully employed.
OPTION ADJUSTED DURATION
Although they have no restrictions as to the minimum or maximum maturity of
any particular security held by them, the Government Securities Portfolio
intends to maintain a maximum duration approximately equal to that of a 2-year
U.S. Treasury security, and the Mortgage Securities Portfolio intends to
maintain a maximum duration approximately equal to that of a 3-year U.S.
Treasury security. Under normal interest rate conditions, the Government
Securities Portfolio's target duration is expected to be no shorter than that
of a 6-month U.S. Treasury security and no longer than that of a 1-year U.S.
Treasury security, and the Mortgage Securities Portfolio's target duration is
expected to be approximately equal to that of a 2-year U.S. Treasury security.
The Portfolios' duration is a measure of the price sensitivity of the
Portfolios, including expected cash flow and mortgage prepayments under a wide
range of interest rate scenarios. Maturity measures only the time until final
payment is due on a bond or other debt security; it does not take into account
the pattern of a security's cash flows over time, including how cash flow is
affected by prepayments and by changes in interest rates. In determining the
duration of the Portfolios, Goldman, Sachs & Co. will estimate the duration of
obligations that are subject to interest rate changes and prepayment or
redemption by the issuer,
21
<PAGE>
taking into account the influence of interest rates. This method of
determining duration is known as option-adjusted duration. The Portfolios may
use various techniques to shorten or lengthen their option adjusted durations,
including the acquisition of debt obligations at a premium or discount.
OTHER PORTFOLIO MANAGEMENT POLICIES
In addition, neither the Government Securities Portfolio nor the Mortgage
Securities Portfolio will invest more than 15%, and the Money Market Portfolio
will not invest more than 10%, of the value of its net assets in securities
which are illiquid, including restricted securities, federal funds loans and
fixed time deposits maturing in more than seven days, repurchase agreements
providing for settlement in more than seven days after notice, loan
participations by foreign governments where a substantial secondary market is
absent and, to the extent consistent with a Fund's investment objective,
interest-rate only and principal-only fixed rate mortgage backed securities
issued by the U.S. Government, its agencies, instrumentalities or sponsored
enterprises which may not be readily marketable. A repurchase agreement or a
federal funds loan which by its terms can be liquidated before its nominal
fixed term on seven days' or less notice is regarded as a liquid instrument.
Mortgage-related securities issued in a private placement are subject to the
foregoing limitations, unless the Trustees determine, based upon a review of
the trading markets for the specific securities, that such securities are
liquid because they can be offered and sold to "qualified institutional
buyers" under Rule 144A of the 1933 Act and meet certain liquidity guidelines
which the Trustees have adopted. The Trustees have delegated to Goldman, Sachs
& Co. the function of determining and monitoring the liquidity of such
securities, focusing on such important factors, among others, as valuation,
liquidity and availability of information. However, each Portfolio will not
invest more than 10% of its total assets in securities that are subject to
restrictions on resale ("restricted securities") under the Securities Act of
1933, as amended ("1933 Act"), including securities eligible for resale in
reliance on Rule 144A under the 1933 Act. These investment practices could
have the effect of increasing the level of illiquidity in the Portfolios to
the extent that qualified institutional buyers become for a time uninterested
in purchasing these restricted securities.
Goldman, Sachs & Co. seeks to enhance the yield of the Fund's Portfolios by
taking advantage of yield disparities or other factors that occur in the
government securities, mortgage-related securities and money markets. The Fund
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 Goldman, Sachs & Co.'s judgment as to a desirable portfolio
maturity structure or if such disposition is believed to be advisable due to
other circumstances or considerations.
Goldman, Sachs & Co. expects that the net asset value of the Government
Securities Portfolio and the Mortgage Securities Portfolio will be relatively
stable during normal market conditions. However, the Portfolios' net asset
values will vary to some extent, and a sudden and sharp increase in prevailing
interest rates could cause a substantial decline in the Portfolios' net asset
values, while a sudden and sharp decline in interest rates could result in a
substantial increase in the Portfolios' net asset values.
The Government Securities Portfolio and the Mortgage Securities Portfolio
may sell an instrument soon after its acquisition if Goldman, Sachs & Co.
believes that such disposition is consistent with attaining the investment
objectives of each Portfolio. Instruments of the Portfolios may be sold for a
variety of reasons, such as a more favorable investment opportunity or other
circumstances bearing
22
<PAGE>
on the desirability of continuing to hold such instruments. A high rate of
portfolio turnover involves correspondingly greater transaction costs, which
must be borne directly by each Portfolio and ultimately by their unitholders.
Portfolio turnover rate is computed by dividing the lesser of the amount of
securities purchased or securities sold (excluding all securities whose
maturities at acquisition are one year or less) by the average monthly value
of such securities owned during the year, and includes purchase and sale
transactions entered into in connection with mortgage dollar rolls. A 100%
turnover rate would occur, for example, if all of the securities held in such
Portfolio were sold and replaced within one year. The rate at which Portfolio
transactions occur will depend upon Goldman, Sachs & Co.'s perception of how
market conditions will affect such Portfolio. Goldman, Sachs & Co. will not
consider portfolio turnover a limiting factor in making investment decisions
for a Portfolio consistent with such Portfolio's investment objective and such
Portfolio's investment management policies. A higher degree of portfolio
turnover results in increased transaction costs to such Portfolio in the form
of dealer spreads. Because of the exclusion of short-term securities from the
calculation of portfolio turnover rates, the portfolio turnover rate for the
Money Market Portfolio is expected to be zero for regulatory reporting
purposes.
CERTAIN INVESTMENT RESTRICTIONS
Pursuant to SEC Rule 2a-7 under the Investment Company Act, the Money Market
Portfolio may not invest more than 5% of its assets taken at amortized cost in
the securities of any one issuer (except U.S. Government Securities and
repurchase agreements collateralized by such securities). The Portfolio may,
however, invest up to 25% of its assets in the First Tier Securities of a
single issuer for a period of up to three business days after the purchase
thereof, although the Portfolio may not make more than one such investment at
any time. The Money Market Portfolio may not invest in securities which are
Second Tier Securities at the time of purchase. The foregoing non-fundamental
operating policies are more restrictive than the fundamental policy set forth
in paragraph 1 below. The Money Market Portfolio will operate in accordance
with these operating policies which comply with SEC Rule 2a-7.
The Portfolios are subject to certain fundamental investment restrictions
which, as described in more detail in the Additional Statement, may generally
be changed with respect to a Portfolio only with the approval of the holders
of a majority of the outstanding units of the Portfolio. For a more complete
description of the investment restrictions summarized below and the other
fundamental investment restrictions to which the Portfolios are subject, see
the Additional Statement.
1. The Portfolios may not invest in the instruments of any one issuer, other
than Government Securities (as defined in the Investment Company Act of 1940),
if immediately after such investment more than 5% of the value of such
Portfolio's total assets would be invested in the instruments of such issuer,
except that (a) with certain limitations stated in the Additional Statement,
up to 25% of the value of its total assets may be invested without regard to
such 5% limitation and (b) such 5% limitation shall not apply to repurchase
agreements collateralized by government securities.
2. The Portfolios may not borrow money, except as a temporary measure, and
then only in amounts not exceeding one-third of the value of a Portfolio's net
assets.
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<PAGE>
REPORTS TO UNITHOLDERS
Each unitholder of the Government Securities Portfolio and the Mortgage
Securities Portfolio is provided with a printed confirmation for each
transaction. It is not anticipated that a printed confirmation for each
transaction will be provided to unitholders of the Money Market Portfolio.
However, all unitholders will be provided an individual monthly statement for
each Portfolio showing each transaction for the reported month. A year-to-date
statement for any account will be provided upon request made to Goldman, Sachs
& Co. Each unitholder will also receive annual and semiannual financial
statements. Unitholder inquiries should be addressed to Goldman, Sachs & Co.
at the address set forth on the cover page of this Prospectus.
PURCHASE OF UNITS
Purchases of units of the Portfolios may be made only by Federal Reserve
wire. Payment by other means, including check or draft or transfer of funds
which are not federal funds, will not be accepted. There is no minimum for
initial or subsequent investments nor are minimum balances required.
MONEY MARKET PORTFOLIO
Units of the Money Market Portfolio are offered on a continuous basis at
their net asset value next determined after receipt of a purchase order in the
manner set forth below, and provided that The Northern Trust Company
("Northern"), Chicago, Illinois, the subcustodian for State Street Bank and
Trust Company ("State Street") receives the purchase price in federal funds on
the same Business Day (as such term is defined under "Additional
Information"). See "Net Asset Value." Purchase orders may be placed and will
become effective only on Business Days. Purchase orders may be made by
telephoning Goldman, Sachs & Co. at 800-342-5828 or by a written request
addressed to Goldman, Sachs & Co. Attention: Shareholder Services, Trust for
Credit Unions--Money Market Portfolio, 4900 Sears Tower, Chicago, Illinois
60606.
Federal Reserve wires for the purchase of Money Market Portfolio units
should be directed to Northern, as sub-custodian for State Street, rather than
to State Street itself. Units of the Money Market Portfolio are deemed to have
been purchased when an order becomes effective and are entitled to dividends
on Units purchased as follows:
<TABLE>
<CAPTION>
IF ORDER IS RECEIVED BY
GOLDMAN, SACHS & CO. DIVIDENDS BEGIN
----------------------- ---------------
<S> <C>
By: 2:30 p.m.--N.Y. time Same Business Day
-------------------------------------------------------------------------
After: 2:30 p.m.--N.Y. time Next Business Day
-------------------------------------------------------------------------
</TABLE>
Federal Reserve wires should be sent as early as possible, but no later than
3:30 p.m., New York time, to facilitate crediting to the unitholder's account.
GOVERNMENT SECURITIES PORTFOLIO AND MORTGAGE SECURITIES PORTFOLIO
Units of each Portfolio are offered on a continuous basis at their net asset
value next determined after the order therefor has been received. See "Net
Asset Value."
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<PAGE>
Purchase orders may be placed only on Business Days. If the order is
received by Goldman, Sachs & Co. by 4:00 p.m., New York time, settlement of
the transaction will occur on the next Business Day and the units to which the
order relates will be issued and will commence earning income on such next
Business Day provided that federal funds in respect of such order have been
received by Northern by such next Business Day. If the order is received by
Goldman, Sachs & Co. after 4:00 p.m., New York time, settlement of the
transaction will occur on the second Business Day and the units to which the
order relates will be issued and will commence earning income on the second
Business Day provided the federal funds in respect of such order are received
by Northern by such second Business Day. If payment in federal funds is not
received within the period stated above, an investor's purchase order will be
cancelled, and the investor will be responsible for any loss resulting to the
Fund.
OTHER INFORMATION
In the interest of economy, certificates representing Fund units are not
issued. The Fund and its co-distributors reserve the right to reject any
purchase order.
After the initial purchase of units, an Account Information Form must be
completed promptly and mailed to Goldman, Sachs & Co. at the address set forth
on the cover page of this Prospectus. Redemptions may not be effected prior to
receipt of such Account Information Form.
Goldman, Sachs & Co. and/or CFS may from time to time, at their own expense,
provide compensation to certain dealers whose customers purchase significant
amounts of units of the Fund. The amount of such compensation may be made on a
one-time and/or periodic basis and, in the case of Goldman, Sachs & Co., may
be up to 20% of the annual fees that are earned by Goldman, Sachs & Co. as
investment adviser to the Fund (after adjustments) and are attributable to
units held by such customers. Such compensation does not represent an
additional expense to the Fund or its unitholders, since it will be paid from
the assets of Goldman, Sachs & Co., its affiliates or CFS.
REDEMPTION OF UNITS
The Fund redeems its units without charge upon request of a unitholder at
the net asset value next determined after the receipt of such request in
proper form. See "Net Asset Value." Although redemption requests may be placed
on any day on which the Fund's net asset value per unit is determined,
proceeds will be remitted only on Business Days (as such term is defined under
"Additional Information"). Redemption requests may be made by calling Goldman,
Sachs & Co. at 800-342-5828 or by a written request addressed to Goldman,
Sachs & Co., Attention: Shareholder Services, Trust for Credit Unions, 4900
Sears Tower, Chicago, Illinois 60606. The letter of instruction must specify
the number of Units to be redeemed, the Portfolio from which Units are being
redeemed, the account number, payment instructions and the exact registration
on the account. A unitholder may request redemptions by telephone if the
optional telephone redemption privilege is elected on the Account Information
Form. It may be difficult to implement redemptions by telephone in times of
drastic economic or market changes. In an effort to prevent unauthorized or
fraudulent redemption and exchange requests by telephone, Goldman, Sachs & Co.
and State Street each employ reasonable procedures specified by the Fund to
confirm that such instructions are genuine. Consequently, proceeds of
telephone redemptions will be wired directly to the credit union, central
credit union, or other depository account designated in the unitholder's
Account Information Form, unless the unitholder provides written instructions
indicating another credit union, central credit union, or other
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<PAGE>
depository account. Telephone redemption requests will also be recorded. The
Fund may implement other procedures from time to time. If reasonable
procedures are not implemented, the Fund may be liable for any loss due to
unauthorized or fraudulent transactions. In all other cases, neither the Fund,
the Portfolios nor Goldman, Sachs & Co. will be responsible for the
authenticity of redemption instructions received by telephone. Thus, except as
stated, the total risk of loss for unauthorized transactions is on the
investor.
MONEY MARKET PORTFOLIO
If a redemption request with respect to Money Market Portfolio units is
received by Goldman, Sachs & Co. by 2:30 p.m., New York time, the units to be
redeemed do not earn income on the day the request is received, but proceeds
are ordinarily wired on the same day. If such request is received by Goldman,
Sachs & Co. after such time and prior to 4:00 p.m., New York time, the units
to be redeemed earn income on the day the request is received, and proceeds
are ordinarily wired on the morning of the following Business Day. On any
Business Day when the Public Securities Association (PSA) recommends that the
securities market closes early, the Money Market Portfolio reserves the right
to cease accepting purchase and redemption orders for the same Business Day
credit at the time the PSA recommends that the securities market closes. On
days the Money Market Portfolio closes early, purchase and redemption orders
received after the PSA recommended closing time will be credited to the next
Business Day. In addition, the Money Market Portfolio reserves the right to
advance the time by which purchase and redemption orders must be received for
the same Business Day credit as otherwise permitted by the SEC.
GOVERNMENT SECURITIES PORTFOLIO AND MORTGAGE SECURITIES PORTFOLIO
If a redemption request with respect to units of either Portfolio is
received by Goldman, Sachs & Co. by 4:00 p.m., New York time, the proceeds are
ordinarily wired on the next Business Day. Units to be redeemed earn income
with respect to the day the request is received; however, units redeemed on a
day immediately preceding a weekend or holiday continue to earn income until
the next Business Day.
OTHER INFORMATION
Once wire instructions have been given to Northern, neither the Fund nor
Goldman, Sachs & Co. assumes responsibility for the performance of Northern or
of any intermediaries in the transfer process. If a problem with such
performance arises, the investor should deal directly with Northern or such
intermediaries.
If its authorized signature is guaranteed by a credit union, commercial
bank, trust company, member firm of a national securities exchange or other
eligible guarantor institution, a unitholder may change the designated credit
union, central credit union or other depository account at any time upon
written notice to Goldman, Sachs & Co. Additional documentation, regarding any
such change or regarding a redemption by any means, may be required when
deemed appropriate by Goldman, Sachs & Co. and the request for such redemption
will not be considered to have been received in proper form until such
additional documentation has been received.
Under the Investment Company Act of 1940, the Fund is required to settle
redemption requests within seven days of receipt of such request. The right of
a unitholder to redeem units and the date of payment by the Fund may be
suspended for more than seven days for any period during which the
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<PAGE>
New York Stock Exchange is closed, other than the customary weekends or
holidays, or trading on such Exchange is restricted as determined by the SEC;
or during any emergency, as determined by the SEC, as a result of which it is
not reasonably practicable for the Fund to dispose of securities owned by it
or to determine fairly the value of the Fund's net assets; or for such other
period as the SEC may by order permit for the protection of unitholders of the
Fund.
Portfolio units are not redeemable at the option of the Fund unless the
Trustees determine in their sole discretion that failure to so redeem may have
materially adverse consequences to the unitholders of the Portfolio.
EXCHANGE PRIVILEGE
Units of each Portfolio may be exchanged for units of any other Portfolio at
the net asset value next determined either by writing to Goldman, Sachs & Co.,
Attention: Trust for Credit Unions, Shareholder Services, 4900 Sears Tower,
Chicago, Illinois 60606 or, if previously elected in the Account Information
Form, by telephone at 800-342-5828 (9:00 a.m. to 4:00 p.m. New York time). All
telephone exchanges must be registered in the same name(s) and with the same
address as registered in the Portfolio from which the exchange is being made.
A unitholder should consider the investment objective, policies and applicable
fees of each Portfolio before making an exchange.
Certain procedures are employed to prevent unauthorized or fraudulent
exchange requests as set forth under "Redemption of Units." In times of
drastic economic or market changes the telephone exchange privilege may be
difficult to implement.
Exchanges are only available in states where exchanges may legally be made.
The Fund reserves the right to reject any exchange request, and the exchange
privilege may be modified or withdrawn at any time. At least sixty (60) days'
notice will be given to unitholders of any material modification or
withdrawal, except when notice is not required by the SEC.
INCOME
Substantially all of the net investment income of the Money Market Portfolio
will be declared as a dividend on each day. Net short-term capital gains, if
any, will be paid in accordance with the requirements of the Internal Revenue
Code of 1986 and may be reflected in daily dividend declarations. The Money
Market Portfolio does not expect to realize long-term capital gains.
The Government Securities Portfolio and the Mortgage Securities Portfolio
each intend to declare a daily dividend (payable monthly) determined with the
objective of distributing the majority of its net investment income while
enhancing the stability of principal. Over the course of the fiscal year,
dividends accrued and paid will constitute substantially all of the
Portfolios' net investment income. The amount of the dividend will reflect
changes in interest rates (i.e., as interest rates increase, dividends will
increase and as interest rates decline, dividends will be reduced). Because
the Government Securities Portfolio and the Mortgage Securities Portfolio
invest in mortgage-related securities that are subject to prepayments, the
Trust cannot precisely predict the amount of principal and interest that a
Portfolio will receive. Therefore, at times, a Portfolio may distribute
amounts above current income levels, which will constitute a return of
capital. The Portfolios also intend that all net
27
<PAGE>
realized long-term and short-term capital gains will be declared and paid as a
dividend at least annually. In determining amounts of capital gains, any
capital loss carryovers from prior years will be offset against capital gains.
Net investment income of the Money Market Portfolio (from the time of the
immediately preceding determination thereof) consists of (i) interest accrued
or discount accreted (including both original issue and market discount) on
the assets of such Portfolio and any general income of the Fund allocated to
such Portfolio less (ii) the amortization of market premium and the estimated
expenses of such Portfolio.
Net investment income of the Government Securities Portfolio and the
Mortgage Securities Portfolio consists of (i) interest accrued, discount
accreted on certain Portfolio securities and any general income of the Fund
allocated to such Portfolio less (ii) the sum of (a) premiums amortized on
certain Portfolio securities and (b) the estimated expenses of such Portfolio.
The net investment income of the Portfolios is determined by State Street on
a daily basis. On days on which net asset value is calculated, this
determination is made immediately prior to the calculation of the Portfolio's
net asset value as of 4:00 p.m., New York time.
Payment of dividends with respect to net investment income will be paid on
the last calendar day of each month in additional units of the applicable
Portfolio at the net asset value on such day, unless cash distributions are
elected, in which case payment will be made by Federal Reserve wire on the
first Business Day of the succeeding month. Dividends with respect to capital
gains, if any, when declared will be paid in additional units of the
applicable Portfolio at the net asset value on the declared payment date,
unless cash distributions are elected. A unitholder's election to receive
dividends in cash is initially made on its Account Information Form and may be
changed at any time upon written notice to Goldman, Sachs & Co. The election
with respect to the short-term component, if any, of a Portfolio's capital
gains dividend must be the same as the election with respect to such
Portfolio's monthly net investment income dividends (i.e., both must be
received either in units or in cash). The election with respect to the long-
term component, if any, of a Portfolio's annual capital gains dividend may
differ from such election with respect to such Portfolio's monthly net
investment income dividends.
At the time of an investor's purchase of units of either the Government
Securities Portfolio or the Mortgage Securities Portfolio a portion of the per
unit net asset value may be represented by undistributed income of such
Portfolio or unrealized appreciation of the securities held by such Portfolio.
NET ASSET VALUE
The net asset value per unit of each Portfolio is calculated by adding the
value of all securities and other assets of such Portfolio, subtracting the
liabilities of such Portfolio, dividing the remainder by the number of units
of such Portfolio outstanding and rounding the result to the nearest one cent.
MONEY MARKET PORTFOLIO
The net asset value per unit of the Money Market Portfolio for purposes of
both purchase and redemption of units of such Portfolio is calculated by State
Street immediately after the determination
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<PAGE>
of net investment income earned by unitholders of record, as of 4:00 p.m., New
York time on each Business Day (as such term is defined under "Additional
Information").
The Fund seeks to maintain a net asset value for the Money Market Portfolio
of $1.00 per unit. In this connection, the Money Market Portfolio values its
portfolio securities on the basis of amortized cost. The amortized cost method
values a security at its cost on the date of purchase and thereafter assumes a
constant amortization to maturity of any discount or premium, regardless of
the impact of fluctuating interest rates on the market value of the
instrument. For a more complete description of the amortized cost valuation
method and its effect on existing and prospective unitholders, see the
Additional Statement. There can be no assurance that the Money Market
Portfolio will be able at all times to maintain a net asset value per unit of
$1.00.
GOVERNMENT SECURITIES PORTFOLIO AND MORTGAGE SECURITIES PORTFOLIO
The net asset value per unit of each Portfolio for purposes of both purchase
and redemption of units is calculated by State Street as of 4:00 p.m., New
York time, immediately after the determination of income to be declared as a
dividend, on each Business Day (as such term is defined under "Additional
Information"). Portfolio securities for which accurate market quotations are
readily available will be valued on the basis of quotations provided by
dealers in such securities or furnished by a pricing service. Portfolio
securities for which accurate market quotations are not readily available and
other assets will be valued at fair value using methods determined in good
faith by Goldman, Sachs & Co. under the supervision of the Trustees and may
include yield equivalents or a pricing matrix. Short-term securities with
maturities of 60 days or less are valued at amortized cost which the Trustees
have determined to equal fair value. In the case of the Government Securities
Portfolio and the Mortgage Securities Portfolio, the net asset value per unit
will fluctuate as the values of portfolio securities change in response to
changing market rates of interest, principal prepayments and other factors.
TAXES
TAXATION OF UNITHOLDERS
If state and federally chartered credit unions meet all requirements of
Section 501(c)(14)(A) of the Internal Revenue Code of 1986, as amended (the
"Code") and all rules and regulations thereunder, they will be exempt from
federal income taxation on any income, dividends or capital gains realized as
the result of purchasing, holding, exchanging or redeeming units of the Fund.
Unitholders should consult their own tax advisers concerning applicable
state tax laws.
FEDERAL TAXATION OF THE FUND
The Fund intends that each of its Portfolios will qualify for the special
tax treatment afforded regulated investment companies under Subchapter M of
the Code. Each Portfolio of the Fund is treated as a separate corporation for
federal tax purposes and generally must comply with the qualification and
other requirements applicable to regulated investment companies, without
regard to the Fund's other Portfolios. If a Portfolio otherwise complies with
such provisions, then in any taxable year for which it distributes at least
90% of its taxable income determined for federal income tax purposes, the
Portfolio will be relieved of federal income tax on the amounts distributed.
The Fund intends to distribute to its unitholders substantially all of each
Portfolio's net investment income. See "Income." Net investment income may be
different from taxable income determined for federal income tax purposes.
However, such difference is not expected to adversely affect any Portfolio's
compliance with the provisions of the Code applicable to regulated investment
companies.
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<PAGE>
Generally, on the sale or exchange of obligations held for more than one
year, net gain realized by a Portfolio which is not attributable to original
issue discount or certain market discount will be long-term capital gain. Such
capital gain, if any, will be distributed as capital gain dividends.
The Code will impose a 4% excise tax if a Portfolio fails to meet certain
requirements with respect to distributions of net ordinary income and capital
gain net income. It is not anticipated that this provision will have any
material impact on the Portfolios or their unitholders.
If for any taxable year a Portfolio does not qualify as a regulated
investment company, all of its taxable income will be taxed to such Portfolio
at the appropriate corporate rate without any reduction for distributions made
to unitholders.
The foregoing discussion of tax consequences is based on federal tax laws
and regulations in effect on the date of this Prospectus, which are subject to
change by legislative or administrative action.
MANAGEMENT
TRUSTEES
The trust agreement pursuant to which the Fund is organized (the "Trust
Agreement") provides that, subject to its provisions, the business of the Fund
shall be managed by the Trustees. The Trust Agreement provides that (a) the
Trustees may enter into agreements with other persons to provide for the
performance and assumption of various services and duties, including, subject
to the Trustees' general supervision, advisory and administration services and
duties and also including distribution, custodian, transfer and dividend
disbursing agency, unitholder servicing and accounting services and duties,
(b) a Trustee shall be liable for his own willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct
of his office, and for nothing else, and shall not be liable for errors of
judgment or mistakes of fact or law, and (c) subject to the preceding clause,
the Trustees are not responsible or liable for any neglect or wrongdoing of
any officer or any person referred to in clause (a).
The Additional Statement contains information as to the identity of and
other information about the Trustees and officers of the Fund.
INVESTMENT ADVISER AND TRANSFER AGENT
Goldman, Sachs & Co., through GSAM, One New York Plaza, New York, New York
10004, a separate operating division, acts as investment adviser to the Fund.
In addition, Goldman, Sachs & Co. acts as transfer agent. Goldman, Sachs & Co.
became registered as an investment adviser in 1981. As of October 31, 1995,
Goldman, Sachs & Co. served as an investment adviser, administrator or
distributor for approximately $53.9 billion in assets.
Under its advisory agreement with the Fund, Goldman, Sachs & Co., subject to
the general supervision of the Fund's Trustees, manages the Fund's Portfolios
and provides certain administrative services for the Fund. As manager of the
Fund's Portfolios, it is the responsibility of Goldman, Sachs & Co. to make
investment decisions for the Fund and to place the purchase and sale orders
for the portfolio transactions of the Fund. Unitholder inquiries should be
directed to Goldman, Sachs & Co., 4900 Sears Tower, Chicago, Illinois 60606.
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<PAGE>
The portfolio managers for the Government Securities Portfolio and the
Mortgage Securities Portfolio are Theodore T. Sotir and Jonathan A. Beinner.
Mr. Sotir is a Vice President of Goldman, Sachs & Co. and his responsibilities
include development of overall fixed income strategy and risk control. Mr.
Sotir joined GSAM in 1993, after working as a portfolio manager at Fidelity
Management Trust Company. Prior to joining Fidelity, Mr. Sotir worked for
Goldman, Sachs & Co. in the fixed income division for six years. Mr. Beinner
is a Vice President of Goldman, Sachs & Co. and his responsibilities include
investing in the particular types of securities the Portfolios may hold. Mr.
Beinner joined GSAM in 1990 after working in the trading and arbitrage group
of Franklin Savings Association.
As compensation for the services rendered to the Fund by Goldman, Sachs &
Co. pursuant to its advisory agreement Goldman, Sachs & Co. is entitled to
receive fees, computed daily and payable monthly, from the Money Market
Portfolio at annual rates equal to .20%, up to $300 million and .15% over $300
million and from the Government Securities Portfolio and Mortgage Securities
Portfolio, respectively, at annual rates equal to .20% and .20% of the average
daily net assets of the particular Portfolio. During the last fiscal year,
Goldman, Sachs & Co. did not impose a portion of its advisory fees for the
Money Market Portfolio and Mortgage Securities. Effective July 1, 1995,
Goldman, Sachs & Co. has voluntarily agreed to limit its advisory fee with
respect to the Money Market Portfolio to .12% of the first $250 million, .10%
of the next $250 million, .09% of the next $250 million and .08% over $750
million of the Portfolio's average daily net assets. This voluntary limitation
may be terminated by Goldman, Sachs & Co. at any time. For the fiscal year
ended August 31, 1995, the Money Market Portfolio, Government Securities
Portfolio and Mortgage Securities Portfolio paid, after waivers, advisory fees
to Goldman, Sachs & Co. at the annual rate of .15%, .20% and .15%,
respectively, of their average daily net assets.
ACTIVITIES OF GOLDMAN, SACHS & CO. AND ITS AFFILIATES AND OTHER ACCOUNTS
MANAGED BY GOLDMAN, SACHS & CO. The involvement of Goldman, Sachs & Co. and
its affiliates in the management of, or its interest in, other accounts and
other activities of Goldman, Sachs & Co. may present conflicts of interest
with respect to the Portfolios or limit its investment activities. Goldman,
Sachs & Co. and its affiliates engage in proprietary trading and advise
accounts and funds which have investment objectives similar to those of the
Portfolios and/or which engage in and compete for transactions in the same
types of securities and instruments as the Portfolios. Goldman, Sachs & Co.
and its affiliates will not have any obligation to make available any
information regarding their proprietary activities or strategies, or the
activities or strategies used for other accounts managed by them, for the
benefit of the management of the Portfolios and it is not anticipated that
Goldman, Sachs & Co. will have access to proprietary information for the
purpose of managing the Portfolios. The results of the Portfolios' investment
activities, therefore, may differ from those of Goldman, Sachs & Co. and its
affiliates and it is possible that the Portfolios could sustain losses during
periods in which Goldman, Sachs & Co. and its affiliates and other accounts
achieve significant profits on their trading for proprietary or other
accounts. From time to time, the Portfolios' activities may be limited because
of regulatory restrictions applicable to Goldman, Sachs & Co. and its
affiliates, and/or their internal policies designed to comply with such
restrictions. See "Activities of Goldman, Sachs & Co. and its Affiliates and
Other Accounts Managed by Goldman, Sachs & Co." in the Additional Statement
for further information.
ADMINISTRATOR
Callahan Credit Union Financial Services Limited Partnership ("CUFSLP"), c/o
Callahan Financial Services, Inc., P.O. Box 11, Manchester, MD 21102, a
Delaware limited partnership for which Callahan Financial Services, Inc.
serves as general partner and in which 37 major credit unions are limited
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<PAGE>
partners, acts as the administrator of the Fund. Under its administration
agreement with the Fund, CUFSLP, subject to the general supervision of the
Fund's Trustees, periodically reviews the performance of the investment
adviser, the transfer agent, the distributors and the custodian of the Fund;
provides facilities, equipment and personnel to serve the needs of investors;
develops and monitors investor programs for credit unions; provides assistance
in connection with the processing of unit purchase and redemption orders as
reasonably requested by the transfer agent or the Fund; handles unitholder
problems and calls relating to administrative matters; provides advice and
assistance concerning the regulatory requirements applicable to credit unions
that invest in the Fund; and provides other administrative services to the
Fund.
For such services, and the assumption by CUFSLP of the expenses related
thereto, pursuant to its administration agreement CUFSLP is entitled to
receive fees, computed daily and payable monthly, from the Money Market
Portfolio, Government Securities Portfolio and Mortgage Securities Portfolio,
respectively, at annual rates equal to .10% .10% and .05% of the average daily
net assets of the respective Portfolio. Effective July 1, 1995, CUFSLP has
voluntarily agreed to limit its administration fee charged to the Money Market
Portfolio to .05% of the first $250 million, .05% of the next $250 million,
.04% of the next $250 million and .03% over $750 million of the Portfolio's
average daily net assets. This voluntary limitation may be terminated by
CUFSLP at any time. For the fiscal year ended August 31, 1995, the Money
Market Portfolio, Government Securities Portfolio and Mortgage Securities
Portfolio paid, after waivers, administration fees to CUFSLP at the annual
rates of .04%, .10% and .05%, respectively, of their average daily net assets.
DISTRIBUTORS
Callahan Financial Services, Inc. ("CFS"), 1001 Connecticut Ave., N.W.,
Suite 1022, Washington, D.C. 20036-5504, a Delaware corporation, and Goldman,
Sachs & Co., 85 Broad Street, New York, New York, 10004, serve as co-
distributors of units of the Fund. CFS, a registered broker-dealer under the
Securities Exchange Act of 1934, is an affiliate of Callahan & Associates,
Inc., a corporation organized under the laws of the District of Columbia,
founded in 1985.
CFS and Goldman, Sachs & Co. have entered into distribution agreements with
the Fund to sell units of the Portfolios upon the terms and at the current
offering price described in this Prospectus. CFS and Goldman, Sachs & Co. are
not obligated to sell any certain number of units of the Portfolios. From time
to time the distributors may purchase or sell units for their own account.
FUND EXPENSES
Common expenses of the Fund are allocated pro rata to the respective
Portfolios based upon their respective net asset values.
CUFSLP has agreed that to the extent the total annualized operating expenses
(excluding interest, taxes, brokerage and extraordinary expenses) (the
"Operating Expenses") of the Money Market Portfolio exceed 0.20% of its
average daily net assets, CUFSLP will either reduce the administration fees
payable or pay the Operating Expenses of the Money Market Portfolio.
Additionally, CUFSLP and Goldman, Sachs & Co., have each voluntarily agreed to
limit all other expenses of the Government Securities Portfolio such that
CUFSLP will reimburse other expenses that exceed .05% up to .10% of the
Portfolio's average net assets, and Goldman, Sachs & Co. will reimburse other
expenses that exceed .10% up to .15% of the Portfolio's average net assets.
There are no sales loads, commissions or other fees imposed on investors at
the time of purchase of units and no redemption fees or other charges imposed
at the time of redemption of units.
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<PAGE>
PERFORMANCE AND YIELD INFORMATION
From time to time quotations of the Money Market Portfolio's yield and
effective yield may be included in advertisements and communications to
unitholders. Both yield figures are based on historical earnings and are not
intended to indicate future performance. The yield of the Portfolio refers to
the net investment income generated by an investment in the Portfolio over a
specified seven-day period. This income is then "annualized." That is, the
amount of income generated by the investment during that week is assumed to be
generated each week over a 52-week period and is shown as a percentage of the
investment. The effective yield is expressed similarly but, when annualized,
the income earned by an investment in the Portfolio is assumed to be
reinvested. The effective yield will be slightly higher than the yield because
of the compounding effect of this assumed reinvestment. Yield and effective
yield for the Portfolio will vary based on changes in market conditions, the
level of interest rates and the level of the Portfolio's expenses.
Similarly, from time to time total return and yield data for the Government
Securities Portfolio and the Mortgage Securities Portfolio may be quoted in
advertisements or in unitholder communications. The total return of the
Government Securities Portfolio and the Mortgage Securities Portfolio will be
calculated on an average annual total return basis, and may also be calculated
on an aggregate total return basis, for various periods. Average annual total
return reflects the average annual percentage change in value of an investment
in a Portfolio over the measuring period. Aggregate total return reflects the
total percentage change in value over the measuring period. Both methods of
calculating total return assume that dividends and capital gain distributions
made by a Portfolio during the period are reinvested in Portfolio units. The
Fund may also advertise from time to time the total return of the Government
Securities Portfolio and the Mortgage Securities Portfolio on a year-by-year
or other basis for various specified periods by means of quotations, charts,
graphs or schedules.
The yields of the Government Securities Portfolio and the Mortgage
Securities Portfolio are computed based on the net income of the Portfolios
during a 30-day period, which period will be identified in connection with the
particular yield quotation. More specifically, a Portfolio's yield is computed
by dividing the Portfolio's net income per unit during a 30-day period by the
maximum offering price per unit on the last day of the period and annualizing
the result on a semi-annual basis. The net investment income used for purposes
of determining yield may differ from net income used for accounting purposes.
The Fund may advertise the performance of its Portfolios relative to certain
performance rankings, indices and other investments described more fully in
the Additional Statement.
Investors should note that the investment results of each Portfolio will
fluctuate over time, and any presentation of a Portfolio's yield or total
return for any prior period should not be considered as a representation of
what an investment may earn or what an investor's yield or return may be in
any future period.
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ADDITIONAL INFORMATION
The Trust Agreement provides that each unitholder, by virtue of becoming
such, will be held to have expressly assented and agreed to the terms of the
Trust Agreement and to have become a party thereto. The Trust Agreement
permits the Trustees to issue an unlimited number of full and fractional units
of beneficial interest of one or more separate series ("Portfolios")
representing interests in separate investment portfolios. The Trustees have
the right to establish investment portfolios in addition to those heretofore
established.
Each unit of a Portfolio is entitled to one vote on all matters voted upon
by the unitholders of such Portfolio, with fractional units being entitled to
proportionate fractional votes. Units do not have cumulative voting rights. As
a general matter, the Fund does not hold annual or other meetings of
unitholders. This is because the Trust Agreement provides for unitholder
voting only for the election or removal of one or more Trustees, if a meeting
is called for that purpose, and for certain other designated matters. Each
Trustee serves until the next meeting of unitholders, if any, called for the
purpose of considering the election or reelection of such Trustee or a
successor to such Trustee, and until the election and qualification of his
successor, if any, elected at such meeting, or until such Trustee sooner dies,
resigns, retires or is removed by the unitholders or two-thirds of the
Trustees. The Fund will facilitate unitholder communication with other
unitholders as provided under Section 16(c) of the Investment Company Act of
1940. For a further description of unitholder rights with respect to the
removal of Trustees and of other designated matters voted on by unitholders,
see "Description of Units" in the Additional Statement.
As used in this Prospectus, the term "Business Day" refers to those days on
which Goldman, Sachs & Co., The Northern Trust Company, State Street Bank and
Trust Company and the Federal Reserve Bank of New York are all open for
business, which are Monday through Friday except for holidays. For 1996, such
holidays are: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day
(observed), Good Friday, Memorial Day (observed), Independence Day, Labor Day,
Columbus Day, Veterans' Day, Thanksgiving and Christmas Day. On those days
when one of such organizations closes early, the right is reserved by Goldman,
Sachs & Co. to advance the time on that day by which purchase and redemption
requests must be received to become effective; provided that the current net
asset value of each unit shall be computed at least once on such days.
34
<PAGE>
TRUST
-----
for Credit Unions
Investment Adviser
Goldman, Sachs & Co.
New York, New York
Distributors
Transfer Agent Custodian
Callahan Financial
Goldman, Sachs & Co. State Street Bank and Trust Services, Inc.
Chicago, Illinois Company Washington, DC
Boston, Massachusetts (800) 237-5678
Administrator Goldman, Sachs & Co.
Auditors New York, New York
Callahan Credit Union (800) 342-5828
Financial Services Arthur Andersen LLP (800-DIAL-TCU)
Limited Partnership Boston, Massachusetts
Washington, DC
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
TRUST FOR CREDIT UNIONS
4900 SEARS TOWER
CHICAGO, ILLINOIS 60606-6303
MONEY MARKET PORTFOLIO
GOVERNMENT SECURITIES PORTFOLIO
MORTGAGE SECURITIES PORTFOLIO
This Statement of Additional Information (the "Additional Statement") is not a
Prospectus. This Additional Statement should be read in conjunction with the
Prospectus dated December 1, 1995, the ("Prospectus") relating to the offering
of units of the Money Market Portfolio, Government Securities Portfolio and
Mortgage Securities Portfolio of the Trust for Credit Unions. A copy of the
Prospectus may be obtained from Goldman, Sachs & Co. at (800) 342-5828 or
Callahan Credit Union Financial Services Limited Partnership ("CUFSLP") (800)
237-5678.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
Introduction B-3
Management B-5
Advisory and Other Services B-8
Portfolio Transactions B-11
Amortized Cost Valuation B-21
Description of Units B-23
Adjustable and Fixed Rate Mortgage Loans and
Mortgage-Related Securities B-27
Investment Restrictions B-40
Calculation of Performance Quotations B-44
Other Information B-51
Financial Statements B-52
Description of Securities Ratings B-53
</TABLE>
<PAGE>
UNITS OF THE PORTFOLIOS ARE NOT ENDORSED BY, INSURED BY, GUARANTEED BY,
OBLIGATIONS OF OR OTHERWISE SUPPORTED BY THE U. S. GOVERNMENT, ANY CREDIT UNION
OR BY THE NATIONAL CREDIT UNION SHARE INSURANCE FUND, THE NATIONAL CREDIT UNION
ADMINISTRATION OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN THE PORTFOLIOS
INVOLVES RISK INCLUDING POSSIBLE LOSS OF PRINCIPAL.
B-2
<PAGE>
INTRODUCTION
Trust for Credit Unions (the "Fund") is an open-end diversified, management
investment company (commonly known as a "mutual fund") offered only to state and
federally chartered credit unions. The Fund seeks to achieve a high level of
income to the extent consistent with the investment objectives of its investment
portfolios: the Money Market Portfolio, the Government Securities Portfolio,
the Mortgage Securities Portfolio, the Target Maturity Portfolio (1996), the
Target Maturity Portfolio (Feb 97) and the Target Maturity Portfolio (May 97).
This Additional Statement relates to the offering of the units of the Money
Market Portfolio, the Government Securities Portfolio and the Mortgage
Securities Portfolio (individually, a "Portfolio" and collectively, the
"Portfolios").
The Fund was established under Massachusetts law by an Agreement and Declaration
of Trust dated September 24, 1987. The Agreement and Declaration of Trust
permits the Trustees to issue an unlimited number of full and fractional units
of beneficial interest of one or more separate series ("Portfolios")
representing interests in separate investment portfolios. The Trustees have the
right to establish investment portfolios in addition to those heretofore
established. Pursuant thereto, the Trustees have created the Money Market
Portfolio, the Government Securities Portfolio, the Mortgage Securities
Portfolio, the Target Maturity Portfolio (1996), the Target Maturity Portfolio
(Feb 97) and the Target Maturity Portfolio (May 97). Additional portfolios may
be added in the future from time to time. See "Additional Information" in the
Prospectus. Investment in the Portfolios relieves investors from the
administrative and accounting burdens involved in direct investments, and also
provides related benefits as described below.
High Current Income. The Money Market Portfolio seeks to maximize current
- --------------------
income to the extent consistent with the preservation of capital and the
maintenance of liquidity by investing in high quality money market investments
authorized under the Federal Credit Union Act. The Government Securities and
Mortgage Securities Portfolios seek to achieve a higher current yield than a
money market fund, since they can invest in longer-term, higher yielding
securities, and may utilize certain investment techniques not available to a
money market fund. Similarly, the yields of the Government Securities and
Mortgage Securities Portfolios are expected to exceed that offered by bank
certificates of deposit and money market accounts. However, the Portfolios do
not maintain a constant net asset value per unit and are subject to greater
fluctuation in the value of their units than a money market fund. Unlike bank
certificates of deposit and money market accounts, investments in units of the
Portfolios are not insured or guaranteed by any government agency.
B-3
<PAGE>
Relative Stability of Principal. Unlike the Money Market Portfolio which seeks
- --------------------------------
to maintain its net asset value per unit at $1.00 (although there is no
assurance that the Portfolio will be able to do so on a continuous basis), the
Government Securities and Mortgage Securities Portfolios' net asset values per
unit fluctuate. The Government Securities Portfolio attempts to reduce net
asset value fluctuation by maintaining a maximum duration equal to that of a 2-
year U.S. Treasury security and a target duration no shorter than that of a 6-
month U.S. Treasury security and no longer than that of a one-year U.S. Treasury
security. Similarly, the Mortgage Securities Portfolio attempts to reduce net
asset value fluctuation by maintaining a maximum duration that will not exceed
that of 3-year U.S. Treasury security and a target duration equal to that of a
2-year U.S. Treasury security and utilizing certain active management techniques
to hedge interest rate risk. Duration, which is a measure of the price
sensitivity of the Portfolio, including expected cash flows and mortgage
prepayments under a wide range of interest rate scenarios, is reviewed and
recalculated daily. However, there is no assurance that these strategies will be
successful.
Liquidity. Because the Portfolios' units may be redeemed upon request of a
- ----------
unit holder on any Business Day at net asset value, the Portfolios offer greater
liquidity than many competing investments such as certificates of deposit and
direct investments in certain mortgage-related securities.
Experienced Professional Management. Successfully creating and managing a
- ------------------------------------
diversified portfolio of mortgage-related securities requires professionals with
extensive experience. Members of the Goldman, Sachs & Co.'s highly skilled
portfolio management team bring together many years of experience in the
analysis, valuation and trading of U.S. fixed income securities. At October 31,
1995, they were responsible for approximately $17.5billion in fixed income
assets in $5.4billion in mortgage-related securities.
A Sophisticated Investment Process. The Portfolios' investment process starts
- -----------------------------------
with a review of trends for the overall economy as well as for different sectors
of the U.S. mortgage and other markets. Goldman, Sachs & Co.'s portfolio
managers then analyze yield spreads, implied volatility and the shape of the
yield curve.
In planning each Portfolio's strategy, the managers are able to draw upon the
economic and fixed income research resources of Goldman, Sachs & Co. They also
have access to the firm's proprietary models. Among the quantitative techniques
used in the Government Securities and Mortgage Securities Portfolios' investment
process are:
B-4
<PAGE>
. option-adjusted analytics to make initial strategic asset allocations
within the mortgage markets and to reevaluate investments as market
conditions change; and
. analytics to estimate mortgage prepayments and cash flows under different
interest rate scenarios and to maintain an optimal portfolio structure.
The Portfolio managers may use these and other trading and hedging techniques in
response to market and interest rate conditions. In particular, these and other
evaluative tools help the portfolio managers select securities with investment
characteristics they believe are desirable.
Convenience of a Fund Structure. The Government Securities and Mortgage
- --------------------------------
Securities Portfolios eliminate many of the complications that direct ownership
of mortgage securities entails. For example, most mortgage-related securities
generate monthly payments of both principal and interest, just as the underlying
mortgages do. To conserve their principal, investors must make a special effort
to segregate and reinvest the principal portion of each payment on their own.
The Portfolios relieve investors of this chore by automatically reinvesting all
principal payments within the Portfolio and distributing only current income
each month.
MANAGEMENT
Information pertaining to the Trustees and officers of the Fund is set forth
below. Trustees deemed to be "interested persons" of the Fund for purposes of
the Investment Company Act of 1940 (the "1940 Act") are indicated by an
asterisk.
Gene R. Artemenko, Age 67, Route 4, Box 1593, Reeds Spring, Missouri 65737.
Trustee. Retired.Formerly, President and Treasurer of the United Air Lines
Employees' Credit Union until June 1991.
James C. Barr, 60, 1600 North Oak Street, #420, Arlington, Virginia 22209.
Trustee. Chief Executive Officer of the National Milk Producers Federation since
March 1985. Prior to March 1985, Executive Vice President of the Credit Union
National Association.
Edgar F. Callahan, Age 67, 156 Second Street, San Francisco, California 94105-
3993. Trustee. President and Chief Operating Officer of PATELCO Credit Union
since October 1987.
Robert M. Coen, Age 56, 2003 Sheridan Road, Evanston, Illinois 60208. Trustee.
Professor of Economics, Northwestern University.
B-5
<PAGE>
John T. Collins, Age 49, 1330 Connecticut Ave. N.W., Washington, D.C. 20036.
Trustee. Partner in the law firm of Steptoe & Johnson since January 1985. Prior
to January 1985, General Counsel to the U.S. Senate Banking Committee.
Thomas S. Condit, Age 54, 300 No. Washington Street, Suite 200, Falls Church, VA
22046. Trustee. President and Chief Executive Officer of Craver, Matthews, Smith
& Co., Inc. ( a direct mail fund raising company) since June 1993. President and
Chief Executive Officer of National Cooperative Bank (a financial services
company) June 1983 - May 1993 and various positions with affiliated or
subsidiary corporations from June 1983 to January 1992.
Rudy J. Hanley, Age 52, 2115 N. Broadway, Santa Ana, California 92706. Vice
Chairman and Trustee. Chief Executive Officer of Orange County Teachers Federal
Credit Union since September 1982. Director of Credit Union National Association
since November 1992 to September 1, 1995 .
John L. Ostby, Age 76, HC-73,Box 840, Lake of the Woods, Virginia 22508.
Chairman and Trustee. Attorney at Law of John Ostby, Esq. since January 1991.
Attorney at Law,July 1985 to December 1995 .
Wendell A. Sebastian, Age 51, 711 South Dale Mabry, Tampa, Florida 33679.
Trustee. President of GTE Federal Credit Union since September 1991. Vice
President of GTE Federal Credit Union from April 1989 to September 1991.
Director and President of Callahan Financial Services, Inc. from March 1987 to
March 1989.
Marcia L. Beck, Age 40, One New York Plaza, New York, New York 10004. President.
Director of Mutual Funds Group of Goldman Sachs Asset Management since December
1994. Director of Institutional Funds Group of Goldman Sachs Asset
management September 1992 to December 1994. Vice President and Senior Portfolio
Manager, Goldman Sachs Asset Management June 1988 to Present.
Charles W. Filson, Age 51, 1001 Connecticut Avenue, N.W., Suite 1022,
Washington, D.C. 20036-5504. Vice President. Director and Vice President of
Callahan Financial Services, Inc. since March 1989 and Treasurer thereof since
March 1987.
Pauline Taylor, Age 49, 4900 Sears Tower, Chicago, IL 60606-6303. Vice
President. Vice President of Goldman, Sachs & Co. since June 1992. Consultant
from 1989-1992. Senior Vice President of Fidelity Investments prior to 1989.
John W. Mosior, Age 56, 4900 Sears Tower, Chicago, Illinois 60606-6303. Vice
President. Vice President of Goldman, Sachs & Co. Manager, Shareholder Servicing
of Goldman Sachs Asset Management since November 1989.
B-6
<PAGE>
Nancy L. Mucker, Age 46, 4900 Sears Tower, Chicago, Illinois 60606-6303. Vice
President, Vice President of Goldman, Sachs & Co. since April 1985. Manager,
Shareholder Servicing of Goldman Sachs Asset Management since November
1989.
Scott M. Gilman, Age 36, One New York Plaza, New York, New York 10004.
Treasurer. Director, Mutual Fund Administration, Goldman Sachs Asset Management
since April 1994. Assistant Treasurer of Goldman Sachs Funds Management, Inc.
since March 1993. Vice President of Goldman, Sachs & Co. since March 1990.
Formerly, Manager, Arthur Andersen & Co.
Michael J. Richman, Age 35, 85 Broad Street, New York, New York 10004.
Secretary. Associate General Counsel, Goldman Sachs Asset Management since
February 1994. Vice President and Assistant General Counsel, Goldman, Sachs &
Co., Counsel to the Funds Group, Goldman Sachs Asset Management since June 1992.
Formerly, Partner of Hale and Dorr from September 1991 to June 1992. Formerly,
Attorney-at-Law, Gaston & Snow from September 1985 to September 1991.
Howard B. Surloff, Age 30,85 Broad Street, New York, New York 10004. Assistant
Secretary. Assistant General Counsel and Vice President, Goldman, Sachs & Co,
since November 1993 and May 1994, respectively. Counsel to the Funds Group,
Goldman Sachs Asset Management since November 1993. Formerly Associate of
Shereff, Friedman, Hoffman & Goodman.
William F. Connors, Age 52,1001 Connecticut Avenue, N.W., Suite 1022,
Washington, D.C. 20036. Assistant Secretary. President and Secretary of Callahan
Financial Services, Inc. since April 1994. President and CEO of Los Angeles
Police Credit Union from 1987 to 1994.
Kaysie Uniake, Age 34, One New York Plaza, New York, New York 10004. Assistant
Secretary. Vice President and Portfolio Manager, Goldman Sachs Asset Management
1988 to Present.
Elizabeth Alexander, Age 26, One New York Plaza, New York, New York 10004.
Assistant Secretary. Junior Portfolio Manager, 1995 to Present. Funds Trading
Assistant, Goldman Sachs Asset Management 1993 to 1995. Formerly, Compliance
Analyst, Prudential Insurance, 1991 through 1993.
Steven Hartstein, Age 31, 85 Broad Street, New York, New York 10004. Assistant
Secretary. Legal Product Analyst, Goldman, Sachs & Co. since June 1993. Funds
Compliance Officer, Citibank Global Asset management, August 1991 to June 1993.
Legal Assistant, Brown & Wood prior thereto.
Gail Shanley, Age 26, 85 Broad Street, New York, New York 10004. Assistant
Secretary. Legal Products Analyst, Goldman, Sachs &
B-7
<PAGE>
Co. since June 1994. Formerly, Blue Sky Legal Assistant at Smith Barney
Shearson.
As of October 31, 1995, the Trustees and officers of the Fund, as a group, owned
in the aggregate less than 1% of the outstanding shares of the Fund. Each
officer holds comparable positions with certain other investment companies of
which Goldman, Sachs & Co., GSAM or an affiliate thereof is the investment
adviser and/or distributor.
The following table sets forth certain information with respect to the
compensation of each Trustee of the Trust for the one-year period ended August
31, 1995:
<TABLE>
<CAPTION>
Pension or
Retirement Total
Benefits Compensation
Pension or Accrued From Goldman
Aggregate as Part Estimated Sachs Mutual
Compensation of Trust's Annual Benefits Funds (Including
Name of Trustee From the Trust Expense Upon Retirement the Trust)
- --------------- -------------- ------- --------------- ----------
<S> <C> <C> <C> <C>
Gene R. Artemenko $8,000 -0- -0- $8,000
James C. Barr $8,000 -0- -0- $8,000
Edgar F. Callahan $ 0 -0- -0- -0-
Robert M. Coen $8,000 -0- -0- $8,000
John T. Collins $8,000 -0- -0- $8,000
Thomas S. Condit $8,000 -0- -0- $8,000
Rudolph J. Hanley $8,000 -0- -0- $8,000
John L. Otsby $8,000 -0- -0- $8,000
Wendell A. Sebastian $ 0 -0- -0- -0-
Lawrence Connell $2,000 -0- -0- $2,000
</TABLE>
* The Goldman Sachs Mutual Funds consisted of 70 mutual funds, including the six
series of the Trust, on August 31, 1995.
ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER
As stated in the Prospectus, Goldman, Sachs & Co., through Goldman Sachs Asset
Management ("GSAM"), One New York Plaza, 41stFloor, New York, New York 10004, a
separate operating division, acts as the Fund's investment adviser. See
"Management--Investment Adviser and Transfer Agent" in the Prospectus for a
description of the investment advisory duties of Goldman, Sachs & Co. Goldman,
Sachs & Co.'s administrative obligations include, subject to the general
supervision of the Trustees of the Fund, (a) providing supervision of all
aspects of the Fund's non-investment operations not performed by others pursuant
to the Fund's administration agreement or custodian agreement, (b) providing the
Fund, to the extent not provided pursuant to such agreements or the Fund's
transfer agency agreement, with person-
B-8
<PAGE>
nel to perform such executive, administrative and clerical services as are
reasonably necessary to provide effective administration of the Fund, (c)
arranging, to the extent not provided pursuant to such agreements, for the
preparation, at the Fund's expense, of its tax returns, reports to unitholders,
periodic updating of the Prospectus and reports filed with the Securities and
Exchange Commission (the "SEC") and other regulatory authorities, (d) providing
the Fund, to the extent not provided pursuant to such agreements, with adequate
office space and necessary office equipment and services, (e) maintaining all of
the Fund's records other than those maintained pursuant to such agreements, (f)
to the extent requested by the Trustees of the Fund, negotiating changes to the
terms and provisions of the Fund's administration agreement, the custodian
agreement and the distribution agreement with Callahan Financial Services, Inc.,
and (g) reviewing and paying (or causing to be paid) all bills or statements for
services rendered to the Fund.
The advisory agreement provides that Goldman, Sachs & Co. may render similar
services to others so long as its services under such agreement are not impaired
thereby. The advisory agreement also provides that, subject to applicable
provisions of the 1940 Act, Goldman, Sachs & Co. will not be liable for any
error in judgment or mistake of law or for any loss suffered by the Fund except
a loss resulting from willful misfeasance, bad faith or gross negligence in the
performance of its obligations and duties, or by reason of its reckless
disregard of its obligations and duties, under the advisory agreement or the
transfer agency agreement. The advisory agreement provides further that the Fund
will indemnify Goldman, Sachs & Co. against certain liabilities, including
liabilities under federal and state securities laws, or, in lieu thereof,
contribute to payment for resulting losses.
The advisory agreement will remain in effect with respect to a particular
Portfolio until March 31, 1996, and will continue from year to year thereafter
provided such continuance is specifically approved at least annually (a) by the
vote of a majority of the outstanding units of such Portfolio (as defined under
"Investment Restrictions") or by a majority of the Trustees of the Fund, and (b)
by the vote of a majority of the Trustees of the Fund who are not parties to the
advisory agreement or "interested persons" (as such term is defined in the 1940
Act) 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
if assigned (as defined in the 1940 Act) and is terminable at any time with
respect to any Portfolio without penalty by the Trustees of the Fund or by vote
of a majority of the outstanding units of the Portfolio (as defined under
"Investment Restrictions") on 60 days' written notice to Goldman, Sachs & Co.
and by Goldman, Sachs & Co. on 60 days' written notice to the Fund.
B-9
<PAGE>
Applicable regulations of state securities commissions (and provisions of the
advisory agreement) will require Goldman, Sachs & Co. to rebate a portion of its
advisory fee in an amount equal to any excess of annual Portfolio expenses
(including the advisory fee, but excluding interest, taxes, brokerage
commissions and extraordinary expenses) over expense limitations imposed by such
state regulations, unless exemptions are obtained. CUFSLP has agreed to bear an
amount equal to the remaining portion of any such excess). The most stringent
expense limitation imposed by any of the states, as of this date, is imposed by
the California Department of Corporations which provides that the aggregate
annual expenses of a Portfolio will not exceed 2 1/2% of the first $30 million
of the average net assets, 2% percent of the next $70 million of the average net
assets and 1 1/2% of the remaining average net assets of the Portfolio for any
fiscal year, determined monthly or at more frequent intervals on a consistent
basis.
Expenses borne by the Money Market Portfolio, Government Securities Portfolio
and Mortgage Securities Portfolio include, subject to the limitations described
herein, the fees payable to Goldman, Sachs & Co. and CUFSLP, the fees and
expenses of the Fund's custodian, filing fees for the registration or
qualification of Portfolio units under federal and state securities laws,
expenses of the organization of the Portfolios, the fees of any trade
association of which the Fund is a member, taxes, interest, costs of liability
insurance, fidelity bonds, indemnification or contribution, any costs, expenses
or laws arising out of any liability of or claim for damages or other relief
asserted against the Fund for violation of any law, legal, auditing and tax
services fees and expenses, expenses of preparing and setting in type
prospectuses, statements of addition information, proxy material, reports and
notices and the printing and distributing of the same to the Portfolios'
unitholders and regulatory authorities and compensation and expenses of the
Trustees.
B-10
<PAGE>
For the fiscal years ended August 31, 1995, August 31, 1994 and August 31,
1993,the amount of the advisory fee paid by each Portfolio was as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Money Market
Portfolio $410,109+ $752,090+ $1,338,678+
Government
Securities
Portfolio 1,078,346 1,647,179++ 2,361,974++
Mortgage
Securities
Portfolio 388,187+++ 550,161+++ 223,762+++
</TABLE>
_____________________
+ Waived additional advisory fees in the amount of $109,898, $37,050 and
$247,950, respectively, for such periods. Without waivers, the Money Market
Portfolio would have paid advisory fees of $520,007, $789,140 and
$1,586,628, respectively for such periods. In addition, the expenses of the
Money Market Portfolio were reduced or otherwise limited in the amounts of
$78,198, $198,584 and $275,404, respectively, by the Adviser for such
periods.
++ Waived additional advisory fees in the amount of $175,010 and $483,214,
respectively for such periods. Without waivers, the Government Securities
Portfolio would have paid advisory fees of $1,822,189 and $2,845,188,
respectively for such periods.
+++ Waived additional advisory fees in the amount of $140,912,$19,263 and
$74,587, respectively, for such periods. Without waivers, the Mortgage
Securities Portfolio would have paid advisory fees of $529,099, $569,424
and $298,349, respectively, for such periods.
PORTFOLIO TRANSACTIONS
In connection with portfolio transactions for the Fund, which are generally done
at a net price without a broker's commission (i.e., a dealer is dealing with the
Fund as principal and receives compensation equal to the spread between the
dealer's cost for a given security and the resale price of such security), the
Fund's advisory agreement provides that Goldman, Sachs & Co. shall attempt to
obtain the best net price and the most favorable execution. On occasions when
Goldman, Sachs & Co. deems the purchase or sale of a security to be in the best
interests of a
B-11
<PAGE>
Portfolio as well as its other customers (including any other Portfolio or other
investment company or advisory account for which Goldman, Sachs & Co. acts as
investment adviser), the advisory agreement provides that Goldman, Sachs & Co.,
to the extent permitted by applicable laws and regulations, may aggregate the
securities to be sold or purchased for the Portfolio with those to be sold or
purchased for such other customers in order to obtain the best net price and
most favorable execution. In such event, allocation of the securities so
purchased or sold, as well as the expenses incurred in the transaction, will be
made by Goldman, Sachs & Co. in the manner it considers to be most equitable and
consistent with its fiduciary obligations to such Portfolio and such other
customers. In some instances, this procedure may adversely affect the size of
the position obtainable for such Portfolio. To the extent that the execution
and price offered by more than one dealer are believed to be comparable, the
advisory agreement permits Goldman, Sachs & Co., in its discretion, to purchase
and sell portfolio securities to and from dealers who provide the Fund with
brokerage or research services.
During the fiscal year ended August 31, 1995, the Funds acquired and sold
securities issued by Nomura Securities International, Salomon Brothers, Inc.,
Bear Stearns Companies, Inc., First Boston Corporation, Daiwa Securities
America, Inc., Smith Barney Shearson, Merrill Lynch, Lehman Brothers, Morgan
Stanley Group, Inc. and Swiss Bank Corp. At August 31, 1995, the Money Market
Portfolio held the following amounts of securities of its regular
brokers/dealers, as defined in Rule 10b-1 under the 1940 Act, or their parents
($ in thousands): Bear Stearns Companies, Inc. - $14,240; Daiwa Securities
America, Inc. - $40,349; First Boston Corporation -$8,544; Swiss Bank Corp.-
$20,647; Salomon Brothers, Inc.-$53,289; Smith Barney Shearson-$12,021 and
Nomura Securities International-$75,000. The Government Securities Portfolio
held the following: Salomon Brothers, Inc. -$21,102 and Daiwa Securities
America, Inc. -$12,102. The Mortgage Securities Portfolio held the following:
Salomon Brothers, Inc. - $13,082; Merrill Lynch-$10,610 and Daiwa Securities
America, Inc. -$1,033.
Activities of Goldman, Sachs & Co. and Its Affiliates and Other Accounts Managed
by Goldman Sachs. The involvement of Goldman, Sachs & Co. and its advisory
affiliates, in the management of, or interest in , other accounts and other
activities of Godman, Sachs & Co. may present conflicts of interest with respect
to the Portfolio or impede their investment activities.
Goldman, Sachs & Co. and its advisory affiliates, have proprietary interests in,
and manage or advise accounts or funds (including separate accounts and other
funds and collective investment vehicles) which have investment objectives
similar to those of the Portfolios and/or engage in transactions in the same
types of securities and instruments as the Portfolios. Goldman, Sachs & Co. and
its affiliates are
B-12
<PAGE>
major participants in the fixed income markets, in each case on a proprietary
basis and for the accounts of customers. As such, Goldman, Sachs & Co. and its
affiliates are actively engaged in transactions in the same securities and
instruments in which a Portfolio invest. Such activities could affect the prices
and availability of the securities and instruments in which the Portfolios will
invest, which could have an adverse impact on each Portfolio's performance. Such
transactions, particularly in respect of proprietary accounts or customer
accounts other than those included in the Advisor and its advisory affiliates'
asset management activities, will be executed independently of the Portfolios'
transactions and thus at prices or rates that may be more or less favorable.
When the Advisor and its advisory affiliates seek to purchase or sell the same
assets for their managed accounts, including a Portfolio, the assets actually
purchased or sold may be allocated among the accounts on a basis determined in
its good faith discretion to be equitable. In some cases, this system may
adversely affect the size or the price of the assets purchased or sold for the
Portfolios.
From time to time, a Portfolio's activities may be restricted because of
regulatory restrictions applicable to Goldman, Sachs & Co. and its affiliates,
and/or their internal policies designed to comply with such restrictions. As a
result, there may be periods, for example, when the Advisor will not initiate or
recommend certain types of transactions in certain securities or instruments
with respect to which the Advisor and/or its affiliates are performing services
or when position limits have been reached.
In connection with their management of the Portfolios the Advisor may
have access to certain fundamental analysis and proprietary technical models
developed by Goldman, Sachs & Co. and other affiliates. The Advisor will not be
under any obligation, however, to effect transactions on behalf of the
Portfolios in accordance with such analysis and models. In addition, neither
Goldman, Sachs & Co. nor any of its affiliates will have any obligation to make
available any information regarding their proprietary activities or strategies,
or the activities or strategies used for other accounts managed by them, for the
benefit of the management of the Portfolios and it is not anticipated that the
Advisor will have access to such information for the purpose of managing the
Portfolios. The proprietary activities or portfolio strategies of Goldman, Sachs
& Co. and its affiliates or the activities or strategies used for accounts
managed by them or other customer accounts could conflict with the transactions
and strategies employed by the Advisor in managing the Portfolios.
The results of each Portfolio's investment activities may differ
significantly from the results achieved by the Advisor and its affiliates for
their proprietary accounts or accounts (in-
B-13
<PAGE>
cluding investment companies or collective investment vehicles) managed or
advised by them. It is possible that Goldman, Sachs & Co. and its affiliates and
such other accounts will achieve investment results which are substantially more
or less favorable than the results achieved by the Portfolios. Moreover, it is
possible that the Portfolios will sustain losses during periods in which
Goldman, Sachs & Co. and its affiliates achieve significant profits on their
trading for proprietary or other accounts. The opposite result is also
possible.
An investment policy committee which may include partners of Goldman, Sachs
& Co. and its affiliates may develop general policies regarding Portfolio
activities, but will not be involved in the day-to-day management of the
Portfolios. In such instances, those individuals may, as a result, obtain
information regarding the Portfolios' proposed investment activities which is
not generally available to the public. In addition, by virtue of their
affiliation with Goldman, Sachs & Co., any such member of an investment policy
committee will have direct or indirect interests in the activities of Goldman
Sachs and its affiliates in securities and investments similar to those in which
the Portfolios invest.
In addition, certain principals and certain of the employees of the Advisor
are also principals or employees of Goldman, Sachs & Co. or their affiliated
entities. As a result, the performance by these principals and employees of
their obligations to such other entities may be a consideration of which
investors in the Portfolios should be aware.
The Advisor may enter into transactions and invest in instruments on behalf
of a Portfolio in which customers of Goldman, Sachs & Co. serve as the
counterparty, principal or issuer. In such cases, such party's interests in the
transaction will be adverse to the interests of the Portfolios, and such party
may have no incentive to assure that the Portfolios obtain the best possible
prices or terms in connection with the transactions. Goldman, Sachs & Co. and
its affiliates may also create, write or issue derivative instruments for
customers of Goldman, Sachs & Co. or its affiliates, the underlying securities
or instruments of which may be those in which the Portfolios invest or which may
be based on the performance of a Portfolio. The Portfolios may, subject to
applicable law, purchase investments which are the subject of an underwriting or
other distribution by Goldman, Sachs & Co. or its affiliates and may also enter
into transactions with other clients of Goldman, Sachs & Co. or its affiliates
where such other clients have interests adverse to those of the Portfolios. To
the extent affiliated transactions are permitted, the Portfolios will deal with
Goldman, Sachs & Co. and its affiliates on an arm's-length basis.
B-14
<PAGE>
Each Portfolio will be required to establish business relationships with
its counterparties based on the Portfolio's own credit standing. Neither
Goldman, Sachs & Co. nor its affiliates will have any obligation to allow their
credit to be used in connection with a Portfolio's establishment of its business
relationships, nor is it expected that a Portfolio's counterparties will rely on
the credit of Goldman, Sachs & Co. or any of its affiliates in evaluating the
Fund's creditworthiness.
It is possible that a Portfolio's holdings will include securities of
entities for which Goldman, Sachs & Co. performs investment banking services as
well as securities of entities in which Goldman, Sachs & Co. makes a market.
From time to time, Goldman, Sachs & Co.'sactivities may limit the
Portfolios' flexibility in purchases and sales of securities. When Goldman,
Sachs & Co. is engaged in an underwriting or other distribution of securities of
an entity, the Advisor may be prohibited from purchasing or recommending
the purchase of certain securities of that entity for the Portfolios .
TRANSFER AGENT
Under its transfer agency agreement, Goldman, Sachs & Co. serves as transfer
agent and dividend disbursing agent for the Fund. Goldman, Sachs & Co. has
undertaken to the Fund to (a) process and provide confirmations for purchase and
redemption transactions, (b) answer customer inquiries regarding the current
yield of, and certain other matters (e.g., account status information)
pertaining to, the Fund, (c) establish and maintain separate accounts with
respect to each unitholder, (d) provide periodic statements showing account
balances and (e) provide for dividends or distributions to unitholders.
B-15
<PAGE>
As compensation for the services rendered to the Fund as transfer agent,
Goldman, Sachs & Co. is entitled to a fee of $18 per year for each unitholder
account plus reimbursement for certain expenses.
For the last three fiscal years, the amount of the transfer agency fees accrued
by each Portfolio was as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Money Market
Portfolio * * *
Government
Securities
Portfolio $4,252 $3,933 $4,118
Mortgage
Securities
Portfolio $1,407 $1,237 $655**
</TABLE>
* The transfer agent received no fees for the periods indicated above.
** For the period October 9, 1992 (commencement of operations) through August
31, 1993.
ADMINISTRATOR
As stated in the Prospectus, CUFSLP acts as administrator for the Fund. In
carrying out its duties, CUFSLP has undertaken to (a) review the preparation of
reports and proxy statements to unitholders, the periodic updating of the
Prospectus, this Additional Statement and the Registration Statement and the
preparation of all other reports filed with the SEC, (b) periodically review the
services performed by the investment adviser, the custodian, the distributors
and the transfer agent, and make such reports and recommendations to the
Trustees of the Fund concerning the performance of such services as the Trustees
reasonably request or as CUFSLP deems appropriate, (c) negotiate changes to the
terms and provisions of the Fund's advisory agreement, the custodian agreement,
the transfer agency agreement and the distribution agreement with Goldman, Sachs
& Co., to the extent requested by the Trustees of the Fund, and (d) provide the
Fund with personnel to perform such executive, administrative and clerical
services as may be reasonably requested by the Trustees of the Fund.
In addition, CUFSLP has undertaken to: (a) provide facilities, equipment and
personnel to serve the needs of investors, including communications systems and
personnel to handle unitholder inquiries, (b) develop and monitor investor
programs for credit
B-16
<PAGE>
unions, (c) provide assistance in connection with the processing of unit
purchase and redemption orders as reasonably requested by the transfer agent or
the Fund, (d) inform Goldman, Sachs & Co. in connection with the portfolio
management of the Fund as to anticipated purchases and redemptions by
unitholders and new investors, (e) provide information and assistance in
connection with the registration of the Fund's units in accordance with state
securities requirements, (f) make available and distribute information
concerning the Fund to unitholders as requested by the Fund, (g) handle
unitholder problems and calls relating to administrative matters, (h) provide
advice and assistance concerning the regulatory requirements applicable to
credit unions that invest in the Fund, (i) provide assistance in connection with
the preparation of the Fund's periodic financial statements and annual audit as
reasonably requested by the Fund or the Fund's independent accountants, (j)
furnish stationery and office supplies, and (k) generally assist in the Fund's
operations.
For the last three fiscal years, the amount of the administration fee earned by
CUFSLP was as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Money Market
Portfolio $102,002+ $262,423+ $642,331 +
Government
Securities
Portfolio $539,173 $823,589 $1,137,071 ++
Mortgage
Securities
Portfolio $132,275 $142,349 $74,587
</TABLE>
- ---------------------
+ Waived additional administration fees in the amount of $163,831,$143,193
and $150,983 respectively.
++ Waived additional administration fees in the amount of $968,402.
The administration agreement will remain in effect until March 30, 1996, and
will continue from year to year thereafter provided such continuance is
specifically approved at least annually (a) by the vote of a majority of the
Trustees and (b) by the vote of a majority of the Trustees of the Fund who are
not parties to the administration agreement or "interested persons" (as such
term is defined in the 1940 Act) of any party thereto (the "Disinterested
Trustees"), cast in person at a meeting called for the purpose of voting on such
approval. The administration agreement may be terminated with respect to a
Portfolio at any time, without the
B-17
<PAGE>
payment of any penalty, by a vote of a majority of the Disinterested Trustees or
by vote of the majority of the outstanding units of the Portfolio (as defined
under "Investment Restrictions") on 60 days' written notice to CUFSLP and by
CUFSLP on 60 days' written notice to the Fund. The administration agreement
provides that it may be amended by the mutual consent of the Fund and CUFSLP,
but the consent of the Fund must be approved by vote of a majority of the
Disinterested Trustees cast in person at a meeting called for the purpose of
voting on such amendment. The administration agreement will terminate
automatically if assigned (as defined in the 1940 Act).
The administration agreement provides that CUFSLP will not be liable for any
error in judgment or mistake of law or for any loss suffered by the Fund except
a loss resulting from willful misfeasance, bad faith or gross negligence in the
performance of its obligations and duties, or by reason of its reckless
disregard of its obligations and duties, under the agreement. The agreement
provides further that the Fund will indemnify CUFSLP against certain
liabilities, including liabilities under the federal and state securities laws
or, in lieu thereof, contribute to payment for resulting losses.
The thirty-seven credit unions listed below are the limited partners of CUFSLP,
which created Trust for Credit Unions in conjunction with Goldman, Sachs & Co.
As of June 30, 1995, these credit unions had total assets of $20.8billion from
twenty-two different states.
J. David Osborne, President
Larry Hoffman, Vice President-Finance
Anheuser-Busch Employees Credit Union
Larry Morgan, President
APCO Employees Credit Union
Douglas Ferraro, President
Kyle M. Markland, Sr. Vice President Finance
Bellco First Federal Credit Union
Gary Oakland, President
T. Brad Canfield, Vice President
Accounting/Investments
Boeing Employees Credit Union
John Siefken, President
Sandy Andrews, Sr. Vice President
Citizens Equity Federal Credit Union
B-18
<PAGE>
Dean Nelson, President
Bryan Bennett, Vice President-Controller
City-County Federal Credit Union
Larry T. Wilson, President
Barry Hooks, Finance Manager
Coastal Federal Credit Union
Tom Budd, Manager of Finance
Dearborn Federal Credit Union
Donald Hersman, General Manger
Kendrick Smith, Portfolio Manager
Eastern Financial Federal Credit Union
Thomas E. Sargent, President
Michael Osborne, Chief Financial Officer
First Technology Federal Credit Union
Wendell A. Sebastian, President
Brian Crawford, Controller
GTE Federal Credit Union
Stan Hollen, President
Judy Flores, CFO
The Golden 1 Credit Union
Charles Cockburn, President
Hudson Valley Federal Credit Union
Paul Horgen, President
Michele Manthey, Vice President
Finance and Administration
IBM Mid-America Employees Federal Credit Union
Joseph J. Baldin, President
Bob Jansen, Vice President-Operations
Inland Employees Federal Credit Union
Jean Yokum, President
Greg Manweiler, Vice President Finance
Langley Federal Credit Union
Frank Berrish, President
Greg Manweiler, Vice President Finance
Langley Federal Credit Union
Dennis Pierce, President
Dennis Mann, Senior Vice President
Members America Credit Union
B-19
<PAGE>
Joseph Bressi, President
Montgomery County Teachers Federal Credit Union
Douglas M. Allman, President
NASA Federal Credit Union
Lindsay Alexander, President
Tim Duvall, Finance Division Manager
NIH Federal Credit Union
Brad Beal, President
Paul Parrish, Sr. Vice President
Chief Financial Officer
Nevada Federal Credit Union
Joseph S. Coey, President
New Mexico Educators Federal Credit Union
Michael J. Maslak, President
Dave Doss, Chief Financial Officer
North Island Federal Credit Union
Rudy Hanley, President
Paul Sundermann, Chief Financial Officer
Orange County Teachers Federal Credit Union
Edgar F. Callahan, President
Andrew Hunter, Chief Financial Officer
Patelco Credit Union
Jeffrey Farver, President
San Antonio Federal Credit Union
Gregory Thomas, President
Space Coast Credit Union
Stephan Winninger, President
State Employees Credit Union
Donald Granato, President
Steel Works Community Federal Credit Union
Richard Rice, President
Teachers Credit Union
Betty Hobbs, President
Roy Dobbs, Executive Vice President
Tennessee Teachers Credit Union
Gregory Blount, President
Tropical Federal Credit Union
B-20
<PAGE>
Philip L. Hart, President
Tulsa Federal Employees Credit Union
Leonard Greene, President
Unified Federal Credit Union
E. Burton Eubanks, President
University Federal Credit Union
Frank Berrish, President
Visions Federal Credit Union
Custodian
State Street Bank and Trust Company ("State Street"), P.O. Box 1713, Boston,
Massachusetts 02105, is the custodian of the Fund's portfolio securities and
cash. State Street also maintains the Fund's accounting records. The Northern
Trust Company ("Northern") has been retained by State Street to serve as its
agent in connection with certain wire receipts and transfers of funds.
Auditors
Arthur Andersen LLP, independent public accountants, One International Place,
Boston, Massachusetts 02110, have been selected as auditors of the Fund. In
addition to audit services, Arthur Andersen LLP prepare the Fund's federal and
state tax returns, and provide consultation and assistance on accounting,
internal control and related matters. The financial statements of the Money
Market Portfolio, the Government Securities Portfolio and the Mortgage
Securities Portfolio are incorporated by reference into this Additional
Statement (under "Financial Statements") from the Fund's annual report to
unitholders for the fiscal year ended August 31, 1995(the "Annual Report") and
the data set forth under "Financial Highlights" in the Prospectus have been
audited by Arthur Andersen LLP, as indicated in their report with respect
thereto, which is incorporated by reference in reliance upon the authority of
said firm as experts in giving said report.
AMORTIZED COST VALUATION
As stated in the Prospectus, the Money Market Portfolio seeks to maintain a net
asset value of $1.00 per unit and, in this connection, values its instruments on
the basis of amortized cost pursuant to Rule 2a-7 under the 1940 Act. The
amortized cost method values a security at its cost on the date of purchase and
thereafter assumes a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. While this method provides certainty in valuation, it
may result in periods
B-21
<PAGE>
during which value, as determined by amortized cost, is higher or lower than the
price the Portfolio would receive if it sold the instrument. During such
periods the yield to investors in the Portfolio may differ somewhat from that
obtained in a similar entity which uses available indications as to market value
to value its portfolio instruments. For example, if the use of amortized cost
resulted in a lower (higher) aggregate Portfolio value on a particular day, a
prospective investor in the Portfolio would be able to obtain a somewhat higher
(lower) yield and ownership interest than would result from investment in such
similar entity and existing investors would receive less (more) investment
income and ownership interest. In this connection, the amortized cost method
may result in dilution of unitholder interests. Similar effects arise out of
the rounding of the Portfolio's net asset value per unit to the nearest one
cent. However, the Fund expects that the procedures and limitations referred to
in the following paragraphs of this section will tend to minimize the
differences referred to above.
Under Rule 2a-7, the Fund's Trustees, in supervising the Fund's operations and
delegating special responsibilities involving portfolio management to Goldman,
Sachs & Co., are obligated, as a particular responsibility within the overall
duty of care owed to the unitholders, to establish procedures reasonably
designed, taking into account current market conditions and the Money Market
Portfolio's investment objective, to stabilize the net asset value of such
Portfolio, as computed for the purposes of purchases and redemptions, at $1.00
per unit. The Trustees' procedures include periodically monitoring the
difference (the "Market Value Difference") between the amortized cost value per
unit and the net asset value per unit based upon available indications of market
value, considering whether steps should be taken in the event such Market Value
Difference exceeds 1/2 of 1%, and the taking of such steps as they consider
appropriate (e.g., selling portfolio instruments to shorten average portfolio
maturity or to realize capital gains or losses, reducing or suspending
unitholder income accruals, redeeming units in kind, canceling units without
monetary consideration, or utilizing a net asset value per unit based upon
available indications of market value which under such circumstances would vary
from $1.00) to eliminate or reduce to the extent reasonably practicable any
material dilution or other unfair results to investors or existing unitholders
which might arise from Market Value Differences. Available indications of market
value used by the Fund consist of actual market quotations or appropriate
substitutes which reflect current market conditions and include (a) quotations
or estimates of market value for individual portfolio instruments and/or (b)
values for individual portfolio instruments derived from market quotations
relating to varying maturities of a class of money market instruments.
B-22
<PAGE>
Rule 2a-7 requires that the Money Market Portfolio limit its investments to
those which Goldman, Sachs & Co., under guidelines established by the Fund's
Board of Trustees, determines to present minimal credit risks and which are
"Eligible Securities" as defined by the SEC and described in the Prospectus.
The Rule also calls for the Money Market Portfolio to maintain a dollar weighted
average portfolio maturity (not more than 90 days) appropriate to its objective
of maintaining a stable net asset value per unit and precludes the purchase of
any instrument deemed under such Rule to have a remaining maturity of more than
397 days.
Generally, the maturity of an instrument held by the Money Market Portfolio
shall be deemed to be the period remaining until the date noted on the face of
the instrument as the date on which the principal amount must be paid or, in the
case of an instrument called for redemption, the date on which the redemption
payment must be made. However, instruments having variable or floating interest
rates or demand features may be deemed to have remaining maturities as follows:
(a) a government security with a variable rate of interest readjusted no less
frequently than every thirteen months may be deemed to have a maturity equal to
the period remaining until the next readjustment of the interest rate; (b) an
instrument with a variable rate of interest, the principal amount of which is
scheduled on the face of the instrument to be paid in thirteen months or less,
may be deemed to have maturity equal to the period remaining until the next
readjustment of the interest rate; (c) an instrument with a variable rate of
interest that is subject to a demand feature may be deemed to have a maturity
equal to the longer of the period remaining until the next readjustment of the
interest rate or the period remaining until the principal amount can be
recovered through demand; (d) an instrument with a floating rate of interest
that is subject to a demand feature may be deemed to have a maturity equal to
the period remaining until the principal amount can be recovered through demand;
and (e) a repurchase agreement may be deemed to have a maturity equal to the
period remaining until the date on which the repurchase of the underlying
securities is scheduled to occur or, where no date is specified but the
agreement is subject to demand, the notice period applicable to a demand for the
repurchase of the securities.
DESCRIPTION OF UNITS
As the Prospectus indicates, the Fund's Trust Agreement permits the Trustees to
issue an unlimited number of full and fractional units of beneficial interest of
one or more separate series representing interests in different investment
portfolios. Under the terms of the Trust Agreement, each unit of each series
has a par value of $.001, represents an equal proportionate interest in a
particular investment portfolio with each other unit and is
B-23
<PAGE>
entitled to such dividends out of the income belonging to such investment
portfolio as are declared by the Trustees. Upon liquidation of an investment
portfolio, unitholders thereof are entitled to share pro rata in the net assets
belonging to that investment portfolio available for distribution. Units do not
have preemptive or conversion rights. Units when issued as described in the
Prospectus are fully paid and nonassessable, except as expressly set forth
below.
Any Trustee may be removed by the unitholders with or without cause at any time
by vote of those unitholders holding not less than two-thirds of the units then
outstanding, cast in person or by proxy at any meeting called for that purpose.
The Trustees shall promptly call a meeting of unitholders for the purpose of
voting upon the question of removal of any Trustee when requested in writing to
do so by the holders of record of not less than 10% of the outstanding units.
Whenever ten or more unitholders of record who have been such for at least six
months preceding the date of application, and who hold in the aggregate either
units having a net asset value of at least $25,000 or at least 1% of the
outstanding units, whichever is less, shall apply to the Trustees in writing,
stating that they wish to communicate with other unitholders with a view to
obtaining signatures to a request for a unitholder meeting and include with such
application a form of communication and request which they wish to transmit, the
Trustees shall within five business days after receipt of such application
either (1) afford to such applicants access to a list of the names and addresses
of all unitholders as recorded on the books of the Fund or investment portfolio
involved; or (2) inform such applicants as to the approximate number of
unitholders of record, and the approximate cost of mailing to them the proposed
form of communication and request and, upon receipt of the material and the
expenses of mailing, shall promptly mail such materials to all unitholders
unless a majority of the Trustees believe that in their opinion either such
material contains untrue statements of fact or omits to state facts necessary to
make the statements contained therein not misleading, or would be in violation
of applicable law. The Trustees shall thereafter comply with any order entered
by the SEC and the requirements of the 1940 Act and the Securities Exchange Act
of 1934.
In addition to Trustee election or removal as described in the Prospectus and as
further described herein, the Trust Agreement provides for unitholder voting
only (a) with respect to any contract as to which unitholder approval is
required by the 1940 Act, (b) with respect to any termination or reorganization
of the Fund or any Portfolio to the extent and as provided in the Trust
Agreement, (c) with respect to any amendment of the Trust Agreement (other than
amendments establishing and designating new investment portfolios, abolishing
investment portfolios, changing
B-24
<PAGE>
the name of the Fund or the name of any investment portfolio, supplying any
omission, curing any ambiguity or curing, correcting or supplementing any
provision thereof which is internally inconsistent with any other provision
thereof or which is defective or inconsistent with the 1940 Act or with the
requirements of the Internal Revenue Code and applicable regulations for the
Fund's obtaining the most favorable treatment thereunder available to regulated
investment companies), which amendments require approval by a majority of the
units entitled to vote, (d) to the same extent as the stockholders of a
Massachusetts business corporation as to whether or not a court action,
proceeding or claim should or should not be brought or maintained derivatively
or as a class action on behalf of the Fund or the unitholders, and (e) with
respect to such additional matters relating to the Fund as may be required by
the 1940 Act, the Trust Agreement, the By-Laws of the Fund, any registration of
the Fund with the SEC or any state, or as the Trustees may consider necessary or
desirable.
Under Massachusetts law, there is a possibility that unitholders of a business
trust could, under certain circumstances, be held personally liable as partners
for the obligations of the Trust. The Trust Agreement contains an express
disclaimer of unitholder liability for acts or obligations of the Fund and
requires that notice of such disclaimer be given in each agreement, obligation
or instrument entered into or executed by the Trustees or any officer. The
Trust Agreement provides for indemnification out of Fund property of any
unitholder charged or held personally liable for the obligations or liabilities
of the Fund solely by reason of being or having been a unitholder of the Fund
and not because of such unitholder's acts or omissions or for some other reason.
The Trust Agreement also provides that the Fund shall, upon proper and timely
request, assume the defense of any charge made against any unitholder as such
for any obligation or liability of the Fund and satisfy any judgment thereon.
Thus, the risk of a unitholder incurring financial loss on account of unitholder
liability is limited to circumstances in which the Fund itself would be unable
to meet its obligations.
The Trust Agreement provides that on any matter submitted to a vote of the
unitholders, all units entitled to vote, irrespective of investment portfolio,
shall be voted in the aggregate and not by investment portfolio except that (a)
as to any matter with respect to which a separate vote of any investment
portfolio is required by the 1940 Act or would be required under the
Massachusetts Business Corporation Law if the Fund were a Massachusetts business
corporation, such requirements as to a separate vote by the investment portfolio
shall apply in lieu of the aggregate voting as described above, (b) in the event
that the separate vote requirements referred to in (a) above apply with respect
to one or more investment portfolios, then subject to (c) below, the units of
all other investment portfolios shall vote as a single
B-25
<PAGE>
investment portfolio, and (c) as to any matter which does not affect the
interest of a particular investment portfolio, only unitholders of the affected
investment portfolio shall be entitled to vote thereon.
Rule 18f-2 under the 1940 Act provides that any matter required by the
provisions of the 1940 Act or applicable state law, or otherwise, to be
submitted to the holders of the outstanding voting securities of an investment
company such as the Fund shall not be deemed to have been effectively acted upon
unless approved by the holders of a majority of the outstanding units of each
investment portfolio affected by such matter. Rule 18f-2 further provides that
an investment portfolio shall be deemed to be affected by a matter unless the
interests of each investment portfolio in the matter are identical or the matter
does not affect any interest of the investment portfolio. Under the Rule, the
approval of an investment advisory agreement or any change in a fundamental
investment policy would be effectively acted upon with respect to an investment
portfolio only if approved by a majority of the outstanding units of such
investment portfolio. However, the Rule also provides that the ratification of
the appointment of independent accountants, the approval of principal
underwriting contracts and the election of Trustees may be effectively acted
upon by unitholders of the Fund voting together in the aggregate without regard
to a particular investment portfolio.
As of October 31, 1995, the outstanding units of the Money Market Portfolio, the
Government Securities Portfolio and the Mortgage Securities Portfolio were
398,722,202.660, 54,375,319.039 and 27,192,762.875, respectively. To the Fund's
knowledge, as of such date, the only entity which may have owned 5% or more of
the outstanding units of the Money Market Portfolio was Dearborn Federal Credit
Union, 400 Town Center Drive, Dearborn, MI 48126 (8.03%. To the Fund's
knowledge, as of the same date, the only entity which may have owned 5% or more
of the outstanding units of the Government Securities Portfolio was Patelco
Credit Union, 156 Second Street, San Francisco, CA 94105 (15.01%), Boeing
Employees Credit Union, 12770 Gateway Drive, Tukwila, WA 98124 (7.38%)and APCO
Employees Credit Union, 1608 7th Avenue, N., Birmingham, AL 35203 (5.52%). To
the Fund's knowledge, as of the same date, the only entities which may have
owned 5% or more of the outstanding units of the Mortgage Securities Portfolio
were Patelco Credit Union, 156 Second Street, San Francisco, CA 94105 (22.72%),
Eastern Financial Federal Credit Union, 700 South Royal Poinciana Blvd. Miami
Springs, FL 33166 (7.32%), San Diego County Credit Union, 9985 Pacific Heights
Blvd., San Diego, CA 92121 (6.25%), First Technology Federal Credit Union, 3855
S.W. 153rd Drive, Beaverton, OR 97006 (6.64%), South Carolina Federal Credit
Union, P.O. Box 190012, N. Charleston, SC 29419 (5.51%) and Orange County
Teachers
B-26
<PAGE>
Federal Credit Union, P.O. Box 11547, Santa Ana, CA 92711 (5.49%).
ADJUSTABLE AND FIXED RATE MORTGAGE LOANS AND
MORTGAGE-RELATED SECURITIES
The Nature of Adjustable and Fixed Rate Mortgage Loans
The following is a general description of the adjustable and fixed rate mortgage
loans which may be expected to underlie the mortgage-related securities in which
the Government Securities Portfolio, the Mortgage Securities Portfolio and, to a
lesser extent, the Money Market Portfolio invest. The actual mortgage loans
underlying any particular issue of mortgage-related securities may differ
materially from those described below.
Adjustable Rate Mortgage Loans ("ARMs"). ARMs included in a mortgage pool will
generally provide for a fixed initial mortgage interest rate for a specified
period of time. Thereafter, the interest rates (the "Mortgage Interest Rates")
may be subject to periodic adjustment based on changes in the applicable index
rate (the "Index Rate"). The adjusted rate would be equal to the Index Rate plus
a gross margin, which is a fixed percentage spread over the Index Rate
established for each ARM at the time of its origination.
Adjustable interest rates can cause payment increases that some mortgagors may
find difficult to make. However, certain ARMs provide that the Mortgage Interest
Rate may not be adjusted to a rate above an applicable lifetime maximum rate or
below an applicable lifetime minimum rate for such ARM. Certain ARMs may also be
subject to limitations on the maximum amount by which the Mortgage Interest Rate
may adjust for any single adjustment period (the "Maximum Adjustment"). Other
ARMs ("Negatively Amortizing ARMs") may provide instead or as well for
limitations on changes in the monthly payment on such ARMs. Limitations on
monthly payments can result in monthly payments which are more or less than the
amount necessary to amortize a Negatively Amortizing ARM by its maturity at the
Mortgage Interest Rate in effect in any particular month. In the event that a
monthly payment is insufficient to pay the interest accruing on a Negatively
Amortizing ARM, any such excess interest is added to the principal balance of
the loan, causing negative amortization, and will be repaid through future
monthly payments. It may take borrowers under Negatively Amortizing ARMs longer
periods of time to accumulate equity and may increase the likelihood of default
by such borrowers. In the event that a monthly payment exceeds the sum of the
interest accrued at the applicable Mortgage Interest Rate and the principal
payment which would have been necessary to amortize the outstanding principal
balance over the remaining term of the loan, the excess (or "accelerated
amortization")
B-27
<PAGE>
further reduces the principal balance of the ARM. Negatively Amortizing ARMs do
not provide for the extension of their original maturity to accommodate changes
in their Mortgage Interest Rate. As a result, unless there is a periodic
recalculation of the payment amount (which there generally is), the final
payment may be substantially larger than the other payments. These limitations
on periodic increases in interest rates and on changes in monthly payments
protect borrowers from unlimited interest rate and payment increase, but may
result in increased credit exposure and prepayment risks for lenders.
There are a number of indices which provide the basis for rate adjustments on
ARMs. Commonly utilized indices include the one-year, three-year and five-year
constant maturity Treasury rates, the three-month Treasury Bill rate, the 180-
day Treasury Bill rate, rates of longer-term Treasury securities, the 11th
District Federal Home Loan Bank Cost of Funds, the National Median Cost of
Funds, the one-month, three-month, six-month or one year London Interbank
Offered Rate ("LIBOR"), the prime rate of a specific bank, or commercial paper
rates. Some indices, such as the one-year constant maturity Treasury rate,
closely mirror changes in market interest rate levels. Others, such as the 11th
District Federal Home Loan Bank Cost of Funds Index, tend to lag behind changes
in market rate levels and tend to be somewhat less volatile. The degree of
volatility in the market value of the Portfolios will be influenced by the
length of the interest rate reset periods and the degree of volatility in the
applicable indices.
Fixed Rate Mortgage Loans. Generally, fixed rate mortgage loans eligible for
inclusion in a mortgage pool (the "Fixed Rate Mortgage Loans") will bear simple
interest at fixed annual rates and have original terms to maturity ranging from
5 to 40 years. Fixed Rate Mortgage Loans generally provide for monthly payments
of principal and interest in substantially equal installments for the
contractual term of the mortgage note in sufficient amounts to amortize fully
principal by maturity, although certain Fixed Rate Mortgage Loans provide for a
large final "balloon" payment upon maturity.
Legal Considerations of Mortgage Loans. The following is a discussion of
certain legal and regulatory aspects of the ARMs and Fixed Rate Mortgage Loans
expected to underlie the mortgage-related securities in which the Portfolios may
invest. These regulations may impair the ability of a mortgage lender to
enforce its rights under the mortgage documents. These regulations may
adversely affect the Portfolios' investments in both privately-issued mortgage-
related securities (in the case of the Mortgage Securities Portfolio) and
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities by delaying the receipt of payments derived from principal or
interest on mortgage loans affected by such regulations.
B-28
<PAGE>
1. Foreclosure. A foreclosure of a defaulted mortgage loan may be
delayed due to compliance with statutory notice or service of process
provisions, difficulties in locating necessary parties or legal challenges
to the mortgagee's right to foreclose. Depending upon market conditions,
the ultimate proceeds of the sale of foreclosed property may not equal the
amounts owed on the mortgage loan.
Further, courts in some cases have imposed general equitable principles
upon foreclosure generally designed to relieve the borrower from the legal
effect of default and have required lenders to undertake affirmative and
expensive actions to determine the causes for the default and the
likelihood of loan reinstatement.
2. Rights of Redemption. In some states, after foreclosure of a mortgage
loan, the borrower and foreclosed junior lienors are given a statutory
period in which to redeem the property, which right may diminish the
mortgagee's ability to sell the property.
3. Legislative Limitations. In addition to anti-deficiency and related
legislation, numerous other federal and state statutory provisions,
including the federal bankruptcy laws and state laws affording relief to
debtors, may interfere with or affect the ability of a secured mortgage
lender to enforce its security interest. For example, a bankruptcy court
may grant the debtor a reasonable time to cure any default on a mortgage
loan, including a payment default. The court in certain instances, may also
reduce the monthly payments due under such mortgage loan, change the rate
of interest, reduce the principal balance of the loan to the then-current
appraised value of the related mortgage property and alter the mortgage
loan repayment schedule and grant priority to certain liens over the lien
of the mortgage loan. If a court relieves a borrower's obligation to repay
amounts otherwise due on a mortgage loan, the mortgage loan servicer will
not be required to advance such amounts, and any loss in respect thereof
will be borne by the holders of securities backed by such loans. In
addition, numerous federal and state consumer protection laws impose
penalties for failure to comply with specific requirements in connection
with origination and servicing of mortgage loans.
4. "Due-on-Sale" Provisions. Fixed-rate mortgage loans may contain a so-
called "due-on-sale" clause permitting acceleration of the maturity of the
mortgage loan if the borrower transfers the property. The Garn-St. Germain
Depository Institutions Act of 1982 sets forth nine specific instances in
which no mortgage lender covered by that Act may exercise a "due-on-sale"
clause upon a transfer of property. The inability to enforce a "due-on-
sale" clause or the lack of
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such a clause in mortgage loan documents may result in a mortgage loan
being assumed by a purchaser of the property that bears an interest rate
below the current market rate.
5. Usury Laws. Some states prohibit charging interest on mortgage loans
in excess of statutory limits. If such limits are exceeded, substantial
penalties may be incurred and, in some cases, enforceability of the
obligation to pay principal and interest may be affected.
MORTGAGE-RELATED SECURITIES
Mortgage-related securities represent direct or indirect participations in, or
are collateralized by and payable from, mortgage loans secured by real property.
The investment characteristics of adjustable and fixed rate mortgage-related
securities differ from those of traditional fixed income securities. The major
differences include the payment of interest and principal of mortgage-related
securities on a more frequent (usually monthly) schedule, and the possibility
that principal may be prepaid at any time due to prepayments on the underlying
mortgage loans. These differences can result in significantly greater price and
yield volatility than is the case with traditional fixed income securities. In
general, if a Portfolio purchases mortgage-related securities at a premium, a
faster than expected prepayment rate will reduce both the market value and the
yield to maturity from those which were anticipated. A prepayment rate that is
slower than expected will have the opposite effect of increasing yield to
maturity and market value. Conversely, if a Portfolio purchases mortgage-related
securities at a discount, faster than expected prepayments will increase, while
slower than expected prepayments will reduce, yield to maturity and market
value.
Prepayments on a pool of mortgage loans are influenced by changes in current
interest rates and a variety of economic, geographic, social and other factors
(such as changes in mortgagors' housing needs, job transfers, unemployment,
mortgagors' equity in the mortgage properties and servicing decisions). The
timing and level of prepayments cannot be predicted. Generally, however,
prepayments on mortgage loans will increase during a period of falling mortgage
interest rates and decrease during a period of rising mortgage interest rates.
Accordingly, the amounts of prepayments available for reinvestment by a
Portfolio are likely to be greater during a period of declining mortgage
interest rates. If general interest rates decline, such prepayments are likely
to be reinvested at lower interest rates than the Portfolio was earning on the
mortgage-related securities that were prepaid.
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The rate of interest on mortgage-related securities is normally lower than the
interest rates paid on the mortgages included in the underlying pool due to the
annual fees paid to the servicer of the mortgage pool for passing through
monthly payments to certificateholders and to any guarantor, such as GNMA, and
due to any yield retained by the issuer. Actual yield to the holder may vary
from the coupon rate, even if adjustable, if the mortgage-related securities are
purchased or traded in the secondary market at a premium or discount. In
addition, there is normally some delay between the time the issuer receives
mortgage payments from the servicer and the time the issuer makes the payments
on the mortgage-related securities and this delay reduced the effective yield to
the holder of such securities.
The issuers of certain mortgage-backed obligations may elect to have the pool of
mortgage loans (or indirect interests in mortgage loans) underlying the
securities treated as a real estate mortgage investment conduit ("REMIC"), which
are subject to special federal income tax rules. A description of the types of
mortgage-related securities in which the Portfolios may invest is provided
below. The descriptions are general and summary in nature, and do not detail
every possible variation of the types of securities that are permissible for the
Portfolios.
1.Private Mortgage Pass-Through Securities
General Characteristics. The Mortgage Securities Portfolio may invest in
privately-issued mortgage pass-through securities ("Mortgage Pass-Throughs")
which represent participation interests in pools of private mortgage loans
conveyed to the issuing trust and generally serviced for the trust by the
originator. For federal income tax purposes, such trusts are generally treated
as grantor trusts or REMICs and, in either case, are generally not subject to
any significant amount of federal income tax at the entity level. Mortgage
Pass-Throughs (whether fixed or adjustable rate) provide for monthly payments
that are a "pass-through" of the monthly interest and principal payments
(including any prepayments) made by the individual borrowers on the pooled
mortgage loans, net of any fees or other amounts paid to any guarantor,
administrator and/or servicer of the underlying mortgage loans.
Each mortgage pool underlying Mortgage Pass-Throughs will consist of mortgage
loans evidenced by promissory notes secured by first mortgages or first deeds of
trust or other similar security instruments creating a first lien on the
mortgaged properties (the "Mortgaged Properties"). The Mortgaged Properties
will consist of residential properties upon which are located detached
individual dwelling units, individual condominiums, townhouses, duplexes,
triplexes, fourplexes, rowhouses, manufactured homes, individual units in
planned unit developments and other attached dwelling units, vacation homes,
second homes, residential invest-
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ment properties, multi-family units or properties with mixed residential and
commercial uses. A trust fund with respect to which a REMIC election has been
made may include regular interests in other REMICs which in turn will ultimately
evidence interests in mortgage loans.
The seller or servicer of the underlying mortgage obligations will generally
make representations and warranties to certificateholders as to certain
characteristics of the mortgage loans and as to the accuracy of certain
information furnished to the trustee in respect of each such mortgage loan.
Upon a breach of any representation or warranty that materially and adversely
affects the interests of the related certificateholders in a mortgage loan, the
seller or servicer generally will be obligated either to cure the breach in all
material respects, to repurchase the mortgage loan or, if the related agreement
so provides, to substitute in its place a mortgage loan pursuant to the
conditions set forth therein. Such a repurchase or substitution obligation
generally constitutes the sole remedy available to the related
certificateholders or the trustee for the material breach of any such
representation or warranty by the seller or servicer.
Description of Certificates. Mortgage Pass-Throughs may be issued in one or
more classes of senior certificates and one or more classes of subordinate
certificates. Each such class may bear a different pass-through rate.
Generally, each certificate will evidence the specified interest of the holder
thereof in the payments of principal or interest or both in respect of the
mortgage pool comprising part of the trust fund for such certificates.
