<PAGE>
-------------------------------------------
TRUST
---
for Credit Unions
-------------------------------------------
Annual Report
-------------------------------------
August 31, 1996
<PAGE>
Dear TCU Investor,
Thank you for your support of the Trust for Credit Unions (TCU) over the
past year. Since the first TCU portfolio opened in 1988, over 300 credit unions
have invested in the portfolios. As of August 31, 1996, TCU's assets totaled
more than $1.4 billion, accounting for over two-thirds of credit unions' mutual
fund investments.* We are pleased that so many credit unions have made TCU part
of their investment strategy.
Over the past year, the level of total credit union investments increased
slightly (up 4.2% from June 1995 to June 1996) and credit unions' mutual fund
investments grew by 4.0%.* During the same period, TCU's assets increased by
over $100 million, reflecting its competitive performance and ease of liquidity.
We are pleased to report that all of the TCU portfolios have performed very
well for the 12 months ended August 31, 1996, outperforming their benchmarks.
The portfolios' strong results during the period were largely due to successful
sector allocation and security selection by Goldman Sachs Asset Management, the
investment adviser.
On September 30, 1996, three Trustees were elected at a special shareholder
meeting. These Trustees were Rudolf J. Hanley, Chief Executive Officer of Orange
County Federal Credit Union; Betty G. Hobbs, President and Chief Executive
Officer of Tennessee Teachers Credit Union; and John P. McNulty, General Partner
of Goldman, Sachs & Co. and Co-Head of Goldman Sachs Asset Management. For
additional details and information on the other matters approved at the
shareholder meeting, please refer to the "Unaudited Supplemental Information"
section.
The upcoming year will undoubtedly bring many challenges and opportunities
to the credit union community. We look forward to working with you to help you
meet your future financial needs.
Sincerely,
/s/ Wendell A. Sebastian /s/ Robert F. Deutsch
Wendell A. Sebastian Robert F. Deutsch
President Vice President
Callahan Financial Services, Inc. Goldman Sachs Asset Management
and Trust for Credit Unions and Trust for Credit Unions
September 30, 1996
*Source: Callahan & Associates, Inc.
<PAGE>
Dear TCU Investor,
We are pleased to have the opportunity to review the performance of each of
the Trust for Credit Unions portfolios for the 12-month period ended August 31,
1996. To help put your 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: Economy Accelerated Following Year-End Weakness
The economy nearly ground to a halt in late 1995, with fourth-quarter real
Gross Domestic Product (GDP) growing at only 0.5% (annualized), in large part
due to bloated inventories and anemic consumer spending. During January and
February 1996, the government delays in releasing economic data and the
distorting effects of the harsh winter storms made it difficult to get an
accurate reading on the economy's health. However, when data finally became
available, it became clear that the economy rebounded faster than expected,
recording real GDP growth of 2.0% for the first quarter of 1996. Growth
continued to accelerate during the second quarter, with trade, factory orders,
automobile sales and industrial production all showing significant improvement.
As a result, GDP increased a robust 4.8% during the second quarter, its highest
rate in two years.
The pace of economic growth appeared to moderate in July, somewhat
tempering concerns of potential overheating. July employment growth was below
expectations, housing starts and manufacturing data were weak, and retail sales,
while stronger than expected, were nevertheless still relatively soft. In
August, key indicators sent mixed signals regarding the economy's health,
leading investors to rapidly change their views from slowing growth to
strengthening and back again as the latest reports became available. For
example, in August, retail sales and industrial production were sluggish. In
contrast, the unemployment rate fell to the lowest level in more than seven
years, reviving fears of rising labor costs. However, inflation remained under
control, as lower than expected producer- and consumer-price data for August
eventually indicated.
Bond Market Sold Off Following a 1995 Rally, Then Stabilized During the Summer
In September 1995, the U.S. bond market began to trend higher following a
generally lackluster summer. The rebound continued from October through January
1996, as weak economic data and tame inflation helped fuel robust upward
momentum. However, in February 1996 the bond market began to falter, and a sharp
rise in interest rates triggered a dramatic decline in bond prices that
continued from March through the beginning of May. The primary catalysts of the
abrupt sell-off were stronger than expected economic and job growth as well as
surging commodity prices, which aroused investors' fear of higher inflation and
increased bond market volatility. Though the bond market stabilized from mid-May
through July and briefly surged in early August, it had come under pressure
again by the end of August.
During the period, the yield curve shifted upward and steepened
dramatically everywhere but at the shortest end. The yield on six-month Treasury
bills fell slightly from 5.51% on August 31, 1995 to approximately 5.48% on
August 31, 1996. For the same time period, the yield on the 30-year U.S.
Treasury bond rose from 6.65% a year ago to 7.12%, breaking the psychologically
important 7.0% level. For the 12-month period ended August 31, 1996, the total
returns of the one-year and 30-year Treasuries were 5.40% and -0.79%,
respectively.
2
<PAGE>
Historical Treasury Yield Curve
[GRAPH CHART APPEARS HERE]
8/31/95 8/31/96
------- -------
3-Month 5.44% 5.28%
6-Month 5.51% 5.48%
1-Year 5.63% 5.89%
2-Year 5.85% 6.34%
3-Year 5.94% 6.52%
5-Year 6.07% 6.73%
10-Year 6.29% 6.94%
30-Year 6.65% 7.12%
Source: Bloomberg, L.P.
The yield curve shifted upward and steepened considerably in the one- to
five-year range.
The Fed Eased in December and January, Then Remained Neutral
The U.S. Federal Reserve ("the Fed") left the Federal funds rate unchanged
at 5.75% from September 1995 through November. However, in response to generally
sluggish year-end 1995 economic conditions, the Fed cut the Federal funds rate
by 25 basis points in December 1995 and an additional 25 basis points in January
1996. Despite stronger than expected growth during the second half of the fund's
fiscal year, the Fed remained neutral and left the Federal funds rate at 5.25%
as of August 31, 1996.
The ARM Market Strengthened as Prepayment Risk Declined
The performance of adjustable rate mortgage securities (ARMs), which
represent a significant portion of the non-money market TCU portfolios, was
closely linked to the changing direction of interest rates during the period. In
September 1995, declining interest rates spurred homeowners to switch to
long-term, fixed rate mortgages, resulting in increased refinancing activity and
widening spreads between ARMs and Treasuries. Prepayments continued to depress
the ARM market, reaching a high in February 1996, when long-term interest rates
began to rise. From February through August, spreads between ARMs and Treasuries
tightened significantly as mortgage prepayment fears eased. In terms of the
market's technical balance, strong investor demand for ARMs, coupled with no
significant new issuance from agencies and declining private label supply, have
supported ARM prices. In addition, the ARM market benefited from strong inflows
from nontraditional buyers, such as "crossover" corporate bond investors,
seeking more attractive relative spreads from short-duration instruments.
Economic Outlook: Healthy Economic Growth for the Near Term
Key economic indicators continue to send mixed signals, with economists
divided on whether the economy's momentum will slow or strengthen in the coming
months. As of this writing, the pause in growth during the summer appears
temporary, rather than indicative of a deeper, more sustained slowdown. The
Fed's "wait and see" stance is likely to continue until more convincing signs of
inflation emerge as policy makers attempt to strike a balance between containing
inflation and not snuffing out growth.
3
<PAGE>
TCU Money Market Portfolio
Objective
The objective of the TCU Money Market Portfolio (MMP) is to maximize
current income to the extent consistent with the preservation of capital and
maintenance of 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, 1996, the TCU Money Market
Portfolio had an average annual total return of 5.51%, outperforming Donoghue's
All-Taxable Money Market Index total return of 5.08%. As of August 31, 1996, the
portfolio had a seven-day current yield of 5.13% and an effective yield of
5.26%./1/
Portfolio Composition and Investment Strategies
During the first half of the portfolio's fiscal year, September 1995
through February 1996, we lengthened the portfolio's weighted average maturity
as short-term interest rates declined. When the near-term direction of
short-term interest rates became less clear during the latter half of the year,
the portfolio's weighted average maturity was shortened.
As of August 31, the portfolio's largest sector allocation continued to be
repurchase agreements (70.8%), to help credit unions meet their liquidity needs.
During the period, we reduced the portfolio's weighting in domestic bank notes
to 3.5% from 10.4% a year ago in favor of domestic certificates of deposit (CDs)
(12.9%), which were more plentiful. Other holdings included Federal funds
(7.0%), bankers' acceptances (3.5%) and variable rate obligations (2.3%).
The portfolio's Eurodollar CDs matured during the period, but we did not
roll the position over when we determined that the sector was not priced at
enough of a premium over domestic alternatives. In addition, we did not roll
over the portfolio's investments in U.S. government agency securities because
the spread between bank obligations and government agencies widened, rendering
agencies less attractive than alternative investments.
__________________
/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>
Portfolio Composition as of August 31, 1996*
[PIE CHART APPEARS HERE]
Variable Rate Obligations 2.3%
Banker's Acceptances 3.5%
Bank Notes 3.5%
Federal Funds 7.0%
Certificates of Deposits 12.9%
Repurchase Agreements 70.8%
* These percentages may differ from those in the accompanying Statement of
Investments, which reflect portfolio holdings as a percentage of net assets.
Looking Forward
Going forward, we currently forecast rising rates during the remainder of
1996 into early 1997. Therefore, we expect the portfolio to operate with a
relatively short average maturity of 10 to 20 days over the next few months. We
intend to continue stressing high-quality securities and will structure the
portfolio in an attempt to remain competitive with other short-term investments.
5
<PAGE>
TCU Government Securities Portfolio
Objective
The TCU Government Securities Portfolio (GSP) seeks a high level of current
income consistent with low volatility of principal by investing in obligations
authorized under the Federal Credit Union Act. Operating since July 10, 1991,
the portfolio invests primarily in ARMs issued by the U.S. government, its
agencies or instrumentalities. The TCU GSP's maximum duration is equal to that
of a two-year U.S. Treasury security, and its target duration is to be 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. As of August 31, 1996, its actual duration
was 0.78 years, nearly the same as the duration of the portfolio's benchmark,
which was 0.75 years.
Performance Review
For the 12-month period ended August 31, 1996, the average annual total
return of the TCU GSP was 6.26% (6.26% in dividend income and 0.0% in price
appreciation), compared with 5.41% for the nine-month Treasury average. (The
nine-month Treasury return is calculated by averaging the six-month Treasury
bill and the one-year Treasury bill.) The portfolio's average annual total
return for the five years ended August 31, 1996 was 5.02%.
The strong performance of the portfolio relative to the benchmark was
primarily due to the portfolio's large ARM position (74.9%), which outperformed
equal-duration Treasuries as spreads narrowed.
We are pleased to note that the portfolio also performed well compared with
its peers. For the 12 months ended August 31, 1996, TCU GSP ranked within the
top 20% (ninth out of 56) of adjustable rate mortgage funds based on total
return, according to Lipper Analytical Services, Inc. (Please note that Lipper
rankings do not take sales charges into account and that past performance is not
a guarantee of future results.)
The portfolio's net asset value (NAV) held steady during the period,
closing at $9.76 on August 31, 1996, unchanged from its level a year earlier.
