<PAGE>
-------------------------------------
TRUST
for Credit Unions
-------------------------------------
ANNUAL REPORT
-------------------------
AUGUST 31, 1998
<PAGE>
Dear TCU Investor,
We would like to thank you for your continued support of the Trust for Credit
Unions (TCU)--thank you especially to those credit unions who selected TCU as a
new investment option for their credit union's portfolio.
As the strong momentum of credit union liquidity carried through most of this
fiscal year, the TCU portfolio assets increased significantly. The TCU
Portfolios assets rose over 54%, ending fiscal year 1998 at over $2.1 billion,
thus reaching their highest levels since April 1993. In conjunction with
increased credit union liquidity, asset levels increased as TCU delivered
another year of strong performance. The Portfolios offered competitive yields
and performance relative to other investment alternatives in the market.
In addition to performance, the TCU Portfolios have brought new service
features to you this year:
. SHAREHOLDER SERVICE
New statements: Monthly shareholder statements were redesigned and
enhanced to provide additional and consolidated information for your TCU
account.
Order Deadline: The TCU Money Market Portfolio ("MMP") deadline for
transaction orders was extended. The new cut-off time for MMP
transactions is 3:00 p.m. (EST).
. LEADERSHIP
Police & Fire Federal Credit Union of Pennsylvania, a $786 million
financial institution, became the fortieth credit union partner in
CUFSLP. CUFSLP, the Callahan Credit Union Financial Services Limited
Partnership, as administrator of TCU, brings credit union leadership and
oversight to the ongoing development and operation of TCU.
Again, thank you for selecting the Trust for Credit Unions. We look forward
to meeting your credit union's investment needs in the coming year.
Sincerely,
/s/ Charles W. Filson /s/ Gordon Linke
Charles W. Filson Gordon Linke
President Vice President
Callahan Financial Services, Inc. Goldman Sachs Asset Management
and Trust for Credit Unions and Trust for Credit Unions
September 30, 1998
<PAGE>
THE ECONOMY: THE FEDERAL RESERVE REMAINS ON HOLD
Throughout the period under review, the U.S. economy remained resilient in
the wake of Asia's financial crisis.
Early on, subdued inflationary pressures, in combination with a slower pace
of economic growth, kept the Federal Reserve Board (the "Fed") from tightening
monetary policy. The onset of Asian market turbulence in October strengthened
the likelihood that the Fed would continue to pursue this course of non-action.
Officials indicated that they wanted to await stabilization in the world
markets, then assess the potential damage to the U.S. economy, before making
any tightening moves.
As the period progressed, it became clear that the strength of the U.S.
equity market would diffuse the impact of the Asian crisis on U.S. growth.
Additionally, Asian currency devaluations helped to control U.S. inflationary
pressures and further served to keep the Fed on hold. By period end, however,
Asia's market turmoil had spread to other world markets. For the first time in
months, an easing of monetary policy became an option as the Fed's near-term
focus shifted from the pace of U.S. economic activity to the health of the
global financial system.
THE BOND MARKET: BOND MARKETS FLUCTUATED ALONG WITH INVESTOR CONFIDENCE
For most of the review period, markets vacillated in response to investor
optimism that the Asian ordeal was well in hand and investor fears that global
contagion was threatening. The result was a 12-month period punctuated by
market sell-offs and rallies.
At period end, this touch-and-go global anxiety culminated in a powerful
Treasury rally. The catalyst for the rally included investors' wholesale
preference for Treasuries--exacerbated by the ruble devaluation and Russia's
defacto default--and technical imbalances (forced liquidations by heavily
leveraged players combined with seasonal supply pressures). In August alone,
the long bond rallied 46 basis points, while shorter securities rallied 70
basis points.
OUTLOOK
On the U.S. front, indications are that the U.S. economy retains forward
momentum. Although consumer confidence and spending have recently registered
declines, the fundamental supports for spending growth still appear intact.
However, although real GDP growth should remain firm for the rest of 1998, we
now expect it will be less than what was initially anticipated and will
decelerate in 1999.