Any class of certificates may also be divided into subclasses entitled to
varying amounts of principal and interest. If a REMIC election has been made,
certificates of such subclasses may be entitled to payments on the basis of a
stated principal balance and stated interest rate, and payments among different
subclasses may be made on a sequential, concurrent, pro rata or disproportionate
basis, or any combination thereof. The stated interest rate on any such
subclass of certificates may be a fixed rate or one which varies in direct or
inverse relationship to an objective interest index. Subclasses of certificates
as to which a REMIC election has been made may have the features and structures
described below under the caption "Multiple Class Pass-Through Securities and
Collateralized Mortgage Obligations."
Generally, each registered holder of a certificate will be entitled to receive
its pro rata share of monthly distributions of all or a portion of principal of
the underlying mortgage loans or of interest on the principal balances thereof,
which accrues at the applicable mortgage pass-through rate, or both. The
difference between the mortgage interest rate and the related mortgage pass-
through rate (less the amount, if any, of retained
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yield) with respect to each mortgage loan will generally be paid to the servicer
as a servicing fee. Since certain adjustable rate mortgage loans included in a
mortgage pool may provide for deferred interest (i.e., negative amortization),
the amount of interest actually paid by a mortgagor in any month may be less
than the amount of interest accrued on the outstanding principal balance of the
related mortgage loan during the relevant period at the applicable mortgage
interest rate. In such event, the amount of interest that is treated as
deferred interest will be added to the principal balance of the related mortgage
loan and will be distributed pro rata to certificateholders as principal of such
mortgage loan when paid by the mortgagor in subsequent monthly payments or at
maturity.
Ratings. The ratings assigned by an NRSRO to Mortgage Pass-Throughs address the
likelihood of the receipt of all distributions on the underlying mortgage loans
by the related certificateholders under the agreements pursuant to which such
certificates are issued. A rating agency's ratings take into consideration the
credit quality of the related mortgage pool, including any credit support
providers, structural and legal aspects associated with such certificates, and
the extent to which the payment stream on such mortgage pool is adequate to make
payments required by such certificates. A rating agency's ratings on such
certificates do not, however, constitute a statement regarding frequency of
prepayments on the related mortgage loans. In addition, the rating assigned by
a rating agency to a certificate does not address the remote possibility that,
in the event of the insolvency of the issuer of certificates where a
subordinated interest was retained, the issuance and sale of the senior
certificates may be recharacterized as a financing and, as a result of such
recharacterization, payments on such certificates may be affected.
Types of Credit Support. Mortgage pools created by non-governmental issuers
generally offer a higher yield than government and government-related pools
because of the absence of direct or indirect government or agency payment
guarantees. To lessen the effect of failures by obligors on underlying assets
to make payments, Mortgage Pass-Throughs may contain elements of credit support.
Such credit support falls into two classes: liquidity protection and protection
against ultimate default by an obligor on the underlying mortgages. Liquidity
protection refers to the provision of advances, generally by the entity
administering the pools of mortgages, the provision of a reserve fund, or a
combination thereof, to ensure, subject to certain limitations, that scheduled
payments on the underlying pool are made in a timely fashion. Protection
against ultimate default ensures ultimate payment of the obligations on at least
a portion of the mortgages in the pool. Such protection may be provided through
guarantees, insurance policies or letters of credit obtained from third
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parties, through various means of structuring the transaction or through a
combination of such approaches.
In addition, one or more classes of certificates of Mortgage Pass-Throughs may
be subordinate certificates which provide that the rights of the subordinate
certificateholders to receive any or a specified portion of distributions with
respect to the underlying mortgage loans may be subordinated to the rights of
the senior certificateholders. If so structured, the subordination feature may
be enhanced by distributing to the senior certificateholders on certain
distribution dates, as payment of principal, a specified percentage (which
generally declines over time) of all principal prepayments received during the
preceding prepayment period ("shifting interest credit enhancement"). This will
have the effect of accelerating the amortization of the senior certificates
while increasing the interest in the trust fund evidenced by the subordinate
certificates. Increasing the interest of the subordinate certificates relative
to that of the senior certificate is intended to preserve the availability of
the subordination provided by the subordinate certificates. In addition,
because the senior certificateholders in a shifting interest credit enhancement
structure are entitled to receive a percentage of principal prepayments which is
greater than their proportionate interest in the trust fund, the rate of
principal prepayments on the mortgage loans will have an even greater effect on
the rate of principal payments and the amount of interest payments on, and the
yield to maturity of, the senior certificates.
In addition to providing for a preferential right of the senior
certificateholders to receive current distributions from the mortgage pool, a
reserve fund may be established relating to such certificates (the "Reserve
Fund"). The Reserve Fund may be created with an initial cash deposit by the
originator or servicer and augmented by the retention of distributions otherwise
available to the subordinate certificateholders or by excess servicing fees
until the Reserve Fund reaches a specified amount.
The subordination feature, and any Reserve Fund, is intended to enhance the
likelihood of timely receipt by senior certificateholders of the full amount of
scheduled monthly payments of principal and interest due them and will protect
the senior certificateholders against certain losses; however, in certain
circumstances the Reserve Fund could be depleted and temporary shortfalls could
result. In the event the Reserve Fund is depleted before the subordinated
amount is reduced to zero, senior certificateholders will nevertheless have a
preferential right to receive current distributions from the mortgage pool to
the extent of the then outstanding subordinated amount. Unless otherwise
specified, until the subordinated amount is reduced to zero, on any distribution
date any amount otherwise distributable to the subordinate certificates or, to
the extent specified, in
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the Reserve Fund will generally be used to offset the amount of any losses
realized with respect to the mortgage loans ("Realized Losses"). Realized
Losses remaining after application of such amounts will generally be applied to
reduce the ownership interest of the subordinate certificates in the mortgage
pool. If the subordinated amount has been reduced to zero, Realized Losses
generally will be allocated pro rata among all certificateholders in proportion
to their respective outstanding interests in the mortgage pool.
As an alternative, or in addition to the credit enhancement afforded by
subordination, credit enhancement for Mortgage Pass-Throughs may be provided by
mortgage insurance, hazard insurance, by the deposit of cash, certificates of
deposit, letters of credit, a limited guaranty or by such other methods as are
acceptable to a rating agency. In certain circumstances, such as where credit
enhancement is provided by guarantees or a letter of credit, the security is
subject to credit risk because of its exposure to an external credit enhancement
provider.
Voluntary Advances. Generally, in the event of delinquencies in payments on the
mortgage loans underlying the Mortgage Pass-Throughs, the servicer agrees to
make advances of cash for the benefit of certificate-holders, but only to the
extent that it determines such voluntary advances will be recoverable from
future payments and collections on the mortgage loans or otherwise.
Optional Termination. Generally, the servicer may, at its option with respect
to any certificates, repurchase all of the underlying mortgage loans remaining
outstanding at such time as the aggregate outstanding principal balance of such
mortgage loans is less than a specified percentage (generally 5-10%) of the
aggregate outstanding principal balance of the mortgage loans as of the cut-off
date specified with respect to such series.
2.Government Mortgage-Related Securities
As stated in the Prospectus, certain mortgage-related securities acquired by the
Portfolios will be issued or guaranteed by the U.S. Government or one of its
agencies, instrumentalities or sponsored enterprises, including but not limited
to the Government National Mortgage Association ("GNMA"), the Federal National
Mortgage Association ("FNMA") and the Federal Home Loan Mortgage Corporation
("FHLMC") ("Government Mortgage-Related Securities"). GNMA securities are backed
by the full faith and credit of the U.S. Government, which means that the U.S.
Government guarantees that the interest and principal will be paid when due.
FNMA securities and FHLMC securities are not backed by the full faith and credit
of the U.S. Government; however, because of their ability to borrow from the
U.S. Treasury, they are generally viewed by the market as high quality
securities with minimal credit risks. There are
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several types of guaranteed mortgage-related securities currently available,
including guaranteed mortgage pass-through certificates and multiple-class
securities, which include guaranteed REMIC pass-through certificates and
stripped mortgage-backed securities. The Portfolios will be permitted to invest
in other types of Government Mortgage-Related Securities that may be available
in the future to the extent such investment is consistent with their respective
investment policies and objectives.
GNMA Certificates. GNMA is a wholly-owned corporate instrumentality of the
United States. GNMA is authorized to guarantee the timely payment of the
principal of and interest on certificates that are based on and backed by a pool
of mortgage loans insured by the Federal Housing Administration ("FHA Loans"),
or guaranteed by the Veterans Administration ("VA Loans"), or by pools of other
eligible mortgage loans. In order to meet its obligations under any guaranty,
GNMA is authorized to borrow from the United States Treasury in an unlimited
amount.
FNMA Certificates. FNMA is a stockholder-owned corporation chartered under an
act of the United States Congress. Each FNMA Certificate is issued and
guaranteed by and represents an undivided interest in a pool of mortgage loans
(a "Pool") formed by FNMA. Each Pool consists of residential mortgage loans
("Mortgage Loans") either previously owned by FNMA or purchased by it in
connection with the formation of the Pool. The Mortgage Loans may be either
conventional Mortgage Loans (i.e., not insured or guaranteed by any U.S.
Government agency) or Mortgage Loans that are either insured by the Federal
Housing Administration ("FHA") or guaranteed by the Veterans Administration
("VA"). The lenders originating and servicing the Mortgage Loans are subject to
certain eligibility requirements established by FNMA.
FNMA has certain contractual responsibilities. With respect to each Pool, FNMA
is obligated to distribute scheduled monthly installments of principal and
interest after FNMA's servicing and guaranty fee, whether or not received, to
certificate holders. FNMA is also obligated to distribute to holders of
certificates an amount equal to the full principal balance of any foreclosed
Mortgage Loan, whether or not such principal balance is actually recovered. The
obligations of FNMA under its guaranty of the FNMA Certificates are obligations
solely of FNMA.
FHLMC Certificates. FHLMC is a corporate instrumentality of the United States.
The principal activity of FHLMC currently is the purchase of first lien,
conventional, residential mortgage loans and participation interests in such
mortgage loans and their resale in the form of mortgage securities, primarily
FHLMC Certificates. A FHLMC Certificate represents a pro rata interest in a
group of mortgage loans or participation in mortgage loans (a "FHLMC Certificate
group") purchased by FHLMC.
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FHLMC guarantees to each registered holder of a FHLMC Certificate the timely
payment of interest at the rate provided for by such Certificate (whether or not
received on the underlying loans). FHLMC also guarantees to each registered
certificate holder ultimate collection of all principal of the related mortgage
loans, without any offset or deduction, but does not, generally, guarantee the
timely payment of scheduled principal. The obligations of FHLMC under its
guaranty of FHLMC Certificates are obligations solely of FHLMC.
The mortgage loans underlying the FHLMC Certificates will consist of adjustable
rate or fixed rate mortgage loans with original terms of maturity of between ten
and thirty years. Substantially all of these mortgage loans are secured by
first liens on one- to four-family residential properties or multi-family
projects. Each mortgage loan must meet the applicable standards set forth in
the law creating FHLMC. A FHLMC Certificate group may include whole loans,
participation interests in whole loans and undivided interests in whole loans
and participation comprising another FHLMC Certificate group.
3. Multiple Class Pass-Through Securities and Collateralized Mortgage
Obligations
As stated, the Government Securities Portfolio and the Mortgage Securities
Portfolio may also invest in multiple class mortgage-related securities,
including collateralized mortgage obligations and REMIC pass-through or
participation certificates (collectively, "CMOs"). These multiple class
securities may be issued by U.S. Government agencies, instrumentalities or
sponsored enterprises, including FNMA and FHLMC or, in the case of the Mortgage
Securities Portfolio, by trusts formed by private originators of, if investors
in, mortgage loans. In general, CMOs represent direct ownership interests in, a
pool of residential mortgage loans or mortgage pass-through securities (the
"Mortgage Assets"), the payments on which are used to make payments on the CMOs.
Investors may purchase beneficial interests in CMOs, which are known as
"regular" interests or "residual" interests. The Portfolios do not intend to
purchase residual interests.
Each class of CMOs often referred to as a "tranche," is issued at a specific
adjustable or fixed interest rate and must be fully retired no later than its
final distribution date. Principal prepayments on the Mortgage Assets
underlying the CMOs may cause some or all of the classes of CMOs to be retired
substantially earlier than their final distribution dates.
The principal of and interest on the Mortgage Assets may be allocated among the
several classes of CMOs in various ways. In certain structures (known as
"sequential pay" CMOs), payments of principal, including any principal
prepayments, on the Mortgage
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Assets generally are applied to the classes of CMOs in the order of their
respective final distribution dates. Thus, no payment of principal will be made
on any class of sequential pay CMOs until all other classes having an earlier
final scheduled distribution date have been paid in full.
Additional structures of CMOs include, among others, "parallel pay" CMOs.
Parallel pay CMOs are those which are structured to apply principal payments and
prepayments of the Mortgage Assets to two or more classes concurrently on a
proportionate or disproportionate basis. These simultaneous payments are taken
into account in calculating the final distribution date of each class.
A wide variety of CMOs may be issued in the parallel pay or sequential pay
structures. These securities include accrual certificates (also known as "Z-
Bonds"), which do not accrue interest at a specified rate until all other
certificates having an earlier final scheduled distribution date have been
retired and such Z-Bonds are converted thereafter to an interest-paying
security, and planned amortization class ("PAC") certificates, which are
parallel pay CMOs which generally require that specified amounts of principal be
applied on each payment date to one or more classes of a CMO (the "PAC
Certificates"), even though all other principal payments and prepayments of the
Mortgage Assets are then required to be applied to one or more other classes of
the Certificates. The scheduled principal payments for the PAC Certificates
generally have the highest priority on each payment date after interest due has
been paid to all classes entitled to receive interest currently. Shortfalls, if
any, are added to the amount payable on the next payment date. The PAC
Certificate payment schedule is taken into account in calculating the final
distribution date of each class of PAC. In order to create PAC tranches, one or
more tranches generally must be created that absorb most of the volatility in
the underlying Mortgage Assets. These tranches tend to have market prices and
yields that are much more volatile than the PAC classes.
FNMA CMOs are issued and guaranteed as to timely distribution of principal and
interest by FNMA. That is to say, FNMA will be obligated to distribute on a
timely basis to holders of FNMA CMO Certificates required installments of
principal and interest and to distribute the principal balance of each class of
CMO in full, whether or not sufficient funds are otherwise available.
For FHLMC CMOs, 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 certificates ("PCs"). PCs represent undivided
interests in specified level payment, residential mortgages or participation
therein purchased by FHLMC and placed in a PC pool. With respect to principal
payments on PCs, FHLMC generally guarantees ultimate collection of all principal
of the related mortgage loans without
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offset or deduction. FHLMC also guarantees timely payment of principal on
certain PCs, referred to as "Gold PCs."
Legislative and Regulatory Developments in Government-Sponsored Enterprises
In the past several years, there have been a number of federal legislative and
regulatory developments which may ultimately have a significant impact on the
business and operations of FHLMC, FNMA and other government-sponsored
enterprises ("GSEs").
Legislation Affecting FNMA and FHLMC: On October 28, 1992 the President signed
legislation which sets new capital requirements for FNMA and FHLMC, establishes
an oversight office within HUD, allows that office to establish additional
capital requirements based upon a risk-based capital stress test, requires the
two organizations to hold sufficient capital to cover interest rate changes, and
requires the agencies to establish goals to direct funds to lower income
borrowers.
The legislation, the Housing and Community Development Act of 1992, requires
FNMA and FHLMC to hold core capital equal to the sum of 2.5 percent of on-
balance-sheet assets and .45 percent of the unpaid principal balance of
outstanding mortgage-backed securities and other off-balance-sheet assets. The
legislation provides an 18-month transition period for FNMA and FHLMC to reach
this minimum capital level. The other requirements of the bill could increase
the amount of capital to be withheld.
Legislation Affecting the Federal Agricultural Mortgage Association: The Food,
Agricultural, Conservation and Trade Act Amendment of 1991 established minimum
core capital levels for the Federal Agriculture Mortgage Association ("Farmer
Mac") of (1) 2.50 percent of the aggregate on-balance sheet assets, (2) 0.45
percent of the unpaid balance of outstanding securities guaranteed by Farmer Mac
and (3) a linked-percentage of aggregate assets. The President, on October 28,
1992, signed Public Law 102-552, the "Farm Credit Banks and Associations Safety
and Soundness Act of 1992." The act was passed to enhance the financial
soundness of Farm Credit System banks and associations and further supplemented
capital requirements for Farm Credit System banks and associations.
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The effects of any legislation or regulations implementing stricter capital or
other regulatory standards upon the future business and operations of FNMA and
FHLMC cannot be predicted.
INVESTMENT RESTRICTIONS
As the Prospectus states, the Fund may only invest in obligations authorized
under the Federal Credit Union Act. This restriction may not be changed without
the approval of the holders of a majority of the outstanding units of each
affected Portfolio as described below. In addition, to meet the requirements of
federal and state securities laws, the Fund has also adopted the following
enumerated fundamental investment restrictions, none of which may be changed
with respect to a Portfolio without the approval of the holders of a majority of
the outstanding units of the Portfolio as described below. The Fund may not:
(1) Invest any one Portfolio in the instruments of issuers conducting
their principal business activity in the same industry if immediately after
such investment the value of such Portfolio's investments in such industry
would exceed 25% of the value of its total assets; provided that there is
no limitation with respect to or arising out of (a) in the case of the
Mortgage Securities Portfolio, investments in obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities or
repurchase agreements by such Portfolio of securities collateralized by
such obligations; or (b) in the case of the Money Market Portfolio and
Government Securities Portfolio, investments in obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities,
repurchase agreements by such Portfolios of securities collateralized by
such obligations or by cash, certificates of deposit, bankers' acceptances
and bank repurchase agreements; and provided further that during normal
market conditions the Mortgage Securities Portfolio intends to invest at
least 25% of the value of its total assets in mortgage-related securities.
The current position of the staff of the SEC is that only the Money Market
Portfolio may reserve freedom of action to concentrate in bank obligations
and that the exclusion with respect to bank instruments referred to above
may only be applied to instruments of domestic banks. For this purpose,
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the staff also takes the position that foreign branches of domestic banks
may, if certain conditions are met, be treated as domestic banks. The Fund
currently intends to consider only obligations of domestic banks (as
construed to include foreign branches of domestic banks to the extent they
satisfy the above-referenced conditions) to be within this exclusion.
Notwithstanding the foregoing, there is no limitation with respect to or
arising out of investments by the Money Market Portfolio in obligations
issued or guaranteed by U.S. banks, including obligations of foreign
branches of U.S. banks or U.S. branches of foreign banks.
(2) Invest any one Portfolio in the instruments of any one issuer, other
than the U.S. Government, its agencies or instrumentalities, if immediately
after such investment, more than 5% of the value of such Portfolio's total
assets would be invested in the instruments of such issuer, except that (a)
up to 25% of the value of the total assets of the Money Market Portfolio
and Government Securities Portfolio may be invested in repurchase
agreements, certificates of deposit, bankers' acceptances, time deposits
and federal funds without regard to such 5% limitation; (b) up to 25% of
the value of the total assets of each Securities Portfolio may be invested
without regard to such 5% limit and (c) such 5% limitation shall not apply
to repurchase agreements collateralized by obligations of the U.S.
Government, its agencies or instrumentalities.
(3) Make loans, except through (a) the purchase of debt obligations in
accordance with each Portfolio's investment objective and policies, (b)
repurchase agreements with banks, brokers, dealers and other financial
institutions in accordance with the investment objectives of each
Portfolio, (c) the lending of federal funds to qualified financial
institutions in accordance with the investment objectives of each Portfolio
and (d) the lending of securities in accordance with the investment
objective of the Government Securities Portfolio and the Mortgage
Securities Portfolio.
(4) Borrow money, except as a temporary measure, and then only in amounts
not exceeding one third of the value of the Portfolio's net assets.
(5) Mortgage, pledge or hypothecate any assets except to secure permitted
borrowings.
(6) Purchase or sell real estate, but this restriction shall not prevent
the Fund from investing directly or indirectly in portfolio instruments
secured by real estate or interests therein or issued by companies which
invest in real estate or interests therein.
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(7) Purchase or sell commodities or commodity contracts.
(8) Purchase any voting securities except of investment companies (closed-
end investment companies in the case of the Money Market Portfolio and
Government Securities Portfolio) solely to the extent permitted by the 1940
Act, or invest in companies for the purpose of exercising control or
management. Subject to certain exceptions, the 1940 Act contains a
prohibition against the Fund's investing more than 5% of its total assets
in the securities of another investment company, investing more than 10% of
its assets in securities of such investment company and all other
investment companies or purchasing more than 3% of the total outstanding
voting stock of another investment company.
(9) Act as an underwriter of securities.
(10) Issue senior securities as defined in the 1940 Act except insofar as
the Fund may be deemed to have issued a senior security by reason of (a)
borrowing of money to the extent permitted herein or (b) purchasing
securities on a when-issued or delayed delivery basis.
(11) Purchase any security for the Money Market Portfolio that is
restricted as to disposition under federal securities laws (foreign
securities traded only in foreign markets are not regarded as restricted).
(12) Purchase any security on margin (except for delayed delivery or when-
issued transactions or such short-term credits as are necessary for the
clearance of transactions).
(13) Make short sales of securities or maintain a short position.
(14) Write, purchase or sell puts, calls or combinations thereof.
To meet the requirement of the state securities laws, each portfolio has also
adopted the following non-fundamental investment restrictions. (i) Each
Portfolio may invest up to 5% of its total assets, calculated at the time of
purchase, in companies (including predecessors) which have operated less than
three years, except that this limitation does not apply to debt securities which
have been rated investment grade or better by at least one NRSRO. The securities
of such companies may have limited liquidity, which can result in their being
priced higher or lower than might otherwise be the case. In addition,
investments in unseasoned companies are more speculative and entail greater risk
than do investments in companies with an established operating record. (ii) Each
Portfolio may not invest more than 10% of its total
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<PAGE>
assets in securities that are subject to restrictions on resale ("restricted
securities") under the Securities Act of 1933, as amended, including securities
eligible for resale in reliance on Rule 144A under the 1933 Act. The
restrictions in this paragraph are not fundamental and may be changed without
unitholder vote.
Pursuant to SEC Rule 2a-7, the Money Market Portfolio currently may not invest
more than 5% of its total assets in the securities of any one issuer (except
U.S. Government securities or repurchase agreements collateralized by such
obligations). The Portfolio may, however, invest more than 5% of its total
assets in the First Tier Securities of a single issuer for a period of up to
three business days after the purchase thereof, although the Portfolio may not
make more than one such investment at any time. The limitations in this
paragraph are not, however, fundamental, and may be changed in the future
without unitholder vote to the extent permitted by the SEC.
"Value" for the purposes of all investment restrictions shall mean the value
used in determining a Portfolio's net asset value. "U.S. Government securities"
shall mean securities issued or guaranteed by the U.S. Government or any of its
agencies, authorities or instrumentalities.
For purposes of the foregoing limitations, any limitation which involves a
maximum percentage shall not be considered violated unless an excess over the
percentage occurs immediately after, and is caused by, an acquisition or
encumbrance of securities or assets of, or borrowings by, a Portfolio of the
Fund.
Borrowings by the Fund (if any) are not for investment leverage purposes but are
solely for extraordinary or emergency purposes or to facilitate management of
the Portfolios by enabling the Fund to meet redemption requests when the
liquidation of portfolio instruments is deemed to be disadvantageous or not
possible. If due to market fluctuations or other reasons the total assets of a
Portfolio fall below 300% of its borrowings, the Fund will promptly reduce the
borrowings of such Portfolio in accordance with the 1940 Act. No purchases of
securities will be made if borrowings exceed 5% of the value of the applicable
Portfolio's
B-43
<PAGE>
assets. Mortgage dollar rolls that are not accounted for as financings shall
not constitute borrowings.
The prohibition against short sales and short positions does not include
transactions sometimes referred to as "short sales against the box" where the
Fund contemporaneously owns or has the right to obtain at no added cost
securities identical to those sold short.
As used in the Prospectus and this Additional Statement with respect to matters
required to be submitted to unitholders by the provisions of the 1940 Act, the
term "majority of the outstanding units" of either the Fund or a particular
Portfolio of the Fund means the vote of the lesser of (i) 67% or more of the
units of the Fund or such Portfolio present at a meeting, if the holders of more
than 50% of the outstanding units of the Fund or such Portfolio are present or
represented by proxy, or (ii) more than 50% of the outstanding units of the Fund
or such Portfolio.
CALCULATION OF PERFORMANCE QUOTATIONS
From time to time, quotation of the Money Market Portfolio's "yield" and
"effective yield," and the yields and the total return of the Government
Securities Portfolio and the Mortgage Securities Portfolio, may be quoted in
advertisements or communications to unitholders. These advertisements and
communications may be part of marketing activities conducted by either or both
of the Fund's distributors on behalf of the Portfolios. These performance
figures are calculated in the following manner.
MONEY MARKET PORTFOLIO
Yield--the net annualized yield based on a specified 7-calendar day period
calculated at simple interest rates. Yield is calculated by determining the net
change, exclusive of capital changes, in the value of a hypothetical preexisting
account having a balance of one unit at the beginning of the period and dividing
the difference by the value of the account at the beginning of the base period
to obtain the base period return. The yield is annualized by multiplying the
base period return by 365/7. The yield figure is stated to the nearest hundredth
of one percent.
Effective Yield--the net annualized yield for a specified 7-calendar day period
assuming a reinvestment of dividends (compounding). Effective yield is
calculated by the same method as yield except the yield figure is compounded by
adding 1, raising the sum to a power equal to 365 divided by 7, and subtracting
one from the result, according to the following formula: Effective Yield =
[(Base Period Return + 1)/365/7*] - 1.
B-44
<PAGE>
For the seven-day period ended August 31,1995, the yield and the effective yield
for the Money Market Portfolio were:
<TABLE>
<CAPTION>
7-Day Period
Ended August 31,
1995
With Fee Waivers Without Fee Waivers
and Expense and Expense
Reimbursements Reimbursements
<S> <C> <C>
Yield 5.67% 5.54%
Effective
Yield 5.83% 5.70%
</TABLE>
GOVERNMENT SECURITIES PORTFOLIO AND MORTGAGE SECURITIES PORTFOLIO
Yield. The yield of the Government Securities Portfolio and the Mortgage
Securities Portfolio is calculated by dividing the net investment income per
unit (as described below) earned by such Portfolio during a 30-day period by the
maximum offering price per unit on the last day of the period and annualizing
the result on a semi-annual basis by adding one to the quotient, raising the sum
to the power of six, subtracting one from the result and then doubling the
difference. The Portfolio's net investment income per unit earned during the
period is based on the average daily number of units outstanding during the
period entitled to receive dividends and includes dividends and interest earned
during the period minus expenses accrued for the period, net of reimbursements.
This calculation can be expressed as follows:
Yield = 2[[(a-b/cd) + 1](6) - 1]
Where:
a= dividends and interest earned during the period.
b= expenses accrued for the period (net of fee waivers).
c= the average daily number of units outstanding during the period that
were entitled to receive dividends.
d= maximum offering price per unit on the last day of the period.
Except as noted below, interest earned on debt obligations held by the
Government Securities Portfolio and the Mortgage Securities Portfolio is
calculated by computing the yield to maturity of each obligation held by the
Portfolio based on the market value of the obligation (including actual accrued
interest) at the close of business on the last business day of each month, or,
with respect to obligations purchased during the month, the purchase price (plus
actual accrued interest) and dividing the
B-45
<PAGE>
result by 360 and multiplying the quotient by the market value of the obligation
(including actual accrued interest) in order to determine the interest income on
the obligation for each day of the subsequent month that the obligation is held
by the Portfolio. The maturity of an obligation with a call provision is the
next call date on which the obligation reasonably may be expected to be called
or, if none, the maturity date. With respect to debt obligations purchased at a
discount or premium, the formula generally calls for amortization of the
discount or premium. The amortization schedule will be adjusted monthly to
reflect changes in the market values of such debt obligations.
With respect to mortgage-related obligations which are expected to be subject to
monthly payments of principal and interest ("pay downs"), (a) gain or loss
attributable to actual monthly pay downs are accounted for as an increase or
decrease to interest income during the period; and (b) the Portfolio may elect
either (i) to amortize the discount and premium on the remaining security, based
on the cost of the security, to the weighted average maturity date, if such
information is available, or to the remaining term of the security, if any, if
the weighted average maturity date is not available, or (ii) not to amortize
discount or premium on the remaining security.
Total Return. The Government Securities Portfolio and the Mortgage Securities
Portfolio compute average annual total return by determining the average annual
compounded rates of return during specified periods that equate the initial
amount invested to the ending redeemable value of such investment. This is done
by dividing the ending redeemable value of a hypothetical $1,000 initial payment
by $1,000 and raising the quotient to a power equal to one divided by the number
of years (or fractional portion thereof) covered by the computation and
subtracting one from the result. This calculation can be expressed as follows:
T = [(ERV/P)(1/n)] - 1
Where:
T = average annual total return
ERV = ending redeemable value at the end of the period covered by the
computation of a hypothetical $1,000 payment made at the beginning
of the period.
P = hypothetical initial payment of $1,000.
n = period covered by the computation, expressed in terms of years.
B-46
<PAGE>
The Government Securities Portfolio and the Mortgage Securities Portfolio
compute their cumulative total return by determining the cumulative rate of
return during a specified period that likewise equates the initial amount
invested to the ending redeemable value of such investment. The formula for
calculating cumulative total return is as follows:
T = (ERV/P) - 1
Under the methods prescribed by the SEC, standardized calculations of average
annual total return assume the reinvestment of all dividends and capital gains
distributions on the reinvestment dates during the period (although a Portfolio
may also publish non-standardized calculations without this assumption).
Calculations of aggregate total return also assume the reinvestment of all
dividends and capital gains distributions on the reinvestment date during the
period. The ending redeemable value (variable "ERV" in each formula) is
determined by assuming complete redemption of the hypothetical investment and
the deduction of all nonrecurring charges at the end of the period covered by
the computations. Year-to-year total return is calculated in a similar manner.
B-47
<PAGE>
PERFORMANCE FIGURES
<TABLE>
<CAPTION>
Value of $1,000 Investment
--------------------------
Commencement of Operations
Year Ending 8/31/95 through 8/31/95*
------------------- --------------------------
30-Day Period
Ending With Without With Without
8/31/95 Fee Waiver Fee Waiver Fee Waiver Fee Waiver
<S> <C> <C> <C> <C> <C>
Government
Securities
Portfolio
Yield 6.09% N/A N/A N/A N/A
Ending Redeemable
Value at 8/31/95 N/A $1,058.24 $1,058.24 $1,214.67 $1,209.61
Average Annual
Total Return N/A 5.82% 5.82% 4.80% 4.69%
Cumulative Total
Return N/A 5.82% 5.82% 21.47% 20.96%
Mortgage
Securities
Portfolio
Yield 6.85% N/A N/A N/A N/A
Yield (without fee
waiver) 6.80% N/A N/A N/A N/A
Ending Redeemable
Value at 8/31/95 N/A $1,082.03 $1,081.46 $1,161.30 $1,160.07
Average Annual
Total Return N/A 8.20% 8.15% 5.30% 5.26%
Cumulative Total
Return N/A 8.20% 8.15% 16.13% 16.01%
</TABLE>
B-48
<PAGE>
* For the periods from July 10, 1991 and October 9, 1992, (commencement of
operations for the Government Securities Portfolio and the Mortgage
Securities Portfolio, respectively) to August 31, 1995 .
B-49
<PAGE>
ALL PORTFOLIOS
Each of the Portfolios may also quote from time to time distribution rates in
reports to unitholders and in sales literature. The distribution rate for a
specified period is calculated by dividing the total distribution per share by
the maximum offering price on the last day of the period and then annualizing
such amount.
For the thirty-day period ended August 31, 1995, the distribution rate of each
of the following Portfolios was :
<TABLE>
<CAPTION>
30-Day Period 30-Day Period
Ended August 31, 1995, Ended August 31, 1995
Portfolio with fee waiver without fee waiver
- --------- --------------- ------------------
<S> <C> <C>
Government Securities 6.25% 6.25%
Mortgage Securities 6.48% 6.43%
</TABLE>
From time to time the Portfolio's comparative performance may be advertised as
measured by various independent sources, including, but not limited to, Lipper
Analytical Services, Inc., Barron's, The Wall Street Journal, Weisenberger
Investment Companies Service, Donoghue's Money Fund Report, Business Week,
Financial World and Forbes. In addition, the Fund may from time to time
advertise the Portfolio's performance relative to certain indices and benchmark
investments, including (a) the Lehman Brothers Government/Corporate Bond Index,
(b) Lehman Brothers Government Index, (c) Lehman Brothers ARM Index; (d) Lehman
Brothers 1-2 year Government Index; (e) Lehman Brothers 1-3 year Government
Index;(f) Merrill Lynch 1-2.99 Year Treasury Index, (g) Merrill Lynch 2-Year
Treasury Curve Index, (h) the Salomon Brothers Treasury Yield Curve Rate of
Return Index, (i) the Payden & Rygel 2-Year Treasury Note Index, (j) 1-3 Year
U.S. Treasury Notes, (k) constant maturity U.S. Treasury yield indices, (l) the
Consumer Price Index, (m) the London Interbank Offered Rate, (n) other taxable
investments such as certificates of deposit, money market mutual funds,
repurchase agreements and commercial paper, and (o) historical data concerning
the relative performance of adjustable and fixed-rate mortgage loans.
The composition of the securities in such indices and the characteristics of
such benchmark investments are not identical to, and in some cases are very
different from, those of the Fund's Portfolios. These indices and averages are
generally unmanaged and the items included in the calculations of such indices
and averages may not be identical to the formulas used by the Fund to calculate
its performance figures.
From time to time advertisements or communications to unitholders may summarize
the substance of information contained in shareholder
B-50
<PAGE>
reports (including the investment composition of the Portfolios), as well as the
views of Goldman, Sachs & Co. as to current market, economic, trade and interest
rate trends, legislative, regulatory and monetary developments, investment
strategies and related matters believed to be of relevance to the Portfolios
(such as the supply and demand of mortgage-related securities and the relative
performance of different types of mortgage loans and mortgage-related securities
as affected by prepayment rates and other factors).
In addition, advertisements or unitholder communications may include a
discussion of certain attributes or benefits to be derived by an investment in
such Portfolio. Such advertisements or communications may include symbols,
headlines or other material which highlight or summarize the information
discussed in more detail therein.
Performance data is based on historical results and is not intended to indicate
future performance. Yield total return and distribution rates will vary based
on changes in market conditions, the level of interest rates, and Portfolio
expenses. The value of units of the Government Securities Portfolio and
Mortgage Securities Portfolio will fluctuate, and an investor's units may be
worth more or less than their original cost upon redemption.
OTHER INFORMATION
The Prospectus and this Additional Statement do not contain all the information
included in the Registration Statement filed with the SEC under the 1933 Act
with respect to the securities offered by the Prospectus. Certain portions of
the Registration Statement have been omitted from the Prospectus and this
Additional Statement pursuant to the rules and regulations of the SEC. The
Registration Statement including the exhibits filed therewith may be examined at
the office of the SEC in Washington, D.C.
Statements contained in the Prospectus or in this Additional Statement as to the
contents of any contract or other document referred to are not necessarily
complete, and, in each instance, reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement of which the
Prospectus and this Additional Statement form a part, each such statement being
qualified in all respects by such reference. Capitalized terms, to the extent
not otherwise defined herein, shall have the meanings as assigned to them in the
Prospectus.
B-51
<PAGE>
FINANCIAL STATEMENTS
The financial statements and related report of Arthur Andersen LLP, independent
public accountants, contained in the 1995 Annual Report are hereby incorporated
by reference. A copy of the Annual Report accompanies or has preceded this
Additional Statement and may be obtained without charge by writing to Goldman,
Sachs & Co., 4900 Sears Tower, Chicago, Illinois 60606, or Callahan Credit Union
Financial Services Limited Partnership, 1001 Connecticut Ave., N.W., Suite 1022,
Washington, DC 20036-5504, or by calling Goldman, Sachs & Co. at (800) 342-5828
(800-DIAL-TCU) or Callahan Financial Services, Inc. at (800) 237-5678.
B-52
<PAGE>
DESCRIPTION OF SECURITIES RATINGS
A. LONG-TERM RATINGS
MOODY'S INVESTORS SERVICE, INC.
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 edge." 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 risks appear somewhat larger than with Aaa securities.
Moody's applies numerical modifiers l, 2, and 3 in the Aa category. The
modifier 1 indicates that the company ranks in the higher end of the Aa
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end of the Aa category.
STANDARD & POOR'S RATINGS GROUP
AAA: Bonds rated AAA are highest grade debt obligations. This rating indicates
an extremely strong capacity to pay interest and repay principal.
__________________________
* The ratings system described herein are believed to be the most recent
ratings systems available from Moody's Investors Service, Inc. and Standard &
Poor's Ratings Group at the date of this Additional Statement for the securities
listed. Ratings are generally given to securities at the time of issuance.
While the rating agencies may from time to time revise such ratings, they
undertake no obligation to do so, and the ratings indicated do not necessarily
represent ratings which will be given to these securities throughout the period
they are held by a Portfolio.
B-53
<PAGE>
AA: Capacity to pay interest and repay principal is very strong, and differs
from AAA issues only in small degree.
Plus (+) or Minus (-): The AA rating may be modified by the addition of a plus
or minus sign to show relative standing within the AA category.
r: A rating may be modified by the addition of an "r" rating to highlight
derivative, hybrid and certain other obligations that Standard & Poor's believes
may experience high volatility or high variability in expected returns due to
non-credit risks. The absence of an "r" symbol should not be taken as an
indication that an obligation will exhibit no volatility or variability in total
return.
DUFF & PHELPS, INC.
AAA: Long-term fixed income securities which are rated AAA are judged to be of
the highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA: Long-term fixed income securities which are rated AA are judged to be of
high credit quality. Protection factors are strong. Risk is modest but may
vary slightly from time to time because of economic conditions.
Duff & Phelps applies modifiers AA+, AA, and AA- in the AA category for long-
term fixed income securities. The modifier AA+ indicates that the security
ranks in the higher end of the AA category; the modifier AA indicates a mid-
range ranking; and the modifier AA-indicates that the issue ranks in the lower
end of the AA category.
FITCH INVESTORS SERVICE INC.
AAA: Bonds which are rated AAA are 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 which are rated AA are 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. 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+.
Fitch applies plus (+) and minus (-) modifiers in the AA category to indicate
the relative position of a credit within the rating category. The modifier AA+
indicates that the security ranks at the higher end of the AA category than a
security rated AA or
AA-.
B-54
<PAGE>
IBCA LIMITED AND IBCA INC.
AAA: Obligations which are rated AAA are considered to have the lowest
expectations 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 which are rated AA are considered to have 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.
THOMSON BANKWATCH, INC.
AAA: The highest category; indicates the ability to repay principal and
interest on a timely basis is extremely high.
AA: The second highest category; indicates a very strong ability to repay
principal and interest on a timely basis with limited incremental risk compared
to issues rated in the highest category.
Ratings in the Long-Term Debt categories may include a plus (+) or minus (-)
designation which indicates where within the respective category the issue is
placed.
B. SHORT-TERM RATINGS
MOODY'S INVESTORS SERVICE, INC.
Moody's commercial paper ratings are opinions of the ability of issuers to repay
punctually promissory obligations not having an original maturity in excess of
nine months.
P-1: Issuers or related supporting institutions are considered to have a
superior capacity for repayment of short-term promissory obligations. Prime-1
or P-1 repayment capacity will normally be evidenced by the following
characteristics:
- - Leading market positions in well established industries.
- - High rates of return on funds employed.
- - Conservative capitalization structures with moderate reliance on debt
and ample asset protection.
- - Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
B-55
<PAGE>
- - Well established access to a range of financial markets and assured
sources of alternate liquidity.
P-2: Issuers or related supporting institutions are considered to have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
STANDARD & POOR'S RATINGS GROUP
Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt considered short-term in the relevant
market.
A-1: The A-1 designation indicates the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics will be denoted with a plus sign (+) designation.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
DUFF & PHELPS, INC.
Duff & Phelps' short-term debt ratings apply to all obligations with maturities
under one year.
Duff 1: Commercial paper and certificates of deposit rated Duff 1 are
considered to have a very high certainty of timely payment. Liquidity factors
are considered excellent and are supported by good fundamental protection
factors. Risk factors are minor.
Duff 2: Commercial paper and certificates of deposit rated Duff 2 are
considered to have a good certainty of timely payment. Liquidity factors and
company fundamentals are considered sound. Although ongoing internal funding
needs may enlarge total financing requirements, access to capital markets is
good and risk factors are small.
Duff & Phelps applies a plus and minus rating scale, Duff 1 plus, Duff 1 and
Duff 1 minus, in the Duff 1 top grade category for commercial paper and
certificates of deposits. The rating Duff 1 plus indicates that the security
has the highest certainty of timely payment; short-term liquidity is outstanding
and safety is just below risk-free U.S. Treasury short-term obligations. The
rating Duff 1 indicates a very high certainty of timely payment; liquidity
factors are excellent and risk factors are minor. The rating Duff 1 minus
indicates a high
B-56
<PAGE>
certainty of timely payment; liquidity factors are strong and risk factors are
very small.
FITCH INVESTORS SERVICE INC.
Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of generally up to three years.
F-1: Short-term debt obligations rated F-1 are considered to be of very strong
credit quality. Those issues determined to possess exceptionally strong credit
quality and having the strongest degree of assurance for timely payment will be
denoted with a plus (+) sign designation.
F-2: Short-term debt obligations rated F-2 are considered to be of good credit
quality. Issues assigned this rating have a satisfactory degree of assurance
for timely payment, but the margin of safety is not as great as for issues
assigned F-1+ and F-1 ratings.
IBCA LIMITED AND IBCA INC.
A1: Short-term obligations rated A1 are supported by the highest capacity for
timely repayment. A plus (+) sign is added to those issues determined to
possess a particularly strong credit.
A2: Short-term obligations rated A2 are supported by a good capacity for
timely repayment, although such capacity may be susceptible to adverse changes
in business, economic or financial conditions.
Thomson Bankwatch, Inc.
The TBW short-term ratings apply only to unsecured instrument that have a
maturity of one year or less.
The TBW short-term ratings specifically assess the likelihood of an untimely or
incomplete payment of principal and interest.
TBW-1: The highest category; indicates a very high degree of likelihood that
principal and interest will be paid on a timely basis.
TBW-2: The second highest category; while the degree of safety regarding
timely repayment of principal and interest is strong, the relative degree of
safety is not as high a for issues rated "TBW-1".
B-57
<PAGE>
---------------------
TRUST
-----
for Credit Unions
---------------------
Annual Report
-----------------
August 31, 1995
<PAGE>
Dear TCU Investor,
The 12-month period ended August 31, 1995 has been an eventful one, for
both the financial markets and the Trust for Credit Unions. We are pleased to
report that in a challenging environment TCU maintained its market share with
assets of over $1.4 billion to date, which made up approximately 50% of total
credit union mutual fund investments.*
For the past year, credit union lending rose approximately 14% -- one of
the highest levels ever -- while shares grew by approximately 3.0%.* As a
result, credit unions shortened the maturities on their investment portfolios in
order to increase liquidity. While total credit union investments declined 10%
to $105 billion in the 12 months ended June 30, 1995, none of the decline came
from the less than one year to maturity category, which stayed constant at $62
billion.* TCU provides two alternatives, the TCU Money Market Portfolio and the
TCU Government Securities Portfolio, for credit unions targeting the short end
of the yield curve.
Investor sensitivity to derivatives continued during the past year,
resulting in a dramatic decline in the demand for some of the more esoteric and
volatile instruments. In the case of the TCU portfolios, we want to assure you
that higher risk mortgage derivatives such as super floaters and inverse
floaters have never played a major role in our strategy. We have used these
instruments in very small percentages, for hedging purposes and, in certain
cases, for incremental expected return, and have managed the investments
extremely carefully.
The rapidly changing investment climate during the past year demonstrates
the importance of combining Goldman Sachs Asset Management's professional
investment expertise with Callahan Financial Services' in-depth understanding of
the needs of credit unions. The TCU portfolios' positive performance reflects
the results of careful management of duration, sector and security selection as
well as the use of tactical trading strategies to profit from shorter term
opportunities.
As always, we appreciate the opportunity to serve you and look forward to
offering innovative solutions to meet your investing needs in the years ahead.
Sincerely,
/s/ Marcia L. Beck /s/ William F. Connors
Marcia L. Beck William F. Connors
President President
Trust for Credit Unions Callahan Financial Services, Inc.
Director, Mutual Funds Group
Goldman Sachs Asset Management
/s/ Robert F. Deutsch
Robert F. Deutsch
Vice President
Goldman Sachs Asset Management
September 29, 1995
* Source: Callahan & Associates, Inc.
<PAGE>
Dear TCU Investor,
We are pleased to review the past performance of each of the Trust for
Credit Unions portfolios for the one-year period ending August 31, 1995. To help
put the portfolios' performance in perspective, the following is a brief
overview of some of the key events affecting the economy and financial markets
during the period.
Economic Review:
After a Difficult 1994, the Bond Market Staged a Powerful Rally
Rising interest rates took their toll on the U.S. bond market in 1994,
making it one of the most difficult years for bonds in recent memory. Starting
in January 1995, however, the bond market staged a rally that gained momentum
through midyear, fueled by slowing economic growth and relatively contained
inflation. In July and August, the bond market experienced a mild correction,
but by the end of August, bonds were again trending upward.
Robust Economy Faltered in March, but Later Recovered
The economy accelerated during the first half of the fund's fiscal year,
from September 1994 through February 1995. Real Gross Domestic Product (GDP)
grew at 4.0% and 5.1% in the third and fourth quarters of 1994, respectively.
Job growth, real disposable income, consumer spending, and sales of new and
existing homes all exhibited impressive strength.
The high-flying economy began losing altitude in March and weakened further
during the second quarter, fanning fears of a more serious downturn. For the
first quarter of 1995, GDP increased at 2.7%, down sharply from the preceding
quarters. Other troubling indicators included weakening employment, declining
consumer spending, a dramatic drop in the purchasing manager's index and a
downward trending Index of Leading Economic Indicators.
Following a spring dominated by generally poor economic readings, the
economy appeared to begin to revive in midsummer. The economy's response to
previous tightenings had begun to fade, and what appeared to be an inventory
correction cycle had come to an end. By August, employment, housing,
construction spending, auto sales and several other indicators showed some signs
of improvement. Furthermore, second-quarter real GDP growth -- originally
estimated as 0.5% --was revised upward to 1.1%.
Fed Raises Rates Twice During the Period, Then Cuts in July
To head off a resurgence in inflation in the midst of a booming economy,
the U.S. Federal Reserve raised the federal funds rate by 75 basis points in
November 1994 and by an additional 50 basis points in February 1995. All told,
the Fed had raised rates seven times in its tightening cycle, by a total of 300
basis points, to 6.00%.
2
<PAGE>
The Fed then remained neutral through early July 1995, when it reversed
course. Prompted by receding inflationary pressures and a weakening economy, the
Fed cut the federal funds rate 25 basis points to 5.75%.
The shape of the yield curve began flattening dramatically starting with
the November rate increase and continuing through the first half of 1995. The
yield on six-month Treasury bills rose from 5.02% on August 31, 1994 to
approximately 5.51% on August 31, 1995, due in large part to the Fed's actions.
For the same time period, the yield on the 30-year U.S. Treasury bond fell
dramatically, from 7.45% a year ago to 6.65%.
Historical Treasury Yield Curve
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
8/31/94 8/31/95
<S> <C> <C>
3 Month 4.66 5.44
6 Month 5.02 5.51
1 Year 5.53 5.63
2 Year 6.14 5.85
3 Year 6.42 5.94
5 Year 6.80 6.07
10 Year 7.17 6.29
30 Year 7.45 6.65
</TABLE>
Source: Bloomberg, L.P.
The yield curve flattened considerably and
shifted downward at the longer end. The
yield difference between two-year Treasury
notes and 30-year Treasury bonds narrowed
significantly.
A Challenging ARM Market
Interest rate fluctuations throughout the period under review had a direct
impact on the mortgage-backed securities market. In particular, adjustable rate
mortgage securities (ARMs), a key holding in the non-money market TCU
portfolios, went through three distinct phases during the past 12 months.
. At the start of the portfolio's fiscal year on September 1, 1994, spreads
between ARMs and Treasuries widened due to the fear that ARMs would reach
their periodic caps (the maximum their coupons can be raised within a
specified time period) in the rising interest rate environment.
. This situation generally persisted through January 1995, at which point the
ARM market entered a second phase: as interest rates stabilized, cap risk
declined and the prospects for ARMs brightened. This favorable ARM
environment continued through late spring, until interest rates began to
decline.
3
<PAGE>
. Starting approximately in June 1995, spreads between ARMs and Treasuries
began widening again, this time a result of increased prepayment risk based
on the assumption homeowners would refinance their mortgages at lower
rates. Currently, we believe that prepayment risk is fully reflected in ARM
prices, and ARMs are now at attractive valuations.
Economic Outlook: Slow Growth Ahead With Inflation Under Control
Though the signals are still somewhat mixed, the economy appears to have
regained some of its upward momentum and seems to be back on track for a period
of slow growth and relatively contained inflation, making an additional Fed rate
reduction less likely. However, the Fed may make one more precautionary cut by
year end, an event that has already been factored into the market.
- -----------------------
TCU Money Market Portfolio
Objective
The objective of the TCU Money Market Portfolio (MMP) is to maximize
current income, preserve capital and maintain liquidity through investments in
high-quality money market instruments authorized under the Federal Credit Union
Act.
Performance Review
For the 12-month period ended August 31, 1995, the TCU Money Market
Portfolio had a total return of 5.56%, outperforming Donoghue's All-Taxable
Money Market Index by 31 basis points. As of August 31, 1995, the portfolio had
a seven-day current yield of 5.67% and an effective yield of 5.83%./1/
Portfolio Composition and Investment Strategies
In order to meet the liquidity needs of credit unions in a volatile
interest rate environment, we significantly increased our investment in
repurchase agreements (repos) from 37% to 72.4% of the portfolio's assets during
the period under review. As of August 31, 1995, other portfolio positions
included 10.4% in bank notes, 5.2% in U.S. government agency securities, 4.2% in
bankers' acceptances, 3.9% in certificates of deposit (CDs), 2.6% in time
deposits and 1.3% in domestic Eurodollar CDs.
- ------------------------------
/1/ Please note that an investment in the portfolio is neither insured nor
guaranteed by the U.S. government. There can be no assurance that the
portfolio will be able to maintain a stable net asset value of $1.00.
4
<PAGE>
During the first half of the portfolio's fiscal year (September 1994 to
February 1995), we shortened the portfolio's average maturity as interest rates
rose in order to maintain a yield that was competitive with alternative
overnight investments. As it became apparent that the Fed had completed its
tightening cycle, the portfolio's average maturity was lengthened.
Portfolio Composition as of August 31, 1995*
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
Repurchase Agreements 72.4%
Bank Notes 10.4%
U.S. Gov't Agency Discount Notes 5.2%
Bankers Acceptances 4.2%
Certificates of Deposit 3.9%
Time Deposits 2.6%
Domestic Eurodollar Certificates of Deposit 1.3%
</TABLE>
* The percentages shown are of total portfolio investments that have settled
and include an offset to cash equivalents relating to unsettled trades. These
percentages differ from those in the accompanying Statement of Investments,
which reflects portfolio holdings as a percentage of net assets.
Looking Forward
We will continue to emphasize high-quality investments and will structure
the portfolio in an effort to remain competitive with other short-term
alternatives. Going forward, we expect the portfolio to operate with a
relatively short average maturity of 10 to 20 days.
5
<PAGE>
TCU Government Securities Portfolio
Objective
The TCU Government Securities Portfolio (GSP) seeks high current income
consistent with low principal volatility. Operating since July 10, 1991, the
portfolio invests primarily in ARMs issued by the U.S. government, its agencies
or instrumentalities. The portfolio's target duration is six months to one year.
As of August 31, 1995, its actual duration was 0.70 years, almost the same as
the duration of the portfolio's benchmark, which was 0.75 years.
Performance Review
For the 12 months ended August 31, 1995, the TCU GSP achieved a total
return of 5.82% (6.01% in dividend income and -0.19% in price depreciation),
compared with 6.25% for the nine-month Treasury average. (Please note that we
have substituted the nine-month Treasury return for the one-year constant
maturity Treasury (CMT) quoted in last year's annual report because we are
managing the portfolio's duration to under one year. The nine-month Treasury
return is calculated by averaging the six-month Treasury bill and the one-year
Treasury bill.)
The portfolio's underperformance compared with its benchmark was primarily
caused by the widening spreads of ARMs relative to Treasuries. The portfolio's
large ARM position (86.4%) felt the impact of these widening spreads, making
ARMs less valuable than equal-duration Treasuries. The portfolio performed well,
however, compared with its peers. TCU GSP ranked 24th out of 72 adjustable rate
mortgage funds based on total return for the 12 months ended August 31, 1995,
according to Lipper Analytical Services, Inc.
. The portfolio's net asset value (NAV) declined slightly during the period,
from $9.78 on August 31, 1994 to $9.76 on August 31, 1995, as a result of
the yield on the one-year Treasury rising 10 basis points during the
period.
. During the period, the portfolio's distribution rate rose 112 basis points
to 6.25% on August 31, 1995 as ARM coupons continued to reset at higher
levels. The portfolio's 30-Day SEC Yield rose to 6.09% as of August 31,
1995, up from 4.85% a year earlier.
Portfolio Composition and Investment Strategies
The portfolio composition has remained much the same during this fiscal
year as it was last year, with primary emphasis on ARMs (86.4%) indexed to the
one-year CMT. In addition, the portfolio held a small position (3.1%) in Small
Business Administration (SBA) loans and 0.4% in sequential-pay collateralized
mortgage obligations (CMOs). To help manage duration, we maintained an 8.1%
position in repurchase agreements (repos)/cash equivalents.
6
<PAGE>
We believe that when used knowledgeably and very sparingly, derivatives can
improve a portfolio's performance. To this end, as of August 31, 1995, the
portfolio included a 2% position in super floaters. Because their sensitivity to
interest rate movements and coupon resets is approximately four times greater
than regular floaters, super floaters contributed to the portfolio's positive
performance when rates increased during the summer of 1995.
Portfolio Composition as of August 31, 1995*
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
ARMs 86.4%
Repos/Cash Equivalents 8.1%
SBAs 3.1%
Super Floaters 2.0%
Sequentials 0.4%
</TABLE>
* The percentages shown are of total portfolio investments that have settled
and include an offset to cash equivalents relating to unsettled trades. These
percentages differ from those in the accompanying Statement of Investments,
which reflects portfolio holdings as a percentage of net assets.
Looking Forward
We see ARMs as being favorably priced in the current environment. In
general, they continue to provide attractive yields versus comparable-duration
Treasuries. Furthermore, we believe that prepayment fears have been fully priced
into the market, creating upside potential should prepayments increase less than
the market anticipates.
7
<PAGE>
TCU Mortgage Securities Portfolio
Objective
The TCU Mortgage Securities Portfolio (MSP), which commenced operations on
October 9, 1992, seeks high current income consistent with relatively low
principal volatility. The portfolio invests in adjustable rate and fixed rate
mortgage securities issued by the U.S. government, its agencies or
instrumentalities and in mortgage securities rated AA or better by nationally
recognized rating agencies. The portfolio's target duration is the same as that
of the two-year Treasury note; its actual duration was 1.84 years as of August
31, 1995, exactly in line with its benchmark.
Performance Review
The portfolio's total return was 8.20% for the 12-month period ended August
31, 1995 (6.92% from dividend income and 1.28% from price appreciation),
compared with 7.55% for the two-year Treasury note, the portfolio's benchmark.
In addition to outperforming its Treasury benchmark, the portfolio also
performed well relative to its peers. For the 12 months ended August 31, 1995,
the portfolio ranked 22nd out of 129 short-term U.S. government funds based on
total return, according to Lipper Analytical Services, Inc.
The portfolio's term structure contributed to its outperformance relative
to its benchmark. The portfolio includes mortgage-backed securities with a range
of maturities that have both shorter and longer cash flows than the benchmark.
When the yield curve flattened, it was more advantageous to have cash flows
distributed along the curve rather than concentrated like the benchmark's
"bulleted" structure (with maturities at two years).
The portfolio's NAV was $9.74 on August 31, 1995, up $0.12 since last year,
due primarily to the decline in interest rates.
Portfolio Composition and Investment Strategies
Over the 12-month period ended August 31, 1995, we reduced the portfolio's
holdings in sequential-pay CMOs from 47.5% to 15.5% of the portfolio's assets,
and increased its investment in ARMs from 18.1% to 44.4%. As the price of
sequentials increased, we took advantage of tighter spreads versus equal-
duration Treasuries and sold a portion of our holdings in favor of ARMs with
wider spreads.
To increase the portfolio's expected return, we added a 3.4% position in
mezzanine CMOs. Mezzanines are a "tranche," or class of CMO, that ranks in
between senior classes (lower credit risk, lower yielding) and subordinate
classes (higher credit risk, higher yielding).
The portfolio held a 2.9% position in floaters, down slightly from its 3.2%
holding a year earlier, which added slight incremental return over Treasuries.
8
<PAGE>
We managed the portfolio's duration by weighting its positions in U.S.
Treasuries and repos/cash equivalents according to our need to shorten or
lengthen the portfolio's duration. Over the 12-month period, the portfolio's
holdings in U.S. Treasuries were increased from 1.8% to 19.6%, while repos/cash
equivalents decreased from 12.7% of the portfolio to 0.5%.
Portfolio Composition as of August 31, 1995*
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
ARMs 44.4%
U.S. Treasuries 19.6%
Sequentials 15.5%
PACs 9.6%
Fixed Pass-Throughs 4.0%
Mezzanine CMOs 3.4%
Floaters 2.9%
Repos/Cash Equivalents 0.5%
Inverse Floaters 0.1%
</TABLE>
* The percentages shown are of total portfolio investments that have settled
and include an offset to cash equivalents relating to unsettled trades. These
percentages differ from those in the accompanying Statement of Investments,
which reflects portfolio holdings as a percentage of net assets.
Looking Forward
We believe ARMs are attractively priced versus comparable-duration
Treasuries. With prepayment risk already factored into the market, we view ARMs
as having upside potential should prepayments increase more slowly than current
market expectations. In addition, with the lack of new issue supply in the CMO
market, this sector continues to offer value relative to Treasuries.
- ---------------------------
TCU Target Maturity Portfolios
Objectives
The TCU Target Maturity Portfolios (TMPs) have dual objectives: to seek a
high level of current income and to return $10 per unit to investors at or about
three years after the portfolio's inception. However, there is no assurance that
these objectives will be achieved. The portfolios invest primarily in mortgage-
related securities issued by the U.S. government, its agencies or
instrumentalities and in privately issued mortgage-related securities.
<TABLE>
<CAPTION>
Portfolio
U.S. Treasury Duration as of Commencement of
Portfolio Benchmark 8/31/95 Operations
- ------------ -------------- -------------- ---------------
<S> <C> <C> <C>
TMP (1996) 4.25% due 5/96 0.78 years 7/1/93
TMP (Feb 97) 4.75% due 2/97 1.42 years 2/15/94
TMP (May 97) 6.50% due 5/97 1.57 years 5/23/94
</TABLE>
9
<PAGE>
Target Maturity Portfolio (1996)
Performance Review
The portfolio's total return for the 12 months ended August 31, 1995 was
6.51% (6.13% from dividend income and 0.38% from price appreciation), compared
with 6.40% for the 4.25% U.S. Treasury note due May 1996, the portfolio's
benchmark. The portfolio outperformed the benchmark by 11 basis points,
primarily due to the successful use of ARMs and sequential-pay CMO securities
that provided incremental returns over Treasuries. The portfolio's NAV rose
$0.04 during the period to $9.59 on August 31, 1995. As the portfolio gets
closer to its maturity, we have intentionally decreased its duration to 0.78
years from 1.66 years last August.
Portfolio Composition Highlights
As of August 31, 1995, the portfolio was 47.6% invested in ARMs, up from
7.4% one year ago. During the period, we have decreased our holdings in
sequential-pay CMOs and planned amortization class (PAC) CMOs to 16.3% and 6.2%
of the portfolio, respectively. We believe that the ARM sector currently
represents better value than sequentials or PACs, which are trading at tighter
spreads.
The portfolio also included a 4.2% position in floaters and 0.1% in inverse
floaters, held for their incremental yield and expected total return. We managed
the portfolio's duration by balancing the U.S. Treasury position with the
repo/cash equivalents holdings, weighting one versus the other at different
times in response to the changing interest rate environment. To this end, as of
August 31, 1995, the portfolio held a 23.7% position in U.S. Treasuries and a
1.9% position in repos/cash equivalents.
Portfolio Composition as of August 31, 1995*
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
ARMs 47.6%
U.S. Treasuries 23.7%
Sequentials 16.3%
PACs 6.2%
Floaters 4.2%
Repos/Cash Equivalents 1.9%
Inverse Floaters 0.1%
</TABLE>
* The percentages shown are of total portfolio investments that have settled
and include an offset to cash equivalents relating to unsettled trades. These
percentages differ from those in the accompanying Statement of Investments,
which reflects portfolio holdings as a percentage of net assets.
10
<PAGE>
Target Maturity Portfolio (Feb 97)
Performance Review
During the 12-month period ended August 31, 1995, the portfolio realized a
total return of 7.48% (6.64% from dividend income and 0.84% from price
appreciation), compared with 7.19% for the portfolio's benchmark, the 4.75% U.S.
Treasury note due in February 1997. The portfolio outperformed the benchmark by
29 basis points, primarily due to the successful use of ARMs and sequential-pay
CMO securities that provided incremental returns over Treasuries. The
portfolio's NAV increased $0.08 during the period, rising to $9.71 as of August
31, 1995.
Portfolio Composition Highlights
We increased the portfolio's holdings in ARMs to 39.5% as of August 31,
1995, up from 3.5% a year earlier, and cut its sequential-pay CMOs to 38.1%,
down from 69.1% last year. As was the case with the other TCU TMPs, we expect
greater performance potential from attractively valued ARMs, which are trading
at wider spreads than sequentials. Sequential-pay CMOs still represent a major
position in the portfolio since they offer attractive yields relative to
Treasuries.
Also included in the portfolio were 3.3% in floaters, down slightly from
3.7% a year earlier. We managed the portfolio's duration to the benchmark's
duration, primarily by holding U.S. Treasuries (18.9%).
Portfolio Composition as of August 31, 1995*
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
ARMs 39.5%
Sequentials 38.1%
U.S. Treasuries 18.9%
Floaters 3.3%
Cash Equivalents 0.2%
</TABLE>
* The percentages shown are of total portfolio investments that have settled
and include an offset to cash equivalents relating to unsettled trades. These
percentages differ from those in the accompanying Statement of Investments,
which reflects portfolio holdings as a percentage of net assets.
11
<PAGE>
Target Maturity Portfolio (May 97)
Performance Review
The portfolio achieved a total return of 7.70% for the 12-month period
ended August 31, 1995 (6.85% from dividend income and 0.85% from price
appreciation), compared with 7.50% for the fund's benchmark, the 6.50% U.S.
Treasury note due in May 1997. The portfolio outperformed the benchmark by 20
basis points, primarily due to the successful use of ARMs and sequential-pay CMO
securities that provided incremental returns over Treasuries. The portfolio
closed its fiscal year with its NAV at $9.99, an increase of $0.08 from August
31, 1994.
Portfolio Composition Highlights
As of August 31, 1995, 52.1% of the portfolio was invested in ARMs, up from
14.1% a year earlier. The portfolio's second largest grouping was 29.6% in
sequential-pay CMOs, a decrease from its 45.7% position in the previous year.
During the period, we added a 2.7% position in inverse floaters, held for
their incremental yield and potential incremental return. The portfolio also
held 13.7% in U.S. Treasuries and 1.9% in cash equivalents, both of which were
used to manage the portfolio's duration to the benchmark's duration.
Portfolio Composition as of August 31, 1995*
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
ARMs 52.1%
Sequentials 29.6%
U.S. Treasuries 13.7%
Inverse Floaters 2.7%
Cash Equivalents 1.9%
</TABLE>
* The percentages shown are of total portfolio investments that have settled
and include an offset to cash equivalents relating to unsettled trades. These
percentages differ from those in the accompanying Statement of Investments,
which reflects portfolio holdings as a percentage of net assets.
12
<PAGE>
Investment Strategy and Outlook for TCU TMPs
Despite recent weakening in the mortgage market and possible near-term
volatility, we view ARMs as offering attractive value over Treasuries of
comparable duration. In addition, we believe CMOs add incremental yield and
expected return over comparable-duration Treasuries.
As the TCU TMPs approach maturity, we anticipate shifting the portfolios'
allocation to shorter duration mortgage securities.
Distribution Policy
As required by tax law, all mutual funds, including the TCU portfolios,
must either distribute substantially all of the taxable income they generate
each year or will be subject to an excise tax on any undistributed income.
. For the TCU Money Market Portfolio, substantially all of the net investment
income and net short-term capital gains will be declared as a dividend on a
daily basis and paid monthly. If the portfolio were to realize any net
long-term capital gains, they would be distributed at year end.
. For the TCU Government Securities Portfolio and Mortgage Securities
Portfolio, we pay monthly dividends based on the income each portfolio is
expected to generate during the month. The amount of the dividend will
reflect changes in interest rates (i.e., as interest rates increase,
dividends will increase and as interest rates decline, dividends will be
reduced). In addition, because these TCU portfolios invest in mortgage
securities that are subject to prepayments, we cannot precisely predict the
amount of principal and interest that a portfolio will receive. Therefore,
at times, a portfolio may distribute amounts above or below current income
levels. Any excess income, overdistributions or net capital gains generated
will be paid out in a special distribution or adjusted at year end.
. For the TCU Target Maturity Portfolios, the monthly dividends are based on
the prevailing interest rates at the time of each portfolio's inception.
For these portfolios, the monthly dividends are held constant despite any
changes in interest rates or changes in the rate of prepayments. As noted
above, any excess income, overdistribution or net capital gains generated
are paid out or adjusted at year end. The amount of these year end
adjustments may be more significant than in portfolios in which the
dividend is reset each month. In December 1994, the TCU TMP (1996) and TMP
(Feb 97) paid special dividends of $0.0893 per share and $0.0987 per share,
respectively.
13
<PAGE>
As always, we appreciate your support and we will continue to seek out
attractive and rewarding investment opportunities in the future.
Sincerely,
/s/ Laurie H. Wollmuth
Laurie H. Wollmuth
Portfolio Manager
TCU Money Market Portfolio
/s/ Jonathan A. Beinner /s/ Theodore T. Sotir
Jonathan A. Beinner Theodore T. Sotir
Portfolio Manager Portfolio Manager
TCU Government Securities Portfolio
TCU Mortgage Securities Portfolio
TCU Target Maturity Portfolio (1996)
TCU Target Maturity Portfolio (Feb 97)
TCU Target Maturity Portfolio (May 97)
Goldman Sachs Asset Management
September 29, 1995
14
<PAGE>
TRUST FOR CREDIT UNIONS
PERFORMANCE COMPARISON
In accordance with the requirements of the Securities and Exchange Commission,
the following data is supplied for the periods ended August 31, 1995. Each of
the Trust for Credit Union portfolios is compared to its benchmarks assuming the
following initial investment:
<TABLE>
<CAPTION>
Initial
Portfolio Investment Compare to:
- ----------------------------------------------- ---------- -------------------------------------------------------------
<S> <C> <C>
Government Securities ("GSP"): $ 100,000 Lehman Brothers Mutual Fund Adjustable Rate Mortgage
Index ("Lehman ARM Index")(c); Lehman Brothers Mutual
Fund Short (1-2) Government Index ("Lehman 1-2 Gov't
Index"); 1-Year U.S. Treasury Bill ("1-year T-Bill"); 6-Month
U.S. Treasury Bill ("6-month T-Bill").
Mortgage Securities ("MSP"): $ 500,000 Lehman ARM Index; Lehman Brothers Mutual Fund Short
(1-3) Government Index ("Lehman 1-3 Gov't Index");
2-Year U.S. Treasury Bill ("2-year T-Bill").
Target Maturity (1996) ("TMP (1996)"): $1,000,000 Lehman ARM Index; Lehman 1-2 Gov't Index; 4.25% U.S.
Treasury Bill due 05/15/96 ("T-Bill 4.25%").
Target Maturity (Feb 97) ("TMP (Feb 97)"): $1,000,000 Lehman ARM Index; Lehman 1-3 Gov't Index; 4.75% U.S.
Treasury Bill due 02/15/97 ("T-Bill 4.75%").
Target Maturity (May 97) ("TMP (May 97)"): $1,000,000 Lehman ARM Index; Lehman 1-3 Gov't Index; 6.50% U.S.
Treasury Bill due 05/15/97 ("T-Bill 6.50%").
</TABLE>
All performance data shown represents past performance and should not be
considered indicative of future performance which will fluctuate as market
conditions change. The investment return and principal value of an investment
will fluctuate with changes in market conditions so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
Government Securities Portfolio
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
GSP Lehman ARM Index(c) Lehman 1-2 Gov't Index 1-year T-Bill(g) 6-month T-Bill
<S> <C> <C> <C> <C> <C>
8/1/91(b) $100,000 100,000 100,000 100,000
8/31/91 $100,565 101,250 100,832 100,603
1/1/92 103,133
8/31/92 $107,303 108,179 110,607 107,760 106,172
8/31/93 $111,661 114,961 116,102 111,873 109,850
8/31/94 $114,266 115,868 118,784 114,846 113,692
8/31/95 $120,920 125,399 127,130 122,280 120,538
</TABLE>
Average Annual Total Return: One Year - 5.82%
Since Inception (a) - 4.80%
Mortgage Securities Portfolio
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
MSP Lehman ARM Index Lehman 1-3 Gov't Index 2-year T-Bill
<S> <C> <C> <C> <C>
11/1/92(b) $500,000 500,000 500,000 500,000
8/31/93 $532,570 532,860 526,097 526,329
8/31/94 $537,871 537,066 535,052 534,055
8/31/95 $581,995 581,250 574,700 574,400
</TABLE>
Average Annual Total Return: One Year - 8.20%
Since Inception (a) - 5.30%
15
<PAGE>
TRUST FOR CREDIT UNIONS
PERFORMANCE COMPARISON
Target Maturity Portfolio (1996)
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
TMP(1996)(d) TMP(1996)(e) Lehman ARM Index Lehman 1-2 Gov't Index T-Bill 4.25%
<S> <C> <C> <C> <C> <C>
7/1/93(a) $1,000,000 1,000,000 1,000,000 1,000,000 1,000,000
8/31/93 1,011,929 1,011,929 1,010,527 1,009,116 1,012,517
8/31/94 1,020,110 1,020,110 1,018,503 1,032,430 1,023,716
8/31/95 1,086,492 1,080,851 1,102,300 1,105,000 1,089,206
</TABLE>
Average Annual Total Return:
TMP(1996)(d) One Year -- 6.51%
Since Inception (a) -- 3.90%
TMP(1996)(e) One Year -- 5.98%
Since Inception (a) -- 3.66%
Target Maturity Portfolio (Feb 97)
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
TMP(Feb 97)(d) TMP(Feb 97)(e) Lehman ARM Index Lehman 1-3 Gov't Index T-Bill 4.75%
<S> <C> <C> <C> <C> <C>
3/1/94(b) $1,000,000 1,000,000 1,000,000 1,000,000 1,000,000
8/31/94 996,630 996,630 999,122 1,007,226 996,823
8/31/95 1,071,183 1,065,692 1,081,300 1,081,800 1,068,531
</TABLE>
Average Annual Total Return:
TMP(Feb 97)(d) One Year -- 7.48%
Since Inception (a) -- 4.22%
TMP(Feb 97)(e) One Year -- 6.94%
Since Inception (a) -- 3.89%
Target Maturity Portfolio (May 97)
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
TMP(May 97)(d) TMP(May 97)(e) Lehman ARM Index Lehman 1-3 Gov't Index T-Bill 6.50%
<S> <C> <C> <C> <C> <C>
6/1/94(b) $1,000,000 1,000,000 1,000,000 1,000,000 1,000,000
8/31/94 1,013,022 1,013,022 1,013,254 1,014,840 1,015,554
8/31/95 1,091,028 1,085,598 1,096,600 1,090,000 1,091,600
</TABLE>
Average Annual Total Return:
TMP(May 97)(d) One Year -- 7.70%
Since Inception (a) -- 6.75%
TMP(May 97)(e) One Year -- 7.16%
Since Inception (a) -- 6.33%
(a) The Government Securities, Mortgage Securities, Target Maturity (1996),
Target Maturity (Feb 97), and Target Maturity (May 97) portfolios
commenced operations July 10, 1991, October 9, 1992, July 1, 1993,
February 15, 1994 and May 23, 1994, respectively.
(b) For comparative purposes, initial investments are assumed to be made on
the first day of the month following each portfolio's inception.
(c) The calculation of The Lehman ARM Index was initiated for the month ending
January 31, 1992. For comparative purposes in this graph, an initial
investment for this index is assumed on January 1, 1992, at a value equal
to the Government Securities portfolio's investment at such date.
(d) Does not include effect of redemption fee.
(e) Includes effect of 0.50% redemption fee, assuming redemption at the end of
the period presented.
16
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Unitholders and Trustees of
Trust for Credit Unions:
We have audited the accompanying statements of assets and liabilities of
Trust for Credit Unions (a Massachusetts business trust comprising the Money
Market Portfolio, the Government Securities Portfolio, the Mortgage Securities
Portfolio, the Target Maturity Portfolio (1996), the Target Maturity Portfolio
(Feb 97) and the Target Maturity Portfolio (May 97)), including the statements
of investments as of August 31, 1995, the related statements of operations for
the year then ended and the statements of changes in net assets and financial
highlights for the periods presented. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and the 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 the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1995 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 the financial highlights
referred to above present fairly, in all material respects, the financial
position of each of the respective portfolios constituting the Trust for Credit
Unions as of August 31, 1995, the results of their operations for the year then
ended, and the changes in their net assets and the financial highlights for the
periods presented, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts,
October 2, 1995
17
<PAGE>
TRUST FOR CREDIT UNIONS
-------------------
MONEY MARKET PORTFOLIO
STATEMENT OF INVESTMENTS
August 31, 1995
($ in Thousands)
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- --------- -------- -------- ---------
<S> <C> <C> <C>
Bank Notes (10.5%)
Bank of America
$ 15,000 5.74% 09/11/95 $ 15,000
First Bank of Minneapolis
15,000 5.80 09/15/95 15,000
PNC Bank, N.A.
10,000 5.88 09/27/95 10,000
--------
Total Bank Notes............................... $ 40,000
--------
Bankers' Acceptances (4.3%)
Chemical Bank
$ 5,500 5.78%(a) 10/23/95 $ 5,455
Corestates Bank
3,000 5.81(a) 09/14/95 2,994
2,847 5.81(a) 10/17/95 2,826
NationsBank of Georgia, N.A.
5,000 5.77(a) 10/13/95 4,966
--------
Total Bankers' Acceptances..................... $ 16,241
--------
Certificates of Deposit (3.9%)
National Bank of Detroit
$ 15,000 5.78% 09/21/95 $ 15,000
--------
Certificates of Deposit - Eurodollar (1.3%)
Bankers Trust Co., London
$ 5,000 5.75% 09/01/95 $ 5,000
--------
Time Deposit (2.6%)
Fifth Third Bancorp
$ 10,000 5.90% 09/20/95 $ 10,000
--------
U.S. Government Agency Obligations (5.2%)
Federal National Mortgage Association
$ 20,000 5.78%(a) 09/28/95 $ 19,914
--------
Repurchase Agreements (72.6%)
Joint Repurchase Agreement Accounts
$100,000 5.84% 09/01/95 $100,000
102,300 5.85 09/01/95 102,300
Nomura Securities, dated 08/02/95,
repurchase price $50,345 (FNMA:
$20,100, 7.00%, 05/01/08; $8,740, 7.50%,
06/01/09; $22,965, 6.00%, 10/01/08)
50,000 5.77 09/14/95 50,000
Nomura Securities, dated 08/04/95,
repurchase price $25,180 (FNMA:
$26,105, 7.50%, 06/01/09)
25,000 5.77 09/18/95 25,000
--------
Total Repurchase Agreements.................... $277,300
--------
Total Investments.............................. $383,455(b)
========
</TABLE>
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
(a) The rate disclosed for this security represents the yield to maturity.
(b) The amount stated also represents aggregate cost for federal income tax
purposes.
The accompanying notes are an integral
part of these financial statements.
18
<PAGE>
TRUST FOR CREDIT UNIONS
-------------------
GOVERNMENT SECURITIES PORTFOLIO
STATEMENT OF INVESTMENTS
August 31, 1995
($ in Thousands)
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------- -------- -------- ---------
<S> <C> <C> <C>
Mortgage Backed Obligations (91.7%)
Adjustable Rate Federal Home Loan Mortgage Corp.
(FHLMC)(a) (27.1%)
$ 2,227 7.36% 04/01/18 $ 2,298
13,261 7.68 05/01/18 13,669
2,393 7.63 01/01/19 2,463
6,244 7.67 01/01/21 6,440
6,845 7.56 02/01/22 7,001
33,615 7.62 02/01/22 34,629
32,841 7.58 04/01/22 33,833
14,557 7.53 06/01/24 14,965
6,430 7.61 07/01/27 6,536
7,488 7.52 04/01/28 7,633
3,450 7.63 07/01/29 3,519
10,418 7.74 05/01/31 10,672
--------
Total Adjustable Rate FHLMC.................... $143,658
--------
Adjustable Rate Federal National Mortgage Association
(FNMA)(a) (51.9%)
$ 4,957 7.01% 03/01/17 $ 4,997
3,462 7.98 11/01/17 3,564
5,697 7.22 12/01/17 5,811
6,293 7.69 08/01/18 6,436
2,045 7.48 11/01/18 2,093
30,690 7.37 06/01/19 31,329
3,486 7.39 07/01/19 3,559
7,378 7.00 12/01/19 7,359
5,512 7.76 03/01/20 5,687
2,950 7.59 05/01/20 3,021
21,443 7.33 04/01/21 21,875
45,659 7.63 09/01/21 46,964
2,826 7.61 10/01/21 2,868
$2,115 7.63% 11/01/21 $ 2,166
3,159 7.98 02/01/22 3,261
31,402 7.80 09/01/22 32,399
6,779 7.67 07/01/27 6,929
4,755 7.32 10/01/27 4,858
51,484 7.75 01/01/31 53,116
17,000 6.31 02/01/31 17,042
9,309 8.26 02/01/32 9,583
--------
Total Adjustable Rate FNMA..................... $274,917
--------
Adjustable Rate Government National Mortgage
Association (GNMA)(a) (3.8%)
$20,063 7.00% 06/20/24 $ 20,381
--------
Adjustable Rate Small Business Administration
(SBA)(a) (3.0%)
$15,993 7.13% 09/25/17 $ 16,138
--------
Collateralized Mortgage Obligations (CMOs) (5.9%)
Adjustable Rate CMOs(a) (3.5%)
FNMA REMIC Trust 1990- 145, Class A
$18,509 6.76% 12/25/20 $ 18,427
--------
Planned Amortization Class Interest-Only (PAC IO)
CMOs (0.0%)
FNMA REMIC Trust 1991-120, Class H
$ 26 484.26%(b) 06/25/00 $ 58
--------
Sequential Fixed Rate CMOs (0.4%)
FHLMC Series 1278, Class E
$ 176 7.00% 12/15/18 $ 176
</TABLE>
The accompanying notes are an integral
part of these financial statements.
19
<PAGE>
TRUST FOR CREDIT UNIONS
-------------------
GOVERNMENT SECURITIES PORTFOLIO--(Continued)
STATEMENT OF INVESTMENTS
August 31, 1995
($ in Thousands)
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------- -------- -------- ---------
<S> <C> <C> <C>
Mortgage Backed Obligations--(Continued)
Sequential Fixed Rate CMOs--(Continued)
FNMA REMIC Trust 1991-82, Class PH
$ 1,781 8.00% 11/25/18 $ 1,776
--------
Total Sequential Fixed Rate CMOs............... $ 1,952
--------
Super Floater CMOs(a) (2.0%)
FNMA REMIC Trust 1992-157, Class FA
$10,969 2.91% 03/25/04 $ 10,393
--------
Total CMOs..................................... $ 30,830
--------
Total Mortgage Backed Obligations (cost
$492,090)..................................... $485,924
--------
Repurchase Agreements (7.5%)
Joint Repurchase Agreement Account
$39,600 5.84% 09/01/95 $ 39,600
--------
Total Repurchase Agreements (cost $39,600)..... $ 39,600
--------
Total Investments (cost $531,690(c)).......... $525,524
========
- --------------------------------------------------------------------------------
Federal Income Tax Information:
Gross unrealized gain for investments in
which value exceeds cost............................... $ 184
Gross unrealized loss for investments in
which cost exceeds value............................... (6,350)
--------
Net unrealized loss..................................... $ (6,166)
========
- --------------------------------------------------------------------------------
</TABLE>
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
(a) Variable rate security. Coupon rate disclosed is that which is in effect at
August 31, 1995.
(b) Represents security with notional or nominal principal amount. The actual
effective yield of this security is different than the stated rate due to
the amortization of related premiums.
(c) The amount stated also represents aggregate cost for federal income tax
purposes.
The accompanying notes are an integral
part of these financial statements.
20
<PAGE>
TRUST FOR CREDIT UNIONS
-------------------
MORTGAGE SECURITIES PORTFOLIO
STATEMENT OF INVESTMENTS
August 31, 1995
($ in Thousands)
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------- -------- -------- ---------
<S> <C> <C> <C>
Mortgage Backed Obligations (79.8%)
Fixed Rate Government National Mortgage
Association (4.0%)
$ 9,723 9.50% 04/15/10 $ 10,461
--------
Collateralized Mortgage Obligations (CMOs) (75.8%)
Adjustable Rate CMOs(a) (44.4%)
Citicorp Mortgage Securities, Inc. 1992-17,
Class A
$10,796 7.70% 10/25/22 $ 10,981
CMC Securities Corp. II 1993-H, Class A1
6,219 7.56 09/25/23 6,331
CMC Securities Corp. II 1993-I, Class A2
6,099 7.07 09/25/23 6,156
DLJ Mortgage Acceptance Corp.
1992-Q11, Class A2
9,575 8.07 01/25/23 9,664
DLJ Mortgage Acceptance Corp. 1993-Q6,
Class A2
636 6.55 05/25/23 642
Independent National Mortgage Corp.
1994-W, Class A1
11,177 7.43 12/25/24 11,411
Merrill Lynch Mortgage Investors, Inc.
1994-I, Class A1
10,417 7.48 01/25/05 10,610
Prudential Home Mortgage 1991-15,
Class A1
1,571 8.42 11/25/21 1,600
Prudential Home Mortgage 1992-8,
Class A1
466 8.07 04/25/22 475
Prudential Home Mortgage 1992-24,
Class A1
$ 6,364 8.82% 09/25/22 $ 6,518
Resolution Trust Corp. 1992-4, Class B2
4,500 7.59 07/25/28 4,521
Resolution Trust Corp. 1992-11, Class A2
3,727 7.68 10/25/24 3,775
Resolution Trust Corp. 1992-11, Class B2
7,501 7.68 10/25/24 7,531
Resolution Trust Corp. 1994-1, Class M3
5,742 8.08 09/25/29 5,874
Ryland Mortgage Securities Corp.
1989-FN1, Class A
1,937 7.66 11/01/18 1,957
Ryland Mortgage Securities Corp. 1991-1,
Class B1
416 7.59 03/25/20 421
Ryland Mortgage Securities Corp. 1991-7,
Class A1
2,330 7.09 06/25/21 2,329
Ryland Mortgage Securities Corp. 1992-3,
Class A2
486 7.68 06/25/20 491
Ryland Mortgage Securities Corp.
1992-L10, Class B
5,000 8.28 08/25/22 5,035
Salomon Brothers Mortgage Securities
1994-20, Class A
9,212 7.31 12/25/24 9,403
</TABLE>
The accompanying notes are an integral
part of these financial statements.
21
<PAGE>
TRUST FOR CREDIT UNIONS
-------------------
MORTGAGE SECURITIES PORTFOLIO--(Continued)
STATEMENT OF INVESTMENTS
August 31, 1995
($ in Thousands)
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------- -------- -------- ---------
<S> <C> <C> <C>
Mortgage Backed Obligations--(Continued)
Adjustable Rate CMOs--(Continued)
Saxon Mortgage Securities Corp. 1993-1,
Class A2
$ 120 8.35% 02/25/23 $ 122
Saxon Mortgage Securities Corp. 1994-12,
Class A
11,217 7.97 01/25/25 11,555
--------
Total Adjustable Rate CMOs..................... $117,402
--------
Inverse Floater CMOs(a) (0.1%)
FHLMC Series 1134, Class H
$ 224 14.59% 09/15/96 $ 236
--------
Planned Amortization Class (PAC) CMOs (9.6%)
GE Capital Mortgage Services, Inc.
1994-11, Class A1
$14,018 6.50% 03/25/24 $ 13,902
Housing Securities, Inc. 1993-E, Class E8
6,426 10.00 02/25/08 6,728
Prudential Home Mortgage 1993-54,
Class A4
4,721 6.50 01/25/24 4,675
--------
Total PAC CMOs................................. $ 25,305
--------
Regular Floater CMOs(a) (2.9%)
FHLMC Series 1333, Class F
$ 7,636 6.74% 07/15/22 $ 7,715
--------
Sequential Fixed Rate CMOs (18.8%)
CMC Securities Corp. 1993-C, Class C3
$ 4,666 9.55% 04/25/08 $ 4,880
FHLMC Series 172, Class H
6,302 9.00 05/15/20 6,371
Housing Securities, Inc. 1992-F,
Class F3
272 5.50% 08/25/03 270
Prudential Home Mortgage 1992-39,
Class A3
8,000 5.80 12/25/07 7,889
Prudential Home Mortgage 1992-A,
Class 1B1
9,157 7.20 04/28/22 9,048
Prudential Home Mortgage 1993-38,
Class A4
12,806 9.55 09/25/23 13,243
Residential Funding Mortgage Securities
1992-S36, Class A2
4,409 5.70 11/25/07 4,317
Ryland Mortgage Securities Corp. 72,
Class D
1,850 9.85 12/01/16 1,947
Salomon Brothers Mortgage Securities
1994-6, Class A1
1,877 7.02 05/25/24 1,867
--------
Total Sequential Fixed Rate
CMOs.......................................... $ 49,832
--------
Total CMOs...................................... $200,490
--------
Total Mortgage Backed
Obligations (cost $210,044)................... $210,951
--------
</TABLE>
The accompanying notes are an integral
part of these financial statements.
22
<PAGE>
TRUST FOR CREDIT UNIONS
-------------------
MORTGAGE SECURITIES PORTFOLIO--(Continued)
STATEMENT OF INVESTMENTS
August 31, 1995
($ in Thousands)
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------- -------- -------- ---------
<S> <C> <C> <C>
U.S. Treasury Obligations (19.5%)
U.S. Treasury Notes
$17,800 7.38% 11/15/97 $ 18,331
3,700 7.50 10/31/99 3,890
21,380 6.25 02/15/03 21,360
U.S. Treasury Principal-Only Stripped Security
14,600 6.48(b) 11/15/04 8,096
--------
Total U.S. Treasury Obligations
(cost $51,330)................................ $ 51,677
--------
Repurchase Agreements (1.3%)
Joint Repurchase Agreement Account
$ 3,400 5.84% 09/01/95 $ 3,400
--------
Total Repurchase Agreements
(cost $3,400)................................. $ 3,400
--------
Total Investments
(cost $264,774(c))............................ $266,028
========
</TABLE>
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
Federal Income Tax Information:
Gross unrealized gain for investments in which value exceeds cost... $ 2,485
Gross unrealized loss for investments in which cost exceeds value... (1,390)
--------
Net unrealized gain................................................. $ 1,095
========
</TABLE>
- -------------------------------------------------------------------------------
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
(a) Variable rate security. Coupon rate disclosed is that which is in effect
at August 31, 1995.
(b) The rate disclosed for this security represents the yield to maturity.
(c) The aggregate cost for federal income tax purposes is $264,933.
The accompanying notes are an integral
part of these financial statements.
23
<PAGE>
TRUST FOR CREDIT UNIONS
-----------------
TARGET MATURITY PORTFOLIO (1996)
STATEMENT OF INVESTMENTS
August 31, 1995
($ in Thousands)
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------- -------- -------- ---------
<S> <C> <C> <C>
Mortgage Backed Obligations (74.4%)
Adjustable Rate Federal Home Loan Mortgage Corp.
(FHLMC)(a) (4.5%)
$5,601 7.49% 07/01/30 $ 5,751
-------
Collateralized Mortgage Obligations (CMOs) (69.9%)
Adjustable Rate CMOs(a) (43.0%)
Capstead Securities Corp. 1992-14, Class A
$2,400 7.39% 10/25/22 $ 2,419
Chase Mortgage Finance Corp. 1990-E,
Class A1
3,131 7.47 11/25/20 3,152
Citicorp Mortgage Securities, Inc. 1992-17,
Class A
4,662 7.70 10/25/22 4,742
CMC Securities Corp. 1993-2F, Class A1
2,894 7.45 05/25/22 2,940
Housing Securities, Inc. 1992-SL1,
Class A1
2,062 8.65 05/25/16 2,122
Independent National Mortgage Corp.
1994-V, Class A1
4,526 7.51 12/25/24 4,647
Prudential Home Mortgage 1992-24,
Class A1
2,874 8.82 09/25/22 2,943
Residential Funding Mortgage Securities
1993-S38, Class A
1,635 7.87 09/25/23 1,655
Resolution Trust Corp. 1992-11, Class B2
3,700 7.68 10/25/24 3,715
Salomon Brothers Mortgage Securities
1990-3A, Class 1
3,009 6.80 11/25/20 2,978
Salomon Brothers Mortgage Securities
1992-6, Class A1
4,174 7.82% 11/25/22 4,242
Saxon Mortgage Securities Corp. 1992-1,
Class B1
4,400 8.15 09/25/22 4,466
Saxon Mortgage Securities Corp. 1992-4,
Class A
1,325 7.85 12/25/22 1,343
Saxon Mortgage Securities Corp. 1992-6,
Class A
1,782 8.13 01/25/23 1,807
Saxon Mortgage Securities Corp. 1994-11,
Class A
3,404 7.53 12/25/24 3,473
Saxon Mortgage Securities Corp. 1995-1,
Class A
5,348 7.04 04/25/25 5,469
Sears Mortgage Securities 1993-8,
Class A
2,683 7.62 08/25/23 2,717
-------
Total Adjustable Rate CMOs...................... $54,830
-------
Inverse Floater CMOs(a) (0.1%)
Lehman Brothers Mortgage Trust 1992-M1,
Class A1I
$ 81 7.66% 11/25/01 $ 80
-------
Planned Amortization Class (PAC) CMOs (6.2%)
Housing Securities, Inc. 1993-E, Class E8
$7,512 10.00% 02/25/08 $ 7,866
-------
</TABLE>
The accompanying notes are an integral
part of these financial statements.
24
<PAGE>
TRUST FOR CREDIT UNIONS
-----------------
TARGET MATURITY PORTFOLIO (1996)--(Continued)
STATEMENT OF INVESTMENTS
August 31, 1995
($ in Thousands)
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------- -------- -------- ---------
<S> <C> <C> <C>
Mortgage Backed Obligations--(Continued)
Regular Floater CMOs(a) (4.2%)
Capstead Securities Corp. 1993-1, Class F
$1,616 6.63% 03/01/18 $ 1,619
FHLMC Series 1333, Class F
3,751 6.74 07/15/22 3,790
--------
Total Regular Floater CMOs.......................... $ 5,409
--------
Sequential Fixed Rate CMOs (16.4%)
FHLMC Series 172, Class H
$3,151 9.00% 05/15/20 $ 3,185
FHLMC Series 1028, Class F
5,398 9.30 05/15/05 5,479
FHLMC Series 1056, Class G
1,932 8.00 12/15/18 1,939
FNMA REMIC Trust 1990-142, Class J
2,059 9.25 12/25/03 2,072
Prudential Home Mortgage 1993-38, Class A4
5,000 9.55 09/25/23 5,170
Residential Resources, Inc. 15, Class C
3,039 9.75 11/20/18 3,061
--------
Total Sequential Fixed Rate
CMOs.............................................. $ 20,906
--------
Total CMOs.......................................... $ 89,091
--------
Total Mortgage Backed
Obligations (cost $94,633)........................ $ 94,842
--------
U.S. Treasury Obligations (23.6%)
U.S. Treasury Notes
$9,010 4.63% 02/15/96 $ 8,968
7,300 4.25 05/15/96 7,226
8,000 5.88 05/31/96 8,009
3,500 7.25% 11/15/96 3,558
500 7.38 11/15/97 515
1,700 7.50 10/31/99 1,789
--------
Total U.S. Treasury Obligations
(cost $29,918).................... $ 30,065
--------
Repurchase Agreements (3.0%)
Joint Repurchase Agreement Account
$3,800 5.84% 09/01/95 $ 3,800
--------
Total Repurchase Agreements
(cost $3,800).................... $ 3,800
--------
Total Investments
(cost $128,351(b))............... $128,707
========
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Federal Income Tax Information:
Gross unrealized gain for investments in which value
exceeds cost........................................... $ 765
Gross unrealized loss for investments in which
cost exceeds value..................................... (456)
-------
Net unrealized gain..................................... $ 309
=======
</TABLE>
- --------------------------------------------------------------------------------
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
(a) Variable rate security. Coupon rate disclosed is that which is in effect
at August 31, 1995.
(b) The aggregate cost for federal income tax purposes is $128,398.
The accompanying notes are an integral
part of these financial statements.
25
<PAGE>
TRUST FOR CREDIT UNIONS
-----------------
TARGET MATURITY PORTFOLIO (Feb 97)
STATEMENT OF INVESTMENTS
August 31, 1995
($ in Thousands)
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------- -------- -------- ---------
<S> <C> <C> <C>
Mortgage Backed Obligations (80.7%)
Collateralized Mortgage Obligations (CMOs) (80.7%)
Adjustable Rate CMOs(a) (39.5%)
Chase Mortgage Finance Corp. 1990-E,
Class A1
$2,450 7.47% 11/25/20 $ 2,467
DLJ Mortgage Acceptance Corp. 1992-
Q11, Class A2
3,493 8.07 01/25/23 3,525
Independent National Mortgage Corp.
1994-W, Class A1
4,005 7.43 12/25/24 4,089
Merrill Lynch Mortgage Investors, Inc.
1994-I, Class A1
3,813 7.48 01/25/05 3,884
Resolution Trust Corp. 1992-11, Class B2
2,700 7.68 10/25/24 2,711
Resolution Trust Corp. 1994-1, Class M3
2,074 8.08 09/25/29 2,122
Salomon Brothers Mortgage Securities
1994-20, Class A
3,313 7.31 12/25/24 3,381
Saxon Mortgage Securities Corp. 1992-4,
Class A
994 7.85 12/25/22 1,007
Saxon Mortgage Securities Corp. 1992-6,
Class A
1,559 8.13 01/25/23 1,581
Saxon Mortgage Securities Corp. 1994-11,
Class A
2,598 7.53 12/25/24 2,650
Saxon Mortgage Securities Corp. 1994-12,
Class A
4,007 7.97% 01/25/25 4,127
Saxon Mortgage Securities Corp. 1995-1,
Class A
3,964 7.04 04/25/25 4,053
Sears Mortgage Securities 1993-8, Class A
2,044 7.62 08/25/23 2,070
-------
Total Adjustable Rate CMOs.......... $37,667
-------
Regular Floater CMOs(a) (3.3%)
FHLMC Series 1333, Class F
$3,081 6.74% 07/15/22 $ 3,113
-------
Sequential Fixed Rate CMOs (37.9%)
Capstead Securities Corp. 1992-12B,
Class P11
$ 510 8.33% 11/25/05 $ 511
FHLMC Series 172, Class H
2,363 9.00 05/15/20 2,389
FNMA REMIC Trust 1989-10, Class D
5,000 9.50 07/25/09 5,230
FNMA REMIC Trust 1989-80, Class E
8,000 9.00 09/25/18 8,223
FNMA REMIC Trust 1990-142, Class J
2,078 9.25 12/25/03 2,091
FNMA REMIC Trust 1991-G35, Class K
3,301 8.00 06/25/20 3,318
Prudential Home Mortgage 1993-38,
Class A4
4,600 9.55 09/25/23 4,757
</TABLE>
The accompanying notes are an integral
part of these financial statements.
26
<PAGE>
TRUST FOR CREDIT UNIONS
-----------------
TARGET MATURITY PORTFOLIO (FEB 97)--(Continued)
STATEMENT OF INVESTMENTS
August 31, 1995
($ in Thousands)
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------- -------- -------- ---------
<S> <C> <C> <C>
Mortgage Backed Obligations--(Continued)
Sequential Fixed Rate CMOs--(Continued)
Ryland Acceptance Corp. 1989, Class C
$5,000 8.88% 11/01/12 $ 5,038
Salomon Brothers Mortgage Securities
1994-6, Class A1
4,567 7.02 05/25/24 4,543
-------
Total Sequential Fixed Rate
CMOs........................... $36,100
-------
Total CMOs....................... $76,880
-------
Total Mortgage Backed
Obligations (cost $76,592)..... $76,880
-------
U.S. Treasury Obligations (18.8%)
U.S. Treasury Notes
$3,500 7.25% 11/15/96 $ 3,559
4,600 7.38 11/15/97 4,737
2,600 7.50 10/31/99 2,734
5,620 6.25 02/15/03 5,615
U.S. Treasury Principal-Only Stripped
Security
2,200 6.48(b) 11/15/04 1,220
-------
Total U.S. Treasury Obligations
(cost $17,748)................. $17,865
-------
Total Investments
(cost $94,340(c)).............. $94,745
=======
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Federal Income Tax Information:
Gross unrealized gain for investments in which value exceeds cost..... $ 856
Gross unrealized loss for investments in which cost exceeds value..... (471)
------
Net unrealized gain................................................... $ 385
======
</TABLE>
- --------------------------------------------------------------------------------
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
(a) Variable rate security. Coupon rate disclosed is that which is in effect
at August 31, 1995.
(b) The rate disclosed for this security represents the yield to maturity.
(c) The aggregate cost for federal income tax purposes is $94,360.
The accompanying notes are an integral
part of these financial statements.
27
<PAGE>
TRUST FOR CREDIT UNIONS
----------------
TARGET MATURITY PORTFOLIO (MAY 97)
STATEMENT OF INVESTMENTS
August 31, 1995
($ in Thousands)
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------- -------- -------- ---------
<S> <C> <C> <C>
Mortgage Backed Obligations (84.4%)
Adjustable Rate Federal Home Loan Mortgage Corp.
(FHLMC)/(a)/ (4.5%)
$2,800 7.49% 07/01/30 $ 2,876
-------
Collateralized Mortgage Obligations (CMOs) (79.9%)
Adjustable Rate CMOs/(a)/ (47.6%)
Citicorp Mortgage Securities, Inc. 1992-17,
Class A
$2,454 7.70% 10/25/22 $ 2,496
DLJ Mortgage Acceptance Corp. 1992-Q11,
Class A2
2,469 8.07 01/25/23 2,492
Independent National Mortgage Corp.
1994-W, Class A1
2,794 7.43 12/25/24 2,853
Merrill Lynch Mortgage Investors, Inc.
1994-I, Class A1
2,790 7.48 01/25/05 2,842
Prudential Home Mortgage 1992-24,
Class A1
1,642 8.82 09/25/22 1,682
Resolution Trust Corp. 1992-11, Class A2
2,662 7.68 10/25/24 2,696
Resolution Trust Corp. 1994-1, Class M3
1,476 8.08 09/25/29 1,510
Salomon Brothers Mortgage Securities
1994-20, Class A
2,303 7.31 12/25/24 2,351
Saxon Mortgage Securities Corp.
1992-4, Class A
1,160 7.85 12/25/22 1,175
Saxon Mortgage Securities Corp.
1992-6, Class A
947 8.13% 01/25/23 960
Saxon Mortgage Securities Corp.
1994-11, Class A
1,792 7.53 12/25/24 1,828
Saxon Mortgage Securities Corp.
1994-12, Class A
2,795 7.97 01/25/25 2,880
Saxon Mortgage Securities Corp.
1995-1, Class A
2,865 7.04 04/25/25 2,930
Sears Mortgage Securities 1993-8,
Class A
1,469 7.62 08/25/23 1,488
-------
Total Adjustable Rate CMOs.......... $30,183
-------
Inverse Floater CMOs/(a)/ (2.7%)
FHLMC Series 1284, Class E
$1,742 7.71% 05/15/97 $ 1,742
-------
Sequential Fixed Rate CMOs (29.6%)
FHLMC Series 172, Class H
$1,838 9.00% 05/15/20 $ 1,858
FNMA REMIC Trust 1988-2, Class Z
2,870 10.10 02/25/18 3,100
FNMA REMIC Trust 1988-25, Class B
1,146 9.25 10/25/18 1,188
FNMA REMIC Trust 1990-24, Class E
3,500 9.00 03/25/20 3,657
Prudential Home Mortgage 1993-38,
Class A4
3,300 9.55 09/25/23 3,412
</TABLE>
The accompanying notes are an integral
part of these financial statements.
28
<PAGE>
TRUST FOR CREDIT UNIONS
-------------------
TARGET MATURITY PORTFOLIO (MAY 97)--(Continued)
STATEMENT OF INVESTMENTS
August 31, 1995
($ in Thousands)
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------- -------- -------- ---------
<S> <C> <C> <C>
Mortgage Backed Obligations--(Continued)
Sequential Fixed Rate CMOs--(Continued)
Residential Funding Mortgage Securities
1992-S36, Class A2
$2,405 5.70% 11/25/07 $ 2,355
Salomon Brothers Mortgage Securities
1994-6, Class A1
3,197 7.02 05/25/24 3,180
-------
Total Sequential Fixed Rate
CMOs............................ $18,750
-------
Total CMOs....................... $50,675
-------
Total Mortgage Backed
Obligations (cost $52,913)...... $53,551
-------
U.S. Treasury Obligations (13.5%)
U.S. Treasury Notes
$2,200 7.25% 11/15/96 $ 2,237
2,250 7.38 11/15/97 2,317
3,150 7.50 10/31/99 3,312
710 6.25 02/15/03 709
-------
Total U.S. Treasury Obligations
(cost $8,558)..................... $ 8,575
-------
Total Investments
(cost $61,471/(b)/)............... $62,126
=======
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Federal Income Tax Information:
Gross unrealized gain for investments in which value exceeds cost.... $ 764
Gross unrealized loss for investments in which cost exceeds value.... (116)
-------
Net unrealized gain................................................... $ 648
=======
</TABLE>
- --------------------------------------------------------------------------------
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
/(a)/ Variable rate security. Coupon rate disclosed is that which is in
effect at August 31, 1995.