During the 12-month period, the portfolio's distribution rate declined 25 basis
points to 6.00% on August 31 as ARM coupons reset lower while the market
rallied. The portfolio's SEC 30-day yield was 5.84% as of August 31, down from
6.09% last year.
Portfolio Composition and Investment Strategies
During the period, we shifted the portfolio's sector allocations to
maintain approximately the same duration as the benchmark and offset the
shortening of ARM durations due to faster prepayments. These changes included
initiating a 23.5% position in longer duration Treasuries, cutting the
portfolio's shorter duration ARM holdings to 74.9% from 86.4% and liquidating
most of the repurchase agreement/cash equivalent position (0.5% as of August
31).
As part of our overall term structure management, we sold the portfolio's
Small Business Administration (SBA) pools (a 3.1% allocation as of August 31,
1995). Finally, super floaters were trimmed to a 1.1% weighting, down from 2.0%
a year earlier. Super floaters are approximately four times as sensitive to
interest rate movements as regular floaters, and they had a neutral effect on
the portfolio's performance during the period.
6
<PAGE>
Within the ARM sector, we continued to emphasize seasoned issues, which
generally have shorter durations and more stable prepayment patterns than
nonseasoned securities.
Portfolio Composition as of August 31, 1996*
[PIE CHART APPEARS HERE]
ARMS 74.9%
U.S. Treasuries 23.5%
Super Floaters 1.1%
Repos/Cash Equivalents 0.5%
* The percentages shown are of total portfolio investments that have settled
and include an offset to cash equivalents relating to unsettled trades. These
percentages may differ from those in the accompanying Statement of
Investments, which reflect portfolio holdings as a percentage of net assets.
Looking Forward
We have a constructive outlook for ARMs in the coming months. We expect the
spreads between ARMs and Treasuries to continue to narrow as crossover investors
from other short-duration fixed income sectors turn to ARMs for their more
attractive yields. Demand for seasoned ARMs indexed to the one-year constant
maturity Treasury (CMT) remains strong as investors seek the prepayment
stability in a falling rate environment and the reduced cap risk in a rising
rate environment that these securities offer.
7
<PAGE>
TCU Mortgage Securities Portfolio
Objective
The TCU Mortgage Securities Portfolio (MSP) seeks 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 portfolio, which
commenced operations on October 9, 1992, 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 maximum duration will not exceed
that of a three-year U.S. Treasury security and its target duration is equal to
that of its benchmark, the two-year U.S. Treasury security. As of August 31,
1996, the portfolio's actual duration was 1.88 years, in line with its
benchmark.
Performance Review
The portfolio's average annual total return for the 12 months ended August
31, 1996 was 5.67% (6.62% from dividend income and -0.95% from price
depreciation), compared with 4.87% for the two-year U.S. Treasury note. The
portfolio's significant outperformance over the benchmark was due to the
incremental yield advantage of mortgage securities, particularly private-label
ARMs, over comparable duration Treasuries.
During the 12-month period, the portfolio outperformed all of its peers,
ranking first out of 57 short-term U.S. government funds based on total return,
according to Lipper Analytical Services, Inc. (Please note that Lipper rankings
do not take sales charges into account and that past performance is not a
guarantee of future results.)
Despite this strong relative performance, the portfolio's NAV declined
$0.09 during the past year to $9.65 on August 31, 1996, primarily due to the
impact of rising interest rates.
Portfolio Composition and Investment Strategies
Over the 12-month period ended August 31, we shifted the portfolio's
weightings to maintain approximately the same duration as that of the benchmark.
These changes included reducing the portfolio's ARM holdings, which tend to have
short durations, to 30.4% from 44.4% a year ago, and approximately doubling its
position in longer duration fixed rate mortgage pass-throughs to 8.2%.
Other portfolio adjustments were a significant increase in planned
amortization class collateralized mortgage obligations (PAC CMOs) to 22.1% from
9.6% a year earlier as they offered attractive relative value and incremental
yield potential over Treasuries, and the liquidation of CMO floaters (2.9% as of
August 31, 1995). The portfolio's weightings in U.S. Treasuries (18.5%) and
sequential-pay CMOs (18.5%) were little changed from a year ago.
8
<PAGE>
Portfolio Composition as of August 31, 1996*
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
ARMs 30.4%
PACs 22.1%
U.S. Treasuries 18.5%
Sequentials 18.5%
Fixed Rate Mortgage Pass-Through 8.2%
Repos/Cash Equivalents 2.3%
</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 may differ from those in the accompanying Statement of
Investments, which reflect portfolio holdings as a percentage of net assets.
Looking Forward
In the near term, we have a constructive view for ARMs. We believe the
technical balance for the ARM market should remain favorable in the coming
months, with ARMs continuing to benefit from the increased demand of
nontraditional ARM investors seeking higher short-term yields. We currently have
a neutral outlook for CMOs, which are generally trading at fair spreads relative
to equal-duration Treasuries but do not offer significant value over mortgage
pass-throughs. Despite this more challenging CMO environment, we continue to
identify specific areas within the CMO market that offer attractive investment
opportunities.
- ----------------------
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>
U.S. Treasury Portfolio Duration Commencement
Portfolio Benchmark as of 8/31/96 of Operations
- -------------------- ------------------- --------------------- ----------------
<S> <C> <C> <C>
TMP (Feb 97) 4.75% due 2/97 0.49 years 2/15/94
TMP (May 97) 6.50% due 5/97 0.71 years 5/23/94
</TABLE>
9
<PAGE>
Target Maturity Portfolio (Feb 97)
Performance Review
For the 12 months ended August 31, 1996, the portfolio achieved an average
annual total return of 6.70% (7.23% from dividend income and -0.53% from price
depreciation), compared with 6.02% for the portfolio's benchmark, the 4.75% U.S.
Treasury note due in February 1997. The portfolio's significant outperformance
was primarily due to the strong performance of its ARM holdings. Rising interest
rates during the period impacted the portfolio's NAV, which declined $0.05 to
$9.66 as of August 31, 1996.
Portfolio Composition Highlights
The primary changes to the portfolio's sector allocations during the period
under review were made to lower its duration to 0.49 years, down from 1.42 years
in August 1995, in anticipation of its February 1997 maturity. Though the
portfolio's 39.7% weighting in seasoned ARMs, which generally have short
durations, was approximately the same as one year ago, longer term Treasuries
were cut significantly to 2.2% from 18.9%, and repurchase agreements/cash
equivalents were raised to 21.0% from 0.2%.
Other changes included the reduction of sequential-pay CMOs to 18.1% of the
portfolio when their spreads tightened relative to Treasuries. We added to the
portfolio's holdings in CMO floaters, a 15.9% allocation as of August 31, 1996,
due to their very short durations and attractive yield spreads over cash
equivalents. Finally, we established new portfolio positions in fixed rate
mortgage pass-throughs (1.9%) and targeted amortization class (TAC) CMOs (1.2%).
Portfolio Composition as of August 31, 1996*
[PIE CHART APPEARS HERE]
ARMs 39.7%
Repos/Cash Equivalents 21.0%
Sequentials 18.1%
Floaters 15.9%
U.S. Treasuries 2.2%
Fixed Rate Mortgage Pass Throughs 1.9%
TACs 1.2%
* The percentages shown are of total portfolio investments that have settled
and include an offset to cash equivalents relating to unsettled trades. These
percentages may differ from those in the accompanying Statement of
Investments, which reflect portfolio holdings as a percentage of net assets.
10
<PAGE>
Target Maturity Portfolio (May 97)
Performance Review
The portfolio achieved an average annual total return of 6.77% for the
12-month period ended August 31, 1996 (7.18% from dividend income and -0.41%
from price depreciation), compared with 6.04% for the fund's benchmark, the
6.50% U.S. Treasury note due May 1997. The portfolio's NAV at the close of its
fiscal year was $9.95, a decrease of $0.04 from August 31, 1995.
Portfolio Composition Highlights
As of August 31, 1996, ARMs were the largest sector allocation at 45.9% of
the portfolio. Though the ARM sector was cut from 52.1% a year earlier, this
reduction was somewhat offset by the initiation of a 6.5% position in floaters,
which have a similar structure as ARMs. Our preference of one sector over
another is based on where we perceive greater relative value and individual
security selection.
The most significant change in the portfolio's allocation was a reduction
in sequential-pay CMOs to 5.0%, down from 29.6% a year ago, after they performed
well when their spreads tightened relative to Treasuries. Inverse floaters were
increased to a 7.4% weighting because they contributed incremental yield and
potential incremental return. In addition, we initiated positions in PAC CMOs
(5.8%), which offered attractive relative value as well as incremental yield
over Treasuries, and fixed rate mortgage pass-throughs (2.2%). We continued to
use U.S. Treasuries (15.2%) and repurchase agreements/cash equivalents (12.0%)
to manage the portfolio's duration to match that of the benchmark.
Portfolio Composition as of August 31, 1996*
[PIE CHART APPEARS HERE]
ARMs 45.9%
U.S. Treasuries 15.2%
Repos/Cash Equivalents 12.0%
Inverse Floaters 7.4%
Floaters 6.5%
PACs 5.8%
Sequentials 5.0%
Fixed Rate Mortgage Pass-Throughs 2.2%
* The percentages shown are of total portfolio investments that have settled
and include an offset to cash equivalents relating to unsettled trades. These
percentages may differ from those in the accompanying Statement of
Investments, which reflect portfolio holdings as a percentage of net assets.
11
<PAGE>
Investment Strategy and Outlook for TCU TMPs
In the coming months, we intend to shift the allocation of the TCU TMPs to
emphasize shorter duration securities in anticipation of their approaching
maturities.
In general, we have a constructive outlook for the ARM market, which
continues to offer attractive yield relative to other short-duration fixed
income sectors.
Distribution Policy
As required by tax law, all mutual funds, including the TCU portfolios,
must distribute substantially all of the taxable income they generate each year.
. 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 by
December 31.
. For the TCU Government Securities Portfolio and the 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 by December 31.
. 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,
any excess income, overdistribution or net capital gains generated are paid
out or adjusted at year-end. The amount of these adjustments may be more
significant than in portfolios in which the dividend is reset each month.
In December 1995, the TMP (Feb 97) and the TMP (May 97) paid special
dividends of $0.1606 per share and $0.0340 per share, respectively.
12
<PAGE>
In conclusion, we thank you for your investment in the TCU portfolios and
we look forward to continuing our relationship.
Sincerely,
/s/ Laurie H. Wollmuth
Laurie H. Wollmuth
Portfolio Manager
TCU Money Market Portfolio
/s/ Jonathan A. Beinner /s/ James B. Clark
Jonathan A. Beinner James B. Clark
/s/ Peter D. Dion /s/ James P. McCarthy
Peter D. Dion James P. McCarthy
Portfolio Managers
TCU Government Securities Portfolio
TCU Mortgage Securities Portfolio
TCU Target Maturity Portfolio (Feb 1997)
TCU Target Maturity Portfolio (May 1997)
Goldman Sachs Asset Management
September 30, 1996
13
<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, 1996. 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 Note ("2-year T-Note").
Target Maturity (Feb 97) ("TMP (Feb 97)"): $1,000,000 Lehman ARM Index; Lehman 1-3 Gov't Index; 4.75% U.S.