One key factor behind this view is the fact that Asia's turmoil has now
spread into the Western hemisphere. Latin America, in particular, poses the
greatest risk to the U.S. growth outlook. Approximately 20% of all U.S. exports
go to Latin America, and U.S. trade links with this region are tighter than
those with Asia. Therefore, should growth in Latin America substantially
weaken, the end result could be a negative one for the U.S. economy.
Another key factor is the U.S. stock market's recent sharp sell-off. Even if,
as we expect, the market rebounds, its heightened volatility is apt to dampen
growth in consumer and capital spending. As of this writing, the Federal
Reserve Board has cut short-term rates by a quarter of a point, to 5.25%. By
year-end 1999, we expect that this target could fall between 4.50% and 5.00%.
The prospect of this much Fed easing potentially means that the bond market
rally has not yet run its course.
2
<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, 1998, the MMP had an average annual
total return of 5.67%, outperforming the IBC Financial Data All-Taxable Money
Market Index total return of 5.16%. As of August 31, 1998, the Portfolio had a
seven-day current yield of 5.52% and an effective yield of 5.67%./1/
PORTFOLIO COMPOSITION AND INVESTMENT STRATEGIES
During the third quarter, international turmoil caused the short-term yield
curve to move from flat to inverted. An initial broad based flight to quality
caused the prices of government securities to increase and interest rates to
fall. During this time period, TCU maintained a neutral weighted average
maturity of 35-45 days. Subsequent market expectations that the Fed would
intervene caused the short term yield curve to invert further. In line with
market expectations, the Federal Open Market Committee lowered the federal
funds rate by 25 basis points at its September meeting in an attempt to
stabilize financial markets and guard against recession. In anticipation of
the Fed ease, TCU bought three- and six-month securities to extend the
weighted average maturity of the Portfolio to a longer range of 45 to 50 days.
Over the 12-month period ended August 31, 1998, some sector reallocations
occurred:
. We substantially increased the Portfolio's position in repurchase
agreements; conversely, we substantially decreased the Portfolio's
position in bankers acceptances & CDs. This shift occurred since term
repurchase agreements offered relative value versus bankers' acceptances
and CDs.
. We moderately increased the Portfolio's positions in variable rate
obligations--which offered relative value in the existing yield curve
environment--and bank notes, and moderately decreased the Portfolio's
position in time deposits.
- ---------------------
/1/ Please note that an investment in the Portfolio is not insured or
guaranteed by the National Credit Union Share Insurance Fund, National
Credit Union Administration or any other government agency. Although the
Portfolio seeks to preserve the value of your investment of $1.00 per
unit, it is possible to lose money by investing in the Portfolio.
3
<PAGE>
PORTFOLIO COMPOSITION AS OF AUGUST 31, 1998*
[PIE CHART]
Medium Term Notes.............................. 0.9%
Repurchase Agreements.......................... 54.2%
Bank Notes..................................... 16.6%
Bankers' Acceptances & CDs..................... 10.8%
Variable Rate Notes............................ 14.9%
Time Deposits.................................. 2.6%
* These percentages may differ from those in the accompanying Statement of
Investments, which reflect portfolio holdings as a percentage of net assets.
Looking Forward
As the international crisis intensifies and with no evidence to suggest that
it will subside in the near future, we feel that the Fed will continue to lower
interest rates over the next three to six months. We will be extremely cautious
going forward as we carefully monitor both international and domestic
developments. In an attempt to protect against further easing, we will continue
to maintain the weighted average maturity of the Portfolio in the 45-50 day
range by extending when the short-term yield curve is attractively priced in
relation to our expectations of Fed movements.
4
<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. The Portfolio
invests primarily in adjustable rate mortgage securities (ARMs) issued by the
U.S. government, its agencies or instrumentalities. Of course, an investment in
the Portfolio is neither insured nor guaranteed by the U.S. government. The
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 six-month U.S.
Treasury security and no longer than that of a one-year U.S. Treasury security.
As of August 31, 1998, its actual duration was 0.74 years, nearly the same as
the duration of a nine-month Treasury security at 0.75 years.
PERFORMANCE REVIEW
For the 12-month period ended August 31, 1998, the total return of the GSP
was 5.60%, slightly underperforming the 5.86% total return for the nine-month
Treasury average. (The nine-month Treasury return is calculated by averaging
the returns of the six-month Treasury bill and the one-year Treasury bill.)