/(b)/ The aggregate cost for federal income tax purposes is $61,478.
The accompanying notes are an integral
part of these financial statements.
29
<PAGE>
TRUST FOR CREDIT UNIONS
-------------------
STATEMENTS OF ASSETS AND LIABILITIES
August 31, 1995
<TABLE>
<CAPTION>
Target Target Target
Money Government Mortgage Maturity Maturity Maturity
Market Securities Securities Portfolio Portfolio Portfolio
Portfolio Portfolio Portfolio (1996) (Feb 97) (May 97)
------------ ------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in securities, at value (cost:
$383,455,111, $531,690,173,
$264,774,033, $128,350,681,
$94,340,118, $61,471,182, respectively) $383,455,111 $525,523,866 $266,027,558 $128,706,804 $94,744,574 $62,126,077
Cash...................................... 13,528 73,605 45,158 4,213 48,534 135,745
Receivables:
Investment securities sold............... -- 2,222,302 680,499 261,813 128,678 1,047,240
Interest................................. 780,393 4,024,833 1,894,809 989,852 806,341 572,043
Deferred organization expenses, net....... -- 7,096 19,044 11,234 5,723 3,132
Other assets.............................. 1,524 103,702 1,033 5,178 9,571 --
------------ ------------ ------------ ------------ ------------ -----------
Total assets.................. 384,250,556 531,955,404 268,668,101 129,979,094 95,743,421 63,884,237
------------ ------------ ------------ ------------ ------------ -----------
LIABILITIES
Payables:
Investment securities purchased.......... -- -- 3,027,193 1,831,814 -- --
Dividends................................ 2,077,470 2,133,451 1,139,288 540,945 433,655 356,497
Advisory fees............................ 40,729 89,714 33,497 24,821 19,321 13,453
Administration fees...................... 18,213 44,135 10,943 5,273 3,800 2,617
Accrued expenses and other liabilities.... 18,228 29,185 47,954 47,474 65,335 52,689
------------ ------------ ------------ ------------ ------------ -----------
Total liabilities............. 2,154,640 2,296,485 4,258,875 2,450,327 522,111 425,256
------------ ------------ ------------ ------------ ------------ -----------
NET ASSETS
Paid-in capital........................... 382,095,916 550,963,036 274,349,290 133,076,795 98,296,211 63,532,452
Accumulated undistributed (distributions
in excess of) net investment income...... -- (685,743) (1,397,205) 1,163,149 1,015,621 (60,034)
Accumulated net realized loss
(distributions in excess of net realized
gains) on investment transactions........ -- (14,452,067) (9,796,384) (7,067,300) (4,494,978) (668,332)
Net unrealized gain (loss) on investments -- (6,166,307) 1,253,525 356,123 404,456 654,895
------------ ------------ ------------ ------------ ------------ -----------
Net assets................... $382,095,916 $529,658,919 $264,409,226 $127,528,767 $95,221,310 $63,458,981
============ ============ ============ ============ =========== ===========
Net asset value per unit
(net assets/units outstanding) $1.00 $9.76 $9.74 $9.59 $9.71 $9.99
============ ============ ============ ============ =========== ===========
Redemption price per unit (Note 7) $1.00 $9.76 $9.74 $9.54 $9.66 $9.94
============ ============ ============ ============ =========== ===========
UNITS OUTSTANDING
Total units outstanding, $0.001 par value
(unlimited number of units authorized) 382,095,916 54,253,342 27,160,182 13,300,010 9,809,980 6,350,000
============ ============ ============ ============ =========== ===========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
30
<PAGE>
TRUST FOR CREDIT UNIONS
-------------------
STATEMENTS OF OPERATIONS
For The Year Ended August 31, 1995
<TABLE>
<CAPTION>
Target Target Target
Money Government Mortgage Maturity Maturity Maturity
Market Securities Securities Portfolio Portfolio Portfolio
Portfolio/(a)/ Portfolio Portfolio/(b)/ (1996) (Feb 97) (May 97)
-------------- ----------- -------------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment Income:
Interest income......................... $15,279,710 $32,321,799 $ 17,513,762 $ 8,600,800 $ 6,971,041 $4,814,248
----------- ----------- -------------- ----------- ----------- ----------
Expenses:
Advisory fees, net of fees waived....... 410,109 1,078,346 388,187 290,761 227,279 166,798
Administration fees, net of fees
waived................................ 102,002 539,173 132,275 63,315 47,445 33,360
Custodian fees.......................... 19,158 72,222 49,687 43,832 37,592 30,806
Professional fees....................... 43,730 80,998 55,469 48,710 50,241 48,949
Trustees' fees.......................... 12,940 24,560 9,820 4,060 3,740 2,880
Amortization of deferred organization
expenses.............................. -- 4,569 9,039 13,487 3,890 1,812
Other expenses........................... 21,247 55,306 50,537 28,405 18,864 15,345
----------- ----------- -------------- ----------- ----------- ----------
Total expenses........................ 609,186 1,855,174 695,014 492,570 389,051 299,950
Less--Reimbursable expenses.............. (78,198) -- -- -- -- --
----------- ----------- -------------- ----------- ----------- ----------
Net expenses......................... 530,988 1,855,174 695,014 492,570 389,051 299,950
----------- ----------- -------------- ----------- ----------- ----------
Net investment income.................... 14,748,722 30,466,625 16,818,748 8,108,230 6,581,990 4,514,298
Net realized loss on investment
transactions........................... -- (4,600,744) (3,551,399) (2,597,069) (1,844,120) (339,194)
Net change in unrealized gain (loss) on
investments............................ -- 4,293,439 7,151,412 2,383,940 1,992,445 801,748
----------- ----------- -------------- ----------- ----------- ----------
Net increase in net assets resulting
from operations........................ $14,748,722 $30,159,320 $ 20,418,761 $ 7,895,101 $ 6,730,315 $4,976,852
=========== =========== ============== =========== =========== ==========
</TABLE>
/(a)/ For the year ended August 31, 1995, the investment advisor and the
administrator waived fees of $109,898 and $163,831, respectively.
/(b)/ For the year ended August 31, 1995, the investment advisor waived fees
of $140,912.
The accompanying notes are an integral
part of these financial statements.
31
<PAGE>
TRUST FOR CREDIT UNIONS
-------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended August 31, 1995
<TABLE>
<CAPTION>
Target Target Target
Money Government Mortgage Maturity Maturity Maturity
Market Securities Securities Portfolio Portfolio Portfolio
Portfolio Portfolio Portfolio (1996) (Feb 97) (May 97)
---------------- ------------ ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
From Operations:
Net investment income................... $ 14,748,722 $ 30,466,625 $ 16,818,748 $ 8,108,230 $ 6,581,990 $ 4,514,298
Net realized loss from investment
transactions........................... -- (4,600,744) (3,551,399) (2,597,069) (1,844,120) (339,194)
Net change in unrealized gain (loss) on
investments............................ -- 4,293,439 7,151,412 2,383,940 1,992,445 801,748
---------------- ------------ ------------ ------------ ----------- -----------
Net increase in net assets resulting
from operations........................ 14,748,722 30,159,320 20,418,761 7,895,101 6,730,315 4,976,852
---------------- ------------ ------------ ------------ ----------- -----------
Distributions to Unitholders:
From net investment income.............. (14,700,440) (30,842,606) (16,818,748) (7,523,785) (6,068,263) (4,420,145)
In excess of net investment income...... -- (685,743) (434,471) -- -- --
From paid-in capital.................... -- -- (406,506) -- -- --
---------------- ------------ ------------ ------------ ----------- -----------
Total distributions to unitholders...... (14,700,440) (31,528,349) (17,659,725) (7,523,785) (6,068,263) (4,420,145)
---------------- ------------ ------------ ------------ ----------- -----------
From Unit Transactions:
Proceeds from sale of units............. 3,043,450,086 21,279,121 7,814,480 -- -- --
Reinvestment of dividends and
distributions.......................... 6,769,666 9,375,252 4,880,915 -- -- --
Cost of units repurchased............... (2,885,160,983) (93,957,586) (34,931,625) (465,411) (2,821,023) (5,964,428)
---------------- ------------ ------------ ------------ ----------- -----------
Net increase (decrease) in net
assets from unit transactions.......... 165,058,769 (63,303,213) (22,236,230) (465,411) (2,821,023) (5,964,428)
---------------- ------------ ------------ ------------ ----------- -----------
Additional paid-in capital............... -- -- -- 68,281 -- --
---------------- ------------ ------------ ------------ ----------- -----------
Total increase (decrease)............... 165,107,051 (64,672,242) (19,477,194) (25,814) (2,158,971) (5,407,721)
Net Assets:
Beginning of year....................... 216,988,865 594,331,161 283,886,420 127,554,581 97,380,281 68,866,702
---------------- ------------ ------------ ------------ ----------- -----------
End of year............................. $ 382,095,916 $529,658,919 $264,409,226 $127,528,767 $95,221,310 $63,458,981
================ ============ ============ ============ =========== ===========
Accumulated undistributed
(distributions in excess of) net
investment income....................... -- $ (685,743) $ (1,397,205) $ 1,163,149 $ 1,015,621 $ (60,034)
================ ============ ============ ============ =========== ===========
Summary of Unit Transactions:
Units sold.............................. 3,043,450,086 2,179,482 807,374 -- -- --
Reinvestment of dividends and
distributions.......................... 6,769,666 963,379 508,864 -- -- --
Units repurchased....................... (2,885,160,983) (9,662,680) (3,664,116) (50,000) (300,000) (600,000)
---------------- ------------ ------------ ------------ ----------- -----------
Increase (decrease) in units
outstanding............................ 165,058,769 (6,519,819) (2,347,878) (50,000) (300,000) (600,000)
================ ============ ============ ============ =========== ===========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
32
<PAGE>
TRUST FOR CREDIT UNIONS
-------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended August 31, 1994/(a)/
<TABLE>
<CAPTION>
Target Target Target
Money Government Mortgage Maturity Maturity Maturity
Market Securities Securities Portfolio Portfolio Portfolio
Portfolio Portfolio Portfolio (1996) (Feb 97)/(a)/ (May 97)/(a)/
---------------- -------------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
From Operations:
Net investment income................ $ 13,359,541 $ 34,984,779 $ 16,116,670 $ 7,674,729 $ 3,360,096 $ 1,107,903
Net realized gain (loss) from
investment transactions............. 64,113 (3,444,347) (5,968,515) (4,530,665) (2,650,858) (329,138)
Net change in unrealized loss on
investments......................... -- (12,596,598) (7,965,845) (2,125,231) (1,587,989) (146,853)
---------------- -------------- ------------ ------------ ------------- -------------
Net increase (decrease) in net
assets resulting from operations.... 13,423,654 18,943,834 2,182,310 1,018,833 (878,751) 631,912
---------------- -------------- ------------ ------------ ------------- -------------
Distributions to Unitholders:
From net investment income........... (13,367,335) (34,473,092) (16,524,091) (7,021,439) (2,865,059) (1,107,903)
In excess of net investment income... (48,282) -- (980,012) -- -- (157,307)
From net realized gain on investment
transactions........................ (80,063) -- -- (409,166) -- --
In excess of net realized gain on
investment transactions............. -- -- (106,925) -- -- --
---------------- -------------- ------------ ------------ ------------- -------------
Total distributions to unitholders... (13,495,680) (34,473,092) (17,611,028) (7,430,605) (2,865,059) (1,265,210)
---------------- -------------- ------------ ------------ ------------- -------------
From Unit Transactions:
Proceeds from sale of units.......... 4,632,526,155 270,324,927 165,304,632 -- 101,599,800 69,500,000
Reinvestment of dividends and
distributions....................... 7,931,835 17,390,685 9,430,698 -- -- --
Cost of units repurchased............ (5,039,626,380) (800,339,049) (88,930,101) -- (475,709) --
---------------- -------------- ------------ ------------ ------------- -------------
Net increase (decrease) in net
assets from unit transactions....... (399,168,390) (512,623,437) 85,805,229 -- 101,124,091 69,500,000
---------------- -------------- ------------ ------------ ------------- -------------
Total increase (decrease)............ (399,240,416) (528,152,695) 70,376,511 (6,411,772) 97,380,281 68,866,702
Net Assets:
Beginning of year.................... 616,229,281 1,122,483,856 213,509,909 133,966,353 -- --
---------------- -------------- ------------ ------------ ------------- -------------
End of year.......................... $ 216,988,865 $ 594,331,161 $283,886,420 $127,554,581 $ 97,380,281 $ 68,866,702
================ ============== ============ ============ ============= =============
Accumulated undistributed
(distributions in excess of)
net investment income............... $ (48,282) $ 375,981 $ (971,373) $ 565,617 $ 498,404 $ (155,599)
================ ============== ============ ============ ============= =============
Summary of Unit Transactions:
Units sold........................... 4,632,526,155 27,232,221 16,491,479 -- 10,159,980 6,950,000
Reinvestment of dividends and
distributions....................... 7,931,835 1,759,454 958,468 -- -- --
Units repurchased.................... (5,039,626,380) (80,790,850) (9,011,149) -- (50,000) --
---------------- -------------- ------------ ------------ ------------- -------------
Increase (decrease) in units
outstanding......................... (399,168,390) (51,799,175) 8,438,798 -- 10,109,980 6,950,000
================ ============== ============ ============ ============= =============
</TABLE>
/(a)/ For the periods from February 15, 1994 and May 23, 1994,
(commencement of operations for the Target Maturity Portfolio
(Feb 97) and Target Maturity Portfolio (May 97), respectively) to
August 31, 1994.
The accompanying notes are an integral
part of these financial statements.
33
<PAGE>
TRUST FOR CREDIT UNIONS
-------------------
MONEY MARKET PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A UNIT OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Income from Distributions to
investment operations unitholders
--------------------- ---------------------------------------
From
Net In net Net
asset Net From excess real- asset
value at Net realized net of net ized value
begin- invest- gain on invest- invest- gain on at
ning of ment invest- ment ment invest- end of Total
period income ments/(a)/ income income ments period return/(b)/
--------- --------- ---------- --------- --------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year ended: 8/31/95......... $1.00 $0.0555 $ -- $(0.0553) $ -- $ -- $1.00 5.56%
8/31/94......... 1.00 0.0329 0.0002 (0.0342) (0.0001) (0.0002) 1.00 3.50
8/31/93......... 1.00 0.0305 0.0004 (0.0305) -- (0.0005) 1.00 3.14
8/31/92......... 1.00 0.0416 0.0008 (0.0416) -- (0.0007) 1.00 4.39
8/31/91......... 1.00 0.0641 -- (0.0641) -- -- 1.00 6.93
8/31/90......... 1.00 0.0824 -- (0.0824) -- -- 1.00 8.58
8/31/89......... 1.00 0.0899 -- (0.0899) -- -- 1.00 9.28
5/17/88/(c)/ to 8/31/88......... 1.00 0.0214 -- (0.0214) -- -- 1.00 7.40/(d)/
<CAPTION>
Ratio information
assuming no waiver
of fees or expense
reimbursements
------------------------
Ratio of
net
invest-
ment Net Ratio of
Ratio of income assets net
net to at end Ratio of investment
expenses average of expenses to income
to average net period average net to average
net assets assets (000's) assets net assets
---------- ---------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Year ended: 8/31/95......... 0.20% 5.55% $382,096 0.33% 5.42%
8/31/94......... 0.25 3.29 216,989 0.34 3.20
8/31/93......... 0.25 3.05 616,229 0.33 2.97
8/31/92......... 0.25 4.16 864,924 0.29 4.12
8/31/91......... 0.25 6.41 654,977 0.25 6.41
8/31/90......... 0.25 8.24 258,304 0.25 8.24
8/31/89......... 0.25 8.99 167,331 0.25 8.99
5/17/88/(c)/ to 8/31/88......... 0.25/(d)/ 7.27/(d)/ 106,739 0.25/(d)/ 7.27/(d)/
</TABLE>
/(a)/ May include balancing effect of calculating per share amounts.
/(b)/ Assumes investment at the net asset value at the beginning of the
period, reinvestment of all dividends and distributions and a complete
redemption of the investment at the net asset value at the end of the
period.
/(c)/ Commencement of operations.
/(d)/ Annualized.
The accompanying notes are an integral
part of these financial statements.
34
<PAGE>
TRUST FOR CREDIT UNIONS
-------------------
GOVERNMENT SECURITIES PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A UNIT OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Income from Distributions to
investment operations unitholders
--------------------- ---------------------------------------
Net
realized From In excess
Net and In net of net Net
asset unreal- From excess real- real- asset
value at Net ized gain net of net ized ized value
begin- invest- (loss) on invest- invest- gain on gain on at
ning of ment invest- ment ment invest- invest- end of Total
period income ments/(a)/ income income ments ments period return/(b)/
--------- --------- ---------- --------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Year ended: 8/31/95.......... $ 9.78 $0.5515 $(0.0011) $(0.5582) $(0.0122) $ -- $ -- $ 9.76 5.82%
8/31/94.......... 9.97 0.4286 (0.1974) (0.4212) -- -- -- 9.78 2.33
8/31/93.......... 10.03 0.4641 (0.0599) (0.4630) (0.0012) -- -- 9.97 4.06
8/31/92.......... 10.00 0.5588 0.0311 (0.5594) -- -- -- 10.03 6.68
7/10/91/(d)/ to 8/31/91.......... 10.00 0.0873 (0.0016) (0.0857) -- -- -- 10.00 7.02/(e)/
<CAPTION>
Ratio information
assuming no waiver
of fees or expense
reimbursements
------------------------
Ratio of
net
invest-
ment Net Ratio of
Ratio of income Port- assets net
net to folio at end Ratio of investment
expenses average turn- of expenses to income
to average net over period average net to average
net assets assets rate/(c)/ (000's) assets net assets
---------- ---------- --------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Year ended: 8/31/95.......... 0.34% 5.65% 70.58% $ 529,659 0.34% 5.65%
8/31/94.......... 0.35 4.25 42.27 594,331 0.37 4.23
8/31/93.......... 0.34 4.58 67.38 1,122,484 0.47 4.45
8/31/92.......... 0.36 5.91 195.53 1,153,410 0.59 5.68
7/10/91/(d)/ to 8/31/91.......... 0.48/(e)/ 7.16/(e)/ 3.56 94,139 0.73/(e)/ 6.91/(e)/
</TABLE>
/(a)/ Includes balancing effect of calculating per share amounts.
/(b)/ Assumes investment at the net asset value at the beginning of the
period, reinvestment of all dividends and distributions and a complete
redemption of the investment at the net asset value at the end of the
period.
/(c)/ May include effect of mortgage dollar roll transactions.
/(d)/ Commencement of operations.
/(e)/ Annualized.
The accompanying notes are an integral
part of these financial statements.
35
<PAGE>
TRUST FOR CREDIT UNIONS
-------------------
MORTGAGE SECURITIES PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A UNIT OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Income from Distributions to
investment operations unitholders
--------------------- ---------------------------------------
Net
realized In excess
Net and In of net Net
asset unreal- From excess real- asset
value at Net ized gain net of net ized value
begin- invest- (loss) on invest- invest- gain on From at
ning of ment invest- ment ment invest- paid-in end of Total
period income ments/(a)/ income income ments capital period return/(b)/
--------- --------- ---------- --------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Year ended: 8/31/95 ..... $ 9.62 $0.6075 $0.1539 $(0.6075) $(0.0175) $ -- $(0.0164) $ 9.74 8.20%
8/31/94 ..... 10.13 0.5533 (0.4530) (0.5719) (0.0340) (0.0044) -- 9.62 1.00
10/9/92/(d)/ to 8/31/93 ..... 10.00 0.4895 0.1144 (0.4702) -- -- -- 10.13 6.27
<CAPTION>
Ratio information
assuming no waiver
of fees or expense
reimbursements
------------------------
Ratio of
net
invest-
ment Net Ratio of
Ratio of income Port- assets net
net to folio at end Ratio of investment
expenses average turn- of expenses to income
to average net over period average net to average
net assets assets rate/(c)/ (000's) assets net assets
---------- ---------- --------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Year ended: 8/31/95 ..... 0.26% 6.36% 130.98% $264,409 0.32% 6.30%
8/31/94 ..... 0.28 5.66 188.58 283,886 0.29 5.65
10/9/92/(d)/ to 8/31/93 ..... 0.33/(e)/ 5.64/(e)/ 146.24 213,510 0.38/(e)/ 5.59/(e)/
</TABLE>
/(a)/ Includes balancing effect of calculating per share amounts.
/(b)/ Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions and a complete redemption
of the investment at the net asset value at the end of the period.
/(c)/ May include effect of mortgage dollar roll transactions.
/(d)/ Commencement of operations.
/(e)/ Annualized.
The accompanying notes are an integral
part of these financial statements.
36
<PAGE>
TRUST FOR CREDIT UNIONS
-------------------
TARGET MATURITY PORTFOLIOS
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A UNIT OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Income from Distributions to
investment operations unitholders
-------------------------- -----------------------------------------------
Net
realized From In excess
Net and In net of net
asset unreal- From excess real- real-
value at Net ized gain net of net ized ized
begin- invest- (loss) on invest- invest- gain on gain on
ning of ment invest- ment ment invest- invest-
period income ments/(a)/ income income ments ments
---------- ---------- -------------- ---------- ---------- --------- ---------
Target Maturity Portfolio (1996)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Year ended: 8/31/95 ...... $ 9.55 $ 0.6089 $(0.0092) $(0.5648) $ -- $ -- $ --
8/31/94 ...... 10.03 0.5750 (0.4983) (0.5261) -- (0.0306) --
7/1/93/(e)/ to 8/31/93 ...... 10.00 0.0774 0.0375 (0.0774) (0.0075) -- --
Target Maturity Portfolio (Feb 97)
- ------------------------------------------------------------------------------------------------------------------
Year ended: 8/31/95 ...... 9.63 0.6674 0.0261 (0.6135) -- -- --
2/15/94/(e)/ to 8/31/94 ...... 10.00 0.3313 (0.4189) (0.2824) -- -- --
Target Maturity Portfolio (May 97)
- ------------------------------------------------------------------------------------------------------------------
Year ended: 8/31/95 ...... 9.91 0.6674 0.0673 (0.6547) -- -- --
5/23/94/(e)/ to 8/31/94 ...... 10.00 0.1594 (0.0674) (0.1594) (0.0226) -- --
</TABLE>
<TABLE>
<CAPTION>
Ratio of
net
invest-
Net ment Net
asset Ratio of income Port- assets
Addi- value net to folio at end
tional at expenses average turn of
paid-in end of Total to average net over period
capital/(b)/ period return/(c)/ net assets assets rate/(d)/ (000's)
---------------- ---------- --------------- -------------- ---------- ------------- -----------
Target Maturity Portfolio (1996)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Year ended: 8/31/95 ..... $0.0051 $ 9.59 6.51% 0.39% 6.40% 183.93% $127,529
8/31/94 ..... -- 9.55 0.81 0.38 5.89 232.92 127,555
7/1/93/(e)/ to 8/31/93 ..... -- 10.03 1.19 0.43/(f)/ 4.56/(f)/ 143.44 133,966
Target Maturity Portfolio (Feb 97)
- --------------------------------------------------------------------------------------------------------------------------------
Year ended: 8/31/95 ..... -- 9.71 7.48 0.41 6.94 171.98 95,221
2/15/94/(e)/ to 8/31/94 ..... -- 9.63 (0.83) 0.42/(f)/ 6.30/(f)/ 156.03 97,380
Target Maturity Portfolio (May 97)
- --------------------------------------------------------------------------------------------------------------------------------
Year ended: 8/31/95 ..... -- 9.99 7.70 0.45 6.77 147.76 63,459
5/23/94/(e)/ to 8/31/94 ..... -- 9.91 0.92 0.48/(f)/ 5.80/(f)/ 74.68 68,867
</TABLE>
/(a)/ Includes balancing effect of calculating per share amounts.
/(b)/ See Note 9.
/(c)/ Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no
redemption fee. For the Target Maturity Portfolios, total return would be
reduced if a redemption fee were taken into account.
/(d)/ May include effect of mortgage dollar roll transactions.
/(e)/ Commencement of operations.
/(f)/ Annualized.
The accompanying notes are an integral
part of these financial statements.
37
<PAGE>
TRUST FOR CREDIT UNIONS
-------------------
NOTES TO FINANCIAL STATEMENTS
August 31, 1995
1. Organization
Trust for Credit Unions (the "Fund") is a Massachusetts business trust
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company consisting of six diversified portfolios: the
Money Market Portfolio, Government Securities Portfolio, Mortgage Securities
Portfolio, Target Maturity Portfolio (1996), Target Maturity Portfolio (Feb 97)
and Target Maturity Portfolio (May 97). Units of the Fund are offered for sale
solely to state and federally chartered credit unions. Unless extended by
appropriate action of the Fund's Board of Trustees and by the unitholders,
Target Maturity Portfolio (1996), Target Maturity Portfolio (Feb 97) and Target
Maturity Portfolio (May 97) (the "Target Maturity Portfolios"), will be
liquidated on or about June 30, 1996, February 18, 1997 and May 15, 1997,
respectively, (the "Termination Date"), at which time, all units of these
Portfolios that are outstanding as of the close of business on the respective
Termination Date will be redeemed by the Fund at their net asset value.
2. Summary of Significant Accounting Policies
The following is a summary of significant accounting policies followed by
the Fund which are in conformity with those generally accepted in the investment
company industry:
A. Investment Valuation
------------------------
For the Government Securities Portfolio, Mortgage Securities Portfolio, and
Target Maturity Portfolios, investments in mortgage backed and asset backed
obligations are valued based on yield equivalents, a pricing matrix or other
sources, under valuation procedures established by the Fund's Board of Trustees.
Other portfolio securities for which accurate market quotations are readily
available are valued on the basis of quotations furnished by a pricing service
or provided by dealers in such securities. Portfolio securities for which
accurate market quotations are not readily available are valued in accordance
with the Fund's valuation procedures. Securities of the Money Market Portfolio
and short-term debt obligations maturing in sixty days or less for the
Government Securities Portfolio, Mortgage Securities Portfolio and Target
Maturity Portfolios are valued at amortized cost which approximates market
value. Under this method, all investments purchased at a discount or premium are
valued by amortizing the difference between the original purchase price and
maturity value of the issue over the period to maturity.
B. Security Transactions and Investment Income
-----------------------------------------------
Security transactions are recorded on the trade date. Realized gains and
losses on sales of portfolio securities are calculated on the identified cost
basis. For the Money Market Portfolio, interest income is determined on the
basis of interest accrued, premium amortized and discount earned. The Mortgage
Securities Portfolio and the Target Maturity Portfolios amortize market
discounts and premiums on certain mortgage backed securities and treasury
obligations.
38
<PAGE>
TRUST FOR CREDIT UNIONS
-------------------
NOTES TO FINANCIAL STATEMENTS--(Continued)
August 31, 1995
For the Government Securities Portfolio, Mortgage Securities Portfolio and
Target Maturity Portfolios, premiums on interest-only securities and on
collateralized mortgage obligations with nominal principal amounts are
amortized, on an effective yield basis, over the expected life of the respective
securities, taking into account actual principal prepayment experience and
estimates of future principal prepayments. Certain mortgage security paydown
gains and losses are taxable as ordinary income. Such paydown gains and losses
increase or decrease taxable ordinary income available for distribution and are
classified in interest income in the accompanying Statements of Operations.
Original issue discounts on debt securities are amortized to interest income
over the life of the security with a corresponding increase in the cost basis of
that security.
C. Federal Taxes
-----------------
It is each portfolio's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute each year substantially all investment company taxable income to its
unitholders. Accordingly, no federal tax provisions are required. The
characterization of distributions to unitholders for financial reporting
purposes is determined in accordance with income tax rules and is based upon the
best available information. Therefore, in the accompanying financial statements,
the source of a portfolio's distributions may be shown as (i) from net
investment income, (ii) in excess of net investment income, (iii) from net
realized gains on investment transactions, (iv) in excess of net realized gains
on investment transactions, and/or (v) from capital. During the year ended
August 31, 1995, the Mortgage Securities Portfolio distributed approximately
$406,506 from paid-in capital resulting from distributions in excess of
accumulated tax earnings and profits.
As of each portfolio's most recent tax year-end, the following portfolios
had approximately the following amounts of capital loss carry forward for U.S.
Federal tax purposes:
<TABLE>
<CAPTION>
Portfolio Amount Years of Expiration
------------------------------- -------------------------- -----------------------------
<S> <C> <C>
Government Securities......... $15,330,000 1999 - 2002
Mortgage Securities........... 9,554,000 2001 - 2003
Target Maturity (1996)........ 6,987,000 1996*
Target Maturity (Feb 97)...... 4,476,000 1997*
Target Maturity (May 97)...... 661,000 1997*
</TABLE>
* Represents earlier of Termination Date of portfolio or actual expiration
date of capital loss carry forward.
These amounts are available to be carried forward to offset future capital
gains of the corresponding portfolios to the extent permitted by applicable laws
or regulations.
39
<PAGE>
TRUST FOR CREDIT UNIONS
-------------------
NOTES TO FINANCIAL STATEMENTS--(Continued)
August 31, 1995
D. Deferred Organization Expenses
----------------------------------
Organization-related costs are being amortized on a straight-line basis
over a period of five years for the Government Securities and Mortgage
Securities Portfolios, and over three years for the Target Maturity Portfolios.
E. Expenses
------------
Expenses incurred by the Fund that do not specifically relate to an
individual portfolio of the Fund are allocated to the portfolios based on each
portfolio's relative average net assets for the period.
3. Agreements
Goldman Sachs Asset Management ("GSAM"), a separate operating division of
Goldman, Sachs & Co. ("Goldman Sachs"), acts as investment adviser pursuant to
an Advisory Agreement with the Fund. Under the Advisory Agreement, Goldman
Sachs, subject to general supervision of the Fund's Trustees, manages the Fund's
portfolios and provides certain administrative services for the Fund. As
compensation for services rendered under the Advisory Agreement and the
assumption of the expenses related thereto, Goldman Sachs is entitled to a fee,
computed daily and payable monthly, at the following annual rates as a
percentage of each respective portfolio's average daily net assets:
<TABLE>
<CAPTION>
Portfolio Asset levels Fee
- ----------------------------- --------------------------- ---------
<S> <C> <C>
Money Market................ up to $300 million 0.20%
in excess of $300 million 0.15%
Government Securities....... all 0.20%
Mortgage Securities......... all 0.20%
Target Maturity Portfolios.. up to $75 million 0.25%
in excess of $75 million 0.20%
</TABLE>
During the fiscal year ended August 31, 1995, Goldman Sachs voluntarily
agreed to waive varying levels of the advisory fees incurred by the Money Market
Portfolio and Mortgage Securities Portfolio amounting to $109,898 and $140,912,
respectively. Goldman Sachs also serves as the Transfer Agent of the Fund for a
fee.
40
<PAGE>
TRUST FOR CREDIT UNIONS
-------------------
NOTES TO FINANCIAL STATEMENTS--(Continued)
August 31, 1995
Callahan Credit Union Financial Services Limited Partnership ("CUFSLP")
serves as the Fund's administrator pursuant to an Administration Agreement.
Callahan Financial Services, Inc. serves as a general partner to CUFSLP, and 37
major credit unions are limited partners. Under the Administration Agreement,
CUFSLP, subject to general supervision of the Fund's Trustees, provides certain
administrative services to the Fund. As compensation for services rendered under
the Administration Agreement, CUFSLP is entitled to the following fees, computed
daily and payable monthly, at the following annual rates as a percentage of each
respective portfolio's average daily net assets:
<TABLE>
<CAPTION>
Portfolio Fee
----------------------------- ---------
<S> <C>
Money Market................ 0.10%
Government Securities....... 0.10%
Mortgage Securities......... 0.05%
Target Maturity Portfolios.. 0.05%
</TABLE>
During the fiscal year ended August 31, 1995, CUFSLP voluntarily agreed to
waive varying levels of the administration fees incurred by the Money Market
Portfolio amounting to $163,831.
Through June 30, 1995, Goldman Sachs agreed to reimburse all expenses
(excluding interest, taxes, brokerage and extraordinary expenses) of the Money
Market Portfolio, other than fees payable under the Administration Agreement and
the Advisory Agreement. Effective July 1, 1995, CUFSLP has agreed that to the
extent the total annualized operating expenses (excluding interest, taxes,
brokerage and extraordinary expenses) (the "Operating Expenses") of the Money
Market Portfolio exceed 0.20% of the average daily net assets of the Money
Market Portfolio, CUFSLP will either reduce the administration fees otherwise
payable or pay such Operating Expenses of the Money Market Portfolio. For the
two months ended August 31, 1995, no expenses were required to be reimbursed by
CUFSLP under this agreement.
The Government Securities Portfolio bears the fees payable under the
Administration Agreement and the Advisory Agreement as well as other expenses
incurred in its operations. Effective January 1, 1993, and until further notice,
CUFSLP and Goldman Sachs have each voluntarily agreed to limit the other
annualized ordinary operating expenses of the Government Securities Portfolio
such that CUFSLP will reimburse expenses that exceed .05% up to .10% of the
Government Securities Portfolio's average daily net assets, and Goldman Sachs
will reimburse expenses that exceed .10% up to .15% of the Government Securities
Portfolio's average daily net assets. For the year ended August 31, 1995, no
expenses were required to be reimbursed by CUFSLP or Goldman Sachs under this
agreement.
41
<PAGE>
TRUST FOR CREDIT UNIONS
-------------------
NOTES TO FINANCIAL STATEMENTS--(Continued)
August 31, 1995
Callahan Financial Services, Inc. and Goldman Sachs serve as exclusive
distributors of units of the Fund. During the fiscal year ended August 31,
1995, neither received any compensation for this service.
4. Investment Transactions
Purchases and proceeds of sales or maturities of long-term securities for
the Government Securities Portfolio, Mortgage Securities Portfolio, Target
Maturity Portfolio (1996), Target Maturity Portfolio (Feb 97) and Target
Maturity Portfolio (May 97) , for the fiscal year ended August 31, 1995, were as
follows ($ in thousands):
<TABLE>
<CAPTION>
Target Target Target
Government Mortgage Maturity Maturity Maturity
Securities Securities Portfolio Portfolio Portfolio
Portfolio Portfolio (1996) (Feb 97) (May 97)
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Purchases of U.S. Government
and agency obligations............. $318,764 $221,489 $176,144 $115,750 $67,667
Purchases (excluding U.S.
Government and agency
obligations)....................... -- 115,304 66,399 41,612 25,555
Sales or maturities of U.S.
Government and agency
obligations........................ 387,871 285,122 185,048 148,654 85,884
Sales or maturities (excluding U.S.
Government and agency
obligations)........................ -- 39,573 30,174 4,220 13,306
</TABLE>
5. Repurchase Agreements
During the term of a repurchase agreement, the value of the underlying
securities, including accrued interest, is required to equal or exceed the value
of the repurchase agreement. The underlying securities for all repurchase
agreements are held in safekeeping in the customer-only account of State Street
Bank and Trust Company, the Fund's custodian, or at sub-custodians. GSAM
monitors the market value of the underlying securities by pricing them daily.
42
<PAGE>
TRUST FOR CREDIT UNIONS
-------------------
NOTES TO FINANCIAL STATEMENTS--(Continued)
August 31, 1995
6. Joint Repurchase Agreement Accounts
The portfolios, together with other registered investment companies having
advisory agreements with GSAM, transfer uninvested cash balances into joint
accounts, the daily aggregate balances of which are invested in repurchase
agreements. The underlying securities for the repurchase agreements include U.S.
Treasury obligations and mortgage-related securities issued by the U.S.
Government, its agencies or instrumentalities.
As of August 31, 1995, the Money Market Portfolio had a 2.85% undivided
interest in the repurchase agreements in the following joint account which
equaled $102,300,000 in principal amount. As of August 31, 1995, the repurchase
agreements in this joint account, along with the corresponding underlying
securities (including the type of security, market value, interest rate and
maturity date) were as follows ($ in thousands):
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
------ -------- -------- ---------
<S> <C> <C> <C> <C>
Bear Stearns Companies, dated 08/31/95, repurchase price $500,081 (U.S.
Treasury Interest-Only Strips: $510,834, 05/15/98-08/15/01).................. $500,000 5.85% 09/01/95 $ 500,000
Chase Securities, dated 08/31/95, repurchase price $620,100 (U.S. Treasury
Notes: $632,404, 3.88-9.25%, 09/30/95-07/31/98)............................... 620,000 5.83 09/01/95 620,000
Daiwa Securities, Inc., dated 08/31/95, repurchase price $350,057 (U.S. Treasury
Bill: $357,000, 11/30/95)..................................................... 350,000 5.84 09/01/95 350,000
First Boston Corp., dated 08/31/95, repurchase price $300,049 (U.S. Treasury
Bills: $306,709, 11/02/95-05/02/96)........................................... 300,000 5.82 09/01/95 300,000
Goldman, Sachs & Co., dated 08/31/95, repurchase price $200,033 (U.S. Treasury
Notes: $142,179, 4.00-8.88%, 01/31/96-11/15/01) (U.S. Treasury Interest-Only
Strips: $26,825, 11/15/96-05/15/99) (U.S. Treasury Principal-Only Strips:
$34,996, 11/15/96-08/15/00)................................................... 200,000 5.92 09/01/95 200,000
J.P. Morgan Securities, Inc., dated 08/31/95, repurchase price $300,049 (U.S.
Treasury Notes: $305,666, 7.75-15.75%, 02/15/99-11/15/01)..................... 300,000 5.90 09/01/95 300,000
Smith Barney, Inc., dated 08/31/95, repurchase price $422,168 (U.S. Treasury
Notes: $417,011, 5.88-8.50%, 07/31/96-04/30/00) (U.S. Treasury Interest-Only
Strip: $4,069, 05/15/99) (U.S. Treasury Principal-Only Strip: $9,463,
02/15/96)..................................................................... 422,100 5.84 09/01/95 422,100
Swiss Bank Corp., dated 08/31/95, repurchase price $725,118 (U.S. Treasury
Bills: $153,523, 09/07/95-08/22/96) (U.S. Treasury Notes: $585,983,
3.88-9.25%, 09/30/95-07/31/00)................................................ 725,000 5.84 09/01/95 725,000
Union Bank of Switzerland Securities, Inc., dated 08/31/95, repurchase price:
$175,028 (U.S. Treasury Notes: $178,742, 7.38-7.75%, 11/15/97-01/31/00)....... 175,000 5.83 09/01/95 175,000
----------
Total Joint Repurchase Agreement Account.................................... $3,592,100
==========
</TABLE>
43
<PAGE>
TRUST FOR CREDIT UNIONS
-------------------
NOTES TO FINANCIAL STATEMENTS--(Continued)
August 31, 1995
As of August 31, 1995, the Money Market, Government Securities, Mortgage
Securities and Target Maturity (1996) Portfolios had a 7.60%, 3.01%, 0.26%, and
0.29% undivided interest, respectively, in the repurchase agreements in the
following joint account, which equaled $100,000,000, $39,600,000, $3,400,000 and
$3,800,000 in principal amount, respectively. As of August 31, 1995, the
repurchase agreements in this joint account, along with the corresponding
underlying securities (including the type of security, market value, interest
rate and maturity date) were as follows ($ in thousands):
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
------ -------- -------- ---------
<S> <C> <C> <C> <C>
Daiwa Securities, Inc., dated 08/31/95, repurchase price $400,065 (U.S. Treasury
Bill: $408,000, 11/30/95)....................................................... $400,000 5.84% 09/01/95 $ 400,000
Salomon Brothers, Inc., dated 08/31/95, repurchase price $701,714 (U.S. Treasury
Bills: $97,305, 11/16/95-07/25/96) (U.S. Treasury Notes: $46,277, 4.25-8.50%,
05/15/96-04/15/00) (U.S. Treasury Interest-Only Strips: $361,286, 02/15/96-
05/15/01) (U.S. Treasury Principal-Only Strips: $210,569, 08/15/97-11/15/00).... 701,600 5.84 09/01/95 701,600
Union Bank of Switzerland Securities, Inc., dated 08/31/95, repurchase price
$215,035, (U.S. Treasury Bill: $2,922, 02/22/96) (U.S. Treasury Notes: $215,431,
5.38-12.38%, 05/31/98-05/15/04).................................................. 215,000 5.83 09/01/95 215,000
----------
Total Joint Repurchase Agreement Account........................................................................ $1,316,600
==========
</TABLE>
7. Redemption Units
Unitholders of the Target Maturity Portfolios who redeem their units prior
to the respective Termination Date will be charged a redemption fee equal to
.50% of the net asset value of the redeemed units at the time of the redemption.
The redemption fee is not a sales charge, but is kept by the respective
portfolio for the benefit of continuing unitholders.
8. Certain Reclassifications
In accordance with Statement of Position 93-2, the Mortgage Securities,
Target Maturity (1996), Target Maturity (Feb 97) and Target Maturity (May 97)
portfolios have reclassified $415,145, $13,087, $3,490 and $1,412, respectively,
which represents a reduction in paid-in capital and an increase in accumulated
undistributed net investment income. These reclassifications have no impact on
the net asset value of the respective portfolio and are designed to present such
portfolio's capital accounts on a tax basis.
9. Other Matters
During the fiscal year ended August 31, 1995, Goldman Sachs contributed
additional paid-in capital to the Target Maturity Portfolio (1996) as reflected
in the accompanying Statements of Changes in Net Assets.
44
<PAGE>
This Annual Report is authorized for distribution to prospective investors only
when preceded or accompanied by the Trust for Credit Unions Prospectus which
contains facts concerning the Fund's objectives and policies, management,
expenses and other information.
<PAGE>
[LOGO OF TRUST FOR CREDIT UNIONS APPEARS HERE]
Trustees
John L. Ostby, Chairman
Rudolf J. Hanley, Vice-Chairman
Gene R. Artemenko
James C. Barr
Edgar F. Callahan
Robert M. Coen
John T. Collins
Thomas S. Condit
Wendell A. Sebastian
Officers
Marcia L. Beck
President
Charles W. Filson
Vice President
John W. Mosior
Vice President
Nancy L. Mucker
Vice President
Pauline Taylor
Vice President
Scott M. Gilman
Treasurer
Michael J. Richman
Secretary
William F. Connors
Assistant Secretary
Howard B. Surloff
Assistant Secretary
Administrator
Callahan Credit Union Financial Services
Limited Partnership
Investment Advisor
Goldman Sachs Asset Management,
a separate operating division
of Goldman, Sachs & Co.
Transfer Agent
Goldman, Sachs & Co.
Distributors
Callahan Financial Services, Inc.
Goldman, Sachs & Co.
[LOGO OF GOLDMAN SACHS APPEARS HERE]
TCUANN95
<PAGE>
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TRUST
-----
for Credit Unions
Prospectus
December 1, 1995
TARGET MATURITY PORTFOLIO (1996)
TARGET MATURITY PORTFOLIO (Feb 1997)
TARGET MATURITY PORTFOLIO (May 1997)
<PAGE>
TRUST FOR CREDIT UNIONS
TARGET MATURITY PORTFOLIO (1996)
TARGET MATURITY PORTFOLIO (FEB 97)
TARGET MATURITY PORTFOLIO (MAY 97)
---------------
Trust for Credit Unions (the "Fund") is an open-end diversified, management
investment company (commonly known as a "mutual fund") offered only to state
and federally chartered credit unions. This Prospectus relates solely to the
offering of units of the Target Maturity Portfolio (1996), Target Maturity
Portfolio (Feb 97) and Target Maturity Portfolio (May 97) (individually, a
"Portfolio" and collectively, the "Portfolios").
The objective of each Portfolio is to achieve a high level of current income
and to return $10 per unit (the initial public offering price) to investors on
or about the third anniversary of its commencement date for the Target
Maturity Portfolio (1996), Target Maturity Portfolio (Feb 97) and Target
Maturity Portfolio (May 97) (June 30, 1996, February 18, 1997 and May 15,
1997, respectively). There can be no assurance that a Portfolio will attain
its investment objective. The Portfolios invest primarily in mortgage-related
securities issued or guaranteed by the U.S. Government, its agencies,
instrumentalities or sponsored enterprises and in privately-issued mortgage-
related securities rated, at the time of purchase, in one of the two highest
rating categories by a nationally recognized statistical rating organization
("NRSRO"). Units of each Portfolio are designed to qualify as eligible
investments for federally chartered credit unions, but may or may not qualify
as eligible investments for particular state chartered credit unions.
Goldman, Sachs & Co., through Goldman Sachs Asset Management, a separate
operating division, serves as the Fund's investment adviser. Goldman, Sachs &
Co. also serves as the Fund's transfer agent. Callahan Credit Union Financial
Services Limited Partnership serves as the Fund's administrator. Callahan
Financial Services, Inc., the general partner of Callahan Credit Union
Financial Services Limited Partnership, and Goldman, Sachs & Co. serve as the
Fund's co-distributors.
The Fund's initial public offering for the Target Maturity Portfolio (1996),
Target Maturity Portfolio (Feb 97) and Target Maturity Portfolio (May 97)
closed on June 30, 1993, February 15, 1994 and May 20, 1994, respectively. The
Fund's co-distributors may solicit orders for units of each of the Portfolios
during a subsequent subscription period at some future date, but presently do
not expect to do so.
This Prospectus dated December 1, 1995, which sets forth concisely the
information about the Portfolios that a prospective investor ought to know
before investing, should be retained for future reference. A Statement of
Additional Information (the "Additional Statement") dated the same date,
containing further information about each Portfolio which may be of interest
to investors, has been filed with the Securities and
(Continued on following page)
UNITS OF THE PORTFOLIOS ARE NOT ENDORSED BY, INSURED BY, GUARANTEED BY,
OBLIGATIONS OF OR OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, ANY CREDIT UNION
OR BY THE NATIONAL CREDIT UNION SHARE INSURANCE FUND, THE NATIONAL CREDIT
UNION ADMINISTRATION OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN THE
PORTFOLIOS INVOLVES RISK INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
(Continued from previous page)
Exchange Commission (the "SEC"), is incorporated herein by reference in its
entirety, and may be obtained without charge from Goldman, Sachs & Co. or
Callahan Credit Union Financial Services Limited Partnership by calling the
applicable telephone number listed below.
GOLDMAN, SACHS & CO. Toll Free.......................800-342-5828
(800-DIAL-TCU)
Advisor and Co-Distributor
One New York Plaza
New York, New York 10005
CALLAHAN CREDIT UNION FINANCIAL Toll Free.......................800-237-5678
SERVICES LIMITED PARTNERSHIP
Administrator
c/o Callahan Financial Services, Inc.
1001 Connecticut Ave., N.W., Suite 1022
Washington, D.C. 20036-5504
CALLAHAN FINANCIAL SERVICES, INC. Toll Free.......................800-237-5678
Co-Distributor
1001 Connecticut Ave., N.W., Suite 1022
Washington, D.C. 20036-5504
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HIGHLIGHTS................................................................. 1
FEES AND EXPENSES.......................................................... 6
FINANCIAL HIGHLIGHTS....................................................... 7
INVESTMENT OBJECTIVE....................................................... 8
DESCRIPTION OF INVESTMENTS................................................. 9
OTHER INVESTMENT PRACTICES, POLICIES AND RESTRICTIONS...................... 16
REPORTS TO UNITHOLDERS..................................................... 20
PURCHASE OF UNITS.......................................................... 20
REDEMPTION OF UNITS........................................................ 21
INCOME..................................................................... 22
NET ASSET VALUE............................................................ 23
TAXES...................................................................... 23
MANAGEMENT................................................................. 24
PERFORMANCE AND YIELD INFORMATION.......................................... 26
ADDITIONAL INFORMATION..................................................... 27
</TABLE>
i
<PAGE>
(This Page Intentionally Left Blank)
<PAGE>
HIGHLIGHTS
INTRODUCTION
Each of the Portfolios is an open-end, diversified, management investment
company (commonly known as a "mutual fund") offered solely to state and
federally chartered credit unions. Units of each Portfolio 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, Part
703 of the National Credit Union Administration Rules ("NCUA") and Regulations
and NCUA Letter Number 155. The Fund intends to review changes in the
applicable laws, rules and regulations governing eligible investments for
federally chartered credit unions, and to take such action as may be necessary
so that the investments of each Portfolio qualify as eligible investments
under the Federal Credit Union Act and the regulations thereunder. Units of
each Portfolio, however, may or may not qualify as eligible investments for
particular state chartered credit unions. The Fund encourages each state
chartered credit union to consult qualified legal counsel concerning whether a
Portfolio is a permissible investment under the laws applicable to it.
INVESTMENT OBJECTIVE Pages 8 and 9
The Portfolios seek to achieve a high level of current income by investing
in obligations authorized under the Federal Credit Union Act and to return $10
per unit (the initial public offering price) to investors on or about the
following dates: Target Maturity Portfolio (1996)-June 30, 1996, Target
Maturity Portfolio (Feb 97)-February 18, 1997 and Target Maturity Portfolio
(May 97)-May 15, 1997, respectively. Under normal circumstances, each
Portfolio will invest primarily (i.e., at least 65% of its assets) in
mortgage-related securities issued or guaranteed by the U.S. Government, its
agencies, instrumentalities or sponsored enterprises and in privately-issued
mortgage-related securities rated, at the time of purchase, in one of the two
highest rating categories by an NRSRO. These securities will include both
adjustable rate and fixed rate mortgage pass-through securities,
collateralized mortgage obligations and other multi-class mortgage-related
securities, as well as other securities that are collateralized by or
represent direct or indirect interests in mortgage-related securities or
mortgage loans. Each Portfolio may also invest in (a) other securities issued
or guaranteed as to principal and interest by the U.S. Government or by its
agencies, instrumentalities or sponsored enterprises, (b) repurchase
agreements pertaining thereto and (c) certain short-term obligations (as
specified in "Description of Investments--Short-Term Obligations").
Although the Portfolios may purchase securities of any maturity, each
Portfolio will seek to attain its objective to return $10 per unit by (1)
preserving capital through active portfolio management, including the purchase
and sale of securities to change each Portfolio's option-adjusted duration
(see "Description of Investments--Other Portfolio Management Policies") and
(2) reducing, over time, the price sensitivity of each Portfolio to changes in
interest rates in light of expected cash flows and mortgage prepayments under
different interest rate scenarios. Each Portfolio will seek to achieve a high
level of income through the active management of its assets in relation to
market conditions, interest rate changes and the remaining term of each
Portfolio. No assurance can be given that each Portfolio will achieve its
investment objective.
PURCHASE OF UNITS Page 20
Purchase of units of each Portfolio may be made only by Federal Reserve
wire. The minimum investment by an investor is $1,000,000. If, however, an
investor is a unitholder in the Fund's other
1
<PAGE>
investment portfolios at the time of purchase, the amount of minimum
investment will be reduced by the value of the investor's holdings in the
other portfolios up to a maximum reduction of $500,000.
Orders for Portfolio units received before 4:00 p.m., New York time, on a
Business Day earn income commencing the next Business Day provided that
federal funds have been received by such next Business Day.
REDEMPTION OF UNITS Pages 21 and 22
All units of a Portfolio that are outstanding on the Termination Date (as
defined below) will be redeemed by the Fund without a redemption fee at their
net asset value (which is targeted to be approximately $10) as of the close of
business on the Termination Date of a Portfolio, and each Portfolio will be
liquidated without further unitholder action. The Termination Dates of the
respective Portfolios will occur on or about June 30, 1996 for the Target
Maturity Portfolio (1996), February 18, 1997 for Target Maturity Portfolio
(Feb 97) and May 15, 1997 for Target Maturity Portfolio (May 97). Investors
may also redeem units at any time before the Portfolio's Termination Date at
their net asset value next determined after a request has been received by the
Fund, less a redemption fee for early withdrawal equal to .50% of the net
asset value of the redeemed units at the time of redemption. The redemption
fee is not a sales charge, but is kept by a Portfolio for the benefit of its
unitholders. The purpose of the fee is to offset costs a Portfolio may incur
(for example in connection with the liquidation of portfolio securities) in
order to make payment in cash to a redeeming unitholder. Redemption requests
received before 4:00 p.m., New York time, normally provide federal funds on
the next Business Day (as defined under "Additional Information") to the
unitholder's designated account.
INCOME AND CAPITAL GAINS DISTRIBUTION POLICY
Pages 22 and 23
Dividends from net investment income will be declared daily and paid monthly
by each Portfolio in cash by Federal Reserve wire unless an election is made
to invest dividends in units of the Fund's Money Market Portfolio on the last
calendar day of each month. Over the course of the fiscal year, dividends
accrued and paid will constitute all or substantially all of each Portfolio's
net investment income. From time to time, in order to stabilize the monthly
rate of distribution to unitholders and to enhance stability of principal, a
portion of such dividends may constitute a return of capital. Each Portfolio
intends that net realized capital gains, if any, after offset by any available
capital loss carryforwards from prior fiscal years, will be declared as a
dividend at least annually. Dividends payable to unitholders with respect to
net investment income and capital gains, if any, will be paid in cash unless
an election is made to invest dividends in units of the Fund's Money Market
Portfolio at net asset value on the payment date.
NET ASSET VALUE Page 23
The net asset value per unit of each Portfolio is determined by dividing the
excess of the market value of all securities and other assets over liabilities
by the number of units outstanding. Each Portfolio's net asset value per unit
will fluctuate as the value of such Portfolio's assets changes in response to
changing market rates of interest, principal prepayments and other factors.
All units of a Portfolio that are outstanding on its Termination Date will be
redeemed at net asset value as of the close of business on such Termination
Date, which is targeted to be approximately $10.
2
<PAGE>
INVESTMENT ADVISER
Pages 24 and 25
Goldman, Sachs & Co., one of the largest international investment banking
and brokerage firms in the United States, serves as the Fund's investment
adviser and also provides certain administrative services. Goldman, Sachs &
Co. provides its advisory services through Goldman Sachs Asset Management
("GSAM"), a separate operating division.
ADMINISTRATOR
Pages 25 and 26
Callahan Credit Union Financial Services Limited Partnership ("CUFSLP"), a
Delaware limited partnership in which 37 major credit unions are limited
partners, acts as the administrator of the Fund. In this capacity, CUFSLP
periodically reviews the performance of the investment adviser, the transfer
agent, the co-distributors and the custodian of the Fund and provides other
administrative services to the Fund.
DISTRIBUTORS
Page 26
Callahan Financial Services, Inc. ("CFS"), the general partner of CUFSLP,
and Goldman, Sachs & Co. serve as co-distributors of units in the Portfolios.
RISK FACTORS
Although each Portfolio's objective is to return $10 per unit (the initial
public offering price) to investors on its Termination Date, there is no
assurance that this objective will be achieved. In particular, while each
Portfolio will seek to reduce, over time, its price sensitivity to interest
rates, each Portfolio will purchase securities with maturities that fall after
the Termination Date, and it is possible that a Portfolio will realize capital
losses that are not offset by capital gains on the dispositions of securities
held by it. If a Portfolio realizes any capital losses on dispositions of
securities that are not offset by capital gains on dispositions of other
securities, a Portfolio may be unable to distribute to its unitholders on the
Termination Date an amount equal to approximately $10 per unit then
outstanding. In addition, the timing of the realization of any such capital
gains or capital losses, and the possibility that a Portfolio may be required
to distribute all or a portion of any such capital gains prior to the
Termination Date, may adversely affect the ability of a Portfolio to
distribute an amount equal to approximately $10 per unit on the Termination
Date, as well as the level of income earned by a Portfolio during its term.
Each Portfolio's ability to attain its investment objective will depend, in
part, on the success of the investment adviser's investment and hedging
strategies, on future interest rate trends, and on developments in the market
for mortgage-related securities. For example, a decline in market rates of
interest, or an increase in prepayments on mortgage-related securities held by
a Portfolio, may have an adverse effect on the income earned and dividends
paid by that Portfolio. In addition, operating results will depend upon the
availability of opportunities for the investment of each Portfolio's assets.
In this regard, the universe of suitable investments for each Portfolio will
be more limited than that for many other investment companies because of each
Portfolio's policy to limit its price sensitivity to interest rates and to
terminate on the Termination Date, and each Portfolio's income and dividends
may decline in the last year of its term for these reasons. As a result of
each Portfolio's active management techniques, the Portfolios expect to
experience a high portfolio turnover rate. A high rate
3
<PAGE>
of portfolio turnover involves correspondingly greater transaction costs,
which must be borne directly by each Portfolio and ultimately by its
unitholders. For a further discussion of the implications of a high portfolio
turnover rate, see "Other Portfolio Management Policies."
Furthermore, because the co-distributors do not expect to offer additional
Portfolio units and because units may be redeemed by investors at any time
during the term of each Portfolio, it is expected that the number of
outstanding Portfolio units could decrease before its Termination Date. The
redemption of units could increase the per unit expenses of the remaining
investors and adversely affect both a Portfolio's performance and the
investments of the remaining unitholders. Unitholder redemptions may also
require the investment adviser to sell portfolio securities that it would
otherwise keep in a Portfolio and to realign the remaining securities in the
Portfolio in light of the Portfolio's objective resulting in increased
expenses and lower performance. It is possible that the costs incurred by a
Portfolio in liquidating portfolio securities to meet redemption requests will
exceed the Portfolio's redemption fee for early withdrawal and that remaining
unitholders will, in this respect, also be adversely affected.
Each Portfolio's investments are interest rate sensitive, and their yields
will depend on a variety of factors including general market conditions for
the investments, the financial condition of the issuers involved, the size of
the particular offerings and the maturity, credit quality and rating of the
particular securities. Generally, the longer the maturity of a security, the
higher its yield and the greater its volatility. The market value of
securities held by a Portfolio (and consequently, a Portfolio's net asset
value) will generally decline during periods of increasing interest rates, and
increase during periods of declining interest rates (although many mortgage-
related securities will generally have less potential for capital appreciation
during periods of declining rates than other debt securities). Mortgage-
related securities, in particular, typically have frequent interest and
principal payments, and are subject to principal prepayments. As a result,
mortgage-related securities may be less effective than other types of debt
securities as a means of "locking in" interest rates. Moreover, the rate of
principal prepayments will frequently accelerate during periods of declining
interest rates. As a result, when a Portfolio reinvests amounts representing
scheduled and unscheduled payments of principal, it may receive a lower rate
of interest.
In addition, there can be no assurance that the date of subsequent sales (if
any) of a Portfolio's units, will occur at a time when market and interest-
rate conditions are favorable with respect to the types of mortgage-related
securities in which each Portfolio will invest. Investments by the Portfolios
during unfavorable conditions will adversely affect the Portfolio's investment
performance.
Each Portfolio's policy of investing primarily in mortgage-related
securities will have the effect of increasing the Portfolio's exposure to the
risks associated with such securities and may cause the net asset value of the
Portfolio to fluctuate more than if the Portfolio invested in other types of
securities. Privately-issued mortgage-related securities typically are not
guaranteed by the U.S. Government, its agencies, instrumentalities or
sponsored enterprises but such securities are generally structured with one or
more types of credit enhancement such as guarantees, subordination, insurance
policies or letters of credit obtained by the issuer or sponsor from third
parties, through various means of structuring the transaction or through a
combination of such approaches. In addition, although the Portfolios treat
each mortgage-related portfolio as a separate issuer, concentration in issues
of mortgage-related securities within the same master trust, sponsored by the
same sponsor or serviced
4
<PAGE>
by the same servicer may involve certain risks. Servicers of mortgage-related
pools collect payments on the underlying mortgage assets for pass-through to
the securityholders on a periodic basis. Upon insolvency of the servicer, the
securityholders may be at risk with respect to collections received by the
servicer but not yet delivered to the securityholders. In addition, a
sponsor's transfer of assets to a trust or other pooling vehicle may not
represent a true sale and, upon insolvency of the sponsor, the securityholders
of the trust or other pool may be at risk with respect to the assets
transferred to the trust or pool by the sponsor.
Some mortgage-related securities acquired by each Portfolio will be issued
or guaranteed by the U.S. Government, its agencies, instrumentalities or
sponsored enterprises; however, under certain interest rate and prepayment
scenarios each Portfolio may nevertheless fail to recoup fully its investment
in certain of these securities. In accordance with guidelines and standards
adopted by the Board of Trustees, Goldman, Sachs & Co. may determine that
certain interest-only and principal-only fixed rate mortgage-backed securities
issued by the U.S. Government, its agencies, instrumentalities or sponsored
enterprises may not be readily marketable. If so, these securities will be
considered illiquid for purposes of each Portfolio's limitation on investments
in illiquid securities. The yields on a class of stripped mortgage-backed
securities that receives all or most of the interest (i.e. IO's) are generally
higher than the prevailing market yields on other mortgage-related securities
because they are extremely sensitive to the rate of principal payments,
including prepayments. Prepayments can result in a Portfolio's failure to
recoup its initial investment even though the stripped mortgage backed
securities are issued or guaranteed by the U.S. Government. Investors should
be aware that investments made by each Portfolio also entail other risks.
These include the possible failure of an obligor or counter-party (parties to
whom a Portfolio has credit or performance exposure) to meet its commitments,
adverse economic, real estate or unemployment trends, possible failure in the
processing of transactions and risks associated with investments in foreign
branches of U.S. banks. Each Portfolio may engage in various investment
practices that involve special risks, such as repurchase agreements,
securities lending and mortgage dollar rolls. As indicated, one or more of the
Fund's Portfolios may, to the extent consistent with the Rules and Regulations
of the National Credit Union Administration, invest in stripped mortgage-
backed securities, zero coupon bonds, collateralized mortgage obligations and
other multi-class mortgage-related securities which present certain risks. See
"Description of Investments" and "Other Investment Practices, Policies and
Restrictions" for further information.
The involvement of Goldman, Sachs & Co., and its affiliates, partners and
officers, in the investment activities and business operations of the Fund may
present certain potential conflicts-of-interest, as described under
"Management--Investment Adviser and Transfer Agent."
5
<PAGE>
FEES AND EXPENSES
The following table illustrates all expenses and fees that a unitholder of a
Portfolio will incur.
UNITHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Sales Load Imposed on Purchases..................................... None
Sales Load Imposed on Reinvested Dividends. ........................ None
Maximum Redemption Fee.............................................. 0.50%
Maximum Exchange Fees............................................... None
</TABLE>
ANNUAL PORTFOLIO OPERATING EXPENSES
(as a percentage of average daily net assets)
<TABLE>
<CAPTION>
TMP TMP
TMP FEB MAY
1996 97 97
---- --- ---
<S> <C> <C> <C>
Investment Advisory Fee................................... .23% .24% .25%
Administration Fee........................................ .05% .05% .05%
Other Expenses............................................ .11% .12% .15%
--- --- ---
Total Portfolio Operating Expenses........................ .39% .41% .45%
=== === ===
</TABLE>
The purpose of this table is to assist investors in understanding the
various expenses that an investor in a Portfolio will bear directly or
indirectly. The information for the Portfolios is based on the expenses
incurred during the Portfolios' last fiscal year.
Management fees for each Portfolio consist of an investment advisory fee to
Goldman, Sachs & Co. payable monthly at an annual rate equal to .25% of
average daily net assets up to $75 million and .20% of average daily net
assets over $75 million of the Portfolio, and an administration fee to CUFSLP
payable monthly at an annual rate equal to .05% of the average daily net
assets of the Portfolio. Units that are redeemed by investors before the
Termination Date will be subject to a redemption fee for early withdrawal
equal to .50% of the net asset value of the redeemed units. Units that are
redeemed on the Termination Date are not subject to a redemption fee.
The following example illustrates the expenses that an investor would pay on
a $1,000 investment in a Portfolio over various time periods based on the
information presented above assuming a 5% annual rate of return and an
investment of all dividends and distributions. The first line assumes
redemption at the end of each time period. The second line assumes no
redemption.
<TABLE>
<CAPTION>
TMP TMP
TMP 1996 FEB 97 MAY 97
-------------- -------------- --------------
1 YEAR 3 YEARS 1 YEAR 3 YEARS 1 YEAR 3 YEARS
------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Redemption Assumed........... $9 $13 $ 9 $14 $10 $14
No Redemption Assumed........ $4 $13 $ 4 $14 $ 5 $14
--- --- --- --- --- ---
</TABLE>
This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or lesser than those
shown in the Table.
6
<PAGE>
FINANCIAL HIGHLIGHTS
The following information with respect to a unit of the Target Maturity
Portfolio (1996), Target Maturity Portfolio (Feb 97) and the Target Maturity
Portfolio (May 97) outstanding during the periods indicated has been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
report, incorporated by reference into the Additional Statement, from the
Fund's annual report to unitholders for the fiscal year ended August 31, 1995
(the "Annual Report"), and should be read in conjunction with the financial
statements and related notes appearing in the Annual Report. This Annual
Report also contains other performance information and is available upon
request and without charge by writing to either of the addresses on the inside
cover of this Prospectus.
<TABLE>
<CAPTION>
INCOME FROM DISTRIBUTIONS TO
INVESTMENT OPERATIONS UNITHOLDERS
----------------------- ----------------------------------------
NET IN FROM IN NET
NET REALIZED AND EXCESS NET EXCESS ASSET
ASSET NET UNREALIZED FROM NET OF NET REALIZED OF NET VALUE
VALUE AT INVEST- GAIN (LOSS) INVEST- INVEST- GAIN ON REALIZED ADDITIONAL AT
BEGINNING MENT ON INVEST- MENT MENT INVEST- GAIN ON PAID-IN END OF TOTAL
OF PERIOD INCOME MENTS(a) INCOME INCOME MENTS INVESTMENTS CAPITAL(b) PERIOD RETURN(c)
--------- ---------- ------------ -------- ------- -------- ----------- ---------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
TARGET MATURITY PORTFOLIO (1996)
- ------------------------------------------------------------------------------------------------------------------------------
Year ended: 8/31/95. $9.55 $0.6089 $(0.0092) $(0.5648) $ -- $ -- $ -- $0.0051 $9.59 6.51%
8/31/94......... 10.03 0.5750 (0.4983) (0.5261) -- (0.0306) -- -- 9.55 0.81
7/1/93(e) to
8/31/93......... 10.00 0.0774 0.0375 (0.0774) (0.0075) -- -- -- 10.03 1.19
<CAPTION>
TARGET MATURITY PORTFOLIO (FEB 97)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Year end-
ed: 8/31/95..... 9.63 0.6674 0.0261 (0.6135) -- -- -- -- 9.71 7.48
2/15/94(e) to
8/31/94......... 10.00 0.3313 (0.4189) (0.2824) -- -- -- -- 9.63 (0.83)
<CAPTION>
TARGET MATURITY PORTFOLIO (MAY 97)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Year end-
ed: 8/31/95..... 9.91 0.6674 0.0673 (0.6547) -- -- -- -- 9.99 7.70
5/23/94(e) to
8/31/94......... 10.00 0.1594 (0.0674) (0.1594) (0.0226) -- -- -- 9.91 0.92
<CAPTION>
RATIO OF
NET
RATIO INVEST- NET
OF NET MENT ASSETS
EXPENSES INCOME AT END
TO TO PORTFOLIO OF
AVERAGE AVERAGE TURNOVER PERIOD
NET ASSETS NET ASSETS RATE(d) (000'S)
---------- ---------- --------- --------
TARGET MATURITY PORTFOLIO (1996)
- ---------------------------------------------------------------
<S> <C> <C> <C> <C>
Year ended: 8/31/95. 0.39% 6.40% 183.93% $127,529
8/31/94......... 0.38 5.89 232.92 127,555
7/1/93(e) to
8/31/93......... 0.43(f) 4.56(f) 143.44 133,966
<CAPTION>
TARGET MATURITY PORTFOLIO (FEB 97)
- ---------------------------------------------------------------
<S> <C> <C> <C> <C>
Year end-
ed: 8/31/95..... 0.41 6.94 171.98 95,221
2/15/94(e) to
8/31/94......... 0.42(f) 6.30(f) 156.03 97,380
<CAPTION>
TARGET MATURITY PORTFOLIO (MAY 97)
- ---------------------------------------------------------------
<S> <C> <C> <C> <C>
Year end-
ed: 8/31/95..... 0.45 6.77 147.76 63,459
5/23/94(e) to
8/31/94......... 0.48(f) 5.80(f) 74.68 68,867
</TABLE>
- --------------------------------------------------------------------------------
(a) Includes balancing effect of calculating per share amounts.
(b) See Note 9 in Annual Report.
(c) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no
redemption fee. For the Target Maturity Portfolios, total return would be
reduced if a redemption fee were taken into account.
(d) May include effect of mortgage dollar roll transactions.
(e) Commencement of operations.
(f) Annualized.
7
<PAGE>
INVESTMENT OBJECTIVE
INTRODUCTION
The Fund is an open-end, diversified, management investment company
(commonly known as a "mutual fund") organized on September 24, 1987 as a
Massachusetts business trust. The Fund seeks to achieve a high level of income
to the extent consistent with the investment objectives of its investment
portfolios. The Fund presently maintains six investment portfolios--the Money
Market Portfolio, Government Securities Portfolio, Mortgage Securities
Portfolio, Target Maturity Portfolio (1996), Target Maturity Portfolio (Feb
97) and Target Maturity Portfolio (May 97). This Prospectus relates solely to
the offering of units of three Portfolios--Target Maturity Portfolio (1996),
Target Maturity Portfolio (Feb 97) and Target Maturity Portfolio (May 97)
(individually, a "Portfolio" and collectively, the "Portfolios").
The Fund is offered solely to state and federally chartered credit unions.
Units of each of the Fund's investment 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, Part 703
of the National Credit Union Administration Rules ("NCUA") and Regulations and
NCUA Letter Number 155. The Fund intends to review changes in the applicable
laws, rules and regulations governing eligible investments for federally
chartered credit unions, and to take such action as may be necessary so that
the investments of the Fund qualify as eligible investments under the Federal
Credit Union Act and the regulations thereunder.
Sections 107(7), 107(8) and 107(15) of the Federal Credit Union Act set
forth those securities, deposits and other obligations in which federally
chartered credit unions may invest. Included are mortgage-related securities,
securities issued or fully guaranteed as to principal and interest by the
United States Government or its agencies, instrumentalities or sponsored
enterprises, accounts in specified federally insured financial institutions
and other specified investments.
The investments of the Portfolios consist exclusively of assets intended to
qualify as eligible investments if owned directly by a federally chartered
credit union. Units of the Portfolios, however, may or may not qualify as
eligible investments for particular state chartered credit unions. The Fund
encourages each state chartered credit union to consult qualified legal
counsel concerning whether the units of the Portfolios are permissible
investments under the laws applicable to it.
TARGET MATURITY PORTFOLIOS
Each Portfolio seeks to achieve a high level of current income by investing
in obligations authorized under the Federal Credit Union Act and to return $10
per unit (the initial public offering price) to investors on or about the
following Termination Dates: Target Maturity Portfolio (1996)-June 30, 1996,
Target Maturity Portfolio (Feb 97)-February 18, 1997 and Target Maturity
Portfolio (May 97)-May 15, 1997.
Each Portfolio invests exclusively in:
--mortgage-related securities issued or guaranteed by the U.S.
Government, its agencies, instrumentalities or sponsored enterprises
and privately-issued mortgage-related securities, rated at the time of
purchase, in one of the two highest rating categories by an NRSRO;
--other securities issued or guaranteed as to principal and interest by
the U.S. Government or by its agencies, instrumentalities or sponsored
enterprises;
--repurchase agreements pertaining thereto; and
--short-term obligations (as specified in "Description of Investments--
Short-Term Obligations").
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The investment objective of each Portfolio (which is set forth in the first
sentence of this section) may not be changed without the approval of the
holders of a majority of the outstanding units of a Portfolio, as described
under "Additional Information." Although each Portfolio is permitted to
purchase securities of any maturity, each Portfolio will seek to attain its
objective to return $10 per unit by (1) preserving capital through active
portfolio management, including the purchase and sale of securities to change
the Portfolio's option-adjusted duration (see "Description of Investments--
Other Portfolio Management Policies") and (2) reducing, over time, its price
sensitivity to changes in interest rates in light of expected cash flows and
mortgage prepayments under different interest rate scenarios. Each Portfolio
will seek to achieve a high level of income through the active management of
its assets in relation to market conditions, interest rate changes and the
remaining term of the Portfolio. There can be no assurance that the objective
of any Portfolio will be realized. In seeking its objective, a Portfolio may
not always purchase securities offering the highest yield.
DESCRIPTION OF INVESTMENTS
MORTGAGE-RELATED SECURITIES
Mortgage-related securities are securities that directly or indirectly
represent participations in, or are collateralized by and payable from
payments on, mortgage loans secured by real property. These securities include
both adjustable rate and fixed rate mortgage pass-through securities and
collateralized mortgage obligations and other multi-class mortgage-related
securities as well as other securities that are collateralized by or represent
direct or indirect interests in mortgage-related securities or mortgage loans.
The issuers of certain mortgage-related securities may elect to have the pool
of mortgage loans (or indirect interests in mortgage loans) underlying the
securities treated as a real estate mortgage investment conduit ("REMIC"),
which is subject to special federal income tax rules. A description of the
types of mortgage-related securities in which the Portfolios will invest is
provided below. The descriptions are general and summary in nature, and do not
detail every possible variation of the types of mortgage-related securities
that are permissible for each Portfolio.
1. INVESTMENT CHARACTERISTICS OF MORTGAGE-RELATED SECURITIES
In general, changes in both prepayment rates on mortgage-related securities
and interest rates and the volume of transactions in Portfolio units will
affect a Portfolio's return. A predominant factor affecting the prepayment
rate on a pool of mortgage loans is the difference between the interest rates
on outstanding mortgage loans and prevailing mortgage loan interest rates
(giving consideration to the cost of any refinancing). In general, if mortgage
loan interest rates fall sufficiently below the interest rates on fixed rate
mortgage loans underlying mortgage-related securities, the rate of prepayment
would be expected to increase. Prepayments of adjustable rate mortgage loans
may also increase in a declining interest rate environment as borrowers seek
to "lock-in" low rates. Conversely, if mortgage loan interest rates rise above
the interest rates on outstanding mortgage loans, the rate of prepayment may
be expected to decrease. Due to these factors, mortgage-related securities may
be less effective than U.S. Treasury securities of similar maturity at
maintaining yields during periods of declining interest rates, since the
mortgage payments will normally be reinvested in instruments with lower yields
reflecting prevailing market conditions.
Because each Portfolio's investments are interest rate sensitive, the
Portfolio's performance will depend in large part upon the ability of the
Portfolio to anticipate and respond to fluctuations in market interest rates
and to utilize appropriate strategies to maximize returns to the Portfolio,
while attempting
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to minimize the associated risks to its investment capital. Prepayments may
have a disproportionate effect on certain mortgage-related securities such as
stripped mortgage-backed and certain other multiple class pass-through
securities, which are discussed below.
Generally, to the extent mortgage-related securities are purchased at a
premium, a faster than anticipated rate of unscheduled principal prepayments
will result in a lower than anticipated yield. On the other hand, if the
securities are purchased at a discount, a faster than anticipated rate of
unscheduled prepayment of principal will result in a higher than anticipated
yield.
2. PRIVATE MORTGAGE PASS-THROUGH SECURITIES
Privately-issued mortgage pass-through securities ("Private Mortgage Pass-
Throughs") represent interests in pools of mortgage loans that are issued by
trusts formed by originators of and institutional investors in mortgage loans
(or represent interests in custodial arrangements administered by such
institutions). These originators and institutions include commercial banks,
mortgage bankers, savings and loan associations, credit unions, savings banks,
insurance companies, investment banks or special purpose subsidiaries of the
foregoing. For federal income tax purposes, such trusts are generally treated
as grantor trusts or REMICs and, in either case, are generally not subject to
any significant amount of federal income tax at the entity level.
The mortgage pools underlying Private Mortgage Pass-Throughs consist of
private mortgage loans evidenced by promissory notes secured by first
mortgages or first deeds of trust or other similar security instruments
creating a first lien on residential, residential multi-family and commercial
properties. Private Mortgage Pass-Throughs (whether fixed or adjustable rate)
provide for monthly payments that are a "pass-through" of the monthly interest
and principal payments (including any prepayments) made by the individual
borrowers on the pooled mortgage loans, net of any fees or other amounts paid
to any guarantor, administrator and/or servicer of the underlying mortgage
loans. A trust fund with respect to which a REMIC election has been made may
include regular interests in other REMICs which in turn will ultimately
evidence interests in mortgage loans.
Private Mortgage Pass-Throughs generally offer a higher yield than
Government Mortgage-Related Securities (as defined below) because of the
absence of any direct or indirect government or agency payment guarantees.
However, timely payment of interest and principal on mortgage loans in these
pools may be supported by various forms of insurance or guarantees, including
individual loan, pool and hazard insurance, subordination and letters of
credit. The insurance and guarantees are issued by government entities,
private insurers, banks and mortgage poolers. Mortgage-related securities
without insurance or guarantees may be purchased by a Portfolio if they have
the required rating from an NRSRO. Although the market for such securities is
becoming increasingly liquid, some mortgage-related securities issued by
private organizations may not be readily marketable. Types of credit support
are discussed further in the Additional Statement.
3. GOVERNMENT MORTGAGE-RELATED SECURITIES
Each Portfolio may also invest in mortgage-related securities issued or
guaranteed by the U.S. Government and its agencies, instrumentalities or
sponsored enterprises ("Government Mortgage-Related Securities"). These
securities include the Government National Mortgage Association ("GNMA")
mortgage-backed certificates ("GNMA Certificates"), which are mortgage-backed
securities of the modified pass-through type where both scheduled interest and
principal payments (including prepayments) are paid monthly to the holder of
the certificate whether or not they are paid by the
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underlying mortgagor. The National Housing Act provides that the full faith
and credit of the United States is pledged to the timely payment of principal
and interest by GNMA of amounts due on these GNMA Certificates. Each GNMA
Certificate evidences an interest in a specific pool of mortgage loans
(frequently one-to-four family residential loans) insured by the Federal
Housing Administration or the Farmers Home Administration or guaranteed by the
Veterans Administration.
Government Mortgage-Related Securities also include securities issued by the
Federal National Mortgage Association ("FNMA") and by the Federal Home Loan
Mortgage Corporation ("FHLMC"). FNMA, a federally chartered and stockholder-
owned corporation, issues pass-through securities which are guaranteed as to
timely payment of principal and interest by FNMA. FHLMC, also a federally
chartered corporation, issues pass-through securities which are guaranteed as
to timely payment of interest and ultimate collection of principal by FHLMC.
Securities issued or guaranteed by FNMA and FHLMC are not backed by the full
faith and credit of the United States.
To the extent consistent with its investment objective, each Portfolio may
purchase "stripped" securities issued or guaranteed by U.S. Government
agencies or instrumentalities that evidence ownership in the future interest
payments or future principal payments on Government Mortgage-Related
Securities. Stripped mortgage-backed securities ("SMBS") are usually
structured with two classes that receive different proportions of the interest
and principal distributions from a pool of Government Mortgage-Related
Securities. A common type of SMBS will have one class receiving all of the
interest, while the other class will receive all of the principal. However, in
some instances, one class will receive some of the interest and most of the
principal while the other class will receive most of the interest and the
remainder of the principal. If the underlying obligations experience different
than anticipated prepayments of principal, a Portfolio may fail to recoup
fully its initial investment in these securities. Although the market for such
securities is increasingly liquid, Goldman, Sachs & Co., in accordance with
guidelines and standards adopted by the Board of Trustees, may determine that
certain SMBS are not readily marketable. If so, these securities will be
considered illiquid for purposes of each Portfolio's limitation on investments
in illiquid securities. The yields on a class of SMBS that receives all or
most of the interest are generally higher than prevailing market yields on
other Government Mortgage-Related Securities because they are extremely
sensitive to the rate of principal payments, including prepayments.
Prepayments can result in a Portfolio's failure to recoup its initial
investment even though the SMBS are issued or guaranteed by the U.S.
Government. Consistent with the Rules and Regulations of the National Credit
Union Administration, the Portfolios will purchase SMBS solely to reduce the
interest rate risk of the holdings (although this policy will not reduce the
risk of loss on the SMBS themselves that are held by the Portfolios), and will
not purchase SMBS issued by private issuers.
4. MULTI-CLASS MORTGAGE-RELATED SECURITIES AND COLLATERALIZED MORTGAGE
OBLIGATIONS
Mortgage-related securities acquired by each Portfolio will include
collateralized mortgage obligations and other multi-class mortgage-related
securities (collectively, "CMOs") issued by FNMA, FHLMC or other mortgage-
related U.S. Government agencies, instrumentalities or sponsored enterprises,
as well as by private issuers. CMOs provide an investor with a specified
interest in the cash flow of a pool of underlying mortgages or other mortgage-
related securities. Issuers of CMOs frequently elect to be taxed as REMICs.
CMOs are issued in multiple classes, each with a specified fixed or floating
interest rate and a final scheduled distribution date. The relative payment
rights of the
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various CMO classes may be structured in many ways. In many cases, payments of
principal are applied to the CMO classes in the order of their respective
stated maturities, so that no principal payments will be made on a CMO class
until all other classes having an earlier stated maturity date are paid in
full. Sometimes, however, CMO classes are "parallel pay," i.e., payments of
principal are made to two or more classes concurrently. In accordance with the
Rules and Regulations of the National Credit Union Administration, unless the
purchase is made solely to reduce interest rate risk or unless the instrument
is a floating or adjustable rate CMO class, the Portfolios will not invest in
any CMO class that meets any of the following three tests using prevailing
market-interest rates and prepayment speeds: (1) the CMO class has an expected
average life greater than 10 years; (2) the average life of the CMO class
extends by more than 4 years assuming an immediate and sustained parallel
shift in the yield curve of plus 300 basis points, or shortens by more than 6
years assuming an immediate and sustained parallel shift in the yield curve of
minus 300 basis points; or (3) the estimated change in the price of the CMO
class is more than 17% due to an immediate and sustained parallel shift in the
yield curve of plus or minus 300 basis points. For these purposes, "average
life" means the weighted average time to principal repayment, with the amount
of the principal paydowns (both scheduled and unscheduled) as the weights. The
expected average life and average life sensitivity test described above do not
apply to a floating or adjustable rate CMO class, irrespective of whether it
has been purchased to reduce interest rate risk, if (a) the interest rate is
reset at least annually, (b) the interest rate is below the contractual cap of
the CMO class at the time of purchase or a subsequent testing date, (c) the
index upon which the interest rate is based is a widely-used market interest
rate index such as the London Interbank Offered Rate (LIBOR) and (d) the
interest rate of the instrument varies directly (not inversely) with the index
upon which it is based and is not reset as a multiple of the change in the
index. If an instrument is a floating or adjustable rate CMO class which
passes the requirements described in (a) through (d) above, the Portfolios
will not invest in any such floating or adjustable rate CMO class that using
prevailing market-interest rates and pre-payment speeds meets the price
sensitivity test listed above. CMOs may exhibit more or less price volatility
and interest rate risk than other types of mortgage-related obligations.
Although the market for CMOs is generally liquid, Goldman, Sachs & Co. may
determine that certain CMOs are not readily marketable. If so, these CMOs will
be considered illiquid for purposes of the Fund's limitations on investments
in illiquid securities. CMOs are discussed further in the Additional Statement
under "Adjustable and Fixed Rate Mortgage Loans and Mortgage-Related
Securities."
OTHER GOVERNMENT SECURITIES
Each Portfolio may acquire other securities issued or guaranteed as to
principal and interest by the U.S. Government or by its agencies,
instrumentalities or sponsored enterprises ("Government Securities"). These
securities in general include a variety of U.S. Treasury obligations,
consisting of bills, notes and bonds, which principally differ only in their
interest rates, maturities and times of issuance, and obligations issued or
guaranteed by the U.S. Government, its agencies, instrumentalities or
sponsored enterprises which are supported by (a) the full faith and credit of
the U.S. Treasury (such as GNMA participation certificates), (b) the limited
authority of the issuer to borrow from the U.S. Treasury (such as securities
of the Student Loan Marketing Association), (c) the authority of the U.S.
Government to purchase certain obligations of the issuer (such as securities
of FNMA), or (d) only the credit of the issuer. No assurance can be given that
the U.S. Government will provide financial support to U.S. Government
agencies, instrumentalities or sponsored enterprises as described in clauses
(b) or (c) in the future, other than as set forth above, since it is not
obligated to do so by law.
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Government Securities are deemed to include (to the extent that it is
consistent with the Investment Company Act of 1940) securities for which the
payment of principal and interest is backed by an irrevocable letter of credit
issued by the U.S. Government, its agencies, instrumentalities or sponsored
enterprises. Government Securities are also deemed to include (to the extent
consistent with the Investment Company Act of 1940) participations in loans
made to foreign governments or their agencies that are guaranteed as to
principal and interest by the U.S. Government or its agencies,
instrumentalities or sponsored enterprises. The secondary market for certain
of these participations is extremely limited. In the absence of a substantial
secondary market, such participations will therefore be regarded as illiquid.
Each Portfolio may invest in separately traded principal and interest
components of securities, including mortgage-related securities, issued or
guaranteed by the United States Government, its agencies, instrumentalities or
sponsored enterprises. In the case of securities issued or guaranteed by the
United States Government, the principal and interest components of selected
securities are traded independently under the Separate Trading of Registered
Interest and Principal of Securities program ("STRIPS"). Under the STRIPS
program, the principal and interest components are individually numbered and
separately issued by the U.S. Treasury at the request of depository financial
institutions, which then trade the component parts independently.
Each Portfolio may invest in zero coupon bonds, which are debt obligations
issued or purchased at a significant discount from face value, provided that
such bonds do not have maturity dates of more than 10 years from settlement.
Each Portfolio will only purchase zero coupon bonds which are Government
Securities. The discount approximates the total amount of interest the bonds
will accrue and compound over the period until maturity or the first interest
payment date at a rate of interest reflecting the market rate of the security
at the time of issuance. Zero coupon bonds do not require the periodic payment
of interest. Such investments benefit the issuer by mitigating its need for
cash to meet debt service, but some also require a higher rate of return to
attract investors who are willing to defer receipt of such cash. Such
investments may experience greater volatility in market value than debt
obligations which provide for regular payments of interest. Each Portfolio
will accrue income on such investments for tax and accounting purposes, as
required, which is distributable to shareholders and which, because no cash is
received at the time of accrual, may require the liquidation of other
portfolio securities to satisfy the Portfolio's distribution obligations.
GOVERNMENT RELATED OBLIGATIONS
Although they are not considered obligations of the U.S. Government for
certain securities law purposes, and therefore do not qualify as U.S.
Government Securities, each Portfolio may also acquire securities issued or
guaranteed as to principal and interest by the U.S. Government, its agencies,
instrumentalities or sponsored enterprises in the form of custodial receipts
that evidence ownership of future interest payments, principal payments or
both on certain notes or bonds issued by the U.S. Government, its agencies,
instrumentalities or sponsored enterprises.
REPURCHASE AGREEMENTS
When a Portfolio purchases securities, it may enter into a repurchase
agreement with the seller wherein the seller agrees, at the time of sale, to
repurchase the securities at a mutually agreed upon time and price. A
Portfolio may enter into repurchase agreements with broker-dealers and with
banks. Although the securities subject to the repurchase agreement may bear
maturities exceeding one year, settlement for the repurchase would never be
more than one year after a Portfolio's acquisition of the
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securities and normally would be within a shorter period of time. The
Portfolios generally intend to enter into repurchase agreements which
terminate within seven days after notice by a Portfolio. If a Portfolio were
to enter into repurchase agreements which provide for a notice period greater
than seven days, a Portfolio would do so only if such investment, together
with other illiquid securities, did not exceed 15% of the Portfolio's net
assets. The resale price will be in excess of the purchase price, reflecting
an agreed-upon market rate effective for the period of time a Portfolio's
money will be invested in the securities, and will not be related to the
coupon rate of the purchased securities. During the term of the repurchase
agreement, Goldman, Sachs & Co. will require the seller to maintain the value
of the securities subject to the agreement in an amount that exceeds the
repurchase price. In the event the seller of the repurchase agreement enters a
bankruptcy or other insolvency proceeding, or in the event of the failure of
the seller to repurchase the underlying securities as agreed upon, a Portfolio
could, however, experience losses that include (a) possible decline in the
value of the underlying securities during the period while a Portfolio seeks
to enforce its rights thereto and possible delay in enforcement of those
rights, (b) possible loss of all or a part of the income or proceeds of the
repurchase, (c) additional expenses to a Portfolio for enforcing those rights
and (d) possible delay in the disposition of the underlying securities pending
court action or possible loss of rights in such securities. The percentage of
each Portfolio's assets invested in repurchase agreements may vary from time
to time depending upon Goldman, Sachs & Co.'s evaluation of market trends and
other conditions. The Portfolios will enter into repurchase transactions only
with parties that meet creditworthiness standards approved by the Fund's
Trustees. Goldman, Sachs & Co. monitors the creditworthiness of such parties
under the Trustees' general supervision. In addition, the Portfolios, together
with other registered investment companies having advisory agreements with the
Adviser, may transfer uninvested cash balances into a single joint account,
the daily aggregate balance of which will be invested in one or more
repurchase agreements.
SHORT-TERM OBLIGATIONS
1. BANK OBLIGATIONS
A Portfolio may invest in United States dollar-denominated obligations
issued or guaranteed by United States banks with total assets exceeding $1
billion (including obligations issued by foreign branches of such banks) but
only to the extent permitted under the Federal Credit Union Act and the rules
and regulations promulgated thereunder. Such obligations will be rated in one
of the two highest rating categories by an NRSRO or, if unrated, determined to
be of comparable quality by Goldman, Sachs & Co. and may include certificates
of deposit, bankers' acceptances, bank notes, deposit notes and other
obligations. Bank obligations may be general obligations of the parent bank or
may be limited to the issuing branch by the terms of the specific obligations
or by government regulation.
Obligations of foreign branches of United States banks include fixed time
deposits. Fixed time deposits are payable at a stated maturity date and bear a
fixed rate of interest. Generally, fixed time deposits are not payable until
maturity, but may permit early withdrawal subject to penalties which vary
depending upon market conditions and the remaining maturity of the
obligations. Fixed time deposits do not have a market, and those fixed time
deposits with maturities over seven days will be regarded as illiquid.
However, there are no contractual restrictions on the right to transfer a
beneficial interest in the deposit to a third party.
Bank notes and bankers acceptances rank junior to domestic deposit
liabilities of the bank and pari passu with other senior, unsecured
obligations of the bank. Bank notes are classified as "other
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borrowings" on a bank's balance sheet, while deposit notes and certificates of
deposit are classified as deposits. Bank notes are not insured by the Federal
Deposit Insurance Corporation or any other insurer. Deposit notes are insured
by the Federal Deposit Insurance Corporation only to the extent of $100,000
per depositor per bank.
Banks are subject to extensive but different governmental regulations which
may limit both the amount and types of loans which may be made and interest
rates which may be charged. In addition, the profitability of the banking
industry is largely dependent upon the availability and cost of funds for the
purpose of financing lending operations under prevailing money market
conditions. General economic conditions as well as exposure to credit losses
arising from possible financial difficulties of borrowers play an important
part in the operations of this industry.
Obligations of foreign branches of United States banks involve investment
risks in addition to those of domestic obligations of domestic issuers,
including the possibility that liquidity could be impaired because of future
political and economic developments, that the obligations may be less
marketable than comparable domestic obligations of domestic issuers, that a
foreign jurisdiction might impose withholding taxes on interest income payable
on those obligations, that deposits may be seized or nationalized, that
foreign governmental restrictions such as exchange controls may be adopted
which might adversely affect the payment of principal and interest on those
obligations, or that there may be difficulties in obtaining or enforcing a
judgment against a foreign branch.
2. FEDERAL FUNDS
The Portfolios may make unsecured loans of federal funds to United States
banks with total assets exceeding $1 billion (including obligations issued by
foreign branches of such banks) to the extent permitted by the Federal Credit
Union Act and the rules and regulations promulgated thereunder, provided that
(i) the accounts of such banks are insured by the Federal Deposit Insurance
Corporation, (ii) the interest received therefrom is at the market rate for
federal funds transactions and (iii) the transaction has a maturity of one or
more business days or the Fund is able to require repayment at any time. The
Portfolios consider federal funds investments maturing in more than seven days
to be illiquid, and therefore will limit such transactions along with all
other illiquid investments to 15% of the value of a Portfolio's net assets.
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 "Fed Member
Bank"). A loan of federal funds is an unsecured loan at a negotiated interest
rate for a negotiated time period, generally overnight, of federal funds by
one Fed Member Bank to another. Since, pursuant to an exemption, the borrowing
Fed Member Bank is not required to maintain reserves on the borrowed federal
funds, the interest rate it pays on such loans is generally higher than the
rate it pays on other deposits of comparable size and maturity that are
subject to reserve requirements. In addition, a "depository institution" or
other exempt institution such as the Fund may under Regulation D of the Board
of Governors of the Federal Reserve System in effect make loans of federal
funds by instructing a correspondent or other willing Fed Member Bank at which
it maintains an account to loan federal funds on its behalf. Loans of federal
funds are not insured by the Federal Deposit Insurance Corporation.
In the event the borrower of federal funds enters a bankruptcy or other
insolvency proceeding, a Portfolio could experience delays and incur expense
in recovering cash. Further, the possibility exists that in such an instance,
the borrowing institution may not be able to repay the loaned funds. Loans of
federal funds rank junior to domestic deposit liabilities of the bank and pari
passu with other senior,
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unsecured obligations of the bank. With regard to the solvency of the
borrowing institution, the Portfolios will limit federal funds lending to
those member banks of the Federal Reserve System whose creditworthiness has
been reviewed and found by Goldman, Sachs & Co. to be comparable in quality to
securities rated high quality by an NRSRO. Creditworthiness is of particular
importance given the unsecured nature of federal funds borrowings.
3. OTHER INVESTMENT COMPANIES
As a means of maintaining short-term liquidity, each Portfolio reserves the
right to invest up to 10% of its total assets, calculated at the time of
purchase, in the securities of other investment companies. A Portfolio may not
invest more than 5% of its total assets in the securities of any one
investment company or acquire more than 3% of the voting securities of any
other investment company. Pursuant to an exemptive order obtained from the
SEC, other investment companies and its unitholders in which the Portfolios
may invest include money market funds for which GSAM, Goldman, Sachs & Co. or
any of their affiliates serves as investment adviser, administrator or
distributor. Each Portfolio and ultimately its unitholders will indirectly
bear its proportionate share of any management fees paid by investment
companies in which it invests in addition to the advisory fee paid by the
Portfolio, except that to the extent that any Portfolio invests in a money
market fund for which GSAM, Goldman, Sachs & Co. or any of their affiliates
acts as adviser (such as the Fund's Money Market Portfolio), the fee payable
by that Portfolio to GSAM will be reduced by an amount equal to the
Portfolio's proportionate share of the advisory and administrative fees paid
by such money market fund to GSAM, Goldman, Sachs & Co. or any of their
affiliates.
OTHER INVESTMENT PRACTICES, POLICIES AND RESTRICTIONS
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
Each Portfolio may purchase or sell portfolio securities in when-issued or
delayed delivery transactions. In such transactions, instruments are bought or
sold with payment and delivery taking place in the future in order to secure
what is considered to be an advantageous yield or price to a Portfolio at the
time of entering into the transactions. However, the yield on a comparable
security available when delivery takes place may vary from the yield on the
security at the time that the when-issued or delayed delivery transaction was
entered into. When a Portfolio engages in when-issued and delayed delivery
transactions, the Portfolio relies on the seller or buyer, as the case may be,
to consummate the transaction. Failure to consummate the transaction may
result in a Portfolio's missing the opportunity of obtaining a price or yield
considered to be advantageous. In such transactions the payment obligation and
the interest rate are fixed on the trade date, although no interest accrues to
the purchaser prior to the settlement date. The settlement date for such
transactions will take place no more than 120 days after the trade date.
Consistent with the requirements of the Investment Company Act of 1940,
securities purchased on a when-issued or delayed delivery basis are recorded
as an asset (with the purchase price being recorded as a liability) and are
subject to changes in value based upon changes in the general level of
interest rates. At the time of delivery of the security, the value may be more
or less than the transaction price. To the extent that a Portfolio remains
substantially fully invested at the same time that it has entered into such
transactions, which it would normally expect to do, there will be greater
fluctuations in the market value of its net assets than if such Portfolio set
aside cash to satisfy its purchase commitment. However, a Portfolio will
maintain designated liquid assets at least equal in value to commitments for
when-issued or delayed delivery securities, and such assets will be segregated
in an account earmarked specifically for the settlement of such commitments. A
Portfolio will only make commitments to purchase portfolio securities on a
when-issued or delayed delivery basis with the intention of actually acquiring
the securities and not for the purpose of investment leverage.
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LENDING OF PORTFOLIO SECURITIES
The Portfolios may seek to increase its income by lending portfolio
securities to institutions, such as banks and broker-dealers. These loans will
be continuously collateralized by cash, cash equivalents or Government
Securities in an amount at least equal to the market value of the securities
loaned. Each Portfolio will have the right to call a loan and obtain the
securities loaned at any time on five days notice. For the duration of a loan,
each Portfolio will continue to receive the equivalent of the interest paid by
the issuer on the securities loaned and will also receive compensation from
investment of the collateral. Each Portfolio will not have the right to vote
any securities having voting rights during the existence of the loan, but each
Portfolio will call the loan in anticipation of an important vote to be taken
among holders of the securities or the giving or withholding of its consent on
a material matter affecting the investment. As with other extensions of
credit, there are risks of delay in recovering, or even loss of rights in, the
collateral should the borrower of the securities fail financially. However,
the loans will be made only to firms deemed by Goldman, Sachs & Co. to be of
good standing, and when, in its judgment, the consideration which can be
earned currently from securities loans of this type justifies the attendant
risk. If Goldman, Sachs & Co. determines to make securities loans, it is
intended that the value of the securities loaned will not exceed one-third of
the value of the total assets of the relevant Portfolio.
MORTGAGE DOLLAR ROLLS
The Portfolios may enter into mortgage "dollar rolls" in which a Portfolio
sells securities for delivery in the current month and simultaneously
contracts with the same counterparty to repurchase similar (same type, coupon
and maturity) but not identical securities on a specified future date not
exceeding 120 days. During the roll period, a Portfolio loses the right to
receive principal and interest paid on the securities sold. However, the
Portfolio would benefit to the extent of any difference between the price
received for the securities sold and the lower forward price for the future
purchase (often referred to as the "drop") or fee income plus the interest
earned on the cash proceeds of the securities sold until the settlement date
of the forward purchase. Unless such benefits exceed the income, capital
appreciation and gain or loss due to mortgage prepayments that would have been
realized on the securities sold as part of the mortgage dollar roll, the use
of this technique will diminish the investment performance of a Portfolio
compared with what such performance would have been without the use of
mortgage dollar rolls. All cash proceeds will be invested in instruments that
are permissible investments for the Portfolios. The Portfolios will hold and
maintain in a segregated account until the settlement date cash, U.S.
Government Securities or other liquid, high grade debt securities in an amount
equal to the forward purchase price. All mortgage dollar rolls will be settled
in accordance with National Credit Union Administration Rules and Regulations.
For financial reporting and tax purposes, each Portfolio proposes to treat
mortgage dollar rolls as two separate transactions; one involving the purchase
of a security and a separate transaction involving a sale. The Portfolios do
not currently intend to enter into mortgage dollar rolls that are accounted
for as a financing.
Mortgage dollar rolls involve the following risks: if the broker-dealer to
whom a Portfolio sells the security becomes insolvent, the Portfolio's right
to purchase or repurchase the mortgage-related securities may be restricted
and the instrument which the Portfolio is required to repurchase may be worth
less than an instrument which the Portfolio originally held. Successful use of
mortgage dollar
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rolls may depend upon the investment adviser's ability to predict correctly
interest rates and mortgage prepayments. For these reasons there is no
assurance that mortgage dollar rolls can be successfully employed.
OTHER PORTFOLIO MANAGEMENT POLICIES
In addition, a Portfolio will not invest more than 15% of the value of its
net assets in securities which are illiquid, including restricted securities,
federal funds loans maturing in more than seven days and fixed time deposits
maturing in more than seven days, repurchase agreements providing for
settlement in more than seven days after notice, loan participations by
foreign governments where a substantial secondary market is absent and, to the
extent consistent with a Portfolio's investment objective interest-only and
principal-only fixed rate mortgage backed securities issued by the U.S.
Government, its agencies, instrumentalities or sponsored enterprises which may
not be readily marketable. A repurchase agreement or a federal funds loan
which by its terms can be liquidated before its nominal fixed term on seven
days' or less notice is regarded as a liquid instrument. Mortgage-related
securities issued in a private placement are subject to this 15% limitation,
unless the Trustees determine, based upon a review of the trading markets for
the specific securities, that such securities are liquid because they can be
offered and sold to "qualified institutional buyers" under Rule 144A of the
Securities Act of 1933 and meet certain liquidity guidelines which the
Trustees have adopted. The Trustees have delegated to Goldman, Sachs & Co. the
function of determining and monitoring liquidity of such securities, focusing
on such important factors, among others, as valuation, liquidity and
availability of information. However, each Portfolio will not invest more than
10% of its total assets in securities that are subject to restrictions on
resale ("restricted securities") under the Securities Act of 1933, as amended
("1933 Act"), including securities eligible for resale in reliance on Rule
144A under the 1933 Act. These investment practices could have the effect of
increasing the level of illiquidity in the Portfolios to the extent that
qualified institutional buyers become for a time uninterested in purchasing
these restricted securities.
Goldman, Sachs & Co. seeks to enhance the yield of the Portfolios by taking
advantage of yield disparities or other factors that occur in the mortgage-
related securities markets. The Portfolios 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 Goldman, Sachs & Co.'s
judgment as to a desirable portfolio maturity structure or if such disposition
is believed to be advisable due to other circumstances or considerations.
Goldman, Sachs & Co. expects that the net asset value of the Portfolios will
be relatively stable during normal market conditions. However, each
Portfolio's net asset value will vary to some extent, and a sudden and sharp
increase in prevailing interest rates could cause a substantial decline in
each Portfolio's net asset value, while a sudden and sharp decline in interest
rates could result in a substantial increase in each Portfolio's net asset
value.