Treasury Note due 02/15/97 ("T-Note 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 Note due 05/15/97 ("T-Note 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 OF GOVERNMENT SECURITIES PORTFOLIO APPEARS HERE]
<TABLE>
<CAPTION>
GSP Lehman ARM Index(c) Lehman 1-2 Gov't Index 1-year T-Bill 6-Month T-Bill
--- ------------------- ---------------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
August 1, 1991(b) $100,000 N/A* $100,000 $100,000 $100,000
August 31, 1991 $100,585 N/A* $101,250 $100,832 $100,603
August 31, 1992 $107,303 $108,179 $110,607 $107,760 $106,172
August 31, 1993 $111,661 $114,961 $116,102 $111,873 $109,850
August 31, 1994 $114,266 $115,868 $118,784 $114,846 $113,692
August 31, 1995 $120,920 $125,399 $127,130 $122,280 $120,538
August 31, 1996 $128,513 $133,475 $133,930 $128,900 $127,060
</TABLE>
- ----------------------------------------
Average Annual Total Return
- ----------------------------------------
One Year Five Year Since inception(a)
- ----------------------------------------
6.26% 5.02% 5.08%
- ----------------------------------------
Mortgage Securities Portfolio
[GRAPH OF MORTGAGE SECURITIES PORTFOLIO APPEARS HERE]
<TABLE>
<CAPTION>
MSP Lehman ARM Index Lehman 1-3 Gov't Index 2-year T-Note
--- ---------------- ---------------------- -------------
<S> <C> <C> <C> <C>
November 1, 1992(b) $500,000 $500,000 $500,000 $500,000
August 31, 1993 $532,570 $532,860 $526,097 $526,329
August 31, 1994 $537,871 $537,066 $535,052 $534,055
August 31, 1995 $581,995 $581,250 $574,700 $574,400
August 31, 1996 $615,069 $618,650 $604,750 $602,350
</TABLE>
- -----------------------------------
Average Annual Total
- -----------------------------------
One Year Since Inception(a)
- -----------------------------------
5.67% 5.39%
- -----------------------------------
14
<PAGE>
TRUST FOR CREDIT UNIONS
PERFORMANCE COMPARISON - (Continued)
Target Maturity Portfolio (Feb 97)
[GRAPHIC OF TARGET MATURITY PORTFOLIO APPEARS HERE]
<TABLE>
<CAPTION>
TMP(Feb 97)(d) TMP(Feb 97)(e) Lehman ARM Index Lehman 1-3 Gov't Index T-Note 4.75%
-------------- -------------- ---------------- ---------------------- ------------
<S> <C> <C> <C> <C> <C>
March 1, 1994(b) $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000
August 31, 1994 $996,630 $996,630 $999,122 $1,007,226 $996,823
August 31, 1995 $1,071,183 $1,071,183 $1,081,300 $1,081,800 $1,068,531
August 31, 1996 $1,143,152 $1,137,262 $1,150,900 $1,138,400 $1,133,000
</TABLE>
Average Annual Total Return
--------------------------------
One Year Since inception(a)
- -------------------------------------------------
TMP(Feb 97)(d) 6.70% 5.19%
- -------------------------------------------------
TMP(Feb 97)(e) 6.17% 4.99%
- -------------------------------------------------
Target Maturity Portfolio (May 97)
[GRAPH OF TARGET MATURITY PORTFOLIO APPEARS HERE]
<TABLE>
<CAPTION>
TMP(May 97)(d) TMP(May 97)(e) Lehman ARM Index Lehman 1-3 Gov't Index T-Note 6.50%
-------------- -------------- ---------------- ---------------------- ------------
<S> <C> <C> <C> <C> <C>
June 1, 1994(b) $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000
August 31, 1994 $1,013,022 $1,013,022 $1,013,254 $1,014,840 $1,015,554
August 31, 1995 $1,091,028 $1,091,028 $1,096,600 $1,090,000 $1,091,600
August 31, 1996 $1,165,056 $1,159,234 $1,167,200 $1,147,100 $1,157,500
</TABLE>
Average Annual Total Return
--------------------------------
One Year Since inception(a)
- -------------------------------------------------
TMP(May 97)(d) 6.77% 6.75%
- -------------------------------------------------
TMP(May 97)(e) 6.23% 6.52%
- -------------------------------------------------
(a) The Government Securities, Mortgage Securities, Target Maturity (Feb 97),
and Target Maturity (May 97) Portfolios commenced operations July 10, 1991,
October 9, 1992, 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 ended
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.
15
<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 (Feb 97) and the Target Maturity
Portfolio (May 97)), including the statements of investments as of August 31,
1996, 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, 1996 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, 1996, 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 3, 1996
16
<PAGE>
TRUST FOR CREDIT UNIONS
-----------------
MONEY MARKET PORTFOLIO
STATEMENT OF INVESTMENTS
August 31, 1996
($ in Thousands)
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ---------- -------- ---------- ------------
<S> <C> <C> <C>
Bank Notes (3.5%)
Bank of America, Illinois
$ 10,000 5.33% 10/11/96 $ 10,000
SouthTrust Bank, N.A.
5,000 5.57 10/10/96 5,000
----------
Total Bank Notes................. $ 15,000
----------
Bankers' Acceptances (3.5%)
NationsBank of Texas, N.A.
$ 5,000 5.26%(a) 09/19/96 $ 4,987
NationsBank, N.A.
10,000 5.37(a) 11/04/96 9,906
----------
Total Bankers' Acceptances....... $ 14,893
----------
Certificates of Deposit (12.9%)
Fifth Third Bank of Cincinatti
$ 10,000 5.41% 09/03/96 $ 10,000
First Alabama Bank
10,000 5.34 10/07/96 10,000
First Tennessee Bank
15,000 5.36 10/04/96 15,000
Morgan Guaranty Trust Co.
5,000 5.54 10/17/96 5,001
U.S. National Bank of Oregon
15,000 5.29 09/16/96 15,000
----------
Total Certificates of Deposit.... $ 55,001
----------
Federal Funds (7.0%)
American Express Centurion Bank
$ 15,000 5.34% 09/10/96 $ 15,000
Branch Banking & Trust Co.
15,000 5.31 09/16/96 15,000
----------
Total Federal Funds.............. $ 30,000
----------
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- --------- -------- ---------- -----------
<S> <C> <C> <C>
Variable Rate Demand Note (2.3%)
PNC Bank, N.A.
$ 10,000 5.21% 09/03/96 $ 10,000
----------
Repurchase Agreements (71.0%)
Bear Stearns Companies, Inc., dated
08/16/96, repurchase price $50,199
(FHLMC: $51,216, 7.50-8.00%,
01/01/08-07/01/26)
$ 50,000 5.31% 09/12/96 $ 50,000
CS First Boston Corp., dated 08/05/96,
repurchase price $50,222 (FNMA: $51,566,
6.12-6.23%, 02/01/32-10/01/32)
50,000 5.33 09/04/96 50,000
Goldman, Sachs & Co., dated 08/16/96,
repurchase price $25,118 (FNMA: $25,790,
6.12-7.31%, 12/01/33-01/01/35)
25,000 5.32 09/17/96 25,000
Joint Repurchase Agreement Accounts
152,800 5.26 09/03/96 152,800
25,000 5.26 09/03/96 25,000
----------
Total Repurchase Agreements...... $ 302,800
----------
Total Investments ............... $ 427,694/(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.
17
<PAGE>
TRUST FOR CREDIT UNIONS
--------------
GOVERNMENT SECURITIES PORTFOLIO
STATEMENT OF INVESTMENTS
August 31, 1996
($ in Thousands)
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- ---------- --------- ---------- --------
Mortgage Backed Obligations (76.3%)
Adjustable Rate Federal Home Loan Mortgage Corp.
(FHLMC)/(a)/ (25.0%)
<S> <C> <C> <C>
$ 1,527 8.09% 04/01/18 $ 1,566
9,271 7.62 05/01/18 9,568
2,995 7.30 07/01/18 3,085
1,884 7.81 01/01/19 1,936
5,354 7.36 02/01/22 5,483
29,368 7.76 02/01/22 30,486
26,037 7.78 04/01/22 27,008
2,297 6.88 11/01/22 2,318
4,954 6.89 11/01/22 4,964
14,408 7.65 11/01/22 14,900
11,193 7.68 06/01/24 11,484
3,550 7.20 02/01/28 3,644
6,321 7.17 04/01/28 6,477
2,934 7.15 07/01/29 2,976
8,115 7.20 05/01/31 8,284
--------
Total Adjustable Rate FHLMC...... $134,179
========
Adjustable Rate Federal National Mortgage Association
(FNMA)/(a)/ (40.9%)
$ 4,043 6.52% 03/01/17 $ 4,077
2,473 7.24 11/01/17 2,546
17,145 7.33 12/01/17 17,648
5,108 7.07 08/01/18 5,251
4,722 7.53 09/01/18 4,878
1,701 7.35 11/01/18 1,749
26,207 7.27 06/01/19 26,931
2,651 7.27 07/01/19 2,721
6,957 7.00 12/01/19 6,883
4,712 7.65 03/01/20 4,906
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------- --------- ---------- --------
Mortgage Backed Obligations--(Continued)
Adjustable Rate FNMA--(Continued)
<S> <C> <C> <C>
$ 2,135 7.37% 05/01/20 $ 2,184
17,807 7.23 04/01/21 18,320
37,832 7.45 09/01/21 39,200
2,243 7.30 10/01/21 2,279
1,456 7.76 11/01/21 1,490
2,598 7.53 02/01/22 2,695
24,678 7.53 09/01/22 25,539
23,125 7.44 09/01/25 23,993
5,859 7.32 07/01/27 6,022
4,058 7.29 10/01/27 4,169
15,702 6.09 02/01/31 15,575
--------
Total Adjustable Rate FNMA....... $219,056
========
Adjustable Rate Giant/(a)/ (1.8%)
$ 9,270 7.32% TBA/(b)/ $ 9,547
--------
Adjustable Rate Government National Mortgage
Association (GNMA)/(a)/ (4.6%)
$24,588 6.00% 10/20/25 $ 24,605
--------
Collateralized Mortgage Obligations (CMOs)(4.0%)
Adjustable Rate CMOs/(a)/ (2.9%)
FNMA REMIC Trust 1990-145, Class A
$15,403 6.49% 12/25/20 $ 15,382
--------
Super Floater CMOs/(a)/ (1.1%)
FNMA REMIC Trust 1992-157, Class FA
$ 6,288 1.22% 03/25/04 $ 6,053
--------
Total CMOs ...................... $ 21,435
--------
Total Mortgage Backed
Obligations (cost $412,138) ... $408,822
--------
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
TRUST FOR CREDIT UNIONS
--------------
GOVERNMENT SECURITIES PORTFOLIO - (Continued)
STATEMENT OF INVESTMENTS
August 31, 1996
($ in Thousands)
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- ---------- --------- ---------- ----------
<S> <C> <C> <C>
U.S. Treasury Obligations (23.2%)
U.S. Treasury Notes
$ 89,000 7.25% 11/15/96 $ 89,292
27,000 5.63 10/31/97 26,868
8,000 5.88 04/30/98 7,950
----------
Total U.S. Treasury Obligations
(cost $124,836) ............... $ 124,110
----------
Repurchase Agreements (4.8%)
Joint Repurchase Agreement Account (c)
$ 25,600 5.26% 09/03/96 $ 25,600
----------
Total Repurchase Agreements
(cost $25,600) ................ $ 25,600
----------
Total Investments (cost
$562,574(d)) .................. $ 558,532
==========
</TABLE>
- -----------------------------------------------------------
<TABLE>
<S> <C>
Federal Income Tax Information:
Gross unrealized gain for investments
in which value exceeds cost .......... $ 398
Gross unrealized loss for investments
in which cost exceeds value .......... (4,662)
==========
Net unrealized loss .................... $ (4,264)
==========
</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, 1996.