The Portfolio's net asset value (NAV) fell during the review period, closing
at $9.79, down $0.05 from its level a year earlier. As of August 31, 1998, the
Portfolio's 30-day distribution rate was 5.87% and its SEC 30-day yield was
5.49%.
PORTFOLIO COMPOSITION AND INVESTMENT STRATEGIES
Throughout the period under review, low interest rates and a persistently
flat yield curve encouraged ARM prepayment activity as borrowers sought to lock
in attractive long-term fixed-rate financing. As a result, spreads widened as
investors demanded greater compensation for accepting the sector's heightened
prepayment risk. In response, we gradually reduced the Portfolio's exposure to
ARMs and CMOs as mortgages became less attractive over the course of the year.
Portfolio holdings continued to be concentrated in securities with good cash
flow stability; for example, less prepayment-sensitive seasoned ARMs, short-
duration sequential and floating rate CMOs, and discount coupon 15-year and
balloon pass-throughs. The Portfolio's cash balance was invested at the repo
rate, which was attractive from a relative standpoint as Treasury rates fell.
5
<PAGE>
PORTFOLIO COMPOSITION AS OF AUGUST 31, 1998*
[PIE CHART]
Repos/Cash Equivalents......................... 10.0%
ARMs........................................... 66.9%
Agency Debentures.............................. 6.5%
U.S. Treasuries................................ 12.0%
Sequentials.................................... 0.5%
Floaters....................................... 0.8%
Fixed Rate Mortgage Pass-Throughs.............. 3.3%
* 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 light of the mortgage market's recent cheapening, we expect to increase
our exposure to ARMs and CMOs. However, given recent volatility and continued
uncertainty, we will do so opportunistically. More specifically, we intend to
continue our focus on seasoned ARMs that were originated prior to 1993.
Seasoned issues offer a greater degree of prepayment protection than those of
new origination, in large part because seasoned borrowers are typically less
responsive to potential refinancing opportunities and also have less economic
incentive due to lower loan balances.
6
<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
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. Of course, an
investment in the Portfolio is neither insured nor guaranteed by the U.S.
government. The MSP invests in obligations authorized under the Federal Credit
Union Act with a maximum duration not to exceed that of a three-year U.S.
Treasury security and a target duration equal to that of its benchmark, the
two-year U.S. Treasury security. As of August 31, 1998, the Portfolio's actual
duration was 1.74 years, in line with its benchmark.
PERFORMANCE REVIEW
The Portfolio's total return for the 12 months ended August 31, 1998, was
8.10%, outperforming the 7.26% return for the two-year U.S. Treasury note. Much
of the outperformance was attributable to the Portfolio's term structure, which
benefited from the flattening of the yield curve during the period.
As of August 31, 1998, the Portfolio's net asset value (NAV) was $9.90, up
$0.15 from a year earlier. The Portfolio's 30-day distribution rate and 30-day
SEC yield were 5.96% and 5.91%, respectively, as of the end of the period.
PORTFOLIO COMPOSITION AND INVESTMENT STRATEGIES
Over the 12-month period under review, mortgages detracted from incremental
performance. This was primarily due to an acceleration in the Treasury market
rally that occurred in the final months of the period in response to a global
flight to quality. With regard to specific issues, we emphasized structures
with attractive convexity characteristics--for example, 15-year collateral in
the pass-through subsector, and floaters, planned amortization classes (PACs)
and sequentials in the collateralized mortgage obligation (CMO) subsector.
With regard to the adjustable rate mortgage (ARM) market, both the flat yield
curve and the absolute level of interest rates encouraged ARM prepayment
activity as borrowers sought to lock in attractive fixed-rate financing. As a
result, spreads widened as investors demanded greater compensation for
accepting the sector's heightened prepayment risk. Throughout the period, we
focused primarily on AAA- and AA-rated non-agency ARMs; these securities
typically have limited cap risk due to their shorter average lives, and limited
prepayment exposure due to their seasoning and lower dollar prices.