In addition, as stated above each Portfolio intends to reduce, over time,
its "duration" in an effort to return $10 per unit upon the termination of a
Portfolio. Each Portfolio's duration is a measure of the price sensitivity of
a Portfolio, including expected cash flows and mortgage prepayments under a
wide range of interest rate scenarios. Maturity measures only the time until
final payment is due on a bond or other debt security; it does not take into
account the pattern of a security's cash flows over time, including how cash
flow is affected by prepayments and by changes in interest rates. In
determining
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the duration of the Portfolios, Goldman, Sachs & Co. will estimate the duration
of obligations that are subject to interest rate changes and prepayment or
redemption by the issuer, taking into account the influence of interest rates.
This method of determining duration is known as option-adjusted duration. The
Portfolios will actively buy and sell securities in order to adjust its option-
adjusted duration. There is no assurance that Goldman, Sachs & Co.'s estimates
of duration will, in fact, be accurate.
Each Portfolio may sell an instrument soon after its acquisition if Goldman,
Sachs & Co. believes that such disposition is consistent with attaining the
investment objective of each Portfolio. Portfolio instruments may be sold for a
variety of reasons, such as a more favorable investment opportunity or other
circumstances bearing on the desirability of continuing to hold such
instruments. A high rate of portfolio turnover involves correspondingly greater
transaction costs, which must be borne directly by each Portfolio and
ultimately by its unitholders.
Portfolio turnover rate is computed by dividing the lesser of the amount of
securities purchased or securities sold (excluding all securities whose
maturities at acquisition are one year or less) by the average monthly value of
such securities owned during the year, and includes purchase and sale
transactions entered into in connection with mortgage dollar rolls. A 100%
turnover rate would occur, for example, if all of the securities held by a
Portfolio were sold and replaced within one year. The rate at which
transactions occur will depend upon Goldman, Sachs & Co.'s perception of how
market conditions will affect a Portfolio. Goldman, Sachs & Co. will not
consider portfolio turnover a limiting factor in making investment decisions
for a Portfolio consistent with its investment objective and portfolio
management policies. A higher degree of portfolio turnover results in increased
transaction costs in the form of dealer spreads.
Each Portfolio's expected high turnover rate could cause a Portfolio to
realize gains in excess of restrictions imposed by the Internal Revenue Code of
1986 which require that less than 30% of the Portfolio's gross income in each
taxable year be derived from sales or other dispositions of securities held for
less than three months. If this requirement is not satisfied, a Portfolio would
not qualify for the special Federal tax treatment allowed to a regulated
investment company. The Portfolios intend to monitor their compliance with this
requirement.
CERTAIN INVESTMENT RESTRICTIONS
The Portfolios are subject to certain fundamental investment restrictions
which, as described in more detail in the Additional Statement, may be changed
with respect to a Portfolio only with the approval of the holders of a majority
of the outstanding units of that Portfolio. For a more complete description of
the investment restrictions summarized below and the other fundamental
investment restrictions to which the Portfolios are subject, see the Additional
Statement.
1. A Portfolio may not invest in the instruments of any one issuer, other
than Government Securities (as defined in the Investment Company Act of 1940),
if immediately after such investment, more than 5% of the value of a
Portfolio's total assets would be invested in the instruments of such issuer,
except that (a) up to 25% of the value of its total assets may be invested
without regard to such 5% limitation and (b) such 5% limitation shall not apply
to repurchase agreements collateralized by Government Securities.
2. A Portfolio may not borrow money, except for temporary or short-term
purposes, provided that the Portfolio maintains asset coverage of 300% for all
such borrowing. (As a matter of non-fundamental policy, a Portfolio may not
purchase securities while borrowings exceed 5% of the value of the Portfolio's
assets.)
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REPORTS TO UNITHOLDERS
Each unitholder of a Portfolio is provided with a printed confirmation for
each transaction and an individual monthly statement for the Portfolio. A
year-to-date statement for any account will be provided upon request made to
Goldman, Sachs & Co. Each unitholder will also receive annual and semi-annual
financial statements. Unitholder inquiries should be addressed to Goldman,
Sachs & Co. at the address set forth on the cover page of this Prospectus.
PURCHASE OF UNITS
Purchases of units of the Portfolios may be made only by Federal Reserve
wire. Payment by other means, including check or draft or transfer of funds
which are not federal funds, will not be accepted.
Units of the Portfolios may be offered on a continuous basis at their net
asset value next determined after the order therefor has been received. See
"Net Asset Value." However, the Portfolios currently do not expect to offer
additional Portfolio units for sale.
If authorized, purchase orders may be placed only on Business Days. If the
order is received by Goldman, Sachs & Co. by 4:00 p.m., New York time,
settlement of the transaction will occur on the next Business Day and the
units to which the order relates will be issued and will commence earning
income on such next Business Day provided that federal funds in respect of
such order have been received by The Northern Trust Company ("Northern") by
such next Business Day. If the order is received by Goldman, Sachs & Co. after
4:00 p.m., New York time, settlement of the transaction will occur on the
second Business Day and the units to which the order relates will be issued
and will commence earning income the second Business Day provided the federal
funds in respect of such order are received by Northern by such second
Business Day. If payment in federal funds is not received within the period
stated above, an investor's purchase order will be cancelled, and the investor
will be responsible for any loss resulting to the Fund.
OTHER INFORMATION
In the interest of economy, certificates representing Portfolio units will
not be issued. The Fund and its co-distributors reserve the right to reject
any purchase order.
After the initial purchase of units, an Account Information Form must be
completed promptly and mailed to Goldman, Sachs & Co. at the address set forth
on the cover page of this Prospectus. Redemptions may not be effected prior to
receipt of such Account Information Form.
Goldman, Sachs & Co. and/or CFS may from time to time, at their own expense,
provide compensation to certain dealers whose customers purchase significant
amounts of units of the Portfolios. The amount of such compensation may be
made on a one-time and/or periodic basis and, in the case of Goldman, Sachs &
Co., may be up to 20% of the annual fees that are earned by Goldman, Sachs &
Co. as investment adviser to the Portfolios (after adjustments) and are
attributable to units held by such customers. Such compensation will not
represent an additional expense to the Portfolios or their unitholders, since
it will be paid from assets of Goldman, Sachs & Co., its affiliates or CFS.
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REDEMPTION OF UNITS
All units of a Portfolio outstanding on their applicable Termination Date
will be redeemed by the Fund without a redemption charge at their net asset
value as of the close of business on the Termination Date. See "Net Asset
Value." The Termination Dates of the respective Portfolios will occur on or
about June 30, 1996 for Target Maturity Portfolio (1996), February 18, 1997
for Target Maturity Portfolio (Feb. 97) and May 15, 1997 for Target Maturity
Portfolio (May 97). Investors may also redeem units at any time before a
Termination Date at their net asset value next determined after a request has
been received by the Fund, less a redemption fee for early withdrawal equal to
.50% of the net asset value of the redeemed units at the time of redemption.
The redemption fee is not a sales charge, but is kept by a Portfolio for the
benefit of continuing unitholders. The purpose of the redemption fee is to
offset costs a Portfolio may incur in order to make payment in cash to a
redeeming unitholder, such as costs incurred in liquidating portfolio
securities, transaction and brokerage costs, odd-lot premiums, transfer taxes,
administrative fees, custodian fees and registrar or transfer agent fees.
Redemption requests are made by calling Goldman, Sachs & Co. at 800-342-5828
(800-DIAL-TCU) or by a written request addressed to Goldman, Sachs & Co.,
Attention: Shareholder Services, Trust for Credit Unions, 4900 Sears Tower,
Chicago, Illinois 60606. The letter of instruction must specify the Portfolio,
the number of units to be redeemed, the account number, payment instructions
and the exact registration on the account. A unitholder may request
redemptions by telephone if the optional telephone redemption privilege is
elected on the Account Information Form accompanying this Prospectus. It may
be difficult to implement redemptions by telephone in times of drastic
economic or market changes. In an effort to prevent unauthorized or fraudulent
redemption requests by telephone, Goldman, Sachs & Co. and State Street each
employ reasonable procedures specified by the Fund to confirm that such
instructions are genuine. Consequently, proceeds of telephone redemptions will
be wired directly to the credit union, central credit union or other
depository account designated in the unitholder's Account Information Form,
unless the unitholder provides written instructions indicating another credit
union, central credit union, or other depository account. Telephone redemption
requests will also be recorded. The Fund may implement other procedures from
time to time. If reasonable procedures are not implemented, the Fund may be
liable for any loss due to unauthorized or fraudulent transactions. In all
other cases, neither a Portfolio, the Fund nor Goldman Sachs & Co. will be
responsible for the authenticity of redemption instructions received by
telephone. Thus, except as stated, the total risk of loss for unauthorized
transactions is on the investor.
Although redemption requests may be placed on any day on which a Portfolio's
net asset value per unit is determined, proceeds will be remitted only on
Business Days (as defined under "Additional Information"). If a redemption
request is received by Goldman, Sachs & Co. by 4:00 p.m., New York time, the
proceeds are ordinarily wired on the next Business Day. Units to be redeemed
earn income with respect to the day the request is received; however, units
redeemed on a day immediately preceding a weekend or a holiday continue to
earn income until the next Business Day.
OTHER INFORMATION
Once wire instructions have been given to Northern, neither the Fund nor
Goldman, Sachs & Co. assumes responsibility for the performance of Northern or
of any intermediaries in the transfer process. If a problem with such
performance arises, the investor should deal directly with Northern or such
intermediaries.
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If its authorized signature is guaranteed by a credit union, commercial
bank, trust company, member firm of a national securities exchange or other
eligible guarantor institution, a unitholder may change the designated credit
union, central credit union or other depository account at any time upon
written notice to Goldman, Sachs & Co. Additional documentation, regarding any
such change or regarding a redemption by any means, may be required when
deemed appropriate by Goldman, Sachs & Co., and the request for such
redemption will not be considered to have been received in proper form until
such additional documentation has been received.
Under the Investment Company Act of 1940, the Fund is required to settle
redemption requests within seven days of receipt of such request. The right of
a unitholder to redeem units and the date of payment by the Fund may be
suspended for more than seven days for any period during which the New York
Stock Exchange is closed, other than the customary weekends or holidays, or
trading on such Exchange is restricted as determined by the SEC; or during any
emergency, as determined by the SEC, as a result of which it is not reasonably
practicable for the Fund to dispose of securities owned by a Portfolio or to
determine fairly the value of a Portfolio's net assets; or for such other
period as the SEC may by order permit for the protection of unitholders of a
Portfolio.
Prior to the applicable Termination Date, units of a Portfolio are not
redeemable at the option of the Fund unless the Trustees determine in their
sole discretion that failure to so redeem may have materially adverse
consequences to the unitholders of the relevant Portfolio.
INCOME
The Portfolios intend to declare a daily dividend (payable monthly)
determined with the objective of distributing the majority of its net
investment income while enhancing the stability of principal. Over the course
of a fiscal year, dividends accrued and paid will constitute substantially all
of the Portfolios' net investment income. From time to time, in order to
stabilize the monthly rate of distribution to unitholders and to enhance
stability of principal, a portion of such dividends may constitute a return of
capital. The Portfolios also intend that all net realized long-term and short-
term capital gains will be declared and paid as a dividend at least annually.
In determining amounts of capital gains, any capital loss carryovers from
prior years will be offset against capital gains.
Net investment income of each Portfolio consists of (i) interest accrued or
discount accreted on certain securities held by each Portfolio and any general
income of the Fund allocated to each Portfolio less (ii) the sum of (a)
premiums amortized on certain securities held by each Portfolio and (b) the
estimated expenses of each Portfolio.
The net investment income of the Portfolios is determined by State Street on
a daily basis. On days on which net asset value is calculated, this
determination is made immediately prior to the calculation of each Portfolio's
net asset value as of 4:00 p.m., New York time.
Dividends payable to unitholders with respect to net investment income and
capital gains, if any, will be paid in cash by Federal Reserve wire on the
first Business Day of the succeeding month, unless an election is made to
invest dividends in units of the Fund's Money Market Portfolio on the last
calendar day of each month at net asset value on such day. A unitholder must
elect to invest dividends in units of the Fund's Money Market Portfolio on the
Account Information Form and, unless the
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unitholder is a current investor in the Money Market Portfolio, must open an
account with the Fund for that Portfolio. A unitholder's dividend election may
be changed at any time upon written notice to Goldman, Sachs & Co. The
election with respect to each Portfolio's capital gains dividends must be the
same as the election with respect to each Portfolio's monthly net investment
income dividends (i.e., both must be either received in cash or invested in
Money Market Portfolio units).
NET ASSET VALUE
Net asset value per unit of each Portfolio is calculated by adding the value
of all securities and other assets of a Portfolio, subtracting the liabilities
of that Portfolio, and dividing the remainder by the number of units of the
Portfolio outstanding.
The net asset value per unit of each Portfolio for purposes of redemption of
units is calculated by State Street as of 4:00 p.m., New York time,
immediately after the determination of income declared as a dividend, on each
Business Day (as defined under "Additional Information"). Portfolio securities
for which accurate market quotations are readily available will be valued on
the basis of quotations provided by dealers in such securities or furnished by
a pricing service. Portfolio securities for which accurate market quotations
are not readily available and other assets will be valued at fair value using
methods determined in good faith by Goldman, Sachs & Co. under the supervision
of the Trustees and may include yield equivalents or a pricing matrix. Short-
term securities with maturities of 60 days or less are valued at amortized
cost which the Trustees have determined to equal fair value. Each Portfolio's
net asset value per unit will fluctuate as the value of its portfolio
securities changes in response to changing market rates of interest, principal
prepayments and other factors.
TAXES
TAXATION OF UNITHOLDERS
If state and federally chartered credit unions meet all requirements of
Section 501(c)(14)(A) of the Internal Revenue Code of 1986, as amended (the
"Code") and all rules and regulations thereunder, they will be exempt from
federal income taxation on any income, dividends or capital gains realized as
the result of purchasing, holding, exchanging or redeeming units of a
Portfolio.
Unitholders should consult their own tax advisers concerning applicable
state tax laws.
FEDERAL TAXATION OF THE FUND
The Fund intends that each Portfolio will qualify for the special tax
treatment afforded regulated investment companies under Subchapter M of the
Code. Each Portfolio is treated as a separate corporation for federal tax
purposes and generally must comply with the qualification and other
requirements applicable to regulated investment companies, without regard to
the Fund's other investment portfolios. If each Portfolio otherwise complies
with such provisions, then in any taxable year for which it distributes at
least 90% of its taxable income determined for federal income tax purposes,
each Portfolio will be relieved of federal income tax on the amounts
distributed. The Fund intends to distribute to unitholders substantially all
of each Portfolio's net investment income. See "Income." Net investment income
may be different from taxable income determined for federal income tax
purposes. However, such difference is not expected to affect adversely each
Portfolio's compliance with the provisions of the Code applicable to regulated
investment companies.
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Generally, on the sale or exchange of obligations held for more than one
year, net gain realized by each Portfolio which is not attributable to original
issue discount or certain market discount will be long-term capital gain. Such
capital gain, if any, will be distributed as capital gain dividends.
The Code will impose a 4% excise tax if a Portfolio fails to meet certain
requirements with respect to distributions of net ordinary income and capital
gain net income. It is not anticipated that this provision will have any
material impact on the Portfolios or their unitholders.
If for any taxable year a Portfolio does not qualify as a regulated
investment company, all of its taxable income will be taxed to a Portfolio at
the appropriate corporate rate without any reduction for distributions made to
unitholders.
The foregoing discussion of tax consequences is based on federal tax laws and
regulations in effect on the date of this Prospectus, which are subject to
change by legislative or administrative action.
MANAGEMENT
TRUSTEES
The trust agreement pursuant to which the Fund is organized (the "Trust
Agreement") provides that, subject to its provisions, the business of the Fund
shall be managed by the Trustees. The Trust Agreement provides that (a) the
Trustees may enter into agreements with other persons to provide for the
performance and assumption of various services and duties, including, subject
to the Trustees' general supervision, advisory and administration services and
duties and also including distribution, custodian, transfer and dividend
disbursing agency, unitholder servicing and accounting services and duties, (b)
a Trustee shall be liable for his own willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office, and for nothing else, and shall not be liable for errors of judgment or
mistakes of fact or law, and (c) subject to the preceding clause, the Trustees
are not responsible or liable for any neglect or wrongdoing of any officer or
any person referred to in clause (a).
The Additional Statement contains information as to the identity of and other
information about the Trustees and officers of the Fund.
INVESTMENT ADVISER AND TRANSFER AGENT
Goldman, Sachs & Co., through GSAM, One New York Plaza, New York, New York
10004, a separate operating division, acts as investment adviser to the Fund.
In addition, Goldman, Sachs & Co. acts as transfer agent. Goldman, Sachs & Co.
became registered as an investment adviser in 1981. As of October 31, 1995,
Goldman, Sachs & Co. served as an investment adviser, administrator or
distributor for approximately $53.9 billion in assets.
Under its advisory agreement with the Fund, Goldman, Sachs & Co., subject to
the general supervision of the Fund's Trustees, manages the Portfolios and
provides certain administrative services for the Fund. As manager of the
Portfolios , it is the responsibility of Goldman, Sachs & Co. to make
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investment decisions for the Portfolios and to place the purchase and sale
orders for the portfolio transactions of the Portfolios. Unitholder inquiries
should be directed to Goldman, Sachs & Co., 4900 Sears Tower, Chicago,
Illinois 60606.
The Fund's portfolio managers are Theodore T. Sotir and Jonathan A. Beinner.
Mr. Sotir is a Vice President of Goldman, Sachs & Co. and his responsibilities
include development of overall fixed income strategy and risk control. Mr.
Sotir joined GSAM in 1993, after working as a portfolio manager at Fidelity
Management Trust Company. Prior to joining Fidelity, Mr. Sotir worked for
Goldman, Sachs & Co. in the fixed income division for six years. Mr. Beinner
is a Vice President of Goldman, Sachs & Co. and his responsibilities include
investing in the particular types of securities the Portfolios may hold. Mr.
Beinner joined GSAM in 1990, after working in the trading and arbitrage group
of Franklin Savings Association.
As compensation for the services rendered for the Portfolios pursuant to its
advisory agreement and the assumption by it of the expenses related thereto,
Goldman, Sachs & Co. is entitled to receive a fee, computed daily and payable
monthly, from a Portfolio at an annual rate equal to .25% up to $75 million
and .20% over $75 million of each of the Portfolio's average daily net assets
considered separately on a per Portfolio basis. For the fiscal year ended
August 31, 1995, the Target Maturity Portfolio (1996), Target Maturity
Portfolio (Feb 97) and Target Maturity Portfolio (May 97) each paid an
advisory fee to Goldman, Sachs & Co. at the annual rate of .23%, .24% and
.25%, respectively, of each Portfolio's average daily net assets.
ACTIVITIES OF GOLDMAN, SACHS & CO. AND ITS AFFILIATES AND OTHER ACCOUNTS
MANAGED BY GOLDMAN, SACHS & CO. The involvement of Goldman, Sachs & Co. and
its affiliates in the management of, or its interest in, other accounts and
other activities of Goldman, Sachs & Co. may present conflicts of interest
with respect to the Portfolios or limit its investment activities. Goldman,
Sachs & Co. and its affiliates engage in proprietary trading and advise
accounts and funds which have investment objectives similar to those of the
Portfolios and/or which engage in and compete for transactions in the same
types of securities and instruments as the Portfolios. Goldman, Sachs & Co.
and its affiliates will not have any obligation to make available any
information regarding their proprietary activities or strategies, or the
activities or strategies used for other accounts managed by them, for the
benefit of the management of the Portfolios and it is not anticipated that
Goldman, Sachs & Co. will have access to proprietary information for the
purpose of managing the Portfolios. The results of the Portfolios' investment
activities, therefore, may differ from those of Goldman, Sachs & Co. and its
affiliates and it is possible that the Portfolios could sustain losses during
periods in which Goldman, Sachs & Co. and its affiliates and other accounts
achieve significant profits on their trading for proprietary or other
accounts. From time to time, the Portfolios' activities may be limited because
of regulatory restrictions applicable to Goldman, Sachs & Co. and its
affiliates, and/or their internal policies designed to comply with such
restrictions. See "Activities of Goldman, Sachs & Co. and its Affiliates and
Other Accounts Managed by Goldman, Sachs & Co." in the Additional Statement
for further information.
ADMINISTRATOR
Callahan Credit Union Financial Services Limited Partnership ("CUFSLP"), c/o
Callahan Financial Services, Inc., 1001 Connecticut Ave., N.W., Suite 1022,
Washington, D.C., 20036-5504, a Delaware limited partnership for which
Callahan Financial Services, Inc. serves as general partner and in which 37
major credit unions are limited partners, acts as the administrator of the
Portfolios. Under its
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administration agreement with the Fund, CUFSLP, subject to the general
supervision of the Fund's Trustees, periodically reviews the performance of
the investment adviser, the transfer agent, the distributors and the custodian
of the Portfolios; provides facilities, equipment and personnel to serve the
needs of investors; develops and monitors investor programs for credit unions;
provides assistance in connection with the processing of unit purchase and
redemption orders as reasonably requested by the transfer agent or the Fund;
handles unitholder problems and calls relating to administrative matters;
provides advice and assistance concerning the regulatory requirements
applicable to credit unions that invest in the Portfolios; and provides other
administrative services to the Fund.
For such services, CUFSLP is entitled to receive a fee, computed daily and
payable monthly, from each Portfolio at an annual rate equal to .05% of the
average daily net assets of each Portfolio. For the fiscal year ended August
31, 1995, the Target Maturity Portfolio (1996), the Target Maturity Portfolio
(Feb 97) and Target Maturity Portfolio (May 97) each paid an administration
fee to CUFSLP at the annual rate of .05%, respectively, of each Portfolio's
average daily net assets.
DISTRIBUTORS
Callahan Financial Services, Inc. ("CFS"), 1001 Connecticut Ave., N.W.,
Suite 1022, Washington, D.C. 20036-5504, a Delaware corporation, and Goldman,
Sachs & Co., 85 Broad Street, New York, New York, 10004, serve as co-
distributors of units of the Portfolios. CFS, a registered broker-dealer under
the Securities Exchange Act of 1934, is an affiliate of Callahan & Associates
Inc., a corporation organized under the laws of the District of Columbia,
founded in 1985.
CFS and Goldman, Sachs & Co. have entered into distribution agreements with
the Fund to sell units of the Portfolios upon the terms and at the current
offering price described in this Prospectus. CFS and Goldman, Sachs & Co. are
not obligated to sell any certain number of units of the Portfolios.
FUND EXPENSES
Common expenses of the Fund are allocated pro rata to the Portfolios and the
Fund's other investment portfolios based upon their respective net asset
values.
There are no sales loads, commissions or other fees imposed on investors at
the time of purchase of units and no charges imposed at the time of redemption
of units other than the redemption fee described under "Redemption of Units."
PERFORMANCE AND YIELD INFORMATION
From time to time total return and yield data for the Portfolios may be
quoted in advertisements or in unitholder communications. The total return of
the Portfolios will be calculated on an average annual total return basis, and
may also be calculated on an aggregate total return basis, for various
periods. Average annual total return reflects the average annual percentage
change in value of an investment in a Portfolio over the measuring period.
Aggregate total return reflects the total percentage change in value over the
measuring period. The methods prescribed by the SEC for standardized total
return calculations provide that calculations of total return assume that
dividends and capital gain distributions made by the Portfolios during the
period are reinvested in Portfolio units and reflect any non-recurring
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charges (such as the redemption fee for early withdrawal). The Fund may,
however, also advertise from time to time the total return of a Portfolio
without these fees, and may advertise total return on a year-by-year or other
basis for various specified periods by means of quotations, charts, graphs or
schedules.
The yield of a Portfolio is computed based on the net investment income of
the Portfolio during a 30-day period, which period will be identified in
connection with the particular yield quotation. More specifically, a
Portfolio's yield is computed by dividing the Portfolio's net investment
income per unit during a 30-day period by the maximum offering price per unit
on the last day of the period and annualizing the result on a semi-annual
basis. The net investment income used for purposes of determining yield may
differ from net investment income used for accounting purposes.
The Fund may advertise the performance of a Portfolio relative to certain
performance rankings, indices and other investments as described more fully in
the Additional Statement. Investors should note that the investment results of
the Portfolios will fluctuate over time, and any presentation of a Portfolio's
yield or total return for any prior period should not be considered as a
representation of what an investment may earn or what an investor's yield or
return may be in any future period.
ADDITIONAL INFORMATION
Under the Trust Agreement, all units of a Portfolio that are outstanding on
its Termination Date will be redeemed by the Fund at their net asset value,
and each Portfolio will be liquidated without further unitholder action. In
connection with these actions, the Board of Trustees may make appropriate
provision for any liabilities of a Portfolio. Prior to a Termination Date,
however, the Board of Trustees of the Trust may consider whether it is in the
best interests of the unitholders to liquidate a Portfolio on its Termination
Date notwithstanding the provisions of the Declaration of Trust. In
considering the matter, the Board of Trustees will take into account, among
other factors, the adverse effect which capital losses realized upon the
disposition of securities in connection with a liquidation (if any such losses
are anticipated) would have on a Portfolio and its unitholders. In the event
that the Board of Trustees determines that liquidation of a Portfolio on its
Termination Date would not be in the best interests of unitholders, the Board
of Trustees will call a special meeting of unitholders to consider an
appropriate amendment to the Declaration of Trust. The Declaration of Trust
requires the affirmative vote of the holders of a majority of outstanding
units of the particular Portfolio involved to approve such an amendment.
The Trust Agreement provides that each unitholder, by virtue of becoming
such, will be held to have expressly assented and agreed to the terms of the
Trust Agreement and to have become a party thereto. The Trust Agreement
permits the Trustees to issue an unlimited number of full and fractional units
of beneficial interest of one or more separate series representing interests
in separate investment portfolios. The Trustees have the right to establish
investment portfolios in addition to those heretofore established.
Each unit of a Portfolio is entitled to one vote on all matters voted upon
by the unitholders of such Portfolio, with fractional units being entitled to
proportionate fractional votes. Units do not have cumulative voting rights. As
a general matter, the Fund does not hold annual or other meetings of
unitholders. This is because the Trust Agreement provides for unitholder
voting only for the election or removal of one or more Trustees, if a meeting
is called for that purpose, and for certain other
27
<PAGE>
designated matters. Each Trustee serves until the next meeting of unitholders,
if any, called for the purpose of considering the election or reelection of
such Trustee or a successor to such Trustee, and until the election and
qualification of his successor, if any, elected at such meeting, or until such
Trustee sooner dies, resigns, retires or is removed by the unitholders or two-
thirds of the Trustees. A Portfolio will facilitate unitholder communication
with other unitholders as provided under Section 16(c) of the Investment
Company Act of 1940. For a further description of unitholder rights with
respect to the removal of Trustees and of other designated matters voted on by
unitholders, see "Description of Units" in the Additional Statement.
As used in this Prospectus, the term "Business Day" refers to those days on
which Goldman, Sachs & Co., The Northern Trust Company, State Street Bank and
Trust Company and the Federal Reserve Bank of New York are all open for
business, which are Monday through Friday except for holidays. For 1996, such
holidays are: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day
(observed), Good Friday, Memorial Day (observed), Independence Day, Labor Day,
Columbus Day, Veterans' Day, Thanksgiving and Christmas Day. On those days
when one of these organizations closes early, the right is reserved by
Goldman, Sachs & Co. to advance the time on that day by which redemption
requests must be received to become effective; provided that the current net
asset value of each unit shall be computed at least once on such days.
28
<PAGE>
TRUST
-----
for Credit Unions
Investment Adviser
Goldman, Sachs & Co.
New York, New York
Transfer Agent Custodian Distributors
Goldman, Sachs & Co. State Street Bank and Trust Callahan Financial
Chicago, Illinois Company Services, Inc.
Boston, Massachusetts Washington, DC
(800) 237-5678
Administrator
Callahan Credit Union Goldman, Sachs & Co.
Financial Services Auditors New York, New York
Limited Partnership Arthur Andersen LLP (800) 342-5828
Washington, DC Boston, Massachusetts (800-DIAL-TCU)
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
TRUST FOR CREDIT UNIONS
4900 SEARS TOWER
CHICAGO, ILLINOIS 60606-6303
(TARGET MATURITY PORTFOLIO (1996))
(TARGET MATURITY PORTFOLIO (FEB 97))
(TARGET MATURITY PORTFOLIO (MAY 97))
This Statement of Additional Information (the "Additional Statement") is not a
Prospectus. This Additional Statement should be read in conjunction with the
Prospectus dated December 1, 1995, (the "Prospectus") relating to the offering
of units of the Target Maturity Portfolio (1996), Target Maturity Portfolio (Feb
97) and Target Maturity Portfolio (May 97), (individually a "Portfolio" and
collectively the "Portfolios") of Trust for Credit Unions. A copy of the
Prospectus may be obtained from Goldman, Sachs & Co. at (800) 342-5828
(800-DIAL-TCU) or Callahan Credit Union Financial Services Limited Partnership
at ("CUFSLP") (800) 237-5678.
______________________________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Introduction B-3
Management B-5
Advisory and Other Services B-8
Portfolio Transaction B-11
Description of Units B-21
Adjustable and Fixed Rate Mortgage Loans and
Mortgage-Related Securities B-24
Investment Restrictions B-38
Calculation of Performance Quotations B-41
Other Information B-48
Financial Statements B-48
Description of Securities Ratings B-48
</TABLE>
THE DATE OF THIS ADDITIONAL STATEMENT IS DECEMBER 1, 1995.
<PAGE>
UNITS OF THE PORTFOLIOS ARE NOT ENDORSED BY, INSURED BY, GUARANTEED BY,
OBLIGATIONS OF OR OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, ANY CREDIT UNION
OR BY THE NATIONAL CREDIT UNION SHARE INSURANCE FUND, THE NATIONAL CREDIT UNION
ADMINISTRATION OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN THE PORTFOLIOS
INVOLVES RISK INCLUDING POSSIBLE LOSS OF PRINCIPAL.
B-2
<PAGE>
INTRODUCTION
Each Portfolio is a separate, diversified portfolio of Trust for Credit Unions
(the "Fund"), an open-end management investment company.
The Portfolios are designed for state and federally chartered credit unions
which seek higher current yields than a three-year Treasury note from a "high
quality" mortgage-related securities portfolio that will terminate within a
prescribed period. "High quality" securities are rated, at the time of purchase,
in one of the two highest rating categories by a nationally recognized
statistical rating organization ("NRSRO") and also include securities issued or
guaranteed by the U.S. Government, its agencies, instrumentalities or sponsored
enterprises. Investment in the Portfolio relieves investors from the
administrative and accounting burdens involved in direct investments, and also
provides related benefits as described below.
High Current Income. Each Portfolio seeks to achieve a high level of current
- --------------------
income. In considering whether a Portfolio has achieved this objective, the
investment adviser will compare such Portfolio's yield to that of a three-year
Treasury note maturing on or about May 15, 1996,February 15, 1997 and May 15,
1997, for the Target Maturity Portfolio (1996), Target Maturity Portfolio (Feb
97) and Target Maturity Portfolio (May 97) respectively. Unlike U.S. Treasury
notes, it is expected that most investments made by a Portfolio will not be
backed by the full faith and credit of the U.S. Government, and many investments
will not be insured or guaranteed by any government agency.
By selecting a term of three years, each Portfolio hopes to take advantage of a
portion of the yield curve that the investment adviser believes to be relatively
undervalued. In the investment adviser's view, this section of the curve has
historically offered a very attractive risk/return profile.
Preservation of Capital. Each Portfolio will seek to attain its objective to
- ------------------------
return $10 per unit by (1) preserving capital through active portfolio
management, including the purchase and sale of securities to change the
Portfolio's option-adjusted duration (see "Description of Investments -- Other
Portfolio Management Policies" in the Prospectus) and (2) reducing, over time,
the price sensitivity of a Portfolio to changes in interest rates in light of
expected cash flows and mortgage prepayments under different interest rate
scenarios. Duration, which is a measure of the price sensitivity of a
Portfolio, including expected cash flows and mortgage prepayments under a wide
range of interest rate scenarios, is reviewed and recalculated daily. In
connection with each Portfolio's goal to preserve capital, the investment
adviser will seek to limit a Portfolio's price
B-3
<PAGE>
volatility to that of a three-year Treasury note maturing on or about May 15,
1996, February 15, 1997 and May 15, 1997, respectively. However, there is no
assurance that the investment adviser's strategies will be successful. Each
Portfolio's net asset value per unit will fluctuate more than that of a money
market fund.
Liquidity. Because a Portfolio's units may be redeemed, subject to the
- ----------
redemption fee for early withdrawal, upon request of its unitholder on any
Business Day, a Portfolio offers greater liquidity than many competing
investments such as certificates of deposit and direct investments in certain
mortgage-related securities.
Experienced Professional Management. Successfully creating and managing a
- ------------------------------------
diversified portfolio of mortgage-related securities requires professionals with
extensive experience. Members of Goldman, Sachs & Co.'s highly skilled portfolio
management team bring together many years of experience in the analysis,
valuation and trading of U.S. fixed income securities. At October 31, 1995, they
were responsible for approximately $17.5 billion in fixed income assets
including $5.4 billion in mortgage-related securities.
A Sophisticated Investment Process. The Portfolios' investment process starts
- -----------------------------------
with a review of trends for the overall economy as well as for different sectors
of the U.S. mortgage market. Goldman, Sachs & Co.'s portfolio managers then
analyze yield spreads, implied volatility and the shape of the yield curve.
In planning each Portfolio's strategies, the managers are able to draw upon
certain fundamental analysis and proprietary technical models of Goldman, Sachs
& Co. Among the quantitative techniques used in the Portfolio's investment
process are:
. option-adjusted analytics to make initial strategic asset allocations
within the mortgage markets and to reevaluate investments as market
conditions change; and
. analytics to estimate mortgage prepayments and cash flows under different
interest rate scenarios and to maintain an optimal portfolio structure.
The Portfolio managers may use these and other trading and hedging techniques in
response to market and interest rate conditions. In particular, these and other
evaluative tools help the portfolio managers select securities with investment
characteristics they believe are desirable.
Convenience of a Fund Structure. The Portfolios eliminate many of the
- --------------------------------
complications that direct ownership of mortgage securities entail. For example,
most mortgage-related securities generate
B-4
<PAGE>
monthly payments of both principal and interest, just as the underlying
mortgages do. To conserve their principal, investors must make a special effort
to segregate and reinvest the principal portion of each payment on their own.
Each Portfolio relieves investors of this chore by automatically reinvesting all
principal payments within a Portfolio and distributing only current income each
month.
Laddered Maturities Program The Fund designed the program specifically for
- ---------------------------
credit unions with the help of a team of CFO's from leading credit unions. The
Portfolios that comprise the program may assist investors that wish to "ladder"
a portfolio (that is, construct a portfolio of securities with progressive
maturity dates) or match or hedge liabilities. A laddering strategy can be a
simple, convenient and effective method of establishing a disciplined, long-term
approach to investing. Specifically, a laddering strategy involves structuring
a portfolio so that a designated amount of money is invested continuously for a
fixed period on an ongoing basis. Laddering a portion of an investment
portfolio can result in more stable investment income, maturities timed to
coincide with cash flows, and maintenance of a conservative, interest rate
neutral approach to investing. Credit unions have typically used Treasury
securities, agency securities or certificates of deposit as core investments in
a laddering strategy. Unlike Treasury notes, investments in units of a
portfolio are not backed by the full faith and credit of the U.S. Government nor
issued or guaranteed by any government agency. Unlike certificates of deposit,
portfolio units do not provide a fixed yield for a stated period of time, and
return of principal is not assured.
MANAGEMENT
Information pertaining to the Trustees and officers of the Fund is set forth
below. Trustees deemed to be "interested persons" of the Fund for purposes of
the Investment Company Act of 1940 (the "1940 Act") are indicated by an
asterisk.
Gene R. Artemenko, Route 4, Box 1593, Reeds Spring, Missouri 65737. Trustee, Age
67, retired. Formerly, President and Treasurer of the United Air Lines
Employees' Credit Union until June 1991.
James C. Barr, 1600 North Oak Street, #420, Arlington, Virginia 22209. Trustee,
Age 60. Chief Executive Officer of the National Milk Producers Federation since
March 1985.
Edgar F. Callahan, 156 Second Street, San Francisco, California 94105-3993.
Trustee, Age 67. President and Chief Operating Officer of PATELCO Credit Union
since October 1987.
B-5
<PAGE>
Robert M. Coen, 2003 Sheridan Road, Evanston, Illinois 60208. Trustee, Age 56.
Professor of Economics, Northwestern University.
John T. Collins, 1330 Connecticut Ave. N.W., Washington, D.C. 20036. Trustee,
Age 49. Partner in the law firm of Steptoe & Johnson since January 1985. Prior
to January 1985, General Counsel to the U.S. Senate Banking Committee.
Thomas S. Condit, 300 No. Washington Street, Suite 200, Falls Church, VA 22046.
Trustee, Age 54. President and Chief Executive Officer of Craver, Matthews,
Smith & Co., Inc. (a direct mail fund raising company) since June 1993.
President and Chief Executive Officer of National Cooperative Bank (a financial
services company) June 1983 - May 1993 and various positions with affiliated or
subsidiary corporations from June 1983 to January 1992.
Rudy J. Hanley, 2115 N. Broadway, Santa Ana, California 92706. Vice Chairman and
Trustee, Age 52. Chief Executive Officer of Orange County Teachers Federal
Credit Union since September 1982. Director of Credit Union National
Association, November 1992 to September 1, 1995.
John L. Ostby, HC-73, Box 840, Lake of the Woods, Locust Grove, Virginia 22508.
Chairman and Trustee, Age 76. Attorney at Law of John Ostby, Esq. since January
1991. Attorney at Law, July 1985 to December 1994, General Counsel to the
National Credit Union Administration.
Wendell A. Sebastian, 711 South Dale Mabry, Tampa, Florida 33679. Trustee, Age
51. President of GTE Federal Credit Union since September 1991. Vice President
of GTE Federal Credit Union from April 1989 to September 1991. Director and
President of Callahan Financial Services, Inc. from March 1987 to March
1989.
Marcia L. Beck, One New York Plaza, New York, New York 10004. President, Age 40.
Director Mutual Funds Group of Goldman Sachs Asset Management since December
1994. Director of Institutional Funds Group of Goldman Sachs Asset Management
September 1992 to December 1994. Vice President and Senior Portfolio Manager,
Goldman Sachs Asset Management June 1988 to Present.
Charles W. Filson, 1001 Connecticut Avenue, N.W., Suite 1022, Washington, D.C.
20036-5504. Vice President, Age 51. Director and Vice President of Callahan
Financial Services, Inc. March 1989 and Treasurer thereof since March 1987.
Pauline Taylor, 4900 Sears Tower, Chicago, IL 60606-6303. Vice President, Age
49. Vice President of Goldman, Sachs & Co. since
B-6
<PAGE>
June 1992. Consultant from 1989-1992. Senior Vice President of Fidelity
Investments prior to 1989.
John W. Mosior, 4900 Sears Tower, Chicago, Illinois 60606-6303. Vice President,
Age 56. Vice President of Goldman, Sachs & Co. Manager, Shareholder Servicing of
Goldman Sachs Asset Management since November 1989.
Nancy L. Mucker, 4900 Sears Tower, Chicago, Illinois 60606-6303. Vice President,
Age 46. Vice President of Goldman, Sachs & Co. since April 1985. Manager,
Shareholder Servicing of Goldman Sachs Asset Management since November 1989.
Scott M. Gilman, One New York Plaza, New York, New York 10004. Treasurer, Age
36. Director, Mutual Fund Administration, Goldman Sachs Asset Management since
April 1994. Assistant Treasurer of Goldman Sachs Funds Management, Inc. since
March 1993. Vice President of Goldman, Sachs & Co. since March 1990. Formerly,
Manager, Arthur Andersen & Co.
Michael J. Richman, 85 Broad Street, New York, New York 10004. Secretary, Age
35. Associate General Counsel, Goldman Sachs Asset Management since February
1994. Vice President and Assistant General Counsel, Goldman, Sachs & Co.,
Counsel to the Funds Group, Goldman Sachs Asset Management since June 1992.
Formerly, Partner of Hale and Dorr from September 1991 to June 1992. Formerly,
Attorney-at-Law, Gaston & Snow from September 1985 to September 1991.
Howard B. Surloff, 85 Broad Street, New York, New York 10004. Assistant
Secretary, Age 30. Assistant General Counsel and Vice President, Goldman, Sachs
& Co, since November 1993 and May 1994, respectively. Counsel to the Funds
Group, Goldman Sachs Asset Management since November 1993. Formerly Associate of
Shereff, Friedman, Hoffman & Goodman.
William F. Connors, 1001 Connecticut Avenue, N.W., Suite 1022, Washington, D.C.
20036. Assistant Secretary, Age 52. President and Secretary of Callahan
Financial Services, Inc. since April 1994. President and CEO of Los Angeles
Police Credit Union from 1987 to 1994.
Kaysie Uniacke, One New York Plaza, New York, New York 10004. Assistant
Secretary, Age 34. Vice President and Portfolio Manager, Goldman Sachs Asset
Management 1988 to Present.
Elizabeth Alexander, One New York Plaza, New York, New York 10004. Assistant
Secretary, Age 26. Junior Portfolio Manager, 1995 to Present. Fund Trading
Assistant, Goldman Sachs Asset Management 1993 to 1995. Formerly, Compliance
Analyst, Prudential Insurance, 1991 through 1993.
B-7
<PAGE>
Steven Hartstein, 85 Broad Street, New York, New York 10004. Assistant
Secretary, Age 31. Legal Product Analyst, Goldman, Sachs & Co. since June 1993.
Funds Compliance Officer, Citibank Global Asset Management, August 1991 to June
1993. Legal Assistant, Brown & Wood prior hereto.
Gail Shanley, 85 Broad Street, New York, New York 10004. Assistant Secretary,
Age 26. Legal Products Analyst, Goldman, Sachs & Co. since June 1994.
Formerly, Blue Sky Legal Assistant at Smith Barney Shearson.
As of October 31, 1995, the Trustees and Officers of the Fund, as a group, owned
in the aggregate less than 1% of the outstanding shares of the Fund. Each
officer holds comparable positions with certain other investment companies of
which Goldman, Sachs & Co., GSAM or an affiliate thereof is the investment
adviser and/or distributor.
The following table sets forth certain information with respect to the
compensation of each Trustee of the Trust for the one-year period ended August
31, 1995:
<TABLE>
<CAPTION>
Pension or Total
Retirement Compensation
Benefits Estimated From Goldman
Pension or Accrued Annual Sachs Mutual
Aggregate as Part Benefits Funds
Compensation of Trust's Upon including
Name of Trustee from the Trust Expenses Retirement the Trust)*
- --------------- -------------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
Gene R. Artemenko $8,000 -0- -0- $8,000
James C. Barr $8,000 -0- -0- $8,000
Edgar F. Callahan $ 0 -0- -0- -0-
Robert M. Coen $8,000 -0- -0- $8,000
John T. Collins $8,000 -0- -0- $8,000
Thomas S. Condit $8,000 -0- -0- $8,000
Rudolf J. Hanley $8,000 -0- -0- $8,000
John L. Ostby $8,000 -0- -0- $8,000
Wendell A. Sebastian $ 0 -0- -0- -0-
Lawrence Connell $2,000 -0- -0- $2,000
</TABLE>
* The Goldman Sachs Mutual Funds consisted of 70 mutual funds, including the
six series of the Trust, on August 31, 1995.
ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER
As stated in the Prospectus, Goldman, Sachs & Co., through Goldman Sachs Asset
Management ("GSAM"), One New York Plaza, New York, New York 10004, a separate
operating division, acts as the Fund's investment adviser. See "Management-
Investment Adviser and Transfer Agent" in the Prospectus for a description of
the investment advisory duties of Goldman, Sachs & Co. Goldman, Sachs
B-8
<PAGE>
& Co.'s administrative obligations include, subject to the general supervision
of the Trustees of the Fund, (a) providing supervision of all aspects of a
Portfolio's non-investment operations not performed by others pursuant to a
Portfolio's administration agreement or custodian agreement, (b) providing a
Portfolio, to the extent not provided pursuant to such agreements or the Fund's
transfer agency agreement, with personnel to perform such executive,
administrative and clerical services as are reasonably necessary to provide
effective administration of such Portfolio, (c) arranging, to the extent not
provided pursuant to such agreements, for the preparation, at a Portfolio's
expense, of its tax returns, reports to unitholders, periodic updating of the
Prospectus and reports filed with the Securities and Exchange Commission (the
"SEC") and other regulatory authorities, (d) providing the Fund, to the extent
not provided pursuant to such agreements, with adequate office space and
necessary office equipment and services, (e) maintaining all of a Portfolio's
records other than those maintained pursuant to such agreements, (f) to the
extent requested by the Trustees of the Fund, negotiating changes to the terms
and provisions of the Fund's administration agreement, the custodian agreement
and the distribution agreement with Callahan Financial Services, Inc., and (g)
reviewing and paying (or causing to be paid) all bills or statements for
services rendered to a Portfolio.
The advisory agreement provides that Goldman, Sachs & Co. may render similar
services to others so long as its services under such agreements are not
impaired thereby. The advisory agreement also provides that, subject to
applicable provisions of the 1940 Act, Goldman, Sachs & Co. will not be liable
for any error in judgment or mistake of law or for any loss suffered by the Fund
except a loss resulting from willful misfeasance, bad faith or gross negligence
in the performance of its obligations and duties, or by reason of its reckless
disregard of its obligations and duties, under the advisory agreement or the
transfer agency agreement. The advisory agreement provides further that the
Fund will indemnify Goldman, Sachs & Co. against certain liabilities, including
liabilities under federal and state securities laws, or, in lieu thereof,
contribute to payment for resulting losses.
The advisory agreement will remain in effect until March 31, 1996 with respect
to Target Maturity Portfolio (1996) and Target Maturity Portfolio (Feb 97) and
until March 31, 1997 with respect to Target Maturity Portfolio (May 97). After
the initial term for a Portfolio, the Advisory Agreement will continue from year
to year thereafter with respect to a Portfolio provided such continuance is
specifically approved at least annually (a) by the vote of a majority of the
outstanding units of each Portfolio (as defined under "Investment Restrictions")
or by a majority of the Trustees of the Fund, and (b) by the vote of a majority
of the Trustees of the Fund who are not parties to the advisory agreement or
"interested persons" (as such term is defined in the
B-9
<PAGE>
1940 Act) of any party thereto, (the "Disinterested Trustees"), cast in person
at a meeting called for the purpose of voting on such approval. The advisory
agreement will terminate automatically if assigned (as defined in the 1940 Act)
and is terminable at any time without penalty with respect to a Portfolio by the
Trustees of the Fund or by vote of a majority of the outstanding units of the
relevant Portfolio (as defined under "Investment Restrictions") on 60 days'
written notice to Goldman, Sachs & Co. and by Goldman, Sachs & Co. on 60 days'
written notice to the Fund. The advisory agreement may not be amended with
respect to a Portfolio without the vote of a majority of a Portfolio's
outstanding units.
Applicable regulations of state securities commissions and the advisory
agreement will require Goldman, Sachs & Co. to rebate its advisory fee with
respect to a Portfolio in an amount equal to a portion of any excess of annual
Portfolio expenses (including the advisory fee, but excluding interest, taxes,
brokerage commissions and extraordinary expenses) over expense limitations
imposed by such state regulations, unless exemptions are obtained. Callahan
Credit Union Financial Services Limited Partnership ("CUFSLP") has agreed to
bear an amount equal to the remaining portion of any such excess.) The most
stringent expense limitation imposed by any of the states, as of this date, is
imposed by the California Department of Corporations which provides that the
aggregate annual expenses of a Portfolio will not exceed 2 1/2% of the first $30
million of the average net assets, 2% percent of the next $70 million of the
average net assets and 1 1/2% of the remaining average net assets of a Portfolio
for any fiscal year, determined monthly or at more frequent intervals on a
consistent basis.
Expenses borne by each Portfolio include, without limitation, the fees payable
to Goldman, Sachs & Co. and CUFSLP, the fees and expenses of the Fund's
custodian, filing fees for the registration or qualification of Portfolio units
under federal and state securities laws, expenses of the organization of the
Portfolios, the fees of any trade association of which the Fund is a member,
taxes, interest, costs of liability insurance, fidelity bonds, indemnification
or contribution, any costs, expenses or losses arising out of any liability of
or claim for damages or other relief asserted against the Fund for violation of
any law, legal, auditing and tax services fees and expenses, expenses of
preparing and setting in type prospectuses, statements of additional
information, proxy material, reports and notices and the printing and
distributing of the same to the Portfolios' unitholders and regulatory
authorities and compensation and expenses of the Trustees.
B-10
<PAGE>
For the periods indicated, the amount of the advisory fee incurred by each
Portfolio was as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Target Maturity
Portfolio (1996)* $290,761 $297,958 $51,719
Target Maturity
Portfolio (Feb 97)** $227,279 $127,619 N/A
Target Maturity
Portfolio (May 97)*** $166,798 $ 47,744 N/A
</TABLE>
___________________
* Commenced operations July 1, 1993.
** Commenced operations February 15, 1994.
*** Commenced Operations May 23, 1994.
PORTFOLIO TRANSACTIONS
In connection with portfolio transactions for a Portfolio, which are generally
done at a net price without a broker's commission (i.e., a dealer is dealing
with a Portfolio as principal and receives compensation equal to the spread
between the dealer's cost for a given security and the resale price of such
security), the Portfolio's advisory agreement provides that Goldman, Sachs & Co.
shall attempt to obtain the best net price and the most favorable execution. On
occasions when Goldman, Sachs & Co. deems the purchase or sale of a security to
be in the best interests of a Portfolio as well as its other customers
(including any other portfolio or other investment company or advisory account
for which Goldman, Sachs & Co. acts as investment adviser), the advisory
agreement provides that Goldman, Sachs & Co., to the extent permitted by
applicable laws and regulations, may aggregate the securities to be sold or
purchased for a Portfolio with those to be sold or purchased for such other
customers in order to obtain the best net price and most favorable execution.
In such event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by Goldman, Sachs & Co. in
the manner it considers to be most equitable and consistent with its fiduciary
obligations to each Portfolio and such other customers. In some instances, this
procedure may adversely affect the size of the position obtainable for a
Portfolio. To the extent that the execution and price offered by more than one
dealer are believed to be comparable, the advisory agreement permits Goldman,
Sachs & Co., in its discretion, to purchase and sell
B-11
<PAGE>
portfolio securities to and from dealers who provide the Fund with brokerage or
research services.
During the fiscal year ended August 31, 1995, the Funds acquired and sold
securities issued by Nomura Securities International, Salomon Brothers, Inc.,
Bear Stearns Companies, Inc., First Boston Corporation, Daiwa Securities
America, Inc., Smith Barney Shearson, Inc., Merrill Lynch & Co., Lehman
Brothers, Morgan Stanley Group, Inc. and Swiss Bank Corp. At August 31, 1995,
the Target Maturity Portfolio (1996) held the following amounts of securities of
its regular brokers/dealers, as defined in Rule 10b-1 under the 1940 Act, or
their partners ($ in thousands): Salomon Brothers, Inc.-$9,245; Lehman Brothers-
$80 and Daiwa Securities America, Inc.-$1,154. The Target Maturity Portfolio
(Feb 97) held the following amount of securities of its regular broker/dealers,
as defined in Rule 10b-1 under the 1940 Act, or their partners ($ in thousands):
Salomon Brothers, Inc.-$7,924 and Merril Lynch & Co.-$3,884. The Target Maturity
Portfolio (May 97) held the following amounts of securities of its regular
brokers/dealers, as defined in Rule 10b-1 under the 1940 Act, or their partners
($ in thousands): Salomon Brothers, Inc. - $5,531 and Merrill Lynch & Co.-
$2,842.
ACTIVITIES OF GOLDMAN, SACHS & CO. AND ITS AFFILIATES AND OTHER ACCOUNTS
- -------------------------------------------------------------------------
MANAGED BY GOLDMAN, SACHS & CO. The involvement of Goldman, Sachs & Co. and its
- -------------------------------
advisory affiliates, in the management of, or interest in , other accounts and
other activities of Goldman, Sachs & Co. may present conflicts of interest with
respect to the Portfolios or impede their investment activities.
Goldman, Sachs & Co. and its advisory affiliates have proprietary interests
in, and manage or advise accounts or funds (including separate accounts and
other funds and collective investment vehicles) which have investment objectives
similar to those of the Portfolios and/or which engage in transactions in the
same types of securities and instruments as the Portfolios. Goldman, Sachs & Co.
and its affiliates are major participants in the fixed income markets, in each
case on a proprietary basis and for the accounts of customers. As such, Goldman,
Sachs & Co. and its affiliates are actively engaged in transactions in the same
securities and instruments in which the Portfolios invest. Such activities could
affect the prices and availability of the securities and instruments in which
the Portfolios will invest, which could have an adverse impact on each
Portfolio's performance. Such transactions, particularly in respect of
proprietary accounts or customer accounts other than those included in the
Advisor and its advisory affiliates' asset management activities, will be
executed independently of the Portfolios' transactions and thus at prices or
rates that may be more or less favorable. When the Advisor and its advisory
affiliates seek to purchase or sell the same assets for their managed accounts,
including a Portfolio, the assets actually
B-12
<PAGE>
purchased or sold may be allocated among the accounts on a basis determined in
its good faith discretion to be equitable. In some cases, this system may
adversely affect the size or the price of the assets purchased or sold for the
Portfolios.
From time to time, a Portfolio's activities may be restricted because of
regulatory restrictions applicable to Goldman, Sachs & Co. and its affiliates,
and/or their internal policies designed to comply with such restrictions. As a
result, there may be periods, for example, when the Advisor will not initiate or
recommend certain types of transactions in certain securities or instruments
with respect to which the Advisor and/or its affiliates are performing services
or when position limits have been reached.
In connection with their management of the Portfolios, the Advisor may have
access to certain fundamental analysis and proprietary technical models
developed by Goldman, Sachs & Co. and other affiliates. The Advisor will not be
under any obligation, however, to effect transactions on behalf of the
Portfolios in accordance with such analysis and models. In addition, neither
Goldman, Sachs & Co. nor any of its affiliates will have any obligation to make
available any information regarding their proprietary activities or strategies,
or the activities or strategies used for other accounts managed by them, for the
benefit of the management of the Portfolios and it is not anticipated that the
Advisor will have access to such information for the purpose of managing the
Portfolios. The proprietary activities or portfolio strategies of Goldman,
Sachs & Co. and its affiliates or the activities or strategies used for accounts
managed by them or other customer accounts could conflict with the transactions
and strategies employed by the Advisor in managing the Portfolios.
The results of each Portfolio's investment activities may differ significantly
from the results achieved by the Advisor and its affiliates for their
proprietary accounts or accounts (in cluding investment companies or collective
investment vehicles) managed or advised by them. It is possible that Goldman,
Sachs & Co. and its affiliates and such other accounts will achieve investment
results which are substantially more or less favorable than the results achieved
by the Portfolios. Moreover, it is possible that the Portfolios will sustain
losses during periods in which Goldman, Sachs & Co. and its affiliates achieve
significant profits on their trading for proprietary or other accounts. The
opposite result is also possible.
An investment policy committee which may include partners of Goldman, Sachs &
Co. and its affiliates may develop general policies regarding Portfolio
activities, but will not be involved in the day-to-day management of the
Portfolios. In such instances, those individuals may, as a result, obtain
information regarding
B-13
<PAGE>
the Portfolios' proposed investment activities which is not generally available
to the public. In addition, by virtue of their affiliation with Goldman, Sachs
& Co., any such member of an investment policy committee will have direct or
indirect interests in the activities of Goldman, Sachs & Co. and its affiliates
in securities and investments similar to those in which the Portfolios
invest.
In addition, certain principals and certain of the employees of the Advisor
are also principals or employees of Goldman, Sachs & Co. or its affiliated
entities. As a result, the performance by these principals and employees of
their obligations to such other entities may be a consideration of which
investors in the Portfolios should be aware.
The Advisor may enter into transactions and invest in instruments on behalf of
a Portfolio in which customers of Goldman, Sachs & Co. serve as the
counterparty, principal or issuer. In such cases, such party's interests in the
transaction will be adverse to the interests of the Portfolios, and such party
may have no incentive to assure that the Portfolios obtain the best possible
prices or terms in connection with the transactions. Goldman, Sachs & Co. and
its affiliates may also create, write or issue derivative instruments for
customers of Goldman, Sachs & Co. or its affiliates, the underlying securities
or instruments of which may be those in which the Portfolios invest or which may
be based on the performance of a Portfolio. The Portfolios may, subject to
applicable law, purchase investments which are the subject of an underwriting or
other distribution by Goldman, Sachs & Co. or its affiliates and may also enter
into transactions with other clients of Goldman, Sachs & Co. or its affiliates
where such other clients have interests adverse to those of the Portfolios. To
the extent affiliated transactions are permitted, the Portfolios will deal with
Goldman, Sachs & Co. and its affiliates on an arm's-length basis.
Each Portfolio will be required to establish business relationships with its
counterparties based on the Portfolio's own credit standing. Neither Goldman,
Sachs & Co. nor its affiliates will have any obligation to allow their credit to
be used in connection with a Portfolio's establishment of its business
relationships, nor is it expected that a Portfolio's counterparties will rely on
the credit of Goldman, Sachs & Co. or any of its affiliates in evaluating the
Portfolio's creditworthiness.
B-14
<PAGE>
It is possible that a Portfolio's holdings will include securities of entities
for which Goldman, Sachs & Co. performs investment banking services as well as
securities of entities in which Goldman, Sachs & Co. makes a market. From time
to time, Goldman, Sachs & Co.'s activities may limit the Portfolios' flexibility
in purchases and sales of securities. When Goldman, Sachs & Co. is engaged in
an underwriting or other distribution of securities of an entity, the Advisor
may be prohibited from purchasing or recommending the purchase of certain
securities of that entity for the Portfolios.
TRANSFER AGENT
Under its transfer agency agreement, Goldman, Sachs & Co. serves as transfer
agent and dividend disbursing agent for each Portfolio. Goldman, Sachs & Co.
has undertaken to (a) process and provide confirmations for purchase and
redemption transactions, (b) answer customer inquiries regarding the current
yield of, and certain other matters (e.g., account status information)
pertaining to, each Portfolio, (c) establish and maintain separate accounts with
respect to each unitholder, (d) provide periodic statements showing account
balances and (e) provide for the payment of dividends or distributions to
unitholders.
As compensation for the services rendered for a Portfolio as transfer agent,
Goldman, Sachs & Co. is also entitled to a fee of $18 per year for each
unitholder account plus reimbursement for certain expenses.
For the periods indicated, the amount of the transfer agency fee incurred by
each Portfolio was as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Target Maturity
Portfolio (1996)* $ 765 $ 892 $ 0
Target Maturity
Portfolio (Feb 97)** $ 598 $ 324 N/A
Target Maturity
Portfolio (May 97)*** $ 376 $ 200 N/A
</TABLE>
B-15
<PAGE>
* Commenced operations July 1, 1993.
** Commenced operations February 15, 1994.
*** Commenced Operations May 23, 1994.
ADMINISTRATOR
As stated in the Prospectus, CUFSLP acts as administrator for the Portfolios.
In carrying out its duties, CUFSLP has undertaken to (a) review the preparation
of reports and proxy statements to unitholders, the periodic updating of the
Prospectus, this Additional Statement and the Registration Statement and the
preparation of all other reports filed with the SEC, (b) periodically review the
services performed by the investment adviser, the custodian, the distributors
and the transfer agent, and make such reports and recommendations to the
Trustees of the Fund concerning the performance of such services as the Trustees
reasonably request or as CUFSLP deems appropriate, (c) negotiate changes to the
terms and provisions of the Fund's advisory agreement, the custodian agreement,
the transfer agency agreement and the distribution agreement with Goldman, Sachs
& Co., to the extent requested by the Trustees of the Fund, and (d) provide the
Fund with personnel to perform such executive, administrative and clerical
services as may be reasonably requested by the Trustees of the Fund.
In addition, CUFSLP has undertaken to: (a) provide facilities, equipment and
personnel to serve the needs of investors, including communications systems and
personnel to handle unitholder inquiries, (b) develop and monitor investor
programs for credit unions, (c) provide assistance in connection with the
processing of unit purchase and redemption orders as reasonably requested by the
transfer agent or the Fund, (d) inform Goldman, Sachs & Co. in connection with
the investment management of the Portfolios as to anticipated purchases and
redemptions by unitholders and new investors, (e) provide information and
assistance in connection with the registration of each Portfolio's units in
accordance with state securities requirements, (f) make available and distribute
information concerning the Portfolios to unitholders as requested by the Fund,
(g) handle unitholder problems and calls relating to administrative matters, (h)
provide advice and assistance concerning the regulatory requirements applicable
to credit unions that invest in a Portfolio, (i) provide assistance in
connection with the preparation of each Portfolio's periodic financial
statements and annual audit as reasonably requested by the Fund or the Fund's
independent accountants, (j) furnish stationery and office supplies, and (k)
generally assist in the Portfolios' operations.
B-16
<PAGE>
For the periods indicated, the amount of the administration fee earned by CUFSLP
was as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Target Maturity
Portfolio (1996)* $63,315 $65,114 $11,337
Target Maturity
Portfolio (Feb 97)** $47,445 $26,652 N/A
Target Maturity
Portfolio (May 97)*** $33,360 $ 9,549 N/A
</TABLE>
___________________
* Commenced operations July 1, 1993.
** Commenced operations February 15, 1994.
*** Commenced Operations May 23, 1994.
The administration agreement will remain in effect until March 31, 1996, and
will continue from year to year thereafter provided such continuance is
specifically approved at least annually (a) by the vote of a majority of the
Trustees and (b) by the vote of a majority of the Trustees of the Fund who are
not parties to the administration agreement or "interested persons" (as such
term is defined in the 1940 Act) of any party thereto (the "Disinterested
Trustees"), cast in person at a meeting called for the purpose of voting on such
approval. The administration agreement may be terminated with respect to a
Portfolio at any time, without the payment of any penalty, by a vote of a
majority of the Disinterested Trustees or by vote of the majority of the
outstanding units of the Portfolio (as defined under "Investment Restrictions")
on 60 days' written notice to CUFSLP and by CUFSLP on 60 days' written notice to
the Fund. The administration agreement provides that it may be amended by the
mutual consent of the Fund and CUFSLP, but the consent of the Fund must be
approved by vote of a majority of the Disinterested Trustees cast in person at a
meeting called for the purpose of voting on such amendment. The administration
agreement will terminate automatically if assigned (as defined in the 1940
Act).
The administration agreement provides that CUFSLP will not be liable for any
error in judgment or mistake of law or for any loss suffered by the Fund except
a loss resulting from willful misfeasance, bad faith or gross negligence in the
performance of its obligations and duties, or by reason of its reckless
disregard of its obligations and duties, under the agreement. The agreement
provides further that the Fund will indemnify CUFSLP against certain
liabilities, including liabilities under the federal and state securities laws
or, in lieu thereof, contribute to payment for resulting losses.
B-17
<PAGE>
The thirty-seven credit unions listed below are the limited partners of
CUFSLP, which created Trust for Credit Unions in conjunction with Goldman, Sachs
& Co. As of June 30, 1995, these credit unions had total assets of $20.8 billion
from twenty-two different states.
J. David Osborne, President
Larry Hoffman, Vice President-Finance
Anheuser-Busch Employees Credit Union
Larry Morgan, President
APCO Employees Credit Union
Douglas Ferraro, President
Kyle M. Markland, Sr. Vice President Finance
Bellco First Federal Credit Union
Gary Oakland, President
T. Brad Canfield, Vice President
Accounting/Investments
Boeing Employees Credit Union
John Siefken, President
Sandy Andrews, Sr. Vice President
Citizens Equity Federal Credit Union
Dean Nelson, President
Bryan Bennett, Vice President-Controller
City-County Federal Credit Union
Larry T. Wilson, President
Barry Hooks, Finance Manager
Coastal Federal Credit Union
Tom Budd, Manager of Finance
Dearborn Federal Credit Union
Donald Hersman, General Manger
Kendrick Smith, Portfolio Manager
Eastern Financial Federal Credit Union
Thomas E. Sargent, President
Michael Osborne, Chief Financial Officer
First Technology Federal Credit Union
Wendell A. Sebastian, President
Brian Crawford, Controller
GTE Federal Credit Union
Stan Hollen, President
Judy Flores, CFO
The Golden 1 Credit Union
B-18
<PAGE>
Charles Cockburn, President
Hudson Valley Federal Credit Union
Paul Horgen, President
Michele Manthey, Vice President
Finance and Administration
IBM Mid-America Employees Federal Credit Union
Joseph J. Baldin, President
Bob Jansen, Vice President-Operations
Inland Employees Federal Credit Union
Jean Yokum, President
Greg Manweiler, Vice President Finance
Langley Federal Credit Union
Frank Berrish, President
LICU Corporate Federal Credit Union
Dennis Pierce, President
Dennis Mann, Senior Vice President
Members America Credit Union
Joseph Bressi, President
Montgomery County Teachers Federal Credit Union
Douglas M. Allman, President
NASA Federal Credit Union
Lindsay Alexander, President
Tim Duvall, Finance Division Manager
NIH Federal Credit Union
Brad Beal, President
Paul Parrish, Sr. Vice President
Chief Financial Officer
Nevada Federal Credit Union
Joseph S. Coey, President
New Mexico Educators Federal Credit Union
Michael J. Maslak, President
Dave Doss, Chief Financial Officer
North Island Federal Credit Union
Rudy Hanley, President
Paul Sundermann, Chief Financial Officer
Orange County Teachers Federal Credit Union
Edgar F. Callahan, President
Andrew Hunter, Chief Financial Officer
B-19
<PAGE>
Patelco Credit Union
Jeffrey Farver, President
San Antonio Federal Credit Union
Gregory Thomas, President
Space Coast Credit Union
Stephan Winninger, President
State Employees Credit Union
Donald Granato, President
Steel Works Community Federal Credit Union
Richard Rice, President
Teachers Credit Union
Betty Hobbs, President
Roy Dobbs, Executive Vice President
Tennessee Teachers Credit Union
Gregory Blount, President
Tropical Federal Credit Union
Philip L. Hart, President
Tulsa Federal Employees Credit Union
Leonard Greene, President
Unified Federal Credit Union
E. Burton Eubanks, President
University Federal Credit Union
Frank Berrish, President
Visions Federal Credit Union
CUSTODIAN
State Street Bank and Trust Company ("State Street"), P.O. Box 1713, Boston,
Massachusetts 02105, is the custodian of the Fund's portfolio securities and
cash. State Street also maintains the Fund's accounting records. The Northern
Trust Company ("Northern") has been retained by State Street to serve as its
agent in connection with certain wire receipts and transfers of funds.
AUDITORS
Arthur Andersen LLP, independent public accountants, One International Place,
Boston, Massachusetts, 02110, have been selected as auditors of the Fund. In
addition to audit services, Arthur Andersen LLP, prepares the Fund's federal and
state tax
B-20
<PAGE>
returns, and provide consultation and assistance on accounting, internal control
and related matters. The financial statements of the Target Maturity Portfolio
(1996), Target Maturity Portfolio (Feb 97) and Target Maturity Portfolio (May
97) are incorporated by reference into this Additional Statement (under
"Financial Statements") from the Fund's annual report to unitholders for the
fiscal year ended August 31, 1995 (the "Annual Report") and the data set forth
under "Financial Highlights" in the Prospectus have been audited by Arthur
Andersen LLP, as indicated in their report with respect thereto, which is
incorporated by reference in reliance upon the authority of said firm as experts
in giving said report.
DESCRIPTION OF UNITS
As the Prospectus indicates, the Fund's Trust Agreement permits the Trustees to
issue an unlimited number of full and fractional units of beneficial interest of
one or more separate series representing interests in different investment
portfolios. Under the terms of the Trust Agreement, each unit of each series has
a par value of $.001, represents an equal proportionate interest in a particular
investment portfolio with each other unit and is entitled to such dividends out
of the income belonging to such investment portfolio as are declared by the
Trustees. All units of a Portfolio that are outstanding on its Termination Date
will be redeemed by the Fund at their net asset value, and each Portfolio will
be liquidated without further unitholder action. Units do not have preemptive or
conversion rights. Units when issued as described in the Prospectus are fully
paid and nonassessable, except as expressly set forth below.
Any Trustee may be removed by the Fund's unitholders with or without cause at
any time by vote of those unitholders holding not less than two-thirds of the
units then outstanding, cast in person or by proxy at any meeting called for
that purpose. The Trustees shall promptly call a meeting of unitholders for the
purpose of voting upon the question of removal of any Trustee when requested in
writing to do so by the holders of record of not less than 10% of the
outstanding units.
Whenever ten or more unitholders of record who have been such for at least six
months preceding the date of application, and who hold in the aggregate either
units having a net asset value of at least $25,000 or at least 1% of the
outstanding units, whichever is less, shall apply to the Trustees in writing
stating that they wish to communicate with other unitholders with a view to
obtaining signatures to a request for a unitholder meeting and include with such
application a form of communication and request which they wish to transmit, the
Trustees shall within five business days after receipt of such application
either (1) afford to such applicants access to a list of the names and addresses
of
B-21
<PAGE>
all unitholders as recorded on the books of the Fund or investment portfolio
involved; or (2) inform such applicants as to the approximate number of
unitholders of record, and the approximate cost of mailing to them the proposed
form of communication and request and, upon receipt of the material and the
expenses of mailing, shall promptly mail such materials to all unitholders
unless a majority of the Trustees believe that either such material contains
untrue statements of fact or omits to state facts necessary to make the
statements contained therein not misleading, or would be in violation of
applicable law. The Trustees shall thereafter comply with any order entered by
the SEC and the requirements of the 1940 Act and the Securities Exchange Act of
1934.
In addition to Trustee election or removal as described in the Prospectus and as
further described herein, the Trust Agreement provides for unitholder voting
only (a) with respect to any contract as to which unitholder approval is
required by the 1940 Act, (b) with respect to any termination or reorganization
of the Fund or any investment portfolio to the extent and as provided in the
Trust Agreement (the liquidation of a Portfolio at the relevant Termination Date
is not subject to further unitholders action), (c) with respect to any amendment
of the Trust Agreement (other than amendments establishing and designating new
investment portfolios, abolishing investment portfolios, changing the name of
the Fund or the name of any investment portfolio, supplying any omission, curing
any ambiguity or curing, correcting or supplementing any provision thereof which
is internally inconsistent with any other provision thereof or which is
defective or inconsistent with the 1940 Act or with the requirements of the
Internal Revenue Code and applicable regulations for the Fund's obtaining the
most favorable treatment thereunder available to regulated investment
companies), which amendments require approval by a majority of the units
entitled to vote, (d) to the same extent as the stockholders of a Massachusetts
business corporation as to whether or not a court action, proceeding or claim
should or should not be brought or maintained derivatively or as a class action
on behalf of the Fund or the unitholders, and (e) with respect to such
additional matters relating to the Fund as may be required by the 1940 Act, the
Trust Agreement, the By-Laws of the Fund, any registration of the Fund with the
SEC or any State, or as the Trustees may consider necessary or desirable.
Under Massachusetts law, there is a possibility that unitholders of a business
trust could, under certain circumstances, be held personally liable as partners
for the obligations of the Trust. The Trust Agreement contains an express
disclaimer of unitholder liability for acts or obligations of the Fund and
requires that notice of such disclaimer be given in each agreement, obligation
or instrument entered into or executed by the Trustees or any officer. The
Trust Agreement provides for indemnification out of
B-22
<PAGE>
Fund property of any unitholder charged or held personally liable for the
obligations or liabilities of the Fund solely by reason of being or having been
a unitholder of the Fund and not because of such unitholder's acts or omissions
or for some other reason. The Trust Agreement also provides that the Fund
shall, upon proper and timely request, assume the defense of any charge made
against any unitholder as such for any obligation or liability of the Fund and
satisfy any judgment thereon. Thus, the risk of a unitholder's incurring
financial loss on account of unitholder liability is limited to circumstances in
which the Fund itself would be unable to meet its obligations.
The Trust Agreement provides that on any matter submitted to a vote of the
unitholders, all units entitled to vote shall be voted in the aggregate and not
by investment portfolio except that (a) as to any matter with respect to which a
separate vote of any investment portfolio is required by the 1940 Act or would
be required under the Massachusetts Business Corporation Law if the Fund were a
Massachusetts business corporation, such requirements as to a separate vote by
the investment portfolio shall apply in lieu of the aggregate voting as
described above, (b) in the event that the separate vote requirements referred
to in (a) above apply with respect to one or more investment portfolios, then
subject to (c) below, the units of all other investment portfolios shall vote as
a single investment portfolio, and (c) as to any matter which does not affect
the interest of a particular investment portfolio, only unitholders of the
affected investment portfolio shall be entitled to vote thereon.
Rule 18f-2 under the 1940 Act provides that any matter required by the
provisions of the 1940 Act or applicable state law, or otherwise, to be
submitted to the holders of the outstanding voting securities of an investment
company such as the Fund shall not be deemed to have been effectively acted upon
unless approved by the holders of a majority of the outstanding units of each
investment portfolio affected by such matter. Rule 18f-2 further provides that
an investment portfolio shall be deemed to be affected by a matter unless the
interests of each investment portfolio in the matter are identical or the matter
does not affect any interest of the investment portfolio. Under the Rule, the
approval of an investment advisory agreement or any change in a fundamental
investment policy would be effectively acted upon with respect to an investment
portfolio only if approved by a majority of the outstanding units of such
investment portfolio. However, the Rule also provides that the ratification of
the appointment of independent accountants, the approval of principal
underwriting contracts and the election of Trustees may be effectively acted
upon by unitholders of the Fund voting together in the aggregate without regard
to a particular investment portfolio.
B-23
<PAGE>
As of October 31, 1995, the outstanding units of the Target Maturity Portfolio
(1996), Target Maturity Portfolio (Feb 97) and Target Maturity Portfolio (May
97) were 13,300,010.000, 9,809,980.030 and 6,350,000.000, respectively. To the
Fund's knowledge, as of such date, the only entities which may have owned 5% or
more of the outstanding units of each portfolio were: Target Maturity Portfolio
(1996)-Orange County Teachers Federal Credit Union, P.O. Box 11547, Santa Ana,
CA 92711 (11.3%)-Citizens Equity Federal Credit Union, 5700 N. Middle Road,
Peoria, IL 61607 (7.5%), Hudson Valley Federal Credit Union, P.O. Box 1750,
Poughkeepsie, NY 12601 (7.5%) and Langley Federal Credit Union, 1055 West
Mercury Blvd., Box 7463, Harrison, VA 23666 (7.5%). Target Maturity Portfolio
(Feb 97) - Patelco Credit Union, 156 Second Street, San Francisco, CA 94105
(20.4%), Orange County Teachers Federal Credit Union, P.O. Box 11547, Santa Ana,
CA 92711 (17.3%), Citizens Equity Federal Credit Union, 5700 N. Middle Road,
Peoria, IL 61607 (7.1%), Capital Corporate Federal Credit Union, 8181
Professional Place, Ste. 130, Landover, MD 20785 (5.1%), Eastern Financial
Federal Credit Union, 700 South Royal Poinciana Blvd., Miami Springs, FL 33166
(5.1%), Langley Federal Credit Union, 1055 West Mercury Blvd., Box 7463,
Harrison, VA 23666 (5.1%) and Hudson Valley Federal Credit ICV Union, P.O. Box
1750, Poughkeepsie, NY 12601 (5.1%). Target Maturity Portfolio - (May 97) -Space
Coast Credit Union, P.O. Box 2470, Melbourne, FL 32902-2470 (14.2%), Dearborn
Federal Credit Union, 400 Towne Centre Drive, Dearborn, MI 48126 (9.5%), Langely
Federal Credit Union, 1055 West Mercury Boulevard, Box 7463, Harrison, VA 23666
(7.9%), Patelco Credit Union, 156 Second Street, San Francisco, CA 94105 (7.2%),
Eastern Financial Federal Credit Union, 700 South Royal Poinciana Blvd., Miami
Springs, FL 33166 (7.9%), Orange County Teachers Federal Credit Union, P.O. Box
11547, Santa Ana, CA 92711 (7.9%), Boeing Employees Credit Union, 12770 Gateway
Dr., Tukwila, WA 98124 (7.9%) and Visions Federal Credit Union, 24 McKlinley
Avenue, Endicott, NY 13760 (6.3%).
ADJUSTABLE AND FIXED RATE MORTGAGE LOANS AND
MORTGAGE-RELATED SECURITIES
THE NATURE OF ADJUSTABLE AND FIXED RATE MORTGAGE LOANS
The following is a general description of the adjustable and fixed rate mortgage
loans which may be expected to underlie the mortgage-related securities in which
each Portfolio invests. The actual mortgage loans underlying any particular
issue of mortgage-related securities may differ materially from those described
below.
Adjustable Rate Mortgage Loans ("ARMs"). ARMs included in a mortgage pool will
generally provide for a fixed initial mortgage interest rate for a specified
period of time. Thereafter, the
B-24
<PAGE>
interest rates (the "Mortgage Interest Rates") may be subject to periodic
adjustment based on changes in the applicable index rate (the "Index Rate").
The adjusted rate would be equal to the Index Rate plus a gross margin, which is
a fixed percentage spread over the Index Rate established for each ARM at the
time of its origination.
Adjustable interest rates can cause payment increases that some mortgagors may
find difficult to make. However, certain ARMs provide that the Mortgage
Interest Rate may not be adjusted to a rate above an applicable lifetime maximum
rate or below an applicable lifetime minimum rate for such ARM. Certain ARMs
may also be subject to limitations on the maximum amount by which the Mortgage
Interest Rate may adjust for any single adjustment period (the "Maximum
Adjustment"). Other ARMs ("Negatively Amortizing ARMs") may provide instead or
as well for limitations on changes in the monthly payment on such ARMs.
Limitations on monthly payments can result in monthly payments which are more or
less than the amount necessary to amortize a Negatively Amortizing ARM by its
maturity at the Mortgage Interest Rate in effect in any particular month. In
the event that a monthly payment is insufficient to pay the interest accruing on
a Negatively Amortizing ARM, any such excess interest is added to the principal
balance of the loan, causing negative amortization, and will be repaid through
future monthly payments. It may take borrowers under Negatively Amortizing ARMs
longer periods of time to accumulate equity and may increase the likelihood of
default by such borrowers. In the event that a monthly payment exceeds the sum
of the interest accrued at the applicable Mortgage Interest Rate and the
principal payment which would have been necessary to amortize the outstanding
principal balance over the remaining term of the loan, the excess (or
"accelerated amortization") further reduces the principal balance of the ARM.
Negatively Amortizing ARMs do not provide for the extension of their original
maturity to accommodate changes in their Mortgage Interest Rate. As a result,
unless there is a periodic recalculation of the payment amount (which there
generally is), the final payment may be substantially larger than the other
payments. These limitations on periodic increases in interest rates and on
changes in monthly payments protect borrowers from unlimited interest rate and
payment increases, but may result in increased credit exposure and prepayment
risks for lenders.
There are a number of indices which provide the basis for rate adjustments on
ARMs. Commonly utilized indices include the one-year, three-year and five-year
constant maturity Treasury rates, the three-month Treasury Bill rate, the 180-
day Treasury Bill rate, rates of longer-term Treasury securities, the 11th
District Federal Home Loan Bank Cost of Funds, the National Median Cost of
Funds, the one-month, three-month, six-month, or one-year London Interbank
Offered Rate ("LIBOR"), the prime rate of a specific bank, or commercial paper
rates. Some indices, such as the one-
B-25
<PAGE>
year constant maturity Treasury rate, closely mirror changes in market interest
rate levels. Others, such as the 11th District Federal Home Loan Bank Cost of
Funds Index, tend to lag behind changes in market rate levels and tend to be
somewhat less volatile. The degree of volatility in the market value of a
Portfolio and therefore in the net asset value of a Portfolio's units will be
influenced by the length of the interest rate reset periods and the degree of
volatility in the applicable indices.
Fixed Rate Mortgage Loans. Generally, fixed rate mortgage loans eligible for
inclusion in a mortgage pool (the "Fixed Rate Mortgage Loans") will bear simple
interest at fixed annual rates and have original terms to maturity ranging from
5 to 40 years. Fixed Rate Mortgage Loans generally provide for monthly payments
of principal and interest in substantially equal installments for the
contractual term of the mortgage note in sufficient amounts to amortize fully
principal by maturity, although certain Fixed Rate Mortgage Loans provide for a
large final "balloon" payment upon maturity.
Legal Considerations of Mortgage Loans. The following is a discussion of
certain legal and regulatory aspects of the ARMs and Fixed Rate Mortgage Loans
expected to underlie the mortgage-related securities in which a Portfolio may
invest. These regulations may impair the ability of a mortgage lender to
enforce its rights under the mortgage documents. These regulations may
adversely affect a Portfolio's investments in both privately issued mortgage-
related securities and those issued or guaranteed by the U.S. Government, its
agencies, instrumentalities or sponsored enterprises.
1. Foreclosure. A foreclosure of a defaulted mortgage loan may be delayed due
to compliance with statutory notice or service of process provisions,
difficulties in locating necessary parties or legal challenges to the
mortgagee's right to foreclose. Depending upon market conditions, the
ultimate proceeds of the sale of foreclosed property may not equal the amounts
owed on the mortgage loan.
Further, courts in some cases have imposed general equitable principles upon
foreclosure generally designed to relieve the borrower from the legal effect
of default and have required lenders to undertake affirmative and expensive
actions to determine the causes for the default and the likelihood of loan
reinstatement.
2. Rights of Redemption. In some states, after foreclosure of a mortgage
loan, the borrower and foreclosed junior lienors are given a statutory period
in which to redeem the property, which right may diminish the mortgagee's
ability to sell the property.
B-26
<PAGE>
3. Legislative Limitations. In addition to anti-deficiency and related
legislation, numerous other federal and state statutory provisions, including
the federal bankruptcy laws and state laws affording relief to debtors, may
interfere with or affect the ability of a secured mortgage lender to enforce
its security interest. For example, a bankruptcy court may grant the debtor a
reasonable time to cure any default on a mortgage loan, including a payment
default. The court, in certain instances, may also reduce the monthly
payments due under such mortgage loan, change the rate of interest, reduce the
principal balance of the loan to the then-current appraised value of the
related mortgage property, alter the mortgage loan repayment schedule, and
grant priority to certain liens over the lien of the mortgage loan. If a
court relieves a borrower's obligation to repay amounts otherwise due on a
mortgage loan, the mortgage loan servicer will not be required to advance such
amounts, and any loss may be borne by the holders of securities backed by such
loans. In addition, numerous federal and state consumer protection laws
impose penalties for failure to comply with specific requirements in
connection with origination and servicing of mortgage loans.
4. "Due on Sale" Provisions. Fixed rate mortgage loans may contain a so
called "due on sale" clause permitting acceleration of the maturity of the
mortgage loan if the borrower transfers the property. The Garn St. Germain
Depository Institutions Act of 1982 sets forth nine specific instances in
which no mortgage lender covered by that Act may exercise a "due on sale"
clause upon a transfer of property. The inability to enforce a "due on sale"
clause or the lack of such a clause in a mortgage loan documents may result in
a mortgage loan being assumed by a purchaser of the property that bears an
interest rate below the current market rate.
5. Usury Laws. Some states prohibit charging interest on mortgage loans in
excess of statutory limits. If such limits are exceeded, substantial
penalties may be incurred and, in some cases, enforceability of the obligation
to pay principal and interest may be affected.
MORTGAGE-RELATED SECURITIES
Mortgage-related securities represent direct or indirect participations in, or
are collateralized by and payable from, mortgage loans secured by real property.
The investment characteristics of adjustable and fixed rate mortgage-related
securities differ from those of traditional fixed income securities. The major
differences include the payment of interest and principal of mortgage-related
securities on a more frequent (usually monthly) schedule, and the
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possibility that principal may be prepaid at any time due to prepayments on the
underlying mortgage loans. These differences can result in significantly
greater price and yield volatility than is the case with traditional fixed
income securities. In general, if a Portfolio purchases mortgage-related
securities at a premium, a faster than expected prepayment rate will reduce both
the market value and the yield to maturity from those which were anticipated. A
prepayment rate that is slower than expected will have the opposite effect of
increasing yield to maturity and market value. Conversely, if a Portfolio
purchases mortgage-related securities at a discount, faster than expected
prepayments will increase, while slower than expected prepayments will reduce,
yield to maturity and market value.
Prepayments on a pool of mortgage loans are influenced by changes in current
interest rates and a variety of economic, geographic, social and other factors
(such as changes in mortgagors' housing needs, job transfers, unemployment,
mortgagors' equity in the mortgage properties and servicing decisions). The
timing and level of prepayments cannot be predicted. Generally, however,
prepayments on mortgage loans will increase during a period of falling mortgage
interest rates and decrease during a period of rising mortgage interest rates.
Accordingly, the amounts of prepayments available for reinvestment by a
Portfolio are likely to be greater during a period of declining mortgage
interest rates. If general interest rates decline, such prepayments are likely
to be reinvested at lower interest rates than the Portfolio was earning on the
mortgage-related securities that were prepaid.
The rate of interest on mortgage-related securities is normally lower than the
interest rates paid on the mortgages included in the underlying pool due to the
annual fees paid to the servicer of the mortgage pool for passing through
monthly payments to certificateholders and to any guarantor, such as GNMA, and
due to any yield retained by the issuer. Actual yield to the holder may vary
from the coupon rate, even if adjustable, if the mortgage-related securities are
purchased or traded in the secondary market at a premium or discount. In
addition, there is normally some delay between the time the issuer receives
mortgage payments from the servicer and the time the issuer makes the payments
on the mortgage-related securities and this delay reduces the effective yield to
the holder of such securities.
The issuers of certain mortgage-related securities may elect to have the pool of
mortgage loans (or indirect interests in mortgage loans) underlying the
securities treated as a real estate mortgage investment conduit ("REMIC"), which
are subject to special federal income tax rules. A description of the types of
mortgage-related securities in which a Portfolio may invest is provided below.
The descriptions are general and summary in
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nature, and do not detail every possible variation of the types of securities
that are permissible for a Portfolio.
1. Private Mortgage Pass-Through Securities
General Characteristics. Privately issued mortgage pass-through securities
("Private Mortgage Pass-Throughs") represent participation interests in pools of
mortgage loans conveyed to the issuing trust and generally serviced for the
trust by the originator. For federal income tax purposes, such trusts are
generally treated as grantor trusts or REMICs and, in either case, are generally
not subject to any significant amount of federal income tax at the entity level.
Private Mortgage Pass-Throughs (whether fixed or adjustable rate) provide for
monthly payments that are a "pass-through" of the monthly interest and principal
payments (including any prepayments) made by the individual borrowers on the
pooled mortgage loans, net of any fees or other amounts paid to any guarantor,
administrator and/or servicer of the underlying mortgage loans.
Each mortgage pool underlying Private Mortgage Pass-Throughs will consist of
mortgage loans evidenced by promissory notes secured by first mortgages or first
deeds of trust or other similar security instruments creating a first lien on
the mortgaged properties (the "Mortgaged Properties"). The Mortgaged Properties
may consist of residential properties upon which is located detached individual
dwelling units, individual condominium units, townhouses, duplexes, triplexes,
fourplexes, rowhouses, manufactured homes, individual units in planned unit
developments and other attached dwelling units, vacation homes, second homes,
residential investment properties, multi-family units or properties with mixed
residential and commercial uses. A trust fund with respect to which a REMIC
election has been made may include regular interests in other REMICs which in
turn will ultimately evidence interests in mortgage loans.
The seller or servicer of the underlying mortgage obligations will generally
make representations and warranties to certificateholders as to certain
characteristics of the mortgage loans and as to the accuracy of certain
information furnished to the trustee in respect of each such mortgage loan.
Upon a breach of any representation or warranty that materially and adversely
affects the interests of the related certificateholders in a mortgage loan, the
seller or servicer generally will be obligated either to cure the breach in all
material respects, to repurchase the mortgage loan or, if the related agreement
so provides, to substitute in its place a mortgage loan pursuant to the
conditions set forth therein. Such a repurchase or substitution obligation
generally constitutes the sole remedy available to the related
certificateholders or the trustee for a material breach of any such
representation or warranty by the seller or servicer.
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Description of Certificates. Private Mortgage Pass-Throughs may be issued in
one or more classes of senior certificates and one or more classes of
subordinate certificates. Each such class may bear a different pass-through
rate. Generally, each certificate will evidence the specified interest of the
holder thereof in the payments of principal or interest or both in respect of
the mortgage pool comprising part of the trust fund for such certificates.
Any class of certificates may also be divided into subclasses entitled to
varying amounts of principal and interest. If a REMIC election has been made,
certificates of such subclasses may be entitled to payments on the basis of a
stated principal balance and stated interest rate, and payments among different
subclasses may be made on a sequential, concurrent, pro rata or disproportionate
--------
basis, or any combination thereof. The stated interest rate on any such
subclass of certificates may be a fixed rate or one which varies in direct or
inverse relationship to an objective interest index. Subclasses of certificates
as to which a REMIC election has been made may have the features and structures
described below under the caption "Multiple Class Pass-Through Securities and
Collateralized Mortgage Obligations."
Generally, each registered holder of a certificate will be entitled to receive
its pro rata share of monthly distributions of all or a portion of principal of
--------
the underlying mortgage loans or of interest on the principal balances thereof,
which accrues at the applicable mortgage pass-through rate, or both. The
difference between the mortgage interest rate and the related mortgage pass-
through rate (less the amount, if any, of retained yield) with respect to each
mortgage loan will generally be paid to the servicer as a servicing fee. Since
certain adjustable rate mortgage loans included in a mortgage pool may provide
for deferred interest (i.e., negative amortization), the amount of interest
actually paid by a mortgagor in any month may be less than the amount of
interest accrued on the outstanding principal balance of the related mortgage
loan during the relevant period at the applicable mortgage interest rate. In
such event, the amount of interest that is treated as deferred interest will be
added to the principal balance of the related mortgage loan and will be
distributed pro rata to certificateholders as principal of such mortgage loan
--------
when paid by the mortgagor in subsequent monthly payments or at maturity.
Ratings. The ratings assigned by an NRSRO to Private Mortgage Pass-Throughs
address the likelihood of the receipt of all distributions on the underlying
mortgage loans by the related certificateholders under the agreements pursuant
to which such certificates are issued. A rating agency's ratings take into
consideration the credit quality of the related mortgage pool, including any
credit support providers, structural and legal aspects associated with such
certificates, and the extent to
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which the payment stream on such mortgage pool is adequate to make payments
required by such certificates. A rating agency's ratings on such certificates
do not, however, constitute a statement regarding frequency of prepayments on
the related mortgage loans. In addition, the rating assigned by a rating agency
to a certificate does not address the remote possibility that, in the event of
the insolvency of the issuer of certificates where a subordinated interest was
retained, the issuance and sale of the senior certificates may be
recharacterized as a financing and, as a result of such recharacterization,
payments on such certificates may be affected.
Types of Credit Support. Mortgage pools created by non-governmental issuers
generally offer a higher yield than government and government-related pools
because of the absence of direct or indirect government or agency payment
guarantees. To lessen the effect of failures by obligors on underlying assets
to make payments, Private Mortgage Pass-Throughs may contain elements of credit
support. Such credit support falls into two classes: liquidity protection and
protection against ultimate default by an obligor on the underlying mortgages.
Liquidity protection refers to the provision of advances, generally by the
entity administering the pools of mortgages, the provision of a reserve fund, or
a combination thereof, to ensure, subject to certain limitations, that scheduled
payments on the underlying pool are made in a timely fashion. Protection
against ultimate default ensures ultimate payment of the obligations on at least
a portion of the mortgages in the pool. Such protection may be provided through
guarantees, insurance policies or letters of credit obtained from third parties,
through various means of structuring the transaction or through a combination of
such approaches.
In addition, one or more classes of certificates of Private Mortgage Pass-
Throughs may be subordinate certificates which provide that the rights of the
subordinate certificateholders to receive any or a specified portion of
distributions with respect to the underlying mortgage loans may be subordinated
to the rights of the senior certificateholders. If so structured, the
subordination feature may be enhanced by distributing to the senior
certificateholders on certain distribution dates, as payment of principal, a
specified percentage (which generally declines over time) of all principal
prepayments received during the preceding prepayment period ("shifting interest
credit enhancement"). This will have the effect of accelerating the
amortization of the senior certificates while increasing the interest in the
trust fund evidenced by the subordinate certificates. Increasing the interest
of the subordinate certificates relative to that of the senior certificates is
intended to preserve the availability of the subordination provided by the
subordinate certificates. In addition, because
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the senior certificateholders in a shifting interest credit enhancement
structure are entitled to receive a percentage of principal prepayments which is
greater than their proportionate interest in the trust fund, the rate of
principal prepayments on the mortgage loans will have an even greater effect on
the rate of principal payments and the amount of interest payments on, and the
yield to maturity of, the senior certificates.
In addition to providing for a preferential right of the senior
certificateholders to receive current distributions from the mortgage pool, a
reserve fund may be established relating to such certificates (the "Reserve
Fund"). The Reserve Fund may be created with an initial cash deposit by the
originator or servicer and augmented by the retention of distributions otherwise
available to the subordinate certificateholders or by excess servicing fees
until the Reserve Fund reaches a specified amount.
The subordination feature, and any Reserve Fund, are intended to enhance the
likelihood of timely receipt by senior certificateholders of the full amount of
scheduled monthly payments of principal and interest due them and will protect
the senior certificateholders against certain losses; however, in certain
circumstances the Reserve Fund could be depleted and temporary shortfalls could
result. In the event the Reserve Fund is depleted before the subordinated
amount is reduced to zero, senior certificateholders will nevertheless have a
preferential right to receive current distributions from the mortgage pool to
the extent of the then outstanding subordinated amount. Unless otherwise
specified, until the subordinated amount is reduced to zero, on any distribution
date any amount otherwise distributable to the subordinate certificates or, to
the extent specified, in the Reserve Fund will generally be used to offset the
amount of any losses realized with respect to the mortgage loans ("Realized
Losses"). Realized Losses remaining after application of such amounts will
generally be applied to reduce the ownership interest of the subordinate
certificates in the mortgage pool. If the subordinated amount has been reduced
to zero, Realized Losses generally will be allocated pro rata among all
--------
certificateholders in proportion to their respective outstanding interests in
the mortgage pool.
As an alternative, or in addition to the credit enhancement afforded by
subordination, credit enhancement for Private Mortgage Pass-Throughs may be
provided by mortgage insurance, by the deposit of cash, certificates of deposit,
letters of credit, a limited guaranty or by such other methods as are acceptable
to a rating agency. In certain circumstances, such as where credit enhancement
is provided by insurance, guarantees or a letter of credit, the security is
subject to credit risk because of its exposure to an external credit enhancement
provider.
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Voluntary Advances. Generally, in the event of delinquencies in payments on the
mortgage loans underlying the Private Mortgage Pass-Throughs, the servicer
agrees to make advances of cash for the benefit of certificateholders, but only
to the extent that it determines such voluntary advances will be recoverable
from future payments and collections on the mortgage loans or otherwise.
Optional Termination. Generally, the servicer may, at its option with respect
to any certificates, repurchase all of the underlying mortgage loans remaining
outstanding at such time as the aggregate outstanding principal balance of such
mortgage loans is less than a specified percentage (generally 5-10%) of the
aggregate outstanding principal balance of the mortgage loans as of the cut-off
date specified with respect to such series.
2. Government Mortgage-Related Securities
As stated in the Prospectus, certain mortgage-related securities acquired by a
Portfolio will be issued or guaranteed by the U.S. Government or one of its
agencies, instrumentalities or sponsored enterprises, including but not limited
to the Government National Mortgage Association ("GNMA"), the Federal National
Mortgage Association ("FNMA") and the Federal Home Loan Mortgage Corporation
("FHLMC") ("Government Mortgage-Related Securities"). GNMA securities are backed
by the full faith and credit of the U.S. Government, which means that the U.S.
Government guarantees that the interest and principal will be paid when due.
FNMA securities and FHLMC securities are not backed by the full faith and credit
of the U.S. Government; however, because of their ability to borrow from the
U.S. Treasury, they are generally viewed by the market as high quality
securities with minimal credit risks. There are several types of these
guaranteed mortgage-related securities currently available, including guaranteed
mortgage pass-through certificates and multiple-class securities, which include
guaranteed REMIC pass-through certificates and stripped mortgage-backed
securities. A Portfolio will be permitted to invest in other types of Government
Mortgage-Related Securities that may be available in the future to the extent
such investment is consistent with its investment policies and objective.
GNMA Certificates. GNMA is a wholly-owned corporate instrumentality of the
United States. GNMA is authorized to guarantee the timely payment of the
principal of and interest on certificates that are based on and backed by a pool
of mortgage loans insured by the Federal Housing Administration ("FHA Loans"),
or guaranteed by the Veterans Administration ("VA Loans"), or by pools of other
eligible mortgage loans. In order to meet its obligations under any guaranty,
GNMA is authorized to borrow from the United States Treasury in an unlimited
amount.
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FNMA Certificates. FNMA is a stockholder-owned corporation chartered under an
act of the United States Congress. Each FNMA Certificate is issued and
guaranteed by and represents an undivided interest in a pool of mortgage loans
(a "Pool") formed by FNMA. Each Pool consists of residential mortgage loans
("Mortgage Loans") either previously owned by FNMA or purchased by it in
connection with the formation of the Pool. The Mortgage Loans may be either
private Mortgage Loans (i.e., not insured or guaranteed by any U.S. Government
agency) or Mortgage Loans that are either insured by the Federal Housing
Administration ("FHA") or guaranteed by the Veterans Administration ("VA"). The
lenders originating and servicing the Mortgage Loans are subject to certain
eligibility requirements established by FNMA.
FNMA has certain contractual responsibilities. With respect to each Pool, FNMA
is obligated to distribute scheduled monthly installments of principal and
interest after FNMA's servicing and guaranty fee, whether or not received, to
Certificate holders. FNMA is also obligated to distribute to holders of
Certificates an amount equal to the full principal balance of any foreclosed
Mortgage Loan, whether or not such principal balance is actually recovered. The
obligations of FNMA under its guaranty of the FNMA Certificates are obligations
solely of FNMA.
FHLMC Certificates. FHLMC is a corporate instrumentality of the United States.
The principal activity of FHLMC currently is the purchase of first lien,
conventional, residential mortgage loans and participation interests in such
mortgage loans and their resale in the form of mortgage securities, primarily
FHLMC Certificates. A FHLMC Certificate represents a pro rata interest in a
group of mortgage loans or participations in mortgage loans (a "FHLMC
Certificate group") purchased by FHLMC.
FHLMC guarantees to each registered holder of a FHLMC Certificate the timely
payment of interest at the rate provided for by such Certificate (whether or not
received on the underlying loans). FHLMC also guarantees to each registered
Certificate holder ultimate collection of all principal of the related mortgage
loans, without any offset or deduction, but does not, generally, guarantee the
timely payment of scheduled principal. The obligations of FHLMC under its
guaranty of FHLMC Certificates are obligations solely of FHLMC.
The mortgage loans underlying the FHLMC Certificates will consist of adjustable
rate or fixed rate mortgage loans with original terms of maturity of between ten
and thirty years. Substantially all of these mortgage loans are secured by
first liens on one- to four-family residential properties or multi-family
projects. Each mortgage loan must meet the applicable standards set forth in
the law creating FHLMC. A FHLMC Certificate group may include whole loans,
participation interests in whole loans and undivided
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interests in whole loans and participations comprising another FHLMC Certificate
group.
3. Multiple Class Pass-Through Securities and
Collateralized Mortgage Obligations
As stated, a Portfolio may invest in multiple class mortgage-related securities,
including collateralized mortgage obligations and REMIC pass-through or
participation certificates (collectively, "CMOs"). These multiple class
mortgage-related securities may be issued by U.S. Government agencies,
instrumentalities or sponsored enterprises, including FNMA and FHLMC, or by
trusts formed by private originators of, or investors in, mortgage loans. In
general, CMOs represent direct ownership interests in a pool of mortgage loans
or mortgage pass-through securities (the "Mortgage Assets"), the payments on
which are used to make payments on the CMOs. Investors may purchase beneficial
interests in CMOs, which are known as "regular" interests or "residual"
interests. Each Portfolio does not intend to purchase residual interests.
Each class of CMOs, often referred to as a "tranche," is issued at a specific
adjustable or fixed interest rate and is scheduled to be fully retired no later
than its final distribution date. Principal prepayments on the Mortgage Assets
underlying the CMOs may cause some or all of the classes of CMOs to be retired
substantially earlier than their final distribution dates. Generally, interest
is paid or accrues on all classes of CMOs on a monthly basis.
The principal of and interest on the Mortgage Assets may be allocated among the
several classes of a CMO in various ways. In certain structures (known as
"sequential pay" CMOs), payments of principal, including any principal
prepayments, on the Mortgage Assets generally are applied to the classes of CMOs
in the order of their respective final scheduled distribution dates. Thus, no
payment of principal will be made on any class of sequential pay CMOs until all
other classes having an earlier final scheduled distribution date have been paid
in full.
Additional structures of CMOs include, among others, "parallel pay" CMOs.
Parallel pay CMOs are those which are structured to apply principal payments and
prepayments of the Mortgage Assets to two or more classes concurrently on a
proportionate or disproportionate basis. These simultaneous payments are taken
into account in calculating the final scheduled distribution date of each class.
A wide variety of CMOs may be issued in the parallel pay or sequential pay
structures. These securities include accrual certificates (also known as "Z-
Bonds"), which do not accrue interest at a specified rate until all other
certificates having
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an earlier final scheduled distribution date have been retired and such "Z-
Bonds" are converted thereafter to an interest-paying security, and planned
amortization class ("PAC") certificates, which are parallel pay CMOs which
generally require that specified amounts of principal be applied on each payment
date to one or more classes of a CMO (the "PAC Certificates"), even though all
other principal payments and prepayments of the Mortgage Assets are then
required to be applied to one or more other classes of the Certificates. The
scheduled principal payments for the PAC Certificates generally have the highest
priority on each payment date after interest due has been paid to all classes
entitled to receive interest currently. Shortfalls, if any, are added to the
amount payable on the next payment date. The PAC Certificate payment schedule
is taken into account in calculating the final scheduled distribution date of
each class of PAC. In order to create PAC tranches, one or more tranches
generally must be created that absorb most of the prepayment volatility in the
underlying Mortgage Assets. These tranches tend to have market prices and
yields that are much more volatile than the PAC classes.
FNMA CMOs are issued and guaranteed as to timely distribution of principal and
interest by FNMA. That is to say, FNMA will be obligated to distribute on a
timely basis to holders of FNMA CMO certificates required installments of
principal and interest and to distribute the principal balance of each class of
a CMO in full, whether or not sufficient funds are otherwise available.