/(b)/ TBA (To Be Assigned) securities are purchased on a forward commitment
basis with an approximate (generally +/- 2.5%) principal amount and no
definite maturity date. The actual principal amount and maturity date will
be determined upon settlement when the specific mortgage pools are
assigned.
/(c)/ A portion of this security is being segregated for open TBA purchases.
/(d)/ The aggregate cost for federal income tax purposes is $562,796.
The accompanying notes are an integral
part of these financial statements.
19
<PAGE>
TRUST FOR CREDIT UNIONS
--------------
MORTGAGE SECURITIES PORTFOLIO
STATEMENT OF INVESTMENTS
August 31, 1996
($ in Thousands)
Principal Interest Maturity
Amount Rate Date Value
- ---------- --------- ---------- ----------
Mortgage Backed Obligations (79.8%)
Adjustable Rate Government National Mortgage
Association (GNMA)/(a)/ (4.1%)
$ 13,499 6.00% 10/20/25 $ 13,509
--------
Fixed Rate Federal National Mortgage Association (FNMA)
(6.5%)
$ 3,475 6.00% 09/01/07 $ 3,332
7,655 6.50 06/01/08 7,418
1,581 6.00 10/01/08 1,500
3,371 6.00 06/01/09 3,198
6,587 6.00 10/01/09 6,249
--------
Total Fixed Rate FNMA............ $ 21,697
--------
Fixed Rate GNMA (1.7%)
$ 5,037 10.00% 10/15/16 $ 5,525
--------
Collateralized Mortgage Obligations (CMOs) (67.5%)
Adjustable Rate CMOs(a) (26.5%)
Citicorp Mortgage Securities, Inc. 1992-17, Class A
$ 7,889 7.42% 10/25/22 $ 8,035
CMC Securities Corp. II 1993-H, Class A1
4,239 7.43 09/25/23 4,290
CMC Securities Corp. II 1993-I, Class A2
4,282 6.88 09/25/23 4,309
Imperial Savings Association 1988-3, Class A
2,331 7.32 01/25/18 2,348
Independent National Mortgage Corp.
1994-W, Class A1
7,176 8.09 12/25/24 7,330
Principal Interest Maturity
Amount Rate Date Value
--------- --------- ---------- ----------
Mortgage Backed Obligations--(Continued)
Adjustable Rate CMOs--(Continued)
Merrill Lynch Mortgage Investors, Inc.
1994-I, Class A1
$ 7,760 7.38% 01/25/05 $ 7,914
Prudential Home Mortgage 1992-8, Class A1
282 8.03 04/25/22 287
Prudential Home Mortgage 1992-24, Class A1
3,111 8.21 09/25/22 3,167
Resolution Trust Corp. 1992-4, Class B2
4,500 7.35 07/25/28 4,549
Resolution Trust Corp. 1992-11, Class A2
2,998 7.36 10/25/24 3,022
Resolution Trust Corp. 1992-11, Class B2
7,501 7.36 10/25/24 7,542
Resolution Trust Corp. 1994-1, Class M3
4,671 7.95 09/25/29 4,787
Resolution Trust Corp. 1995-1, Class A3
6,776 7.23 10/25/28 6,894
Resolution Trust Corp. 1995-1, Class M3
3,189 7.23 10/25/28 3,229
Ryland Mortgage Securities Corp. 1989-FN1,
Class A
1,507 7.44 11/01/18 1,523
Ryland Mortgage Securities Corp. 1991-4,
Class A1
2,163 7.21 02/25/20 2,157
Ryland Mortgage Securities Corp. 1991-7,
Class A1
1,314 6.55 06/25/21 1,316
The accompanying notes are an integral
part of these financial statements.
20
<PAGE>
TRUST FOR CREDIT UNIONS
--------------
MORTGAGE SECURITIES PORTFOLIO - (Continued)
STATEMENT OF INVESTMENTS
August 31, 1996
($ in Thousands)
Principal Interest Maturity
Amount Rate Date Value
- ---------- --------- ---------- ----------
Mortgage Backed Obligations--(Continued)
Adjustable Rate CMOs--(Continued)
Ryland Mortgage Securities Corp. 1991-B1,
Class 1
$ 1,843 7.26% 03/25/20 $ 1,861
Ryland Mortgage Securities Corp. 1992-3,
Class A2
383 7.33 06/25/20 385
Salomon Brothers Mortgage Securities
1994-20, Class A
6,383 7.72 12/25/24 6,501
Saxon Mortgage Securities Corp. 1992-1,
Class B1
6,800 7.66 09/25/22 6,835
----------
Total Adjustable Rate CMOs....... $ 88,281
----------
Planned Amortization Class (PAC) CMOs (22.2%)
CMC Securities Corp. 1993-F, Class A2
$ 5,000 6.75% 11/25/23 $ 4,960
FHLMC Series 1584, Class E
8,800 5.75 10/15/16 8,514
FHLMC Series 1684, Class F
14,000 5.75 08/15/20 13,082
FNMA REMIC Trust 1993-86, Class D
12,693 5.50 05/25/04 12,528
GE Capital Mortgage Services, Inc. 1994-7,
Class A6
2,443 5.50 02/25/09 2,355
GE Capital Mortgage Services, Inc. 1994-11,
Class A1
11,472 6.50 03/25/24 11,360
Principal Interest Maturity
Amount Rate Date Value
- --------- --------- ---------- ----------
Mortgage Backed Obligations--(Continued)
Planned Amortization Class (PAC) CMOs--(Continued)
GE Capital Mortgage Services, Inc. 1994-13,
Class A1
$ 3,544 6.50% 04/25/24 $ 3,507
Housing Securities, Inc. 1993-E, Class E8
10,429 10.00 02/25/08 10,804
Prudential Home Mortgage 1993-54, Class A4
4,721 6.50 01/25/24 4,628
Residential Funding Mortgage Securities
1994-S12, Class A-3
2,188 04/25/09 2,168
----------
Total PAC CMOs................... $ 73,906
----------
Sequential Fixed Rate CMOs (18.8%)
CMC Securities Corp. 1993-C, Class C3
$ 3,844 9.55% 04/25/08 $ 3,992
FNMA REMIC Trust 1988-12, Class A
3,968 10.00 02/25/18 4,195
FNMA REMIC Trust 1989-12, Class X
7,305 10.00 12/25/14 7,551
FNMA REMIC Trust 1989-59, Class H
15,000 7.75 10/25/18 15,161
Prudential Home Mortgage 1992-20, Class A6
2,257 7.65 08/25/22 2,260
Prudential Home Mortgage 1992-39, Class A3
5,467 5.80 12/25/07 5,432
Prudential Home Mortgage 1992-A, Class 1B1
8,113 7.20 04/28/22 8,073
Prudential Home Mortgage 1993-38, Class A4
13,254 9.55 09/25/23 13,863
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, 1996
($ in Thousands)
Principal Interest Maturity
Amount Rate Date Value
- ---------- --------- ---------- ----------
Mortgage Backed Obligations--(Continued)
Sequential Fixed Rate CMOs--(Continued)
Ryland Mortgage Securities Corp. 72, Class D
$ 1,807 9.85% 12/01/16 $ 1,856
----------
Total Sequential Fixed Rate
CMOs ........................... $ 62,383
----------
Total CMOs ...................... $ 224,570
----------
Total Mortgage Backed
Obligations (cost $265,716) ... $ 265,301
----------
U.S. Treasury Obligations (18.3%)
U.S. Treasury Notes
$ 10,250 5.88% 04/30/98 $ 10,186
13,000 5.13 06/30/98 12,740
12,200 6.88 08/31/99 12,307
22,670 7.88 11/15/04 24,013
U.S. Treasury Principal-Only Stripped
Security/(b)/
2,600 6.92% 11/15/04 1,476
----------
Total U.S. Treasury Obligations
(cost $61,425) ................ $ 60,722
----------
Repurchase Agreements (1.5%)
Joint Repurchase Agreement Account
$ 5,100 5.26% 09/03/96 $ 5,100
----------
Total Repurchase Agreements
(cost $5,100) ................. $ 5,100
----------
Total Investments
(cost $332,241/(c)/) .......... $ 331,123
==========
- -----------------------------------------------------------
Federal Income Tax Information:
Gross unrealized gain for investments
in which value exceeds cost .......... $ 1,526
Gross unrealized loss for investments
in which cost exceeds value .......... (2,701)
==========
Net unrealized loss .................... $ (1,175)
==========
- -----------------------------------------------------------
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, 1996.
/(b)/The interest rate disclosed for these securitites represents effective
yield to maturity.
/(c)/The aggregate cost for federal income tax purposes is $332,298.
The accompanying notes are an integral
part of these financial statements.
22
<PAGE>
TRUST FOR CREDIT UNIONS
--------------
TARGET MATURITY PORTFOLIO (FEB 97)
STATEMENT OF INVESTMENTS
August 31, 1996
($ in Thousands)
Principal Interest Maturity
Amount Rate Date Value
- ---------- -------- ---------- ---------
Mortgage Backed Obligations (76.9%)
Adjustable Rate Federal Home Loan Mortgage Corp.
(FHLMC)/(a)/ (4.2%)
$ 3,813 8.00% 09/01/18 $ 3,941
---------
Fixed Rate Government National Mortgage Association(1.9%)
$ 1,666 10.00% 10/15/16 $ 1,827
---------
Collateralized Mortgage Obligations (CMOs)(70.8%)
Adjustable Rate CMOs(a) (35.6%)
Capstead Securities Corp. 1992-14, Class A
$ 1,766 7.14% 10/25/22 $ 1,775
Chase Mortgage Finance Corp. 1990-E,
Class A1
1,645 7.06 11/25/20 1,658
CMC Securities Corp. II 1993-H, Class A1
3,564 7.43 09/25/23 3,608
Imperial Savings Association 1987-3, Class A1
2,196 7.42 06/25/17 2,195
Merrill Lynch Mortgage Investors, Inc.