7
<PAGE>
PORTFOLIO COMPOSITION AS OF AUGUST 31, 1998*
[PIE CHART]
TAC............................................ 1.1%
U.S. Treasuries................................ 13.2%
Agency Debentures.............................. 5.1%
ARMs........................................... 15.3%
Fixed Rate Mortgage Pass-Throughs.............. 10.6%
Sequentials.................................... 8.0%
PACs........................................... 43.2%
Floaters....................................... 2.3%
Support........................................ 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.
Looking Forward
At today's levels, we believe mortgages offer better value than they did a
year ago. However, we believe volatility is likely to persist, at least in the
near term. As a result, we intend to exercise caution in our security selection
process.
TCU PORTFOLIO DISTRIBUTION POLICY
As required by tax law, all mutual funds, including the three 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 at calendar year-end.
For the TCU Government Securities Portfolio and the TCU Mortgage Securities
Portfolio, the Portfolios pay monthly dividends based on the income each
Portfolio is expected to generate during the month. The amount of the dividend
will reflect changes in interest rates (i.e., as interest rates increase,
dividends will increase and as interest rates decline, dividends will be
reduced). In addition, because these TCU Portfolios invest in mortgage
securities that are subject to prepayments, we cannot precisely predict the
amount of principal and interest that a Portfolio will receive. Therefore, at
times, a Portfolio may distribute amounts above or below current income levels.
Any excess income, overdistributions or net capital gains generated will be
paid out in a special distribution or adjusted at calendar year-end.
8
<PAGE>
We appreciate your confidence in the TCU Portfolios and we look forward to
continuing to serve your investment needs in the future.
Goldman Sachs Money Market Portfolio Management Team
Goldman Sachs U.S. Fixed Income Investment Management Team
9
<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, 1998. Each of
the two 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 $10,000 Lehman Brothers Mutual Fund Adjustable Rate
("GSP"): 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 $10,000 Lehman ARM Index; Lehman Brothers Mutual Fund
("MSP"): Short (1-3) Government Index ("Lehman 1-3 Gov't
Index"); 2-Year U.S. Treasury Note ("2-year T-
Note").
</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
-------------------------------
Lehman ARM Lehman 1-2 1-year 6-Month
GSP (Index (c)) Gov't Index T-Bill (q) T-Bill
--- --------- ----------- --------- ------
August 1, 1991(b) $10,000 N/A* $10,000 $10,000 $10,000
August 31, 1991 $10,057 N/A* $10,125 $10,083 $10,060
January 1, 1992 $10,313
August 31, 1992 $10,730 $10,818 $11,061 $10,776 $10,617
August 31, 1993 $11,166 $11,496 $11,610 $11,187 $10,985
August 31, 1994 $11,427 $11,587 $11,878 $11,485 $11,369
August 31, 1995 $12,092 $12,540 $12,713 $12,228 $12,054
August 31, 1996 $12,851 $13,348 $13,393 $12,890 $12,706
August 31, 1997 $13,763 $14,411 $14,298 $13,712 $13,424
August 31, 1998 $14,533 $15,351 $15,277 $14,543 $14,183
Mortgage Securities Portfolio
-----------------------------
Lehman Lehman 1-3
MSP ARM Index Gov't Index 2-year T-Bill
--- --------- ----------- -------------
November 1, 1992(b) $10,000 $10,000 $10,000 $10,000
August 31, 1993 $10,651 $10,657 $10,522 $10,527
August 31, 1994 $10,757 $10,741 $10,701 $10,681
August 31, 1995 $11,640 $11,625 $11,494 $11,488
August 31, 1996 $12,301 $12,373 $12,095 $12,047
August 31, 1997 $13,272 $13,359 $12,945 $12,885
August 31, 1998 $14,347 $14,231 $13,891 $13,820
(a) The Government Securities and Mortgage Securities Portfolios commenced
operations July 10, 1991 and October 9, 1992, 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.
10
<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, and the Mortgage
Securities Portfolio), including the statements of investments as of August 31,
1998, 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, 1998 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, 1998, 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 9, 1998
11
<PAGE>
TRUST FOR CREDIT UNIONS
---------------
MONEY MARKET PORTFOLIO
STATEMENT OF INVESTMENTS
AUGUST 31, 1998
($ IN THOUSANDS)
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY AMORTIZED
AMOUNT RATE DATE COST
--------- -------- -------- ---------
<S> <C> <C> <C>
BANK NOTES (16.6%)
BankBoston, N.A.