For FHLMC CMOs, 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 certificates ("PCs"). PCs represent undivided
interests in specified level payment, residential mortgages or participations
therein purchased by FHLMC and placed in a PC pool. With respect to principal
payments on PCs, FHLMC generally guarantees ultimate collection of all principal
of the related mortgage loans without offset or deduction. FHLMC also
guarantees timely payment of principal on certain PCs, referred to as "Gold
PCs."
LEGISLATIVE AND REGULATORY DEVELOPMENTS IN GOVERNMENT-SPONSORED ENTERPRISES
In the past several years, there have been a number of federal legislative and
regulatory developments which may ultimately have a significant impact on the
business and operations of FHLMC, FNMA and other government-sponsored
enterprises ("GSEs").
Legislation Affecting FNMA and FHLMC: On October 28, 1992 the President signed
legislation which sets new capital requirements for FNMA and FHLMC, establishes
an oversight office within HUD, allows that office to establish additional
capital requirements based upon a risk-based capital stress test, requires the
two
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organizations to hold sufficient capital to cover interest rate changes, and
requires the agencies to establish goals to direct funds to lower income
borrowers.
The legislation, the Housing and Community Development Act of 1992, requires
FNMA and FHLMC to hold core capital equal to the sum of 2.5 percent of on-
balance-sheet assets and .45 percent of the unpaid principal balance of
outstanding mortgage-backed securities and other off-balance-sheet assets. The
legislation provides an 18-month transition period for FNMA and FHLMC to reach
this minimum capital level. The other requirements of the bill could increase
the amount of capital to be withheld.
Legislation Affecting the Federal Agricultural Mortgage Association: The Food,
Agricultural, Conservation and Trade Act Amendment of 1991 established minimum
core capital levels for the Federal Agriculture Mortgage Association ("Farmer
Mac") of (1) 2.50 percent of the aggregate on-balance sheet assets, (2) 0.45
percent of the unpaid balance of outstanding securities guaranteed by Farmer Mac
and (3) a linked-percentage of aggregate assets. The President, on October 28,
1992, signed Public Law 102-552, the "Farm Credit Banks and Associations Safety
and Soundness Act of 1992." The act was passed to enhance the financial
soundness of Farm Credit System banks and associations and further supplemented
capital requirements for Farm Credit System banks and associations.
The effects of any legislation or regulations implementing stricter capital or
other regulatory standards upon the future business and operations of FNMA and
FHLMC cannot be predicted.
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INVESTMENT RESTRICTIONS
As the Prospectus states, a Portfolio may only invest in obligations authorized
under the Federal Credit Union Act. This restriction may not be changed without
the approval of the holders of a majority of the outstanding units of a
Portfolio as described below. In addition, to meet the requirements of federal
and state securities laws, each Portfolio has also adopted the following
enumerated fundamental investment restrictions, none of which may be changed
without the approval of the holders of a majority of the outstanding units of
the Portfolio as described below. A Portfolio may not:
A. Invest in the instruments of issuers conducting their principal business
activity in the same industry if immediately after such investment the value
of the Portfolio's investments in such industry would exceed 25% of the value
of its total assets; provided that there is no limitation with respect to or
arising out of investments in obligations issued or guaranteed by the U.S.
Government or its agencies or instrumentalities or repurchase agreements by
the Portfolio of securities collateralized by such obligations; and provided
further that during normal market conditions each Portfolio intends to invest
at least 25% of the value of its total assets in mortgage-related securities.
B. Invest in the instruments of any one issuer, other than the U.S.
Government, its agencies or instrumentalities, if immediately after such
investment, more than 5% of the value of the Portfolio's total assets would be
invested in the instruments of such issuer, except that (a) up to 25% of the
value of the total assets of the Portfolio may be invested without regard to
such 5% limitation and (b) such 5% limitation shall not apply to repurchase
agreements collateralized by obligations of the U.S. Government, its agencies
or instrumentalities.
C. Make loans, except through (a) the purchase of debt obligations in
accordance with the Portfolio's investment objective and policies, (b)
repurchase agreements with banks, brokers, dealers and other financial
institutions in accordance with the investment objectives of the Portfolio,
(c) the lending of federal funds to qualified financial institutions in
accordance with the investment objectives of the Portfolio and (d) the lending
of securities in accordance with the investment objective of the Portfolio.
D. Borrow money, except for temporary or short-term purposes, provided that
the Portfolio maintains asset coverage of 300% for all such borrowing.
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E. Mortgage, pledge or hypothecate any assets except to secure permitted
borrowings.
F. Purchase or sell real estate, but this restriction shall not prevent the
Portfolio from investing directly or indirectly in portfolio instruments
secured by real estate or interests therein or issued by companies which
invest in real estate or interests therein.
G. Purchase or sell commodities or commodity contracts.
H. Purchase any voting securities except of investment companies (solely to
the extent permitted by the 1940 Act) and as otherwise consistent with its
investment objective and policies, or invest in companies for the purpose of
exercising control or management. Subject to certain exceptions, the 1940 Act
contains a prohibition against each Portfolio investing more than 5% of its
total assets in the securities of another investment company, investing more
than 10% of its assets in securities of such investment company and all other
investment companies or purchasing more than 3% of the total outstanding
voting stock of another investment company.
I. Act as an underwriter of securities.
J. Issue senior securities as defined in the 1940 Act except insofar as the
Portfolio may be deemed to have issued a senior security by reason of (a)
borrowing of money to the extent permitted herein, or (b) purchasing
securities on a when-issued or delayed delivery basis, or (c) entering into a
mortgage dollar roll.
K. Purchase any security on margin (except for delayed delivery or when-issued
transactions or such short-term credits as are necessary for the clearance of
transactions).
L. Make short sales of securities or maintain a short position.
M. Write, purchase or sell puts, calls or combinations thereof.
Each Portfolio, to meet the requirements of state securities laws, has also
adopted the following enumerated non-fundamental investment restrictions. A
Portfolio:
(1) will prohibit the purchase or retention by such Portfolio of the
securities of any issuer if the officers, directors or trustees of the
Trust, its advisers, or managers owning beneficially more than one-half of
one percent of the securities of an issuer together own
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beneficially more than five percent of the securities of that issuer;
(2) will not invest (a) more than 15% of its net assets in illiquid
investments, including repurchase agreements maturing in more than seven
days, securities that are not readily marketable and restricted securities
not eligible for resale pursuant to Rule 144A under the Securities Act of
1933; or (b) more than 10% of its net assets in restricted securities
(including those eligible for resale under Rule 144A).
(3) may invest up to 5% of its total assets, calculated at the time of
purchase, in companies (including predecessors) which have operated less
than three years, except that this limitation does not apply to debt
securities which have been rated investment grade or better by at least one
nationally recognized statistical rating organization. The securities of
such companies may have limited liquidity, which can result in their being
priced higher or lower than might otherwise be the case. In addition,
investments in unseasoned companies are more speculative and entail greater
risk than do investments in companies with an established operating record.
For purposes of the foregoing limitations, any limitation which involves a
maximum percentage shall not be considered violated unless an excess over the
percentage occurs immediately after, and is caused by, an acquisition or
encumbrance of securities or assets of, or borrowings by, a Portfolio. In
addition, securities held in escrow or separate accounts in connection with a
Portfolio's investment practices are not deemed to be pledged for purposes of
the foregoing limitations.
Borrowings by a Portfolio (if any) are not for investment leverage purposes but
are solely for temporary or short-term purposes or to facilitate management of
the Portfolio by enabling the Fund to meet redemption requests when the
liquidation of portfolio instruments is deemed to be disadvantageous or not
possible. If due to market fluctuations or other reasons the total assets of a
Portfolio fall below 300% of its borrowings, the Fund will promptly reduce the
borrowings of such Portfolio in accordance with the 1940 Act. No purchases of
securities will be made if such borrowings exceed 5% of the value of a
Portfolio's assets. Mortgage dollar rolls that are not accounted for as
financings shall not constitute borrowings.
The prohibition against short sales and short positions does not include
transactions sometimes referred to as "short sales against the box" where a
Portfolio contemporaneously owns or has the right to obtain at no added cost
securities identical to those sold short.
B-40
<PAGE>
As used in the Prospectus and this Additional Statement with respect to
matters required to be submitted to unitholders by the provisions of the 1940
Act, the term "majority of the outstanding units" of either the Fund or a
Portfolio means the vote of the lesser of (i) 67% or more of the units of the
Fund or a Portfolio present at a meeting, if the holders of more than 50% of the
outstanding units of the Fund or Portfolio are present or represented by proxy,
or (ii) more than 50% of the outstanding units of the Fund or a Portfolio.
CALCULATION OF PERFORMANCE QUOTATIONS
From time to time, the yield, the distribution rate and the total return of a
Portfolio may be quoted in advertisements or communications to unitholders.
These advertisements and communications may be part of marketing activities
conducted by either or both of the Fund's co-distributors on behalf of a
Portfolio. Performance figures are calculated in the following manner:
Yield Calculations. The yield of a Portfolio is calculated by dividing the net
investment income per unit (as described below) earned by a Portfolio during a
30-day period by the maximum offering price per unit on the last day of the
period and annualizing the result on a semi-annual basis by adding one to the
quotient, raising the sum to the power of six, subtracting one from the result
and then doubling the difference. A Portfolio's net investment income per unit
earned during the period is based on the average daily number of units
outstanding during the period entitled to receive dividends and includes
dividends and interest earned during the period minus expenses accrued for the
period, net of reimbursements. This calculation can be expressed as follows:
Yield = 2[[((a-b)/cd) + 1] (6) - 1]
Where:
a = dividends and interest earned during the period.
b = expenses accrued for the period.
c = the average daily number of units outstanding during the period that were
entitled to receive dividends.
d = maximum offering price per unit on the last day of the period.
Except as noted below, interest earned on debt obligations held by a Portfolio
is calculated by computing the yield to maturity of each obligation held by a
Portfolio based on the market value
B-41
<PAGE>
of the obligation (including actual accrued interest) at the close of business
on the last business day of each month, or, with respect to obligations
purchased during the month, the purchase price (plus actual accrued interest)
and dividing the result by 360 and multiplying the quotient by the market value
of the obligation (including actual accrued interest) in order to determine the
interest income on the obligation for each day of the subsequent month that the
obligation is held by a Portfolio. The maturity of an obligation with a call
provision is the next call date on which the obligation reasonably may be
expected to be called or, if none, the maturity date. With respect to debt
obligations purchased at a discount or premium, the formula generally calls for
amortization of the discount or premium. The amortization schedule will be
adjusted monthly to reflect changes in the market values of such debt
obligations.
With respect to mortgage-related obligations which are expected to be subject to
monthly payments of principal and interest ("pay downs"), (a) gain or loss
attributable to actual monthly pay downs is accounted for as an increase or
decrease to interest income during the period; and (b) a Portfolio may elect
either (i) to amortize the discount and premium on the remaining security, based
on the cost of the security, to the weighted average maturity date, if such
information is available, or to the remaining term of the security, if any, if
the weighted average maturity date is not available, or (ii) not to amortize
discount or premium on the remaining security.
Distribution Rate Calculations. The distribution rate for a specified period is
calculated by dividing the total distribution per unit by the maximum offering
price or net asset value on the last day of the period and then annualizing such
amount.
Total Return Calculations. A Portfolio computes its average annual total return
by determining the average annual compounded rates of return during specified
periods that equate the initial amount invested to the ending redeemable value
of such investment. This is done by dividing the ending redeemable value of a
hypothetical $1,000 initial payment by $1,000 and raising the quotient to a
power equal to one divided by the number of years (or fractional portion
thereof) covered by the computation and subtracting one from the result. This
calculation can be expressed as follows:
B-42
<PAGE>
T = [(ERV/P) (1/n)] - 1
Where:
T = average annual total return.
ERV = ending redeemable value at the end of the period covered by the
computation of a hypothetical $1,000 payment made at the beginning of
the period.
P = hypothetical initial payment of $1,000.
n = period covered by the computation, expressed in terms of years.
Each Portfolio computes its cumulative total return by determining the
cumulative rate of return during a specified period that likewise equates the
initial amount invested to the ending redeemable value of such investment. The
formula for calculating cumulative total return is as follows:
T = (ERV/P) - 1
Under the methods prescribed by the SEC, standardized calculations of average
annual total return assume the reinvestment of all dividends and capital gain
distributions on the reinvestment dates during the period (although a Portfolio
may also publish non-standardized calculations without this assumption).
Calculations of cumulative total return also assume the reinvestment of all
dividends and capital gains distributions on the reinvestment date during the
period. The ending redeemable value (variable "ERV" in each formula) is
determined by assuming complete redemption of the hypothetical investment and
the deduction of all nonrecurring charges (such as a Portfolio's redemption fee
for early withdrawal) at the end of the period covered by the computations
(although, again, a Portfolio may also publish non-standardized calculations
without this deduction). Year-to-year total return is calculated in a similar
manner.
B-43
<PAGE>
PERFORMANCE FIGURES
<TABLE>
<CAPTION>
Value of $1,000 Investment
--------------------------
Commencement of Operations
Year Ending 8/31/95 7/01/93 through 8/31/95
------------------- --------------------------
30-Day Period
Ending With Without With Without
08/31/95 Redemption Fee Redemption Fee Redemption Fee Redemption Fee
------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
TARGET MATURITY
PORTFOLIO (1996)
Yield 6.66% N/A N/A N/A N/A
Distribution Rate 4.99% N/A N/A N/A N/A
Ending Redeemable
Value at 8/31/95 N/A $1,059.76 $1,065.07 $1,081.00 $1,086.49
Average Annual
Total Return N/A 5.98% 6.51% 3.66% 3.90%
Cumulative Total
Return N/A 5.98% 6.51% 8.10% 8.65%
</TABLE>
B-44
<PAGE>
PERFORMANCE FIGURES
<TABLE>
<CAPTION>
Value of $1,000 Investment
--------------------------
Commencement of Operations
Year Ending 8/31/95 2/15/94 through 8/31/95
------------------- --------------------------
30-Day Period
Ending With Without With Without
08/31/95 Redemption Fee Redemption Fee Redemption Fee Redemption Fee
------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
TARGET MATURITY
PORTFOLIO (FEB 97)
Yield 7.28% N/A N/A N/A N/A
Distribution Rate 5.36% N/A N/A N/A N/A
Ending Redeemable
Value at 8/31/95 N/A $1,069.41 $1,074.81 $1,060.60 $1,065.88
Average Annual
Total Return N/A 6.94% 7.48% 3.89% 4.22%
Cumulative Total
Return N/A 6.94% 7.48% 6.06% 6.59%
</TABLE>
B-45
<PAGE>
PERFORMANCE FIGURES
<TABLE>
<CAPTION>
Value of $1,000 Investment
---------------------------
Commencement of Operations
Year Ending 8/31/95 5/23/94 through 8/31/95
-------------------- --------------------------
30-Day Period
Ending With Without With Without
08/31/95 Redemption Fee Redemption Fee Redemption Fee Redemption Fee
------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
TARGET MATURITY
PORTFOLIO (MAY 97)
Yield 7.15% N/A N/A N/A N/A
Distribution Rate 6.62% N/A N/A N/A N/A
Ending Redeemable
Value at 8/31/95 N/A $1,071.64 $1,077.00 $1,081.50 $1,086.91
Average Annual
Total Return N/A 7.16% 7.70% 6.33% 6.75%
Cumulative Total
Return N/A 7.16% 7.70% 8.15% 8.69%
</TABLE>
B-46
<PAGE>
From time to time a Portfolio's comparative performance may be advertised as
measured by various independent sources, including, but not limited to, Lipper
Analytical Services, Inc., Barron's, The Wall Street Journal, Weisenberger
Investment Companies Service, Donoghue's Money Fund Report, Business Week,
Financial World and Forbes. In addition, the Fund may from time to time
advertise the Portfolio's performance relative to certain indices and benchmark
investments, including (a) the Lehman Brothers Government/Corporate Bond Index,
(b) Lehman Brothers Government Index, (c) Lehman Brothers ARM Index; (d) Lehman
Brothers 1-2 year Government Index; (e) Lehman Brothers 1-3 year Government
Index;(f) Merrill Lynch 1-2.99 Year Treasury Index, (g) Merrill Lynch 2-Year
Treasury Curve Index, (h) the Salomon Brothers Treasury Yield Curve Rate of
Return Index, (i) the Payden & Rygel 2-Year Treasury Note Index, (j) 1-3 Year
U.S. Treasury Notes, (k) constant maturity U.S. Treasury yield indices, (l) the
Consumer Price Index, (m) the London Interbank Offered Rate, (n) other taxable
investments such as certificates of deposit, money market mutual funds,
repurchase agreements and commercial paper, and (o) historical data concerning
the relative performance of adjustable and fixed-rate mortgage loans.
The composition of the securities in such indices and the characteristics of
such benchmark investments are not identical to, and in some cases are very
different from, those of a Portfolio. These indices and averages are generally
unmanaged and the items included in the calculations of such indices and
averages may not be identical to the formulas used by a Portfolio to calculate
its performance figures.
From time to time advertisements or communications to unitholders may summarize
the substance of information contained in shareholder reports (including the
investment composition of the Portfolios), as well as the views of Goldman,
Sachs & Co. as to current market, economic, trade and interest rate trends,
legislative, regulatory and monetary developments, investment strategies and
related matters believed to be of relevance to the Portfolios (such as the
supply and demand of mortgage-related securities and the relative performance of
different types of mortgage loans and mortgage-related securities as affected by
prepayment rates and other factors).
In addition, advertisements or unitholder communications may include a
discussion of certain attributes or benefits to be derived by an investment in a
Portfolio. Such advertisements or communications may include symbols, headlines
or other material which highlight or summarize the information discussed in more
detail therein.
Performance data is based on historical results and is not intended to indicate
future performance. Yield, total return and distribution rates will vary based
on changes in market conditions, the level of interest rates, portfolio
investments and portfolio expenses. The value of the Portfolios' units will
fluctuate, and an investor's units may be worth more or less than their original
cost upon redemption.
B-47
<PAGE>
OTHER INFORMATION
GENERAL
The Prospectus for the Portfolios and this Additional Statement do not contain
all the information included in the Registration Statement filed with the SEC
under the 1933 Act with respect to the securities offered by the Prospectus.
Certain portions of the Registration Statement have been omitted from the
Prospectus and this Additional Statement pursuant to the rules and regulations
of the SEC. The Registration Statement including the exhibits filed therewith
may be examined at the office of the SEC in Washington, D.C.
Statements contained in the Portfolios' Prospectus or in this Additional
Statement as to the contents of any contract or other document referred to are
not necessarily complete, and, in each instance, reference is made to the copy
of such contract or other document filed as an exhibit to the Registration
Statement of which the Prospectus and this Additional Statement form a part,
each such statement being qualified in all respects by such reference.
Capitalized terms, to the extent not otherwise defined herein, shall have the
meanings as assigned to them in the Prospectus.
FINANCIAL STATEMENTS
The financial statements and related report of Arthur Andersen LLP, independent
public accountants, contained in the 1995 Annual Report are hereby incorporated
by reference. A copy of the Annual Report accompanies or has preceded this
Additional Statement and may be obtained without charge by writing to Goldman,
Sachs & Co., 4900 Sears Tower, Chicago, Illinois 60606, or Callahan Credit Union
Financial Services Limited Partnership, 1001 Connecticut Ave., N.W., Suite 1022,
Washington, DC 20036-5504, or by calling Goldman, Sachs & Co. at (800) 342-5828
or Callahan Financial Services, Inc. at (800) 237-5678.
DESCRIPTION OF SECURITIES RATINGS
A. LONG-TERM RATINGS
MOODY'S INVESTORS SERVICE, INC.
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 edge." 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.
B-48
<PAGE>
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 risks appear somewhat larger than with Aaa securities.
Moody's applies numerical modifiers l, 2, and 3 in the Aa category. The
modifier 1 indicates that the company ranks in the higher end of the Aa
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end of the Aa category.
STANDARD & POOR'S RATINGS GROUP
AAA: Bonds rated AAA are highest grade debt obligations. This rating indicates
an extremely strong capacity to pay interest and repay principal.
AA: Capacity to pay interest and repay principal is very strong, and differs
from AAA issues only in small degree.
Plus (+) or Minus (-): The AA rating may be modified by the addition of a plus
or minus sign to show relative standing within the AA category.
r: A rating may be modified by the addition of an "r" rating to highlight
derivative, hybrid and certain other obligations that Standard & Poor's believes
may experience high volatility or high variability in expected returns due to
non-credit risks. The absence of an "r" symbol should not be taken as an
indication that an obligation will exhibit no volatility or variability in total
return.
* The ratings system described herein are believed to be the most recent ratings
systems available from Moody's Investors Service, Inc. and Standard & Poor's
Ratings Group at the date of this Additional Statement for the securities
listed. Ratings are generally given to securities at the time of issuance. While
the rating agencies may from time to time revise such ratings, they undertake no
obligation to do so, and the ratings indicated do not necessarily represent
ratings which will be given to these securities throughout the period they are
held by a Portfolio.
DUFF & PHELPS, INC.
AAA: Long-term fixed income securities which are rated AAA are judged to be of
the highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
B-49
<PAGE>
AA: Long-term fixed income securities which are rated AA are judged to be of
high credit quality. Protection factors are strong. Risk is modest but may
vary slightly from time to time because of economic conditions.
Duff & Phelps applies modifiers AA+, AA, and AA- in the AA category for long-
term fixed income securities. The modifier AA+ indicates that the security
ranks in the higher end of the AA category; the modifier AA indicates a mid-
range ranking; and the modifier AA-indicates that the issue ranks in the lower
end of the AA category.
FITCH INVESTORS SERVICE INC.
AAA: Bonds which are rated AAA are 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 which are rated AA are 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. 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+.
Fitch applies plus (+) and minus (-) modifiers in the AA category to indicate
the relative position of a credit within the rating category. The modifier AA+
indicates that the security ranks at the higher end of the AA category than a
security rated AA or
AA-.
IBCA LIMITED AND IBCA INC.
AAA: Obligations which are rated AAA are considered to have the lowest
expectations 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 significantly.
AA: Obligations which are rated AA are considered to have 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.
B-50
<PAGE>
THOMSON BANKWATCH, INC.
AAA: The highest category; indicates the ability to repay principal and interest
on a timely basis is extremely high.
AA:The second highest category; indicates a very strong ability to repay
principal and interest on a timely basis with limited incremental risk compared
to issues rated in the highest category.
Ratings in the Long-Term Debt categories may include a plus (+) or minus (-)
designation which indicates where within the respective category the issue is
placed.
B. SHORT-TERM RATINGS
MOODY'S INVESTORS SERVICE, INC.
Moody's commercial paper ratings are opinions of the ability of issuers to repay
punctually promissory obligations not having an original maturity in excess of
nine months.
P-1: Issuers or related supporting institutions are considered to have a
superior capacity for repayment of short-term promissory obligations. Prime-1
or P-1 repayment capacity will normally be evidenced by the following
characteristics:
- - Leading market positions in well established industries.
- - High rates of return on funds employed.
- Conservative capitalization structures with moderate reliance on debt
and ample asset protection.
- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
- Well established access to a range of financial markets and assured
sources of alternate liquidity.
P-2: Issuers or related supporting institutions are considered to have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
B-51
<PAGE>
STANDARD & POOR'S RATINGS GROUP
Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt considered short-term in the relevant
market.
A-1: The A-1 designation indicates the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics will be denoted with a plus sign (+) designation.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
DUFF & PHELPS, INC.
Duff & Phelps' short-term debt ratings apply to all obligations with maturities
under one year.
Duff 1: Commercial paper and certificates of deposit rated Duff 1 are
considered to have a very high certainty of timely payment. Liquidity factors
are considered excellent and are supported by good fundamental protection
factors. Risk factors are minor.
Duff 2: Commercial paper and certificates of deposit rated Duff 2 are
considered to have a good certainty of timely payment. Liquidity factors and
company fundamentals are considered sound. Although ongoing internal funding
needs may enlarge total financing requirements, access to capital markets is
good and risk factors are small.
Duff & Phelps applies a plus and minus rating scale, Duff 1 plus, Duff 1 and
Duff 1 minus, in the Duff 1 top grade category for commercial paper and
certificates of deposits. The rating Duff 1 plus indicates that the security
has the highest certainty of timely payment; short-term liquidity is outstanding
and safety is just below risk-free U.S. Treasury short-term obligations. The
rating Duff 1 indicates a very high certainty of timely payment; liquidity
factors are excellent and risk factors are minor. The rating Duff 1 minus
indicates a high certainty of timely payment; liquidity factors are strong and
risk factors are very small.
FITCH INVESTORS SERVICE INC.
Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of generally up to three years.
F-1: Short-term debt obligations rated F-1 are considered to be of very strong
credit quality. Those issues determined to possess exceptionally strong credit
quality and having the strongest degree of
B-52
<PAGE>
assurance for timely payment will be denoted with a plus (+) sign designation.
F-2: Short-term debt obligations rated F-2 are considered to be of good credit
quality. Issues assigned this rating have a satisfactory degree of assurance
for timely payment, but the margin of safety is not as great as for issues
assigned F-1+ and F-1 ratings.
IBCA LIMITED AND IBCA INC.
A1: Short-term obligations rated A1 are supported by the capacity for timely
repayment. A plus (+) sign is added to those issues determined to possess a
particularly strong credit feature.
A2: Short-term obligations rated A2 are supported by a good capacity for timely
repayment, although such capacity may be susceptible to adverse changes in
business, economic or financial conditions.
THOMSON BANKWATCH, INC.
The TBW short-term ratings apply only to unsecured instrument that have a
maturity of one year or less.
The TBW short-term ratings specifically assess the likelihood of an untimely or
incomplete payment of principal and interest.
TBW-1: The highest category; indicates a very high degree of likelihood that
principal and interest will be paid on a timely basis.
TBW-2: The second highest category; while the degree of safety regarding timely
repayment of principal and interest is strong, the relative degree of safety is
not as high a for issues rated "TBW-1".
B-53
<PAGE>
---------------------
TRUST
-----
for Credit Unions
---------------------
Annual Report
-----------------
August 31, 1995
<PAGE>
Dear TCU Investor,
The 12-month period ended August 31, 1995 has been an eventful one, for
both the financial markets and the Trust for Credit Unions. We are pleased to
report that in a challenging environment TCU maintained its market share with
assets of over $1.4 billion to date, which made up approximately 50% of total
credit union mutual fund investments.*
For the past year, credit union lending rose approximately 14% -- one of
the highest levels ever -- while shares grew by approximately 3.0%.* As a
result, credit unions shortened the maturities on their investment portfolios in
order to increase liquidity. While total credit union investments declined 10%
to $105 billion in the 12 months ended June 30, 1995, none of the decline came
from the less than one year to maturity category, which stayed constant at $62
billion.* TCU provides two alternatives, the TCU Money Market Portfolio and the
TCU Government Securities Portfolio, for credit unions targeting the short end
of the yield curve.
Investor sensitivity to derivatives continued during the past year,
resulting in a dramatic decline in the demand for some of the more esoteric and
volatile instruments. In the case of the TCU portfolios, we want to assure you
that higher risk mortgage derivatives such as super floaters and inverse
floaters have never played a major role in our strategy. We have used these
instruments in very small percentages, for hedging purposes and, in certain
cases, for incremental expected return, and have managed the investments
extremely carefully.
The rapidly changing investment climate during the past year demonstrates
the importance of combining Goldman Sachs Asset Management's professional
investment expertise with Callahan Financial Services' in-depth understanding of
the needs of credit unions. The TCU portfolios' positive performance reflects
the results of careful management of duration, sector and security selection as
well as the use of tactical trading strategies to profit from shorter term
opportunities.
As always, we appreciate the opportunity to serve you and look forward to
offering innovative solutions to meet your investing needs in the years ahead.
Sincerely,
/s/ Marcia L. Beck /s/ William F. Connors
Marcia L. Beck William F. Connors
President President
Trust for Credit Unions Callahan Financial Services, Inc.
Director, Mutual Funds Group
Goldman Sachs Asset Management
/s/ Robert F. Deutsch
Robert F. Deutsch
Vice President
Goldman Sachs Asset Management
September 29, 1995
* Source: Callahan & Associates, Inc.
<PAGE>
Dear TCU Investor,
We are pleased to review the past performance of each of the Trust for
Credit Unions portfolios for the one-year period ending August 31, 1995. To help
put the portfolios' performance in perspective, the following is a brief
overview of some of the key events affecting the economy and financial markets
during the period.
Economic Review:
After a Difficult 1994, the Bond Market Staged a Powerful Rally
Rising interest rates took their toll on the U.S. bond market in 1994,
making it one of the most difficult years for bonds in recent memory. Starting
in January 1995, however, the bond market staged a rally that gained momentum
through midyear, fueled by slowing economic growth and relatively contained
inflation. In July and August, the bond market experienced a mild correction,
but by the end of August, bonds were again trending upward.
Robust Economy Faltered in March, but Later Recovered
The economy accelerated during the first half of the fund's fiscal year,
from September 1994 through February 1995. Real Gross Domestic Product (GDP)
grew at 4.0% and 5.1% in the third and fourth quarters of 1994, respectively.
Job growth, real disposable income, consumer spending, and sales of new and
existing homes all exhibited impressive strength.
The high-flying economy began losing altitude in March and weakened further
during the second quarter, fanning fears of a more serious downturn. For the
first quarter of 1995, GDP increased at 2.7%, down sharply from the preceding
quarters. Other troubling indicators included weakening employment, declining
consumer spending, a dramatic drop in the purchasing manager's index and a
downward trending Index of Leading Economic Indicators.
Following a spring dominated by generally poor economic readings, the
economy appeared to begin to revive in midsummer. The economy's response to
previous tightenings had begun to fade, and what appeared to be an inventory
correction cycle had come to an end. By August, employment, housing,
construction spending, auto sales and several other indicators showed some signs
of improvement. Furthermore, second-quarter real GDP growth -- originally
estimated as 0.5% --was revised upward to 1.1%.
Fed Raises Rates Twice During the Period, Then Cuts in July
To head off a resurgence in inflation in the midst of a booming economy,
the U.S. Federal Reserve raised the federal funds rate by 75 basis points in
November 1994 and by an additional 50 basis points in February 1995. All told,
the Fed had raised rates seven times in its tightening cycle, by a total of 300
basis points, to 6.00%.
2
<PAGE>
The Fed then remained neutral through early July 1995, when it reversed
course. Prompted by receding inflationary pressures and a weakening economy, the
Fed cut the federal funds rate 25 basis points to 5.75%.
The shape of the yield curve began flattening dramatically starting with
the November rate increase and continuing through the first half of 1995. The
yield on six-month Treasury bills rose from 5.02% on August 31, 1994 to
approximately 5.51% on August 31, 1995, due in large part to the Fed's actions.
For the same time period, the yield on the 30-year U.S. Treasury bond fell
dramatically, from 7.45% a year ago to 6.65%.
Historical Treasury Yield Curve
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
8/31/94 8/31/95
<S> <C> <C>
3 Month 4.66 5.44
6 Month 5.02 5.51
1 Year 5.53 5.63
2 Year 6.14 5.85
3 Year 6.42 5.94
5 Year 6.80 6.07
10 Year 7.17 6.29
30 Year 7.45 6.65
</TABLE>
Source: Bloomberg, L.P.
The yield curve flattened considerably and
shifted downward at the longer end. The
yield difference between two-year Treasury
notes and 30-year Treasury bonds narrowed
significantly.
A Challenging ARM Market
Interest rate fluctuations throughout the period under review had a direct
impact on the mortgage-backed securities market. In particular, adjustable rate
mortgage securities (ARMs), a key holding in the non-money market TCU
portfolios, went through three distinct phases during the past 12 months.
. At the start of the portfolio's fiscal year on September 1, 1994, spreads
between ARMs and Treasuries widened due to the fear that ARMs would reach
their periodic caps (the maximum their coupons can be raised within a
specified time period) in the rising interest rate environment.
. This situation generally persisted through January 1995, at which point the
ARM market entered a second phase: as interest rates stabilized, cap risk
declined and the prospects for ARMs brightened. This favorable ARM
environment continued through late spring, until interest rates began to
decline.
3
<PAGE>
. Starting approximately in June 1995, spreads between ARMs and Treasuries
began widening again, this time a result of increased prepayment risk based
on the assumption homeowners would refinance their mortgages at lower
rates. Currently, we believe that prepayment risk is fully reflected in ARM
prices, and ARMs are now at attractive valuations.
Economic Outlook: Slow Growth Ahead With Inflation Under Control
Though the signals are still somewhat mixed, the economy appears to have
regained some of its upward momentum and seems to be back on track for a period
of slow growth and relatively contained inflation, making an additional Fed rate
reduction less likely. However, the Fed may make one more precautionary cut by
year end, an event that has already been factored into the market.
- -----------------------
TCU Money Market Portfolio
Objective
The objective of the TCU Money Market Portfolio (MMP) is to maximize
current income, preserve capital and maintain liquidity through investments in
high-quality money market instruments authorized under the Federal Credit Union
Act.
Performance Review
For the 12-month period ended August 31, 1995, the TCU Money Market
Portfolio had a total return of 5.56%, outperforming Donoghue's All-Taxable
Money Market Index by 31 basis points. As of August 31, 1995, the portfolio had
a seven-day current yield of 5.67% and an effective yield of 5.83%./1/
Portfolio Composition and Investment Strategies
In order to meet the liquidity needs of credit unions in a volatile
interest rate environment, we significantly increased our investment in
repurchase agreements (repos) from 37% to 72.4% of the portfolio's assets during
the period under review. As of August 31, 1995, other portfolio positions
included 10.4% in bank notes, 5.2% in U.S. government agency securities, 4.2% in
bankers' acceptances, 3.9% in certificates of deposit (CDs), 2.6% in time
deposits and 1.3% in domestic Eurodollar CDs.
- ------------------------------
/1/ Please note that an investment in the portfolio is neither insured nor
guaranteed by the U.S. government. There can be no assurance that the
portfolio will be able to maintain a stable net asset value of $1.00.
4
<PAGE>
During the first half of the portfolio's fiscal year (September 1994 to
February 1995), we shortened the portfolio's average maturity as interest rates
rose in order to maintain a yield that was competitive with alternative
overnight investments. As it became apparent that the Fed had completed its
tightening cycle, the portfolio's average maturity was lengthened.
Portfolio Composition as of August 31, 1995*
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
Repurchase Agreements 72.4%
Bank Notes 10.4%
U.S. Gov't Agency Discount Notes 5.2%
Bankers Acceptances 4.2%
Certificates of Deposit 3.9%
Time Deposits 2.6%
Domestic Eurodollar Certificates of Deposit 1.3%
</TABLE>
* The percentages shown are of total portfolio investments that have settled
and include an offset to cash equivalents relating to unsettled trades. These
percentages differ from those in the accompanying Statement of Investments,
which reflects portfolio holdings as a percentage of net assets.
Looking Forward
We will continue to emphasize high-quality investments and will structure
the portfolio in an effort to remain competitive with other short-term
alternatives. Going forward, we expect the portfolio to operate with a
relatively short average maturity of 10 to 20 days.
5
<PAGE>
TCU Government Securities Portfolio
Objective
The TCU Government Securities Portfolio (GSP) seeks high current income
consistent with low principal volatility. Operating since July 10, 1991, the
portfolio invests primarily in ARMs issued by the U.S. government, its agencies
or instrumentalities. The portfolio's target duration is six months to one year.
As of August 31, 1995, its actual duration was 0.70 years, almost the same as
the duration of the portfolio's benchmark, which was 0.75 years.
Performance Review
For the 12 months ended August 31, 1995, the TCU GSP achieved a total
return of 5.82% (6.01% in dividend income and -0.19% in price depreciation),
compared with 6.25% for the nine-month Treasury average. (Please note that we
have substituted the nine-month Treasury return for the one-year constant
maturity Treasury (CMT) quoted in last year's annual report because we are
managing the portfolio's duration to under one year. The nine-month Treasury
return is calculated by averaging the six-month Treasury bill and the one-year
Treasury bill.)
The portfolio's underperformance compared with its benchmark was primarily
caused by the widening spreads of ARMs relative to Treasuries. The portfolio's
large ARM position (86.4%) felt the impact of these widening spreads, making
ARMs less valuable than equal-duration Treasuries. The portfolio performed well,
however, compared with its peers. TCU GSP ranked 24th out of 72 adjustable rate
mortgage funds based on total return for the 12 months ended August 31, 1995,
according to Lipper Analytical Services, Inc.
. The portfolio's net asset value (NAV) declined slightly during the period,
from $9.78 on August 31, 1994 to $9.76 on August 31, 1995, as a result of
the yield on the one-year Treasury rising 10 basis points during the
period.
. During the period, the portfolio's distribution rate rose 112 basis points
to 6.25% on August 31, 1995 as ARM coupons continued to reset at higher
levels. The portfolio's 30-Day SEC Yield rose to 6.09% as of August 31,
1995, up from 4.85% a year earlier.
Portfolio Composition and Investment Strategies
The portfolio composition has remained much the same during this fiscal
year as it was last year, with primary emphasis on ARMs (86.4%) indexed to the
one-year CMT. In addition, the portfolio held a small position (3.1%) in Small
Business Administration (SBA) loans and 0.4% in sequential-pay collateralized
mortgage obligations (CMOs). To help manage duration, we maintained an 8.1%
position in repurchase agreements (repos)/cash equivalents.
6
<PAGE>
We believe that when used knowledgeably and very sparingly, derivatives can
improve a portfolio's performance. To this end, as of August 31, 1995, the
portfolio included a 2% position in super floaters. Because their sensitivity to
interest rate movements and coupon resets is approximately four times greater
than regular floaters, super floaters contributed to the portfolio's positive
performance when rates increased during the summer of 1995.
Portfolio Composition as of August 31, 1995*
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
ARMs 86.4%
Repos/Cash Equivalents 8.1%
SBAs 3.1%
Super Floaters 2.0%
Sequentials 0.4%
</TABLE>
* The percentages shown are of total portfolio investments that have settled
and include an offset to cash equivalents relating to unsettled trades. These
percentages differ from those in the accompanying Statement of Investments,
which reflects portfolio holdings as a percentage of net assets.
Looking Forward
We see ARMs as being favorably priced in the current environment. In
general, they continue to provide attractive yields versus comparable-duration
Treasuries. Furthermore, we believe that prepayment fears have been fully priced
into the market, creating upside potential should prepayments increase less than
the market anticipates.
7
<PAGE>
TCU Mortgage Securities Portfolio
Objective
The TCU Mortgage Securities Portfolio (MSP), which commenced operations on
October 9, 1992, seeks high current income consistent with relatively low
principal volatility. The portfolio invests in adjustable rate and fixed rate
mortgage securities issued by the U.S. government, its agencies or
instrumentalities and in mortgage securities rated AA or better by nationally
recognized rating agencies. The portfolio's target duration is the same as that
of the two-year Treasury note; its actual duration was 1.84 years as of August
31, 1995, exactly in line with its benchmark.
Performance Review
The portfolio's total return was 8.20% for the 12-month period ended August
31, 1995 (6.92% from dividend income and 1.28% from price appreciation),
compared with 7.55% for the two-year Treasury note, the portfolio's benchmark.
In addition to outperforming its Treasury benchmark, the portfolio also
performed well relative to its peers. For the 12 months ended August 31, 1995,
the portfolio ranked 22nd out of 129 short-term U.S. government funds based on
total return, according to Lipper Analytical Services, Inc.
The portfolio's term structure contributed to its outperformance relative
to its benchmark. The portfolio includes mortgage-backed securities with a range
of maturities that have both shorter and longer cash flows than the benchmark.
When the yield curve flattened, it was more advantageous to have cash flows
distributed along the curve rather than concentrated like the benchmark's
"bulleted" structure (with maturities at two years).
The portfolio's NAV was $9.74 on August 31, 1995, up $0.12 since last year,
due primarily to the decline in interest rates.
Portfolio Composition and Investment Strategies
Over the 12-month period ended August 31, 1995, we reduced the portfolio's
holdings in sequential-pay CMOs from 47.5% to 15.5% of the portfolio's assets,
and increased its investment in ARMs from 18.1% to 44.4%. As the price of
sequentials increased, we took advantage of tighter spreads versus equal-
duration Treasuries and sold a portion of our holdings in favor of ARMs with
wider spreads.
To increase the portfolio's expected return, we added a 3.4% position in
mezzanine CMOs. Mezzanines are a "tranche," or class of CMO, that ranks in
between senior classes (lower credit risk, lower yielding) and subordinate
classes (higher credit risk, higher yielding).
The portfolio held a 2.9% position in floaters, down slightly from its 3.2%
holding a year earlier, which added slight incremental return over Treasuries.
8
<PAGE>
We managed the portfolio's duration by weighting its positions in U.S.
Treasuries and repos/cash equivalents according to our need to shorten or
lengthen the portfolio's duration. Over the 12-month period, the portfolio's
holdings in U.S. Treasuries were increased from 1.8% to 19.6%, while repos/cash
equivalents decreased from 12.7% of the portfolio to 0.5%.
Portfolio Composition as of August 31, 1995*
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
ARMs 44.4%
U.S. Treasuries 19.6%
Sequentials 15.5%
PACs 9.6%
Fixed Pass-Throughs 4.0%
Mezzanine CMOs 3.4%
Floaters 2.9%
Repos/Cash Equivalents 0.5%
Inverse Floaters 0.1%
</TABLE>
* The percentages shown are of total portfolio investments that have settled
and include an offset to cash equivalents relating to unsettled trades. These
percentages differ from those in the accompanying Statement of Investments,
which reflects portfolio holdings as a percentage of net assets.
Looking Forward
We believe ARMs are attractively priced versus comparable-duration
Treasuries. With prepayment risk already factored into the market, we view ARMs
as having upside potential should prepayments increase more slowly than current
market expectations. In addition, with the lack of new issue supply in the CMO
market, this sector continues to offer value relative to Treasuries.
- ---------------------------
TCU Target Maturity Portfolios
Objectives
The TCU Target Maturity Portfolios (TMPs) have dual objectives: to seek a
high level of current income and to return $10 per unit to investors at or about
three years after the portfolio's inception. However, there is no assurance that
these objectives will be achieved. The portfolios invest primarily in mortgage-
related securities issued by the U.S. government, its agencies or
instrumentalities and in privately issued mortgage-related securities.
<TABLE>
<CAPTION>
Portfolio
U.S. Treasury Duration as of Commencement of
Portfolio Benchmark 8/31/95 Operations
- ------------ -------------- -------------- ---------------
<S> <C> <C> <C>
TMP (1996) 4.25% due 5/96 0.78 years 7/1/93
TMP (Feb 97) 4.75% due 2/97 1.42 years 2/15/94
TMP (May 97) 6.50% due 5/97 1.57 years 5/23/94
</TABLE>
9
<PAGE>
Target Maturity Portfolio (1996)
Performance Review
The portfolio's total return for the 12 months ended August 31, 1995 was
6.51% (6.13% from dividend income and 0.38% from price appreciation), compared
with 6.40% for the 4.25% U.S. Treasury note due May 1996, the portfolio's
benchmark. The portfolio outperformed the benchmark by 11 basis points,
primarily due to the successful use of ARMs and sequential-pay CMO securities
that provided incremental returns over Treasuries. The portfolio's NAV rose
$0.04 during the period to $9.59 on August 31, 1995. As the portfolio gets
closer to its maturity, we have intentionally decreased its duration to 0.78
years from 1.66 years last August.
Portfolio Composition Highlights
As of August 31, 1995, the portfolio was 47.6% invested in ARMs, up from
7.4% one year ago. During the period, we have decreased our holdings in
sequential-pay CMOs and planned amortization class (PAC) CMOs to 16.3% and 6.2%
of the portfolio, respectively. We believe that the ARM sector currently
represents better value than sequentials or PACs, which are trading at tighter
spreads.
The portfolio also included a 4.2% position in floaters and 0.1% in inverse
floaters, held for their incremental yield and expected total return. We managed
the portfolio's duration by balancing the U.S. Treasury position with the
repo/cash equivalents holdings, weighting one versus the other at different
times in response to the changing interest rate environment. To this end, as of
August 31, 1995, the portfolio held a 23.7% position in U.S. Treasuries and a
1.9% position in repos/cash equivalents.
Portfolio Composition as of August 31, 1995*
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
ARMs 47.6%
U.S. Treasuries 23.7%
Sequentials 16.3%
PACs 6.2%
Floaters 4.2%
Repos/Cash Equivalents 1.9%
Inverse Floaters 0.1%
</TABLE>
* The percentages shown are of total portfolio investments that have settled
and include an offset to cash equivalents relating to unsettled trades. These
percentages differ from those in the accompanying Statement of Investments,
which reflects portfolio holdings as a percentage of net assets.
10
<PAGE>
Target Maturity Portfolio (Feb 97)
Performance Review
During the 12-month period ended August 31, 1995, the portfolio realized a
total return of 7.48% (6.64% from dividend income and 0.84% from price
appreciation), compared with 7.19% for the portfolio's benchmark, the 4.75% U.S.
Treasury note due in February 1997. The portfolio outperformed the benchmark by
29 basis points, primarily due to the successful use of ARMs and sequential-pay
CMO securities that provided incremental returns over Treasuries. The
portfolio's NAV increased $0.08 during the period, rising to $9.71 as of August
31, 1995.
Portfolio Composition Highlights
We increased the portfolio's holdings in ARMs to 39.5% as of August 31,
1995, up from 3.5% a year earlier, and cut its sequential-pay CMOs to 38.1%,
down from 69.1% last year. As was the case with the other TCU TMPs, we expect
greater performance potential from attractively valued ARMs, which are trading
at wider spreads than sequentials. Sequential-pay CMOs still represent a major
position in the portfolio since they offer attractive yields relative to
Treasuries.
Also included in the portfolio were 3.3% in floaters, down slightly from
3.7% a year earlier. We managed the portfolio's duration to the benchmark's
duration, primarily by holding U.S. Treasuries (18.9%).
Portfolio Composition as of August 31, 1995*
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
ARMs 39.5%
Sequentials 38.1%
U.S. Treasuries 18.9%
Floaters 3.3%
Cash Equivalents 0.2%
</TABLE>
* The percentages shown are of total portfolio investments that have settled
and include an offset to cash equivalents relating to unsettled trades. These
percentages differ from those in the accompanying Statement of Investments,
which reflects portfolio holdings as a percentage of net assets.
11
<PAGE>
Target Maturity Portfolio (May 97)
Performance Review
The portfolio achieved a total return of 7.70% for the 12-month period
ended August 31, 1995 (6.85% from dividend income and 0.85% from price
appreciation), compared with 7.50% for the fund's benchmark, the 6.50% U.S.
Treasury note due in May 1997. The portfolio outperformed the benchmark by 20
basis points, primarily due to the successful use of ARMs and sequential-pay CMO
securities that provided incremental returns over Treasuries. The portfolio
closed its fiscal year with its NAV at $9.99, an increase of $0.08 from August
31, 1994.
Portfolio Composition Highlights
As of August 31, 1995, 52.1% of the portfolio was invested in ARMs, up from
14.1% a year earlier. The portfolio's second largest grouping was 29.6% in
sequential-pay CMOs, a decrease from its 45.7% position in the previous year.
During the period, we added a 2.7% position in inverse floaters, held for
their incremental yield and potential incremental return. The portfolio also
held 13.7% in U.S. Treasuries and 1.9% in cash equivalents, both of which were
used to manage the portfolio's duration to the benchmark's duration.
Portfolio Composition as of August 31, 1995*
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
ARMs 52.1%
Sequentials 29.6%
U.S. Treasuries 13.7%
Inverse Floaters 2.7%
Cash Equivalents 1.9%
</TABLE>
* The percentages shown are of total portfolio investments that have settled
and include an offset to cash equivalents relating to unsettled trades. These
percentages differ from those in the accompanying Statement of Investments,
which reflects portfolio holdings as a percentage of net assets.
12
<PAGE>
Investment Strategy and Outlook for TCU TMPs
Despite recent weakening in the mortgage market and possible near-term
volatility, we view ARMs as offering attractive value over Treasuries of
comparable duration. In addition, we believe CMOs add incremental yield and
expected return over comparable-duration Treasuries.
As the TCU TMPs approach maturity, we anticipate shifting the portfolios'
allocation to shorter duration mortgage securities.
Distribution Policy
As required by tax law, all mutual funds, including the TCU portfolios,
must either distribute substantially all of the taxable income they generate
each year or will be subject to an excise tax on any undistributed income.
. For the TCU Money Market Portfolio, substantially all of the net investment
income and net short-term capital gains will be declared as a dividend on a
daily basis and paid monthly. If the portfolio were to realize any net
long-term capital gains, they would be distributed at year end.
. For the TCU Government Securities Portfolio and Mortgage Securities
Portfolio, we pay monthly dividends based on the income each portfolio is
expected to generate during the month. The amount of the dividend will
reflect changes in interest rates (i.e., as interest rates increase,
dividends will increase and as interest rates decline, dividends will be
reduced). In addition, because these TCU portfolios invest in mortgage
securities that are subject to prepayments, we cannot precisely predict the
amount of principal and interest that a portfolio will receive. Therefore,
at times, a portfolio may distribute amounts above or below current income
levels. Any excess income, overdistributions or net capital gains generated
will be paid out in a special distribution or adjusted at year end.
. For the TCU Target Maturity Portfolios, the monthly dividends are based on
the prevailing interest rates at the time of each portfolio's inception.
For these portfolios, the monthly dividends are held constant despite any
changes in interest rates or changes in the rate of prepayments. As noted
above, any excess income, overdistribution or net capital gains generated
are paid out or adjusted at year end. The amount of these year end
adjustments may be more significant than in portfolios in which the
dividend is reset each month. In December 1994, the TCU TMP (1996) and TMP
(Feb 97) paid special dividends of $0.0893 per share and $0.0987 per share,
respectively.
13
<PAGE>
As always, we appreciate your support and we will continue to seek out
attractive and rewarding investment opportunities in the future.
Sincerely,
/s/ Laurie H. Wollmuth
Laurie H. Wollmuth
Portfolio Manager
TCU Money Market Portfolio
/s/ Jonathan A. Beinner /s/ Theodore T. Sotir
Jonathan A. Beinner Theodore T. Sotir
Portfolio Manager Portfolio Manager
TCU Government Securities Portfolio
TCU Mortgage Securities Portfolio
TCU Target Maturity Portfolio (1996)
TCU Target Maturity Portfolio (Feb 97)
TCU Target Maturity Portfolio (May 97)
Goldman Sachs Asset Management
September 29, 1995
14
<PAGE>
TRUST FOR CREDIT UNIONS
PERFORMANCE COMPARISON
In accordance with the requirements of the Securities and Exchange Commission,
the following data is supplied for the periods ended August 31, 1995. Each of
the Trust for Credit Union portfolios is compared to its benchmarks assuming the
following initial investment:
<TABLE>
<CAPTION>
Initial
Portfolio Investment Compare to:
- ----------------------------------------------- ---------- -------------------------------------------------------------
<S> <C> <C>
Government Securities ("GSP"): $ 100,000 Lehman Brothers Mutual Fund Adjustable Rate Mortgage
Index ("Lehman ARM Index")(c); Lehman Brothers Mutual
Fund Short (1-2) Government Index ("Lehman 1-2 Gov't
Index"); 1-Year U.S. Treasury Bill ("1-year T-Bill"); 6-Month
U.S. Treasury Bill ("6-month T-Bill").
Mortgage Securities ("MSP"): $ 500,000 Lehman ARM Index; Lehman Brothers Mutual Fund Short
(1-3) Government Index ("Lehman 1-3 Gov't Index");
2-Year U.S. Treasury Bill ("2-year T-Bill").
Target Maturity (1996) ("TMP (1996)"): $1,000,000 Lehman ARM Index; Lehman 1-2 Gov't Index; 4.25% U.S.
Treasury Bill due 05/15/96 ("T-Bill 4.25%").
Target Maturity (Feb 97) ("TMP (Feb 97)"): $1,000,000 Lehman ARM Index; Lehman 1-3 Gov't Index; 4.75% U.S.
Treasury Bill due 02/15/97 ("T-Bill 4.75%").
Target Maturity (May 97) ("TMP (May 97)"): $1,000,000 Lehman ARM Index; Lehman 1-3 Gov't Index; 6.50% U.S.
Treasury Bill due 05/15/97 ("T-Bill 6.50%").
</TABLE>
All performance data shown represents past performance and should not be
considered indicative of future performance which will fluctuate as market
conditions change. The investment return and principal value of an investment
will fluctuate with changes in market conditions so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
Government Securities Portfolio
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
GSP Lehman ARM Index(c) Lehman 1-2 Gov't Index 1-year T-Bill(g) 6-month T-Bill
<S> <C> <C> <C> <C> <C>
8/1/91(b) $100,000 100,000 100,000 100,000
8/31/91 $100,565 101,250 100,832 100,603
1/1/92 103,133
8/31/92 $107,303 108,179 110,607 107,760 106,172
8/31/93 $111,661 114,961 116,102 111,873 109,850
8/31/94 $114,266 115,868 118,784 114,846 113,692
8/31/95 $120,920 125,399 127,130 122,280 120,538
</TABLE>
Average Annual Total Return: One Year - 5.82%
Since Inception (a) - 4.80%
Mortgage Securities Portfolio
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
MSP Lehman ARM Index Lehman 1-3 Gov't Index 2-year T-Bill
<S> <C> <C> <C> <C>
11/1/92(b) $500,000 500,000 500,000 500,000
8/31/93 $532,570 532,860 526,097 526,329
8/31/94 $537,871 537,066 535,052 534,055
8/31/95 $581,995 581,250 574,700 574,400
</TABLE>
Average Annual Total Return: One Year - 8.20%
Since Inception (a) - 5.30%
15
<PAGE>
TRUST FOR CREDIT UNIONS
PERFORMANCE COMPARISON
Target Maturity Portfolio (1996)
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
TMP(1996)(d) TMP(1996)(e) Lehman ARM Index Lehman 1-2 Gov't Index T-Bill 4.25%
<S> <C> <C> <C> <C> <C>
7/1/93(a) $1,000,000 1,000,000 1,000,000 1,000,000 1,000,000
8/31/93 1,011,929 1,011,929 1,010,527 1,009,116 1,012,517
8/31/94 1,020,110 1,020,110 1,018,503 1,032,430 1,023,716
8/31/95 1,086,492 1,080,851 1,102,300 1,105,000 1,089,206
</TABLE>
Average Annual Total Return:
TMP(1996)(d) One Year -- 6.51%
Since Inception (a) -- 3.90%
TMP(1996)(e) One Year -- 5.98%
Since Inception (a) -- 3.66%
Target Maturity Portfolio (Feb 97)
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
TMP(Feb 97)(d) TMP(Feb 97)(e) Lehman ARM Index Lehman 1-3 Gov't Index T-Bill 4.75%
<S> <C> <C> <C> <C> <C>
3/1/94(b) $1,000,000 1,000,000 1,000,000 1,000,000 1,000,000
8/31/94 996,630 996,630 999,122 1,007,226 996,823
8/31/95 1,071,183 1,065,692 1,081,300 1,081,800 1,068,531
</TABLE>
Average Annual Total Return:
TMP(Feb 97)(d) One Year -- 7.48%
Since Inception (a) -- 4.22%
TMP(Feb 97)(e) One Year -- 6.94%
Since Inception (a) -- 3.89%
Target Maturity Portfolio (May 97)
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
TMP(May 97)(d) TMP(May 97)(e) Lehman ARM Index Lehman 1-3 Gov't Index T-Bill 6.50%
<S> <C> <C> <C> <C> <C>
6/1/94(b) $1,000,000 1,000,000 1,000,000 1,000,000 1,000,000
8/31/94 1,013,022 1,013,022 1,013,254 1,014,840 1,015,554
8/31/95 1,091,028 1,085,598 1,096,600 1,090,000 1,091,600
</TABLE>
Average Annual Total Return:
TMP(May 97)(d) One Year -- 7.70%
Since Inception (a) -- 6.75%
TMP(May 97)(e) One Year -- 7.16%
Since Inception (a) -- 6.33%
(a) The Government Securities, Mortgage Securities, Target Maturity (1996),
Target Maturity (Feb 97), and Target Maturity (May 97) portfolios
commenced operations July 10, 1991, October 9, 1992, July 1, 1993,
February 15, 1994 and May 23, 1994, respectively.
(b) For comparative purposes, initial investments are assumed to be made on
the first day of the month following each portfolio's inception.
(c) The calculation of The Lehman ARM Index was initiated for the month ending
January 31, 1992. For comparative purposes in this graph, an initial
investment for this index is assumed on January 1, 1992, at a value equal
to the Government Securities portfolio's investment at such date.
(d) Does not include effect of redemption fee.
(e) Includes effect of 0.50% redemption fee, assuming redemption at the end of
the period presented.
16
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Unitholders and Trustees of
Trust for Credit Unions:
We have audited the accompanying statements of assets and liabilities of
Trust for Credit Unions (a Massachusetts business trust comprising the Money
Market Portfolio, the Government Securities Portfolio, the Mortgage Securities
Portfolio, the Target Maturity Portfolio (1996), the Target Maturity Portfolio
(Feb 97) and the Target Maturity Portfolio (May 97)), including the statements
of investments as of August 31, 1995, the related statements of operations for
the year then ended and the statements of changes in net assets and financial
highlights for the periods presented. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and the 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 the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1995 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 the financial highlights
referred to above present fairly, in all material respects, the financial
position of each of the respective portfolios constituting the Trust for Credit
Unions as of August 31, 1995, the results of their operations for the year then
ended, and the changes in their net assets and the financial highlights for the
periods presented, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts,
October 2, 1995
17
<PAGE>
TRUST FOR CREDIT UNIONS
-------------------
MONEY MARKET PORTFOLIO
STATEMENT OF INVESTMENTS
August 31, 1995
($ in Thousands)
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- --------- -------- -------- ---------
<S> <C> <C> <C>
Bank Notes (10.5%)
Bank of America
$ 15,000 5.74% 09/11/95 $ 15,000
First Bank of Minneapolis
15,000 5.80 09/15/95 15,000
PNC Bank, N.A.
10,000 5.88 09/27/95 10,000
--------
Total Bank Notes............................... $ 40,000
--------
Bankers' Acceptances (4.3%)
Chemical Bank
$ 5,500 5.78%(a) 10/23/95 $ 5,455
Corestates Bank
3,000 5.81(a) 09/14/95 2,994
2,847 5.81(a) 10/17/95 2,826
NationsBank of Georgia, N.A.
5,000 5.77(a) 10/13/95 4,966
--------
Total Bankers' Acceptances..................... $ 16,241
--------
Certificates of Deposit (3.9%)
National Bank of Detroit
$ 15,000 5.78% 09/21/95 $ 15,000
--------
Certificates of Deposit - Eurodollar (1.3%)
Bankers Trust Co., London
$ 5,000 5.75% 09/01/95 $ 5,000
--------
Time Deposit (2.6%)
Fifth Third Bancorp
$ 10,000 5.90% 09/20/95 $ 10,000
--------
U.S. Government Agency Obligations (5.2%)
Federal National Mortgage Association
$ 20,000 5.78%(a) 09/28/95 $ 19,914
--------
Repurchase Agreements (72.6%)
Joint Repurchase Agreement Accounts
$100,000 5.84% 09/01/95 $100,000
102,300 5.85 09/01/95 102,300
Nomura Securities, dated 08/02/95,
repurchase price $50,345 (FNMA:
$20,100, 7.00%, 05/01/08; $8,740, 7.50%,
06/01/09; $22,965, 6.00%, 10/01/08)
50,000 5.77 09/14/95 50,000
Nomura Securities, dated 08/04/95,
repurchase price $25,180 (FNMA:
$26,105, 7.50%, 06/01/09)
25,000 5.77 09/18/95 25,000
--------
Total Repurchase Agreements.................... $277,300
--------
Total Investments.............................. $383,455(b)
========
</TABLE>
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
(a) The rate disclosed for this security represents the yield to maturity.
(b) The amount stated also represents aggregate cost for federal income tax
purposes.
The accompanying notes are an integral
part of these financial statements.
18
<PAGE>
TRUST FOR CREDIT UNIONS
-------------------
GOVERNMENT SECURITIES PORTFOLIO
STATEMENT OF INVESTMENTS
August 31, 1995
($ in Thousands)
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------- -------- -------- ---------
<S> <C> <C> <C>
Mortgage Backed Obligations (91.7%)
Adjustable Rate Federal Home Loan Mortgage Corp.
(FHLMC)(a) (27.1%)
$ 2,227 7.36% 04/01/18 $ 2,298
13,261 7.68 05/01/18 13,669
2,393 7.63 01/01/19 2,463
6,244 7.67 01/01/21 6,440
6,845 7.56 02/01/22 7,001
33,615 7.62 02/01/22 34,629
32,841 7.58 04/01/22 33,833
14,557 7.53 06/01/24 14,965
6,430 7.61 07/01/27 6,536
7,488 7.52 04/01/28 7,633
3,450 7.63 07/01/29 3,519
10,418 7.74 05/01/31 10,672
--------
Total Adjustable Rate FHLMC.................... $143,658
--------
Adjustable Rate Federal National Mortgage Association
(FNMA)(a) (51.9%)
$ 4,957 7.01% 03/01/17 $ 4,997
3,462 7.98 11/01/17 3,564
5,697 7.22 12/01/17 5,811
6,293 7.69 08/01/18 6,436
2,045 7.48 11/01/18 2,093
30,690 7.37 06/01/19 31,329
3,486 7.39 07/01/19 3,559
7,378 7.00 12/01/19 7,359
5,512 7.76 03/01/20 5,687
2,950 7.59 05/01/20 3,021
21,443 7.33 04/01/21 21,875
45,659 7.63 09/01/21 46,964
2,826 7.61 10/01/21 2,868
$2,115 7.63% 11/01/21 $ 2,166
3,159 7.98 02/01/22 3,261
31,402 7.80 09/01/22 32,399
6,779 7.67 07/01/27 6,929
4,755 7.32 10/01/27 4,858
51,484 7.75 01/01/31 53,116
17,000 6.31 02/01/31 17,042
9,309 8.26 02/01/32 9,583
--------
Total Adjustable Rate FNMA..................... $274,917
--------
Adjustable Rate Government National Mortgage
Association (GNMA)(a) (3.8%)
$20,063 7.00% 06/20/24 $ 20,381
--------
Adjustable Rate Small Business Administration
(SBA)(a) (3.0%)
$15,993 7.13% 09/25/17 $ 16,138
--------
Collateralized Mortgage Obligations (CMOs) (5.9%)
Adjustable Rate CMOs(a) (3.5%)
FNMA REMIC Trust 1990- 145, Class A
$18,509 6.76% 12/25/20 $ 18,427
--------
Planned Amortization Class Interest-Only (PAC IO)
CMOs (0.0%)
FNMA REMIC Trust 1991-120, Class H
$ 26 484.26%(b) 06/25/00 $ 58
--------
Sequential Fixed Rate CMOs (0.4%)
FHLMC Series 1278, Class E
$ 176 7.00% 12/15/18 $ 176
</TABLE>
The accompanying notes are an integral
part of these financial statements.
19
<PAGE>
TRUST FOR CREDIT UNIONS
-------------------
GOVERNMENT SECURITIES PORTFOLIO--(Continued)
STATEMENT OF INVESTMENTS
August 31, 1995
($ in Thousands)
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------- -------- -------- ---------
<S> <C> <C> <C>
Mortgage Backed Obligations--(Continued)
Sequential Fixed Rate CMOs--(Continued)
FNMA REMIC Trust 1991-82, Class PH
$ 1,781 8.00% 11/25/18 $ 1,776
--------
Total Sequential Fixed Rate CMOs............... $ 1,952
--------
Super Floater CMOs(a) (2.0%)
FNMA REMIC Trust 1992-157, Class FA
$10,969 2.91% 03/25/04 $ 10,393
--------
Total CMOs..................................... $ 30,830
--------
Total Mortgage Backed Obligations (cost
$492,090)..................................... $485,924
--------
Repurchase Agreements (7.5%)
Joint Repurchase Agreement Account
$39,600 5.84% 09/01/95 $ 39,600
--------
Total Repurchase Agreements (cost $39,600)..... $ 39,600
--------
Total Investments (cost $531,690(c)).......... $525,524
========
- --------------------------------------------------------------------------------
Federal Income Tax Information:
Gross unrealized gain for investments in
which value exceeds cost............................... $ 184
Gross unrealized loss for investments in
which cost exceeds value............................... (6,350)
--------
Net unrealized loss..................................... $ (6,166)
========
- --------------------------------------------------------------------------------
</TABLE>
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
(a) Variable rate security. Coupon rate disclosed is that which is in effect at
August 31, 1995.
(b) Represents security with notional or nominal principal amount. The actual
effective yield of this security is different than the stated rate due to
the amortization of related premiums.
(c) The amount stated also represents aggregate cost for federal income tax
purposes.
The accompanying notes are an integral
part of these financial statements.
20
<PAGE>
TRUST FOR CREDIT UNIONS
-------------------
MORTGAGE SECURITIES PORTFOLIO
STATEMENT OF INVESTMENTS
August 31, 1995
($ in Thousands)
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------- -------- -------- ---------
<S> <C> <C> <C>
Mortgage Backed Obligations (79.8%)
Fixed Rate Government National Mortgage
Association (4.0%)
$ 9,723 9.50% 04/15/10 $ 10,461
--------
Collateralized Mortgage Obligations (CMOs) (75.8%)
Adjustable Rate CMOs(a) (44.4%)
Citicorp Mortgage Securities, Inc. 1992-17,
Class A
$10,796 7.70% 10/25/22 $ 10,981
CMC Securities Corp. II 1993-H, Class A1
6,219 7.56 09/25/23 6,331
CMC Securities Corp. II 1993-I, Class A2
6,099 7.07 09/25/23 6,156
DLJ Mortgage Acceptance Corp.
1992-Q11, Class A2
9,575 8.07 01/25/23 9,664
DLJ Mortgage Acceptance Corp. 1993-Q6,
Class A2
636 6.55 05/25/23 642
Independent National Mortgage Corp.
1994-W, Class A1
11,177 7.43 12/25/24 11,411
Merrill Lynch Mortgage Investors, Inc.
1994-I, Class A1
10,417 7.48 01/25/05 10,610
Prudential Home Mortgage 1991-15,
Class A1
1,571 8.42 11/25/21 1,600
Prudential Home Mortgage 1992-8,
Class A1
466 8.07 04/25/22 475
Prudential Home Mortgage 1992-24,
Class A1
$ 6,364 8.82% 09/25/22 $ 6,518
Resolution Trust Corp. 1992-4, Class B2
4,500 7.59 07/25/28 4,521
Resolution Trust Corp. 1992-11, Class A2
3,727 7.68 10/25/24 3,775
Resolution Trust Corp. 1992-11, Class B2
7,501 7.68 10/25/24 7,531
Resolution Trust Corp. 1994-1, Class M3
5,742 8.08 09/25/29 5,874
Ryland Mortgage Securities Corp.
1989-FN1, Class A
1,937 7.66 11/01/18 1,957
Ryland Mortgage Securities Corp. 1991-1,
Class B1
416 7.59 03/25/20 421
Ryland Mortgage Securities Corp. 1991-7,
Class A1
2,330 7.09 06/25/21 2,329
Ryland Mortgage Securities Corp. 1992-3,
Class A2
486 7.68 06/25/20 491
Ryland Mortgage Securities Corp.
1992-L10, Class B
5,000 8.28 08/25/22 5,035
Salomon Brothers Mortgage Securities
1994-20, Class A
9,212 7.31 12/25/24 9,403
</TABLE>
The accompanying notes are an integral
part of these financial statements.
21
<PAGE>
TRUST FOR CREDIT UNIONS
-------------------
MORTGAGE SECURITIES PORTFOLIO--(Continued)
STATEMENT OF INVESTMENTS
August 31, 1995
($ in Thousands)
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------- -------- -------- ---------
<S> <C> <C> <C>
Mortgage Backed Obligations--(Continued)
Adjustable Rate CMOs--(Continued)
Saxon Mortgage Securities Corp. 1993-1,
Class A2
$ 120 8.35% 02/25/23 $ 122
Saxon Mortgage Securities Corp. 1994-12,
Class A
11,217 7.97 01/25/25 11,555
--------
Total Adjustable Rate CMOs..................... $117,402
--------
Inverse Floater CMOs(a) (0.1%)
FHLMC Series 1134, Class H
$ 224 14.59% 09/15/96 $ 236
--------
Planned Amortization Class (PAC) CMOs (9.6%)
GE Capital Mortgage Services, Inc.
1994-11, Class A1
$14,018 6.50% 03/25/24 $ 13,902
Housing Securities, Inc. 1993-E, Class E8
6,426 10.00 02/25/08 6,728
Prudential Home Mortgage 1993-54,
Class A4
4,721 6.50 01/25/24 4,675
--------
Total PAC CMOs................................. $ 25,305
--------
Regular Floater CMOs(a) (2.9%)
FHLMC Series 1333, Class F
$ 7,636 6.74% 07/15/22 $ 7,715
--------
Sequential Fixed Rate CMOs (18.8%)
CMC Securities Corp. 1993-C, Class C3
$ 4,666 9.55% 04/25/08 $ 4,880
FHLMC Series 172, Class H
6,302 9.00 05/15/20 6,371
Housing Securities, Inc. 1992-F,
Class F3
272 5.50% 08/25/03 270
Prudential Home Mortgage 1992-39,
Class A3
8,000 5.80 12/25/07 7,889
Prudential Home Mortgage 1992-A,
Class 1B1
9,157 7.20 04/28/22 9,048
Prudential Home Mortgage 1993-38,
Class A4
12,806 9.55 09/25/23 13,243
Residential Funding Mortgage Securities
1992-S36, Class A2
4,409 5.70 11/25/07 4,317
Ryland Mortgage Securities Corp. 72,
Class D
1,850 9.85 12/01/16 1,947
Salomon Brothers Mortgage Securities
1994-6, Class A1
1,877 7.02 05/25/24 1,867
--------
Total Sequential Fixed Rate
CMOs.......................................... $ 49,832
--------
Total CMOs...................................... $200,490
--------
Total Mortgage Backed
Obligations (cost $210,044)................... $210,951
--------
</TABLE>
The accompanying notes are an integral
part of these financial statements.
22
<PAGE>
TRUST FOR CREDIT UNIONS
-------------------
MORTGAGE SECURITIES PORTFOLIO--(Continued)
STATEMENT OF INVESTMENTS
August 31, 1995
($ in Thousands)
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------- -------- -------- ---------
<S> <C> <C> <C>
U.S. Treasury Obligations (19.5%)
U.S. Treasury Notes
$17,800 7.38% 11/15/97 $ 18,331
3,700 7.50 10/31/99 3,890
21,380 6.25 02/15/03 21,360
U.S. Treasury Principal-Only Stripped Security
14,600 6.48(b) 11/15/04 8,096
--------
Total U.S. Treasury Obligations
(cost $51,330)................................ $ 51,677
--------
Repurchase Agreements (1.3%)
Joint Repurchase Agreement Account
$ 3,400 5.84% 09/01/95 $ 3,400
--------
Total Repurchase Agreements
(cost $3,400)................................. $ 3,400
--------
Total Investments
(cost $264,774(c))............................ $266,028
========
</TABLE>
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
Federal Income Tax Information:
Gross unrealized gain for investments in which value exceeds cost... $ 2,485
Gross unrealized loss for investments in which cost exceeds value... (1,390)
--------
Net unrealized gain................................................. $ 1,095
========
</TABLE>
- -------------------------------------------------------------------------------
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
(a) Variable rate security. Coupon rate disclosed is that which is in effect
at August 31, 1995.
(b) The rate disclosed for this security represents the yield to maturity.
(c) The aggregate cost for federal income tax purposes is $264,933.
The accompanying notes are an integral
part of these financial statements.
23
<PAGE>
TRUST FOR CREDIT UNIONS
-----------------
TARGET MATURITY PORTFOLIO (1996)
STATEMENT OF INVESTMENTS
August 31, 1995
($ in Thousands)
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------- -------- -------- ---------
<S> <C> <C> <C>
Mortgage Backed Obligations (74.4%)
Adjustable Rate Federal Home Loan Mortgage Corp.
(FHLMC)(a) (4.5%)
$5,601 7.49% 07/01/30 $ 5,751
-------
Collateralized Mortgage Obligations (CMOs) (69.9%)
Adjustable Rate CMOs(a) (43.0%)
Capstead Securities Corp. 1992-14, Class A
$2,400 7.39% 10/25/22 $ 2,419
Chase Mortgage Finance Corp. 1990-E,
Class A1
3,131 7.47 11/25/20 3,152
Citicorp Mortgage Securities, Inc. 1992-17,
Class A
4,662 7.70 10/25/22 4,742
CMC Securities Corp. 1993-2F, Class A1
2,894 7.45 05/25/22 2,940
Housing Securities, Inc. 1992-SL1,
Class A1
2,062 8.65 05/25/16 2,122
Independent National Mortgage Corp.
1994-V, Class A1
4,526 7.51 12/25/24 4,647
Prudential Home Mortgage 1992-24,
Class A1
2,874 8.82 09/25/22 2,943
Residential Funding Mortgage Securities
1993-S38, Class A
1,635 7.87 09/25/23 1,655
Resolution Trust Corp. 1992-11, Class B2
3,700 7.68 10/25/24 3,715
Salomon Brothers Mortgage Securities
1990-3A, Class 1
3,009 6.80 11/25/20 2,978
Salomon Brothers Mortgage Securities
1992-6, Class A1
4,174 7.82% 11/25/22 4,242
Saxon Mortgage Securities Corp. 1992-1,
Class B1
4,400 8.15 09/25/22 4,466
Saxon Mortgage Securities Corp. 1992-4,
Class A
1,325 7.85 12/25/22 1,343
Saxon Mortgage Securities Corp. 1992-6,
Class A
1,782 8.13 01/25/23 1,807
Saxon Mortgage Securities Corp. 1994-11,
Class A
3,404 7.53 12/25/24 3,473
Saxon Mortgage Securities Corp. 1995-1,
Class A
5,348 7.04 04/25/25 5,469
Sears Mortgage Securities 1993-8,
Class A
2,683 7.62 08/25/23 2,717
-------
Total Adjustable Rate CMOs...................... $54,830
-------
Inverse Floater CMOs(a) (0.1%)
Lehman Brothers Mortgage Trust 1992-M1,
Class A1I
$ 81 7.66% 11/25/01 $ 80
-------
Planned Amortization Class (PAC) CMOs (6.2%)
Housing Securities, Inc. 1993-E, Class E8
$7,512 10.00% 02/25/08 $ 7,866
-------
</TABLE>
The accompanying notes are an integral
part of these financial statements.
24
<PAGE>
TRUST FOR CREDIT UNIONS
-----------------
TARGET MATURITY PORTFOLIO (1996)--(Continued)
STATEMENT OF INVESTMENTS
August 31, 1995
($ in Thousands)
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------- -------- -------- ---------
<S> <C> <C> <C>
Mortgage Backed Obligations--(Continued)
Regular Floater CMOs(a) (4.2%)
Capstead Securities Corp. 1993-1, Class F
$1,616 6.63% 03/01/18 $ 1,619
FHLMC Series 1333, Class F
3,751 6.74 07/15/22 3,790
--------
Total Regular Floater CMOs.......................... $ 5,409
--------
Sequential Fixed Rate CMOs (16.4%)
FHLMC Series 172, Class H
$3,151 9.00% 05/15/20 $ 3,185
FHLMC Series 1028, Class F
5,398 9.30 05/15/05 5,479
FHLMC Series 1056, Class G
1,932 8.00 12/15/18 1,939
FNMA REMIC Trust 1990-142, Class J
2,059 9.25 12/25/03 2,072
Prudential Home Mortgage 1993-38, Class A4
5,000 9.55 09/25/23 5,170
Residential Resources, Inc. 15, Class C
3,039 9.75 11/20/18 3,061
--------
Total Sequential Fixed Rate
CMOs.............................................. $ 20,906
--------
Total CMOs.......................................... $ 89,091
--------
Total Mortgage Backed
Obligations (cost $94,633)........................ $ 94,842
--------
U.S. Treasury Obligations (23.6%)
U.S. Treasury Notes
$9,010 4.63% 02/15/96 $ 8,968
7,300 4.25 05/15/96 7,226
8,000 5.88 05/31/96 8,009
3,500 7.25% 11/15/96 3,558
500 7.38 11/15/97 515
1,700 7.50 10/31/99 1,789
--------
Total U.S. Treasury Obligations
(cost $29,918).................... $ 30,065
--------
Repurchase Agreements (3.0%)
Joint Repurchase Agreement Account
$3,800 5.84% 09/01/95 $ 3,800
--------
Total Repurchase Agreements
(cost $3,800).................... $ 3,800
--------
Total Investments
(cost $128,351(b))............... $128,707
========
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Federal Income Tax Information:
Gross unrealized gain for investments in which value
exceeds cost........................................... $ 765
Gross unrealized loss for investments in which
cost exceeds value..................................... (456)
-------
Net unrealized gain..................................... $ 309
=======
</TABLE>
- --------------------------------------------------------------------------------
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
(a) Variable rate security. Coupon rate disclosed is that which is in effect
at August 31, 1995.
(b) The aggregate cost for federal income tax purposes is $128,398.
The accompanying notes are an integral
part of these financial statements.
25
<PAGE>
TRUST FOR CREDIT UNIONS
-----------------
TARGET MATURITY PORTFOLIO (Feb 97)
STATEMENT OF INVESTMENTS
August 31, 1995
($ in Thousands)
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------- -------- -------- ---------
<S> <C> <C> <C>
Mortgage Backed Obligations (80.7%)
Collateralized Mortgage Obligations (CMOs) (80.7%)
Adjustable Rate CMOs(a) (39.5%)
Chase Mortgage Finance Corp. 1990-E,
Class A1
$2,450 7.47% 11/25/20 $ 2,467
DLJ Mortgage Acceptance Corp. 1992-
Q11, Class A2
3,493 8.07 01/25/23 3,525
Independent National Mortgage Corp.
1994-W, Class A1
4,005 7.43 12/25/24 4,089
Merrill Lynch Mortgage Investors, Inc.
1994-I, Class A1
3,813 7.48 01/25/05 3,884
Resolution Trust Corp. 1992-11, Class B2
2,700 7.68 10/25/24 2,711
Resolution Trust Corp. 1994-1, Class M3
2,074 8.08 09/25/29 2,122
Salomon Brothers Mortgage Securities
1994-20, Class A
3,313 7.31 12/25/24 3,381
Saxon Mortgage Securities Corp. 1992-4,
Class A
994 7.85 12/25/22 1,007
Saxon Mortgage Securities Corp. 1992-6,
Class A
1,559 8.13 01/25/23 1,581
Saxon Mortgage Securities Corp. 1994-11,
Class A
2,598 7.53 12/25/24 2,650
Saxon Mortgage Securities Corp. 1994-12,
Class A
4,007 7.97% 01/25/25 4,127
Saxon Mortgage Securities Corp. 1995-1,
Class A
3,964 7.04 04/25/25 4,053
Sears Mortgage Securities 1993-8, Class A
2,044 7.62 08/25/23 2,070
-------
Total Adjustable Rate CMOs.......... $37,667
-------
Regular Floater CMOs(a) (3.3%)
FHLMC Series 1333, Class F
$3,081 6.74% 07/15/22 $ 3,113
-------
Sequential Fixed Rate CMOs (37.9%)
Capstead Securities Corp. 1992-12B,
Class P11
$ 510 8.33% 11/25/05 $ 511
FHLMC Series 172, Class H
2,363 9.00 05/15/20 2,389
FNMA REMIC Trust 1989-10, Class D
5,000 9.50 07/25/09 5,230
FNMA REMIC Trust 1989-80, Class E
8,000 9.00 09/25/18 8,223
FNMA REMIC Trust 1990-142, Class J
2,078 9.25 12/25/03 2,091
FNMA REMIC Trust 1991-G35, Class K
3,301 8.00 06/25/20 3,318
Prudential Home Mortgage 1993-38,
Class A4
4,600 9.55 09/25/23 4,757
</TABLE>
The accompanying notes are an integral
part of these financial statements.
26
<PAGE>
TRUST FOR CREDIT UNIONS
-----------------
TARGET MATURITY PORTFOLIO (FEB 97)--(Continued)
STATEMENT OF INVESTMENTS
August 31, 1995
($ in Thousands)
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------- -------- -------- ---------
<S> <C> <C> <C>
Mortgage Backed Obligations--(Continued)
Sequential Fixed Rate CMOs--(Continued)
Ryland Acceptance Corp. 1989, Class C
$5,000 8.88% 11/01/12 $ 5,038
Salomon Brothers Mortgage Securities
1994-6, Class A1
4,567 7.02 05/25/24 4,543
-------
Total Sequential Fixed Rate
CMOs........................... $36,100
-------
Total CMOs....................... $76,880
-------
Total Mortgage Backed
Obligations (cost $76,592)..... $76,880
-------
U.S. Treasury Obligations (18.8%)
U.S. Treasury Notes
$3,500 7.25% 11/15/96 $ 3,559
4,600 7.38 11/15/97 4,737
2,600 7.50 10/31/99 2,734
5,620 6.25 02/15/03 5,615
U.S. Treasury Principal-Only Stripped
Security
2,200 6.48(b) 11/15/04 1,220
-------
Total U.S. Treasury Obligations
(cost $17,748)................. $17,865
-------
Total Investments
(cost $94,340(c)).............. $94,745
=======
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Federal Income Tax Information:
Gross unrealized gain for investments in which value exceeds cost..... $ 856
Gross unrealized loss for investments in which cost exceeds value..... (471)
------
Net unrealized gain................................................... $ 385
======
</TABLE>
- --------------------------------------------------------------------------------
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
(a) Variable rate security. Coupon rate disclosed is that which is in effect
at August 31, 1995.
(b) The rate disclosed for this security represents the yield to maturity.
(c) The aggregate cost for federal income tax purposes is $94,360.
The accompanying notes are an integral
part of these financial statements.
27
<PAGE>
TRUST FOR CREDIT UNIONS
----------------
TARGET MATURITY PORTFOLIO (MAY 97)
STATEMENT OF INVESTMENTS
August 31, 1995
($ in Thousands)
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------- -------- -------- ---------
<S> <C> <C> <C>
Mortgage Backed Obligations (84.4%)
Adjustable Rate Federal Home Loan Mortgage Corp.
(FHLMC)/(a)/ (4.5%)
$2,800 7.49% 07/01/30 $ 2,876
-------
Collateralized Mortgage Obligations (CMOs) (79.9%)
Adjustable Rate CMOs/(a)/ (47.6%)
Citicorp Mortgage Securities, Inc. 1992-17,
Class A
$2,454 7.70% 10/25/22 $ 2,496
DLJ Mortgage Acceptance Corp. 1992-Q11,
Class A2
2,469 8.07 01/25/23 2,492
Independent National Mortgage Corp.
1994-W, Class A1
2,794 7.43 12/25/24 2,853
Merrill Lynch Mortgage Investors, Inc.
1994-I, Class A1
2,790 7.48 01/25/05 2,842
Prudential Home Mortgage 1992-24,
Class A1
1,642 8.82 09/25/22 1,682
Resolution Trust Corp. 1992-11, Class A2
2,662 7.68 10/25/24 2,696
Resolution Trust Corp. 1994-1, Class M3
1,476 8.08 09/25/29 1,510
Salomon Brothers Mortgage Securities
1994-20, Class A
2,303 7.31 12/25/24 2,351
Saxon Mortgage Securities Corp.
1992-4, Class A
1,160 7.85 12/25/22 1,175
Saxon Mortgage Securities Corp.
1992-6, Class A
947 8.13% 01/25/23 960
Saxon Mortgage Securities Corp.
1994-11, Class A
1,792 7.53 12/25/24 1,828
Saxon Mortgage Securities Corp.
1994-12, Class A
2,795 7.97 01/25/25 2,880
Saxon Mortgage Securities Corp.
1995-1, Class A
2,865 7.04 04/25/25 2,930
Sears Mortgage Securities 1993-8,
Class A
1,469 7.62 08/25/23 1,488
-------
Total Adjustable Rate CMOs.......... $30,183
-------
Inverse Floater CMOs/(a)/ (2.7%)
FHLMC Series 1284, Class E
$1,742 7.71% 05/15/97 $ 1,742
-------
Sequential Fixed Rate CMOs (29.6%)
FHLMC Series 172, Class H
$1,838 9.00% 05/15/20 $ 1,858
FNMA REMIC Trust 1988-2, Class Z
2,870 10.10 02/25/18 3,100
FNMA REMIC Trust 1988-25, Class B
1,146 9.25 10/25/18 1,188
FNMA REMIC Trust 1990-24, Class E
3,500 9.00 03/25/20 3,657
Prudential Home Mortgage 1993-38,
Class A4
3,300 9.55 09/25/23 3,412
</TABLE>
The accompanying notes are an integral
part of these financial statements.
28
<PAGE>
TRUST FOR CREDIT UNIONS
-------------------
TARGET MATURITY PORTFOLIO (MAY 97)--(Continued)
STATEMENT OF INVESTMENTS
August 31, 1995
($ in Thousands)
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------- -------- -------- ---------
<S> <C> <C> <C>
Mortgage Backed Obligations--(Continued)
Sequential Fixed Rate CMOs--(Continued)
Residential Funding Mortgage Securities
1992-S36, Class A2
$2,405 5.70% 11/25/07 $ 2,355
Salomon Brothers Mortgage Securities
1994-6, Class A1
3,197 7.02 05/25/24 3,180
-------
Total Sequential Fixed Rate
CMOs............................ $18,750
-------
Total CMOs....................... $50,675
-------
Total Mortgage Backed
Obligations (cost $52,913)...... $53,551
-------
U.S. Treasury Obligations (13.5%)
U.S. Treasury Notes
$2,200 7.25% 11/15/96 $ 2,237
2,250 7.38 11/15/97 2,317
3,150 7.50 10/31/99 3,312
710 6.25 02/15/03 709
-------
Total U.S. Treasury Obligations
(cost $8,558)..................... $ 8,575
-------
Total Investments
(cost $61,471/(b)/)............... $62,126
=======
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Federal Income Tax Information:
Gross unrealized gain for investments in which value exceeds cost.... $ 764
Gross unrealized loss for investments in which cost exceeds value.... (116)
-------
Net unrealized gain................................................... $ 648
=======
</TABLE>
- --------------------------------------------------------------------------------
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
/(a)/ Variable rate security. Coupon rate disclosed is that which is in
effect at August 31, 1995.
/(b)/ The aggregate cost for federal income tax purposes is $61,478.
The accompanying notes are an integral
part of these financial statements.
29
<PAGE>
TRUST FOR CREDIT UNIONS
-------------------
STATEMENTS OF ASSETS AND LIABILITIES
August 31, 1995
<TABLE>
<CAPTION>
Target Target Target
Money Government Mortgage Maturity Maturity Maturity
Market Securities Securities Portfolio Portfolio Portfolio
Portfolio Portfolio Portfolio (1996) (Feb 97) (May 97)
------------ ------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in securities, at value (cost:
$383,455,111, $531,690,173,
$264,774,033, $128,350,681,
$94,340,118, $61,471,182, respectively) $383,455,111 $525,523,866 $266,027,558 $128,706,804 $94,744,574 $62,126,077
Cash...................................... 13,528 73,605 45,158 4,213 48,534 135,745
Receivables:
Investment securities sold............... -- 2,222,302 680,499 261,813 128,678 1,047,240
Interest................................. 780,393 4,024,833 1,894,809 989,852 806,341 572,043
Deferred organization expenses, net....... -- 7,096 19,044 11,234 5,723 3,132
Other assets.............................. 1,524 103,702 1,033 5,178 9,571 --
------------ ------------ ------------ ------------ ------------ -----------
Total assets.................. 384,250,556 531,955,404 268,668,101 129,979,094 95,743,421 63,884,237
------------ ------------ ------------ ------------ ------------ -----------
LIABILITIES
Payables:
Investment securities purchased.......... -- -- 3,027,193 1,831,814 -- --
Dividends................................ 2,077,470 2,133,451 1,139,288 540,945 433,655 356,497
Advisory fees............................ 40,729 89,714 33,497 24,821 19,321 13,453
Administration fees...................... 18,213 44,135 10,943 5,273 3,800 2,617
Accrued expenses and other liabilities.... 18,228 29,185 47,954 47,474 65,335 52,689
------------ ------------ ------------ ------------ ------------ -----------
Total liabilities............. 2,154,640 2,296,485 4,258,875 2,450,327 522,111 425,256
------------ ------------ ------------ ------------ ------------ -----------
NET ASSETS
Paid-in capital........................... 382,095,916 550,963,036 274,349,290 133,076,795 98,296,211 63,532,452
Accumulated undistributed (distributions
in excess of) net investment income...... -- (685,743) (1,397,205) 1,163,149 1,015,621 (60,034)
Accumulated net realized loss
(distributions in excess of net realized
gains) on investment transactions........ -- (14,452,067) (9,796,384) (7,067,300) (4,494,978) (668,332)
Net unrealized gain (loss) on investments -- (6,166,307) 1,253,525 356,123 404,456 654,895
------------ ------------ ------------ ------------ ------------ -----------
Net assets................... $382,095,916 $529,658,919 $264,409,226 $127,528,767 $95,221,310 $63,458,981
============ ============ ============ ============ =========== ===========
Net asset value per unit
(net assets/units outstanding) $1.00 $9.76 $9.74 $9.59 $9.71 $9.99
============ ============ ============ ============ =========== ===========
Redemption price per unit (Note 7) $1.00 $9.76 $9.74 $9.54 $9.66 $9.94
============ ============ ============ ============ =========== ===========
UNITS OUTSTANDING
Total units outstanding, $0.001 par value
(unlimited number of units authorized) 382,095,916 54,253,342 27,160,182 13,300,010 9,809,980 6,350,000
============ ============ ============ ============ =========== ===========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
30
<PAGE>
TRUST FOR CREDIT UNIONS
-------------------
STATEMENTS OF OPERATIONS
For The Year Ended August 31, 1995
<TABLE>
<CAPTION>
Target Target Target
Money Government Mortgage Maturity Maturity Maturity
Market Securities Securities Portfolio Portfolio Portfolio
Portfolio/(a)/ Portfolio Portfolio/(b)/ (1996) (Feb 97) (May 97)
-------------- ----------- -------------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment Income:
Interest income......................... $15,279,710 $32,321,799 $ 17,513,762 $ 8,600,800 $ 6,971,041 $4,814,248
----------- ----------- -------------- ----------- ----------- ----------
Expenses:
Advisory fees, net of fees waived....... 410,109 1,078,346 388,187 290,761 227,279 166,798
Administration fees, net of fees
waived................................ 102,002 539,173 132,275 63,315 47,445 33,360
Custodian fees.......................... 19,158 72,222 49,687 43,832 37,592 30,806
Professional fees....................... 43,730 80,998 55,469 48,710 50,241 48,949
Trustees' fees.......................... 12,940 24,560 9,820 4,060 3,740 2,880
Amortization of deferred organization
expenses.............................. -- 4,569 9,039 13,487 3,890 1,812
Other expenses........................... 21,247 55,306 50,537 28,405 18,864 15,345
----------- ----------- -------------- ----------- ----------- ----------
Total expenses........................ 609,186 1,855,174 695,014 492,570 389,051 299,950
Less--Reimbursable expenses.............. (78,198) -- -- -- -- --
----------- ----------- -------------- ----------- ----------- ----------
Net expenses......................... 530,988 1,855,174 695,014 492,570 389,051 299,950
----------- ----------- -------------- ----------- ----------- ----------
Net investment income.................... 14,748,722 30,466,625 16,818,748 8,108,230 6,581,990 4,514,298
Net realized loss on investment
transactions........................... -- (4,600,744) (3,551,399) (2,597,069) (1,844,120) (339,194)
Net change in unrealized gain (loss) on
investments............................ -- 4,293,439 7,151,412 2,383,940 1,992,445 801,748
----------- ----------- -------------- ----------- ----------- ----------
Net increase in net assets resulting
from operations........................ $14,748,722 $30,159,320 $ 20,418,761 $ 7,895,101 $ 6,730,315 $4,976,852
=========== =========== ============== =========== =========== ==========
</TABLE>
/(a)/ For the year ended August 31, 1995, the investment advisor and the
administrator waived fees of $109,898 and $163,831, respectively.
/(b)/ For the year ended August 31, 1995, the investment advisor waived fees
of $140,912.
The accompanying notes are an integral
part of these financial statements.
31
<PAGE>
TRUST FOR CREDIT UNIONS
-------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended August 31, 1995
<TABLE>
<CAPTION>
Target Target Target
Money Government Mortgage Maturity Maturity Maturity
Market Securities Securities Portfolio Portfolio Portfolio
Portfolio Portfolio Portfolio (1996) (Feb 97) (May 97)
---------------- ------------ ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
From Operations:
Net investment income................... $ 14,748,722 $ 30,466,625 $ 16,818,748 $ 8,108,230 $ 6,581,990 $ 4,514,298
Net realized loss from investment
transactions........................... -- (4,600,744) (3,551,399) (2,597,069) (1,844,120) (339,194)
Net change in unrealized gain (loss) on
investments............................ -- 4,293,439 7,151,412 2,383,940 1,992,445 801,748
---------------- ------------ ------------ ------------ ----------- -----------
Net increase in net assets resulting
from operations........................ 14,748,722 30,159,320 20,418,761 7,895,101 6,730,315 4,976,852
---------------- ------------ ------------ ------------ ----------- -----------
Distributions to Unitholders:
From net investment income.............. (14,700,440) (30,842,606) (16,818,748) (7,523,785) (6,068,263) (4,420,145)
In excess of net investment income...... -- (685,743) (434,471) -- -- --
From paid-in capital.................... -- -- (406,506) -- -- --
---------------- ------------ ------------ ------------ ----------- -----------
Total distributions to unitholders...... (14,700,440) (31,528,349) (17,659,725) (7,523,785) (6,068,263) (4,420,145)
---------------- ------------ ------------ ------------ ----------- -----------
From Unit Transactions:
Proceeds from sale of units............. 3,043,450,086 21,279,121 7,814,480 -- -- --
Reinvestment of dividends and
distributions.......................... 6,769,666 9,375,252 4,880,915 -- -- --
Cost of units repurchased............... (2,885,160,983) (93,957,586) (34,931,625) (465,411) (2,821,023) (5,964,428)
---------------- ------------ ------------ ------------ ----------- -----------
Net increase (decrease) in net
assets from unit transactions.......... 165,058,769 (63,303,213) (22,236,230) (465,411) (2,821,023) (5,964,428)
---------------- ------------ ------------ ------------ ----------- -----------
Additional paid-in capital............... -- -- -- 68,281 -- --
---------------- ------------ ------------ ------------ ----------- -----------
Total increase (decrease)............... 165,107,051 (64,672,242) (19,477,194) (25,814) (2,158,971) (5,407,721)
Net Assets:
Beginning of year....................... 216,988,865 594,331,161 283,886,420 127,554,581 97,380,281 68,866,702
---------------- ------------ ------------ ------------ ----------- -----------
End of year............................. $ 382,095,916 $529,658,919 $264,409,226 $127,528,767 $95,221,310 $63,458,981
================ ============ ============ ============ =========== ===========
Accumulated undistributed
(distributions in excess of) net
investment income....................... -- $ (685,743) $ (1,397,205) $ 1,163,149 $ 1,015,621 $ (60,034)
================ ============ ============ ============ =========== ===========
Summary of Unit Transactions:
Units sold.............................. 3,043,450,086 2,179,482 807,374 -- -- --
Reinvestment of dividends and
distributions.......................... 6,769,666 963,379 508,864 -- -- --
Units repurchased....................... (2,885,160,983) (9,662,680) (3,664,116) (50,000) (300,000) (600,000)
---------------- ------------ ------------ ------------ ----------- -----------
Increase (decrease) in units
outstanding............................ 165,058,769 (6,519,819) (2,347,878) (50,000) (300,000) (600,000)
================ ============ ============ ============ =========== ===========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
32
<PAGE>
TRUST FOR CREDIT UNIONS
-------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended August 31, 1994/(a)/
<TABLE>
<CAPTION>
Target Target Target
Money Government Mortgage Maturity Maturity Maturity
Market Securities Securities Portfolio Portfolio Portfolio
Portfolio Portfolio Portfolio (1996) (Feb 97)/(a)/ (May 97)/(a)/
---------------- -------------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
From Operations:
Net investment income................ $ 13,359,541 $ 34,984,779 $ 16,116,670 $ 7,674,729 $ 3,360,096 $ 1,107,903
Net realized gain (loss) from
investment transactions............. 64,113 (3,444,347) (5,968,515) (4,530,665) (2,650,858) (329,138)
Net change in unrealized loss on
investments......................... -- (12,596,598) (7,965,845) (2,125,231) (1,587,989) (146,853)
---------------- -------------- ------------ ------------ ------------- -------------
Net increase (decrease) in net
assets resulting from operations.... 13,423,654 18,943,834 2,182,310 1,018,833 (878,751) 631,912
---------------- -------------- ------------ ------------ ------------- -------------
Distributions to Unitholders:
From net investment income........... (13,367,335) (34,473,092) (16,524,091) (7,021,439) (2,865,059) (1,107,903)
In excess of net investment income... (48,282) -- (980,012) -- -- (157,307)
From net realized gain on investment
transactions........................ (80,063) -- -- (409,166) -- --
In excess of net realized gain on
investment transactions............. -- -- (106,925) -- -- --
---------------- -------------- ------------ ------------ ------------- -------------
Total distributions to unitholders... (13,495,680) (34,473,092) (17,611,028) (7,430,605) (2,865,059) (1,265,210)
---------------- -------------- ------------ ------------ ------------- -------------
From Unit Transactions:
Proceeds from sale of units.......... 4,632,526,155 270,324,927 165,304,632 -- 101,599,800 69,500,000
Reinvestment of dividends and
distributions....................... 7,931,835 17,390,685 9,430,698 -- -- --
Cost of units repurchased............ (5,039,626,380) (800,339,049) (88,930,101) -- (475,709) --
---------------- -------------- ------------ ------------ ------------- -------------
Net increase (decrease) in net
assets from unit transactions....... (399,168,390) (512,623,437) 85,805,229 -- 101,124,091 69,500,000
---------------- -------------- ------------ ------------ ------------- -------------
Total increase (decrease)............ (399,240,416) (528,152,695) 70,376,511 (6,411,772) 97,380,281 68,866,702
Net Assets:
Beginning of year.................... 616,229,281 1,122,483,856 213,509,909 133,966,353 -- --
---------------- -------------- ------------ ------------ ------------- -------------
End of year.......................... $ 216,988,865 $ 594,331,161 $283,886,420 $127,554,581 $ 97,380,281 $ 68,866,702
================ ============== ============ ============ ============= =============
Accumulated undistributed
(distributions in excess of)
net investment income............... $ (48,282) $ 375,981 $ (971,373) $ 565,617 $ 498,404 $ (155,599)
================ ============== ============ ============ ============= =============
Summary of Unit Transactions:
Units sold........................... 4,632,526,155 27,232,221 16,491,479 -- 10,159,980 6,950,000
Reinvestment of dividends and
distributions....................... 7,931,835 1,759,454 958,468 -- -- --
Units repurchased.................... (5,039,626,380) (80,790,850) (9,011,149) -- (50,000) --
---------------- -------------- ------------ ------------ ------------- -------------
Increase (decrease) in units
outstanding......................... (399,168,390) (51,799,175) 8,438,798 -- 10,109,980 6,950,000
================ ============== ============ ============ ============= =============
</TABLE>
/(a)/ For the periods from February 15, 1994 and May 23, 1994,
(commencement of operations for the Target Maturity Portfolio
(Feb 97) and Target Maturity Portfolio (May 97), respectively) to
August 31, 1994.
The accompanying notes are an integral
part of these financial statements.
33
<PAGE>
TRUST FOR CREDIT UNIONS
-------------------
MONEY MARKET PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A UNIT OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Income from Distributions to
investment operations unitholders
--------------------- ---------------------------------------
From
Net In net Net
asset Net From excess real- asset
value at Net realized net of net ized value
begin- invest- gain on invest- invest- gain on at
ning of ment invest- ment ment invest- end of Total
period income ments/(a)/ income income ments period return/(b)/
--------- --------- ---------- --------- --------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year ended: 8/31/95......... $1.00 $0.0555 $ -- $(0.0553) $ -- $ -- $1.00 5.56%
8/31/94......... 1.00 0.0329 0.0002 (0.0342) (0.0001) (0.0002) 1.00 3.50
8/31/93......... 1.00 0.0305 0.0004 (0.0305) -- (0.0005) 1.00 3.14
8/31/92......... 1.00 0.0416 0.0008 (0.0416) -- (0.0007) 1.00 4.39
8/31/91......... 1.00 0.0641 -- (0.0641) -- -- 1.00 6.93
8/31/90......... 1.00 0.0824 -- (0.0824) -- -- 1.00 8.58
8/31/89......... 1.00 0.0899 -- (0.0899) -- -- 1.00 9.28
5/17/88/(c)/ to 8/31/88......... 1.00 0.0214 -- (0.0214) -- -- 1.00 7.40/(d)/
<CAPTION>
Ratio information
assuming no waiver
of fees or expense
reimbursements
------------------------
Ratio of
net
invest-
ment Net Ratio of
Ratio of income assets net
net to at end Ratio of investment
expenses average of expenses to income
to average net period average net to average
net assets assets (000's) assets net assets
---------- ---------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Year ended: 8/31/95......... 0.20% 5.55% $382,096 0.33% 5.42%
8/31/94......... 0.25 3.29 216,989 0.34 3.20
8/31/93......... 0.25 3.05 616,229 0.33 2.97
8/31/92......... 0.25 4.16 864,924 0.29 4.12
8/31/91......... 0.25 6.41 654,977 0.25 6.41
8/31/90......... 0.25 8.24 258,304 0.25 8.24
8/31/89......... 0.25 8.99 167,331 0.25 8.99
5/17/88/(c)/ to 8/31/88......... 0.25/(d)/ 7.27/(d)/ 106,739 0.25/(d)/ 7.27/(d)/
</TABLE>
/(a)/ May include balancing effect of calculating per share amounts.
/(b)/ Assumes investment at the net asset value at the beginning of the
period, reinvestment of all dividends and distributions and a complete
redemption of the investment at the net asset value at the end of the
period.
/(c)/ Commencement of operations.
/(d)/ Annualized.
The accompanying notes are an integral
part of these financial statements.