1994-I, Class A1
2,841 7.38 01/25/05 2,897
Prudential Home Mortgage 1992-8, Class A1
1,127 8.03 04/25/22 1,148
Resolution Trust Corp. 1992-11, Class B2
2,700 7.36 10/25/24 2,715
Resolution Trust Corp. 1994-1, Class M3
1,687 7.95 09/25/29 1,729
Resolution Trust Corp. 1995-1, Class A3
3,986 7.23 10/25/28 4,055
Ryland Mortgage Securities Corp. 1992-L10,
Class A
1,471 7.50 08/25/22 1,481
Principal Interest Maturity
Amount Rate Date Value
- --------- -------- ---------- ---------
Mortgage Backed Obligations--(Continued)
Adjustable Rate CMOs--(Continued)
Salomon Brothers Mortgage Securities
1990-3A, Class 1
$ 1,901 6.43% 11/25/20 $ 1,901
Salomon Brothers Mortgage Securities
1994-20, Class A
2,295 7.72 12/25/24 2,338
Saxon Mortgage Securities Corp. 1992-4,
Class A
594 7.33 12/25/22 599
Saxon Mortgage Securities Corp. 1992-6,
Class A
967 7.42 01/25/23 976
Saxon Mortgage Securities Corp. 1994-11,
Class A
1,884 7.64 12/25/24 1,928
Saxon Mortgage Securities Corp. 1995-1B,
Class A2
2,703 7.74 04/25/25 2,761
---------
Total Adjustable Rate CMOs........ $ 33,764
---------
Regular Floater CMOs/(a)/ (16.0%)
Capstead Securities Corp. 1993-1, Class F
$ 391 6.25% 03/01/18 $ 392
Collateralized Mortgage Securities Corp.
1990-6, Class H
3,000 6.14 10/20/20 3,029
Collateralized Mortgage Securities Corp.
Series T, Class 1
338 6.24 10/20/18 338
DLJ Mortgage Acceptance Corp. 1996-Q5,
Class A1
3,642 6.00 06/25/26 3,641
The accompanying notes are an integral
part of these financial statements.
23
<PAGE>
TRUST FOR CREDIT UNIONS
--------------
TARGET MATURITY PORTFOLIO (FEB 97) - (Continued)
STATEMENT OF INVESTMENTS
August 31, 1996
($ in Thousands)
Principal Interest Maturity
Amount Rate Date Value
- ---------- -------- ---------- ---------
Mortgage Backed Obligations--(Continued)
Regular Floater CMOs--(Continued)
FBC Mortgage Securities Trust A, Class 1
$ 301 6.19% 01/20/18 $ 301
FHLMC Series 1011, Class F
3,418 6.34 11/15/20 3,470
Residential Funding Mortgage Securities
1993-S13, Class A5
2,299 6.19 03/25/08 2,302
Resolution Trust Corp 1993-C1, Class A2
1,677 6.60 05/25/24 1,677
---------
Total Regular Floater CMOs........ $ 15,150
---------
Sequential Fixed Rate CMOs (18.0%)
FHLMC Series 1028, Class F
$ 1,694 9.30% 05/15/05 $ 1,708
FHLMC Series 1056, Class G
24 8.00 12/15/18 23
FNMA REMIC Trust 1989-10, Class D
5,000 9.50 07/25/09 5,140
FNMA REMIC Trust 1989-80, Class E
5,655 9.00 09/25/18 5,831
Prudential Home Mortgage 1993-38, Class A4
4,203 9.55 09/25/23 4,396
---------
Total Sequential Fixed Rate CMOs.. $ 17,098
---------
Principal Interest Maturity
Amount Rate Date Value
- --------- -------- ---------- ---------
Mortgage Backed Obligations--(Continued)
Targeted Amortization Class (TAC) CMOs (1.2%)
FNMA REMIC Trust G-35, Class K
$ 1,099 8.00% 06/25/20 $ 1,101
---------
Total CMOs ....................... $ 67,113
---------
Total Mortgage Backed Obligations
(cost $72,790) ................. $ 72,881
---------
U.S. Treasury Obligations (2.1%)
United States Treasury Note
$ 2,000 5.63% 10/31/97 $ 1,990
---------
Total U.S. Treasury Obligations
(cost $1,993) .................. $ 1,990
---------
Repurchase Agreements (14.6%)
Joint Repurchase Agreement Account
$ 13,800 5.26% 09/03/96 $ 13,800
---------
Total Repurchase Agreements (cost
$13,800) ....................... $ 13,800
=========
Total Investments
(cost $88,583(b)) .............. $ 88,671
=========
The accompanying notes are an integral
part of these financial statements.
24
<PAGE>
TRUST FOR CREDIT UNIONS
--------------
TARGET MATURITY PORTFOLIO (FEB 97) - (Continued)
STATEMENT OF INVESTMENTS
August 31, 1996
($ in Thousands)
- -----------------------------------------------------------
Federal Income Tax Information:
Gross unrealized gain for investments in
which value exceeds cost .............. $ 377
Gross unrealized loss for investments in
which cost exceeds value .............. (330)
---------
Net unrealized gain ..................... $ 47
=========
- -----------------------------------------------------------
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, 1996.
(b)The aggregate cost for federal income tax purposes is $88,624.
The accompanying notes are an integral
part of these financial statements.
25
<PAGE>
<TABLE>
<CAPTION>
TRUST FOR CREDIT UNIONS
--------------
TARGET MATURITY PORTFOLIO (MAY 97)
STATEMENT OF INVESTMENTS
August 31, 1996
($ in Thousands)
Principal Interest Maturity
Amount Rate Date Value
- ---------- --------- ---------- ---------
<S> <C> <C> <C>
Mortgage Backed Obligations (72.6%)
Adjustable Rate Federal Home Loan Mortgage Corp.
(FHLMC)(a) (3.7%)
$ 2,246 7.67% 07/01/30 $ 2,326
---------
Fixed Rate Government National Mortgage Association
(2.2%)
$ 1,266 10.00% 10/15/16 $ 1,388
---------
Collateralized Mortgage Obligations (CMOs) (66.7%)
Adjustable Rate CMOs(a) (42.4%)
Citicorp Mortgage Securities, Inc.
1992-17, Class A
$ 1,793 7.42% 10/25/22 $ 1,826
DLJ Mortgage Acceptance Corp. 1996-Q5,
Class A1
2,428 6.00 06/25/26 2,427
Imperial Savings Association 1987-3, Class A1
1,495 7.42 06/15/17 1,494
Independent National Mortgage Corp.
1994-W, Class A1
1,794 8.07 12/25/24 1,833
Merrill Lynch Mortgage Investors, Inc.
1994-I, Class A1
2,079 7.38 01/25/05 2,120
Prudential Home Mortgage 1992-24, Class A1
2,208 8.21 09/25/22 2,247
Resolution Trust Corp. 1992-11, Class A2
2,141 7.36 10/25/24 2,159
Resolution Trust Corp. 1994-1, Class M3
1,201 7.95 09/25/29 1,231
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------- --------- ---------- ---------
<S> <C> <C> <C>
Mortgage Backed Obligations--(Continued)
Adjustable Rate CMOs--(Continued)
Ryland Mortgage Securities Corp. 1992-L1,
Class A1
$ 2,079 6.84% 02/25/22 $ 2,083
Salomon Brothers Mortgage Securities
1994-20, Class A
1,596 7.72 12/25/24 1,625
Saxon Mortgage Securities Corp. 1992-3,
Class A
1,189 7.43 11/25/22 1,199
Saxon Mortgage Securities Corp. 1992-4,
Class A
1,484 7.33 12/25/22 1,498
Saxon Mortgage Securities Corp. 1992-6,
Class A
1,692 7.42 01/25/23 1,708
Saxon Mortgage Securities Corp. 1994-11,
Class A
1,300 7.64 12/25/24 1,330
Saxon Mortgage Securities Corp. 1995-1B,
Class A2
1,954 7.74 04/25/25 1,995
---------
Total Adjustable Rate CMOs........ $ 26,775
---------
Inverse Floater CMOs(a) (7.4%)
FHLMC Series 1266, Class F
$ 2,956 9.83% 05/15/97 $ 2,953
FHLMC Series 1284, Class E
1,742 8.75 05/15/97 1,737
---------
Total Inverse Floater CMOs........ $ 4,690
---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
26
<PAGE>
TRUST FOR CREDIT UNIONS
--------------
TARGET MATURITY PORTFOLIO (MAY 97) - (Continued)
STATEMENT OF INVESTMENTS
August 31, 1996
($ in Thousands)
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- ---------- --------- ---------- ---------
<S> <C> <C> <C>
Mortgage Backed Obligations--(Continued)
Planned Amortization Class (PAC) CMOs (5.8%)
FNMA REMIC Trust 1990-24, Class E
$ 3,500 9.00% 03/25/20 $ 3,660
---------
Regular Floater CMOs(a) (6.1%)
FHLMC Series 1011, Class F
$ 2,442 6.34% 11/15/20 $ 2,479
Residential Funding Mortgage Securities
1993-S13, Class A5
1,396 6.19 03/25/08 1,398
---------
Total Regular Floater CMOs........ $ 3,877
---------
Sequential Fixed Rate CMOs (5.0%)
Prudential Home Mortgage 1993-38, Class A4
$ 3,015 9.55% 09/25/23 $ 3,154
---------
Total CMOs ....................... $ 42,156
---------
Total Mortgage Backed Obligations
(cost $45,705) ................. $ 45,870
---------
U.S. Treasury Obligations (15.0%)
U.S. Treasury Note
$ 9,500 5.63% 10/31/97 $ 9,453
---------
Total U.S. Treasury Obligations
(cost $9,476) .................. $ 9,453
---------
Repurchase Agreements (7.4%)
Joint Repurchase Agreement Account
$ 4,700 5.26% 09/03/96 $ 4,700
---------
Total Repurchase Agreements (cost
$4,700) ........................ $ 4,700
---------
Total Investments
(cost $59,881(b)) .............. $ 60,023
=========
<CAPTION>
- ----------------------------------------------------------
<S> <C>
Federal Income Tax Information:
Gross unrealized gain for investments in
which value exceeds cost .............. $ 339
Gross unrealized loss for investments in
which cost exceeds value .............. (197)
---------
Net unrealized gain ..................... $ 142
=========
- -----------------------------------------------------------
</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, 1996.
/(b)/ The amount stated also represents the aggregate cost for federal income
tax purposes.
The accompanying notes are an integral
part of these financial statements.