$ 20,000 5.58% 10/08/98 $ 20,000
5,000 5.76 03/31/99 5,000
5,000 5.74 04/15/99 4,999
FCC National Bank
5,000 5.65 03/03/99 4,999
First Union National Bank
13,000 5.56 09/21/98 13,000
20,000 5.57 10/20/98 20,000
Greenwood Trust Co.
15,000 5.60 09/09/98 15,000
20,000 5.60 09/23/98 20,000
10,000 5.59 11/23/98 10,000
Huntington National Bank
3,000 5.82 11/13/98 3,000
NationsBank, N.A.
15,000 5.58 10/26/98 15,000
PNC Bank, N.A.
10,000 5.71 04/26/99 9,996
Wachovia Bank, N.A.
20,000 5.57 09/01/98 20,000
--------
Total Bank Notes................................ $160,994
--------
BANKERS' ACCEPTANCE(a) (0.5%)
Key Bank National Association
$ 5,000 5.49% 09/21/98 $ 4,985
--------
CERTIFICATES OF DEPOSIT (10.3%)
Bank of America National Trust and Savings
Association
$ 5,000 5.63% 02/26/99 $ 4,998
Bankers Trust Co.
10,000 5.72 03/30/99 9,998
Crestar Bank
25,000 5.58 10/07/98 25,000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY AMORTIZED
AMOUNT RATE DATE COST
--------- -------- -------- ---------
<S> <C> <C> <C>
CERTIFICATES OF DEPOSIT--(CONTINUED)
Mellon Bank, N.A.
$ 20,000 5.57% 10/05/98 $ 20,000
NationsBank, N.A.
15,000 5.57 09/01/98 15,000
Northern Trust Co.
25,000 5.56 09/09/98 25,000
--------
Total Certificates of Deposit................... $ 99,996
--------
MEDIUM TERM NOTES (0.9%)
Bank of New York
$ 4,000 5.57% 03/17/99 $ 3,998
BankBoston, N.A.
5,000 6.67 04/09/99 5,028
--------
Total Medium Term Notes......................... $ 9,026
--------
TIME DEPOSIT (2.6%)
American Express Centurion Bank
$ 25,000 5.56% 09/08/98 $ 25,000
--------
VARIABLE RATE DEMAND NOTES(b) (14.9%)
Bank One
$ 5,000 5.67% 09/21/98 $ 5,000
Comerica Bank
10,000 5.55 09/11/98 10,000
10,000 5.55 06/10/99 9,995
10,000 5.52 07/19/99 9,995
First Tennessee Bank, N.A.
5,000 5.57 04/23/99 4,998
15,000 5.55 06/09/99 14,993
First USA Bank
5,000 5.99 02/01/99 5,007
Key Bank National Association
15,000 5.56 02/22/99 14,996
</TABLE>
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
TRUST FOR CREDIT UNIONS
---------------
MONEY MARKET PORTFOLIO--(CONTINUED)
STATEMENT OF INVESTMENTS
AUGUST 31, 1998
($ IN THOUSANDS)
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY AMORTIZED
AMOUNT RATE DATE COST
--------- -------- -------- ---------
<S> <C> <C> <C>
VARIABLE RATE DEMAND NOTES(b)--(CONTINUED)
PNC Bank, N.A.
$ 15,000 5.54% 07/01/99 $ 14,991
10,000 5.52 07/27/99 9,993
Southtrust Bank, N.A.
5,000 5.57 04/21/99 4,998
10,000 5.55 09/08/99 10,000
US Bank, N.A.