34
<PAGE>
TRUST FOR CREDIT UNIONS
-------------------
GOVERNMENT SECURITIES PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A UNIT OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Income from Distributions to
investment operations unitholders
--------------------- ---------------------------------------
Net
realized From In excess
Net and In net of net Net
asset unreal- From excess real- real- asset
value at Net ized gain net of net ized ized value
begin- invest- (loss) on invest- invest- gain on gain on at
ning of ment invest- ment ment invest- invest- end of Total
period income ments/(a)/ income income ments ments period return/(b)/
--------- --------- ---------- --------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Year ended: 8/31/95.......... $ 9.78 $0.5515 $(0.0011) $(0.5582) $(0.0122) $ -- $ -- $ 9.76 5.82%
8/31/94.......... 9.97 0.4286 (0.1974) (0.4212) -- -- -- 9.78 2.33
8/31/93.......... 10.03 0.4641 (0.0599) (0.4630) (0.0012) -- -- 9.97 4.06
8/31/92.......... 10.00 0.5588 0.0311 (0.5594) -- -- -- 10.03 6.68
7/10/91/(d)/ to 8/31/91.......... 10.00 0.0873 (0.0016) (0.0857) -- -- -- 10.00 7.02/(e)/
<CAPTION>
Ratio information
assuming no waiver
of fees or expense
reimbursements
------------------------
Ratio of
net
invest-
ment Net Ratio of
Ratio of income Port- assets net
net to folio at end Ratio of investment
expenses average turn- of expenses to income
to average net over period average net to average
net assets assets rate/(c)/ (000's) assets net assets
---------- ---------- --------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Year ended: 8/31/95.......... 0.34% 5.65% 70.58% $ 529,659 0.34% 5.65%
8/31/94.......... 0.35 4.25 42.27 594,331 0.37 4.23
8/31/93.......... 0.34 4.58 67.38 1,122,484 0.47 4.45
8/31/92.......... 0.36 5.91 195.53 1,153,410 0.59 5.68
7/10/91/(d)/ to 8/31/91.......... 0.48/(e)/ 7.16/(e)/ 3.56 94,139 0.73/(e)/ 6.91/(e)/
</TABLE>
/(a)/ Includes balancing effect of calculating per share amounts.
/(b)/ Assumes investment at the net asset value at the beginning of the
period, reinvestment of all dividends and distributions and a complete
redemption of the investment at the net asset value at the end of the
period.
/(c)/ May include effect of mortgage dollar roll transactions.
/(d)/ Commencement of operations.
/(e)/ Annualized.
The accompanying notes are an integral
part of these financial statements.
35
<PAGE>
TRUST FOR CREDIT UNIONS
-------------------
MORTGAGE SECURITIES PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A UNIT OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Income from Distributions to
investment operations unitholders
--------------------- ---------------------------------------
Net
realized In excess
Net and In of net Net
asset unreal- From excess real- asset
value at Net ized gain net of net ized value
begin- invest- (loss) on invest- invest- gain on From at
ning of ment invest- ment ment invest- paid-in end of Total
period income ments/(a)/ income income ments capital period return/(b)/
--------- --------- ---------- --------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Year ended: 8/31/95 ..... $ 9.62 $0.6075 $0.1539 $(0.6075) $(0.0175) $ -- $(0.0164) $ 9.74 8.20%
8/31/94 ..... 10.13 0.5533 (0.4530) (0.5719) (0.0340) (0.0044) -- 9.62 1.00
10/9/92/(d)/ to 8/31/93 ..... 10.00 0.4895 0.1144 (0.4702) -- -- -- 10.13 6.27
<CAPTION>
Ratio information
assuming no waiver
of fees or expense
reimbursements
------------------------
Ratio of
net
invest-
ment Net Ratio of
Ratio of income Port- assets net
net to folio at end Ratio of investment
expenses average turn- of expenses to income
to average net over period average net to average
net assets assets rate/(c)/ (000's) assets net assets
---------- ---------- --------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Year ended: 8/31/95 ..... 0.26% 6.36% 130.98% $264,409 0.32% 6.30%
8/31/94 ..... 0.28 5.66 188.58 283,886 0.29 5.65
10/9/92/(d)/ to 8/31/93 ..... 0.33/(e)/ 5.64/(e)/ 146.24 213,510 0.38/(e)/ 5.59/(e)/
</TABLE>
/(a)/ Includes balancing effect of calculating per share amounts.
/(b)/ Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions and a complete redemption
of the investment at the net asset value at the end of the period.
/(c)/ May include effect of mortgage dollar roll transactions.
/(d)/ Commencement of operations.
/(e)/ Annualized.
The accompanying notes are an integral
part of these financial statements.
36
<PAGE>
TRUST FOR CREDIT UNIONS
-------------------
TARGET MATURITY PORTFOLIOS
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A UNIT OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Income from Distributions to
investment operations unitholders
-------------------------- -----------------------------------------------
Net
realized From In excess
Net and In net of net
asset unreal- From excess real- real-
value at Net ized gain net of net ized ized
begin- invest- (loss) on invest- invest- gain on gain on
ning of ment invest- ment ment invest- invest-
period income ments/(a)/ income income ments ments
---------- ---------- -------------- ---------- ---------- --------- ---------
Target Maturity Portfolio (1996)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Year ended: 8/31/95 ...... $ 9.55 $ 0.6089 $(0.0092) $(0.5648) $ -- $ -- $ --
8/31/94 ...... 10.03 0.5750 (0.4983) (0.5261) -- (0.0306) --
7/1/93/(e)/ to 8/31/93 ...... 10.00 0.0774 0.0375 (0.0774) (0.0075) -- --
Target Maturity Portfolio (Feb 97)
- ------------------------------------------------------------------------------------------------------------------
Year ended: 8/31/95 ...... 9.63 0.6674 0.0261 (0.6135) -- -- --
2/15/94/(e)/ to 8/31/94 ...... 10.00 0.3313 (0.4189) (0.2824) -- -- --
Target Maturity Portfolio (May 97)
- ------------------------------------------------------------------------------------------------------------------
Year ended: 8/31/95 ...... 9.91 0.6674 0.0673 (0.6547) -- -- --
5/23/94/(e)/ to 8/31/94 ...... 10.00 0.1594 (0.0674) (0.1594) (0.0226) -- --
</TABLE>
<TABLE>
<CAPTION>
Ratio of
net
invest-
Net ment Net
asset Ratio of income Port- assets
Addi- value net to folio at end
tional at expenses average turn of
paid-in end of Total to average net over period
capital/(b)/ period return/(c)/ net assets assets rate/(d)/ (000's)
---------------- ---------- --------------- -------------- ---------- ------------- -----------
Target Maturity Portfolio (1996)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Year ended: 8/31/95 ..... $0.0051 $ 9.59 6.51% 0.39% 6.40% 183.93% $127,529
8/31/94 ..... -- 9.55 0.81 0.38 5.89 232.92 127,555
7/1/93/(e)/ to 8/31/93 ..... -- 10.03 1.19 0.43/(f)/ 4.56/(f)/ 143.44 133,966
Target Maturity Portfolio (Feb 97)
- --------------------------------------------------------------------------------------------------------------------------------
Year ended: 8/31/95 ..... -- 9.71 7.48 0.41 6.94 171.98 95,221
2/15/94/(e)/ to 8/31/94 ..... -- 9.63 (0.83) 0.42/(f)/ 6.30/(f)/ 156.03 97,380
Target Maturity Portfolio (May 97)
- --------------------------------------------------------------------------------------------------------------------------------
Year ended: 8/31/95 ..... -- 9.99 7.70 0.45 6.77 147.76 63,459
5/23/94/(e)/ to 8/31/94 ..... -- 9.91 0.92 0.48/(f)/ 5.80/(f)/ 74.68 68,867
</TABLE>
/(a)/ Includes balancing effect of calculating per share amounts.
/(b)/ See Note 9.
/(c)/ Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no
redemption fee. For the Target Maturity Portfolios, total return would be
reduced if a redemption fee were taken into account.
/(d)/ May include effect of mortgage dollar roll transactions.
/(e)/ Commencement of operations.
/(f)/ Annualized.
The accompanying notes are an integral
part of these financial statements.
37
<PAGE>
TRUST FOR CREDIT UNIONS
-------------------
NOTES TO FINANCIAL STATEMENTS
August 31, 1995
1. Organization
Trust for Credit Unions (the "Fund") is a Massachusetts business trust
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company consisting of six diversified portfolios: the
Money Market Portfolio, Government Securities Portfolio, Mortgage Securities
Portfolio, Target Maturity Portfolio (1996), Target Maturity Portfolio (Feb 97)
and Target Maturity Portfolio (May 97). Units of the Fund are offered for sale
solely to state and federally chartered credit unions. Unless extended by
appropriate action of the Fund's Board of Trustees and by the unitholders,
Target Maturity Portfolio (1996), Target Maturity Portfolio (Feb 97) and Target
Maturity Portfolio (May 97) (the "Target Maturity Portfolios"), will be
liquidated on or about June 30, 1996, February 18, 1997 and May 15, 1997,
respectively, (the "Termination Date"), at which time, all units of these
Portfolios that are outstanding as of the close of business on the respective
Termination Date will be redeemed by the Fund at their net asset value.
2. Summary of Significant Accounting Policies
The following is a summary of significant accounting policies followed by
the Fund which are in conformity with those generally accepted in the investment
company industry:
A. Investment Valuation
------------------------
For the Government Securities Portfolio, Mortgage Securities Portfolio, and
Target Maturity Portfolios, investments in mortgage backed and asset backed
obligations are valued based on yield equivalents, a pricing matrix or other
sources, under valuation procedures established by the Fund's Board of Trustees.
Other portfolio securities for which accurate market quotations are readily
available are valued on the basis of quotations furnished by a pricing service
or provided by dealers in such securities. Portfolio securities for which
accurate market quotations are not readily available are valued in accordance
with the Fund's valuation procedures. Securities of the Money Market Portfolio
and short-term debt obligations maturing in sixty days or less for the
Government Securities Portfolio, Mortgage Securities Portfolio and Target
Maturity Portfolios are valued at amortized cost which approximates market
value. Under this method, all investments purchased at a discount or premium are
valued by amortizing the difference between the original purchase price and
maturity value of the issue over the period to maturity.
B. Security Transactions and Investment Income
-----------------------------------------------
Security transactions are recorded on the trade date. Realized gains and
losses on sales of portfolio securities are calculated on the identified cost
basis. For the Money Market Portfolio, interest income is determined on the
basis of interest accrued, premium amortized and discount earned. The Mortgage
Securities Portfolio and the Target Maturity Portfolios amortize market
discounts and premiums on certain mortgage backed securities and treasury
obligations.
38
<PAGE>
TRUST FOR CREDIT UNIONS
-------------------
NOTES TO FINANCIAL STATEMENTS--(Continued)
August 31, 1995
For the Government Securities Portfolio, Mortgage Securities Portfolio and
Target Maturity Portfolios, premiums on interest-only securities and on
collateralized mortgage obligations with nominal principal amounts are
amortized, on an effective yield basis, over the expected life of the respective
securities, taking into account actual principal prepayment experience and
estimates of future principal prepayments. Certain mortgage security paydown
gains and losses are taxable as ordinary income. Such paydown gains and losses
increase or decrease taxable ordinary income available for distribution and are
classified in interest income in the accompanying Statements of Operations.
Original issue discounts on debt securities are amortized to interest income
over the life of the security with a corresponding increase in the cost basis of
that security.
C. Federal Taxes
-----------------
It is each portfolio's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute each year substantially all investment company taxable income to its
unitholders. Accordingly, no federal tax provisions are required. The
characterization of distributions to unitholders for financial reporting
purposes is determined in accordance with income tax rules and is based upon the
best available information. Therefore, in the accompanying financial statements,
the source of a portfolio's distributions may be shown as (i) from net
investment income, (ii) in excess of net investment income, (iii) from net
realized gains on investment transactions, (iv) in excess of net realized gains
on investment transactions, and/or (v) from capital. During the year ended
August 31, 1995, the Mortgage Securities Portfolio distributed approximately
$406,506 from paid-in capital resulting from distributions in excess of
accumulated tax earnings and profits.
As of each portfolio's most recent tax year-end, the following portfolios
had approximately the following amounts of capital loss carry forward for U.S.
Federal tax purposes:
<TABLE>
<CAPTION>
Portfolio Amount Years of Expiration
------------------------------- -------------------------- -----------------------------
<S> <C> <C>
Government Securities......... $15,330,000 1999 - 2002
Mortgage Securities........... 9,554,000 2001 - 2003
Target Maturity (1996)........ 6,987,000 1996*
Target Maturity (Feb 97)...... 4,476,000 1997*
Target Maturity (May 97)...... 661,000 1997*
</TABLE>
* Represents earlier of Termination Date of portfolio or actual expiration
date of capital loss carry forward.
These amounts are available to be carried forward to offset future capital
gains of the corresponding portfolios to the extent permitted by applicable laws
or regulations.
39
<PAGE>
TRUST FOR CREDIT UNIONS
-------------------
NOTES TO FINANCIAL STATEMENTS--(Continued)
August 31, 1995
D. Deferred Organization Expenses
----------------------------------
Organization-related costs are being amortized on a straight-line basis
over a period of five years for the Government Securities and Mortgage
Securities Portfolios, and over three years for the Target Maturity Portfolios.
E. Expenses
------------
Expenses incurred by the Fund that do not specifically relate to an
individual portfolio of the Fund are allocated to the portfolios based on each
portfolio's relative average net assets for the period.
3. Agreements
Goldman Sachs Asset Management ("GSAM"), a separate operating division of
Goldman, Sachs & Co. ("Goldman Sachs"), acts as investment adviser pursuant to
an Advisory Agreement with the Fund. Under the Advisory Agreement, Goldman
Sachs, subject to general supervision of the Fund's Trustees, manages the Fund's
portfolios and provides certain administrative services for the Fund. As
compensation for services rendered under the Advisory Agreement and the
assumption of the expenses related thereto, Goldman Sachs is entitled to a fee,
computed daily and payable monthly, at the following annual rates as a
percentage of each respective portfolio's average daily net assets:
<TABLE>
<CAPTION>
Portfolio Asset levels Fee
- ----------------------------- --------------------------- ---------
<S> <C> <C>
Money Market................ up to $300 million 0.20%
in excess of $300 million 0.15%
Government Securities....... all 0.20%
Mortgage Securities......... all 0.20%
Target Maturity Portfolios.. up to $75 million 0.25%
in excess of $75 million 0.20%
</TABLE>
During the fiscal year ended August 31, 1995, Goldman Sachs voluntarily
agreed to waive varying levels of the advisory fees incurred by the Money Market
Portfolio and Mortgage Securities Portfolio amounting to $109,898 and $140,912,
respectively. Goldman Sachs also serves as the Transfer Agent of the Fund for a
fee.
40
<PAGE>
TRUST FOR CREDIT UNIONS
-------------------
NOTES TO FINANCIAL STATEMENTS--(Continued)
August 31, 1995
Callahan Credit Union Financial Services Limited Partnership ("CUFSLP")
serves as the Fund's administrator pursuant to an Administration Agreement.
Callahan Financial Services, Inc. serves as a general partner to CUFSLP, and 37
major credit unions are limited partners. Under the Administration Agreement,
CUFSLP, subject to general supervision of the Fund's Trustees, provides certain
administrative services to the Fund. As compensation for services rendered under
the Administration Agreement, CUFSLP is entitled to the following fees, computed
daily and payable monthly, at the following annual rates as a percentage of each
respective portfolio's average daily net assets:
<TABLE>
<CAPTION>
Portfolio Fee
----------------------------- ---------
<S> <C>
Money Market................ 0.10%
Government Securities....... 0.10%
Mortgage Securities......... 0.05%
Target Maturity Portfolios.. 0.05%
</TABLE>
During the fiscal year ended August 31, 1995, CUFSLP voluntarily agreed to
waive varying levels of the administration fees incurred by the Money Market
Portfolio amounting to $163,831.
Through June 30, 1995, Goldman Sachs agreed to reimburse all expenses
(excluding interest, taxes, brokerage and extraordinary expenses) of the Money
Market Portfolio, other than fees payable under the Administration Agreement and
the Advisory Agreement. Effective July 1, 1995, CUFSLP has agreed that to the
extent the total annualized operating expenses (excluding interest, taxes,
brokerage and extraordinary expenses) (the "Operating Expenses") of the Money
Market Portfolio exceed 0.20% of the average daily net assets of the Money
Market Portfolio, CUFSLP will either reduce the administration fees otherwise
payable or pay such Operating Expenses of the Money Market Portfolio. For the
two months ended August 31, 1995, no expenses were required to be reimbursed by
CUFSLP under this agreement.
The Government Securities Portfolio bears the fees payable under the
Administration Agreement and the Advisory Agreement as well as other expenses
incurred in its operations. Effective January 1, 1993, and until further notice,
CUFSLP and Goldman Sachs have each voluntarily agreed to limit the other
annualized ordinary operating expenses of the Government Securities Portfolio
such that CUFSLP will reimburse expenses that exceed .05% up to .10% of the
Government Securities Portfolio's average daily net assets, and Goldman Sachs
will reimburse expenses that exceed .10% up to .15% of the Government Securities
Portfolio's average daily net assets. For the year ended August 31, 1995, no
expenses were required to be reimbursed by CUFSLP or Goldman Sachs under this
agreement.
41
<PAGE>
TRUST FOR CREDIT UNIONS
-------------------
NOTES TO FINANCIAL STATEMENTS--(Continued)
August 31, 1995
Callahan Financial Services, Inc. and Goldman Sachs serve as exclusive
distributors of units of the Fund. During the fiscal year ended August 31,
1995, neither received any compensation for this service.
4. Investment Transactions
Purchases and proceeds of sales or maturities of long-term securities for
the Government Securities Portfolio, Mortgage Securities Portfolio, Target
Maturity Portfolio (1996), Target Maturity Portfolio (Feb 97) and Target
Maturity Portfolio (May 97) , for the fiscal year ended August 31, 1995, were as
follows ($ in thousands):
<TABLE>
<CAPTION>
Target Target Target
Government Mortgage Maturity Maturity Maturity
Securities Securities Portfolio Portfolio Portfolio
Portfolio Portfolio (1996) (Feb 97) (May 97)
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Purchases of U.S. Government
and agency obligations............. $318,764 $221,489 $176,144 $115,750 $67,667
Purchases (excluding U.S.
Government and agency
obligations)....................... -- 115,304 66,399 41,612 25,555
Sales or maturities of U.S.
Government and agency
obligations........................ 387,871 285,122 185,048 148,654 85,884
Sales or maturities (excluding U.S.
Government and agency
obligations)........................ -- 39,573 30,174 4,220 13,306
</TABLE>
5. Repurchase Agreements
During the term of a repurchase agreement, the value of the underlying
securities, including accrued interest, is required to equal or exceed the value
of the repurchase agreement. The underlying securities for all repurchase
agreements are held in safekeeping in the customer-only account of State Street
Bank and Trust Company, the Fund's custodian, or at sub-custodians. GSAM
monitors the market value of the underlying securities by pricing them daily.
42
<PAGE>
TRUST FOR CREDIT UNIONS
-------------------
NOTES TO FINANCIAL STATEMENTS--(Continued)
August 31, 1995
6. Joint Repurchase Agreement Accounts
The portfolios, together with other registered investment companies having
advisory agreements with GSAM, transfer uninvested cash balances into joint
accounts, the daily aggregate balances of which are invested in repurchase
agreements. The underlying securities for the repurchase agreements include U.S.
Treasury obligations and mortgage-related securities issued by the U.S.
Government, its agencies or instrumentalities.
As of August 31, 1995, the Money Market Portfolio had a 2.85% undivided
interest in the repurchase agreements in the following joint account which
equaled $102,300,000 in principal amount. As of August 31, 1995, the repurchase
agreements in this joint account, along with the corresponding underlying
securities (including the type of security, market value, interest rate and
maturity date) were as follows ($ in thousands):
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
------ -------- -------- ---------
<S> <C> <C> <C> <C>
Bear Stearns Companies, dated 08/31/95, repurchase price $500,081 (U.S.
Treasury Interest-Only Strips: $510,834, 05/15/98-08/15/01).................. $500,000 5.85% 09/01/95 $ 500,000
Chase Securities, dated 08/31/95, repurchase price $620,100 (U.S. Treasury
Notes: $632,404, 3.88-9.25%, 09/30/95-07/31/98)............................... 620,000 5.83 09/01/95 620,000
Daiwa Securities, Inc., dated 08/31/95, repurchase price $350,057 (U.S. Treasury
Bill: $357,000, 11/30/95)..................................................... 350,000 5.84 09/01/95 350,000
First Boston Corp., dated 08/31/95, repurchase price $300,049 (U.S. Treasury
Bills: $306,709, 11/02/95-05/02/96)........................................... 300,000 5.82 09/01/95 300,000
Goldman, Sachs & Co., dated 08/31/95, repurchase price $200,033 (U.S. Treasury
Notes: $142,179, 4.00-8.88%, 01/31/96-11/15/01) (U.S. Treasury Interest-Only
Strips: $26,825, 11/15/96-05/15/99) (U.S. Treasury Principal-Only Strips:
$34,996, 11/15/96-08/15/00)................................................... 200,000 5.92 09/01/95 200,000
J.P. Morgan Securities, Inc., dated 08/31/95, repurchase price $300,049 (U.S.
Treasury Notes: $305,666, 7.75-15.75%, 02/15/99-11/15/01)..................... 300,000 5.90 09/01/95 300,000
Smith Barney, Inc., dated 08/31/95, repurchase price $422,168 (U.S. Treasury
Notes: $417,011, 5.88-8.50%, 07/31/96-04/30/00) (U.S. Treasury Interest-Only
Strip: $4,069, 05/15/99) (U.S. Treasury Principal-Only Strip: $9,463,
02/15/96)..................................................................... 422,100 5.84 09/01/95 422,100
Swiss Bank Corp., dated 08/31/95, repurchase price $725,118 (U.S. Treasury
Bills: $153,523, 09/07/95-08/22/96) (U.S. Treasury Notes: $585,983,
3.88-9.25%, 09/30/95-07/31/00)................................................ 725,000 5.84 09/01/95 725,000
Union Bank of Switzerland Securities, Inc., dated 08/31/95, repurchase price:
$175,028 (U.S. Treasury Notes: $178,742, 7.38-7.75%, 11/15/97-01/31/00)....... 175,000 5.83 09/01/95 175,000
----------
Total Joint Repurchase Agreement Account.................................... $3,592,100
==========
</TABLE>
43
<PAGE>
TRUST FOR CREDIT UNIONS
-------------------
NOTES TO FINANCIAL STATEMENTS--(Continued)
August 31, 1995
As of August 31, 1995, the Money Market, Government Securities, Mortgage
Securities and Target Maturity (1996) Portfolios had a 7.60%, 3.01%, 0.26%, and
0.29% undivided interest, respectively, in the repurchase agreements in the
following joint account, which equaled $100,000,000, $39,600,000, $3,400,000 and
$3,800,000 in principal amount, respectively. As of August 31, 1995, the
repurchase agreements in this joint account, along with the corresponding
underlying securities (including the type of security, market value, interest
rate and maturity date) were as follows ($ in thousands):
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
------ -------- -------- ---------
<S> <C> <C> <C> <C>
Daiwa Securities, Inc., dated 08/31/95, repurchase price $400,065 (U.S. Treasury
Bill: $408,000, 11/30/95)....................................................... $400,000 5.84% 09/01/95 $ 400,000
Salomon Brothers, Inc., dated 08/31/95, repurchase price $701,714 (U.S. Treasury
Bills: $97,305, 11/16/95-07/25/96) (U.S. Treasury Notes: $46,277, 4.25-8.50%,
05/15/96-04/15/00) (U.S. Treasury Interest-Only Strips: $361,286, 02/15/96-
05/15/01) (U.S. Treasury Principal-Only Strips: $210,569, 08/15/97-11/15/00).... 701,600 5.84 09/01/95 701,600
Union Bank of Switzerland Securities, Inc., dated 08/31/95, repurchase price
$215,035, (U.S. Treasury Bill: $2,922, 02/22/96) (U.S. Treasury Notes: $215,431,
5.38-12.38%, 05/31/98-05/15/04).................................................. 215,000 5.83 09/01/95 215,000
----------
Total Joint Repurchase Agreement Account........................................................................ $1,316,600
==========
</TABLE>
7. Redemption Units
Unitholders of the Target Maturity Portfolios who redeem their units prior
to the respective Termination Date will be charged a redemption fee equal to
.50% of the net asset value of the redeemed units at the time of the redemption.
The redemption fee is not a sales charge, but is kept by the respective
portfolio for the benefit of continuing unitholders.
8. Certain Reclassifications
In accordance with Statement of Position 93-2, the Mortgage Securities,
Target Maturity (1996), Target Maturity (Feb 97) and Target Maturity (May 97)
portfolios have reclassified $415,145, $13,087, $3,490 and $1,412, respectively,
which represents a reduction in paid-in capital and an increase in accumulated
undistributed net investment income. These reclassifications have no impact on
the net asset value of the respective portfolio and are designed to present such
portfolio's capital accounts on a tax basis.
9. Other Matters
During the fiscal year ended August 31, 1995, Goldman Sachs contributed
additional paid-in capital to the Target Maturity Portfolio (1996) as reflected
in the accompanying Statements of Changes in Net Assets.
44
<PAGE>
This Annual Report is authorized for distribution to prospective investors only
when preceded or accompanied by the Trust for Credit Unions Prospectus which
contains facts concerning the Fund's objectives and policies, management,
expenses and other information.
<PAGE>
[LOGO OF TRUST FOR CREDIT UNIONS APPEARS HERE]
Trustees
John L. Ostby, Chairman
Rudolf J. Hanley, Vice-Chairman
Gene R. Artemenko
James C. Barr
Edgar F. Callahan
Robert M. Coen
John T. Collins
Thomas S. Condit
Wendell A. Sebastian
Officers
Marcia L. Beck
President
Charles W. Filson
Vice President
John W. Mosior
Vice President
Nancy L. Mucker
Vice President
Pauline Taylor
Vice President
Scott M. Gilman
Treasurer
Michael J. Richman
Secretary
William F. Connors
Assistant Secretary
Howard B. Surloff
Assistant Secretary
Administrator
Callahan Credit Union Financial Services
Limited Partnership
Investment Advisor
Goldman Sachs Asset Management,
a separate operating division
of Goldman, Sachs & Co.
Transfer Agent
Goldman, Sachs & Co.
Distributors
Callahan Financial Services, Inc.
Goldman, Sachs & Co.
[LOGO OF GOLDMAN SACHS APPEARS HERE]
TCUANN95
<PAGE>
PART C
------
OTHER INFORMATION
-----------------
Item 24. Financial Statements and Exhibits.
---------------------------------
(a) Financial Statements
Included in the Money Market Portfolio, Government Securities Portfolio and
Mortgage Securities Portfolio Prospectus:
Financial Highlights for Trust for Credit Unions Portfolios comprising
(1) the Money Market Portfolio for the seven Years Ended August 31, 1989,
1990, 1991, 1992, 1993, 1994 and 1995 and For the Period May 17, 1988
(Commencement of Operations) to August 31, 1988; (2) for the Government
Securities Portfolio for the four Years Ended August 31, 1992, 1993, 1994
and 1995 and For the Period July 10, 1991 (Commencement of Operations) to
August 31, 1991; (3) for the Mortgage Securities Portfolio For the two
Years Ended August 31, 1994 and 1995 and For the Period October 9, 1992
(Commencement of Operations) to August 31, 1993; (4) for the Target
Maturity Portfolio (1996) For the two Years Ended August 31, 1994 and 1995
and for the period July 1, 1993 (Commencement of Operations) to August 31,
1993; (5) for the Target Maturity Portfolio (Feb 97) for the Year Ended
August 31, 1995 and for the period February 15, 1994 (Commencement of
Operations) through August 31, 1994 and (6) for the Target Maturity
Portfolio (May 97) For the Year Ended August 31, 1995 and For the Period
May 23, 1994 (Commencement of Operations) through August 31, 1994.
Included or incorporated by reference into the Additional Statements for the
Money Market Portfolio, Government Securities Portfolio, Mortgage Securities
Portfolio, Target Maturity Portfolio (1996), Target Maturity Portfolio (Feb 97)
and Target Maturity Portfolio (May 97).
Report of Independent Public Accountants on the Registrant's Annual Report
to Unitholders for Year Ended August 31, 1995.
Statement of Investments for the Money Market Portfolio, August 31, 1995.
Statement of Investments for the Government Securities Portfolio,
August 31, 1995.
Statement of Investments for the Mortgage Securities Portfolio,
August 31, 1995.
C-1
<PAGE>
Statement of Investments for the Target Maturity Portfolio (1996) August
31, 1995.
Statement of Investments for the Target Maturity Portfolio (Feb 97) August
31, 1995.
Statement of Investments for the Target Maturity Portfolio (May 97) August
31, 1995.
Statements of Assets and Liabilities for the Money Market Portfolio, the
Government Securities Portfolio, the Mortgage Securities Portfolio, the
Target Maturity Portfolio (1996), Target Maturity Portfolio (Feb '97) and
Target Maturity Portfolio (May '97) August 31, 1995.
Statements of Operations for the Money Market Portfolio, the Government
Securities Portfolio, the Mortgage Securities Portfolio, the Target
Maturity Portfolio (1996), Target Maturity Portfolio (Feb '97) and Target
Maturity Portfolio (May 97) For the Year Ended August 31, 1995.
Statement of Changes in Net Assets for the Money Market Portfolio For the
Years Ended August 31, 1995 and 1994.
Statement of Changes in Net Assets for the Government Securities Portfolio
For the Years Ended August 31, 1995 and 1994.
Statement of Changes in Net Assets for the Mortgage Securities Portfolio,
For the Years ended August 31, 1995 and August 31, 1994.
Statement of Changes in Net Assets for the Target Maturity Portfolio
(1996) For the Years ended August 31, 1995 and August 31, 1994.
Statement of Changes in Net Assets for the Target Maturity Portfolio
(Feb '97) For the Year ended August 31, 1995 and For the Period
February 15, 1994 (Commencement of Operations) through August 31, 1994.
Statement of Changes in Net Assets for the Target Maturity Portfolio
(May '97) For the Year ended August 31, 1995 and For the Period May 23,
1994 (Commencement of Operations) through August 31, 1995.
Financial Highlights for the Money Market Portfolio For the Years Ended
August 31, 1989, 1990, 1991, 1992, 1993, 1994, 1995 and For the
Period May 17, 1988 (Commencement of Operations) to August 31, 1988.
C-2
<PAGE>
Financial Highlights for the Government Securities Portfolio For the Years
Ended August 31, 1992, 1993, 1994, 1995 and For the Period July 10, 1991
(Commencement of Operations) to August 31, 1991.
Financial Highlights for the Mortgage Securities Portfolio For the Years
Ended August 31, 1994 and 1995 and for the Period October 9, 1992
(Commencement of Operations) to August 31, 1993 .
Financial Highlights for the Target Maturity Portfolio (1996) For the
Years Ended August 31, 1994 and 1995 and for the period July 1, 1993
(Commencement of Operations) to August 31, 1993.
Financial Highlights for the Target Maturity Portfolio (Feb '97) For the
Year Ended August 31, 1995 and for the period February 15, 1994
(Commencement of Operations) to August 31, 1994.
Financial Highlights for the Target Maturity Portfolio (May '97) For the
Year Ended August 31, 1995 and for the period May 23, 1994 (Commencement of
Operations) to August 31, 1994.
Notes to Financial Statement.
None.
All other financial statements, schedules and historical financial
information have been omitted as the subject matter is not required, not
present, or not present in amounts sufficient to require submission.
(b) Exhibits
The following exhibits are included herein:
1 Agreement and Declaration of Trust, dated September 24, 1987, as amended
and restated through December 1, 1987, of the Registrant.
1(a) Amendment No. 1 to the Amended and Restated Agreement and
Declaration of Trust dated April 20, 1988.
1(b) Amendment No. 2 to Amended and Restated Agreement and Declaration
of Trust dated September 21, 1992.
1(c) Amendment No. 3 to Registrant's Amended and Restated Agreement
and Declaration of Trust to Establish and Designate Units of the Target
Maturity Portfolio (1996).
C-3
<PAGE>
1(d) Amendment No. 4 to Registrant's Amended and Restated Agreement
and Declaration of Trust to Establish and Designate Units of the Target
Maturity Portfolio (Feb 97), Target Maturity Portfolio (May 97), Target
Maturity Portfolio (Aug 97) and Target Maturity Portfolio (Nov 97).
2 By-laws of the Registrant.
3 Not applicable.
4 Not applicable.
5 Advisory Agreement between Registrant and Goldman, Sachs & Co. dated June
20, 1991.
5(a) Addendum No. 1 to the Investment Advisory Agreement between the
Registrant and Goldman Sachs & Co. dated October 6, 1992.
5(b) Addendum No. 2 to the Advisory Agreement between Registrant and
Goldman, Sachs & Co.
5(c) Addendum No. 3 to the Advisory agreement between Registrant and
Goldman, Sachs & Co. dated December 23, 1993.
5(d) Addendum No. 4 to the Advisory Agreement between the Registrant
and Goldman, Sachs & Co. dated January 1, 1994.
6 Distribution Agreement between Registrant and Callahan Financial
Services, Inc. dated May 10, 1988.
6(a) Amendment No. 1 to Distribution Agreement between Registrant and
Callahan Financial Services, Inc. dated February 28, 1989.
6(b) Distribution Agreement between Registrant and Goldman, Sachs &
Co. dated February 28, 1989.
7 Not applicable.
8 Custodian Agreement between Registrant and State Street Bank and Trust
Company dated May 10, 1988.
8(a) Amendment to the Custodian Agreement between Registrant and State Street
Bank and Trust Company dated September 18, 1989.
8(b) Transfer Agency Agreement between Registrant and Goldman, Sachs &
Co. dated May 10, 1988.
C-4
<PAGE>
8(c) Amendment No. 1 to Transfer Agency Agreement dated February 28,
1989.
9 Revised and Restated Administration Agreement between Registrant and
Callahan Credit Union Financial Services Limited Partnership dated March
31, 1993.
9(a) Addendum No. 1 to the Revised and Restated Administration Agreement
between Registrant and Callahan Credit Union Financial Services Limited
Partnership.
9(b) Addendum No. 2 to the Revised and Restated Administration Agreement
between Registrant and Callahan Credit Union Financial Services Limited
Partnership dated January 1, 1994.
9(c) Addendum No. 3 to the Administration Agreement dated July 1, 1995
10 Opinion and consent of counsel of Hale and Dorr filed with 24f-2 Notice
on October 31, 1995.
11 Consent of Independent Accountants.
12 Not applicable.
13 Subscription Agreement dated April 28, 1988.
14 Not applicable.
15 Not applicable.
16 Not applicable.
17 Powers of Attorney from Messrs. Artemenko, Barr, Callahan, Caen, Collins,
Conduit, Hanley, Ostby, Sebastian, Beck, Connors, Gilman, Filson, Mosior,
Mucker, Richman, Surloff, Taylor, Hartstein, Shanley, Uniacke, Alexander
27 Financial Data Schedules
Item 25. Persons controlled by or Under Common Control with Registrant.
See Items 28 and 29(a) below.
C-5
<PAGE>
Item 26. Number of Holders of Securities.
<TABLE>
<CAPTION>
Number of
Title of Class Record Holders
- -------------- --------------
<S> <C>
Money Market Portfolio Units 130
Government Securities Portfolio Units 101
Mortgage Securities Portfolio Units 43
Target Maturity Portfolio (1996) Units 40
Target Maturity Portfolio (Feb '97) Units 30
Target Maturity Portfolio (May '97) Units 21
</TABLE>
(Information supplied as of October 31, 1995)
Item 27. Indemnification.
---------------
Article VI of the Registrant's Agreement and Declaration of Trust provides for
indemnification of the Registrant's trustees and officers under certain
circumstances.
Paragraph 7 of the Advisory Agreement between the Registrant and Goldman, Sachs
& Co. provides for indemnification of Goldman, Sachs & Co. or, in lieu thereof,
contribution by the Registrant under certain circumstances.
Paragraph 7 of the Revised and Restated Administration Agreement between the
Registrant and Callahan Credit Union Financial Services Limited Partnership
provides for indemnification of Callahan Credit Union Services Limited
Partnership or, in lieu thereof, contribution by the Registrant under certain
circumstances.
Paragraph 6 of the Distribution Agreements between the Registrant and Callahan
Financial Services, Inc. and the Registrant and Goldman, Sachs & Co. provide for
indemnification of Callahan Financial Services, Inc. and Goldman, Sachs & Co.
or, in lieu thereof, contribution by the Registrant under certain circumstances.
Insofar as indemnification by the Registrant for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted against the Registrant
C-6
<PAGE>
by such trustee, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by final
adjudication of such issue.
Mutual fund and directors and officers liability policies purchased by the
Registrant insure Registrant and its trustees, partners, officers and employees,
subject to the policies' coverage limit and exclusions and varying deductibles,
against loss resulting from claims by reason of any act, error, omission,
misstatement, misleading statement, neglect or breach of duty to the extend
permitted by Section 17(i) of the Investment Company Act of 1940.
Item 28. Business and Other Connections of Investment Adviser.
----------------------------------------------------
Goldman, Sachs & Co., a New York Limited Partnership and Registrant's investment
adviser, is in the investment banking business and is a registered broker-dealer
and futures commission merchant. The business and other connections of the
officers and general partners who have direct responsibility for the asset
management division of Goldman, Sachs & Co. are listed on the Uniform
Application for Investment Adviser Registration ("Form ADV") of Goldman,
Sachs & Co. (File No. 801-16048), The Goldman Sachs Funds Management, L.P. (No.
801-37591) and Goldman Sachs Asset Management International (No. 801-38157) as
applicable. These Form ADV's are currently on file with the Commission, the
texts of which are hereby incorporated by reference.
C-7
<PAGE>
Item 29. Principal Underwriters.
----------------------
Callahan Financial Services, Inc.
(a) Callahan Financial Services, Inc., a Delaware Corporation, does not act as
principal underwriter, depositor or investment adviser for any other
investment company.
(b) Set forth below is certain information pertaining to the directors and
officers of Callahan Financial Services, Inc.
<TABLE>
<CAPTION>
Positions and
Offices with Positions and
Name and Principal Callahan Financial Offices With
Business Address Services, Inc. Registrant
- ------------------ ------------------ ----------
<S> <C> <C>
Charles W. Filson Director and Vice Vice President
Callahan Financial President
Services, Inc
1001 Connecticut Avenue, N.W.
Suite 1022
Washington, D.C. 20036-5504
William F. Connors President and Secretary Assistant Secretary
Callahan Financial
Services, Inc
1001 Connecticut Avenue, N.W.
Suite 1022
Washington, D.C. 20036-5504
</TABLE>
C-8
<PAGE>
Goldman, Sachs & Co.
(a) Goldman, Sachs & Co., or an affiliate thereof, also serves as investment
adviser and distributor of the units of Goldman Sachs Money Market
Trust, Goldman Sachs Trust, Goldman Sachs Equity Portfolios, Inc., Trust
for Credit Unions and Shares of Paragon Treasury Money Market Fund. Goldman,
Sachs & Co. or an affiliate or division thereof, currently serves as
administrator and distributor to the units of The Benchmark Funds and shares of
Paragon Portfolio.
(b) Set forth below is certain information pertaining to the general partners of
Goldman, Sachs & Co., Registrant's principal underwriter. Each of the following
persons is a general partner of Goldman, Sachs & Co.
<TABLE>
<CAPTION>
Name and Principal Name and Principal
Business Address Business Address
- ---------------- ----------------
<S> <C>
Jon Corzine, Chairman (1)(2) Hideo Ishihara (10)
Roy J. Zuckerberg (2) Oki Matsumoto Inc. (2)
David M. Silfen (2) Richard M. Hayden (2)
Eugene V. Fife (7) Armen A. Avanessians (2)
Robert J. Hurst (2) Howard C. Katz (2)
Paul M. Achleitner (7) Peter K. Barker (9)
Joel S. Beckman (2) David W. Blood (7)
Eric S. Dobkin (2) Henry M. Paulson, Jr.(8)
Willard J. Overlock, Jr. (2) Zachariah Cobrinik (7)
Jonathan L. Cohen (2) Kevin W. Kennedy (2)
Frederic B. Garonzik(7) Daniel M. Neidich (2)
William C. Landreth (11) Edward Spiegel (2)
Gary D. Cohn (7) Christopher A. Cole (2)
Fischer Black (5) Henry Cornell (13)
Robert F. Cummings, Jr. (2) Robert V. Delaney (2)
Angelo De Caro (7) Joseph DellaRosa (2)
Steven G. Einhorn (2) David B. Ford (2)
J. Michael Evans (7) Lawton W. Fitt (2)
David M. Leuschen (2) Michael D. McCarthy (2)
Michael R. Lynch (2) Joseph D. Gatto (2)
Donald C. Opatrny, Jr. (7) Thomas E. Tuft (2)
Peter C. Gerhard (2) Michael P. Mortara (2)
Robert J. Katz (1) (2) Lloyd C. Blankfein (2)
Nomi P. Ghez (2) John P. Curtin, Jr. (2)
David T. Hamamoto (2) Dexter D. Earle (2)
Gavyn Davies (7) Christopher Flowers (2)
John Ehara (10) Walter H. Haydock (15)
Gary Gensler (2) Thomas J. Healey (2)
Charles T. Harris, III (2) Robert E. Higgins (2)
Stephen Hendel (2) David L. Henle (2)
Ernest S. Liu (2) Charles B. Mayer, Jr. (2)
Eff W. Martin (11) Mark Schwartz (2)
Michael J. O'Brien (7) Robert K. Steel (7)
Stephen M. Semlitz (2) John A. Thain (2)
</TABLE>
C-9
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Name and Principal
Business Address Business Address
- ---------------- ----------------
<S> <C>
Francis J. Ingrassia (2) Scott B. Kapnick (7)
John L. Thornton (7) Joseph R. Zimmel (2)
Bracebridge H. Young, Jr. (10) Gary L. Zwerling (2)
Barry L. Zubrow (2) Andrew M. Alper (2)
Jon R. Aisbitt (7) Frank L. Coulson, Jr. (2)
William J. Buckley (2) Richard A. Friedman (2)
Connie Duckworth (8) John H. Gleberman (2)
Alan R. Gillespie (7) Steven M. Heller (2)
Jacob D. Goldfield (2) Robert S. Kaplan (10)
Ann F. Kaplan (2) Kevin M. Kelly (2)
Peter D. Kiernan, III (2) Gaetano J. Muzio (2)
T. Willem Mesdag (7) Timothy J. O'Neill (2)
Robin Neustein (2) John J. Powers (2)
Scott M. Pinkus (2) Arthur J. Reimers,III (7)
Stephen D. Quinn (2) Richard A. Sapp (7)
James P. Riley, Jr. (2) Donald F. Textor (2)
John C. Keinert (2) Patrick J. Ward (10)
Thomas B. Walker, III (2) Jon Winkelried (2)
Jeffrey M. Weingarten (7) Gregory K. Palm (7)
Richard E. Witten (2) John O. Downing (7)
Carlos A. Cordeiro (7) Michael D. Fascitelli (2)
W. Mark Evans (7) Reuben Jeffrey, III (2)
Sylvain M. Hefes (7) Jun Makihara (9)
Lawrence H. Linden (2) Robert B. Morris,III (11)
Masanori Mochida (10) Suzanne M. Johnson (9)
Philip D. Murphy (14) Carl G.E. Palmstierna (7)
Terence M. O'Toole (2) J. David Rogers (10)
Michael G. Rantz (2) Peter Savitz (10)
Joseph Sassoon (7) Ralph F. Severson (11)
Charles B. Seelig, Jr. (2) Gary A. Syman (10)
Gene T. Sykes (9) John L. Townsend, III (2)
Leslie C. Tortora (2) David A. Viniar (2)
Lee G. Vance (7) Peter A. Weinberg (2)
John S. Weinberg (2) George W. Wellde, Jr. (2)
Laurence M. Weiss (2) Sharmin Mossavar-Rahmani (5)
Jaime E. Yordan (2) Robert Litterman (2)
Jonathan L. Kolatch (2) Thomas J. Macirowski (2)
Peter S. Kraus (2) Oki Matsumoto (10)
Jonathan M. Lopatin (2) Eric M. Mindich (2)
Peter G. Mallinson (13) Thomas K. Montag (2)
E. Scott Mead (7) Kipp M. Nelson (7)
Steven T. Mnuchin (2) Robert J. O'Shea (2)
Edward A. Mule (2) Jack L. Salzman (2)
Christopher K. Norton (14) Michael F. Schwerin (2)
Wiet H. Pot (7) Richard G. Sherlund (2)
Eric S. Schwartz (2)
</TABLE>
C-10
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Name and Principal
Business Address Business Address
- ---------------- ----------------
<S> <C>
Richard S. Sharp (7) Cody J. Smith (2)
Michael S. Sherwood (7) Esta E. Stecher (2)
Daniel W. Stanton (2) Byron D. Trott (8)
Frederic E. Steck (11) Peter S. Wheeler (13)
Barry S. Volpert (2) Gary W. Williams (2)
Anthony G. Williams (7) Danny O. Yee (13)
Tracy R. Wolstencroft (4) Mark A. Zurack (2)
Michael J. Zamkow (2)
</TABLE>
- ------------
(1) Management Committee
(2) 85 Broad Street, New York, NY 10004
(3) Mellon Bank Center, 1735 Market Street, 26th Floor,
Philadelphia, PA 19103
(4) 100 Crescent Court, Suite 1000, Dallas, TX 75201
(5) One New York Plaza, New York, NY 10004
(6) 1000 Louisiana Street, Suite 550, Houston, TX 77002
(7) Peterborough Court, 133 Fleet Street, London EC4A 2BB, England
(8) 4900 Sears Tower, Chicago, IL 60606
(9) 333 South Grand Avenue, Suite 1900, Los Angeles, CA 90071
(10) ARK Mori Bldg.,10th Floor, 12-32 Akasaka, 1-chome, Minato-
ku, Tokyo 107, Japan
(11) 555 California Street, 31st Floor, San Francisco, CA 94104
(12) Exchange Place, 53 State Street, 13th Floor, Boston, MA 02109
(13) Asia Pacific Finance Tower, 35th Floor, Citibank Plaza, 3
Garden Road, Hong Kong
(14) Finanz GmbH, MesseTurm, 60308 Frankfurt am Main 1, Germany
(15) Munsterhof 4, 8022, Zurich, Switzerland
(c) Not applicable.
Item 30. Location of Accounts and Records.
--------------------------------
The Agreement and Declaration of Trust, By-laws and minute book of the
Registrant are in the physical possession of Goldman, Sachs & Co., 4900 Sears
Tower, Chicago, Illinois 60606. All other accounts, books and other documents
required to be maintained under Section 31(a) of the Investment Company Act of
1940 and the Rules promulgated thereunder are in the physical possession of
State Street Bank and Trust Company, P.O. Box 1713, Boston, Massachusetts 02105.
C-11
<PAGE>
Item 31. Management Services.
-------------------
Not Applicable.
Item 32. Undertakings.
------------
(a) The Annual Report also contains performance information and is available to
any recipient of the Prospectus upon request and without charge by writing to
either Goldman, Sachs & Co., 4900 Sears Tower, Chicago, Illinois 60606-6303 or
Callahan Credit Union Financial Services Limited Partnership c/o Callahan
Financial Services, Inc., 1001 Connecticut Ave., N.W., Suite 1022, Washington,
D.C. 20036-5504.
C-12
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940 the Registrant certifies that it meets all the requirements
for effectiveness of this Registration Statement pursuant to Rule 485(b) under
the Securities Act of 1933 and has duly caused this Post-Effective Amendment No.
16 to the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City and State of New York on the 21st day of
November 1995.
TRUST FOR CREDIT UNIONS
By: Michael J. Richman
- --------------------------
Michael J. Richman
Secretary
Pursuant to the requirements of the Securities Act of 1993, this Post-Effective
Amendment No. 16 to the Registration Statement has been signed below by the
following persons in the capacities indicated on November 21, 1995.
<TABLE>
<CAPTION>
Name Title
---- -----
<S> <C>
Marcia L. Beck President and Chief Executive Officer
- --------------------
Marcia L. Beck
Scott M. Gilman Treasurer and Chief Financial Officer
- --------------------
Scott M. Gilman
* Chairman and Trustee
- --------------------
John T. Ostby
* Trustee
- --------------------
Wendell A. Sebastian
* Trustee
- --------------------
Edgar F. Callahan
* Trustee
- --------------------
Gene R. Artemenko
* Trustee
- --------------------
James C. Barr
* Trustee
- --------------------
Robert M. Coen
* Trustee
- --------------------
John T. Collins
* Trustee
- --------------------
Thomas S. Condit
* Trustee
- --------------------
Rudy J. Hanley
*By Michael J. Richman
--------------------------
Michael J. Richman
Attorney-In-Fact
</TABLE>
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<S> <C>
1 Agreement and Declaration of Trust, dated September 24, 1987, as
amended and restated through December 1, 1987, of the Registrant.
1(a) Amendment No. 1 to the Amended and Restated Agreement and
Declaration of Trust dated April 20, 1988.
1(b) Amendment No. 2 to Amended and Restated Agreement and Declaration of
Trust dated September 21, 1992.
1(c) Amendment No. 3 to Registrant's Amended and Restated Agreement and
Declaration of Trust to Establish and Designate Units of the Target
Maturity Portfolio (1996).
1(d) Amendment No. 4 to Registrant's Amended and Restated Agreement and
Declaration of Trust to Establish and Designate Units of the Target
Maturity Portfolio (Feb 97), Target Maturity Portfolio (May 97),
Target Maturity Portfolio (Aug 97) and Target Maturity Portfolio (Nov
97).
2 By-laws of the Registrant.
5 Advisory Agreement between Registrant and Goldman, Sachs & Co. dated
June 20, 1991.
5(a) Addendum No. 1 to the Investment Advisory Agreement between the
Registrant and Goldman Sachs & Co. dated October 6, 1992.
5(b) Addendum No. 2 to the Advisory Agreement between Registrant and
Goldman, Sachs & Co.
5(c) Addendum No. 3 to the Advisory agreement between Registrant and
Goldman, Sachs & Co. dated December 23, 1993.
5(d) Addendum No. 4 to the Advisory Agreement between the Registrant and
Goldman, Sachs & Co. dated January 1, 1994.
6 Distribution Agreement between Registrant and Callahan Financial
Services, Inc. dated May 10, 1988.
6(a) Amendment No. 1 to Distribution Agreement between Registrant and
Callahan Financial Services, Inc. dated February 28, 1989.
6(b) Distribution Agreement between Registrant and Goldman, Sachs & Co.
dated February 28, 1989.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
8 Custodian Agreement between Registrant and State Street Bank and Trust
Company dated May 10, 1988.B)
8(a) Amendment to the Custodian Agreement between Registrant and State
Street Bank and Trust Company dated September 18, 1989.
8(b) Transfer Agency Agreement between Registrant and Goldman,
Sachs & Co. dated May 10, 1988. (Reference B)
8(c) Amendment No. 1 to Transfer Agency Agreement dated February 28, 1989.
(Reference B)
9 Revised and Restated Administration Agreement between Registrant and
Callahan Credit Union Financial Services Limited Partnership dated
March 31, 1993. (Reference E)
9(a) Addendum No. 1 to the Revised and Restated Administration Agreement
between Registrant and Callahan Credit Union Financial Services
Limited Partnership. (Reference F)
9(b) Addendum No. 2 to the Revised and Restated Administration Agreement
between Registrant and Callahan Credit Union Financial Services
Limited Partnership dated January 1, 1994. (Reference G)
9(c) Addendum No. 3 to the Administration Agreement dated July 1, 1995
11 Consent of Independent Accountants.
13 Subscription Agreement dated April 28, 1988.
17 Powers of Attorney from Messrs. Artemenko, Barr, Callahan, Caen,
Collins, Conduit, Hanley, Ostby, Sebastian, Beck, Connors, Gilman,
Filson, Mosior, Mucker, Richman, Surloff, Taylor, Hartstein, Shanley,
Uniacke, Alexander
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TRUST FOR
CREDIT UNIONS' ANNUAL REPORT DATED AUGUST 31, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> MONEY MARKET PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-START> SEP-01-1994
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 383,455,111
<INVESTMENTS-AT-VALUE> 383,455,111
<RECEIVABLES> 780,393
<ASSETS-OTHER> 15,052
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 384,250,556
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,154,640
<TOTAL-LIABILITIES> 2,154,640
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 382,095,916
<SHARES-COMMON-STOCK> 382,095,916
<SHARES-COMMON-PRIOR> 217,037,147
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 382,095,916
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 15,279,710
<OTHER-INCOME> 0
<EXPENSES-NET> (530,988)
<NET-INVESTMENT-INCOME> 14,748,722
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 14,748,722
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (14,700,440)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,043,450,086
<NUMBER-OF-SHARES-REDEEMED> (2,885,160,983)
<SHARES-REINVESTED> 6,769,666
<NET-CHANGE-IN-ASSETS> 165,107,051
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (48,282)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 520,007
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 882,915
<AVERAGE-NET-ASSETS> 265,832,795
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.055
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.055)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.20
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TRUST FOR
CREDIT UNIONS' ANNUAL REPORT DATED AUGUST 31, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 2
<NAME> GOVERNMENT SECURITIES PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-START> SEP-01-1994
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 531,690,173
<INVESTMENTS-AT-VALUE> 525,523,866
<RECEIVABLES> 6,247,135
<ASSETS-OTHER> 184,403
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 531,955,404
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,296,485
<TOTAL-LIABILITIES> 2,296,485
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 550,963,036
<SHARES-COMMON-STOCK> 54,253,342
<SHARES-COMMON-PRIOR> 60,773,161
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (685,743)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (14,452,067)
<ACCUM-APPREC-OR-DEPREC> (6,166,307)
<NET-ASSETS> 529,658,919
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 32,321,799
<OTHER-INCOME> 0
<EXPENSES-NET> (1,855,174)
<NET-INVESTMENT-INCOME> 30,466,625
<REALIZED-GAINS-CURRENT> (4,600,744)
<APPREC-INCREASE-CURRENT> 4,293,439
<NET-CHANGE-FROM-OPS> 30,159,320
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (30,842,606)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (685,743)
<NUMBER-OF-SHARES-SOLD> 2,179,482
<NUMBER-OF-SHARES-REDEEMED> (9,662,680)
<SHARES-REINVESTED> 963,379
<NET-CHANGE-IN-ASSETS> (64,672,242)
<ACCUMULATED-NII-PRIOR> 375,981
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (9,851,323)
<GROSS-ADVISORY-FEES> 1,078,346
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,855,174
<AVERAGE-NET-ASSETS> 539,172,698
<PER-SHARE-NAV-BEGIN> 9.78
<PER-SHARE-NII> .552
<PER-SHARE-GAIN-APPREC> (.001)
<PER-SHARE-DIVIDEND> (.571)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.76
<EXPENSE-RATIO> 0.34
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TRUST FOR
CREDIT UNIONS' ANNUAL REPORT DATED AUGUST 31, 1995 AND IS QUALFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 3
<NAME> MORTGAGE SECURITIES PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-START> SEP-01-1994
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 264,774,033
<INVESTMENTS-AT-VALUE> 266,027,558
<RECEIVABLES> 2,575,308
<ASSETS-OTHER> 65,235
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 268,668,101
<PAYABLE-FOR-SECURITIES> 3,027,193
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,231,682
<TOTAL-LIABILITIES> 4,258,875
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 274,349,290
<SHARES-COMMON-STOCK> 27,160,182
<SHARES-COMMON-PRIOR> 29,508,060
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (1,397,205)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (9,796,384)
<ACCUM-APPREC-OR-DEPREC> 1,253,525
<NET-ASSETS> 264,409,226
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 17,513,762
<OTHER-INCOME> 0
<EXPENSES-NET> (695,014)
<NET-INVESTMENT-INCOME> 16,818,748
<REALIZED-GAINS-CURRENT> (3,551,399)
<APPREC-INCREASE-CURRENT> 7,151,412
<NET-CHANGE-FROM-OPS> 20,418,761
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (16,818,748)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (840,977)
<NUMBER-OF-SHARES-SOLD> 807,374
<NUMBER-OF-SHARES-REDEEMED> (3,664,116)
<SHARES-REINVESTED> 508,864
<NET-CHANGE-IN-ASSETS> (19,477,194)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (971,373)
<OVERDIST-NET-GAINS-PRIOR> (6,244,985)
<GROSS-ADVISORY-FEES> 529,099
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 835,926
<AVERAGE-NET-ASSETS> 264,549,580
<PER-SHARE-NAV-BEGIN> 9.62
<PER-SHARE-NII> 0.607
<PER-SHARE-GAIN-APPREC> 0.154
<PER-SHARE-DIVIDEND> (0.625)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> (0.016)
<PER-SHARE-NAV-END> 9.74
<EXPENSE-RATIO> 0.26
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TRUST FOR
CREDIT UNIONS' ANNUAL REPORT DATED AUGUST 31, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 4
<NAME> TARGET MATURITY PORTFOLIO (1996)
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-START> SEP-01-1994
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 128,350,681
<INVESTMENTS-AT-VALUE> 128,706,804
<RECEIVABLES> 1,251,665
<ASSETS-OTHER> 20,625
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 129,979,094
<PAYABLE-FOR-SECURITIES> 1,831,814
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 618,513
<TOTAL-LIABILITIES> 2,450,327
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 133,076,795
<SHARES-COMMON-STOCK> 13,300,010
<SHARES-COMMON-PRIOR> 13,350,010
<ACCUMULATED-NII-CURRENT> 1,163,149
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (7,067,300)
<ACCUM-APPREC-OR-DEPREC> 356,123
<NET-ASSETS> 127,528,767
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 8,600,800
<OTHER-INCOME> 0
<EXPENSES-NET> (492,570)
<NET-INVESTMENT-INCOME> 8,108,230
<REALIZED-GAINS-CURRENT> (2,597,069)
<APPREC-INCREASE-CURRENT> 2,383,940
<NET-CHANGE-FROM-OPS> 7,895,101
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (7,523,785)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> (50,000)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (25,814)
<ACCUMULATED-NII-PRIOR> 565,617
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (4,470,231)
<GROSS-ADVISORY-FEES> 290,761
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 492,570
<AVERAGE-NET-ASSETS> 126,630,718
<PER-SHARE-NAV-BEGIN> 9.55
<PER-SHARE-NII> 0.609
<PER-SHARE-GAIN-APPREC> (0.009)
<PER-SHARE-DIVIDEND> (0.565)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0.005
<PER-SHARE-NAV-END> 9.59
<EXPENSE-RATIO> 0.39
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TRUST FOR
CREDIT UNIONS' ANNUAL REPORT DATED AUGUST 31, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 5
<NAME> TARGET MATURITY PORTFOLIO (FEB 97)
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-START> SEP-01-1994
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 94,340,118
<INVESTMENTS-AT-VALUE> 94,744,574
<RECEIVABLES> 935,019
<ASSETS-OTHER> 63,828
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 95,743,421
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 522,111
<TOTAL-LIABILITIES> 522,111
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 98,296,211
<SHARES-COMMON-STOCK> 9,809,980
<SHARES-COMMON-PRIOR> 10,109,980
<ACCUMULATED-NII-CURRENT> 1,015,621
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (4,494,978)
<ACCUM-APPREC-OR-DEPREC> 404,456
<NET-ASSETS> 95,221,310
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6,971,041
<OTHER-INCOME> 0
<EXPENSES-NET> (389,051)
<NET-INVESTMENT-INCOME> 6,581,990
<REALIZED-GAINS-CURRENT> (1,844,120)
<APPREC-INCREASE-CURRENT> 1,992,445
<NET-CHANGE-FROM-OPS> 6,730,315
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (6,068,263)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> (300,000)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (2,158,971)
<ACCUMULATED-NII-PRIOR> 498,404
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (2,650,858)
<GROSS-ADVISORY-FEES> 227,279
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 389,051
<AVERAGE-NET-ASSETS> 94,889,504
<PER-SHARE-NAV-BEGIN> 9.63
<PER-SHARE-NII> 0.667
<PER-SHARE-GAIN-APPREC> 0.026
<PER-SHARE-DIVIDEND> (0.613)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.71
<EXPENSE-RATIO> 0.41
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TRUST FOR
CREDIT UNIONS' ANNUAL REP0RT DATED AUGUST 31, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 6
<NAME> TARGET MATURITY PORTFOLIO (MAY 97)
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-START> SEP-01-1994
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 61,471,182
<INVESTMENTS-AT-VALUE> 62,126,077
<RECEIVABLES> 1,619,283
<ASSETS-OTHER> 138,877
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 63,884,237
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 425,256
<TOTAL-LIABILITIES> 425,256
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 63,532,452
<SHARES-COMMON-STOCK> 6,350,000
<SHARES-COMMON-PRIOR> 6,950,000
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (60,034)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (668,332)
<ACCUM-APPREC-OR-DEPREC> 654,895
<NET-ASSETS> 63,458,981
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,814,248
<OTHER-INCOME> 0
<EXPENSES-NET> (299,950)
<NET-INVESTMENT-INCOME> 4,514,298
<REALIZED-GAINS-CURRENT> (339,194)
<APPREC-INCREASE-CURRENT> 801,748
<NET-CHANGE-FROM-OPS> 4,976,852
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4,420,145)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> (600,000)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (5,407,721)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (155,599)
<OVERDIST-NET-GAINS-PRIOR> (329,138)
<GROSS-ADVISORY-FEES> 166,798
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 299,950
<AVERAGE-NET-ASSETS> 66,719,163
<PER-SHARE-NAV-BEGIN> 9.91
<PER-SHARE-NII> 0.668
<PER-SHARE-GAIN-APPREC> .067
<PER-SHARE-DIVIDEND> (0.655)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.99
<EXPENSE-RATIO> 0.45
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
EXHIBIT 99.1
TRUST FOR CREDIT UNIONS
(formerly Wacker Fund)
AGREEMENT AND DECLARATION OF TRUST
AGREEMENT AND DECLARATION OF TRUST made at Boston, Massachusetts the 24th
day of September, 1987, as amended and restated through December 1, 1987 by the
Trustees hereunder, and by the holders of Units of beneficial interest to be
issued hereunder as hereinafter provided.
WITNESSETH
WHEREAS this Trust has been formed to carry on the business of an
investment company;
WHEREAS, the Trust is authorized to issue its Units of beneficial interest
in separate Series, the assets belonging to each separate Series to be held in a
separate Sub-Trust applicable to such Series, all as hereinafter provided; and
WHEREAS the Trustees have agreed to manage all property coming into their
hands as trustees of a Massachusetts business trust in accordance with the
provisions hereinafter set forth.
NOW, THEREFORE, the Trustees hereby declare that they will hold all cash,
securities and other assets which they may from time to time acquire in any
manner as Trustees hereunder IN TRUST to manage and dispose of the same upon the
following terms and conditions for the benefit of the holders from time to time
of Units of beneficial interest in this Trust or Sub-Trusts (as hereinafter
defined) as hereinafter set forth.
ARTICLE I
NAME AND DEFINITIONS
Section 1.1 NAME. This Trust shall be known as "Trust for Credit
Unions" and the Trustees shall conduct the business of the Trust under that name
or any other name as they may from time to time determine.
Section 1.2 DEFINITIONS. Whenever used herein, unless otherwise
required by the context or specifically provided:
(a) The "Trust" refers to the Massachusetts business trust established by
this Agreement and Declaration of Trust, as amended from time to time, inclusive
of each and every Sub-Trust established hereunder;
(b) "Trustees" refers to the Trustees of the Trust and of each Sub-Trust
hereunder named herein or elected in accordance with Article III;
<PAGE>
(c) "Units" refer to the transferable units of interest into which the
beneficial interest in the Trust or any Series of the Trust (as the context may
require) shall be divided from time to time; and the word "Unit" shall be
synonymous with the word "share" in any context in which such latter word has a
generally understood meaning (as, for example, in the phrase "share dividend");
(d) "Series" refers to Series of Units established and designated under or
in accordance with the provisions of Article IV;
(e) "Sub-Trust" refers to the separate Sub-Trust of the assets belonging to
its applicable Series (subject to the liabilities of the applicable Series);
(f) "Unitholder" means a record owner of Units;
(g) The "1940" Act" refers to the Investment Company Act of 1940 and the
Rules and Regulations thereunder, all as amended from time to time;
(h) The terms "Commission"and "Principal Underwriter" shall have the
meanings given them in the 1940 Act;
(i) "Declaration of Trust" shall mean this Agreement and Declaration of
Trust as amended or restated from time to time; and
(j) "By-Laws" shall mean the By-Laws of the Trust as amended from time to
time.
ARTICLE II
PURPOSE OF TRUST
The purpose of the Trust is to operate as an investment company and to
offer Unitholders of the Trust and each Sub-Trust one or more investment
programs primarily in securities and debt instruments.
ARTICLE III
THE TRUSTEES
Section 3.1 NUMBER, DESIGNATION, ELECTION, TERM, ETC.
(a) INITIAL TRUSTEES. By his execution of this Declaration of Trust E.J.
Whitman, Jr. declares that he is a Trustee of the Trust and of each Sub-Trust
hereunder.
(b) NUMBER. The Trustees serving as such, whether named above or hereafter
becoming a Trustee, may increase or decrease (to a number not less than three)
the number of Trustees to a number other than the number theretofore determined.
No decrease in the number of Trustees shall have the effect of removing any
Trustee from office prior to the expiration of his term, but the number of
2
<PAGE>
Trustees may be decreased in conjunction with the removal of a Trustee pursuant
to subsection (e) of this Section 3.1.
(c) TERM. Each Trustee, whether named above or hereafter becoming a
Trustee, shall serve as a Trustee of the Trust and of each Sub-Trust hereunder
during the lifetime of this Trust and until its termination as hereinafter
provided or until the next meeting of Unitholders if any called for the purpose
of considering the election or re-election of such Trustee or of a successor to
such Trustee, and until the election and qualification of his successor if any
elected at such meeting, or until such Trustee sooner dies, resigns, retires or
is removed.
(d) RESIGNATION AND RETIREMENT. Any Trustee may resign his trust or retire
as a Trustee, by written instrument signed by him and delivered to the other
Trustees or to any officer of the Trust, and such resignation or retirement
shall take effect upon such delivery or upon such later date as is specified in
such instrument and shall be effective as to the Trust and each Sub-Trust
hereunder.
(e) REMOVAL. Any Trustee may be removed with or without cause at any time:
(i) by written instrument, signed by at least two-thirds of the number of
Trustees in office immediately prior to such removal, specifying the date upon
which such removal shall become effective; or (ii) by vote of the Unitholders
holding not less than two-third of the Units then outstanding, cast in person or
by proxy at any meeting called for the purpose; or (iii) the Trustees shall
promptly call a meeting of Unitholders for the purpose of voting upon the
question of removal of any such Trustee or Trustees when requested in writing to
do so by the holders of record of not less than 10 percent of the outstanding
Units.
(f) VACANCIES. Except as provided in the 1940 Act (including particularly
Section 16(a) thereof), any vacancy or anticipated vacancy resulting from any
reason, including without limitation the death, resignation, retirement, removal
or incapacity of any of the Trustees, or resulting from an increase in the
number of Trustees by the other Trustees may (but so long as there are at least
three remaining Trustees, need not unless required by the 1940 Act) be filled
either by a majority of the remaining Trustees through the appointment in
writing of such other person as such remaining Trustees in their discretion
shall determine or by the election by the Unitholders, at a meeting called for
the purpose, of a person to fill such vacancy, and such appointment or election
shall be effective upon the written acceptance of the person named therein to
serve as a Trustee and agreement by such person to be bound by the provisions of
this Declaration of Trust, except that any such appointment or election in
anticipation of a vacancy to occur by reason of retirement, resignation, or
increase in number of Trustees to be effective at a later date shall become
effective only at or after the effective date of said retirement, resignation,
or increase in number of Trustees. As soon as any Trustee so appointed or
elected shall have accepted such appointment or election and shall have agreed
in writing to be
3
<PAGE>
bound by this Declaration of Trust and the appointment or election is effective,
the Trust estate shall vest in the new Trustee, together with the continuing
Trustees, without any further act or conveyance.
(g) MANDATORY ELECTION BY UNITHOLDERS. Notwithstanding the foregoing
provisions of this Section 3.1, the Trustees shall call a meeting of the
Unitholders for the election of one or more Trustees at such time or times as
may be required in order that the provisions of the 1940 Act (including Section
16(a) thereof) may be complied with, and the authority hereinabove provided for
the Trustees to appoint any successor Trustee or Trustees shall be restricted if
such appointment would result in failure of the Trust to comply with any
provision of the 1940 Act.
(h) EFFECT OF DEATH, RESIGNATION, ETC. The death, resignation, retirement,
removal, or incapacity of the Trustees, or any one of them, shall not operate to
annul or terminate the Trust of any Sub-Trust hereunder or to revoke or
terminate any existing agency or contract created or entered into pursuant to
the terms of this Declaration of Trust.
(i) NO ACCOUNTING. Except to the extent required by the 1940 Act or under
circumstances which would justify his removal for cause, no person ceasing to be
a Trustee as a result of his death, resignation, retirement, removal or
incapacity (nor the estate of any such person) shall be required to make an
accounting to the Unitholders or remaining Trustees upon such cessation.
Section 3.2 POWERS OF TRUSTEES. Subject to the provisions of this
Declaration of Trust, the business of the Trust shall be managed by the
Trustees, and shall have all powers necessary or convenient to carry out that
responsibility and the purpose of the Trust. Without limiting the foregoing,
the Trustees may adopt By-Laws not inconsistent with this Declaration of Trust
providing for the conduct of the business and affairs of the Trust and may amend
and repeal them to the extent that such By-Laws do not reserve that right to the
Unitholders; they may from time to time in accordance with the provisions of
Section 4.1 hereof establish separate Series, each such Series to operate as a
separate and distinct investment medium and with separately defined investment
objectives and policies and distinct investment purposes, and the assets
belonging to each such Series to be held (subject to the liabilities belonging
to such Series) in a separate and distinct Sub-Trust; they may as they consider
appropriate elect and remove officers and appoint and terminate agents and
consultants and hire and terminate employees, any one or more of the foregoing
of whom may be a Trustee, and may provide for the compensation of all of the
foregoing; they may appoint from their own number, and terminate, any one or
more committees consisting of two or more Trustees, including without implied
limitation an executive committee, which may, when the Trustees are not in
session and subject to the 1940 Act, exercise some or all of the power and
authority of the Trustees as the Trustees may determine; in accordance with
Section 3.3 they may employ one or more Advisers,
4
<PAGE>
Administrators, Depositories and Custodians and may authorize any Depository or
Custodian to employ subcustodians or agents and to deposit all or any part of
such assets in a system or systems for the central handling of securities and
debt instruments or the recording of ownership of securities in book entry form,
retain transfer, dividend, accounting or Unitholder servicing agents or any of
the foregoing, provide for the distribution of Units by the Trust through one or
more distributors, principal underwriters or otherwise, set record dates or
times for the determination of Unitholders or various of them with respect to
various matters; they may compensate or provide for the compensation of the
Trustees, officers, advisers, administrators, custodians, other agents,
consultants and employees of the Trust or the Trustees on such terms as they
deem appropriate; and in general they may delegate to any officer of the Trust,
to any committee of the Trustees and to any employee, adviser, administrator,
distributor, depository, custodian, transfer and dividend disbursing agent, or
any other agent or consultant of the Trust such authority, powers, functions and
duties as they consider desirable or appropriate for the conduct of the business
and affairs of the Trust, including without implied limitation of the power and
authority to act in the name of the Trust and of the Trustees, and to sign
documents and to act as attorney-in-fact for the Trustees.
Without limiting the foregoing and to the extent not inconsistent with the
1940 Act or other applicable law, the Trustees shall have power and authority
for and on behalf of the Trust and each separate Sub-Trust established
hereunder:
(a) INVESTMENTS. To invest and reinvest cash and other property, and to
hold cash or other property uninvested without in any event being bound or
limited by any present or future law or custom in regard to investments by
trustees;
(b) DISPOSITION OF ASSETS. To sell, exchange, lend, pledge, mortgage,
hypothecate, write options on and lease any or all of the assets of the Trust;
(c) OWNERSHIP POWERS. To vote or give assent, or exercise any rights of
ownership, with respect to stock or other securities, debt instruments or
property; and to execute and deliver proxies or powers of attorney to such
person or person as the Trustees shall deem proper, granting to such person or
persons such powers and discretion with relation to securities, debt instruments
or property as the Trustees shall deem proper;
(d) SUBSCRIPTION. To exercise powers and rights of subscription or
otherwise which in any manner arise out of ownership of securities or debt
instruments;
(e) FORM OF HOLDING. To hold in security, debt instrument or property in a
form not indicating any trust, whether in bearer, unregistered or other
negotiable form, or in the name of the Trustees or of the Trust or of any Sub-
Trust in the name of a
5
<PAGE>
custodian, subcustodian or other depositary or a nominee or nominees or
otherwise;
(f) REORGANIZATION, ETC. To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or issuer, any
security or debt instrument of which is or was held in the trust; to consent to
any contract, lease, mortgage, purchase or sale of property by such corporation
or issuer, and to pay calls or subscriptions with respect to any security or
debt instrument held in the Trust;
(g) VOTING TRUSTS, ETC. To join with other holders of any securities or
debt instruments in acting through a committee, depositary, voting trustee or
otherwise, and in that connection to deposit any security or debt instrument
with, or transfer any security or debt instrument to, any such committee,
depositary or trustee, and to delegatee to them such power and authority with
relation to any security or debt instrument (whether or not so deposited or
transferred) as the Trustees shall deem proper, and to agree to pay, and to pay,
such portion of the expenses and compensation of such committee, depository or
trustee as the Trustees shall deem proper;
(h) COMPROMISE. To compromise, arbitrate or otherwise adjust claims in
favor of or against the Trust or any Sub-Trust or any matter in controversy,
including but not limited to claims for taxes;
(i) PARTNERSHIPS, ETC. To enter into joint ventures, general or limited
partnerships and any other combinations or associations;
(j) BORROWING AND SECURITY. To borrow funds and to mortgage and pledge the
assets of the Trust or any part thereof to secure obligations arising in
connection with such borrowing;
(k) GUARANTEES, ETC. To endorse or guarantee the payment of any notes or
other obligations of any person; to make contracts of guaranty or suretyship, or
otherwise assume liability for payment thereof; and to mortgage and pledge the
Trust property or any part thereof to secure any of or all such obligations;
(l) INSURANCE. To purchase and pay for entirely out of Trust property such
insurance as they may deem necessary or appropriate for the conduct of the
business, including, without limitation, insurance policies insuring the assets
of the Trust and payment of distributions and principal on its portfolio
investments, and insurance policies insuring the Unitholders, Trustees,
officers, employees, agents, consultants, investment advisers, managers,
administrators, distributors, principal underwriters, or independent
contractors, or any thereof (or any person connected therewith), of the Trust
individually against all claims and liabilities of every nature arising by
reason of holding, being or having held any such office or position, or by
reason of any action alleged to have been taken or omitted by any such person in
any such capacity, including any action taken or omitted that may be
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determined to constitute negligence, whether or not the Trust would have the
power to indemnify such person against such liability; and
(m) PENSIONS, ETC. to pay pensions for faithful service, as deemed
appropriate by the Trustees, and to adopt, establish and carry out pension,
profit-sharing, share bonus, share purchase, savings, thrift and other
retirement, incentive and benefit plans, trust and provisions, including the
purchase of life insurance and annuity contracts as a means of providing such
retirement and other benefits, for any or all of the Trustees, officers,
employees and agents of the Trust.
(n) DISTRIBUTION PLANS. To adopt on behalf of the Trust a Plan of
Distribution and related agreements thereto pursuant to the terms of Rule 12b-1
of the 1940 Act and to make payments from Trust assets pursuant to said Rule
12b-1 Plan.
Except as otherwise provided by the 1940 Act or other applicable law, this
Declaration of Trust or the By-Laws, any action to be taken by the Trustees may
be taken by a majority of the Trustees present at a meeting of Trustees (a
quorum, consisting of at least a majority of the Trustees then in office, being
present), within or without Massachusetts, including any meeting held by means
of a conference telephone or other communications equipment by means of which
all persons participating in the meeting can hear each other at the same time
and participation by such means shall constitute presence in person at a
meeting, or by written consents of a majority of the Trustees then in office.
Section 3.3 CERTAIN CONTRACTS. Subject to compliance with the
provisions of the 1940 Act, but notwithstanding any limitations of present and
future law or custom in regard to delegation of powers by trustees generally,
the Trustees may, at any time and from time to time and without limiting the
generality of their powers and authority otherwise set forth herein, enter into
one or more contracts with any one or more corporations, trusts, associations,
partnerships, limited partnerships, other type of organizations, or individuals,
("Contracting Party") to provide for the performance and assumption of some or
all of the following services, duties and responsibilities to, for or of the
Trust, any one or more Sub-Trusts and/or the Trustees, and to provide for the
performance and assumption of such other services, duties and responsibilities
in addition to those set forth below as the Trustees may determine appropriate:
(a) ADVISORY. Subject to the general supervision of the Trustees and in
conformity with the stated policy of the Trustees with respect to the
investments of the Trust or of the assets belonging to any Series of Units of
the Trust (as that phrase is defined in subsection (a) of Section 4.2), to
manage such investments and assets, make investment decisions with respect
thereto, and to place purchase and sale orders for portfolio transactions
relating to such investments and assets;
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(b) ADMINISTRATION. Subject to the general supervision of the Trustees and
in conformity with any policies of the Trustees with respect to the operations
of the Trust and each Sub-Trust, to supervise all or any part of the operations
of the Trust and each Sub-Trust, and to provide all or any part of the
administrative and clerical personnel, office space and office equipment and
services appropriate for the efficient administration and operations of the
Trust and each Sub-Trust;
(c) DISTRIBUTION. To distribute the Units of the Trust and each Sub-Trust,
to be Principal Underwriter of such Units,and/or to act as agent of the Trust
and each Sub-Trust in the sale of Units and the acceptance or rejection of
orders for the purchase of Units;
(d) CUSTODIAN AND DEPOSITORY. To act as depository for and to maintain
custody of the property of the Trust and each Sub-Trust and accounting records
in connection therewith;
(e) TRANSFER AND DIVIDEND DISBURSING AGENCY. To maintain records of the
ownership of outstanding Units, the issuance and redemption and the transfer
thereof, and to disburse any dividends declared by the Trustees and in
accordance with the policies of the Trustees and/or the instructions of any
particular Unitholder to reinvest any such dividends;
(f) UNITHOLDER SERVICING. To provide service with respect to the
relationship of the Trust and its Unitholders, records with respect to
Unitholders and their Units, and similar matters; and
(g) ACCOUNTING. To handle all or any part of the accounting
responsibilities, whether with respect to the Trust's properties, Unitholders or
otherwise.
The same person may be the Contracting Party for some or all of the services,
duties and responsibilities to, for and of the Trust and/or the Trustees, and
the contracts with respect thereto may contain such terms interpretive of or in
addition to the delineation of the services, duties and responsibilities
provided for, including provisions that are not inconsistent with the 1940 Act
relating to the standard of duty of and the rights to indemnification of the
Contracting Party and others, as the Trustees may determine. Nothing herein
shall preclude, prevent or limit the Trust or a Contracting Party from entering
into sub-contractual arrangements relating to any of the matters referred to in
Sections 3.3(a) through (g) hereof.
The fact that:
(i) any of the Unitholders, Trustees or officers of the Trust is a
shareholder, director, officer, partner, trustee, employee, manager,
adviser, principal underwriter or distributor or agent of or for any
Contracting Party, or of or for any parent or affiliate of any Contracting
Party or that the Contracting Party or any parent or affiliate thereof is a
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Unitholder or has an interest in the Trust or any Sub-Trust, or that
(ii) any Contracting Party may have a contract providing for the
rendering of any similar services to one or more other corporations,
trusts, associations, partnerships, limited partnerships or other
organizations, or has other business or interests,
shall not affect the validity of any contract for the performance and assumption
of services, duties and responsibilities to, for or of the Trust or any Sub-
Trust and/or the Trustees or disqualify any Unitholder, Trustee or officer of
the Trust from voting upon or executing the same or create any liability or
accountability to the Trust, any Sub-Trust or its Unitholders, provided that in
the case of any relationship or interest referred to in the preceding clause (i)
on the part of any Trustee or officer of the Trust either (x) the material facts
as to such relationship or interest have been disclosed to or are known by the
Trustees not having any such relationship or interest and the contract involved
is approved in good faith by a majority of such Trustees not having any such
relationship or interest (even though such unrelated or disinterested Trustees
are less than a quorum of all of the Trustees), (y) the material facts as to
such relationship or interest and as to the contract have been disclosed to or
are known by the Unitholders entitled to vote thereon and the contract involved
is specifically approved in good faith by vote of the Unitholders, or (z) the
specific contract involved is fair to the Trust as of the time it is authorized,
approved or ratified by the Trustees or by the Unitholders.
Section 3.4 PAYMENT OF TRUST EXPENSES AND COMPENSATION OF TRUSTEES. The
Trustees are authorized to pay or to cause to be paid out of the principal or
income of the Trust or any Sub-Trust, or partly out of principal and partly out
of income, and to charge or allocate the same to, between or among such one or
more of the Series that may be established and designated pursuant to Article
IV, as the Trustees deem fair, all expenses, fees, charges, taxes and
liabilities incurred or arising in connection with the Trust or any Sub-Trust,
or in connection with the management thereof, including, but not limited to, the
Trustees' compensation and such expenses and charges for the services of the
Trust's officers, employees, investment adviser, administrator, distributor,
principal underwriter, auditor, counsel, depository, custodian, transfer agent,
dividend disbursing agent, accounting agent, Unitholder servicing agent, and
such other agents, consultants, and independent contractors and such other
expenses and charges as the Trustees may deem necessary or proper to incur.
Without limiting the generality of any other provision hereof, the Trustees
shall be entitled to reasonable compensation from the Trust for their services
as Trustees and may fix the amount of such compensation.
Section 3.5 OWNERSHIP OF ASSETS OF THE TRUST. Title to all of the
assets of the Trust shall at all times be considered as vested in the Trustees.
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ARTICLE IV
UNITS
Section 4.1 DESCRIPTION OF UNITS. The beneficial interest in the Trust
shall be divided into Units, all with $.001 par value and of one class, but the
Trustees shall have the authority from time to time to divide the class of Units
into any number of Series of Units (each of which series of Units shall
represent the beneficial interest in a separate and distinct Sub-Trust of the
Trust, including without limitation the Series specifically established and
designated in Section 4.2), as they deem necessary or desirable. For purposes
of interpreting the relative rights of each Sub-Trust and the Unitholders
thereof, and defining the rights of creditors of any Sub-Trust, each Sub-Trust
established hereunder shall be deemed to be a separate trust. The Trustees
shall have exclusive power without the requirement of Unitholder approval to
establish and designate such Series, and to fix and determine the relative
rights and preferences as between the different Series of Units as to right of
redemption and the price, terms and manner of redemption, special and relative
rights as to dividends and other distributions and on liquidation, sinking or
purchase fund provisions, conversion rights, and conditions under which the
several Series shall have separate voting rights or no voting rights. Except as
aforesaid, as otherwise provided herein, or as provided in an instrument of the
Trustees properly establishing and designating a Series, all Units of the
different Series shall be identical.
The number of authorized Units and the number of Units of each Series that
may be issued is unlimited, and the Trustees may issue Units of any Series for
such consideration and on such terms as they may determine (or for no
consideration if pursuant to a Unit dividend or split-up), all without action or
approval of the Unitholders. All Units when so issued on the terms determined
by the Trustees shall be fully paid and non-assessable (but may be subject to
mandatory contribution back to the Trust as provided in subsection (h) of
Section 4.2). The Trustees may classify or reclassify any unissued Units or any
Units previously issued and reacquired of any Series into one or more Series
that may be established and designated from time to time. The Trustees may hold
as treasury Units (of the same or some other Series), reissue for such
consideration and on such terms as they may determine, or cancel, at their
discretion from time to time, any Units of any Series reacquired by the Trust.
The Trustees may from time to time close the transfer books or establish
record dates and times for the purposes of determining the holders of Units
entitled to be treated as such, to the extent provided or referred to in Section
5.3.
The establishment and designation of any Series of Units in addition to the
Series established and designated in Section 4.2 shall be effective upon the
execution by a majority of the then Trustees of an instrument setting forth such
establishment and
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designation and the relative rights and preferences of such Series, or as
otherwise provided in such instrument. At any time that there are no Units
outstanding of any particular Series previously established and designated the
Trustees may by an instrument executed by a majority of their number abolish or
amend that Series and the establishment and designation thereof. Each
instrument referred to in this paragraph shall have the status of an amendment
to this Declaration of Trust.
Any Trustee, officer or other agent of the Trust, and any organization in
which any such person is interested may acquire, own, hold and dispose of Units
of any Series of the Trust to the same extent as if such person were not a
Trustee, officer or other agent of the Trust; and the Trust may issue and sell
or cause to be issued and sold and may purchase Units of any Series from any
such person or any such organization subject only to the general limitations,
restrictions or other provisions applicable to the sale or purchase of Units of
such Series generally.
Section 4.2 ESTABLISHMENT AND DESIGNATION OF SERIES. Without limiting
the authority of the Trustees set forth in Section 4.1 to establish and
designate any further Series, the Trustees hereby establish and designate two
Series of Units to be known as the "Money Market Portfolio" and the "Government
Securities Portfolio." The Units of the aforesaid Series and of any further
Series that may from time to time be established and designated by the Trustees
shall (unless the Trustees otherwise determine with respect to some further
Series at the time of establishing and designating the same) have the following
relative rights and preferences:
(a) ASSETS BELONGING TO SERIES. All consideration received by the Trust
for the issue or sale of Units of a particular Series, together will all assets
in which such consideration is invested or reinvested, all income, earnings,
profits, and proceeds thereof, including any proceeds derived from the sale,
exchange or liquidation of such assets, and any funds or payment derived from
any reinvestment of such proceeds in whatever form the same may be, shall be
held by the Trustees in trust in a separate Sub-Trust for the benefit of the
holders of Units of that Series and shall irrevocably belong to that Series for
all purposes, subject only to the rights of creditors of the Sub-Trust
applicable to that Series, and shall be so recorded upon the books of account of
the Trust. Such consideration, assets, income, earnings, profits, and proceeds
thereof, including any proceeds derived from the sale, exchange or liquidation
of such assets, and any funds or payments derived from any reinvestment of such
proceeds, in whatever form that same may be, together with any General Items
allocated to that Series as provided in the following sentence, are herein
referred to as "assets belonging to" that Series. In the event that there are
any assets, income, earnings, profits, and proceeds thereof, funds, or payments
which are not readily identifiable as belonging to any particular Series
(collectively "General Items"), the Trustees shall allocate such General Items
to and among any one or more of the Sub-Trusts applicable to the Series
established and designated
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from time to time in such manner and on such basis as they, in their sole
discretion, deem fair and equitable; and any General Items so allocated to the
Sub-Trust applicable to a particular Series shall belong to that Series. Each
such allocation by the Trustees shall be conclusive and binding upon the
Unitholders of all Series for all purposes.
(b) LIABILITIES BELONGING TO SERIES. The assets belonging to each
particular Series shall be charged with the liabilities in respect of that
Series and the Sub-Trust applicable thereto, and all expenses, costs, charges
and reserves attributable to that Series and the Sub-Trust applicable thereto,
and any general liabilities, expenses, costs, charges or reserves of the Trust
which are not readily identifiable as belonging to any particular Series shall
be allocated and charged by the Trustees to and among any one or more of the
Series established and designated from time to time in such manner and on such
basis as the Trustees in their sole discretion deem fair and equitable. The
liabilities, expenses, costs, charges and reserves allocated and so charged to
a Series and the Sub-Trust applicable thereto, are herein referred to as
"liabilities belonging to" that Series. Each allocation of liabilities,
expenses, costs, charges and reserves by the Trustees shall be conclusive and
binding upon the holders of all Series for all purposes.
The Trustees shall have full discretion, to the extent not inconsistent
with the 1940 Act, to determine which items shall be treated as income and which
items as capital; and each such determination and allocation shall be conclusive
and binding upon the Unitholders.
(c) DIVIDENDS. Dividends and distributions on Units of a particular Series
may be paid with such frequency as the Trustees may determine, which may be
daily or otherwise pursuant to a standing resolution or resolutions adopted only
once or with such frequency as the Trustees may determine, to the holders of
Units of that Series, from such of the income and capital gains, accrued or
realized, from the assets belonging to that Series, as the Trustees may
determine, after providing for actual and accrued liabilities belonging to that
Series. All dividends and distributions on Units of a particular Series shall
be distributed pro rata to the holders of that Series in proportion to the
number of Units of that Series held by such holders at the date and time of
record established for the payment of such dividends or distributions, except
that in connection with any dividend or distribution program or procedure the
Trustees may determine that no dividend or distribution shall be payable on
Units as to which the Unitholder's purchase order and/or payment have not been
received by the time or times established by the Trustees under such program or
procedure. Such dividends and distributions may be made in cash or Units or a
combination thereof as determined by the Trustees or pursuant to any program
that the Trustees may have in effect at the time for the election by each
Unitholder of the mode of the making of such dividend or distribution to that
Unitholder. Any such dividend or distribution paid in Units will be paid at the
net asset value
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thereof as determined in accordance with subsection (h) of Section 4.2
Subject to the authority of the Trustees otherwise to determine if they
believe that it is in the interest of the Trust or of any Sub-Trust at any time
or times, is expected that each Sub-Trust will qualify as a "regulated
investment company" under the Internal Revenue Code of 1954, as amended, or any
successor or comparable statute thereto, and regulations promulgated thereunder.
Inasmuch as the computation of net income and gains for Federal income tax
purposes may vary from the computation thereof on the books of the Trust, the
Trustees shall have the power, in their sole discretion, to distribute in any
fiscal year as dividends, including dividends designated in whole or in part as
capital gains distributions, amounts sufficient, in the opinion of the Trustees,
to enable the Trust and each particular Sub-Trust to qualify as a regulated
investment company and to avoid liability of the Trust and of that Sub-Trust for
Federal income tax in respect of that year. However, nothing in the foregoing
shall limit the authority of the Board of Trustees to make distributions greater
than or less than the amount necessary to qualify as a regulated investment
company and to avoid liability of the Trust or of any Sub-Trust for such tax.
(d) LIQUIDATION. In event of the liquidation or dissolution of the Trust,
the Unitholders of each Series that has been established and designated shall be
entitled to receive, as a Series, when and as declared by the Trustees, the
excess of the assets belonging to that Series over the liabilities belonging to
that Series. The assets so distributable to the Unitholders of any particular
Series shall be distributed among such Unitholders in proportion to the number
of Units of that Series held by them and recorded on the books of the Trust.
The liquidation of any particular Series may be authorized either by vote of a
majority of the Trustees then in office or by a majority of the outstanding
voting securities, as defined in the 1940 Act, (Units) of that Series.
(e) VOTING. On each matter submitted to a vote of the Unitholders, each
holder of a Unit shall be entitled to one vote for each such Unit standing in
his name on the books of the Trust irrespective of the Series thereof and all
Units of all Series shall vote as a single class ("Single Class Voting");
provided, however, that (a) as to any matter with respect to which a separate
vote of any Series is required by the 1940 Act or would be required under the
Massachusetts Business Corporation Law if the Trust were a Massachusetts
business corporation, such requirements as to a separate vote by that Series
shall apply in lieu of Single Class Voting as described above; (b) in the event
that the separate vote requirements referred to in (a) above apply with respect
to one or more Series, then, subject to (c) below, the Units of all other Series
shall vote as a single class; and (c) as to any matter which does not affect the
interest of a particular Series, only the holders of Units of the one or more
affected Series shall be entitled to vote.
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(f) REDEMPTION BY UNITHOLDER. Each holder of Units of a particular Series
shall have the right at such times as may be permitted by the Trust, but no less
frequently than once each week, to require the Trust to redeem all or any part
of his Units of that Series at a redemption price equal to the net asset value
per Unit of that Series next determined in accordance with subsection (h) of
this Section 4.2 after the Units are properly tendered for redemption. Payment
of the redemption price shall be in cash; provided, however, that if the
Trustees determine, which determination shall be conclusive, that conditions
exist which make payment wholly in cash unwise or undesirable, the Trust may,
subject to the requirements of the 1940 Act, make payment wholly or partly in
securities or other assets belonging to the Series of which the Units being
redeemed are part at the value of such securities or assets used in such
determination of net asset value.
Notwithstanding the foregoing, the Trust may postpone payment of the
redemption price and may suspend the right of the holder of Units of any Series
to require the Trust to redeem Units of that Series during any period or at any
time when and to the extent permissible under the 1940 Act.
(g) REDEMPTION BY TRUST. Each Unit of each Series that has been
established and designated is subject to redemption by the Trust at the
redemption price which would be applicable if such Unit was then being redeemed
by the Unitholder pursuant to subsection (f) of this Section 4.2 at any time if
the Trustees determine in their sole discretion and by majority vote that
failure to so redeem may have materially adverse consequences to the holders of
the Units, or any Series thereof, of the Trust, and upon such redemption the
holders of the Units so redeemed shall have no further right with respect
thereto other than to receive payment of such redemption price. In addition,
the Trustees, in their sole discretion, may cause the Trust to redeem all of the
Units of one or more Series held by any Unitholder if the value of such Units
held by such Unitholder is less than the minimum amount established from time to
time by the Trustees.
(h) NET ASSET VALUE. The net asset value per Unit of any Series shall be
the quotient obtained by dividing the value of the net assets of that Series
(being the value of the assets belonging to that Series less the liabilities
belonging to that Series) by the total number of Units of that Series
outstanding, all determined in accordance with the methods and procedures,
including without limitation those with respect to rounding, established by the
Trustees from time to time.
The Trustees may determine to maintain the net asset value per Unit of any
Series at a designated constant amount and in connection therewith may adopt
procedures not inconsistent with the 1940 Act for the continuing declarations of
income attributable to that Series as dividends payable in additional Units of
that Series at the designated constant amount and for the handling of any losses
attributable to that Series. Such procedures may provide that in the event of
any loss each Unitholder shall be deemed to
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have contributed to the capital of the Trust attributable to that Series his pro
rata portion of the total number of Units required to be cancelled in order to
permit the net asset value per Unit of that Series to be maintained, after
reflecting such loss, at the designated constant amount. Each Unitholder of the
Trust shall be deemed to have agreed, by his investment in the Trust, to make
the contribution referred to in the preceding sentence in the event of any such
loss.
(i) TRANSFER. All Units of each particular Series shall be transferable,
but transfers of Units of a particular Series will be recorded on the Unit
transfer records of the Trust applicable to that Series only at such times as
Unitholders shall have the right to require the Trust to redeem Units of that
Series and at such other times as may be permitted by the Trustees.
(j) EQUALITY. All Units of each particular Series shall represent an equal
proportionate interest in the assets belonging to that Series (subject to the
liabilities belonging to that Series), and each Unit of any particular Series
shall be equal to each other Unit of that Series; but the provisions of this
sentence shall not restrict any distinctions permissible under subsection (c) of
this Section 4.2 that may exist with respect to dividends and distributions on
Units of the same Series. The Trustees may from time to time divide or combine
the Units of any particular Series into a greater or lesser number of Units of
that Series without thereby changing the proportionate beneficial interest in
the assets belonging to that Series or in any way affecting the rights of Units
of any other Series.
(k) FRACTIONS. Any fractional Unit of any Series, if any such fractional
Share is outstanding, shall carry proportionately all the rights and obligations
of a whole Unit of that Series, including with respect to voting, receipt of
dividends and distributions, redemption of Units, and liquidation of the Trust.
(l) CONVERSION RIGHTS. Subject to compliance with the requirements of the
1940 Act, the Trustees shall have the authority to provide that holders of Units
of any Series shall have the right to convert such Units into Units of one or
more other Series in accordance with such requirements and procedures (involving
as to the transfer of assets equivalent to the net asset value of the Units so
converted among the applicable Sub-Trusts) as may be established by the
Trustees.
Section 4.3 OWNERSHIP OF UNITS. The ownership of Units shall be
recorded on the books of the Trust or of a transfer or similar agent for the
Trust, which books shall be maintained separately for the Units of each Series
that has been established and designated. No certificates certifying the
ownership of Units need be issued except as the Trustees may otherwise determine
from time to time. The Trustees may make such rules as they consider
appropriate for the issuance of Unit certificates, the use of facsimile
signatures, the transfer of Units and similar matters. The record books of the
Trust as kept by the Trust or any transfer
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or similar agent, as the case may be, shall be conclusive as to who are the
Unitholders and as to the number of Units of each Series held from time to time
by each such Unitholder.
Section 4.4 INVESTMENTS IN THE TRUST. The Trustees may accept
investments in the Trust and each Sub-Trust from such persons and on such terms
and for such consideration, not inconsistent with the provisions of the 1940
Act, as they from time to time authorize. The Trustees may authorize any
distributor, principal underwriter, custodian, transfer agent or other person to
accept orders for the purchase of Units that conform to such authorized terms
and to reject any purchase orders for Units whether or not conforming to such
authorized terms.
Section 4.5 NO PREEMPTIVE RIGHTS. Unitholders shall have no preemptive
or other right to subscribe to any additional Units or other securities issued
by the Trust.
Section 4.6 STATUS OF UNITS AND LIMITATION OF PERSONAL LIABILITY. Units
shall be deemed to be personal property giving only the rights provided in this
instrument. Every Unitholder by virtue of having become a Unitholder shall be
held to have expressly assented and agreed to the terms hereof and to have
become a party hereto. The death of a Unitholder during the continuance of the
Trust shall not operate to terminate the Trust or any Sub-Trust nor entitle the
representative of any deceased Unitholder to an accounting or to take any action
in court or elsewhere against the Trust, any Sub-Trust or the Trustees, but only
to the rights of said decedent under this Trust. Ownership of Units shall not
entitle the Unitholder to any title in or to the whole or any part of the Trust
property or right to call for a partition or division of the same or for an
accounting, nor shall the ownership of Units constitute the Unitholders
partners. Neither the Trust nor the Trustees, nor any officer, employee or
agent of the Trust shall have any power to bind personally any Unitholder, nor
except as specifically provided herein to call upon any Unitholder for the
payment of any sum of money or assessment whatsoever other than such as the
Unitholder may at any time personally agree to pay.
Section 4.7 NO APPRAISAL RIGHTS. Unitholders shall have no right to
demand payment for their Units or to any other rights of dissenting Unitholders
in the event the Trust participates in any transaction which would give rise to
appraisal or dissenters' rights by a Unitholder of a corporation organized under
Chapter 156B of the General laws of The Commonwealth of Massachusetts.
ARTICLE V
UNITHOLDERS' POWERS AND MEETINGS
Section 5.1 VOTING POWERS. The Unitholders shall have power to vote
only (i) for the election or removal of Trustees as provided in Section 3.1,
(ii) with respect to any contract with a Contracting Party as provided in
Section 3.3 as to which Unitholder
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approval is required by the 1940 Act, (iii) with respect to any termination or
reorganization of the Trust or any Sub-Trust to the extent and as provided in
Sections 7.1 and 7.2, (iv) with respect to any amendment of this Declaration of
Trust to the extent and as provided in Section 7.3, (v) to the same extent as
the stockholders of a Massachusetts business corporation as to whether or not a
court action, proceeding or claim should or should not be brought or maintained
derivatively or as a class action on behalf of the Trust or the Unitholders, and
(vi) with respect to such additional matters relating to the Trust or any Sub-
Trust as may be required by the 1940 Act, this Declaration of Trust, the By-Laws
or any registration of the Trust with the Commission (or any successor agency)
or any state, or as the Trustees may consider necessary or desirable. There
shall be no cumulative voting in the election of any Trustee or Trustees. Units
may be voted in person or by proxy. A proxy with respect to Units held in the
name of two or more persons shall be valid if executed by any one of them unless
at or prior to exercise of the proxy the Trust receives a specific written
notice to the contrary from any one of them. A proxy purporting to be executed
by or on behalf of a Unitholder shall be deemed valid unless challenged at or
prior to its exercise and the burden of proving invalidity shall rest on the
challenger. Until Units are issued, the Trustees may exercise all rights of
Unitholders and may take any action required by law, this Declaration of Trust
or the By-Laws to be taken by Unitholders.
Section 5.2 MEETINGS. No annual or regular meeting of Unitholders is
required. Special meetings of the Unitholders (including meetings involving
only the holders of Units of one or more but less than all Series) may be called
by the Trustees from time to time to be held at such place within or without the
Commonwealth of Massachusetts, and on such date, as may be designated in the
call thereof for the purpose of taking action upon any matter permitting or
requiring the vote or authority of the Unitholders as provided in Section 5.1.
Written notice of any such meeting shall be given or caused to be given by the
Trustees by mailing such notice at least seven days before such meeting, postage
prepaid, stating the time, place and purpose of the meeting, to each Unitholder
entitled to vote at such meeting at the Unitholder's address as it appears on
the records of the Trust. If the Trustees shall fail to call or give notice of
any meeting of Unitholders (including a meeting involving only the holders of
Units of one or more but less than all Series) for a period of 75 days after
written request by Unitholders holding at least a majority of the Units then
outstanding of any Series entitled to vote upon any matter requiring action by
the Unitholders as provided herein that a meeting be called to consider such
matter, then Unitholders holding at least a majority of the Units then
outstanding of such Series may call and give notice of such meeting, and
thereupon the meeting shall be held in the manner provided for herein in case of
call thereof by the Trustees.
Section 5.3 RECORD DATES FOR MEETINGS (AND OTHER PURPOSES). For the
Purpose of determining the Unitholders who are entitled to vote or act at any
meeting or any adjournment thereof, or who are
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entitled to participate in any dividend or distribution, or for the purpose of
any other action, the Trustees may from time to time close the transfer books
for such period, not exceeding 30 days (except at or in connection with the
termination of the Trust), as the Trustees may determine; or without closing the
transfer books the Trustees may fix a date and time not more than 60 days prior
to the date of any meeting of Unitholders or other action as the date and time
of record for the determination of Unitholders entitled to vote at such meeting
or any adjournment thereof or to be treated as Unitholders of record for
purposes of such other action, and any Unitholder who was a Unitholder at the
date and time so fixed shall be entitled to vote at such meeting or any
adjournment thereof or (subject to any provisions permissible under subsection
(c) of Section 4.2 with respect to dividends or distributions on Units that have
not been ordered and/or paid for by the time or times established by the
Trustees under the applicable dividend or distribution program or procedure then
in effect) to be treated as a Unitholder of record for purposes of such other
action, even though he has since that date and time disposed of his Units, and
no Unitholder becoming such after that date and time shall be so entitled to
vote at such meeting or any adjournment thereof or to be treated as a Unitholder
of record for purposes of such other action.