27
<PAGE>
TRUST FOR CREDIT UNIONS
--------------
STATEMENTS OF ASSETS AND LIABILITIES
August 31, 1996
<TABLE>
<CAPTION>
Target Target
Money Government Mortgage Maturity Maturity
Market Securities Securities Portfolio Portfolio
Portfolio Portfolio Portfolio (Feb 97) (May 97)
------------- -------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments in securities, at value (cost:
$427,693,870, $562,573,997, $332,240,860,
$88,583,110 and
$59,880,881, respectively) ................... $427,693,870 $558,531,575 $331,123,140 $ 88,670,699 $60,022,984
Cash ........................................... 37,902 27,445 98,726 79,540 71,875
Receivables:
Investment securities sold ................... -- 2,680,117 -- 5,876,683 2,940,882
Interest ..................................... 993,161 5,721,937 2,951,881 579,945 524,314
Deferred organization expenses, net ............ -- -- 10,004 1,833 1,320
Other assets ................................... 5,069 78,036 -- 3,022 1,755
------------ ----------- ----------- ---------- ----------
Total assets ....................... 428,730,002 567,039,110 334,183,751 95,211,722 63,563,130
------------ ----------- ----------- ---------- ----------
LIABILITIES
Payables:
Investment securities purchased .............. -- 28,830,336 -- -- --
Dividends .................................... 1,938,770 2,334,853 1,532,816 432,916 356,120
Advisory fees ................................ 41,445 91,208 56,726 19,241 13,402
Administration fees .......................... 18,609 45,602 14,182 4,016 2,681
Accrued expenses and other liabilities ......... 21,352 34,676 33,597 28,694 21,958
------------ ----------- ----------- ---------- ----------
Total liabilities ................... 2,020,176 31,336,675 1,637,321 484,867 394,161
------------ ----------- ----------- ---------- ----------
NET ASSETS
Paid-in capital ................................ 426,709,826 557,133,070 346,096,607 98,296,211 63,532,452
Accumulated undistributed (distributions in
excess of) net investment income ............ -- (395,807) (1,273,901) 628,878 (31,341)
Accumulated net realized loss on investment
transactions ................................. -- (16,992,406) (11,158,556) (4,285,823) (474,245)
Net unrealized gain (loss) on investments ..... -- (4,042,422) (1,117,720) 87,589 142,103
------------ ----------- ----------- ---------- ----------
Net assets .......................... $426,709,826 $535,702,435 $332,546,430 $ 94,726,855 $63,168,969
============ ============ ============ ============ ===========
Net asset value per unit
(net assets/units outstanding) ............... $1.00 $9.76 $9.65 $9.66 $9.95
============ ============ ============ ============ ===========
Redemption price per unit (Note 7) ............. $1.00 $9.76 $9.65 $9.61 $9.90
============ ============ ============ ============ ===========
UNITS OUTSTANDING
Total units outstanding, $0.001 par value
(unlimited number of units authorized) ....... 426,709,826 54,874,828 34,443,586 9,809,980 6,350,000
============ ============ ============ ============ ===========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
28
<PAGE>
TRUST FOR CREDIT UNIONS
--------------
STATEMENTS OF OPERATIONS
For The Year Ended August 31, 1996
<TABLE>
<CAPTION>
Target Target
Money Government Mortgage Maturity Maturity
Market Securities Securities Portfolio Portfolio
Portfolio Portfolio Portfolio (Feb 97) (May 97)
----------- ----------- - ------------ ----------- ----------
<S> <C> <C> <C> <C> <C>
Investment Income:
Interest income ................................ $27,555,285 $34,733,885 $21,271,258 $6,684,077 $4,733,747
----------- ----------- ------------ ----------- ----------
Expenses:
Advisory fees .................................. 893,178 1,067,553 614,735 227,680 158,732
Administration fees ............................ 495,451 533,777 153,910 47,545 31,820
Custodian fees ................................. 63,332 80,145 53,813 37,995 34,115
Professional fees .............................. 52,398 67,684 54,023 44,815 43,178
Trustees' fees ................................. 13,676 19,300 9,829 2,795 1,855
Other expenses ................................. 46,106 99,935 41,813 9,585 1,812
----------- ----------- ------------ ----------- -----------
Total expenses ............................... 1,564,141 1,868,394 928,123 370,415 271,512
Less--Fee waivers and expense
reimbursements ................................. (602,462) (176) (59,027) -- --
----------- ----------- ------------ ----------- ----------
Net expenses ................................. 961,679 1,868,218 869,096 370,415 271,512
----------- ----------- ------------ ----------- ----------
Net investment income ............................ 26,593,606 32,865,667 20,402,162 6,313,662 4,462,235
Net realized gain (loss) on investment
transactions .................................. -- (2,540,339) (1,362,172) 209,155 194,087
Net change in unrealized gain (loss) on
investments ................................... -- 2,123,885 (2,371,245) (316,867) (512,792)
----------- ----------- ------------ ----------- ----------
Net increase in net assets resulting from
operations .................................... $26,593,606 $32,449,213 $16,668,745 $6,205,950 $4,143,530
=========== =========== ============ =========== ==========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
29
<PAGE>
TRUST FOR CREDIT UNIONS
--------------
STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended August 31, 1996
<TABLE>
<CAPTION>
Money Government Mortgage
Market Securities Securities
Portfolio Portfolio Portfolio
<S> -------------- ------------- ------------
From Operations: <C> <C> <C>
Net investment income ........................................... $ 26,593,606 $ 32,865,667 $ 20,402,162
Net realized gain (loss) from investment transactions ........... -- (2,540,339) (1,362,172)
Net change in unrealized gain (loss) on investments ............. -- 2,123,885 (2,371,245)
-------------- ------------ -------------
Net increase in net assets resulting from operations ............ 26,593,606 32,449,213 16,668,745
-------------- ------------ -------------
Distributions to Unitholders:
From net investment income ...................................... (26,593,606) (32,575,731) (19,872,792)
-------------- ------------ -------------
Total distributions to unitholders .............................. (26,593,606) (32,575,731) (19,872,792)
-------------- ------------ -------------
From Unit Transactions:
Proceeds from sale of units ..................................... 4,407,395,102 71,305,733 84,209,886
Reinvestment of dividends and distributions ..................... 14,016,210 5,926,024 3,681,644
Cost of units repurchased ....................................... (4,376,797,402) (71,061,723) (16,550,279)
-------------- ------------ -------------
Net increase in net assets from unit transactions ............... 44,613,910 6,170,034 71,341,251
-------------- ------------ -------------
Total increase (decrease) ..................................... 44,613,910 6,043,516 68,137,204
Net Assets:
Beginning of year ............................................... 382,095,916 529,658,919 264,409,226
-------------- ------------- -------------
End of year ..................................................... $ 426,709,826 $ 535,702,435 $ 332,546,430
============== ============= =============
Accumulated undistributed (distributions in excess of) net
investment income ............................................... $ -- $ (395,807) $ (1,273,901)
============== ============= =============
Summary of Unit Transactions:
Units sold ...................................................... 4,407,395,102 7,283,062 8,597,649
Reinvestment of dividends and distributions ..................... 14,016,210 606,093 377,883
Units repurchased ............................................... (4,376,797,402) (7,267,669) (1,692,128)
-------------- ------------- -------------
Increase in units outstanding ................................... 44,613,910 621,486 7,283,404
============== ============= =============
<CAPTION>
Target Target
Maturity Maturity
Portfolio Portfolio
(Feb 97) (May 97)
----------- -------------
<S> <C> <C>
From Operations:
Net investment income ........................................... $ 6,313,662 $ 4,462,235
Net realized gain (loss) from investment transactions ........... 209,155 194,087
Net change in unrealized gain (loss) on investments ............. (316,867) (512,792)
----------- -----------
Net increase in net assets resulting from operations ............ 6,205,950 4,143,530
----------- -----------
Distributions to Unitholders:
From net investment income ...................................... (6,700,405) (4,433,542)
----------- -----------
Total distributions to unitholders .............................. (6,700,405) (4,433,542)
----------- -----------
From Unit Transactions:
Proceeds from sale of units ..................................... -- --
Reinvestment of dividends and distributions ..................... -- --
Cost of units repurchased ....................................... -- --
----------- -----------
Net increase in net assets from unit transactions ............... -- --
----------- -----------
Total increase (decrease) ..................................... (494,455) (290,012)
Net Assets:
Beginning of year ............................................... 95,221,310 63,458,981
----------- -----------
End of year ..................................................... $94,726,855 $63,168,969
=========== ===========
investment income ............................................... $ 628,878 $ (31,341)
=========== ===========
Summary of Unit Transactions:
Units sold ...................................................... -- --
Reinvestment of dividends and distributions ..................... -- --
Units repurchased ............................................... -- --
----------- -----------
Increase in units outstanding ................................... -- --
=========== ===========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
30
<PAGE>
TRUST FOR CREDIT UNIONS
--------------
STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended August 31, 1995
<TABLE>
<CAPTION>
Money Government
Market Securities
Portfolio Portfolio
----------------- ---------------
<S> <C> <C>
From Operations:
Net investment income...................................................... $ 14,748,722 $ 30,466,625
Net realized loss from investment transactions ............................ -- (4,600,744)
Net change in unrealized gain (loss) on investments ....................... -- 4,293,439
----------------- ---------------
Net increase in net assets resulting from operations ...................... 14,748,722 30,159,320
----------------- ---------------
Distributions to Unitholders:
From net investment income ................................................ (14,700,440) (30,842,606)
In excess of net investment income ........................................ -- (685,743)
From paid-in capital ...................................................... -- --
----------------- ---------------
Total distributions to unitholders ........................................ (14,700,440) (31,528,349)
----------------- ---------------
From Unit Transactions:
Proceeds from sale of units ............................................... 3,043,450,086 21,279,121
Reinvestment of dividends and distributions ............................... 6,769,666 9,375,252
Cost of units repurchased ................................................. (2,885,160,983) (93,957,586)
----------------- ---------------
Net increase (decrease) in net assets from unit transactions .............. 165,058,769 (63,303,213)
----------------- ---------------
Total increase (decrease)................................................ 165,107,051 (64,672,242)
Net Assets:
Beginning of year ......................................................... 216,988,865 594,331,161
----------------- ---------------
End of year ............................................................... $ 382,095,916 $ 529,658,919
================= ===============
Accumulated undistributed (distributions in excess of) net
investment income ......................................................... $ -- $ (685,743)
================= ===============
Summary of Unit Transactions:
Units sold ................................................................ 3,043,450,086 2,179,482
Reinvestment of dividends and distributions ............................... 6,769,666 963,379
Units repurchased ......................................................... (2,885,160,983) (9,662,680)
----------------- ---------------
Increase (decrease) in units outstanding .................................. 165,058,769 (6,519,819)
================= ===============
<CAPTION>
Target Target
Mortgage Maturity Maturity
Securities Portfolio Portfolio
Portfolio (Feb 97) (May 97)
--------------- ------------- -------------
<S> <C> <C> <C>
From Operations:
Net investment income...................................................... $ 16,818,748 $ 6,581,990 $ 4,514,298
Net realized loss from investment transactions ............................ (3,551,399) (1,844,120) (339,194)
Net change in unrealized gain (loss) on investments ....................... 7,151,412 1,992,445 801,748
--------------- ------------- --------------
Net increase in net assets resulting from operations ...................... 20,418,761 6,730,315 4,976,852
--------------- ------------- --------------
Distributions to Unitholders:
From net investment income ................................................ (16,818,748) (6,068,263) (4,420,145)
In excess of net investment income ........................................ (434,471) -- --
From paid-in capital ...................................................... (406,506) -- --
--------------- ------------- --------------
Total distributions to unitholders ........................................ (17,659,725) (6,068,263) (4,420,145)
--------------- ------------- --------------
From Unit Transactions:
Proceeds from sale of units ............................................... 7,814,480 -- --
Reinvestment of dividends and distributions ............................... 4,880,915 -- --
Cost of units repurchased ................................................. (34,931,625) (2,821,023) (5,964,428)
--------------- ------------- --------------
Net increase (decrease) in net assets from unit transactions .............. (22,236,230) (2,821,023) (5,964,428)
--------------- ------------- --------------
Total increase (decrease)................................................ (19,477,194) (2,158,971) (5,407,721)
Net Assets:
Beginning of year ......................................................... 283,886,420 97,380,281 68,866,702
--------------- ------------- --------------
End of year ............................................................... $ 264,409,226 $ 95,221,310 $ 63,458,981
=============== ============= ==============
Accumulated undistributed (distributions in excess of) net
investment income ......................................................... $ (1,397,205) $ 1,015,621 $ (60,034)
=============== ============= ==============
Summary of Unit Transactions:
Units sold ................................................................ 807,374 -- --
Reinvestment of dividends and distributions ............................... 508,864 -- --
Units repurchased ......................................................... (3,664,116) (300,000) (600,000)
--------------- ------------- --------------
Increase (decrease) in units outstanding .................................. (2,347,878) (300,000) (600,000)
=============== ============= ==============
</TABLE>
The accompanying notes are an integral
part of these financial statements.