10,000 5.66 03/17/99 10,003
5,000 5.53 06/16/99 4,998
15,000 5.58 08/31/99 14,997
--------
Total Variable Rate Demand Notes.............. $144,964
--------
REPURCHASE AGREEMENTS (54.1%)
Goldman Sachs & Co., dated 8/21/98,
repurchase price $101,390 (FHLMC:
$38,496, 6.116-7.000%, 7/1/08-2/1/28)
(FNMA: $63,504, 6.500%, 10/1/24)
$100,000 5.56% 11/19/98 $100,000
Joint Account I
126,800 5.82 09/01/98 126,800
Joint Account II
175,000 5.85 09/01/98 175,000
JP Morgan, Inc., dated 6/9/98,
repurchase price $76,056 (GNMA:
$76,794, 8.50-9.00%, 10/15/16-1/15/28)
75,000 5.57 09/08/98 75,000
JP Morgan, Inc., dated 7/14/98,
repurchase price $50,703 (GNMA:
$51,065, 8.50-9.00%, 11/15/19-11/15/27)
50,000 5.56 10/13/98 50,000
--------
Total Repurchase Agreements................... $526,800
--------
Total Investments............................. $971,765(c)
========
</TABLE>
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
(a) The rate disclosed for this security represents the yield to maturity.
(b) Variable rate securities. Coupon rates disclosed are those which are in
effect at August 31, 1998.
(c) The amount stated also represents aggregate cost for federal income tax
purposes.
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
TRUST FOR CREDIT UNIONS
---------------
GOVERNMENT SECURITIES PORTFOLIO
STATEMENT OF INVESTMENTS
AUGUST 31, 1998
($ IN THOUSANDS)
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
- --------- -------- -------- -----
<S> <C> <C> <C>
MORTGAGE BACKED OBLIGATIONS (71.3%)
Adjustable Rate Federal Home Loan Mortgage Corp.
(FHLMC)(a) (21.3%)
$ 1,345 7.13% 08/01/17 $ 1,381
968 7.54 04/01/18 999
5,801 7.54 05/01/18 5,949
2,070 7.34 07/01/18 2,128
4,359 8.16 11/01/18 4,534
15,367 7.56 11/01/19 15,926
5,842 7.36 11/01/21 6,012
3,757 7.36 02/01/22 3,847
19,649 7.65 02/01/22 20,503
16,982 7.70 04/01/22 17,594
2,999 6.95 11/01/22 3,019
1,543 7.22 11/01/22 1,573
9,052 7.53 11/01/22 9,360
7,297 7.67 06/01/24 7,567
4,943 8.13 10/01/25 5,141
2,313 7.21 02/01/28 2,360
3,984 7.21 04/01/28 4,068
10,082 6.17 06/01/29 10,139
1,930 7.15 07/01/29 1,983
9,997 6.17 01/01/30 10,053
5,473 7.35 05/01/31 5,664
--------
Total Adjustable Rate FHLMC....................... $139,800
--------
Adjustable Rate Federal National Mortgage Association
(FNMA)(a) (33.8%)
$ 2,847 6.86% 10/01/13 $ 2,905
2,672 6.59 03/01/17 2,720
1,593 7.49 11/01/17 1,629
11,646 7.27 12/01/17 11,958
1,158 7.04 06/01/18 1,182
3,659 7.10 08/01/18 3,748
3,082 7.50 09/01/18 3,163
5,967 7.59 09/01/18 6,246
1,083 7.29 11/01/18 1,108
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
- --------- -------- -------- -----
<S> <C> <C> <C>
MORTGAGE BACKED OBLIGATIONS--(CONTINUED)
Adjustable Rate FNMA--(Continued)
$ 1,851 7.25% 05/01/19 $ 1,894
17,435 7.22 06/01/19 17,846
1,713 7.20 07/01/19 1,769
5,666 7.00 12/01/19 5,685
3,255 7.64 03/01/20 3,365
1,193 7.43 05/01/20 1,220
10,265 6.43 12/25/20 10,307
26,541 7.60 01/01/21 27,619
12,369 7.24 04/01/21 12,740
25,469 7.44 09/01/21 26,283
1,485 7.09 10/01/21 1,507
3,338 7.61 11/01/21 3,473
1,739 7.51 02/01/22 1,790
27,090 7.51 09/01/22 28,056
14,398 7.44 09/01/25 14,817
1,819 7.09 10/01/25 1,880
6,757 6.15 11/01/26 6,795
3,769 7.18 07/01/27 3,895
2,860 7.20 10/01/27 2,945
12,551 6.15 02/01/31 12,621
--------
Total Adjustable Rate FNMA........................ $221,166
--------
Adjustable Rate Government National Mortgage Association (GNMA)(a) (11.6%)