Section 5.4 A QUORUM AND REQUIRED VOTE. A majority of the Units
entitled to vote shall be a quorum for the transaction of business at a
Unitholders' meeting, but any lesser number shall be sufficient for
adjournments. Any adjourned session or sessions may be held, within a
reasonable time after the date set for the original meeting, without the
necessity of further notice. A majority of the Units voted, at a meeting at
which a quorum is present, shall decide any questions and a plurality shall
elect a Trustee, except when a different vote is required or permitted by any
provision of the 1940 Act or other applicable law or by this Declaration of
Trust or the By-Laws.
Section 5.5 ACTION BY WRITTEN CONSENT. Subject to the provisions of the
1940 Act and other applicable law, any action taken by Unitholders may be taken
without a meeting if a majority of Unitholders entitled to vote on the matter
(or such larger proportion thereof shall be required by the 1940 Act or by any
express provision of this Declaration of Trust or the By-Laws) consent to the
action in writing and such written consents are filed with the records of the
meetings of Unitholders. Such consent shall be treated for all purposes as a
vote taken at a meeting of Unitholders.
Section 5.6 INSPECTION OF RECORDS. The records of the Trust shall be
open to inspection by Unitholders to the same extent as is permitted
stockholders of a Massachusetts business corporation under the Massachusetts
Business Corporation Law.
Section 5.7 ADDITIONAL PROVISIONS. The By-Laws may include further
provisions for Unitholders' votes and meetings and related matters not
inconsistent with the provisions hereof.
18
<PAGE>
Section 5.8 UNITHOLDER COMMUNICATIONS. Whenever ten or more Unitholders
of records who have been such for at least six months preceding the date of
application, and who hold in the aggregate either Units having a net asset value
of at least $25,000 or at least 1% of the outstanding Units, whichever is less,
shall apply to the Trustees in writing, stating that they wish to communicate
with other Unitholders with a view to obtaining signatures to a request for a
Unitholder meeting and accompanied by a form of communication and request which
they wish to transmit, the Trustees shall within five business days after
receipt of such application either (1) afford to such applicants access to a
list of the names and addresses of all Unitholders as recorded on the books of
the Trust or Sub-Trust, as applicable; or (2) inform such applicants as to the
approximate number of Unitholders of record, and the approximate cost of mailing
to them the proposed communication and form of request.
If the Trustees elect to follow the course specified in clause (2) above,
the Trustees, upon the written request of such applicants, accompanied by a
tender of the material to be mailed and of the reasonable expenses of mailing,
shall, with reasonable promptness, mail such material to all Unitholders of
record at their addresses as recorded on the books, unless within five business
days after such tender the Trustees shall mail to such applicants and file with
the Commission, together with a copy of the material to be mailed, a written
statement signed by at least a majority of the Trustees to the effect that in
their opinion either such material contains untrue statements of fact or omits
to state facts necessary to make the statements contained therein not
misleading, or would be in violation of applicable law, and specifying the basis
of such opinion. The Trustees shall thereafter comply with any order entered by
the Commission and the requirements of the 1940 Act and the Securities Exchange
Act of 1934.
ARTICLE VI
LIMITATION OF LIABILITY; INDEMNIFICATION
Section 6.1 TRUSTEES, UNITHOLDERS, ETC. NOT PERSONALLY LIABLE; NOTICE.
All persons extending credit to, contracting with or having any claim against
the Trust shall look only to the assets belonging to the Series with which (or
with whose applicable Sub-Trust) such person dealt for payment under such
credit, contract or claim; and neither the Unitholders nor the Trustees, nor any
of the Trust's officers, employees or agents, whether past, present or future,
nor the assets belonging to any other Series shall be personally liable
therefor. Every note, bond, contract, instrument, certificate or undertaking
and every other act or thing whatsoever executed or done by or on behalf of the
Trust, any Sub-Trust or the Trustees or any of them in connection with the Trust
or any Sub-Trust shall be conclusively deemed to have been executed or done only
by or for the Trust or such Sub-Trust or the Trustees and not personally.
Nothing in this Declaration of Trust shall protect any Trustee or officer
against any liability to the Trust
19
<PAGE>
or the Unitholders to which such Trustee or officer would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office of Trustee or of
such officer.
Every note, bond, contract, instrument, certificate or undertaking made or
issued by the Trustees or by any officers or officer shall give notice that this
Declaration of Trust is on file with the Secretary of The Commonwealth of
Massachusetts and shall recite to the effect that the same was executed or made
by or on behalf of the Trust or by them as Trustees or Trustee or as officers or
officer and not individually and that the obligations of such instrument are not
binding upon any of them or the Unitholders individually but are not binding
only upon the assets and property of the Trust, or the Sub-Trust in question,
but the omission thereof shall not operate to bind any Trustees or Trustee or
officers or officer or Unitholders or Unitholder individually.
Section 6.2 TRUSTEE'S GOOD FAITH ACTION; EXPERT ADVICE; NO BOND OR
SURETY. The exercise by the Trustees of their powers and discretions hereunder
shall be binding upon everyone interested. A Trustee shall be liable for his
own wilful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee, and for nothing else,
and shall not be liable for errors of judgment or mistakes of fact or law.
Subject to the foregoing, (a) the Trustees shall not be responsible or liable in
any event for any neglect or wrongdoing of any officer, agent, employee,
consultant, adviser, administrator, distributor or principal underwriter,
custodian or transfer, dividend disbursing, Unitholder servicing or accounting
agent of the Trust, nor shall any Trustee be responsible for the act or omission
of any other Trustee; (b) the Trustees may take advice of counsel or other
experts with respect to the meaning and operation of this Declaration of Trust
and their duties as Trustees, and shall be under no liability for any act or
omission in accordance with such advice or for failing to follow such advice;
and (c) in discharging their duties, the Trustees, when acting in good faith,
shall be entitled to rely upon the books of account of the Trust and upon
written reports made to the Trustees by any officer appointed by them, any
independent public accountant, and (with respect to the subject matter of the
contract involved) any officer, partner or responsible employee of a Contracting
Party appointed by the Trustees pursuant to Section 3.3. The Trustees as such
shall not be required to give any bond or surety or any other security for the
performance of their duties.
Section 6.3 INDEMNIFICATION OF UNITHOLDERS. In case any Unitholder or
former Unitholder of any Series shall be charged or held to be personally liable
for any obligation or liability of the Trust solely by reason of being or having
been a Unitholder and not because of such Unitholder's acts or omissions or for
some other reason, the Trust (upon proper and timely request by the Unitholder)
shall assume the defense against such charge and satisfy any judgment thereon,
and the Unitholder or former
20
<PAGE>
Unitholder (or his heirs, executors, administrators or other legal
representatives or in the case of a corporation or other entity, its corporate
or other general successor) shall be entitled out of the assets belonging to the
Series of which such Unitholder is a holder to be held harmless from and
indemnified against all loss and expense arising from such liability.
Section 6.4 INDEMNIFICATION OF TRUSTEES, OFFICER, ETC. The Trust shall
indemnify (from the assets belonging to the Series in question) each of its
Trustees and officers and persons who serve at the Trust's request as directors,
officers or trustees of another organization in which the Trust has any interest
as a shareholder, creditor or otherwise, (hereinafter referred to as a "Covered
Person") against all liabilities, including but not limited to amounts paid in
satisfaction of judgments, in compromise or as fines and penalties, and
expenses, including reasonable accountants' and counsel fees, incurred by any
Covered Person in connection with the defense or disposition of any action, suit
or other proceeding, whether civil or criminal, before any court or
administrative or legislative body, in which such Covered Person may be or may
have been involved as a party or otherwise or with which such person may be or
may have been threatened, while in office or thereafter, by reason of being or
having been such a Trustee or officer, director or trustee, except that no
Covered Person shall be indemnified against any liability to the Trust or its
Unitholders to which such Covered Person would otherwise be subject by reason of
wilful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Covered Person's office (such wilful
misfeasance, bad faith, gross negligence or reckless disregard being referred to
herein as "Disabling Conduct"). Expenses, including accountants' and counsel
fees so incurred by any such Covered Person (but excluding amounts paid in
satisfaction of judgments, in compromise or as fines or penalties), may be paid
from time to time by the Trust in advance of the final disposition of any such
action, suit or proceeding upon receipt of (a) an undertaking by or on behalf of
such Covered Person to repay amounts so paid to the Trust if it is ultimately
determined that indemnification of such expenses is not authorized under this
Article VI and either (b) such Covered Person provides security for such
undertaking, (c) the Trust is insured against losses arising by reason of such
payment, or (d) a majority of a quorum of disinterested, non-party Trustees, or
independent legal counsel in a written opinion, determines, based on a review of
readily available facts, that there is reason to believe that such Covered
Person ultimately will be found entitled to indemnification.
Section 6.5 INDEMNIFICATION DETERMINATIONS. Indemnifica-tion of the
Covered Person pursuant to Section 6.4 shall be made if (a) the court or body
before whom the proceeding is brought determines, in a final decision on the
merits, that such Covered Person was not liable by reason of Disabling Conduct
or (b) in the absence of such a determination, a majority of a quorum of
disinterested, non-party Trustees or independent legal counsel in a written
opinion make a reasonable determination, based upon a
21
<PAGE>
review of the facts, that such Covered Person was not liable by reason of
Disabling Conduct.
Section 6.6 INDEMNIFICATION NOT EXCLUSIVE, ETC. The right of
indemnification provided by this Article VI shall not be exclusive of or affect
any other rights to which any such Covered Person may be entitled. As used in
this Article VI, "Covered Person" shall include such person's heirs, executors
and administrators, and a "disinterested, non-party Trustee" is a Trustee who is
neither an interested person of the Trust (as defined in the 1940 Act) nor a
party to the proceeding in question. Nothing contained in this article shall
affect any rights to indemnification to which personnel of the Trust, other than
Trustees and officers, and other persons may be entitled by contract or
otherwise under law, nor the power of the Trust to purchase and maintain
liability insurance on behalf of any such person.
Section 6.7 LIABILITY OF THIRD PERSONS DEALING WITH TRUSTEES. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.
ARTICLE VII
MISCELLANEOUS
Section 7.1 DURATION AND TERMINATION OF TRUST. Unless terminated as
provided herein, the Trust shall continue without limitation of time and without
limiting the generality of the foregoing, no change, alteration or modification
with respect to any Series shall operate to terminate the Trust. The Trust or
any Series may be terminated at any time by a majority of the Trustees then in
office subject to a favorable vote of a majority of the outstanding voting
securities, as defined in the 1940 Act, (Units) of each Series voting separately
by Series.
Upon termination, after paying or otherwise providing for all charges,
taxes, expenses and liabilities, whether due or accrued or anticipated as may be
determined by the Trustees, the Trust shall in accordance with such procedures
as the Trustees consider appropriate reduce the remaining assets to
distributable form in cash, securities or other property, or any combination
thereof, and distribute the proceeds to the Unitholders, in conformity with the
provisions of subsection (d) of Section 4.2.
Section 7.2 REORGANIZATION. The Trustees may sell, convey and transfer
the assets of the Trust, or the assets belonging to any one or more Series, to
another trust, partnership, association or corporation organized under the laws
of any state of the United States, or to the Trust to be held as assets
belonging to another Series of the Trust, in exchange for cash, shares or other
securities (including, in the case of a transfer to another Series
22
<PAGE>
of the Trust, Units of such other Series) with such transfer being made subject
to, or with the assumption by the transferee of, the liabilities belonging to
each Series the assets of which are so transferred; provided, however, that no
assets belonging to any particular Series shall be so transferred unless the
terms of such transfer shall have first been approved at a meeting called for
the purpose by the affirmative vote of the holders of a majority of the
outstanding voting securities, as defined in the 1940 Act, (Units) of that
Series. Following such transfer, the Trustees shall distribute such cash,
shares or other securities (giving due effect to the assets and liabilities
belonging to and any other differences among the various Series the assets
belonging to which have so been transferred) among the Unitholders of the Series
the assets belonging to which have been so transferred; and if all of the assets
of the Trust have been so transferred, the Trust shall be terminated.
Section 7.3 AMENDMENTS. All rights granted to the Unitholders under
this Declaration of Trust are granted subject to the reservation of the right to
amend this Declaration of Trust as herein provided, except that no amendment
shall repeal the limitations on personal liability of any Unitholder or Trustee
or repeal the prohibition of assessment upon the Unitholders without the express
consent of each Unitholder or Trustee involved. Subject to the foregoing, the
provisions of this Declaration of Trust (whether or not related to the rights of
Unitholders) may be amended at any time by an instrument in writing signed by a
majority of the then Trustees (or by an officer of the Trust pursuant to the
vote of a majority of such Trustees), when authorized so to do by the vote in
accordance with subsection (e) of Section 4.2 of Unitholders holding a majority
of the Units entitled to vote, except that amendments (a) establishing and
designating any new Series of Units not established and designated in Section
4.2, (b) abolishing or liquidating a Series of Units or the Sub-Trust applicable
to such Series, (c) having the purpose of changing the name of the Trust or the
name of any Units theretofore established and designated, or (d) supplying any
omission, curing any ambiguity or curing, correcting or supplementing any
provision hereof which is internally inconsistent with any other provision
hereof or which is defective or inconsistent with the 1940 Act or with the
requirements of the Internal Revenue Code and applicable regulations for the
Trust's obtaining the most favorable treatment thereunder available to regulated
investment companies, shall not require authorization by Unitholder vote.
Subject to the foregoing, any such amendment shall be effective as provided in
the instrument containing the terms of such amendment or, if there is no
provision therein with respect to effectiveness, upon the execution of such
instrument and of a certificate (which may be a part of such instrument)
executed by a Trustee or officer of the Trust to the effect that such amendment
has been duly adopted.
Section 7.4 FILING OF COPIES; REFERENCES; HEADINGS. The original or a
copy of this instrument and of each amendment hereto shall be kept at the office
of the Trust where it may be inspected by any Unitholder. A copy of this
instrument and of each amendment
23
<PAGE>
hereto shall be filed by the Trust with the Secretary of the Commonwealth of
Massachusetts and with the Boston City Clerk, as well as any other governmental
office where such filing may from time to time be required, but the failure to
make any such filing shall not impair the effectiveness of this instrument or
any such amendment. Anyone dealing with the Trust may rely on a certificate by
an officer of the Trust as to whether or not any such amendments have been made,
as to the identities of the Trustees and officers, and as to any matters in
connection with the Trust hereunder; and, with the same effect as if it were the
original, may rely on a copy certified by an officer of the Trust to be a copy
of this instrument or of any such amendments. In this instrument and in any
such amendment, references to this instrument, and all expressions like
"herein", "hereof" and "hereunder" shall be deemed to refer to this instrument
as a whole as the same may be amended or affected by any such amendments. The
masculine gender shall include the feminine and neuter genders. Headings are
placed herein for convenience of reference only and shall not be taken as a part
hereof or control or affect the meaning, construction or effect of this
instrument. This instrument may be executed in any number of counterparts each
of which shall be deemed an original.
Section 7.5 APPLICABLE LAW. This Declaration of Trust is made in The
Commonwealth of Massachusetts, and it is created under and is to be governed by
and construed and administered according to the laws of said Commonwealth,
including the Massachusetts Business Corporation Law as the same may be amended
from time to time, to which reference is made with the intention that matters
not specifically covered herein or as to which an ambiguity may exist shall be
resolved as if the Trust were a business corporation organized in Massachusetts,
but the reference to said Business Corporation Law is not intended to give the
Trust, the Trustees, the Unitholders or any other person any right, power,
authority or responsibility available only to or in connection with an entity
organized in corporate form. The Trust shall be of the type referred to in
Section 1 of Chapter 182 of the Massachusetts General Laws and of the type
commonly called a Massachusetts business trust, and without limiting the
provisions hereof, the Trust may exercise all powers which are ordinarily
exercised by such a trust.
IN WITNESS WHEREOF, the undersigned Initial Trustee has hereunto set his
hand and seal in the City of Chicago, Illinois for himself and his assigns, as
of the day and year first above written.
E.J. Whitman, Jr.
--------------------------------
E.J. Whitman, Jr.
24
<PAGE>
State of Illinois
Cook County
Then personally appeared the above-named E.J. Whitman, Jr., who
acknowledged the foregoing Agreement and Declaration of Trust of Trust for
Credit Unions and his execution thereof to be his free act and deed, before me,
this 1st day of December, 1987.
Maria Francis
--------------------------------
Notary Public
My commission expires October 8, 1989
25
<PAGE>
TRUST FOR CREDIT UNIONS
AMENDMENT NO. 1 TO THE AMENDED AND RESTATED AGREEMENT
AND DECLARATION OF TRUST
AMENDMENT NO. 1 to the Agreement and Declaration of Trust of the TRUST FOR
CREDIT UNIONS (the "Trust") dated September 24, 1987 as amended and restated
through December 1, 1987 (the "Agreement") as of this 20th day of April, 1988.
WHEREAS, Section 7.3 of the Agreement provides that the Agreement may be
amended at any time so long as such Amendment is not in contravention of
applicable law, including the Investment Company Act of 1940, as amended (the
"1940 Act"), by an instrument in writing signed by a majority of the then
Trustees (or by an officer of the Trust pursuant to the vote of a majority of
such Trustees).
WHEREAS, the Trust presently consists of two Sub-Trusts of shares,
WHEREAS, all the Trustees of the Trust desire to amend the Agreement to
provide the Trustees with the power to appoint a dividend committee consisting
of one or more Trustees.
NOW, THEREFORE, all the Trustees of the Trust hereby declare:
1. That the first paragraph of Section 3.2 of the Agreement and
Declaration of Trust as heretofore in effect is amended to read as follows:
Section 3.2 POWERS AND TRUSTEES. Subject to the provisions of this
Declaration of Trust, the business of the Trust shall be managed by the
Trustees, and they shall have all powers necessary or convenient to carry out
that responsibility and the purpose of the Trust. Without limiting the
foregoing, the Trustees may adopt By-Laws not inconsistent with this Declaration
of Trust providing for the conduct of the business and affairs of the Trust and
may amend and repeal them to the extent that such By-Laws do not reserve that
right to the Unitholders; they may from time to time in accordance with the
provisions of Section 4.1 hereof establish separate Series, each such Series to
operate as a separate distinct investment medium and with separately defined
investment objectives and policies and distinct investment purposes, and the
assets belonging to each such Series to be held (subject to the liabilities
belonging to such Series) in a separate and distinct Sub-Trust; they may as they
consider appropriate elect and remove officers and appoint and terminate agents
and consultants and hire and terminate employees, any one or more of the
foregoing of whom may be a Trustee, and may provide for the compensation of all
of the foregoing; they may appoint from their own number, and terminate, any one
or more
<PAGE>
committees consisting of two or more Trustees, except that a dividend committee
may consist of one or more Trustees, including without implied limitation an
executive committee, which may, when the Trustees are not in session and subject
to the 1940 Act, exercise some or all of the power and authority of the Trustees
as the Trustees may determine; in accordance with Section 3.3 they may employ
one or more Advisers, Administrators, Depositories and Custodians and may
authorize any Depository or Custodian to employ subcustodians or agents and to
deposit all or any part of such assets in a system or systems for the central
handling of securities and debt instruments or the recording of ownership of
securities in book entry form, retain transfer, dividend, accounting or
Unitholder servicing agents or any of the foregoing, provide for the
distribution of Units by the Trust through one or more distributors, principal
underwriters or otherwise, set record dates or times for the determination of
Unitholders or various of them with respect to various matters; they may
compensate or provide for the compensation of the Trustees, officers, advisers,
administrators, custodians, other agents, consultants and employees of the Trust
or the Trustees on such terms as they deem appropriate; and in general they may
delegate to any officer of the Trust, to any committee or the Trustees and to
any employee, adviser, administrator, distributor, depository, custodian,
transfer and dividend disbursing agent, or any other agent or consultant of the
Trust such authority, powers, functions and duties as they consider desirable or
appropriate for the conduct of the business and affairs of the Trust, including
without implied limitation the power and authority to act in the name of the
Trust and of the Trustees, to sign documents and to act as attorney-in-fact for
the Trustees.
The undersigned being a majority of the Trustees of the Trust, pursuant to
the authorization described above, hereby certify that the Amendment set forth
above has been duly adopted in accordance with the provisions of the Agreement
and Declaration of Trust.
This Agreement may be executed in counterparts, each of which shall be an
original, but all of which shall constitute one and the same instrument.
WITNESS my hand and seal as of the 20th day of April, 1988.
Gene Artemenko
- --------------------------------------------------------------------------------
James C. Barr
- --------------------------------------------------------------------------------
Edgar F. Callahan
- --------------------------------------------------------------------------------
Robert M. Coen
- --------------------------------------------------------------------------------
Eq Whitman, Jr.
- --------------------------------------------------------------------------------
John T. Collins
- --------------------------------------------------------------------------------
Thomas S. Condit
- --------------------------------------------------------------------------------
Randall Moore
- --------------------------------------------------------------------------------
John T. Ostby
- --------------------------------------------------------------------------------
Wendell A. Sebastian
- --------------------------------------------------------------------------------
Eugene R. Artemenko
- --------------------------------------------------------------------------------
<PAGE>
TRUST FOR CREDIT UNIONS
AMENDMENT NO. 2 TO
AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST
-------------------------------------------------------
WHEREAS, Sections 4.1 and 7.3 of the Agreement and Declaration of Trust
dated September 24, 1987 as amended and restated through the date hereof (the
"Declaration"), of Trust for Credit Unions (the "Trust") provides that the
Declaration may be amended to establish and designate new Series of Units by an
instrument in writing executed by a majority of the Trustees of the Trust and
setting forth such establishment and designation and the relative rights and
preferences of such Series;
NOW, THEREFORE, the undersigned, being a majority of the Trustees of the
Trust, (1) hereby amend the Declaration by designating and establishing one
additional Series of Units to be known as the "Mortgage Securities Portfolios,"
such new Series to have the relative rights and preferences set forth in
Subsections (a) through (l) of Section 4.2 of the Declaration, and (2) hereby
determine pursuant to Section 7.3 of the Declaration that the foregoing
Amendment shall be effective upon the execution of a certificate by a Trustee or
officer of the Trust to the effect that said amendment has been duly adopted.
Witness our hands this 21st day of September, 1992.
Gene R. Artemenko Thomas S. Condit
- ----------------------- ------------------------
Gene R. Artemenko Thomas S. Condit
James C. Barr Lawrence Connell
- ----------------------- ------------------------
James C. Barr Lawrence Connell
Edgar F. Callahan Stephen Brent Wells
- ----------------------- ------------------------
Edgar F. Callahan Stephen Brent Wells
Robert M. Coen John L. Ostby
- ----------------------- ------------------------
Robert M. Coen John L. Ostby
John T. Collins Wendell A. Sebastian
- ----------------------- ------------------------
John T. Collins Wendell A. Sebastian
STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
Then personally appeared the above-mentioned Trustees and acknowledged this
instrument to be their free act and deed this 21st day of September, 1992.
Melissa Dolan
--------------------------------------
Notary Public
My Commission Expires: Notary Public,
State of New York
No.01D04843325
Qualified in New York County
Commission Expires April 30, 1993
<PAGE>
TRUST FOR CREDIT UNIONS
AMENDMENT NO. 3 TO
AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST
-------------------------------------------------------
WHEREAS, Sections 4.1 and 7.3 of the Agreement and Declaration of Trust
dated September 24, 1987 as amended and restated through the date hereof (the
"Declaration"), of Trust for Credit Unions (the "Trust") provides that the
Declaration may be amended to establish and designate new Series of Units, and
may establish or liquidate a Series of Units or the Sub-Trust applicable to a
Series, by an instrument in writing executed by a majority of the Trustees of
the Trust;
NOW, THEREFORE, the undersigned, being a majority of the Trustees of the
Trust, (1) hereby amend the Declaration by designating and establishing one
additional Series of Units to be known as the "TCU Target Maturity Portfolio
(1996)," such new Series to have the relative rights and preferences set forth
in Subsections (a) through (l) of Section 4.2 of the Declaration except that all
units of such Series shall be subject to redemption by the Trust and such Series
shall and the Sub-Trust applicable thereto shall be abolished and liquidated at
such time on or after June 30, 1996 as determined by the Board of Trustees of
the Trust; (2) hereby further amend the Declaration by abolishing and
liquidating said new Series at such time on or after June 30, 1996 as determined
by the Board of Trustees of the Trust; and (3) hereby determine pursuant to
Section 7.3 of the Declaration that this Amendment No. 3 shall be effective upon
the execution of a certificate by a Trustee or officer of the Trust to the
effect that said amendment has been duly adopted.
Witness our hands this 29th day of March, 1993.
Gene R. Artemenko Thomas S. Condit
- ----------------- ----------------
Gene R. Artemenko Thomas S. Condit
James C. Barr Lawrence Connell
- ------------- ----------------
James C. Barr Lawrence Connell
Edgar F. Callahan Rudolph J. Hanley
- ----------------- -----------------
Edgar F. Callahan Rudolph J. Hanley
Robert M. Coen John L. Ostby
- -------------- -------------
Robert M. Coen John L. Ostby
John T. Collins Wendell A. Sebastian
- --------------- --------------------
John T. Collins Wendell A. Sebastian
STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
Then personally appeared the above-mentioned Trustees and acknowledged this
instrument to be their free act and deed this 29th day of March, 1993.
Melissa Dolan
-------------
Notary Public
My Commission Expires:Notary Public, State of
New York No.01D04843325
Qualified in New York County
Commission Expires April 30, 1993
<PAGE>
Exhibit 1(d)
TRUST FOR CREDIT UNIONS
AMENDMENT NO. 4 TO
AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST
-------------------------------------------------------
WHEREAS, Sections 4.1 and 7.3 of the Agreement and Declaration of Trust
dated September 24, 1987 as amended and restated through the date hereof (the
"Declaration"), of Trust for Credit Unions (the "Trust") provides that the
Declaration may be amended to establish and designate new Series of Units, and
may establish or liquidate a Series of Units or the Sub-Trust applicable to a
Series, by an instrument in writing executed by a majority of the Trustees of
the Trust;
NOW, THEREFORE, the undersigned, being a majority of the Trustees of the
Trust, (1) hereby amend the Declaration by designating and establishing four
additional Series of Units each to be known as "Target Maturity Portfolio (Feb
97)", "Target Maturity Portfolio (May 97)", "Target Maturity Portfolio (Aug 97)"
and "Target Maturity Portfolio (Nov 97)", the new Series to have the relative
rights and preferences set forth in Subsections (a) through (l) of Section 4.2
of the Declaration, provided that (a) all units of such Series shall be subject
to redemption by the Trust, and such Series and the Sub-Trusts applicable
thereto shall be abolished and liquidated at such time on or after February 18,
1997 for the Target Maturity Portfolio (Feb 97), May 15, 1997 for the Target
Maturity Portfolio (May 97), August 15, 1997 for the Target Maturity Portfolio
(Aug 97) and November 17, 1997 for the Target Maturity Portfolio (Nov 97) as
determined by the Board of Trustees of the Trust and (b) the redemption price
for units of a Series shall be subject to a redemption fee or other change, if
any, as may be fixed by the Trustees; (2) hereby further amend the Declaration
by abolishing and liquidating such Series at such time on or after February 18,
1997, May 15, 1997, August 15, 1997 and November 17, 1997, respectively, as
determined by the Board of Trustees of the Trust; and (3) hereby determine
pursuant to Section 7.3 of the Declaration that this Amendment No. 4 shall be
effective upon the execution of a certificate by a Trustee or officer of the
Trust to the effect that said amendment has been duly adopted.
Witness our hands this thirteenth day of December, 1993.
Michael A. Armellino Thomas S. Condit
- -------------------- --------------------
Michael A. Armellino Thomas S. Condit
Gene R. Artemenko Lawrence Connell
- -------------------- --------------------
Gene R. Artemenko Lawrence Connell
James C. Barr Rudolph J. Hanley
- -------------------- --------------------
James C. Barr Rudolph J. Hanley
Edgar F. Callahan John L. Ostby
- -------------------- --------------------
Edgar F. Callahan John L. Ostby
Robert M. Coen Wendell A. Sebastian
- -------------------- --------------------
Robert M. Coen Wendell A. Sebastian
John T. Collins
- --------------------
John T. Collins
STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
Then personally appeared the above-mentioned Trustees and acknowledged this
instrument to be their free act and deed this 13 day of December, 1993.
Sabrina L. Khan
---------------
Notary Public
My Commission Expires: Notary Public,
State of New York No. 31-4912215
Qualified in New York County
Commission Expires November 9, 1995
<PAGE>
EXHIBIT 99.2
BY-LAWS OF
TRUST FOR CREDIT UNIONS
ARTICLE I
AGREEMENT AND DECLARATION OF TRUST AND PRINCIPAL OFFICE
1.1 AGREEMENT AND DECLARATION OF TRUST. These By-Laws shall be subject to
the Declaration of Trust, as from time to time in effect (the "Declaration of
Trust") of Trust for Credit Unions, the Massachusetts business trust established
by the Declaration of Trust (the "Trust").
1.2 PRINCIPAL OFFICE OF THE TRUST. The principal office of the Trust
shall be located in Chicago, Illinois.
ARTICLE II
MEETINGS OF TRUSTEES
2.1 REGULAR MEETINGS. Regular meetings of the Trustees may be held
without call or notice at such places and at such times as the Trustees may from
time to time determine, provided that notice of the first regular meeting
following any such determination shall be given to absent Trustees.
2.2 SPECIAL MEETINGS. Special meetings of the Trustees may be held at any
time and at any place designated in the call of the meeting when called by the
Chairman of the Trustees, the President of the Treasurer or by two or more
Trustees, sufficient notice thereof being given to each Trustee by the Secretary
or an Assistant Secretary or by the officer of the Trustees calling the meeting.
2.3 NOTICE. It shall be sufficient notice to a Trustee of a special
meeting to send notice by mail at least forty-eight hours or by telegram at
least twenty-four hours before the meeting addressed to the Trustee at his or
her usual or last known business or residence address or to give notice to him
or her in person or by telephone at least twenty-four hours before the meeting.
Notice of a meeting need not be given to any Trustee if a written waiver of
notice, executed by him or her before or after the meeting, is filed with the
records of the meeting, or to any Trustee who attends the meeting without
protesting prior thereto or at its commencement the lack of notice to him or
her. Neither notice of a meeting nor a waiver of a notice need specify the
purposes of the meeting.
2.4 QUORUM. At any meeting of the Trustees a majority of the Trustees
then in office shall constitute a quorum. Any meeting may be adjourned from
time to time by a majority of the votes cast upon the question, whether or not a
quorum is present, and the meeting may be held as adjourned without further
notice.
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2.5 PARTICIPATION BY TELEPHONE. One or more of the Trustees or of any
committee of the Trustees may participate in a meeting thereof by means of a
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at a meeting.
ARTICLE III
CHAIR, VICE CHAIR OFFICERS
3.1 ENUMERATION; QUALIFICATION. The Trustees shall elect from among their
number a person who shall serve as Chair of the Board and a person who shall
serve as Vice-Chair of the Board. Such persons shall not be deemed officers of
the Trust by reason of performing or executing their duties in such capacities.
The officers of the Trust shall be a President, a Treasurer, a Secretary and
such other officers, including Vice Presidents, if any, as the Trustees from
time to time may in their discretion elect. The Trust may also have such agents
as the Trustees from time to time may in their discretion appoint. The Chair
and Vice-Chair of the Trustees shall each be a Trustee and may but need not be a
unitholder; and any officer may be but none need be a Trustee or unitholder.
The Chair and Vice-Chair may be elected to any office of the Trust, and any two
or more offices may be held by the same person. A Trustee who has served as
Chair for two full successive terms shall not be eligible for election as Chair
for the next immediately succeeding term.
3.2 ELECTION. The Chair of the Trustees, Vice Chair of the Trustees,
President, Treasurer, and Secretary shall be elected annually by the Trustees at
a meeting held within the first four months of the Trust's fiscal year. The
meeting at which such persons are elected shall be known as the annual meeting
of Trustees. Other officers, if any, may be elected by the Trustees at the
annual meeting of Trustees or at any other time. Vacancies in any position may
be filled at any time. If the Chair, Vice-Chair or any officer is not elected
within the period set forth above, the Trustees may elect such person at any
meeting held after such period.
3.3 TENURE. The Chairman of the Trustees, the Vice Chairman of the
Trustees, the President, the Treasurer, and the Secretary shall hold office
until the next annual meeting of the Trustees and until their respective
successors are chosen and qualified, or in each case until he or she sooner
dies, resigns, is removed or becomes disqualified. Each other officer shall
hold office and each agent shall retain authority at the pleasure of the
Trustees.
3.4 POWERS. Subject to other provisions of these By-Laws, each officer
shall have, in addition to the duties and powers herein and in the Declaration
of Trust set forth, such duties and powers as are commonly incident to the
office occupied by him or her as if the Trust were organized as a Massachusetts
business
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corporation and such other duties and powers as the Trustees may from time to
time designate.
3.5 CHAIRMAN; VICE CHAIRMAN; PRESIDENT. Unless the Trustees otherwise
provide, the Chairman of the Trustees, or, if there is none, or in the absence
of the Chairman, the Vice Chairman of the Trustees, or, if there is none, or in
the absence of the Vice Chairman, the President shall preside at all meetings of
the unitholders and of the Trustees. The President shall be the chief executive
officer.
3.6 VICE PRESIDENT. The Vice President, or if there is more than one Vice
President, the Vice Presidents in the order determined by the Trustees (or if
there be no such determination, then in the order of their election) shall in
the absence of the President or in the event of his inability or refusal to act,
perform the duties of the President, and when so acting, shall have all the
powers of and be subject to all of the restrictions upon the President. The
Vice President shall perform such other duties and have such other powers as the
Board of Trustees may from time to time prescribe.
3.7 TREASURER. The Treasurer shall be the chief financial and accounting
officer of the Trust, and shall, subject to the provisions of the Declaration of
Trust and to any arrangement made by the Trustees with a custodian, investment
adviser or manage, or transfer, shareholder servicing or similar agent, be in
charge of the valuable papers, books of account and accounting records of the
Trust, and shall have such other duties and powers as may be designated from
time to time by the Trustees or by the President.
3.8 ASSISTANT TREASURER. The Assistant Treasurer, or if there shall be
more than one, the Assistant Treasurers in the order determined by the Trustees
(or if there be no such determination, then in the order of their election),
shall, in the absence of the Treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the Treasurer and
shall perform such other duties and have such other powers as the Board of
Trustees may from time to time prescribe.
3.9 SECRETARY. The Secretary shall record all proceedings of the
shareholder and Trustees in books to be kept therefor, which books or a copy
thereof shall be kept at the principal office of the Trust. In the absence of
the Secretary from any meeting of the shareholders or Trustees, an assistant
Secretary, or if there be none or if he or she is absent, a temporary secretary
chosen at such meeting shall record the proceedings thereof in the aforesaid
books.
3.10 ASSISTANT SECRETARY. The Assistant Secretary, or if there be more
than one, the Assistant Secretaries in the order determined by the Trustees (or
if there be no determination, then in the order of their election), shall, in
the absence of the Secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the Secretary and
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<PAGE>
shall perform such other duties and have such other powers as the Board of
Trustees may from time to time prescribe.
3.11 RESIGNATION AND REMOVALS. Any Trustee or officer may resign at any
time by written instrument signed by him or her and delivered to the Chairman,
the President or the Secretary or to a meeting of the Trustees. Such
resignation shall be effective upon receipt unless specified to be effective at
some other time. The Trustees may remove any office elected by them with or
without cause. Except to the extent expressly provided in a written agreement
with the Trust, no Trustee or officer resigning and no office removed shall have
any right to any compensation for any period following his or her resignation or
removal, or any right to damages on account of such removal.
ARTICLE IV
4.1 GENERAL. The Trustees, by vote of a majority of the Trustees then in
office, may elect from their number an Executive Committee or other committees
and may delegate thereto some or all of their powers except those which by law,
by the Declaration of Trust, or by these By-laws may not be delegated. Except
as the Trustees may otherwise determine, any such committee may make rules for
the conduct of its business, but unless otherwise provided by the Trustees or in
such rules, its business shall be conducted so far as possible in the same
manner as is provided by these By-laws for the Trustees themselves. All members
of such committees shall hold such offices at the pleasure of the Trustees. The
Trustees may abolish any such committee at any time. Any committee to which the
Trustees delegate any of their powers or duties shall keep records of its
meetings and shall report its action to the Trustees. The Trustees shall have
power to rescind any action of any committee, but no such restriction shall have
retroactive effect.
ARTICLE V
5.1 GENERAL. The Trustees and officers shall render reports at the time
and in the manner required by the Declaration of Trust or any applicable law.
Officers and Committees shall render such additional reports as they may deem
desirable or as may from time to time be required by the Trustees.
ARTICLE VI
6.1 GENERAL. The fiscal year of the Trust shall be fixed by resolution of
the Trustees.
ARTICLE VII
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7.1 GENERAL. The seal of the Trust shall consist of a flat-faced die with
the word "Massachusetts", together with the name of the Trust, and the year of
its organization cut or engraved thereon, but unless otherwise required by the
Trustees, the seal shall not be necessary to be placed on, and its absence shall
not impair the validity of, any document, instrument or other paper executed and
delivered by or on behalf of the Trust.
ARTICLE VIII
8.1 GENERAL. Except as the Trustees may generally or in particular cases
authorize the execution thereof in some other manner, all deeds, leases,
contracts, notes and other obligations made by the Trustee shall be signed by
the President, any Vice President, or by the Treasurer and need not bear the
seal of the Trust.
ARTICLE IX
ISSUANCE OF SHARE CERTIFICATES
9.1 SHARE CERTIFICATES. In lieu of issuing certificates for shares, the
Trustees or the transfer agent may either issue receipts therefore or may keep
accounts upon the books of the Trust for the record holders of such shares, who
shall in either case be deemed, for all purpose hereunder, to be the holders of
certificates for such shares as if they had accepted such certificates and shall
be held to have expressly assented and agreed to the terms hereof.
The Trustees may at any time authorize the issuance of share certificates
either in limited cases or to all shareholders. In that event, a shareholder
may receive a certificate stating the number of shares owned by him, in such
form as shall be prescribed from time to time by the Trustees. Such certificate
shall be signed by the President or a Vice President and by the Treasurer or
Assistant Treasurer. Such signatures may be facsimiles if the certificate is
signed by a transfer agent, or by a registrar, other than a Trustee, officer or
employee of the Trust. In case any officer who has signed or whose facsimile
signature has been placed on such certificate shall cease to be such officer
before such certificate is issued, it may be issued by the Trust with the same
effect as if he were such officer at the time of its issue.
9.2 LOSS OF CERTIFICATE. In case of the alleged loss or destruction or
the mutilation of a share certificate, a duplicate certificate may be issued in
place thereof, upon such terms as the Trustees shall prescribe.
9.3 ISSUANCE OF NEW CERTIFICATE TO PLEDGES. A Pledges of shares
transferred as collateral security shall ne entitled to a new certificate if the
instrument of transfer substantially describes the debt or duty that is intended
to be secured thereby.
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Such new certificate shall express on its face that it is held as collateral
security, and the name of the pledgor shall be stated thereon, who alone shall
be liable as a shareholder, and entitled to vote thereon.
9.4 DISCONTINUANCE OF ISSUANCE OF CERTIFICATE. The Trustees may at any
time discontinue the issuance of share certificates and may, by written notice
to each shareholder, require the surrender of share certificates to the Trust
for cancellation. Such surrender and cancellation shall not affect the
ownership of shares in the Trust.
ARTICLE X
DEALINGS WITH TRUSTEES AND OFFICERS
10.1 GENERAL. Any Trustee, officer or other agent of the Trust may
acquire, own and dispose of shares of the Trust to the same extent as if he were
not a Trustee, officer or agent; and the Trustees may accept subscriptions to
shares or repurchase shares from any firm or company in which any Trustee,
officer or other agent of the Trust may have an interest.
ARTICLE XI
AMENDMENTS TO THE BY-LAWS
11.1 GENERAL. These By-laws may be amended or repealed, in whole or in
part, by a majority of the Trustees then in office at any meeting of the
Trustees, or by one or more writings signed by such a majority.
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<PAGE>
EXHIBIT 99.5
ADVISORY AGREEMENT
------------------
ADVISORY AGREEMENT made this 20th day of June, 1991 between TRUST FOR
CREDIT UNIONS, a Massachusetts business trust (the "Fund"), and GOLDMAN, SACHS &
CO., a New York limited partnership (the "Adviser").
W I T N E S S E T H
-------------------
WHEREAS, the Fund is an open-end, diversified management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, the Fund is authorized to issue units of beneficial interest
("Units") in separate series with each such series representing the interests in
a separate portfolio of securities and other assets; and
WHEREAS, the Fund presently offers Units in the Money Market Portfolio and
the Government Securities Portfolio (such Portfolios (the "Current Portfolios")
together with all other portfolios subsequently established by the Fund and made
subject to this Agreement being herein collectively referred to as the
"Portfolios"); and
WHEREAS, the Fund desires to retain the Adviser to render investment
advisory services and certain administrative services to the Fund and each of
its Current Portfolios as indicated below and the Adviser is willing to so
render services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter set forth, the parties hereto agree as follows:
1. Appointment of Adviser.
----------------------
(a) The Fund hereby appoints the Adviser to act as investment adviser
and to provide certain administrative services to the Fund and
each of its Current Portfolios for the periods and on the terms
herein set forth. The Adviser accepts such appointment and
agrees to render the services herein set forth, for the
compensation herein provided.
(b) In the event that the Fund establishes one or more portfolios
other than the Current Portfolios with respect to which it
desires to retain the Adviser to act as investment adviser
thereunder, it shall notify the Adviser in writing. If the
Adviser is willing to render such services under this Agreement
it shall notify the Fund in writing whereupon such portfolio
shall become a Portfolio hereunder and shall be subject to the
provisions of this Agreement to the same extent as the Current
Portfolios except to the extent that said provisions (including
those relating to the compensation payable by the Fund to the
Adviser) are modified with respect to such Portfolio in writing
by the Fund and the Adviser at the time.
2. Delivery of Documents. The Fund has delivered to the Adviser copies
---------------------
of each of the following documents:
(a) Agreement and Declaration of Trust of the Fund dated as of
September 24, 1987 together with Amended and Restated Agreement
and Declaration of Trust through December 1, 1987 and Amendment
No. 1 to such Amended and
<PAGE>
Restated Agreement and Declaration of Trust dated as of April 20,
1988 (such Agreement and Declaration of Trust, as presently in
effect and as amended from time to time, is herein called the
"Trust Agreement"), copies of which are also on file with the
Secretary of The Commonwealth of Massachusetts;
(b) By-Laws of the Fund (such By-laws, as presently in effect and as
amended from time to time, are herein called the By-Laws");
(c) Certified resolutions of the Unitholders and the Trustees of the
Fund approving the terms of this Agreement;
(d) Amended and Restated Administration Agreement dated February 28,
1989 between the Fund and Callahan Credit Union Financial
Services Limited Partnership ("CUFSLP") (such Agreement, as
presently in effect and as amended and/or superseded from time to
time, is herein called the "Administration Agreement");
(e) Distribution Agreement dated May 10, 1988, as amended by
Amendment No. 1 dated January 17, 1989 (the "Callahan
Distribution Agreement"), between the Fund and Callahan Financial
Services, Inc., and Distribution Agreement dated January 17, 1989
between the Adviser and the Fund (such Agreements, as presently
in effect and as amended and/or superseded from time to time, are
herein called the "Distribution Agreements");
(f) Custodian Agreement (including related fee schedule) dated May
10, 1988 between the Fund and State Street Bank and Trust Company
(such Agreement, as presently in effect and as amended and/or
superseded from time to time, is herein called the "Custodian
Agreement");
(g) Transfer Agency Agreement dated May 10, 1988 between the Fund and
the Adviser (such Agreement, as presently in effect and as
amended and/or superseded from time to time, is herein called the
"Transfer Agency Agreement");
(h) Prospectus and Statement of Additional Information of the Fund,
each dated October 31, 1990 (such Prospectus and Statement of
Additional Information, as presently in effect and as amended,
supplemented and/or superseded from time to time, are herein
called the "Prospectus" and "Additional Statement,"
respectively); and
(i) Registration Statement, as amended, of the Fund under the
Securities Act of 1933, as amended (the "1933 Act"), and the 1940
Act on Form N-1A as filed with the Securities and Exchange
Commission (the "Commission") (such Registration Statement, as
presently in effect and as amended from time to time, is herein
called the "Registration Statement").
The Fund agrees to promptly furnish the Adviser from time to time with copies of
all amendments of or supplements to or otherwise current versions of any of the
foregoing documents not heretofore furnished.
2
<PAGE>
3. Duties of Adviser.
-----------------
(a) Subject to the general supervision of the Trustees of the Fund,
the Adviser shall manage the investment operations of each of the
Portfolios and the composition of each such Portfolio's assets,
including the purchase, retention and disposition thereof. In
this regard, the Adviser
(i) shall provide supervision of the Portfolios' assets,
furnish a continuous investment program for such
Portfolios, determine from time to time what investments or
securities will be purchased, retained or sold by the
Portfolios, and what portion of the assets will be invested
or held uninvested as cash;
(ii) shall place orders pursuant to its determinations either
directly with the issuer or with any broker, dealer or
other person who deals in the securities in which the
Portfolio in question is active. In placing orders with
brokers, dealers or such other persons the Adviser shall
attempt to obtain the best net price and the most favorable
execution of its orders. When the execution and price
offered by two or more brokers, dealers or such other
persons are believed to be comparable, the Adviser may, in
its discretion but subject to applicable law, purchase and
sell portfolio securities to and from brokers, dealers or
such other persons who provide brokerage or research
services; and
(iii) may, on occasions when it deems the purchase or sale of a
security to be in the best interests of a Portfolio as well
as its other customers (including any other Portfolio or
any other investment company or advisory account for which
the Adviser acts as adviser), aggregate, to the extent
permitted by applicable laws and regulations, the
securities to be sold or purchased in order to obtain the
best net price and the most favorable execution. In such
event, allocation of the securities so purchased or sold,
as well as the expenses incurred in the transaction, will
be made by the Adviser in the manner it considers to be the
most equitable and consistent with its fiduciary
obligations to such Portfolio and to such other customers.
(b) In addition, the Adviser shall, subject to the general
supervision of the Trustees of the Fund, provide certain
administrative services to the Fund. In this regard, the Adviser
(i) shall, to the extent not provided by others pursuant to the
Administration Agreement or the Custodian Agreement (or the
Transfer Agency Agreement to the extent that a person other
than the Adviser is serving thereunder as the Fund's
transfer agent), provide supervision of all aspects of the
Fund's operations not referred to in paragraph 3(a) above;
(ii) shall, to the extent not provided pursuant to the
Administration Agreement, the Custodian Agreement or the
Transfer Agency Agreement, provide the Fund with personnel
to perform such executive, administrative and clerical
services as are reasonably necessary to provide effective
administration of the Fund;
3
<PAGE>
(iii) shall, to the extent not provided pursuant to the
Administration Agreement, the Custodian Agreement or the
Transfer Agency Agreement, arrange for, at the Fund's
expense, (A) the preparation for the Fund of all required
tax returns, (B) the preparation and submission of reports
to existing Unitholders and (C) the periodic updating of
the Prospectus and the Additional Statement and the
preparation of reports filed with the Commission and other
regulatory authorities;
(iv) shall, to the extent not provided pursuant to the
Administration Agreement, the Custodian Agreement or the
Transfer Agency Agreement, provide the Fund with adequate
office space and all necessary office equipment and
services including telephone service, heat, utilities,
stationery supplies and similar items;
(v) shall, to the extent requested by the Trustees of the Fund,
negotiate changes to the terms and provisions of the
Administration Agreement, the Custodian Agreement and the
Callahan Distribution Agreement; and
(vi) shall review and cause to be paid out of the assets of the
Fund bills or statements for services rendered to the Fund.
(c) The Adviser, in the performance of its duties hereunder, shall
act in conformity with the Trust Agreement, By-Laws, Prospectus,
Additional Statement and Registration Statement and with the
instructions and directions of the Trustees of the Fund, and will
use its best efforts to comply with and conform to the
requirements of the 1940 Act, the Investment Advisers Act of 1940
and all other applicable federal and state laws, regulations and
rulings.
(d) The Adviser shall render to the Trustees of the
Fund such periodic and special reports as the Trustees may
reasonably request.
(e) The Adviser shall notify the Fund of any change in the membership
of the Adviser within a reasonable time after such change.
(f) The services of the Adviser hereunder are not deemed exclusive
and the Adviser shall be free to render similar services to
others so long as its services under this Agreement are not
impaired thereby.
4. Expenses.
--------
(a) During the term of this Agreement, the Adviser will pay all costs
incurred by it in connection with the performance of its duties
under paragraph 3 hereof; provided, however, that the Adviser
-------- -------
shall not be required to pay the cost (including taxes, brokerage
commissions and other transaction costs, if any) of securities
purchased for each of the Portfolios and the cost of the
preparations, submissions, updatings and filings referred to in
paragraph 3(b)(iii). Except as provided in paragraph 4(b) and
(c), the Adviser will not be required to pay any expense related
to the Fund other than those specifically allocated to it in this
paragraph 4(a). In particular, but without limiting the
generality of the foregoing, the Adviser will not be required to
pay: (i) fees and expenses of any administrator of the Fund;
(ii) organization expenses of the Fund; (iii) fees and expenses
incurred by the Fund in connection with membership in investment
company organizations; (iv) payment for portfolio pricing
services to a pricing agent, if any; (v) legal, auditing or
accounting expenses (including an allocable
4
<PAGE>
portion of the cost of the Adviser's employees rendering legal
and accounting services to the Fund); (vi) taxes or governmental
fees; (vii) the fees and expenses of the transfer agent of the
Fund; (viii) the cost of preparing stock certificates or any
other expenses, including clerical expenses of issue, redemption
or repurchase of Units of the Fund; (ix) the expenses of and fees
for registering or qualifying Units for sale and of maintaining
the registration of the Fund and registering the Fund as a broker
or a dealer; (x) the fees and expenses Trustees of the Fund who
are not affiliated with the Adviser; (xi) the cost of preparing
and distributing reports and notices to Unitholders, the
Commission and other regulatory authorities; (xii) the fees or
disbursements of custodians of the Fund's assets, including
expenses incurred in the performance of any obligations
enumerated by the Trust Agreement or By-Laws of the Fund insofar
as they govern agreements with any such custodian; or (xiii)
litigation and indemnification expenses and other extraordinary
expenses not incurred in the ordinary course of the Fund's
business.
(b) The Adviser agrees that if in any fiscal year the aggregate
expenses of any Portfolio (as defined under the securities
regulations of any state having jurisdiction over such Portfolio)
exceed the expense limitations of any such state, the Fund may
deduct from the fees to be paid hereunder, or the Adviser will
bear, that portion of the excess which bears the same relation to
the total of such excess as the Adviser's fee hereunder bears to
the total fees otherwise payable for the fiscal year by the Fund
pursuant to this Agreement and the administration agreement
between the Fund and its administrator with respect to such
Portfolio. Such deduction or payment, if any, will be estimated
and accrued daily and paid on a monthly basis.
(c) In addition to the foregoing, the Adviser may from time to time
further reduce its fee or make payment to a Portfolio in order to
offset all or a portion of certain expenses otherwise payable by
such Portfolio, provided that any such arrangement does not
jeopardize the Portfolio's qualification as a regulated
investment company. Any such fee reduction with respect to the
Money Market Portfolio will be agreed to in advance of the time
such fee would otherwise accrue, and any such arrangement may be
discontinued or modified only with the express approval of the
Trustees of the Fund.
5. Compensation.
------------
(a) Subject to any reduction pursuant to paragraphs 4(b) or 4(c)
hereof, for all services provided and expenses assumed by the
Adviser pursuant to this Agreement with respect to the Money
Market Portfolio, the Fund will pay to the Adviser as full
compensation therefor a monthly fee at the annual rate of .20% of
the average daily net assets of the Money Market Portfolio.
(b) Subject to any reduction pursuant to paragraphs 4(b) or 4(c)
hereof, for all services provided and expenses assumed by the
Adviser pursuant to this Agreement with respect to the Government
Securities Portfolio, the Fund will pay to the Adviser as full
compensation therefor a monthly fee at the annual rate of .25% of
the average daily net assets of the Government Securities
Portfolio.
(c) The foregoing fees will be computed on the average net assets on
each day and will be paid to the Adviser monthly.
5
<PAGE>
6. Books and Records. The Adviser shall maintain all of the Fund's
-----------------
records (other than those maintained pursuant to the Administration Agreement,
the Custodian Agreement or the Transfer Agency Agreement). The Adviser agrees
that all records which it maintains for the Fund are the property of the Fund
and it will surrender promptly to the Fund any of such records upon the Fund's
request. The Adviser further agrees to preserve for the periods prescribed by
Rule 31a-2 of the Commission under the 1940 Act any such records as are required
to be maintained by Rule 31a-1 of the Commission under the 1940 Act.
7. Indemnification.
---------------
(a) Subject to Section 36 of the 1940 Act to the extent applicable,
the Adviser shall not be liable for any error in judgment or
mistake of law or for any loss suffered by the Fund in connection
with the matters to which this Agreement or the Transfer Agency
Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence in the performance of
its obligations and duties under this Agreement or the Transfer
Agency Agreement, or by reason of its reckless disregard of its
obligations and duties under this Agreement or the Transfer
Agency Agreement.
(b) The Fund hereby agrees to indemnify and hold harmless the
Adviser, its officers, partners and employees and each person, if
any, who controls the Adviser (collectively, the "Indemnified
Parties") against any and all losses, claims, damages or
liabilities, joint or several, to which any such Indemnified
Party may become subject under the 1933 Act, the Securities
Exchange Act of 1934 (as amended), the 1940 Act or other federal
or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon
(i) any untrue statement or alleged untrue statement of a
material fact or any omission or alleged omission to state a
material fact required to be stated or necessary to make the
statements made not misleading in (x) the Prospectus, the
Additional Statement or the Registration Statement, (y) any
advertisement or sales literature authorized by the Fund for
use in the offer and sale of Units of any Portfolio, or (z)
any application or other document filed in connection with
the qualification of the Fund or Units of any Portfolio
under the Blue Sky or securities laws of any jurisdiction,
except insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or
are based upon any such untrue statement or omission or
alleged untrue statement or omission either pertaining to a
breach of the Adviser's duties in connection with this
Agreement or any other agreement with the Fund or made in
reliance upon and in conformity with information furnished
to the Fund by or on behalf of the Adviser pertaining to or
originating with the Adviser for use in connection with any
document referred to in clauses (x), (y), or (z), or
(ii) subject in each case to clause (i) above, the Adviser acting
under this Agreement or any other agreement with the Fund in
accordance with their terms;
and the Fund will reimburse each Indemnified Party for any legal
or other expenses incurred by such Indemnified Party in
connection with investigating or defending any such loss, claim,
damage, liability or action.
6
<PAGE>
(c) If the indemnification provided for in paragraph 7(b) is
available in accordance with the terms of such paragraph but is
for any reason held by a court to be unavailable from the Fund,
then the Fund shall contribute to the aggregate amount paid or
payable by the Fund and the Indemnified Parties as a result of
such losses, claims, damages or liabilities (or actions in
respect thereof) in such proportion as is appropriate to reflect
(i) the relative benefits received by the Fund and such
Indemnified Parties in connection with the operations of the
Fund, (ii) the relative fault of the Fund and such Indemnified
Parties, and (iii) any other relevant equitable considerations.
The Fund and the Adviser agree that it would not be just and
equitable if contribution pursuant to this subparagraph (c) were
determined by pro rata allocation or any other method of
allocation which does not take into account the equitable
considerations referred to above in this subparagraph (c). The
aggregate amount paid or payable as a result of the losses,
claims, damages or liabilities (or actions in respect thereof)
referred to above in this subparagraph (c) shall be deemed to
include any legal or other expenses incurred by the Fund and the
Indemnified Parties in connection with investigating or defending
any such loss, claim, damage, liability or action. No person
guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent
misrepresentation.
(d) It is understood, however, that nothing in this paragraph 7 shall
protect any Indemnified Party against, or entitle any Indemnified
Party to indemnification against or contribution with respect to,
any liability to the Fund or its Unitholders to which such
Indemnified Party is subject, by reason of its willful
misfeasance, bad faith or gross negligence in the performance of
its duties, or by reason of any reckless disregard of its
obligations and duties, under this Agreement, the Transfer Agency
Agreement or otherwise, to an extent or in a manner inconsistent
with Section 17(i) of the 1940 Act.
8. Duration and Termination. This Agreement will become effective with
------------------------
respect to a Current Portfolio on the date it is approved by the unitholder(s)
of the Portfolio in accordance with the requirements of the 1940 Act. This
Agreement will become effective with respect to any additional Portfolio on the
date of receipt by the Fund of notice from the Adviser in accordance with
paragraph 1(b) hereof that the Adviser is willing to serve as investment adviser
with respect to such Portfolio, provided that this Agreement (as supplemented by
the terms specified in any notice and agreement pursuant to paragraph 1(b)
hereof) shall have been approved by the unitholder(s) of such Portfolio in
accordance with the requirements of the 1940 Act. Unless sooner terminated,
this Agreement will continue until March 31, 1992. Thereafter, if not
terminated, this Agreement shall continue in effect for successive annual
periods, provided such continuation is specifically approved at least annually
(a) by the vote of a majority of the Trustees of the Fund who are not parties to
this Agreement or interested persons (as defined in the 1940 Act) of any such
party, cast in person at a meeting called for the purpose of voting on such
approval, and (b) by a majority of the Trustees of the Fund or by vote of a
majority of the outstanding Units (as defined with respect to voting securities
in the 1940 Act) representing the interests in such Portfolio; provided,
however, that this Agreement may be terminated by the Fund as to any Portfolio
at any time, without the payment of any penalty, by vote of a majority of the
Trustees of the Fund or by vote of a majority of the outstanding Units (as so
defined) representing the interests in the Portfolio affected thereby on 60
days' written notice to the Adviser, or by the Adviser at any time, without the
payment of any penalty, on 60 days' written notice to the Fund. This Agreement
will automatically and immediately terminate in the event of its assignment (as
defined in the 1940 Act).
7
<PAGE>
9. Status of Adviser as Independent Contractor. The Adviser shall for
-------------------------------------------
all purposes herein be deemed to be an independent contractor and shall, unless
otherwise expressly provided herein or authorized by the Trustees of the Fund
from time to time, have no authority to act for or represent the Fund in any way
or otherwise be deemed an agent of the Fund.
10. Amendment of Agreement. This Agreement may be amended by mutual
----------------------
consent, provided that such amendment is approved (a) by vote of a majority of
those Trustees of the Fund who are not parties to this Agreement or interested
persons (as defined in the 1940 Act) of any such party, cast in person at a
meeting called for the purpose of voting on such amendment, and (b) by vote of a
majority of the outstanding Units (as defined with respect to voting securities
in the 1940 Act) representing the interests in each Portfolio affected by such
amendment. Any amendment to this Agreement shall only be by written instrument
which shall make specific reference to this Agreement and which shall be signed
by the party against which enforcement of such change, waiver, discharge or
termination is sought.
11. Notices. Without limiting the other provisions hereof, notices and
-------
other writings delivered or mailed postage prepaid to the Fund, 4900 Sears
Tower, Chicago, Illinois 60606, Attention: President, with copy to Donald C.
Shine, Nisen & Elliott, 200 West Adams Street, Suite 2500, Chicago, Illinois
60606 or to the Adviser, 4900 Sears Tower, Chicago, Illinois 60606-6303,
Attention: Stephen B. Wells, or to such other address as the Fund or the
Adviser may hereafter specify by written notice to the most recent address
specified by the party to whom such notice is addressed, shall be deemed to have
been properly delivered or given hereunder to the respective addressee.
12. Unitholder Liability. This Agreement is executed by or on behalf of
--------------------
the Fund and the obligations hereunder are not binding upon any of the Trustees,
officers or Unitholders of the Fund individually but are binding only upon the
particular Portfolio to which such obligations pertain and the assets and
property of such Portfolio.
13. Miscellaneous. The captions in this Agreement are included for
-------------
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be construed in accordance with
applicable federal law and (except as to paragraph 12 hereof which shall be
construed in accordance with the laws of the Commonwealth of Massachusetts) the
laws of the State of Illinois and shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors, subject to
paragraph 8 hereof. Anything herein to the contrary notwithstanding, this
Agreement shall not be construed to require, or to impose any
8
<PAGE>
duty upon, either of the parties to do anything in violation of any applicable
laws or regulations. Any provision in this Agreement requiring compliance with
any statute or regulation shall mean such statute or regulation as amended and
in effect from time to time.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
ATTEST: TRUST FOR CREDIT UNIONS
/s/ Michelle Lenzmeier By /s/ Stephen B. Wells
- ---------------------- -------------------------
President
ATTEST: GOLDMAN, SACHS & CO.
/s/ Michelle Lenzmeier By /s/ Alan A. Shuch
- ---------------------- -------------------------
General Partner
9
<PAGE>
TRUST FOR CREDIT UNIONS
ADDENDUM NO. 1 TO THE INVESTMENT ADVISORY AGREEMENT
---------------------------------------------------
This Addendum, dated as of the 6th day of October, 1992, is entered into
between TRUST FOR CREDIT UNIONS (the "TRUST"), a Massachusetts business trust,
and GOLDMAN, SACHS, & CO. (the "Adviser") a New York limited partnership.
WHEREAS, the Trust and the Adviser have entered into an Investment Advisory
Agreement dated as of June 20, 1991 (the "Advisory Agreement"), pursuant to
which the Trust has appointed the Adviser to act as investment adviser to the
Trust for the Money Market Portfolio and the Government Securities Portfolio;
WHEREAS, Section 1(b) of the Advisory Agreement provides that in the event
the Trust establishes one or more additional investment portfolios with respect
to which it desires to retain the Adviser to act as investment adviser under the
Advisory Agreement, the Trust shall so notify the Adviser in writing and if the
Adviser is willing to render such services it shall notify the Trust in writing;
and
WHEREAS, pursuant to Section 1(b) of the Advisory Agreement, the Trust has
notified the Adviser that it is establishing the Mortgage Securities Portfolio
(the "Portfolio"), and that is desires to retain the Adviser to act as the
investment adviser therefor, and the Adviser has notified the Trust that it is
willing to serve as investment adviser for the Portfolio;
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Appointment. The Trust hereby appoints the Adviser to act as
-----------
investment adviser to the Trust for the Portfolio for the period and
on the terms set forth in the Advisory Agreement. The Adviser hereby
accepts such appointment and agrees to render the services set forth
in the Advisory Agreement for the compensation herein provided.
2. Compensation. For the services provided and the expenses assumed
------------
pursuant to the Advisory Agreement, the Trust will pay the Adviser,
and the Adviser will accept as full compensation therefor from the
Trust, a fee at an annual rate of .20% of 1% of the Mortgage
Securities Portfolio's average daily net assets. The fee will be
computed based on net assets on each day and will be paid to the
Adviser monthly. Such fee is attributable to the Portfolio, shall be a
charge to such Portfolio and shall be the obligation of such
Portfolio.
3. Capitalized Terms. From and after the date hereof, the term
-----------------
"Portfolios" as used in the Advisory Agreement shall be deemed to
include the Mortgage Securities Portfolio. Capitalized terms used
herein and not otherwise defined shall be the meanings ascribed to
them in the Advisory Agreement.
1
<PAGE>
4. Miscellaneous. Except to the extent supplemented hereby, the Advisory
-------------
Agreement shall remain unchanged and in full force and effect, and is
hereby ratified and confirmed in all aspects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of the
date and year first above written.
TRUST FOR CREDIT UNIONS
Attest: /s/ Michael J. Richman By: /s/ Stephen B. Wells
---------------------- ------------------------------
As its: President
-------------------
GOLDMAN, SACHS & CO.
Attest: /s/ Michael J. Richman By: /s/ Alan A. Shuch
---------------------- ----------------------------------
As its:
-----------------------
2
<PAGE>
TRUST FOR CREDIT UNIONS
ADDENDUM NO. 2 TO THE INVESTMENT ADVISORY AGREEMENT
This Addendum, dated as of the 30th day of June, 1993, is entered into
between TRUST FOR CREDIT UNIONS (the "Trust"), a Massachusetts business trust,
and GOLDMAN, SACHS & CO. (the "Adviser"), a New York limited partnership.
WHEREAS, the Trust and the Adviser have entered into an Investment Advisory
Agreement dated as of June 20, 1991 (the "Advisory Agreement") and Addendum No.
1 thereto dated October 6, 1992, pursuant to which the Trust has appointed the
Adviser to act as investment adviser to the Trust for the Money Market
Portfolio, Government Securities Portfolio and Mortgage Securities Portfolio;
WHEREAS, Section 1(b) of the Advisory Agreement provides that in the event
the Trust establishes one or more additional investment portfolios with respect
to which it desires to retain the Adviser to act as investment adviser under the
Advisory Agreement, the Trust shall so notify the Adviser in writing and if the
Adviser is willing to render such services it shall notify the Trust in writing;
and
WHEREAS, pursuant to Section 1(b) of the Advisory Agreement, the Trust has
notified the Adviser that it is establishing the TCU Target Maturity Portfolio
(1996) (the "Portfolio"), and that it desires to retain the Adviser to act as
the investment adviser therefore, and the Adviser has notified the Trust that it
is willing to serve as investment adviser for the Portfolio;
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. APPOINTMENT. The Trust hereby appoints the Adviser to act as
investment adviser to the Trust for the Portfolio for the period and
on the terms set forth in the Advisory Agreement. The Adviser hereby
accepts such appointment and agrees to render the services set forth
in the Advisory Agreement for the compensation herein provided.
2. COMPENSATION. For the services provided and the expenses assumed
pursuant to the Advisory Agreement, the Trust will pay the Adviser,
and the Adviser will accept as full compensation therefor from the
Trust, a fee at an annual rate of .25% of the Portfolio's average
daily net assets. The fee will be computed based on net assets on
each day and will be paid to the Adviser monthly. Such fee is
attributable to the Portfolio, shall be a charge to such Portfolio and
shall be the obligation of such Portfolio.
1
<PAGE>
3. CAPITALIZED TERMS. From and after the date hereof, the term
"Portfolios" as used in the Advisory Agreement shall be deemed to
include the TCU Target Maturity Portfolio (1996). Capitalized terms
used herein and not otherwise defined shall be the meanings ascribed
to them in the Advisory Agreement.
4. MISCELLANEOUS. Except to the extent supplemented hereby, the Advisory
Agreement shall remain unchanged and in full force and effect, and is
hereby ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of the
date and year first above written.
TRUST FOR CREDIT UNIONS
Attest: Nancy James By: Nancy L. Mucker
--------------- -----------------------
Nancy L. Mucker
Vice President of the Trust
GOLDMAN, SACHS & CO.
Attest: Cecilia Garcia By: Michael R. Armellino
--------------- -----------------------
General Partner
2
<PAGE>
TRUST FOR CREDIT UNIONS
ADDENDUM NO. 3 TO THE INVESTMENT ADVISORY AGREEMENT
---------------------------------------------------
This Addendum, dated as of the 29th day of December, 1993, is entered into
between TRUST FOR CREDIT UNIONS (the "Fund"), a Massachusetts business trust,
and GOLDMAN, SACHS & CO. (the "Adviser"), a New York limited partnership.
WHEREAS, the Fund and the Adviser have entered into an Investment Advisory
Agreement dated as of June 20, 1991 (the "Advisory Agreement"), Addendum No. 1
thereto dated October 6, 1992, and Addendum No. 2 thereto dated June 30, 1993,
pursuant to which the Fund has appointed the Adviser to act as investment
adviser to the Fund for the Money Market Portfolio, Government Securities
Portfolio, Mortgage Securities Portfolio and Target Maturity Portfolio (1996);
WHEREAS, in consideration of its continued retention as investment adviser
to the Money Market Portfolio and Government Securities Portfolio of the Fund,
the Adviser wishes to reduce the annual investment advisory fees payable by said
Portfolios and to waive and forego irrevocably all fees payable by said
Portfolios that exceed the fees set forth below;
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Compensation.
------------
Effective as of the date hereof for all periods beginning on or after
this date, the Fund will pay to the Adviser as full compensation for its
services under the Advisory Agreement with respect to the Money Market
Portfolio and Government Securities Portfolio the fees set forth below
instead of the fees set forth in Paragraphs 5(a) and 5(b) of the Advisory
Agreement, and the Adviser hereby undertakes and agrees to waive and forego
irrevocably all fees payable by the Fund pursuant to said Paragraphs 5(a)
and 5(b) that exceed the following fees:
(a) Subject to any reduction pursuant to paragraphs 4(b) or 4(c)
of the Advisory Agreement, for all services provided and
expenses assumed by the Adviser pursuant to said Agreement
with respect to the Money Market Portfolio, the Fund will
pay to the Adviser as full compensation therefor a monthly
fee at the annual rate of .20% up to $300 million and .15%
over $300 million of the average daily net assets of the
Money Market Portfolio.
(b) Subject to any reduction pursuant to paragraphs 4(b) or 4(c)
of the Advisory Agreement, for all services provided and
expenses assumed by the Adviser pursuant to said Agreement
with respect to the Government Securities Portfolio, the
Fund will pay to the Adviser as full compensation therefor a
monthly fee at the annual rate of .20% of the average daily
net assets of the Government Securities Portfolio.
<PAGE>
2. Miscellaneous. The fees payable by the Fund pursuant to this Addendum
-------------
may not be hereafter increased except with the approval of the Fund's
unitholders to the extent and as required by the Investment Company
Act of 1940, as amended from time to time. Except to the extent
supplemented hereby, the Advisory Agreement shall remain unchanged and
in full force and effect, and is hereby ratified and confirmed in all
respects as supplemented hereby. Without limiting the foregoing, the
services provided by the Adviser pursuant to the Advisory Agreement
are in no manner reduced or otherwise affected by this Addendum.
IN WITNESS WHEREOF, the undesigned have executed this Addendum as of the
date and year first above written.
TRUST FOR CREDIT UNIONS
Attest: /s/ Rick Larson By: /s/ Marcia Beck
---------------------- ---------------------------
As its: President
-----------------
GOLDMAN, SACHS & CO.
Attest: /s/ Rick Larson By: /s/ Alan A. Shuch
---------------------- ---------------------------
As its: General Partner
-----------------
2
<PAGE>
TRUST FOR CREDIT UNIONS
ADDENDUM NO. 4 TO THE INVESTMENT ADVISORY AGREEMENT
---------------------------------------------------
This Addendum, dated as of the 1st day of January, 1994, is entered into
between TRUST FOR CREDIT UNIONS (the "Fund"), a Massachusetts business trust,
and GOLDMAN, SACHS & CO. (the "Adviser"), a New York limited partnership.
WHEREAS, the Fund and the Adviser have entered into an Investment Advisory
Agreement dated as of June 20, 1991, Addendum No. 1 thereto dated October 6,
1992, Addendum No. 2 thereto dated June 30, 1993 and Addendum No. 3 thereto
dated December 29, 1993, (said agreement and addenda together, the "Advisory
Agreement") pursuant to which the Fund has appointed the Adviser to act as
investment adviser to the Fund for the Money Market Portfolio, Government
Securities Portfolio, Mortgage Securities Portfolio and Target Maturity
Portfolio (1996).
WHEREAS, Section 1(b) of the Advisory Agreement provides that in the event
the Fund establishes one or more additional investment portfolios with respect
to which it desires to retain the Adviser to act as investment adviser under the
Advisory Agreement, the Fund shall so notify the Adviser in writing and if the
Adviser is willing to render such services it shall notify the Fund in writing;
and
WHEREAS, pursuant to Section 1(b) of the Advisory Agreement, the Fund has
notified the Adviser that it is establishing the Target Maturity Portfolio (Feb
97), Target Maturity Portfolio (May 97), Target Maturity Portfolio (Aug 97) and
Target Maturity Portfolio (Nov 97) (each a "Portfolio"), and that it desires to
retain the Adviser to act as the investment adviser therefor, and the Adviser
has notified the Fund that it is willing to serve as investment adviser for each
of the Portfolios;
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Appointment. The Fund hereby appoints the Adviser to act as
-----------
investment adviser to the Fund for each of the Portfolios for the
period and on the terms set forth in the Advisory Agreement;
provided that, unless sooner terminated, the Advisory Agreement
will continue in effect until March 31, 1995 with respect to
Target Maturity Portfolio (Feb 97) and until Market 31, 1996 with
respect to Target Maturity Portfolio (May 97), Target Maturity
Portfolio (Aug 97) and Target Maturity Portfolio (Nov 97). After
said initial term for a Portfolio, the Advisory Agreement will
continue in effect with respect to that Portfolio for successive
annual periods provided its continuation is specifically approved
at least annually in the manner set forth in the Advisory
Agreement. The Adviser hereby accepts such appointment and agrees
to render the services set forth in the Advisory Agreement for
the compensation herein provided.
2. Compensation. For the services provided and the expenses assumed
------------
pursuant to the Advisory Agreement, the Fund will pay the
Adviser, and the Adviser will accept as full compensation
therefor from the Fund, a fee at an annual rate of .25% up to $75
million and .20% over $75 million of each of the Portfolio's
average daily net assets considered separately on a per Portfolio
basis. The fee will be computed based on net assets on each day
and will be paid to the
<PAGE>
Adviser monthly. Such fee is attributable to each Portfolio, will
be a charge to that Portfolio and will be the obligation of such
Portfolio.
3. Capitalized Terms. From and after the date hereof, the term
-----------------
"Portfolios" as used in the Advisory Agreement will be deemed to
include the Target Maturity Portfolio (Feb 97), Target Maturity
Portfolio (May 97), Target Maturity Portfolio (Aug 97) and Target
Maturity Portfolio (Nov 97). Capitalized terms used herein and
not otherwise defined have the meanings ascribed to them in the
Advisory Agreement.
4. Miscellaneous. Except to the extent supplemented hereby, the
-------------
Advisory Agreement will remain unchanged and in full force and
effect, and is hereby ratified and confirmed in all respects as
supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of the
date and year first above written.
TRUST FOR CREDIT UNIONS
Attest: /s/ Rick Larson By: /s/ Marcia Beck
--------------------- -----------------------------
As its: President
------------------
GOLDMAN, SACHS & CO.
Attest: /s/ Rick Larson By: /s/ Alan A. Shuch
--------------------- -----------------------------
As its: General Partner
------------------
2
<PAGE>
EXHIBIT 99.6
Distribution Agreement
----------------------
AGREEMENT made this 10th day of May, 1988, between TRUST FOR CREDIT
UNIONS, a Massachusetts business trust (the "Fund"), and Callahan Financial
Services, Inc., a Delaware corporation (the "Distributor").
W I T N E S S E T H:
--------------------
WHEREAS, the Fund is engaged in business as an open-ended, diversified
management investment company and is so registered under the Investment Company
Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Fund is authorized to issue units of beneficial interest
("Units") in separate series with each such series representing the interests in
a separate portfolio of securities and other assets; and
WHEREAS, the Fund at present offers units of beneficial interest in
the Money Market Portfolio and the Government Securities Portfolio (the "Current
Portfolios"); and
WHEREAS, the Fund desires to retain the Distributor to act as
distributor to provide for the sale and distribution of Units of the Current
Portfolios and all other portfolios subsequently established by the Fund (such
portfolios together with the Current Portfolios being hereafter referred to as
the "Portfolios"), and the Distributor is willing to so render such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained and other good and valuable consideration, receipt whereof is
hereby acknowledged, the parties hereto agree as follows:
<PAGE>
1. Appointment of Distributor. The Fund hereby appoints the
---------------------------
Distributor as exclusive distributor of the Units of each of the Portfolios on
the terms and for the periods set forth in this Agreement. The Distributor
hereby accepts such appointment and agrees to render the services and perform
the duties set forth in this paragraph 1 and in paragraph 2 without
compensation.
2. Duties of Distributor. The following provisions shall apply to
----------------------
the Distributor's obligations as distributor under this Agreement:
(a) The Fund agrees to sell Units of each of the Portfolios through
the Distributor, as agent, from time to time during the term of this
Agreement upon the terms and at the current offering price described in the
Prospectus as that term is defined in the Advisory Agreement of even date
herewith between the Fund and Goldman, Sachs & Co. (the "Advisory
Agreement"). Such sales may, however, be suspended whenever in the
judgment of the Fund it is in its best interests to do so;
(b) The Distributor will arrange for the receipt of orders for the
purpose of Units of each Portfolio and will (and shall have the authority
to) arrange for the receipt and acceptance or rejection of such orders on
behalf of the Fund in accordance with the provisions of the Prospectus;
(c) The Distributor shall not be obligated to sell any certain number
of Units of any Portfolio;
(d) In performing its duties hereunder, the Distributor shall act in
conformity with the Trust Agreement, By-Laws, Prospectus and Registration
Statement (as such terms are defined in
-2-
<PAGE>
the Advisory Agreement) and with the instructions and directions of the Trustees
of the Fund, and will use its best efforts to comply with and conform to the
requirements of the 1940 Act, the Investment Advisers Act of 1940, as amended,
and all other applicable federal and state laws, regulations and rulings; and
(e) The services of the Distributor hereunder are not deemed
exclusive and the Distributor shall be free to render to similar services to
others so long as the Distributor's services hereunder are not impaired thereby.
3. Distribution Costs. During the term of this Agreement, the
-------------------
Distributor will pay the following costs:
(a) Costs of all sales presentations, mailings, advertising and any
other distribution efforts by the Distributor with respect to the Units of each
of the Portfolios; and
(b) Compensation of any personnel of the Distributor for activities
in connection with the distribution or sale of the Units of each of the
Portfolios.
4. Duration and Termination. This Agreement shall continue, unless
------------------------
sooner terminated as provided herein, until March 31, 1989 and thereafter shall
continue automatically for periods of one year so long as each such continuance
is approved at least annually (a) by the vote of a majority of the Trustees of
the Fund who are not parties to this Agreement or interested persons (as defined
in the 1940 Act) of any such party, cast in person at a meeting called for the
purpose of voting on such approval, and (b) by the Trustees of the Fund or by a
vote of a majority of the outstanding Units (as defined with respect to voting
securities in the 1940 Act) representing the interests in each Portfolio
affected
-3-
<PAGE>
thereby; provided, however, that this Agreement may be terminated by the Fund at
-------- -------
any time, without the payment of any penalty, on 60 days' written notice to the
Distributor or by the Distributor at any time, without the payment of any
penalty, on 60 days' written notice to the Fund. This Agreement will
automatically and immediately terminate in the event of its assignment (as
defined in the 1940 Act).
5. Amendment of Agreement. This Agreement may be amended by mutual
----------------------
consent, but the consent of the Fund must be approved by vote of a majority of
those Trustees of the Fund who are not parties to this Agreement or interested
persons (as defined in the 1940 Act) of any such party, cast in person at a
meeting called for the purpose of voting on such amendment. Any amendment to
this Agreement shall only be by written instrument which shall be signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought.
6. Indemnification.
----------------
(a) The Distributor shall not be liable for any error in judgment or
mistake of law or for any loss suffered by the Fund in connection with the
matters to which this Agreement, except a loss resulting from willful
misfeasance, bad faith or gross negligence in the performance of their
obligations and duties under this Agreement, or by reason of its reckless
disregard of its obligations and duties under this Agreement.
(b) The Fund hereby agrees to indemnify and hold harmless the
Distributor, its officers, directors and employees and each person who controls
the Distributor (collectively, the "Indemnified Parties") against any and all
losses, claims, damages,
-4-
<PAGE>
liabilities, joint or several, to which any such Indemnified Party may become
subject under the 1933 Act, the Securities Exchange Act of 1934, as amended, the
1940 Act or other federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of a material
fact or any omission or alleged omission to state a material fact required to be
stated or necessary to make the statements not misleading in (x) the Prospectus,
Additional Statement or the Registration Statement, (y) the advertisement or
sales literature authorized by the Fund for use in the offer and sale of Units
of any Portfolio, or (z) any application or other document filed in connection
with the qualification of the Fund or Units of any Portfolio under the Blue Sky
or securities laws of any jurisdiction, except insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any such untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with information furnished to
the Fund by or on behalf of the Distributor pertaining to or originating with
the Distributor for use in connection with any document referred to in clauses
(x), (y), or (z), or
(ii) subject to clause (i) above, the Distributor acting hereunder;
and the Fund will reimburse each Indemnified Party for any legal or other
expenses incurred by such Indemnified Party in connection with investigating or
defending any such loss, claim, damage, liability or action.
-5-
<PAGE>
(c) If the indemnification provided for in paragraph 6(b) is
available in accordance with the terms of such paragraph but is for any reason
held by a court to be unavailable from the Fund, the Fund shall contribute to
the aggregate amount paid or payable by the Fund and the Indemnified Parties as
a result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect (i) the relative
benefits received by the Fund and such Indemnified Parties in connection with
the operations of the Fund, (ii) the relative fault of the Fund and such
Indemnified Parties, and (iii) any other relevant equitable considerations. The
Fund and the Distributor agree that it would not be just and equitable if
contribution pursuant to this subparagraph (c) were determined solely by pro
rata allocation or any other method of allocation which does not take into
account the equitable considerations referred to above in this subparagraph (c).
The aggregate amount paid or payable as a result of the losses, claims, damages
or liabilities (or actions in respect thereof) referred to above in this
subparagraph (c) shall be deemed to include any legal or other expenses incurred
by the Fund and Indemnified Parties in connection with investigating or
defending any such loss, claim, damage, liability or action. No person guilty
of fraudulent misrepresentations (within the meaning of Section 11(f) of the
1933 Act) shall be entitled to contribution from any person who is not guilty of
such fraudulent misrepresentation.
(d) It is understood, however, that nothing in this Paragraph 6 shall
protect any Indemnified Party against, or entitle any Indemnified Party to
indemnification against or contribution
-6-
<PAGE>
with respect to, any liability to the Fund or its Unitholders to which such
Indemnified Party is subject, by reason of its willful misfeasance, bad faith or
gross negligence in the performance of its duties, or by reason of any reckless
disregard of its obligations and duties, under this Agreement or otherwise to an
extent or in a manner inconsistent with Section 17(i) of the 1940 Act.
7. Unitholder Liability. This Agreement is executed by or on behalf
--------------------
of the Fund and the obligations hereunder are not binding upon any of the
Trustees, officers or Unitholders of the Fund individually but are binding only
upon the Fund and its assets and property.
8. Status of Distributor as Independent Contractor. The Distributor
------------------------------------------------
shall for all purposes herein be deemed to be an independent contractor and
shall, unless otherwise expressly provided herein or authorized by the Trustees
of the Fund or the Adviser/Transfer Agent, respectively, from time to time, have
no authority to act for or represent the Fund or the Adviser/Transfer Agent in
any way or otherwise be deemed an agent of the Fund or the Adviser/Transfer
Agent.
9. Notices. Without limiting the other provisions hereof, notices
--------
and other writings delivered or mailed postage prepaid to the Fund, 4900 Sears
Tower, Chicago, Illinois 60606, Attention: President, with a copy to Donald C.
Shine, Nisen & Elliott, Suite 2500, 200 West Adams Street, Chicago, Illinois
60606 or to the Distributor, 1001 Connecticut Avenue, N.W., Suite 728,
Washington, D.C. 20036, Attention: Wendell A. Sebastian, or to such other
address as the Fund or the Distributor may hereafter specify by written notice
to the most recent address specified by the party
-7-
<PAGE>
to whom such notice is addressed, shall be deemed to have been properly
delivered or given hereunder to the respective addressee.
10. Miscellaneous. The captions in this Agreement are included for
--------------
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall be affected
thereby. This Agreement shall be construed in accordance with applicable
federal law and (except as to paragraph 7 hereof which shall be construed in
accordance with the laws of the Commonwealth of Massachusetts) the laws of the
State of Illinois and shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors, subject to paragraph 4
hereof.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed as of the day and year first above written.
TRUST FOR CREDIT UNIONS
Attest:
Donald C. Shine By: Gene R. Artemenko
- ------------------------ ------------------------
Secretary Chairman
CALLAHAN FINANCIAL SERVICES, INC.
Attest: Charles Filson
----------------
By: Wendell A. Sebastian
------------------------
-8-
<PAGE>
AMENDMENT NO. 1
---------------
TO
--
DISTRIBUTION AGREEMENT
----------------------
AMENDMENT NO. 1, made this 28th day of February, 1989, between TRUST FOR
CREDIT UNIONS, a Massachusetts business trust (the "Fund"), and CALLAHAN
FINANCIAL SERVICES, INC., a Delaware corporation (the "Distributor"), to
Distribution Agreement, dated May 10, 1988, between the Fund and the Distributor
(the "Distribution Agreement").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Fund and the Distributor have entered into a Distribution
Agreement and such parties desire to amend such Agreement; and
WHEREAS, paragraph 5 of the Distribution Agreement provides such Agreement
may be amended subject to the fulfillment of certain conditions and such
conditions have been fulfilled.
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter set forth, the parties hereto agree as follows:
1. Paragraph 1 of the Distribution Agreement is amended such that the word
"exclusive" is deleted from the first sentence of such Section. A new last
sentence of paragraph 1 shall read as follows:
<PAGE>
"The Distributor hereby acknowledges that the Fund and Goldman, Sachs & Co.
shall enter into a Distribution Agreement substantially identical to this
Agreement."
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
TRUST FOR CREDIT UNIONS
Attest:
/s/ Betsy J. Hoffman By: /s/ E.J. Whitman
- ----------------------- -------------------------
Secretary
CALLAHAN FINANCIAL
SERVICES, INC.
Attest:
John T. Roycroft By: Charles W. Filson
- ----------------------- -------------------------
-2-
<PAGE>
Distribution Agreement
----------------------
AGREEMENT made this 28th day of February, 1989, between TRUST FOR
CREDIT UNIONS, a Massachusetts business trust (the "Fund"), and Goldman, Sachs &
Co., a New York limited partnership (the "Distributor").
W I T N E S S E T H:
--------------------
WHEREAS, the Fund is engaged in business as an open-ended, diversified
management investment company and is so registered under the Investment Company
Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Fund is authorized to issue units of beneficial interest
("Units") in separate series with each such series representing the interests in
a separate portfolio of securities and other assets; and
WHEREAS, the Fund at present offers units of beneficial interest in
the Money Market Portfolio and the Government Securities Portfolio (the "Current
Portfolios"); and
WHEREAS, the Fund has previously appointed Callahan Financial
Services, Inc., a Delaware Corporation ("Callahan"), to act as exclusive
distributor to provide for the sale and distribution of Units of the Current
Portfolios and all other portfolios subsequently established by the Fund (such
portfolios together with the Current Portfolios being hereafter referred to as
the "Portfolios").
WHEREAS, the Fund desires to terminate the exclusive nature of the
distribution arrangement with Callahan and retain the Distributor to act as an
additional distributor to provide for the
<PAGE>
sale and distribution of Units of the Portfolios, and the Distributor is willing
to so render such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained and other good and valuable consideration, receipt of which is
hereby acknowledged, the parties hereto agree as follows:
1. Appointment of Distributor. The Fund hereby appoints the
---------------------------
Distributor as distributor of the Units of each of the Portfolios on the terms
and for the periods set forth in this Agreement. The Distributor hereby accepts
such appointment and agrees to render the services and perform the duties set
forth in this paragraph 1 and in paragraph 2 without compensation.
2. Duties of Distributor. The following provisions shall apply to
----------------------
the Distributor's obligations as distributor under this Agreement:
(a) The Fund agrees to sell Units of each of the Portfolios through
the Distributor, as agent, from time to time during the term of this
Agreement upon the terms and at the current offering price described in the
Prospectus as that term is defined in the Amended and Restated Advisory
Agreement of an even date herewith between the Fund and Goldman, Sachs &
Co. (the "Advisory Agreement"). Such sales may, however, be suspended
whenever in the judgment of the Fund it is in its best interests to do so;
(b) The Distributor will arrange for the receipt of orders for the
purchase of Units of each Portfolio and will (and shall have the authority
to) arrange for the receipt and
-2-
<PAGE>
acceptance or rejection of such orders on behalf of the Fund in accordance
with the provisions of the Prospectus;
(c) The Distributor shall not be obligated to sell any certain number
of Units of any Portfolio;
(d) In performing its duties hereunder, the Distributor shall act in
conformity with the Trust Agreement, By-Laws, Prospectus and Registration
Statement (as such terms are defined in the Advisory Agreement) and with the
instructions and directions of the Trustees of the Fund, and will use its best
efforts to comply with and conform to the requirements of the 1940 Act, as
amended, the Investment Advisers Act of 1940 and all other applicable federal
and state laws, regulations and rulings; and
(e) The services of the Distributor hereunder are not deemed
exclusive and the Distributor shall be free to render to similar services to
others so long as the Distributor's services hereunder are not impaired thereby.
3. Distribution Costs. During the term of this Agreement, the
-------------------
Distributor will pay the following costs:
(a) Costs of all sales presentations, mailings, advertising and any
other distribution efforts by the Distributor with respect to the Units of each
of the Portfolios; and
(b) Compensation of any personnel of the Distributor for activities
in connection with the distribution or sale of the Units of each of the
Portfolios.
4. Duration and Termination. This Agreement shall continue, unless
------------------------
sooner terminated as provided herein, until March 31, 1990 and thereafter shall
continue automatically for periods of one year so long as each such continuance
is approved at least
-3-
<PAGE>
annually (a) by the vote of a majority of the Trustees of the Fund who are not
parties to this Agreement or interested persons (as defined in the 1940 Act) of
any such party, cast in person at a meeting called for the purpose of voting on
such approval, and (b) by the Trustees of the Fund or by a vote of a majority of
the outstanding Units (as defined with respect to voting securities in the 1940
Act) representing the interests in each Portfolio affected thereby; provided,
--------
however, that this Agreement may be terminated by the Fund at any time, without
- -------
the payment of any penalty, on 60 days' written notice to the Distributor or by
the Distributor at any time, without the payment of any penalty, on 60 days'
written notice to the Fund. This Agreement will automatically and immediately
terminate in the event of its assignment (as defined in the 1940 Act).
5. Amendment of Agreement. This Agreement may be amended by mutual
----------------------
consent, but the consent of the Fund must be approved by vote of a majority of
those Trustees of the Fund who are not parties to this Agreement or interested
persons (as defined in the 1940 Act) of any such party, cast in person at a
meeting called for the purpose of voting on such amendment. Any amendment to
this Agreement shall only be by written instrument which shall be signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought.
6. Indemnification.
----------------
(a) The Distributor shall not be liable for any error in judgment or
mistake of law or for any loss suffered by the Fund in connection with the
matters to which this Agreement, except a loss resulting from willful
misfeasance, bad faith or gross negligence
-4-
<PAGE>
in the performance of their obligations and duties under this Agreement, or by
reason of its reckless disregard of its obligations and duties under this
Agreement.
(b) The Fund hereby agrees to indemnify and hold harmless the
Distributor, its officers, partners and employees and each person who controls
the Distributor (collectively, the "Indemnified Parties") against any and all
losses, claims, damages, liabilities, joint or several, to which any such
Indemnified Party may become subject under the 1933 Act, the Securities Exchange
Act of 1934, as amended, the 1940 Act or other federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of a material
fact or any omission or alleged omission to state a material fact required to be
stated or necessary to make the statements not misleading in (x) the Prospectus,
Additional Statement or the Registration Statement, (y) any advertisements or
sales literature authorized by the Fund for use in the offer and sale of Units
of any Portfolio, or (z) any application or other document filed in connection
with the qualification of the Fund or Units of any Portfolio under the Blue Sky
or securities laws of any jurisdiction, except insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any such untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with information furnished to
the Fund by or on behalf of the Distributor pertaining to or originating with
the Distributor for use in
-5-
<PAGE>
connection with any document referred to in clauses (x), (y), or (z), or
(ii) subject to clause (i) above, the Distributor acting hereunder;
and the Fund will reimburse each Indemnified Party for any legal or other
expenses incurred by such Indemnified Party in connection with investigating or
defending any such loss, claim, damage, liability or action.
(c) If the indemnification provided for in paragraph 6(b) is
available in accordance with the terms of such paragraph but is for any reason
held by a court to be unavailable from the Fund, the Fund shall contribute to
the aggregate amount paid or payable by the Fund and the Indemnified Parties as
a result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect (i) the relative
benefits received by the Fund and such Indemnified Parties in connection with
the operations of the Fund, (ii) the relative fault of the Fund and such
Indemnified Parties, and (iii) any other relevant equitable considerations. The
Fund and the Distributor agree that it would not be just and equitable if
contribution pursuant to this subparagraph (c) were determined solely by pro
rata allocation or any other method of allocation which does not take into
account the equitable considerations referred to above in this subparagraph (c).
The aggregate amount paid or payable as a result of the losses, claims, damages
or liabilities (or actions in respect thereof) referred to above in this
subparagraph (c) shall be deemed to include any legal or other expenses incurred
by the Fund and the Indemnified Parties in connection with the investigating or
defending any such loss, claim, damage, liability or action.
-6-
<PAGE>
No person guilty of fraudulent misrepresentations (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
(d) It is understood, however, that nothing in this Paragraph 6 shall
protect any Indemnified Party against, or entitle any Indemnified Party to
indemnification against or contribution with respect to, any liability to the
Fund or its Unitholders to which such Indemnified Party is subject, by reason of
its willful misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of any reckless disregard of its obligations and duties,
under this Agreement or otherwise to an extent or in a manner that is
inconsistent with Section 17(i) of the 1940 Act.
7. Unitholder Liability. This Agreement is executed by or on behalf
--------------------
of the Fund and the obligations hereunder are not binding upon any of the
Trustees, officers or Unitholders of the Fund individually but are binding only
upon the Fund and its assets and property.
8. Status of Distributor as Independent Contractor. The Distributor
------------------------------------------------
shall for all purposes herein be deemed to be an independent contractor and
shall, unless otherwise expressly provided herein or authorized by the Trustees
of the Fund or the Adviser/Transfer Agent, respectively, from time to time, have
no authority to act for or represent the Fund or the Adviser/Transfer Agent in
any way or otherwise be deemed an agent of the Fund or the Adviser/Transfer
Agent.
-7-
<PAGE>
9. Notices. Without limiting the other provisions hereof, notices
--------
and other writings delivered or mailed postage prepaid to the Fund, 4900 Sears
Tower, Chicago, Illinois 60606, Attention: President, with a copy to Donald C.
Shine, Nisen & Elliott, Suite 2500, 200 West Adams Street, Chicago, Illinois
60606 or to the Distributor, 4900 Sears Tower, Chicago, Illinois 60606-6303,
Attention: E.J. Whitman, Jr., or to such other address as the Fund or the
Distributor may hereafter specify by written notice to the most recent address
specified by the party to whom such notice is addressed, shall be deemed to have
been properly delivered or given hereunder to the respective addressee.
10. Miscellaneous. The captions in this Agreement are included for
--------------
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall be affected
thereby. This Agreement shall be construed in accordance with applicable
federal law and (except as to paragraph 7 hereof which shall be construed in
accordance with the laws of the Commonwealth of Massachusetts) the laws of the
State of Illinois and shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors, subject to paragraph 4
hereof.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed as of the day and year first above written.
-8-
<PAGE>
TRUST FOR CREDIT UNIONS
Attest:
Betsy Hoffman By: E.J. Whitman, Jr.
- -------------------- ------------------------
Secretary Chairman
Attest: Nancy Mucker By: Goldman, Sachs & Co.
- --------------------- --------------------
Goldman, Sachs & Co.
-9-
<PAGE>
EXHIBIT 99.8
(Executed Copy)
CUSTODIAN AGREEMENT
Agreement dated the 10th day of May, 1988 between Trust for Credit Unions,
a Massachusetts business trust (the "Fund"), and State Street Bank and Trust
Company, a Massachusetts banking corporation ("State Street").
1. APPOINTMENT OF CUSTODIAN. The Fund hereby appoints State Street
custodian of all securities (including repurchase agreements) and cash now owned
or hereafter acquired by the Fund, and State Street hereby accepts such
appointment, upon the terms and conditions set forth in this Agreement. The
Fund agrees promptly to deliver and pay, or cause to be delivered and paid, to
State Street, as custodian, all securities and cash now owned or hereafter
acquired by the Fund. The Fund further agrees to deliver to State Street a
certified or authenticated copy of its Agreement and Declaration of Trust, as
amended (the "Trust Agreement"), a copy of which is also on file with the
Secretary of The Commonwealth of Massachusetts, By-Laws and all amendments
thereto, a certified copy of the resolutions of the Trustees of the Fund
appointing State Street to act in the capacity of custodian as provided in this
Agreement and authorizing the execution and delivery of this Agreement, and
copies of such resolutions, contracts and other documents of the Fund as may be
required by State Street in the performance of its duties hereunder. It is
understood that (a) the Fund is an open-end, diversified management investment
company registered under the Investment Company Act of 1940, as amended ("1940
Act") as a series company initially with two portfolios but with the ability to
create additional portfolios (the initial portfolios and each such additional
portfolio being referred to herein as a "Portfolio" and all such portfolios
being collectively referred to herein as the "Portfolios"), and (b) pursuant to
section 18(f)(2) of the 1940 Act each series of the Fund's Units (as defined in
the Trust Agreement), representing the
1
<PAGE>
interest in a Portfolio, is preferred over all other series in respect of the
assets specifically allocated to such Portfolio.
2. CUSTODY OF CASH; BANK ACCOUNTS. State Street will hold all cash of
each Portfolio, other than cash held by such Portfolio in an account established
and maintained in accordance with Rule 17f-3 under the 1940 Act and other than
cash held in the "GSFG Joint Account" (which consists of a cash account and a
securities account established for the purchase of certain repurchase agreements
by the Fund and certain other funds advised by Goldman, Sachs & Co. which have
amended their respective custodian agreements with State Street to provide for
the establishment of such an account (collectively, the "Funds"), in the banking
department of State Street in a separate account or accounts in the name of such
Portfolio, subject only to draft or order by State Street in accordance with the
terms of this Agreement. State Street will hold the cash in the GSFG Joint
Account in its banking department in a separate account on behalf of the Funds
under the name "GSFG Joint Account", subject only to draft or order by State
Street in accordance with the terms of this Agreement. If and when authorized
by proper instructions in accordance with a vote of the majority of the Trustees
of the Fund, State Street shall open and maintain an additional account or
accounts in such other banks or trust companies as may be designated by such
instructions, provided that such account or accounts shall be in the name of
State Street in its capacity as custodian and subject only to its draft or order
in accordance with the terms of this Agreement. If requested by the Fund, State
Street shall furnish to the Fund, no later than (1) 20 calendar days after the
last business day of each month, a statement reflecting the current status of
its internal reconciliation of the closing balance as of that day in all bank
accounts described in this Section 2 to the balance shown in the daily cash
report for that day rendered to the Fund, and (b) within 5 calendar days after
receipt thereof the bank statement for such month with respect to the additional
account or accounts referred to in the preceding sentence. State Street is
hereby authorized to
2
<PAGE>
endorse and collect all checks, drafts or other orders for the payment of money
received by it for the account of any Portfolio.
State Street will make such arrangements with the Fund's investment
adviser/distributor as will enable State Street to make certain it receives the
Federal funds due to the Fund for Units of the Fund as may be issued or sold
from time to time by the Fund. In connection with such issuance of Units, State
Street shall make such arrangements with the Fund's investment
adviser/distributor as shall insure the timely notification to the Fund of the
receipt of Federal funds by State Street or such other banks or trust companies
referred to in the preceding paragraph by means of the Federal Reserve Wire
System or otherwise.
3. CUSTODY OF SECURITIES.
A. RECEIPT OF SECURITIES. State Street will hold in a separate
account, and physically separated at all times from those of any other persons,
firms, corporations or other Portfolios, pursuant to the provisions hereof, all
securities received by State Street for or for the account of a Portfolio,
except those securities received (either in certificate form or through an entry
crediting State Street's account at the Federal Reserve Bank with such
securities) in connection with repurchase agreements to be held in the GSFG
Joint Account and, if applicable, written evidence of such repurchase
agreements, which Account shall also be separate and physically separated at all
times from those of any other persons, firms, corporations or other Portfolios.
All such securities shall be held or disposed of by State Street for, and
subject at all times to the instructions of, the Fund pursuant to the terms of
this Agreement. State Street shall have no power or authority to assign,
hypothecate, pledge or otherwise dispose of any such securities, except pursuant
to proper instructions and only for the account of the Fund as set forth in
Section 5 hereof. Any securities delivered to State Street other than in bearer
form shall be properly endorsed and in form for transfer or shall be in the name
of State Street, the Fund or nominee of State Street or the Fund.
3
<PAGE>
B. REGISTERED NAMES; NOMINEES. State Street shall register
securities of the Fund held by it under this Agreement, other than those in
bearer form, in the name of the Fund or State Street or a nominee of the Fund or
State Street. Securities of the fund held by an agent appointed pursuant to
Section 8A hereof or a sub-custodian appointed pursuant to Section 8B hereof may
be registered in the name of such agent or sub-custodian or a nominee of such
agent or sub-custodian.
C. RECORD KEEPING AND INVENTORY. State Street shall maintain
records of all receipts, deliveries and locations of securities held by it under
this Agreement, together with a current inventory thereof, and shall conduct
periodic physical inspections of certificates representing such securities in
such manner as State Street shall determine to be advisable or the Fund may
reasonably request from time to time in order to verify the accuracy of such
inventory. With respect to securities held by an agent appointed pursuant to
Section 8A hereof or any sub-custodian appointed pursuant to Section 8B hereof,
State Street may rely upon certificates of the agent or sub-custodian as to its
holdings, it being understood that such reliance in no way relieves State Street
of its responsibilities under this Agreement. State Street will promptly report
to the Fund the results of such inspections, indicating any shortages or
discrepancies uncovered thereby,and will take appropriate action to remedy any
such shortages or discrepancies.
D. USE OF SECURITIES DEPOSITORIES. State Street may deposit all or
any part of the securities held by it hereunder and eligible therefor in the
book entry systems ("Depository Systems") covered by Rule 17f-4(b) under the
1940 Act; provided, however, that (a) State Street, each agent appointed
pursuant to Section 8A hereof and each sub-custodian appointed pursuant to
Section 8B hereof shall comply in all respect with clauses (d)(1) through (d)(4)
of Rule 17f-4 under the 1940 Act, (b) all books and records maintained by State
Street and each such agent and sub-custodian which relate to the Fund's
participation in such Depository Systems
4
<PAGE>
will be at all times during regular business hours be open to inspection by the
Fund's duly authorized officers, employees, agents and auditors, and the Fund
will be furnished with all the information in respect of the services rendered
to it as it may require, (c) in connection with the use of such Depository
Systems, State Street will be liable to the Fund for any losses or damages
relating to the failure to effectively enforce such rights as may exist against
such Depository Systems, agent or sub-custodian, (d) payment for securities
purchased for the account of any Portfolio or return of collateral for
securities loaned by any portfolio ("Loaned Securities") shall be made only upon
(i) receipt of advice from the Depository System that such purchased securities
or Loaned Securities have been transferred to the account (the "Book Entry
Account") contemplated by clause (d)(2) of Rule 17F-4 under the 1940 Act and
(ii) the making of an entry on the records of State Street or such agent or sub-
custodian, as the case may be, to reflect such payment or return and transfer
for the account of such Portfolio, and (e) transfer of securities sold or Loaned
Securities for the account of any Portfolio shall be made only upon (iii)
receipt of advice from the Depository System that payment for such securities or
collateral for such Loaned Securities has been transferred to the Book Entry
Account, and (iv) the making of an entry on the records of State Street or such
agent or sub-custodian, as the case may be, to reflect such transfer of sold
securities or Loaned Securities and transfer of payment or collateral for the
account of such Portfolio.