31
<PAGE>
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--------------
MONEY MARKET PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A UNIT OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Income from investment Distributions to
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: 8/31/96 ........... $ 1.00 $ 0.0539 $ -- $(0.0539) $ -- $ -- $ 1.00 5.51%
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)
</TABLE>
<TABLE>
<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 to average to average
net assets assets (000's) assets net assets
------------ --------- ----------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Year ended: 8/31/96 ........... 0.19% 5.37% $ 426,710 0.31% 5.25%
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)/Includes the 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.
32
<PAGE>
TRUST FOR CREDIT UNIONS
--------------
GOVERNMENT SECURITIES PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A UNIT OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Income from investment Distributions to
operations unitholders
---------------------- -------------------
Net
realized
Net and In Net
asset unreal- From excess asset
value at Net lized gain net of net value
begin- invest- (loss) on invest- invest- at
ning of ment invest- ment ment end of Total
period income ments(a) income income period return/(b)/
---------- --------- ------------ --------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Year ended: 8/31/96 ............................ $ 9.76 $0.6024 $(0.0055) $(0.5969) $ -- $ 9.76 6.26%
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)/
</TABLE>
<TABLE>
<CAPTION>
Ratio information
assuming no waiver
of fees or expense
reimbursements
---------------------------
Ratio of
net
invest-
ment Net Ratio of
Ratio of income Post- assets net
net to folio at end Ratio of investment
expenses average turn- of expenses to income
to average net over period to average to average
net assets assets rate/(c)/ (000's) assets net assets
------------ ---------- ----------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Year ended: 8/31/96 ............................ 0.35% 6.16% 149.66% $ 535,702 0.35% 6.16%
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)/Includes the effect of mortgage dollar roll transactions.
/(d)/Commencement of operations.
/(e)/Annualized.
The accompanying notes are an integral
part of these financial statements.
33
<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 In
realized excess
Net and of Net
asset unreal- From In excess real-
value at Net lized gain net of net lized
begin- invest- (loss)on invest- invest- gain on From
ning of ment invest- ment ment invest- Paid in
period income ments/(a)/ income income ment capital
---------- --------- ------------ ---------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Year ended: 8/31/96 ........... $ 9.74 $0.6604 $(0.1195) $(0.6309) $ -- $ -- $ --
8/31/95 ........... 9.62 0.6075 0.1539 (0.6075) (0.0175) -- (0.0164)
8/31/94 ........... 10.13 0.5533 (0.4530) (0.5719) (0.0340) (0.0044) --
10/9/92/(d)/ to 8/31/93 ........... 10.00 0.4895 0.1144 (0.4702) -- -- --
</TABLE>
<TABLE>
<CAPTION>
Ratio information
assuming no waiver
of fees
-------------------------
Ratio of
net
invest-
Net ment Net Ratio of
asset Ratio of income Port- assets net
value net to folio at end Ratio of investment
at expenses average turn of expenses to income
end of Total to average net over period average net to average
period return/(b)/ net assets assets rate/(c)/ (000's) assets net assets
-------- ------------- ------------ ----------- ---------- --------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year ended: 8/31/96 ........... $ 9.65 5.67% 0.28% 6.64% 163.42% $332,546 0.30% 6.62%
8/31/95 ........... 9.74 8.20 0.26 6.36 130.98 264,409 0.32 6.30
8/31/94 ........... 9.62 1.00 0.28 5.66 188.58 283,886 0.29 5.65
10/9/92/(d)/ to 8/31/93 ........... 10.13 6.27 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)/Includes the effect of mortgage dollar roll transactions.
/(d)/Commencement of operations.
/(e)/Annualized.
The accompanying notes are an integral
part of these financial statements.
34
<PAGE>
<TABLE>
<CAPTION>
TRUST FOR CREDIT UNIONS
--------------
TARGET MATURITY PORTFOLIOS
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A UNIT OUTSTANDING THROUGHOUT EACH PERIOD
Income from
Investment Distributions to
operations unitholders
----------------- --------------------
Net
realized
Net and In Net
asset unreal- From excess asset
value at Net ized gain net of net value
begin- invest- (loss) on invest- invest- at
ning of ment invest- ment ment end of Total
period income ments (a) income income period return(b)
---------- -------- ----------- ---------- --------- -------- -----------
TARGET MATURITY PORTFOLIO (FEB 97)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Year ended: 8/31/96 ................................ $9.71 $0.6436 $(0.0106) $(0.6830) $ -- $9.66 6.70%
8/31/95 ................................ 9.63 0.6674 0.0261 (0.6135) -- 9.71 7.48
2/15/94(d)to8/31/94 ................................ 10.00 0.3313 (0.4189) (0.2824) -- 9.63 (0.83)
TARGET MATURITY PORTFOLIO (MAY 97)
- -----------------------------------------------------------------------------------------------------------------------------
Year ended: 8/31/96 ................................ 9.99 0.7028 (0.0446) (0.6982) -- 9.95 6.77
8/31/95 ................................ 9.91 0.6674 0.0673 (0.6547) -- 9.99 7.70
5/23/94(d)to8/31/94 ................................ 10.00 0.1594 (0.0674) (0.1594) (0.0226) 9.91 0.92
</TABLE>
<TABLE>
<CAPTION>
Ratio of
net
Invest-
ment Net
Ratio of income Port- assets
net to folio at end
expenses average turn of
to average net over period
net assets assets rate(c) (000's)
------------------- -------- -------- ----------
TARGET MATURITY PORTFOLIO (FEB 97)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year ended: 8/31/96 ................................ 0.39% 6.64% 211.33% $94,727
8/31/95 ................................ 0.41 6.94 171.98 95,221
2/15/94(d)to8/31/94 ................................ 0.42(e) 6.30(e) 156.03 97,380
TARGET MATURITY PORTFOLIO (MAY 97)
- ----------------------------------------------------------------------------------------------------
Year ended: 8/31/96 ................................ 0.43 7.03 190.34 63,169
8/31/95 ................................ 0.45 6.77 147.76 63,459
5/23/94(d)to8/31/94 ................................ 0.48(e) 5.80(e) 74.68 68,867
</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 and no
redemption fee. For Target Maturity Portfolio (Feb 97) and Target Maturity
Portfolio (May 97), total return would be reduced if a redemption fee were
taken into account.
(c)Includes the 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
---------------
NOTES TO FINANCIAL STATEMENTS
August 31, 1996
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 five diversified portfolios: the
Money Market Portfolio, Government Securities Portfolio, Mortgage Securities
Portfolio, 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 (Feb 97) and
Target Maturity Portfolio (May 97) (the "Target Maturity Portfolios") will be
liquidated on or about 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.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that may affect the reported amounts.
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 under the direction of 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.
36
<PAGE>
TRUST FOR CREDIT UNIONS
----------------
NOTES TO FINANCIAL STATEMENTS - (Continued)
2. Summary of Significant Accounting Policies -- (Continued)
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.
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. Mortgage Dollar Rolls
--------------------------
The Government Securities, Mortgage Securities and Target Maturity
Portfolios may enter into mortgage "dollar rolls" in which the portfolios sell
securities in the current month for delivery and simultaneously contract with
the same counterparty to repurchase similar (same type, coupon and maturity) but
not identical securities on a specified future date. The portfolios will hold
and maintain in a segregated account until the settlement date, cash or liquid
debt securities in an amount equal to the forward purchase price. For financial
reporting and tax reporting purposes, the portfolios treat mortgage dollar rolls
as two separate transactions: one involving the purchase of a security and a
separate transaction involving a sale.
37
<PAGE>
TRUST FOR CREDIT UNIONS
---------------
NOTES TO FINANCIAL STATEMENTS--(Continued)
August 31, 1996
2. Summary of Significant Accounting Policies -- (Continued)
D. 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.
As of each portfolio's most recent tax year-end, the following portfolios
had approximately the following amounts of capital loss carryforward for U.S.
federal tax purposes:
<TABLE>
<CAPTION>
Portfolio Amount Years of Expiration
---------------------------------------- ---------------------------------------- -----------------------
<S> <C> <C>
Government Securities.................. $17,941,000 1999 - 2004
Mortgage Securities.................... 10,753,000 2001 - 2004
Target Maturity (Feb 97)............... 4,182,000 1997*
Target Maturity (May 97)............... 398,000 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.
E. 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.
38
<PAGE>
TRUST FOR CREDIT UNIONS
---------------
NOTES TO FINANCIAL STATEMENTS--(Continued)
August 31, 1996
2. Summary of Significant Accounting Policies -- (Continued)
F. 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 the 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>
Effective July 1, 1995, Goldman Sachs 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. For the
fiscal year ended August 31, 1996, Goldman Sachs waived advisory fees amounting
to $351,232.
During the period from August 1, 1995 to January 31, 1996, Goldman Sachs
voluntarily agreed to limit its advisory fee with respect to the Mortgage
Securities Portfolio to .15% of the portfolio's average daily net assets. For
the fiscal year ended August 31, 1996, Goldman Sachs waived advisory fees
amounting to $59,027.
39
<PAGE>
TRUST FOR CREDIT UNIONS
---------------
NOTES TO FINANCIAL STATEMENTS--(Continued)
August 31, 1996
3. Agreements -- (Continued)
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 38
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>
For the fiscal year ended August 31, 1996, CUFSLP voluntarily agreed to
limit its administration fee with respect to the Money Market Portfolio to .05%
of the first $500 million, .04% of the next $250 million and .03% over $750
million of the portfolio's average net assets. For the fiscal year ended August
31, 1996, CUFSLP waived administration fees amounting to $251,230.
Effective July 1, 1995, CUFSLP has agreed that to the extent the total
annualized expenses (excluding interest, taxes, brokerage and extraordinary
expenses) (the "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 Expenses of the
Money Market Portfolio. For the fiscal year ended August 31, 1996, 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. CUFSLP and Goldman Sachs have each voluntarily
agreed to limit the other annualized ordinary expenses (excluding advisory and
administration fees) 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 fiscal year ended August 31, 1996, $176 was reimbursed
by CUFSLP and no expenses were reimbursed by Goldman Sachs under this agreement.
40
<PAGE>
TRUST FOR CREDIT UNIONS
---------------
NOTES TO FINANCIAL STATEMENTS--(Continued)
August 31, 1996
3. Agreements -- (Continued)
Callahan Financial Services, Inc. and Goldman Sachs serve as exclusive
distributors of units of the Fund. For the fiscal year ended August 31, 1996,
neither received any compensation for this service. Goldman Sachs also serves as
Transfer Agent of the Fund for a fee.