E. JOINT ACCOUNT PARTICIPATION. State Street acknowledges that each
Fund will participate in the income earned or accrued in the GSFG Joint Account
and in the custodial fees incurred in the operation of the Account on the basis
of the percentage of the total amount in the Account on any day represented by
its share of the Account and that each Fund will have an undivided interest in
the repurchase agreements in the Account equal to such percentage.
5
<PAGE>
4. DISBURSEMENTS OF CASH. Upon the receipt of proper instructions, State
Street shall make payments or disbursements of cash of each Portfolio held by it
or subject to its draft or order under this Agreement, insofar as such cash is
available, only for the following purposes:
A. PURCHASES GENERALLY. To pay for and receive securities purchased
for the account of such Portfolio, payment to be made only (a) upon receipt of
the securities by State Street (or any bank qualified under the 1940 Act to act
as custodian of the assets of a registered management investment company (a
"Qualified Bank") and appointed by State Street pursuant to Section 8A hereof as
State Street's agent for this purpose or appointed as sub-custodian pursuant to
Section 8B hereof), registered as provided in Section 3B hereof or in form for
transfer satisfactory to State Street, (b) in the case of a purchase effected
through a Depository System, in accordance with the conditions set forth in
Section 3D hereof, (c) in the case of repurchase agreements entered into between
such Portfolio and State Street, against receipt of advice from a Depository
System that the securities owned by State Street which are the subject of such
repurchase agreement have been transferred to the Book Entry Account, the making
of an entry on the records of State Street reflecting such transfer, and
issuance of written evidence of the agreement by State Street to repurchase such
securities from such Portfolio, (d) in the case of repurchase agreements entered
into between such Portfolio and a person other than State Street, against
delivery of the securities which are the subject of such repurchase agreement in
certificate form or receipt of advice from a Depository System that such
securities have been transferred to the Book Entry Account, the making of any
entry on the records of State Street reflecting such transfer, and receipt of
written evidence of the agreement by such person to repurchase such securities
from such Portfolio, or (e) for transfer to an account of the fund in any bank,
whether domestic or foreign; such transfer may be affected prior to receipt of a
confirmation from a broker and/or the applicable bank pursuant to Proper
Instructions from the Fund as defined in Section 9. All securities accepted by
6
<PAGE>
State Street shall be accompanied by payment of, or a "due bill" for, any
dividends, interest or other distributions of the issuer, due the purchaser. In
any and every case of a purchase of securities for the account of such Portfolio
where payment is made by State Street in advance of receipt of the securities
purchased, State Street shall be absolutely liable to the Fund for such
securities to the same extent as if the securities had been received by State
Street, except that in the case of repurchase agreements entered into by such
Portfolio with a bank which is a member of the Federal Reserve System State
Street may transfer funds to the account of such bank prior to the receipt of
written evidence that the securities subject to such repurchase agreements have
been transferred by book-entry into the Book Entry Account, provided that such
securities have in fact been so transferred by book-entry. Repurchase
agreements purchased by GSFG Joint Account shall also be governed by the
provisions of this Section 4A.
B. DIVIDENDS AND DISTRIBUTIONS. To release or otherwise apply cash
for the payment of dividends or other distributions to Unitholders of such
Portfolio which are payable in cash.
C. DISBURSEMENTS AND LIABILITIES. To make or cause to be made
disbursements for the payment on behalf of the Fund with respect to such
Portfolio of interest, taxes, investment advisory and transfer agency fees and
operating expenses, including registration and qualification costs and other
expenses of issuing and selling Units of such Portfolio or changing its capital
structure, whether or not such expenses shall be in whole or in part capitalized
or treated as deferred expenses.
D. REDEMPTIONS OF FUND UNITS. Subject to the Declaration of Trust,
the Fund's then current Prospectus (which term, as used herein, shall be deemed
to include the Fund's then current Statement of Additional Information) and
applicable resolutions of the Fund's Trustees, to make funds available in
accordance with the then current Prospectus for payment to
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Unitholders who have delivered to the Fund a request for redemption of their
Units by the Fund pursuant to such Prospectus.
E. GSFG JOINT ACCOUNT. To transfer cash to the GSFG Joint Account.
F. SECURITIES LOANS. To return cash held as collateral for Loaned
Securities, such return to be made only (a) upon receipt of the Loaned
Securities by State Street (or any Qualified Bank appointed by State Street
pursuant to Section 8A hereof as State Street's agent for this purpose or
appointed as sub-custodian pursuant to Section 8B hereof), registered as
provided in Section 3B hereof or in form for transfer satisfactory to State
Street or (b) in case the return of the Loaned Securities is to be effected
through a Depository System, in accordance with the conditions set forth in
Section 3D hereof. All Loaned Securities accepted by State Street shall be
accompanied by payment of, or a "due bill" for, any dividends, interest or other
distributions of the issuer due such Portfolio. In any and every case of a
return of Loaned Securities where the return of collateral is made by State
Street in advance of receipt of the Loaned Securities, State Street shall be
absolutely liable to the Fund for such Loaned Securities to the same extent as
if the securities had been received by State Street, except that in the case of
securities loans entered into by such Portfolio with a bank which is a member of
the Federal Reserve System, State Street may transfer collateral to the account
of such bank prior to the receipt of written evidence that the Loaned Securities
have been transferred by book-entry into the Book Entry Account, provided that
such Loaned Securities have in fact been so transferred by book-entry.
G. OTHER PURPOSES. To make or cause to be made disbursements for
any other purpose which is declared in such instructions to be a proper trust
purpose; provided, however,that before making any such disbursement State Street
shall have received a copy of a resolution of the Trustees certified by the
Secretary of the Fund specifying the amount of such disbursement,
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setting forth the purpose for which such disbursement is to be made, declaring
such purpose to be a proper trust purpose and naming the person(s) to whom the
disbursement is to be made.
5. RELEASE AND DELIVERY OF SECURITIES. State Street shall have the sole
power to release or deliver any securities of a Portfolio held by it pursuant to
this Agreement, including securities held in the GSFG Joint Account. The term
"account of such Portfolio" as used in this Section 5 shall also be deemed to
include the GSFG Joint Account. Upon receipt of proper instructions, State
Street will transfer, exchange or deliver securities held by it hereunder only
for the following purposes:
A. SALES. Upon receipt of payment therefor, to deliver securities
which have been sold for the account of such Portfolio. All such payments shall
be made in Federal funds except when the Fund's investment adviser has advised
State Street that such payments are to be made in clearing house or other funds,
in which event payment shall be made in clearing house or other funds.
B. REDEMPTION OR MATURITY. To deliver securities owned for the
account of such Portfolio to the issuer thereof or its agent when such
securities are called, redeemed, retired or otherwise become payable; provided,
that in any such case, the cash or other consideration payable in respect
thereof is to be delivered to State Street.
C. CHANGES OF NAME AND DENOMINATION. To deliver securities owned
for the account of such Portfolio to the issuer thereof or its agent for
transfer into the name of the Fund or State Street or a nominee of either, or
for exchange for a different number of bonds, certificates, or other evidence
representing the same aggregate face amount or number of units bearing the same
interest rate, maturity dates and call provisions, if any; provided, that in any
such case, the new securities are to be delivered to State Street.
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D. STREET DELIVERY. Upon the sale of such securities for the account
of the Fund, to the broker or its clearing agent, against a receipt, for
examination in accordance with "street delivery" custom; provided that in any
such case, State Street shall have no responsibility or liability for any loss
arising from the delivery of such securities prior to receiving payment for such
securities except as may arise from State Street's own negligence or willful
misconduct.
E. SECURITIES AS COLLATERAL FOR BORROWINGS. To deliver securities
owned for the account of such Portfolio for the purpose of pledge or
hypothecation to secure any loan incurred by the Fund, provided that securities
shall be released only upon payment to State Street of the monies borrowed,
except that in cases where additional collateral is required to secure a
borrowing already made, subject to proper prior authorization, further
securities may be delivered for that purpose. Upon receipt of proper
instructions, State Street shall pay such loan upon redelivery to it of the
securities pledged or hypothecated therefor and upon surrender of the note or
notes evidencing the loan.
F. SECURITIES LOANS.
(i) To deliver securities owned for the account of such Portfolio for
the purpose of making a loan of such securities to another person, provided that
the securities shall be delivered only: (a)(I) upon receipt by State Street (or
any Qualified Bank appointed by State Street pursuant to Section 8A hereof as
State Street's agent for this purpose or appointed as sub-custodian pursuant to
Section 8B hereof) of the collateral for such loan, registered (in the case of
collateral in the form of securities) as provided in Section 3B hereof or in
form for transfer satisfactory to State Street or (II) in case the transfer of
collateral is effected through a Depository System, in accordance with the
conditions set forth in Section 3D hereof and (b) upon receipt of written
evidence of the agreement by the person to whom the securities are being loaned
that such person is borrowing such securities from such Portfolio. In any and
every case of a loan of
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securities for the account of such Portfolio where transfer of the Loaned
Securities is made by State Street in advance of receipt of the collateral,
State Street shall be absolutely liable to the Fund for such collateral to the
same extent as if the collateral had been received by State Street, except that
in the case of loans of securities entered by such Portfolio with a bank which
is a member of the Federal Reserve System, State Street may transfer the Loaned
Securities to the account of such bank prior to the receipt of written evidence
that the collateral for such loan of securities has been transferred by book-
entry into the Book Entry Account, provided that such collateral has in fact
been so transferred by book-entry.
(ii) To return securities held as collateral for loans of securities
by such Portfolio, provided that such return is made only in accordance with the
conditions set forth in Section 4F hereof.
G. EXCHANGES, DEPOSITS, TENDERS, ETC. To exchange securities or
interim receipts or temporary securities held by it or by an agent appointed
pursuant to Section 8A hereof or any sub-custodian appointed pursuant to Section
8B hereof for the account of such Portfolio for other securities alone or for
other securities and cash, and to expend cash, insofar as cash is available, in
connection with any merger, consolidation, reorganization, recapitalization,
conversion or in connection with the exercise of subscription or purchase
rights, or otherwise; to deposit any such securities and cash in accordance with
the terms of any reorganization or protective plan or otherwise, and to deliver
securities to the designated depository or other receiving agent in response to
tender offers or similar offers to purchase received in writing; provided that:
(i) except as directed by proper instructions received in timely
fashion for State Street to act thereon prior to any expiration date
(which shall be presumed to be three business days prior to such date
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unless State Street has advised the Fund of a different period) and
giving full details of the time and method of submitting securities in
response to any tender or similar offer, exercising any subscription
or purchase right or making any exchange pursuant to this Section 5G
and subject to State Street having fulfilled its obligations under
Section 7C hereof pertaining to notices or announcements, State Street
shall be under no obligation regarding any tender or similar offer,
subscription or purchase right or exchange except to exercise its best
efforts;
(ii) when such securities are in the possession of an agent
appointed pursuant to Section 8A hereof, the proper instructions
referred to in the preceding clause (i) must be received by State
Street in timely enough fashion (which shall be presumed to be four
business days unless State Street has advised the Fund of a different
period) for State Street to notify the agent in sufficient time to
permit such agent to act prior to any expiration date; and
(iii) when the securities are in the possession of a sub-
custodian appointed to Section 8B hereof, the proper instructions must
be received by the sub-custodian in timely enough fashion (which shall
be presumed to be three business days unless the sub-custodian has
advised the Fund of a different period) to permit the sub-custodian to
act prior to any expiration date.
H. OTHER PURPOSES. To release or deliver any securities held by it
for the account of such Portfolio for any other purpose which such instructions
declare to be a proper trust purpose; provided, however, that before making any
such release or delivery State Street shall have received a copy of a resolution
of the Trustees certified by the Secretary of the Fund specifying the securities
to be delivered, setting forth the purpose for which
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such release or delivery is to be made, declaring such purpose to be a proper
trust purpose and naming the person(s) to whom such release or delivery is to be
made.
6. RECORDS; ACCOUNTS AND REPORTING.
A. RECORDS. State Street shall create, maintain and retain all
records relating to its activities and obligations under this Agreement in such
manner as will enable the Fund and State Street to meet their respective
obligations under: (i) the 1940 Act, particularly Sections 30 and 31 thereof,
and the rules and regulations thereunder, including the preparation and filing
of all required periodic and other reports, (ii) applicable Federal and State
tax laws, and (iii) any other law or administrative rule or procedure which may
be applicable to the Fund or State Street. All records maintained by State
Street in connection with the performance of its duties under this Agreement
will remain the property of the Fund, shall be returned to the Fund promptly
upon request and, in the event of termination of this Agreement, will be
delivered in accordance with Section 14 hereof.
B. ACCOUNTS AND REPORTINGS. State Street shall keep the books of
account for the Fund and each of its Portfolios, including all books necessary
to permit prompt determinations of the federal tax status of the Fund, each such
Portfolio and the dividends and other distributions declared and/or paid thereby
as and to the extent provided in or contemplated by the Fund's Prospectus as in
effect from time to time (such determinations being collectively referred to
herein as "Tax Determinations"). State Street shall render statements or copies
thereof and shall make Tax Determinations, from time to time as requested by the
President, the Treasurer or the investment adviser of the Fund, such statements
to include interim monthly and complete quarterly, semi-annual and annual
financial statements, which contain, among other things, a list of the
securities for which State Street is accountable to the Fund under this
Agreement as of the end of each month, and a list of all security transactions
that remain unsettled at such time. It is understood and agreed that the Fund
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may request and State Street shall provide each business day a list of the
securities for which State Street is accountable to the Fund under this
Agreement as of the end of such day. In addition, State Street shall promptly
notify the Fund's investment adviser by telephone on each day when there has
been a failure to timely settle any security transaction on that day.
C. ACCESS TO RECORDS. Without limiting Section 3D hereof, subject
to security requirements of State Street applicable to its own employees having
access to similar records with State Street and such regulations as to the
conduct of such matters as may be reasonably imposed by State Street after prior
consultation with an officer of the Fund or its investment adviser, the books
and records of State Street pertaining to its actions under this Agreement shall
be open to inspection and audit at reasonable times by the Trustees of,
attorneys for, and auditors employed by, the Fund.
D. COOPERATION WITH THE FUND AND ITS AUDITORS. State Street shall
cooperate with the Fund and the Fund's independent public accountants in
connection with: (i) the preparation of reports to Unitholders of the Fund, to
the Securities and Exchange Commission (including all required periodic and
other reports), to State securities commissioners, and to others, (ii) annual
and other audits of the books and records of the Fund, and (iii) other matters
of a like nature. State Street shall take all reasonable action necessary for
the Fund to obtain from year to year unqualified opinions from the Fund's
independent public accountants with respect to State Street's activities
hereunder in connection with the preparation of the aforementioned reports and
audits.
7. ADDITIONAL DUTIES OF STATE STREET.
A. COLLECTIONS. Unless otherwise directed by proper instructions,
State Street shall collect, receive and deposit in the bank account or accounts
maintained pursuant to Section 2 hereof all income, principal and other payments
in respect of the securities held by it under this Agreement and do all other
things
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necessary or proper in connection with the collection of such income, principal
and other payments. Without limiting the generality of the foregoing, State
Street shall:
(i) present for payment on the date of payment all coupons and
other items requiring presentation;
(ii) present for payment all securities which may mature or be
called, redeemed, retired or otherwise become payable on the date such
securities become payable;
(iii) endorse and deposit for collection, in the name of the
Fund, checks, drafts or other negotiable instruments on the same day
as received;
(iv) execute ownership and other certificates and affidavits for
all Federal and State tax purposes in connection with the collection
of income; and
(v) notify the Fund as soon as reasonably practicable whenever
income, principal or other payments due on securities are not
collected in due course.
In any case in which State Street does not receive any such due and
unpaid income, principal or other payment within a reasonable time after it has
made proper demands for the same (which shall be presumed to consist of at least
three demand letters and at least one telephonic demand), it shall so notify the
Fund in writing, including copies of all demand letters, any written responses
thereto, and memoranda of telephonic demands and oral responses to written and
telephonic demands, and await proper instructions. State Street shall not be
obliged to take legal action for collection unless and until reasonably
indemnified to its satisfaction. State Street shall, in addition, notify the
Fund as soon as reasonably practicable whenever income due on securities is not
collected in due course.
B. DISTRIBUTIONS, RIGHTS, ETC. State Street shall receive and
collect all distributions, rights and other items of like nature in respect of
securities held by it under this
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Agreement and deal with the same pursuant to proper instructions relative
thereto.
C. PROXIES, NOTICES, VOTING, ETC. State Street shall promptly
deliver or mail to the Fund all forms of proxies and all notices of meetings,
calls, maturities, tender offers, exchange offers and expirations of rights and
any other notices, consents, or announcements affecting or relating to
securities held by State Street, its agents appointed pursuant to Section 8A
hereof and all sub-custodians appointed pursuant to Section 8B hereof, and upon
receipt of proper instructions, State Street shall execute and deliver or cause
its nominee to execute and deliver such proxies or other authorizations as may
be required. Neither State Street, such agents or sub-custodians, nor their
respective nominees shall vote upon any of the securities or execute any proxy
to vote thereon or give any consent or take any other action with respect
thereto (except as otherwise herein provided) unless directed to do so by proper
instructions.
D. VALUATIONS; NET INCOME COMPUTATION. Unless otherwise directed by
proper instructions, State Street shall compute and determine, as of the time
and on those days specified in the Fund's then current Prospectus, the net asset
value of a Unit of each Portfolio, such computation and determination to be made
in accordance with the Fund's then current Prospectus by a vice president,
assistant vice president or assistant secretary of State Street, and shall
promptly notify the Fund of the result of such computation and determination.
In determining market values to be used in computing such net asset value State
Street shall rely upon security valuations received by telephone or otherwise
through the Fund's investment adviser or in a manner otherwise designated by
proper instructions. In addition, in computing such net asset value State
Street may rely upon information or directions furnished to it by the Trustees,
any officer or the investment adviser of the fund relative to: (i) liabilities,
expense accruals and reserves of the Fund and (ii) the fair value of any right
or other property of the Fund. State Street's
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liability to the Fund for the accuracy of quotations received from any source
designated by proper instructions will be no greater than the liability which
such source, or its provider, has to State Street.
Unless advised otherwise by proper instructions, State Street shall also
calculate each day the net investment income, short and long term capital gain
income and other income of such Portfolio for such day and shall promptly advise
the Fund of the results of such calculations. Such calculations shall be made
in accordance with the Fund's then current Prospectus.
E. NONDISCRETIONARY DETAILS. In general, State Street shall attend
to all nondiscretionary details in connection with the sale, exchange,
substitution, purchase, transfer or other dealing with securities or property of
the Fund except as otherwise from time to time directed by proper instructions.
F. PROCEEDS OF SALE OF UNITS OF FUND. Upon receipt of funds for the
purchase of Units of any Portfolio, State Street shall promptly deposit the
purchase price in the account or accounts maintained pursuant to Section 2
hereof and notify the Fund when such action has been completed and such funds
constitute Federal funds.
8. APPOINTMENT OF AGENTS AND SUB-CUSTODIANS.
A. APPOINTMENT OF AGENTS. State Street, as custodian, may at any
time or times appoint (and may at any time remove) any other Qualified Bank as
its agent to carry out such of the provisions of this Agreement as State Street
may from time to time direct, provided that the appointment of such agent shall
not relieve State Street of any of its responsibilities under this Agreement.
B. APPOINTMENT OF SUB-CUSTODIAN. State Street, as custodian, may
from time to time employ one or more Qualified Banks as sub-custodians, but only
in accordance with the terms and
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conditions set forth in a resolution of the Trustees of the Fund authorizing the
appointment of each particular sub-custodian, it being understood and agreed
that: (i) State Street shall have no more responsibility or liability to the
Fund on account of any actions or omissions of any sub-custodian so employed
than such sub-custodian has to State Street; and (ii) the responsibility or
liability of the sub-custodian to State Street shall conform to the resolution
of the Trustees of the Fund authorizing the appointment of the particular sub-
custodian.
9. PROPER INSTRUCTIONS; RELIANCE ON DOCUMENTS.
A. PROPER WRITTEN INSTRUCTIONS. State Street shall be deemed to
have received proper instructions upon receipt of written instructions
(including receipt by telecopier, tested telegram, cable or Telex), which may be
continuing instructions, signed by a majority of the Trustees of the Fund or by
not less than two of the persons the Trustees shall have from time to time
authorized to give the particular class of instructions in questions. Different
persons may be authorized to give instructions for different purposes,and
instructions may be general or specific in terms. A certified copy of a by-law,
resolution or action of the Trustees of the Fund may be received and accepted by
State Street as conclusive evidence of the authority of any such persons to act
and may be considered to be in full force and effect until receipt of written
notice (or oral notice followed by written confirmation within seven days) to
the contrary.
B. PROPER ORAL INSTRUCTIONS. The Fund may authorize one or more
designated persons to issue oral (such term as used herein including, without
limitation, telephonic) instructions, specifying the class or classes of
instructions that may be so issued, in which case the Fund shall deliver to
State Street resolutions of the Trustees to such effect. Such instructions when
given in accordance with the provisions hereof and such resolution shall be
deemed proper instructions. Two or more of the persons designated by the
Trustees to give oral instructions shall promptly confirm such oral instructions
in writing to State Street; but
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State Street shall be under no obligation to insist upon delivery to it of any
such written confirmation or to investigate the reason for its nonreceipt of any
such written confirmation. In case of conflict between oral instructions given
by a person designated in the resolution of the Trustees referred to in the
first sentence of this Section 9B and any written proper instructions, the
instructions most recently received by State Street shall prevail, and in case
of conflict between oral instructions given by a person designated in such
resolution and any written confirmation or purported confirmation of oral
instructions, such written confirmation shall prevail; provided that any
transaction initiated by State Street pursuant to such oral instructions, may,
but need not, be completed by State Street notwithstanding State Street's
receipt of conflicting subsequent proper instructions or written confirmation or
purported confirmation subsequent to State Street's initiation of such
transaction.
C. COMPLIANCE WITH TRUST AGREEMENT. In performing its duties
generally, and more particularly in connection with the purchase, sale and
exchange of securities made by or for the Fund, State Street may take cognizance
of the provisions of the Trust Agreement and By-Laws of the Fund as from time to
time amended; however, except as otherwise expressly provided herein, it may
assume unless and until notified in writing to the contrary that instructions
purporting to be proper instructions received by it are not in conflict with or
in any way contrary to any provision of the Trust Agreement and By-Laws of the
Fund, as from time to time amended, or resolutions or proceedings of the
Trustees of the Fund.
D. RELIANCE ON DOCUMENTS. So long as and to the extent that it is
in the exercise of reasonable care, State Street, as custodian: (i) shall not
be responsible for the title, validity or authenticity of any security or
evidence of title thereto received by it or delivered by it pursuant to this
Agreement, (ii) shall be protected in acting upon any document referred to in
Section 9A hereof reasonably believed by it to be genuine and to have been
properly executed in accordance with such Section 9A, and (iii)
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shall, except as otherwise provided in this Agreement, be entitled to receive as
conclusive proof of any fact or matter required to be ascertained by it
hereunder a certificate signed by any officer of the Fund or its investment
adviser or any other person authorized by the Trustees of the Fund.
10. RELIANCE ON ADVICE OF COUNSEL; INDEMNITY.
A. RELIANCE ON THE ADVICE OF COUNSEL. State Street, as custodian,
shall be entitled to receive, and act upon, advice of counsel (which counsel
shall be selected by State Street with reasonable care based on such counsel's
professional competence and reputation or shall be counsel for the Fund) and
shall be without liability for any action reasonably taken pursuant to such
advice, provided that such action taken is not in violation of applicable
Federal or State laws or regulations and is taken in good faith and without
negligence.
B. INDEMNITY. State Street shall be indemnified and held harmless
by the Fund for any action taken by it in carrying out the terms and provisions
of this Agreement if done in good faith and without negligence or misconduct on
State Street's part; provided that (i) State Street shall not be entitled to
indemnification in those situations where State Street is liable to the Fund
pursuant to Section 3D(c) hereof, (ii) State Street will use all reasonable care
to identify and notify the Fund promptly concerning any situation which
presents, or appears likely to present, the probability of such a claim for
indemnification against the Fund, and (iii) in any case in which the Fund may be
asked to so indemnify and hold harmless State Street, the Fund shall have been
fully and promptly advised for all pertinent facts concerning the situation in
question. The Fund, using counsel of its choice, shall have the option to
defend State Street against any claim which may be a subject of this
indemnification and shall be given timely notice by State Street to permit it to
exercise that option as early as possible with respect to such claim. In the
event the Fund so elects to defend State Street, the Fund will notify State
Street, and thereupon the Fund shall take over
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complete defense of the claim, and, after it does so, State Street shall incur
no further legal or other expenses for which it shall be entitled to
indemnification from the Fund. State Street shall in no case confess any claim
or make any compromise in any case in which the Fund will be asked to indemnify
State Street, except with the Fund's prior written consent.
If the Fund requires State Street to advance cash or securities for
any purpose or in the event that State Street or its nominee shall incur or be
assessed any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Agreement, except such as may arise from
its or its nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of the Fund shall be
security therefor and should the Fund fail to repay State Street promptly, State
Street shall be entitled to utilize available cash and to disposes of Fund
assets to the extent necessary to obtain reimbursement.
11. COMPENSATION; REIMBURSEMENT. The Fund shall pay to State Street,
as custodian, the compensation and expense reimbursement set forth in the
schedule of even date herewith delivered by State Street to the Fund until a
different compensation and expense reimbursement schedule shall be agreed upon
in writing between the parties (including the Fund's ratable share of the
compensation and expense reimbursement with regard to the GSFG Joint Account
based on the percentage of the total amount in the Account on any day
represented by its share of the Account).
12. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT. This Agreement
shall become effective as of the date of its execution, shall continue in full
force and effect until terminated as hereinafter provided, may be amended at any
time by mutual agreement of the parties hereto and may be terminated by either
party by an instrument in writing delivered or mailed, postage prepaid, to the
other party, such termination to take effect not sooner than 120 days after the
date of such delivery or mailing;
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provided that the Fund shall not amend or terminate this Agreement in
contravention of any applicable Federal or State laws or regulations, or any
provision of the Trust Agreement or the Fund's By-Laws, as the same may from
time to time be amended. The Fund may at any time by action of its Trustees
substitute another bank or trust company for State Street by giving notice as
specified above to State Street. Upon termination of this Agreement the Fund
shall pay to State Street such compensation as may be due as of the date of such
termination in accordance with Section 11 hereof.
13. INTERPRETATIVE AND ADDITIONAL PROVISIONS. In connection with the
operation of this Agreement, State Street and the Fund may agree from time to
time, by written instrument signed by both parties, on such provisions
interpretative of or in addition to the provisions of this Agreement as may in
their joint option be consistent with the general tenor of this Agreement,
provided that no such interpretative or additional provisions shall contravene
any applicable Federal or State laws or regulations, or any provisions of the
Trust Agreement or the Fund's By-Laws, as the same may from time to time be
amended. No interpretative or additional provisions made as provided in the
preceding sentence shall be deemed to be an amendment of this Agreement.
14. SUCCESSOR CUSTODIAN.
A. APPOINTMENT OF SUCCESSOR BY FUND. If a successor custodian is
appointed by resolution of the Trustees of the Fund and a certified copy of such
resolution is delivered to State Street, State Street shall, upon termination of
this Agreement or substitution of such successor for State Street, deliver to
such successor custodian at the office of State Street, duly endorsed and in
proper form for transfer, all securities then held by State Street hereunder (or
by an agent or sub-custodian of State Street) and all funds or other property of
the Fund deposited with or held by State Street hereunder (or by any agent or
sub-custodian of State Street).
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B. DELIVERY PURSUANT TO UNITHOLDER RESOLUTION. In the event that
this Agreement is to be terminated but no new custodian can be found by the
Fund, the Fund shall, before authorizing the delivery of such securities, funds
and other property to anyone other than a successor custodian, submit to its
Unitholders the question of whether the fund shall be liquidated or shall
function without a custodian. Upon approval by the Unitholders for the Fund to
liquidate or function without a custodian State Street shall, in like manner at
its office, upon receipt of a certified copy of a resolution of the Unitholders
of the Fund deliver such securities, funds and other property in accordance with
such resolution.
C. SELECTION OF SUCCESSOR BY STATE STREET. In the event that this
Agreement is terminated and no certified resolution of the Trustees of the Fund
appointing a successor custodian or certified copy of a resolution of the
Unitholders shall have been delivered to State Street on or before the date when
such termination shall become effective, then State Street shall have the right
to deliver to a bank or trust company doing business in Boston, Massachusetts,
of its own selection, having an aggregate capital, surplus, and undivided
profits, as shown by its last published report, of not less than $100 million,
all securities, funds, property and instruments of the Fund held by State Street
under this Agreement (or any agent or sub-custodian of State Street) and all
instruments held by State Street (or such agent or sub-custodian) relative
thereto. Thereafter, such bank or trust company shall be the successor
custodian to State Street under this Agreement.
D. CONTINUATION AFTER TERMINATION. In the event that securities,
funds, and other property of the Fund remain in the possession of State Street
after the date of termination hereof owing to failure of the Fund to procure the
certified copy of a resolution of its Unitholders above referred to or of the
Trustees to appoint a successor custodian, State Street shall be entitled to
fair compensation for its services during such period and the
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provisions of this Agreement relating to the duties and obligations of State
Street shall remain in full force and effect.
15. CIRCULATION OF PRINTED MATTER. The Fund shall not circulate any
printed matter which contains any reference to State Street without the prior
written approval of State Street, excepting solely such printed matter as merely
identifies State Street as custodian. The Fund will submit printed matter
requiring approval to State Street in draft form, allowing sufficient time for
review by State Street and its counsel prior to any deadline for printing.
16. COMMUNICATIONS. Notices and other writings delivered or mailed
postage prepaid to the Fund in care of Goldman, Sachs & Co., Funds Group, 4900
Sears Tower, Chicago, Illinois 60606, Attention: E.J. Whitman, Jr., or to State
Street at 1776 Heritage Drive, North Quincy, Massachusetts 02171, or to such
other address as the Fund or State Street may hereafter specify by written
notice to the most recent address specified by the party to whom such notice is
addressed, shall be deemed to have been properly delivered or given hereunder to
the respective addressee.
17. GENERAL. This Agreement shall be binding on and shall inure to the
benefit of the Fund and State Street and their respective successors, shall be
construed according to the laws of The Commonwealth of Massachusetts and may be
executed in two or more counterparts, each of which shall be deemed an original.
This Agreement may not be assigned by State Street without the written consent
of the Fund authorized and approved by a resolution of the Trustees. The
headings in this Agreement have been inserted for convenience of reference only
and shall not affect the meaning or interpretation of this Agreement.
18. UNITHOLDER LIABILITY. This Agreement is executed by or on behalf of
the Fund and the obligations hereunder are not binding upon any of the Trustees,
officers or Unitholders of the Fund
24
<PAGE>
individually but are binding only upon the Fund and its assets and property.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed as of the day and year first above written.
TRUST FOR CREDIT UNIONS
ATTEST:
By Donald C. Shine By Gene R. Artemenko
---------------------- -------------------------
As its Secretary As its Chairman
------------------- -----------------
ATTEST:
State Street Bank & Trust State Street Bank & Trust
- --------------------------- ----------------------------
By A. Siegel By Thomas Swedlund
----------------------- -------------------------
As its Assistant Secretary As its Vice President
--------------------- -----------------------
25
<PAGE>
AMENDMENT TO THE CUSTODIAN AGREEMENT
AGREEMENT made by and between State Street Bank and Trust Company (the
"Custodian") and Trust for Credit Unions (the "Fund").
WHEREAS, the Custodian and the Fund are parties to a Custodian Agreement
dated May 10, 1988 (as amended, the "Custodian Agreement") governing the terms
and conditions under which the Custodian maintains custody of the securities and
other assets of the Fund;
WHEREAS, the Fund is an open-end management investment company registered
under the Investment Company Act of 1940 ("1940 Act") with authority to operate
as a series company with multiple portfolios, and pursuant to section 18(f)(2)
of the 1940 Act each series of the Fund's Units, representing the interest in a
portfolio, is preferred over all other series in respect of the assets
specifically allocated to such portfolio; and
WHEREAS, the Custodian and the Fund desire to amend the Custodian Agreement
to provide for the maintenance of the Fund's foreign securities, and cash
incidental to transactions in such securities, in the custody of certain foreign
organizations acting as subcustodians in conformity with the requirements of
Rule 17f-5 under the 1940 Act;
NOW THEREFORE, in consideration of the premises and covenants contained
herein, the Custodian and the Fund hereby amend the Custodian Agreement by the
addition of the following terms and conditions;
1. APPOINTMENT OF FOREIGN SUBCUSTODIANS. The Fund hereby authorizes and
instructs the Custodian to employ as subcustodians for the Fund's securities and
other assets maintained outside the United States the foreign banking
institutions, foreign trust companies, foreign securities depositories, and
foreign clearing agencies designed at Schedule A hereto ("foreign
subcustodians"). Upon receipt of "Proper Instructions", as defined in Section 9
of the Custodian Agreement, together with a certified resolution of the Fund's
Board of Trustees, the Custodian and the Fund may agree to amend Schedule A
hereto from time to time to designate additional foreign banking institutions,
foreign trust companies, foreign securities depositories and foreign clearing
agencies to act as subcustodians. Upon receipt of Proper Instructions, the Fund
may instruct the Custodian to cease the employment of any one or more of such
subcustodians for maintaining custody of the Fund's assets.
2. ASSETS TO BE HELD. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign subcustodians to: (a) "foreign
securities," as defined in paragraph (c)(1) of Rule 17f-5 under the 1940 Act;
and (b) cash and cash equivalents in such amounts as the Custodian or the Fund
may
1
<PAGE>
determine to be reasonably necessary to effect the Fund's foreign securities
transactions.
3. FOREIGN SECURITIES DEPOSITORIES AND CLEARING AGENCIES. Except as may
otherwise be agreed upon in writing by the Custodian and the Fund, assets of the
Fund shall be maintained in foreign securities depositories and clearing
agencies only through arrangements, implemented by the foreign banking
institutions and foreign trust companies serving as subcustodians pursuant to
the terms hereof. Where possible, such arrangements shall include entry into
agreements containing the provisions set forth in Section 5 hereof.
4. SEGREGATION OF SECURITIES. The Custodian shall identify on its books
as belonging to the Fund (designating the particular portfolio thereof), the
foreign securities and related cash and cash equivalents of such portfolio held
by each foreign subcustodian. Each agreement pursuant to which the Custodian
employs a foreign banking institution or foreign trust company shall require
that such institution establish a custody account for the Custodian on behalf of
the Fund (designating the particular portfolio thereof) and physically segregate
in that account the securities and other assets of such portfolio and, in the
event that such institution deposits the portfolio's securities in a foreign
securities depository, that it shall identify on its books as belonging to the
Custodian, as agent for the Fund (designating the particular portfolio thereof),
the securities so deposited.
5. AGREEMENTS WITH FOREIGN BANKING INSTITUTIONS. Each agreement with a
foreign banking institution and foreign trust company shall be substantially in
the form set forth in Exhibit 1 hereto and shall provide that:
(a) The assets of the Fund's portfolio will not be subject to any
right, charge, security interest, lien or claim of any kind in
favor of the foreign banking institution or foreign trust company
or its creditors or agents, except a claim of payment for their
safe custody or administration;
(b) Beneficial ownership for the Fund's assets will be freely
transferable without the payment of money or value other than for
custody or administration;
(c) Adequate records will be maintained identifying the assets as
belonging to such portfolio;
(d) Officers of or auditors employed by, or other representatives of
the Custodian, including to the extent permitted under applicable
law the independent public accountants for the Fund, will be
given access to the books and records of the foreign banking
institution or foreign trust company relating to its actions
under its agreement with the Custodian; and
2
<PAGE>
(e) Assets of the Fund held by the foreign subcustodian will be
subject only to the instructions of the Custodian or its agents.
6. ACCESS OF INDEPENDENT ACCOUNTANTS OF THE FUND. Upon request of the
Fund, the Custodian will use its best efforts to arrange for the independent
accountants of the Fund to be afforded access to the books and records of any
foreign banking institution or foreign trust company employed as a foreign
subcustodian insofar as such books and records relate to the performance of such
foreign banking institution or foreign trust company under its agreement with
the Custodian.
7. REPORTS BY THE CUSTODIAN. The Custodian will supply to the Fund from
time to time, as reasonably requested by the Fund, statements in respect of the
securities and other assets of the Fund held by foreign subcustodians, including
but not limited to an identification of entities having possession of the Fund's
securities and other assets and advices or notifications of any transfers of
securities to or from such custodial account maintained by a foreign banking
institution or foreign trust company for the Custodian on behalf of the Fund
indicating, as to securities acquired for the Fund, the identity of the entity
having physical possession of such securities.
8. TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT.
(a) Except as otherwise provided in paragraph (b) of this Section 8,
the provisions of Section 4, 5, and 7A, B, C and E of the
Custodian Agreement shall apply, MUTATIS MUTANDIS to the foreign
securities, cash and cash equivalents of the Fund held outside
the United States by foreign subcustodians.
(b) Notwithstanding any provision of the Custodian Agreement to the
contract, settlement and payment for securities received for the
account of the Fund and delivery of securities maintained for the
account of the Fund may be effected in accordance with the
customary established securities trading or securities processing
practices and procedures in the jurisdiction or market in which
the transaction occurs, including, with limitation, delivering
securities to the purchaser thereof or to a dealer thereof (or an
agent for such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such securities from
such purchaser or dealer.
(c) Securities maintained in the custody of a foreign subcustodian
may be maintained in the name of such entity's nominee to the
same extent as set forth in Section 3B of the Custodian
Agreement.
3
<PAGE>
9. LIABILITY OF FOREIGN SUBCUSTODIANS. Each agreement pursuant to which
the Custodian employs a foreign banking institution or foreign trust company as
a foreign subcustodian shall require the subcustodian to exercise reasonable
care in the performance of its duties and to indemnify , and hold harmless, the
Custodian and the Fund from and against any loss, damage, cost, expense,
liability or claim arising out of or in connection with the institution's
performance of such obligations. At the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with respect to any
claims against a foreign banking institution or foreign trust company as a
consequence of any such loss, damage, cost, expense, liability or claim if and
to the extent that the Fund has not been made whole for any such loss, damage,
cost, expense, liability or claim.
10. LIABILITY OF CUSTODIAN. The Custodian shall be liable for the acts or
omissions of a foreign banking institution or foreign trust company to the same
except as set forth with respect to subcustodians generally in the Custodian
Agreement and, regardless of whether assets are maintained in the custody of a
foreign banking institution, a foreign trust company, a foreign securities
depository, a foreign clearing agency or a branch of a U.S. bank as contemplated
by paragraph 13 hereof, the Custodian shall not be liable for any loss, damage,
cost, expense, liability or claim resulting from nationalization, expropriation,
currency restrictions, or acts of war or terrorism on any loss where the
subcustodian has otherwise exercised reasonable care. Notwithstanding the
foregoing provisions of this paragraph 10, in delegating custody duties to State
Street London Ltd., the Custodian shall not be relieved of any responsibility to
the Fund for any loss due to such delegation, except such loss as may result
from:
(a) Political risk (including but not limited to, exchange control
restrictions, confiscation, expropriation, nationalization,
insurrection, civil strife or armed hostilities); or
(b) Other losses (excluding a bankruptcy or insolvency of State
Street London Ltd. not caused by political risk) due to Acts of
God, nuclear incident or the like under circumstances where the
Custodian and State Street London Ltd. have exercised reasonable
care.
11. REIMBURSEMENT FOR ADVANCES. If a portfolio of the Fund requires the
Custodian to advance cash or securities for any purpose including the purchase
or sale of foreign exchange or of contracts for foreign exchange, or in the
event that the Custodian or its nominee shall incur or be assessed any taxes,
charges, expenses, assessments, claims or liabilities in connection with the
performance of this amendment to the Custodian Agreement, except such as may
arise from its or its nominee's own negligent action, negligent failure to act
or willful misconduct, any property at any time held for the account of such
portfolio shall be security
4
<PAGE>
therefor and should the Fund fail to repay the Custodian promptly, the Custodian
shall be entitled to utilize available cash and to dispose of the Fund's assets
to the extent necessary to obtain reimbursement but in no event to exceed the
assets of such portfolio of the Fund.
12. MONITORING RESPONSIBILITIES. The Custodian shall furnish annually to
the Fund, during the month of June, information concerning the foreign
subcustodians employed by the Custodian. Such information shall be similar in
kind and scope to that furnished to the Fund in connection with the initial
approval of this amendment to the Custodian Agreement. In addition, the
Custodian will promptly inform the Fund in the event that the Custodian learns
of a material adverse change in the financial condition of a foreign
subcustodian or any material loss of the assets of the Fund or in the case of
any foreign subcustodian not the subject of an exemptive order from the
Securities and Exchange commission is notified by such foreign subcustodian that
there appears to be a substantial likelihood that its shareholders' equity will
decline below $200 million (U.S. dollars or the equivalent thereof) or that its
shareholders' equity has declined below $200 million (in each case computed in
accordance with generally accepted U.S. accounting principles).
13. BRANCHES OF U.S. BANKS.
(a) Except as otherwise set forth in this amendment to the Custodian
Agreement, the provisions hereof shall not apply where the
custody of Fund assets is maintained in a foreign branch of a
banking institution which is a "bank" as defined by Section
2(a)(5) of the 1940 Act meeting the qualification set forth in
Section 26(a) of said Act. The appointment of any such branch as
a subcustodian shall be governed by paragraph 8B of the Custodian
Agreement.
(b) Cash held for a portfolio of the Fund in the United Kingdom shall
be maintained in an interest bearing account established for such
portfolio with the Custodian's London Branch, which account shall
be subject to the direction of the Custodian, State Street London
Ltd., or both.
14. APPLICABILITY OF CUSTODIAN AGREEMENT. Except as specifically
superseded or modified herein, the terms and provisions of the Custodian
Agreement shall continue to apply with full force and effect.
15. UNITHOLDER LIABILITY. This amendment to the Custodian Agreement is
executed by or on behalf of the Fund and the obligations hereunder are not
binding upon any of the Trustees, officers or unitholders of the Fund
individually but are binding only upon the Fund and its assets and property.
The Fund's Trust
5
<PAGE>
Agreement is on file with the Secretary of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative as of the
18th day of September, 1989.
TRUST FOR CREDIT UNIONS
ATTEST:
By: Betsy J. Hoffman By: E.J. Whitman, Jr.
---------------------- -------------------------
as its Secretary as its President
---------------- ----------------
STATE STREET BANK AND TRUST COMPANY
ATTEST:
By: M. Lincoln By: Thomas E. Swedlund
-------------------------- --------------------------
as its Assistant Secretary as its Vice President
-------------------------- ---------------------
6
<PAGE>
SCHEDULE A
The following foreign banking institutions, foreign trust companies, foreign
securities depositories and foreign clearing agencies have been approved by the
Trustees of Trust for Credit Unions for use as subcustodians for such fund's
securities and other assets.
State Street London Limited
7
<PAGE>
[Execution Copy]
TRANSFER AGENCY AGREEMENT
AGREEMENT made as of the 10th day of May, 1988 by and between TRUST FOR
CREDIT UNIONS, a Massachusetts business trust (the "Fund"), and GOLDMAN, SACHS &
CO., a New York limited partnership ("Goldman Sachs").
W I T N E S S E T H :
WHEREAS, the Fund is an open-end, diversified management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, the Fund is empowered to issue units of beneficial interest
("Units") in separate series with each such series representing the interests in
a separate portfolio of securities and other assets; and
WHEREAS, the Fund presently offers Units of beneficial interest in the
Money Market Portfolio and the Government Securities Portfolio (such Portfolios
(the "Current Portfolios") together with all other portfolios subsequently
established by the Fund being herein collectively referred to as the
"Portfolios"); and
WHEREAS, the Fund has retained State Street Bank and Trust Company as
custodian of the Fund (the "Custodian") pursuant to a custodian agreement, dated
May 10,1988; and
WHEREAS, the Fund has retained Callahan Financial Services, Inc. as
distributor of the Fund's Units (the
<PAGE>
("Distributor") pursuant to a distribution agreement, dated May 10, 1988; and
WHEREAS, the Fund desires to retain Goldman Sachs as Transfer Agent and
Dividend Disbursing Agent and to perform the other services contemplated hereby
with respect to the Fund and each Portfolio and Goldman Sachs desires to accept
such appointment.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. APPOINTMENT OF TRANSFER AGENT AND DIVIDEND DISBURSING AGENT.
(a) Subject to the terms set forth in this Agreement, the Fund hereby
appoints Goldman Sachs as Transfer Agent and Dividend Disbursing Agent and to
perform the other services contemplated hereby with respect to the Fund and each
Portfolio.
(b) Goldman Sachs hereby accepts such appointment and agrees that it
will act as Transfer Agent and Dividend Disbursing Agent and perform the other
services contemplated hereby with respect to the Fund and each Portfolio.
(c) Goldman Sachs agrees to provide the necessary facilities,
equipment and executive, administrative and clerical personnel to perform its
duties and obligations hereunder in accordance with the terms hereof.
2. DUTIES OF TRANSFER AGENT.
(a) Goldman Sachs shall, subject to any Instructions (as defined in
Section 5 hereof), record the issuance, transfer and redemptions of Units in
accordance with the following provisions of this Section 2.
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<PAGE>
(b) After being notified by the Custodian (or, if applicable, its
agent) that the purchase price in respect of orders to purchase Units has been
received in the form of Federal funds, Goldman Sachs shall compute in accordance
with the Fund's Prospectus and Statement of Additional Information, each dated
May 10, 1988 (such Prospectus and Statement of Additional Information, as
presently in effect and as amended, supplemented and/or superseded from time to
time are herein called the "Prospectus" and "Additional Statement",
respectively) the number of Units to be purchased at the net asset value of such
Units applicable to such order and shall: (i) credit the account of the
purchaser with the number of Units so purchased as of the time contemplated by
the Fund's Prospectus and (ii) in the case of all new accounts and all purchase
of Units of the Government Securities Portfolio, mail to the purchaser a
confirmation of the Distributor of such purchase and notice of such credit
together, in case of new accounts, with a copy of the Prospectus, the
Additional Statement requested by the purchaser) and such additional material as
Goldman Sachs believes appropriate.
(c) Upon receipt of requests for transfer in proper form, Goldman
Sachs shall transfer on the records of the Fund maintained by it from time to
time Units and shall credit a like amount of Units to the transferee.
(d) Goldman Sachs shall receive and make an adequate and accurate
record of the date and time of receipt of all requests for redemption of Units
transmitted or delivered to it, and shall process such requests in accordance
with the following provisions. If such redemption requests comply with the
standards for
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<PAGE>
redemption approved by the Fund (as evidenced by the Fund's Prospectus or by
Instructions), Goldman Sachs shall compute in accordance with the Fund's
Prospectus the amount of redemption proceeds payable to each Unitholder
requesting redemption and shall advise the Custodian (or, if applicable, its
agent) of the amount each redeeming Unitholder is entitled to receive and that
the Custodian is authorized to effect payment therefor. If any such request for
redemption does not comply with the standards for redemption approved by the
Fund, Goldman Sachs shall take such actions as it reasonably deems appropriate
under the circumstances and shall effect such redemption at the price applicable
to the date and time of receipt of a redemption request (including any necessary
documents) complying with such standards. Goldman Sachs shall mail to the
redeeming Unitholder a confirmation of the redemption.
3. DUTIES OF DIVIDEND DISBURSING AGENT.
(a) Goldman Sachs shall, as Dividend Disbursing Agent for the Fund and
in accordance with the Prospectus, (i) instruct the Custodian (or, if
applicable, its agent) to wire or otherwise electronically transfer net
investment income and capital gain dividends or distributions to those
Unitholders which have elected to receive such dividends or distributions in
cash, and (ii) credit the account of those Unitholders which have elected to
reinvest such dividends or distributions in additional Units with the requisite
number of additional Units relative to each such dividend or distribution.
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<PAGE>
4. ADDITIONAL DUTIES OF GOLDMAN SACHS.
(a) Goldman Sachs shall establish and maintain separate accounts with
respect to each Unitholder. Goldman Sachs shall maintain records showing for
each Unitholder's account the following: (i) name, address, tax identifying
number and number of Units of each Portfolio held; (ii) historical information
regarding the account, including dividends and distributions paid and date and
price for all transactions; (iii) any stop or restraining order placed against
the account; (iv) information with respect to withholdings in the case of a
foreign account; (v) any dividend or distribution reinvestment order, dividend
or distribution address and correspondence relating to the current maintenance
of the account; and (vi) any information required in order for Goldman Sachs to
perform the calculations and make the determinations contemplated or required by
this Agreement. Goldman Sachs shall also maintain all records relating to its
activities and obligations under this Agreement in such manner as will enable
the Fund and Goldman Sachs to meet their respective obligations under: (vii) the
Prospectus; (viii) the required recordkeeping and reporting provisions of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), particularly
Section 17A thereof, and of the 1940 Act, particularly Sections 30 and 31
thereof, and State securities or Blue Sky laws, and the rules and regulations
thereunder; and (ix) applicable Federal and State tax laws. The Fund does not,
however, provide sub-accounting services. All records maintained by Goldman
Sachs in connection with the performance of its duties under this Agreement will
remain the property of the Fund, shall be returned to the Fund promptly upon
-5-
<PAGE>
request and, in the event of termination of this Agreement, will be promptly
returned to or delivered as directed by the Fund. Such records may be inspected
by the Fund at reasonable times. In the event such records are returned to or
delivered as directed by the Fund, Goldman Sachs may at its option retain copies
of such records.
(b) Goldman Sachs shall furnish to the Fund: (a) information as to the
Units of each Portfolio distributed or to be distributed in each State for "Blue
Sky" purposes at such times and in such degree of detail as is necessary for the
Fund to verify the satisfaction of or to satisfy its obligations to register
such Units under applicable "Blue Sky" laws, and (b) copies of Unitholder lists
and other information and statistical data as may reasonably be requested in
Instructions.
(c) Goldman Sachs shall prepare and file with the Internal Revenue
Service and with the appropriate State agencies, and, if required, mail to
Unitholders such returns for reporting, and information as to the Federal income
tax consequences of, dividends and distributions paid, credited or withheld as
are required on the part of the Fund or Goldman Sachs by the Prospectus or
applicable law or regulation to be so filed and mailed.
(d) Goldman Sachs shall prepare and mail an individual monthly
statement for each Unitholder showing all activity in such Unitholder's account
for the month. Upon request from a Unitholder, Goldman Sachs shall prepare and
mail a year-to-date statement showing all activity in such Unitholder's account
on a year-to-date basis.
-6-
<PAGE>
(e) Goldman Sachs shall mail such Unitholder reports and such proxy
material, proxy cards and other material supplied to it by the Fund in
connection with Unitholder meetings of the Fund and shall receive, examine and
tabulate returned proxies and certify the vote to the Fund, all as and to the
extent requested by the Fund.
(f) Goldman Sachs shall promptly answer all inquiries by Unitholders
pertaining to their accounts maintained by Goldman Sachs hereunder.
(g) Goldman Sachs, in the performance of its duties hereunder, shall
act in conformity with the Fund's Agreement and Declaration of Trust dated
September 24, 1987 as amended and restated through December 1, 1987 together
with Amendment No. 1 thereto (such Agreement and Declaration of Trust, as
presently in effect and as amended from time to time, is herein called the
"Trust Agreement"), the Fund's By-laws (such By-laws, as presently in effect and
as amended from time to time, are herein called the "By-laws") and any
Instruction.
(h) Goldman Sachs shall cooperate with the Fund and the Fund's
independent public accountants in connection with: (a) the preparation of
reports to Unitholders of the Fund, to the Securities and Exchange Commission
(including all required periodic and other reports), to State securities
commissioners, and to others, (b) annual and other audits of the books and
records of the Fund, and (c) other matter of a like nature.
(i) Goldman Sachs shall maintain adequate procedures and systems to
safeguard from loss or damage attributable to fire, theft or any other cause the
Fund's records and other data and
-7-
<PAGE>
Goldman Sachs' records, data, equipment, facilities or other property used in
the performance of its obligations hereunder.
5. INSTRUCTIONS.
(a) Goldman Sachs shall be deemed to have received Instructions (as
that term is used herein) upon receipt of written instructions (including
receipt by telecopier, telegram, cable or Telex), which may be continuing
instructions, signed by a majority of the Trustees of the Fund or by a person
the Trustees shall have from time to time authorized to give the particular
class of Instructions in question. Different persons may be authorized to give
Instructions for different purposes, and Instructions may be general or specific
in terms. A certified copy of a By-law, resolution or action of the Trustees of
the Fund may be received and accepted by Goldman Sachs as conclusive evidence of
the authority of any such persons to act and may be considered to be in full
force and effect until receipt of written notice to the contrary.
(b) The Fund may also authorize one or more designated persons to
issue oral (such term as used herein including, without limitation, telephone)
instructions, specifying the type or types of instructions that may be so
issued, in which case the Fund shall deliver to Goldman Sachs resolutions of the
Trustees to such effect. One or more of the persons designated by the Trustees
to give oral instructions shall promptly confirm such oral instructions in
writing to Goldman Sachs. Such instructions when given in accordance with the
provisions hereof and with such resolutions shall be deemed Instructions
hereunder. In case of conflict between oral Instructions given by a person
designated in
-8-
<PAGE>
the resolution of the Trustees referred to in the first sentence of this
paragraph 5(b) and any written Instructions or any written confirmation or
purported confirmation of oral Instructions, such written Instructions or
confirmation, as the case may be, shall prevail; provided that any transaction
initiated by Goldman Sachs pursuant to such oral Instructions may, but need not,
be completed by Goldman Sachs notwithstanding Goldman Sachs' receipt of
conflicting written Instructions hereunder or written confirmation or purported
confirmation of oral Instructions hereunder subsequent to Goldman Sachs'
initiation of such transaction.
6. COMPENSATION.
(a) For the services provided and the expenses assumed by Goldman
Sachs pursuant to this Agreement, the Fund will pay (or cause to be paid) to
Goldman Sachs as full compensation therefor $18.00 per year per Unitholder
account or such fees as shall be agreed to from time to time and set forth in a
Schedule hereto.
(b) The Fund shall reimburse (or cause reimbursement of) Goldman Sachs
for the cost of any and all forms (excluding the cost of developing the format
of the form) prepared for use in connection with its actions hereunder, as well
as the cost of postage, telephone and telegraph used in communicating with
Unitholders of the Fund to the extent such communications are required under the
terms of this Agreement. Goldman Sachs shall be entitled to all property rights
to the format of all forms it has prepared for use in connection with its
actions hereunder. Goldman Sachs hereby grants the Fund a perpetual, non-
exclusive, royalty-free, assignable license to use forms of identical or similar
format to such forms, and all forms for which Goldman Sachs has
-9-
<PAGE>
received reimbursement from the Fund shall be and remain the physical property
of the Fund until used. The Fund shall also reimburse (or cause reimbursement
of) Goldman Sachs for all microfiche, microfilm and other mediums for the
permanent storage of the Fund's records consumed by Goldman Sachs in the
performance of its obligations hereunder. Except as provided in this paragraph
6(b), Goldman Sachs will pay all expenses incurred by it in connection with the
performance of its duties under this Agreement.
7. DURATION AND TERMINATION.
(a) This Agreement shall continue in full force and effect until
terminated as hereinafter provided, may be amended at any time by mutual
agreement of the parties hereto and may be terminated (except as to the second
and third sentences of paragraph 6(b)) by either party by an instrument in
writing delivered or mailed, postage prepaid, to the other party, such
termination to take effect no sooner than 60 days after the date of such
delivery or mailing.
(b) In connection with the operation of this Agreement, Goldman Sachs
and the Fund may agree from time to time, by written instrument signed by both
parties, on such provisions interpretative of or in addition to the provisions
of this Agreement as may in their joint opinion be consistent with the general
tenor of this Agreement. No interpretive or additional provisions made as
provided in the preceding sentence shall be deemed to be an amendment of this
Agreement.
8. NOTICE.
Without limiting the other provisions hereof, notice and other
writings delivered or mailed postage prepaid to the Fund in
-10-
<PAGE>
care of Trust for Credit Unions, 4900 Sears Tower, Chicago, Illinois 60606,
Attention: E.J. Whitman, Jr., with copy to Donald C. Shine, Nisen & Elliott, 200
West Adams Street, Suite 2500, Chicago, Illinois 60606 or to Goldman Sachs at
4900 Sears Tower, Chicago, Illinois 60606, Attention: John W. Mosior, or to such
other address as the Fund or Goldman Sachs may hereafter specify by written
notice of the most recent address specified by the party to whom such notice is
addressed, shall be deemed to have been properly delivered or given hereunder to
the respective addressee.
9. MISCELLANEOUS.
This Agreement shall be binding on and shall inure to the benefit of
the Fund and Goldman Sachs and their respective successors, shall be construed
according to the laws of Illinois (except as to paragraph 11 hereof which shall
be construed in accordance with the laws of Massachusetts) and may be executed
in two or more counterparts, each of which shall be deemed an original. This
Agreement may not be assigned by Goldman Sachs nor may Goldman Sachs' duties
hereunder be performed by any other person without the prior written consent of
the Fund authorized and approved by a resolution of the Trustees. The term
"assigned" shall be construed consistently with the term "assignment" as defined
in Section 2(a)(4) of the 1940 Act and Rule 2a-6 thereunder as if such Rule
applied to transfer and dividend disbursing agents. The headings in this
Agreement have been inserted for convenience of reference only and shall not
affect the meaning or interpretation of this Agreement. If any provision of
this Agreement shall be held or made invalid by a court decision, statute, rule
or otherwise, the remainder of this Agreement shall
-11-
<PAGE>
not be affected thereby. Any provision in this Agreement requiring compliance
with any statute or regulation shall mean such statute or regulation as amended
and in effect from time to time.
10. AMENDMENT OF AGREEMENT.
This Agreement may be amended by mutual consent, but the consent of
the Fund must be approved by vote of a majority of those Trustees of the Fund
who are not parties to this Agreement or interested persons (as defined in the
1940 Act) of any such party, cast in person at a meeting called for the purpose
of voting on such amendment. Any amendment to this Agreement shall only be by
written instrument which shall make specific reference to this Agreement and
which shall be signed by the party against which enforcement of such change,
waiver, discharge or termination is sought.
11. UNITHOLDER LIABILITY.
This Agreement is executed by or on behalf of the Fund and the
obligations hereunder are not binding upon any of the Trustees, officers or
Unitholders of the Fund individually but are binding only upon the Fund and its
assets and property. The Fund's Trust Agreement, as amended, is on file with
the Secretary of The Commonwealth of Massachusetts.
TRUST FOR CREDIT UNIONS
By Gene R. Artemenko
---------------------------
as its Chairman
--------------
-12-
<PAGE>
GOLDMAN, SACHS & CO.
By James P. Gorter
---------------------------
General Partner
-13-
<PAGE>
AMENDMENT NO. 1
TO
TRANSFER AGENCY AGREEMENT
AMENDMENT NO. 1, made this 28th day of February, 1989 by and between TRUST
FOR CREDIT UNIONS, a Massachusetts business trust (the "Fund"), and GOLDMAN,
SACHS & CO., a New York limited partnership ("Goldman, Sachs"), to Transfer
Agency Agreement, dated May 10, 1988, between the Fund and the Transfer Agent
(the "Transfer Agency Agreement").
W I T N E S S E T H:
WHEREAS, the Fund and the Transfer Agent have entered into a Transfer
Agency Agreement and such parties desire to amend such Agreement; and
WHEREAS, paragraph 7(a) of the Transfer Agency Agreement provides such
Agreement may be amended subject to the fulfillment of certain conditions and
such conditions have been fulfilled.
NOW THEREFORE, in consideration of the premises and mutual covenants
hereinafter set forth, the parties hereto agree as follows:
1. "WHEREAS, the Fund has retained Callahan Financial Services, Inc. as
Distributor of the Fund's Units (the "Distributor") pursuant to a distribution
agreement, dated May 10, 1988;" is amended to read as follows:
"WHEREAS, the Fund has retained Callahan Financial Services, Inc. and
Goldman, Sachs & Co. as Distributors of the Fund's Units (the
"Distributors") pursuant to a distribution agreement, dated May 10, 1988,
and Amendment No. 1, dated February 28, 1989;"
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
TRUST FOR CREDIT UNIONS
Attest:
Betsy J. Hoffman By: E.J. Whitman, Jr.
- -------------------------- --------------------------
Secretary
GOLDMAN, SACHS & CO.
Attest:
Stephen Brent Wells By: Alan A. Shuch
- -------------------------- --------------------------
<PAGE>
EXHIBIT 99.9
TRUST FOR CREDIT UNIONS
REVISED AND RESTATED ADMINISTRATION AGREEMENT
---------------------------------------------
ADMINISTRATION AGREEMENT made this 29th day of March, 1993 between TRUST
FOR CREDIT UNIONS, a Massachusetts business trust (the "Fund"), and CALLAHAN
CREDIT UNION FINANCIAL SERVICES LIMITED PARTNERSHIP, a Delaware limited
partnership (the "Administrator").
W I T N E S S E T H
-------------------
WHEREAS, the Fund is an open-end, diversified management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, the Fund has retained Goldman, Sachs & Co. as the investment
adviser/transfer agent of the Fund (the "Adviser/Transfer Agent"); and
WHEREAS, the Fund has retained Callahan Financial Services, Inc. and
Goldman, Sachs & Co., as distributors of the Fund (the "Distributors"); and
WHEREAS, the Fund presently offers units of beneficial interest ("Units")
in the Money Market Portfolio, Government Securities Portfolio and Mortgage
Securities Portfolio (such Portfolios (the "Current Portfolios") together with
all other portfolios subsequently established by the Fund being herein
collectively referred to as the "Portfolios"); and
WHEREAS, the Fund desires to retain the Administrator to render certain
administrative services to the Fund and the Administrator is willing to render
such services;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Appointment of Administrator. The Fund hereby appoints the
----------------------------
Administrator as administrator to provide certain administrative services to the
Fund for the periods and on the terms herein set forth. The Administrator
accepts such appointment and agrees to render the services herein set forth, for
the compensation herein provided.
2. Delivery of Documents. The Fund has delivered to the Administrator
---------------------
copies of each of the following documents:
(a) Agreement and Declaration of Trust of the Fund dated September
24, 1987, as amended and restated through December 1, 1987,
together with Amendment No. 1 thereto (such Agreement and
Declaration of Trust, as presently in effect and as amended from
time to time, is herein called the "Trust Agreement"), copies of
which are also on file with the Secretary of The Commonwealth of
Massachusetts;
(b) By-Laws of the Fund (such By-Laws as presently in effect and as
amended from time to time, are herein called the "By-Laws");
(c) Certified resolutions of the Trustees of the Fund approving the
terms of this Agreement;
(d) Amended and Restated Advisory Agreement dated June 20, 1991
between the Fund and Goldman, Sachs & Co. (such Agreement, as
presently in effect and
<PAGE>
as amended and/or superseded from time to time, is herein called
the "Advisory Agreement");
(e) Distribution Agreement dated May 10, 1988, as amended by
Amendment No. 1 dated February 28, 1989, between the Fund and
Callahan Financial Services, Inc., and Distribution Agreement
dated February 28, 1989 between the Fund and Goldman, Sachs & Co.
(the "Goldman Distribution Agreement") (such Agreements, as
presently in effect and as amended and/or superseded from time to
time, are herein called the "Distribution Agreements");
(f) Custodian Agreement (including related fee schedule) dated May
10, 1988 between the Fund and State Street Bank and Trust Company
(the "Custodian") (such Agreement, as presently in effect and as
amended and/or superseded from time to time, is herein called the
"Custodian Agreement");
(g) Transfer Agency Agreement dated May 10, 1988 between the Fund and
the Transfer Agent (such Agreement, as presently in effect and as
amended and/or superseded from time to time, is herein called the
"Transfer Agency Agreement");
(h) Prospectus and Statement of Additional Information of the Fund,
each dated December 29, 1992 (such Prospectus and Statement of
Additional Information, as presently in effect and as amended,
supplemented and/or superseded from time to time, are herein
called the "Prospectus" and "Additional Statement,"
respectively); and
(i) Registration Statement, as amended, of the Fund under the
Securities Act of 1933, as amended (the "1933 Act"), and the 1940
Act on Form N-1A as filed with the Securities and Exchange
Commission (the "Commission") on December 1, 1987 (such
Registration Statement, as presently in effect and as amended
from time to time, is herein called the "Registration
Statement").
The Fund agrees to promptly furnish the Administrator from time
to time with copies of all amendments of or supplements to or
otherwise current versions of any of the foregoing documents not
heretofore furnished.
3. Duties of Administrator.
-----------------------
(a) The Administrator shall, subject to the general supervision of
the Trustees of the Fund, provide certain administrative services
to the Fund. In this regard, the Administrator shall
(i) review the preparation of reports and proxy statements to
Unitholders, the periodic updating of the Prospectus, the
Additional Statement and the Registration Statement and the
preparation of all other reports and documents required to
be filed by the Fund with the Commission;
(ii) periodically review the services performed by the Adviser,
the Custodian, the Distributors and the Transfer Agent, and
make such reports and recommendations to the Trustees of the
Fund concerning the performance of such services as the
Trustees reasonably request or as the Administrator deems
appropriate;
2
<PAGE>
(iii) to the extent requested by the Trustees or officers of the
Fund, negotiate changes to the terms and provisions of the
Advisory Agreement, the Custodian Agreement, the Transfer
Agency Agreement and the Goldman Distribution Agreement;
(iv) provide the Fund with personnel to perform such executive,
administrative and clerical services as may be reasonably
requested by the Trustees or officers of the Fund;
(v) provide facilities, equipment and personnel to serve the
needs of investors, including communications systems and
personnel to handle Unitholder inquiries;
(vi) develop and monitor investor programs for credit unions;
(vii) provide assistance in connection with the processing of Unit
purchase and redemption orders as reasonably requested by
the Transfer Agent or the Trustees or officers of the Fund;
(viii) inform the Adviser in connection with the portfolio
management of the Fund as to anticipated purchases and
redemptions by Unitholders and new investors;
(ix) provide information and assistance as requested by the
Adviser/Transfer Agent in connection with the registration
of the Fund's Units in accordance with state securities
requirements;
(x) make available and distribute to Unitholders information
prepared by the Fund as requested by the Trustees or
officers of the Fund;
(xi) handle Unitholder problems and calls relating to
administrative matters;
(xii) provide advice and assistance concerning the regulatory
requirements applicable to credit unions that invest in the
Fund;
(xiii) provide assistance in connection with the preparation of the
Fund's periodic financial statements and annual audit as
reasonably requested by the Trustees or officers of the Fund
or the Fund's independent accountants;
(xiv) furnish stationery and office supplies; and
(xv) generally assist in the Fund's operations.
(b) In addition, the Administrator shall be responsible generally for
providing such office space and equipment and telephone
facilities and personnel as may be necessary or desirable for
performance of all of its services hereunder.
(c) The Administrator, in the performance of its duties hereunder,
shall act in conformity with the Trust Agreement, By-Laws,
Prospectus, Additional Statement and Registration Statement and
with the instructions and directions of the Trustees and officers
of the Fund, and will use its best efforts to comply with
3
<PAGE>
and conform to the requirements of the 1940 Act and all other
applicable federal and state laws, regulations and rulings.
(d) The Administrator shall render to the Fund and the
Adviser/Transfer Agent such periodic and special reports as
either of them may reasonably request.
(e) The services of the Administrator hereunder are not deemed
exclusive and the Administrator shall be free to render similar
services to others so long as its services under this Agreement
are not impaired thereby.
4. Expenses. During the term of this Agreement, the Administrator will
--------
pay all costs incurred by it in connection with the performance of its duties
under this Agreement. Without limiting the foregoing, the Administrator will
pay the compensation and expenses of all of its personnel and will make
available, without expense to the Fund, the services of such of its partners,
officers and employees as may be duly elected officers or Trustees of the Fund,
subject to their individual consent to serve and to any limitations imposed by
law. The Administrator will not be required to pay any expense of the Fund
other than those specifically allocated to it in this paragraph 4. The
Administrator agrees, however, that if in any fiscal year the aggregate expenses
of any Portfolio (as defined under the securities regulations of any state
having jurisdiction over such Portfolio) exceed the expense limitations of any
such state, the Fund may deduct from the fees to be paid hereunder, or the
Administrator will bear, that portion of such excess which bears the same
relation to the total of such excess as the Administrator's fee hereunder bears
to the total fees otherwise payable for the fiscal year by the Fund pursuant to
this Agreement and the Advisory Agreement between the Fund and the Adviser with
respect to the same Portfolio. Such deduction or payment, if any, will be
estimated and accrued daily and paid on a monthly basis.
5. Compensation.
------------
(a) For all services provided and expenses assumed by the
Administrator pursuant to this Agreement with respect to the
Money Market Portfolio, the Fund will pay to the Administrator as
full compensation therefor a monthly fee at the annual rate of
.10% of the average daily net assets of the Money Market
Portfolio.
(b) For all services provided and expenses assumed by the
Administrator pursuant to this Agreement with respect to the
Government Securities Portfolio, the Fund will pay to the
Administrator as full compensation therefor a monthly fee at the
annual rate of .10% of the average daily net assets of the
Government Securities Portfolio;
(c) For all services provided and expenses assumed by the
Administrator pursuant to this Agreement with respect to the
Mortgage Securities Portfolio, the Fund will pay to the
Administrator as full compensation therefor a monthly fee at the
annual rate of .05% of the average daily net assets of the
Government Securities Portfolio;
(d) For all services provided and expenses assumed by the
Administrator pursuant to this Agreement with respect to the
Portfolios other than the Current Portfolios, the Fund will pay
to the Administrator as full compensation therefor a monthly fee
at an annual rate or rates mutually agreed upon by the
Administrator and the Fund of the average daily net assets of
such Portfolio.
4
<PAGE>
(e) The foregoing fees shall be computed on the average net assets on
each day and will be paid to the Administrator monthly.
6. Books and Records. The Administrator shall maintain all of the Fund's
-----------------
records relating to or arising out of the services provided by the Administrator
hereunder. The Administrator agrees that all records which it maintains for the
Fund are the property of the Fund and it will surrender promptly to the Fund any
of such records upon the Fund's request. The Administrator further agrees to
preserve for the periods prescribed by Rule 31a-2 of the Commission under the
1940 Act any such records as are required to be maintained by Rule 31a-1 of the
Commission under the 1940 Act.
7. Indemnification.
---------------
(a) The Administrator shall not be liable for any error in judgment
or mistake of law or for any loss suffered by the Fund in
connection with the matters to which this Agreement relates,
except a loss resulting from willful misfeasance, bad faith or
gross negligence in the performance of its obligations and duties
under this Agreement, or by reason of its reckless disregard of
its obligations and duties under this Agreement.
(b) The Fund hereby agrees to indemnify and hold harmless the
Administrator, its officers, partners and employees and each
person who controls the Administrator (collectively, the
"Indemnified Parties") against any and all losses, claims,
damages or liabilities, joint or several, to which any such
Indemnified Party may become subject under the 1933 Act, the
Securities Exchange Act of 1934 (as amended), the 1940 Act or
other federal or state statutory law or regulation, at common law
or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are
based upon:
(i) any untrue statement or alleged untrue statement of a
material fact or any omission or alleged omission to state a
material fact required to be stated or necessary to make the
statements made not misleading in (x) the Prospectus,
Additional Statement or the Registration Statement, (y) any
advertisements or sales literature authorized by the Fund
for use in the offer and sale of Units of any Portfolio, or
(z) any application or other document filed in connection
with the qualification of the Fund or Units of any Portfolio
under the Blue Sky or securities laws of any jurisdiction,
except insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or
are based upon any such untrue statement or omission or
alleged untrue statement or omission either pertaining to a
breach of the Administrator's duties in connection with this
Agreement or made in reliance upon and in conformity with
information furnished to the Fund by or on behalf of the
Administrator pertaining to or originating with the
Administrator for use in connection with any document
referred to in clauses (x), (y) or (z), or
(ii) subject to clause (i) above, the Administrator acting under
this Agreement in accordance with its terms; and the Fund
will reimburse each Indemnified Party for any legal or other
expenses incurred by such Indemnified Party in connection
with investigating or defending any such loss, claim,
damage, liability or action.
5
<PAGE>
(c) If the indemnification provided for in paragraph 7(b) is
available in accordance with the terms of such paragraph but is
for any reason held by a court to be unavailable from the Fund,
then the Fund shall contribute to the aggregate amount paid or
payable by the Fund and the Indemnified Parties as a result of
such losses, claims, damages or liabilities (or actions in
respect thereof) in such proportion as is appropriate to reflect
(i) the relative benefits received by the Fund and the
Indemnified Parties in connection with the operations of the
Fund, (ii) the relative fault of the Fund and such Indemnified
Parties, and (iii) any other relevant equitable considerations.
The Fund and the Administrator agree that it would not be just
and equitable if contribution pursuant to this subparagraph (c)
were determined solely by pro rata allocation or any other method
of allocation which does not take into account the equitable
considerations referred to above in this subparagraph (c). The
aggregate amount paid or payable as a result of the losses,
claims, damages or liabilities (or actions in respect thereof)
referred to above in this subparagraph (c) shall be deemed to
include any legal or other expenses incurred by the Fund and
Indemnified Parties in connection with investigating or defending
any such loss, claim, damage, liability or action. No person
guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution
from any person who is not guilty of such fraudulent
misrepresentation.
(d) It is understood, however, that nothing in this paragraph 7 shall
protect any Indemnified Party against, or entitle any Indemnified
Party to indemnification against, or contribution with respect
to, any liability to the Fund or its Unitholders to which such
Indemnified Party is subject, by reason of its willful
misfeasance, bad faith or gross negligence in the performance of
its duties, or by reason of any reckless disregard of its
obligations and duties, under this Agreement, or otherwise to an
extent or in a manner that is inconsistent with Section 17(i) of
the 1940 Act.
8. Duration and Termination. This Agreement shall become effective with
------------------------
respect to the Government Securities Portfolio on the date hereof and shall
become effective with respect to the Money Market Portfolio on such date as the
parties shall mutually determine in writing. This Agreement shall remain in
effect, unless sooner terminated as provided herein, until March 31, 1994 and
shall continue from year to year thereafter, provided, however, that each such
continuance must be approved by a vote of a majority of the Trustees of the Fund
and of the Trustees who are not interested persons (as defined in the 1940 Act)
of any party to this Agreement, cast in person at a meeting called for the
purpose of voting on such continuance. This Agreement may be terminated as to
any Portfolio at any time, without the payment of any penalty, by (i) a vote of
a majority of the Trustees of the Fund who are not interested persons (as
defined in the 1940 Act) of any party to this Agreement or by vote of a majority
of the outstanding Units (as so defined) representing the interests in the
Portfolio affected thereby, on 60 days' written notice to the Administrator, or
(ii) by the Administrator on 60 days' written notice to the Fund. This Agreement
will automatically and immediately terminate in the event of its assignment (as
defined by the 1940 Act).
9. Amendment of Agreement. This Agreement may be amended by mutual
----------------------
consent, but the consent of the Fund must be approved by vote of a majority of
those Trustees of the Fund who are not parties to this Agreement or interested
persons (as defined in the 1940 Act) of any such party, cast in person at a
meeting called for the purpose of voting on such amendment. Any amendment to
this Agreement shall only be by written instrument which shall make specific
reference to this Agreement and which shall be signed by the party against which
enforcement of such change, waiver, discharge or termination is sought.
6
<PAGE>
10. Status of Administrator as Independent Contractor. The Administrator
-------------------------------------------------
shall for all purposes herein be deemed to be an independent contractor and
shall, unless otherwise expressly provided herein or authorized by the Trustees
of the Fund or the Adviser/Transfer Agent, respectively, from time to time, have
no authority to act for or represent the Fund or the Adviser/Transfer Agent in
any way or otherwise be deemed an agent of the Fund or the Adviser/ Transfer
Agent.
11. Unitholder Liability. This Agreement is executed by or on behalf of
--------------------
the Fund with respect to each of its Portfolios and the obligations hereunder
are not binding upon any of the Trustees, officers or Unitholders of the Fund
individually but are binding only upon the particular Portfolio to which such
obligations pertain and the assets and property of such Portfolio.
12. Notices. Without limiting the other provisions hereof, notices and
-------
other writings delivered or mailed postage prepaid to the Fund, 4900 Sears
Tower, Chicago, Illinois 60606, Attention: President, with copy to Donald C.
Shine, Nisen & Elliott, 200 West Adams Street, Suite 2500, Chicago, Illinois
60606 or to the Administrator, 1001 Connecticut Avenue, N.W., Suite 728,
Washington, D.C. 20036, Attention: Charles W. Filson, or to such other address
as the Fund or the Administrator may hereafter specify by written notice to the
most recent address specified by the party to whom such notice is addressed,
shall be deemed to have been properly delivered or given hereunder to the
respective addressee.
13. Miscellaneous. The captions in this Agreement are included for
-------------
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be construed in accordance with
applicable federal law and (except as to paragraph 11 hereof which shall be
construed in accordance with the laws of The Commonwealth of
7
<PAGE>
Massachusetts) the laws of the State of Illinois and shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors, subject to paragraph 8 hereof.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
ATTEST: TRUST FOR CREDIT UNIONS
/s/ Nancy James By /s/ Nancy L. Mucker
- --------------- -------------------
Nancy L. Mucker
Vice President of the Trust
CALLAHAN CREDIT UNION FINANCIAL
SERVICES
LIMITED PARTNERSHIP
By Callahan Financial Services,
Inc., Corporate General
ATTEST: Partner
/s/ Nancy James By /s/ Charles W. Filson
- --------------- ---------------------
Charles W. Filson
8
<PAGE>
TRUST FOR CREDIT UNIONS
ADDENDUM NO. 1 TO THE ADMINISTRATION AGREEMENT
This Addendum, dated as of the 30th day of June, 1993, is entered into
between TRUST FOR CREDIT UNIONS (the "Trust"), a Massachusetts business trust,
and CALLAHAN CREDIT UNION FINANCIAL SERVICES LIMITED PARTNERSHIP (the
"Administrator), a Delaware limited partnership.
WHEREAS, the Trust and Administrator have entered into a Revised and
Restated Administration Agreement dated as of March 31, 1993 (the
"Administration Agreement"), pursuant to which the Trust has appointed the
Administrator to provide certain administrative services to the Trust for the
Money Market Portfolio, Government Securities Portfolio and Mortgage Securities
Portfolio, together with all other portfolios subsequently established by the
Trust;
WHEREAS, the Trust is establishing an additional investment portfolio known
as the TCU Target Maturity Portfolio (1996) (the "Portfolio") and desires to
retain the Administrator to act as administrator under the Administration
Agreement;
WHEREAS, the Administrator is willing to serve as administrator for the
Portfolio;
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. APPOINTMENT. The Trust hereby appoints the Administrator as
administrator to provide certain administration services to the Trust
for the Portfolio for the period and on the terms set forth in the
Administration Agreement. The Administrator hereby accepts such
appointment and agrees to render the services set forth in the
Administration Agreement for the compensation herein provided.
2. COMPENSATION. For the services provided and the expenses assumed
pursuant to the Administration Agreement, the Trust will pay the
Administrator, and the Administrator will accept as full compensation
therefore from the Trust, a fee at an annual rate of .05% of the
Portfolio's average daily net assets. The fee will be computed based
on the average net assets on each day and will be paid to the
Administrator monthly. Such fee is attributable to the Portfolio,
shall be a charge to such Portfolio and shall be the obligation of
such Portfolio.
3. CAPITALIZED TERMS. From and after the date hereof, the term
"Portfolios" as used in the Administration
1
<PAGE>
Agreement shall be deemed to include the TCU Target Maturity Portfolio
(1996). Capitalized terms used herein and not otherwise defined shall
have the meanings ascribed to them in the Administration Agreement.
4. MISCELLANEOUS. Except to the extent supplemented hereby, the
Administration Agreement shall remain unchanged and in full force and
effect, and is hereby ratified and confirmed in all respects as
supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of the
date and year first above written.
TRUST FOR CREDIT UNIONS
Attest: Nancy James By: Nancy Mucker
------------------ -------------------------
Nancy L. Mucker
Vice President of the Trust
CALLAHAN CREDIT UNION
FINANCIAL SERVICES LIMITED
PARTNERSHIP
Attest: Angelique Barrow By: Charles Filson
------------------ -------------------------
As its: General Partner
---------------
2
<PAGE>
EXHIBIT 9(b)
TRUST FOR CREDIT UNIONS
FORM OF
ADDENDUM NO. 2 TO THE ADMINISTRATION AGREEMENT
----------------------------------------------
This Addendum, dated as of the 1st day of January, 1994, is entered into
between TRUST FOR CREDIT UNIONS (the "Trust"), a Massachusetts business trust,
and CALLAHAN CREDIT UNION FINANCIAL SERVICES LIMITED PARTNERSHIP (the
"Administrator"), a Delaware limited partnership.
WHEREAS, the Trust and Administrator have entered into a Revised and
Restated Administration Agreement dated as of March 31, 1993 (the
"Administration Agreement"), and Addendum No. 1 thereto dated June 30, 1993,
pursuant to which the Trust has appointed the Administrator to provide certain
administrative services to the Trust for the Money Market Portfolio, Government
Securities Portfolio, Mortgage Securities Portfolio and Target Maturity
Portfolio (1996), together with all other portfolios subsequently established by
the Trust;
WHEREAS, the Trust is establishing four additional investment portfolios,
each known as Target Maturity Portfolio (Feb 97), Target Maturity Portfolio (May
97), Target Maturity Portfolio (Aug 97) and Target Maturity Portfolio (Nov 97)
(each a "Portfolio") and desires to retain the Administrator to act as
administrator under the Administration Agreement;
WHEREAS, the Administrator is willing to serve as administrator for the
Portfolios;
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Appointment. The Trust hereby appoints the Administrator as
-----------
administrator to provide certain administrative services to the Trust
for the Portfolios for the period and on the terms set forth in the
Administration Agreement. The Administrator hereby accepts such
appointment and agrees to render the services set forth in the
Administration Agreement for the compensation herein provided.
2. Compensation. For the services provided and the expenses assumed
------------
pursuant to the Administration Agreement, the Trust will pay the
Administrator, and the Administrator will accept as full compensation
therefor from the Trust, a fee at an annual rate of .05% of each
Portfolio's average daily net assets. The fee will be computed based
on the average net assets on each day and will be paid to the
Administrator monthly. Such fee is attributable to each Portfolio,
shall be a charge to each Portfolio and shall be the obligation of
each Portfolio.
3. Capitalized Terms. From and after the date hereof, the term
-----------------
"Portfolios" as used in the Administration Agreement shall be deemed
to include the Target Maturity Portfolio (Feb 97), Target Maturity
Portfolio (May 97), Target Maturity Portfolio (Aug 97) and Target
Maturity Portfolio (Nov 97) . Capitalized terms used herein and not
otherwise defined shall have the meanings ascribed to them in the
Administration Agreement.
<PAGE>
4. Miscellaneous. Except to the extent supplemented hereby, the
-------------
Administration Agreement shall remain unchanged and in full force and
effect, and is hereby ratified and confirmed in all respects as
supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of the
date and year first above written.
TRUST FOR CREDIT UNIONS
Attest: /s/ Angelique Barrow By: /s/ Marcia Beck
----------------------- -----------------------------
As its: President
-------------------
CALLAHAN CREDIT UNION FINANCIAL
SERVICES LIMITED PARTNERSHIP
Attest: /s/ Charles W. Filson By: /s/ John T. Roycroft
----------------------- -----------------------------
As its: President
-------------------
2
<PAGE>
TRUST FOR CREDIT UNIONS
FORM OF
ADDENDUM NO. 3 TO THE ADMINISTRATION AGREEMENT
----------------------------------------------
This Addendum, dated as of the first day of July, 1995, is entered into
between TRUST FOR CREDIT UNIONS (the "Trust"), a Massachusetts business trust,
and CALLAHAN CREDIT UNION FINANCIAL SERVICES LIMITED PARTNERSHIP (the
"Administrator"), a Delaware limited partnership.
WHEREAS, the Trust and Administrator have entered into a Revised and
Restated Administration Agreement dated as of March 31, 1993 (the
"Administration Agreement"), and Addenda Nos. 1 and 2 thereto dated June 30,
1993 and January 1, 1994, respectively, pursuant to which the Trust has
appointed the Administrator to provide certain administrative services to the
Trust for the Money Market Portfolio, Government Securities Portfolio, Mortgage
Securities Portfolio, Target Maturity Portfolio (1996), Target Maturity
Portfolio (Feb 97) and Target Maturity Portfolio (May 97), together with all
other portfolios subsequently established by the Trust; and
WHEREAS, Goldman, Sachs & Co. renders investment advisory services and
certain administrative services to the aforesaid Portfolios pursuant to an
Advisory Agreement dated June 20, 1991 and Addenda Nos. 1, 2, 3 and 4 dated
October 6, 1992, June 30, 1993, December 29, 1993 and January 1, 1994,
respectively; and
WHEREAS, pursuant to Section 4(c) of the aforesaid Advisory Agreement
Goldman, Sachs & Co. has delivered a letter to the Trust dated May 13, 1992
regarding the payment of expenses of the Trust's Money Market Portfolio; and
WHEREAS, the Trust, Goldman, Sachs & Co. and the Administrator have
determined that the arrangement regarding the payment of expenses of the Trust's
Money Market Portfolio in the aforesaid letter shall be discontinued and that
the arrangement regarding the payment of said expenses set forth below shall be
adopted instead;
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Expense Guarantee. Effective immediately, paragraph 4 of the
-----------------
Administration Agreement is hereby amended to add the following as the
last sentence thereof:
"In addition, the Administrator agrees that the fee
otherwise payable to it under this Agreement with respect
to the Money Market
<PAGE>
Portfolio shall be reduced, and the Administrator shall
otherwise pay the Money Market Portfolio, to the extent
necessary so that the annualized ordinary operating
expenses (excluding interest, taxes, brokerage and
extraordinary expenses) of the Money Market Portfolio do
not exceed 0.20% of the average daily net assets of such
Portfolio, such reduction or payment, if any, to be
estimated and accrued daily and made on a monthly basis."
2. Miscellaneous. Except to the extent supplemented hereby, the
-------------
Administration Agreement shall remain unchanged and in full force and
effect, and is hereby ratified and confirmed in all respects as
supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of the
date and year first above written.
TRUST FOR CREDIT UNIONS
Attest: /s/ Angelique Barrow By: /s/ Marcia L. Beck
----------------------- ----------------------------
As its: President
---------
CALLAHAN CREDIT UNION FINANCIAL
SERVICES LIMITED PARTNERSHIP
Attest: /s/ Marianne Quinn By: /s/ William Connors
----------------------- ----------------------------
As its: General Partner
---------------
<PAGE>
EXHIBIT 99.11
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated October 2, 1995 for
Trust for Credit Unions and to all references to our firm included in or made a
part of Post-Effective Amendment No. 16 and Amendment No. 19 to registration
statement File Nos. 33-18781 and 811-5407, respectively.
/s/ Arthur Andersen LLP
Boston, Massachusetts
November 27, 1995
<PAGE>
EXHIBIT 13
SUBSCRIPTION AGREEMENT
TRUST FOR CREDIT UNIONS
Chicago, Illinois 60606-6303
April 28, 1988
Progressive Consumers
Federal Credit Union
366 Cross Street
Malden, MA 02148
Dear Sirs:
Trust for Credit Unions (the "Fund") hereby accepts your offer to purchase
100,000 units of the Money Market Portfolio of the Fund for $100,000.00 and
acknowledges receipt of payment therefor, subject to the understanding that you
have no present intention of reselling the units so acquired. We have
instructed Goldman, Sachs & Co., the Fund's Transfer Agent, that an account for
such units be opened in your name.
Sincerely yours,
Trust for Credit Unions
By: Nancy L. Mucker
---------------------------
Assistant Treasurer
PROGRESSIVE CONSUMERS
FEDERAL CREDIT UNION accepts this
Subscription Agreement and represents
that it is purchasing such units for
investment purposes only and not with
a view to reselling the units so acquired.
By: Harold M. Orent
----------------------
Title: President
--------------------
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that the undersigned, Gene R. Artemenko, hereby
constitutes and appoints Elizabeth Alexander, Marcia L. Beck, William Connors,
Charles Filson, Scott M. Gilman, Steven E. Hartstein, John W. Mosior, Nancy L.
Mucker, Michael J. Richman, Gail M. Shanley, Howard B. Surloff, Pauline Taylor
and Kaysie Uniacke, jointly and severally, his attorneys-in-fact, each with
power of substitution, for him in any and all capacities to sign the
Registration Statement under the Securities Act of 1933 and the Investment
Company Act of 1940 of Trust for Credit Unions and any and all amendments to
such Registration Statement, and to file the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said attorneys-in-
fact, or his or her substitute or substitutes, may do or cause to be done by
virtue thereof.
Dated: October 2, 1995
Gene R. Artemenko
-----------------
Gene R. Artemenko
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that the undersigned, James C. Barr, hereby
appoints Elizabeth Alexander, Marcia L. Beck, William Connors, Charles Filson,
Scott M. Gilman, Steven E. Hartstein, John W. Mosior, Nancy L. Mucker, Michael
J. Richman, Gail M. Shanley, Howard B. Surloff, Pauline Taylor and Kaysie
Uniacke, jointly and severally, his attorneys-in-fact, each with power of
substitution, for him in any and all capacities to sign the Registration
Statement under the Securities Act of 1933 and the Investment Company Act of
1940 of Trust for Credit Unions and any and all amendments to such Registration
Statement, and to file the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his or her
substitute or substitutes, may do or cause to be done by virtue thereof.
Dated: October 2, 1995
James C. Barr
-------------
James C. Barr
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that the undersigned, Edgar F. Callahan, hereby
appoints Elizabeth Alexander, Marcia L. Beck, William Connors, Charles Filson,
Scott M. Gilman, Steven E. Hartstein, John W. Mosior, Nancy L. Mucker, Michael
J. Richman, Gail M. Shanley, Howard B. Surloff, Pauline Taylor and Kaysie
Uniacke, jointly and severally, his attorneys-in-fact, each with power of
substitution, for him in any and all capacities to sign the Registration
Statement under the Securities Act of 1933 and the Investment Company Act of
1940 of Trust for Credit Unions and any and all amendments to such Registration
Statement, and to file the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his or her
substitute or substitutes, may do or cause to be done by virtue thereof.
Dated: October 2, 1995
Edgar F. Callahan
-----------------
Edgar F. Callahan
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that the undersigned, Robert M. Coen, hereby
appoints Elizabeth Alexander, Marcia L. Beck, William Connors, Charles Filson,
Scott M. Gilman, Steven E. Hartstein, John W. Mosior, Nancy L. Mucker, Michael
J. Richman, Gail M. Shanley, Howard B. Surloff, Pauline Taylor and Kaysie
Uniacke, jointly and severally, his attorneys-in-fact, each with power of
substitution, for him in any and all capacities to sign the Registration
Statement under the Securities Act of 1933 and the Investment Company Act of
1940 of Trust for Credit Unions and any and all amendments to such Registration
Statement, and to file the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his or her
substitute or substitutes, may do or cause to be done by virtue thereof.
Dated: October 2, 1995
Robert M. Coen
--------------
Robert M. Coen
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that the undersigned, John T. Collins, hereby
appoints Elizabeth Alexander, Marcia L. Beck, William Connors, Charles Filson,
Scott M. Gilman, Steven E. Hartstein, John W. Mosior, Nancy L. Mucker, Michael
J. Richman, Gail M. Shanley, Howard B. Surloff, Pauline Taylor and Kaysie
Uniacke, jointly and severally, his attorneys-in-fact, each with power of
substitution, for him in any and all capacities to sign the Registration
Statement under the Securities Act of 1933 and the Investment Company Act of
1940 of Trust for Credit Unions and any and all amendments to such Registration
Statement, and to file the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his or her
substitute or substitutes, may do or cause to be done by virtue thereof.
Dated: October 2, 1995
John T. Collins
---------------
John T. Collins
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that the undersigned, Thomas S. Condit, hereby
appoints Elizabeth Alexander, Marcia L. Beck, William Connors, Charles Filson,
Scott M. Gilman, Steven E. Hartstein, John W. Mosior, Nancy L. Mucker, Michael
J. Richman, Gail M. Shanley, Howard B. Surloff, Pauline Taylor and Kaysie
Uniacke, jointly and severally, his attorneys-in-fact, each with power of
substitution, for him in any and all capacities to sign the Registration
Statement under the Securities Act of 1933 and the Investment Company Act of
1940 of Trust for Credit Unions and any and all amendments to such Registration
Statement, and to file the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his or her
substitute or substitutes, may do or cause to be done by virtue thereof.
Dated: October 2, 1995
Thomas S. Condit
----------------
Thomas S. Condit
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that the undersigned, Rudolf J. Hanley, hereby
appoints Elizabeth Alexander, Marcia L. Beck, William Connors, Charles Filson,
Scott M. Gilman, Steven E. Hartstein, John W. Mosior, Nancy L. Mucker, Michael
J. Richman, Gail M. Shanley, Howard B. Surloff, Pauline Taylor and Kaysie
Uniacke, jointly and severally, his attorneys-in-fact, each with power of
substitution, for him in any and all capacities to sign the Registration
Statement under the Securities Act of 1933 and the Investment Company Act of
1940 of Trust for Credit Unions and any and all amendments to such Registration
Statement, and to file the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his or her
substitute or substitutes, may do or cause to be done by virtue thereof.
Dated: October 2, 1995
Rudolf J. Hanley
----------------
Rudolf J. Hanley
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that the undersigned, John L. Ostby, hereby
appoints Elizabeth Alexander, Marcia L. Beck, William Connors, Charles Filson,
Scott M. Gilman, Steven E. Hartstein, John W. Mosior, Nancy L. Mucker, Michael
J. Richman, Gail M. Shanley, Howard B. Surloff, Pauline Taylor and Kaysie
Uniacke, jointly and severally, his attorneys-in-fact, each with power of
substitution, for him in any and all capacities to sign the Registration
Statement under the Securities Act of 1933 and the Investment Company Act of
1940 of Trust for Credit Unions and any and all amendments to such Registration
Statement, and to file the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his or her
substitute or substitutes, may do or cause to be done by virtue thereof.
Dated: October 2, 1995
John L. Ostby
-------------
John L. Ostby
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that the undersigned, Wendell A. Sebastian,
hereby appoints Elizabeth Alexander, Marcia L. Beck, William Connors, Charles
Filson, Scott M. Gilman, Steven E. Hartstein, John W. Mosior, Nancy L. Mucker,
Michael J. Richman, Gail M. Shanley, Howard B. Surloff, Pauline Taylor and
Kaysie Uniacke, jointly and severally, his attorneys-in-fact, each with power of
substitution, for him in any and all capacities to sign the Registration
Statement under the Securities Act of 1933 and the Investment Company Act of
1940 of Trust for Credit Unions and any and all amendments to such Registration
Statement, and to file the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his or her
substitute or substitutes, may do or cause to be done by virtue thereof.
Dated: October 2, 1995
Wendell A. Sebastian
--------------------
Wendell A. Sebastian
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that the undersigned, Elizabeth Alexander, hereby
appoints Marcia L. Beck, William Connors, Charles Filson, Scott M. Gilman,
Steven E. Hartstein, John W. Mosior, Nancy L. Mucker, Michael J. Richman, Gail
M. Shanley, Howard B. Surloff, Pauline Taylor and Kaysie Uniacke, jointly and
severally, her attorneys-in-fact, each with power of substitution, for her in
any and all capacities to sign the Registration Statement under the Securities
Act of 1933 and the Investment Company Act of 1940 of Trust for Credit Unions
and any and all amendments to such Registration Statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his or her substitute or substitutes, may do
or cause to be done by virtue thereof.
Dated: October 2, 1995
Elizabeth Alexander
-------------------
Elizabeth Alexander
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that the undersigned, Marcia L. Beck, hereby
appoints Elizabeth Alexander, William Connors, Charles Filson, Scott M. Gilman,
Steven E. Hartstein, John W. Mosior, Nancy L. Mucker, Michael J. Richman, Gail
M. Shanley, Howard B. Surloff, Pauline Taylor and Kaysie Uniacke, jointly and
severally, her attorneys-in-fact, each with power of substitution, for her in
any and all capacities to sign the Registration Statement under the Securities
Act of 1933 and the Investment Company Act of 1940 of Trust for Credit Unions
and any and all amendments to such Registration Statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his or her substitute or substitutes, may do
or cause to be done by virtue thereof.
Dated: October 2, 1995
Marcia L. Beck
--------------
Marcia L. Beck
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that the undersigned, William Connors, hereby
appoints Elizabeth Alexander, Marcia L. Beck, Charles Filson, Scott M. Gilman,
Steven E. Hartstein, John W. Mosior, Nancy L. Mucker, Michael J. Richman, Gail
M. Shanley, Howard B. Surloff, Pauline Taylor and Kaysie Uniacke, jointly and
severally, his attorneys-in-fact, each with power of substitution, for him in
any and all capacities to sign the Registration Statement under the Securities
Act of 1933 and the Investment Company Act of 1940 of Trust for Credit Unions
and any and all amendments to such Registration Statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his or her substitute or substitutes, may do
or cause to be done by virtue thereof.
Dated: October 2, 1995
William Connors
---------------
William Connors
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that the undersigned, Charles Filson, hereby
appoints Elizabeth Alexander, Marcia L. Beck, William Connors, Scott M. Gilman,
Steven E. Hartstein, John W. Mosior, Nancy L. Mucker, Michael J. Richman, Gail
M. Shanley, Howard B. Surloff, Pauline Taylor and Kaysie Uniacke, jointly and
severally, his attorneys-in-fact, each with power of substitution, for him in
any and all capacities to sign the Registration Statement under the Securities
Act of 1933 and the Investment Company Act of 1940 of Trust for Credit Unions
and any and all amendments to such Registration Statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his or her substitute or substitutes, may do
or cause to be done by virtue thereof.
Dated: October 2, 1995
Charles Filson
--------------
Charles Filson
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that the undersigned, Scott M. Gilman, hereby
appoints Elizabeth Alexander, Marcia L. Beck, William Connors, Charles Filson,
Steven E. Hartstein, John W. Mosior, Nancy L. Mucker, Michael J. Richman, Gail
M. Shanley, Howard B. Surloff, Pauline Taylor and Kaysie Uniacke, jointly and
severally, his attorneys-in-fact, each with power of substitution, for him in
any and all capacities to sign the Registration Statement under the Securities
Act of 1933 and the Investment Company Act of 1940 of Trust for Credit Unions
and any and all amendments to such Registration Statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his or her substitute or substitutes, may do
or cause to be done by virtue thereof.
Dated: October 2, 1995
Scott M. Gilman
---------------
Scott M. Gilman
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that the undersigned, Steven E. Hartstein, hereby
appoints Elizabeth Alexander, Marcia L. Beck, William Connors, Charles Filson,
Scott M. Gilman, John W. Mosior, Nancy L. Mucker, Michael J. Richman, Gail M.
Shanley, Howard B. Surloff, Pauline Taylor and Kaysie Uniacke, jointly and
severally, his attorneys-in-fact, each with power of substitution, for him in
any and all capacities to sign the Registration Statement under the Securities
Act of 1933 and the Investment Company Act of 1940 of Trust for Credit Unions
and any and all amendments to such Registration Statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his or her substitute or substitutes, may do
or cause to be done by virtue thereof.
Dated: October 2, 1995
Steven E. Hartstein
-------------------
Steven E. Hartstein
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that the undersigned, John W. Mosior, hereby
appoints Elizabeth Alexander, Marcia L. Beck, William Connors, Charles Filson,
Scott M. Gilman, Steven E. Hartstein, John W. Mosior, Nancy L. Mucker, Michael
J. Richman, Gail M. Shanley, Howard B. Surloff, Pauline Taylor and Kaysie
Uniacke, jointly and severally, his attorneys-in-fact, each with power of
substitution, for him in any and all capacities to sign the Registration
Statement under the Securities Act of 1933 and the Investment Company Act of
1940 of Trust for Credit Unions and any and all amendments to such Registration
Statement, and to file the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his or her
substitute or substitutes, may do or cause to be done by virtue thereof.
Dated: October 2, 1995
John W. Mosior
--------------
John W. Mosior
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that the undersigned, Nancy L. Mucker, hereby
appoints Elizabeth Alexander, Marcia L. Beck, William Connors, Charles Filson,
Scott M. Gilman, Steven E. Hartstein, John W. Mosior, Michael J. Richman, Gail
M. Shanley, Howard B. Surloff, Pauline Taylor and Kaysie Uniacke, jointly and
severally, her attorneys-in-fact, each with power of substitution, for her in
any and all capacities to sign the Registration Statement under the Securities
Act of 1933 and the Investment Company Act of 1940 of Trust for Credit Unions
and any and all amendments to such Registration Statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his or her substitute or substitutes, may do
or cause to be done by virtue thereof.
Dated: October 2, 1995
Nancy L. Mucker
---------------
Nancy L. Mucker
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that the undersigned, Michael J. Richman, hereby
appoints Elizabeth Alexander, Marcia L. Beck, William Connors, Charles Filson,
Scott M. Gilman, Steven E. Hartstein, John W. Mosior, Nancy L. Mucker, Gail M.
Shanley, Howard B. Surloff, Pauline Taylor and Kaysie Uniacke, jointly and
severally, his attorneys-in-fact, each with power of substitution, for him in
any and all capacities to sign the Registration Statement under the Securities
Act of 1933 and the Investment Company Act of 1940 of Trust for Credit Unions
and any and all amendments to such Registration Statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his or her substitute or substitutes, may do
or cause to be done by virtue thereof.
Dated: October 2, 1995
Michael J. Richman
------------------
Michael J. Richman