4. Investment Transactions
Purchases and proceeds of sales or maturities of long-term securities for
the Government Securities Portfolio, Mortgage Securities Portfolio, Target
Maturity Portfolio (Feb 97) and Target Maturity Portfolio (May 97) for the
fiscal year ended August 31, 1996 were as follows ($ in thousands):
<TABLE>
<CAPTION>
Target Target
Government Mortgage Maturity Maturity
Securities Securities Portfolio Portfolio
Portfolio Portfolio (Feb 97) (May 97)
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Purchases of U.S. Government and agency
obligations..................................... $831,733 $481,469 $137,303 $97,577
Purchases (excluding U.S. Government and agency
obligations).................................... -- 76,620 50,004 14,342
Sales or maturities of U.S. Government and agency
obligations..................................... 782,015 411,879 156,579 97,535
Sales or maturities (excluding U.S. Government and
agency obligations)............................. -- 79,056 50,228 20,853
</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 subcustodians. GSAM monitors
the market value of the underlying securities by pricing them daily.
41
<PAGE>
TRUST FOR CREDIT UNIONS
---------------
NOTES TO FINANCIAL STATEMENTS--(Continued)
August 31, 1996
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, 1996, the Money Market Portfolio had a 3.97% undivided
interest in the repurchase agreements in the following joint account which
equaled $152,800,000 in principal amount. As of August 31, 1996, the repurchase
agreements in this joint account, along with the corresponding underlying
securities (including the type of security, market value, interest rate and
maturity date), were as follows ($ in thousands):
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
--------- -------- -------- ----------
<S> <C> <C> <C> <C>
Bankers Trust Securities Corp., dated 08/30/96, repurchase price
$1,000,583 (U.S. Treasury Notes: $570,482, 5.13%-9.13%,
06/30/97-08/15/01) (U.S. Treasury Bills: $448,347,
10/17/96-11/07/96)............................................ $1,000,000 5.25% 09/03/96 $1,000,000
Bear Stearns Companies, Inc., dated 08/30/96, repurchase price
$500,292 (U.S. Treasury Interest-Only Strips: $507,966,
02/15/98-08/15/03)............................................ 500,000 5.25 09/03/96 500,000
Chase Securities, Inc., dated 08/30/96, repurchase price
$1,020,596 (U.S. Treasury Bills: $99,805, 06/26/97-08/21/97)
(U.S. Treasury Notes: $940,600, 4.38%-8.88%,
11/15/96-02/15/03)............................................ 1,020,000 5.26 09/03/96 1,020,000
Daiwa Securities, dated 08/30/96, repurchase price $125,073
(U.S. Treasury Bill: $112,089, 11/14/96) (U.S. Treasury
Notes: $15,412, 6.13%, 09/30/00).............................. 125,000 5.25 09/03/96 125,000
Goldman, Sachs & Co., dated 08/30/96, repurchase price $1,000,587
(U.S. Treasury Note: $65,652, 6.13%, 05/31/97) (U.S. Treasury
Interest-Only Strips: $652,161, 11/15/96-08/15/03) (U.S.
Treasury Principal-Only Strips: $297,596, 11/15/96-08/15/03)
(U.S. Treasury Interest-Only Strips: $4,830,
02/15/97-05/15/03)............................................ 1,000,000 5.28 09/03/96 1,000,000
UBS Securities, Inc., dated 08/30/96, repurchase price $100,058,
(U.S. Treasury Note: $102,496, 6.63%, 07/31/01) .............. 100,000 5.18 09/03/96 100,000
UBS Securities, Inc., dated 08/30/96, repurchase price $100,057,
(U.S. Treasury Note: $102,496, 6.63%, 07/31/01) .............. 100,000 5.16 09/03/96 100,000
----------
Total Joint Repurchase Agreement Account.............................................................. $3,845,000
==========
</TABLE>
42
<PAGE>
TRUST FOR CREDIT UNIONS
---------------
NOTES TO FINANCIAL STATEMENTS--(Continued)
August 31, 1996
6. Joint Repurchase Agreement Accounts -- (Continued)
As of August 31, 1996, the Money Market, Government Securities, Mortgage
Securities, Target Maturity (Feb 97) and Target Maturity (May 97) Portfolios had
a 1.08%, 1.11%, 0.22%, 0.60% and 0.20% undivided interest, respectively, in the
repurchase agreements in the following joint account, which equaled $25,000,000,
$25,600,000, $5,100,000, $13,800,000 and $4,700,000 in principal amount,
respectively. As of August 31, 1996, the repurchase agreements in this joint
account, along with the corresponding underlying securities (including the type
of security, market value, interest rate and maturity date), were as follows ($
in thousands):
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
--------- -------- -------- ---------
<S> <C> <C> <C> <C>
Chase Securities, dated 08/30/96, repurchase price $150,088 (U.S.
Treasury Notes: $153,001, 5.50-7.75%, 11/15/98-11/30/99)...... $150,000 5.29% 09/03/96 $150,000
Bear Stearns Companies, Inc., dated 08/30/96, repurchase price
$200,117 (FHLMC: $53,321, 7.00%-8.00%, 10/01/10-08/01/26)
(FNMA: $152,695, 8.00%-9.00%, 07/01/22-09/01/26).............. 200,000 5.28 09/03/96 200,000
Nomura Securities, Inc., dated 08/30/96, repurchase price
$475,278 (FHLMC: $365,152, 5.50%-9.50%, 05/01/99-08/01/26)
(FNMA: $121,873, 6.00%-7.50%, 08/01/08-06/01/26).............. 475,000 5.26 09/03/96 475,000
Nomura Securities, Inc., dated 08/30/96, repurchase price
$500,293 (U.S. Treasury Note: $688, 6.25%, 05/31/00) (FHLB:
$71,881, 4.61%-7.61%, 12/20/96-06/13/05) (FHLMC: $153,763,
5.04%-8.13%, 09/30/96-08/18/05) (FNMA: $256,148, 5.39%-8.35%,
11/15/96-08/23/06) (FFCB: $19,345, 5.35%-5.88%,
09/03/96-05/12/97) (TVA: $8,180, 6.00%-6.50%, 01/15/97-
-08/20/01).................................................... 500,000 5.27 09/03/96 500,000
Smith Barney, Inc., dated 08/30/96, repurchase price $200,117
(U.S. Treasury Notes: $85,124, 5.38%-8.25%, 03/31/97-11/30/00)
(U.S. Treasury Principal-Only Strips: $47,555, 11/15/96-
08/15/05) (U.S. Treasury Interest-Only Strips: $70,822,
02/15/97-02/15/04)............................................ 200,000 5.25 09/03/96 200,000
SBC Securities, Inc., dated 08/30/96, repurchase price $786,058
(U.S. Treasury Bills: $132,184, 09/19/96-02/27/97) (U.S.
Treasury Notes: $672,191, 4.75%-9.13%, 09/30/96-05/15/99)..... 785,600 5.25 09/03/96 785,600
----------
Total Joint Repurchase Agreement Account............................................................. $2,310,600
==========
</TABLE>
7. Redemption Fees
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.
43
<PAGE>
TRUST FOR CREDIT UNIONS
---------------
NOTES TO FINANCIAL STATEMENTS--(Continued)
August 31, 1996
8. Certain Reclassifications
In accordance with Statement of Position 93-2, the Mortgage Securities
Portfolio has reclassified $406,066, which represents an increase to paid-in
capital and a decrease to accumulated undistributed net investment income. This
reclassification has no impact on the net asset value of the portfolio and is
designed to present the portfolio's capital accounts on a tax basis.
9. Other Matters
Pursuant to an SEC exemptive order, the Money Market Portfolio may enter
into certain principal transactions, including repurchase agreements with
Goldman Sachs or its affiliate, Goldman Sachs Money Markets L.P., subject to
certain limitations as follows: 25% of eligible security transactions, as
defined, and 10% of repurchase agreement transactions on an annual basis.
44
<PAGE>
TRUST FOR CREDIT UNIONS
---------------
UNAUDITED SUPPLEMENTAL INFORMATION
August 31, 1996
Shareholder Meeting
At a special shareholder meeting held on September 30, 1996, three
Trustees of the Trust for Credit Unions (the "Trust") were elected (Proposal 1).
These Trustees were Rudolf J. Hanley, Chief Executive Officer of Orange County
Federal Credit Union; Betty G. Hobbs, President and Chief Executive Officer of
Tennessee Teachers Credit Union; and John P. McNulty, General Partner of
Goldman, Sachs & Co. and Co-Head of Goldman Sachs Asset Management. The
following Trustees of the Trust will continue in office: Gene R. Artemenko,
James C. Barr, Edgar F. Callahan, Robert M. Coen, John T. Collins, Thomas S.
Condit, John L. Ostby and Wendell A. Sebastian.
Other actions taken were the ratification of Arthur Andersen LLP as the
Trust's independent accountants (Proposal 2) and the approval of an amendment to
the TCU Money Market Portfolio's fundamental investment restrictions regarding
the concentration of investments in bank obligations (Proposal 3).
At the shareholder meeting, the following were the number of units voted,
either in person or by proxy:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Money Government Mortgage Target Maturity Target Maturity
Market Securities Securities Portfolio Portfolio
Portfolio Portfolio Portfolio (Feb 97) (May 97) Total
--------- --------- --------- -------- -------- -----
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
# of Units 450,997,400 55,078,085 34,462,321 9,809,980 6,350,000 556,697,786
Outstanding
- ----------------------------------------------------------------------------------------------------------------------
# of Units Voted 278,654,025 31,487,621 20,162,442 4,159,970 4,650,000 339,114,058
- ----------------------------------------------------------------------------------------------------------------------
% of Outstanding
Units Voted 62% 57% 59% 42% 73% 61%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
The following is the vote tabulation for each of the Proposals:
<TABLE>
<CAPTION>
Proposal 1:
<S> <C> <C> <C> <C>
Rudolf J. Hanley For: 338,649,692 Withholding Authority: 464,366
Betty G. Hobbs For: 333,369,405 Withholding Authority: 5,744,653
John P. McNulty For: 338,270,605 Withholding Authority: 843,453
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Proposal 2: For: 338,091,539 Against: 1,022,519 Abstain: 0
Proposal 3: For: 265,011,768 Against: 3,642,257 Abstain: 10,000,000
</TABLE>
45
<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 GOLDMAN SACHS APPEARS HERE]
- ---------------------------------
TRUST
for Credit Unions
- ---------------------------------
Trustees
Rudolf J. Hanley, Chairman
Robert M. Coen, Vice-Chairman
Gene R. Artemenko
James C. Barr
Edgar F. Callahan
John T. Collins
Thomas S. Condit
Betty G. Hobbs
John P. McNulty
John L. Ostby
Wendell A. Sebastian
Officers
Wendell A. Sebastian
President
Robert F. Deutsch
Vice President
Charles W. Filson
Vice President
John W. Mosior
Vice President
Nancy L. Mucker
Vice President
Pauline Taylor
Vice President
Scott M. Gilman
Treasurer
John M. Perlowski
Assistant Treasurer
Michael J. Richman
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.