$ 9,906 6.88% 04/20/22 $ 10,177
10,955 6.88 04/20/22 11,176
11,028 7.00 10/20/22 11,223
6,617 6.88 02/20/23 6,739
7,689 6.88 04/20/23 7,838
4,385 7.00 12/20/23 4,459
9,000 5.50 09/20/27 9,166
14,866 5.50 05/20/28 14,935
--------
Total Adjustable Rate GNMA........................ $ 75,713
--------
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
TRUST FOR CREDIT UNIONS
---------------
GOVERNMENT SECURITIES PORTFOLIO--(CONTINUED)
STATEMENT OF INVESTMENTS
AUGUST 31, 1998
($ IN THOUSANDS)
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
- --------- -------- -------- -----
<S> <C> <C> <C>
MORTGAGE BACKED OBLIGATIONS--(CONTINUED)
Fixed Rate FHLMC (1.0%)
$ 6,749 7.00% 01/01/00 $ 6,842
--------
Fixed Rate FNMA (1.3%)
$ 8,487 6.00% 06/01/04 $ 8,497
--------
Fixed Rate GNMA (1.0%)
$ 5,829 9.00% 12/15/17 $ 6,254
--------
Collateralized Mortgage Obligations (CMOs)(1.3%)
Regular Floater CMOs(a) (0.7%)
FHLMC REMIC Trust 1009, Class D
$ 1,701 6.29% 10/15/20 $ 1,715
FHLMC REMIC Trust 1698, Class FA
2,966 6.49 03/15/09 3,095
--------
Total Regular Floater CMOs........................ $ 4,810
--------
Sequential Fixed Rate CMOs (0.6%)
FNMA REMIC Trust 1990-24, Class E
$ 2,034 9.00% 03/25/20 $ 2,103
FNMA REMIC Trust G92-43, Class D
1,505 7.50 01/25/03 1,503
--------
Total Sequential Fixed Rate CMOs.................. $ 3,606
--------
Total CMOs........................................ $ 8,416
--------
Total Mortgage Backed Obligations (cost
$468,679)........................................ $466,688
--------
AGENCY DEBENTURES (6.4%)
Federal Home Loan Bank
$ 7,000 5.76% 03/23/01 $ 7,061
Federal National Mortgage Association
4,000 5.44 01/29/01 3,992
20,700 5.63 03/15/01 20,907
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
- --------- -------- -------- -----
<S> <C> <C> <C>
AGENCY DEBENTURES--(CONTINUED)
Sri Lanka Aid(a)
$10,000 5.99% 11/01/24 $ 10,062
--------
Total Agency Debentures
(cost $41,686)................................... $ 42,022
--------
U.S. TREASURY OBLIGATIONS (12.0%)
U.S. Treasury Notes
$ 4,300 6.00% 08/15/99 $ 4,334
73,100 5.63 11/30/00 74,093
--------
Total U.S. Treasury Obligations (cost $77,701).... $ 78,427
--------
REPURCHASE AGREEMENT (12.6%)
Joint Account II(b)
$82,300 5.85% 09/01/98 $ 82,300
--------
Total Repurchase Agreement (cost $82,300)......... $ 82,300
--------
Total Investments
(cost $670,366(c))............................... $669,437
========
- -------------------------------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION:
Gross unrealized gain for investments in which value
exceeds cost....................................... $ 1,838
Gross unrealized loss for investments in which cost
exceeds value...................................... (2,771)
--------
Net unrealized loss ................................ $ (933)
========
- -------------------------------------------------------------------------------------------------------
</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 securities. Coupon rates disclosed are those which are in
effect at August 31, 1998.
(b) A portion of this security is being segregated as collateral for an
extended settlement security.
(c) The aggregate cost for federal income tax purposes is $670,370.
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
TRUST FOR CREDIT UNIONS
---------------
MORTGAGE SECURITIES PORTFOLIO
STATEMENT OF INVESTMENTS
AUGUST 31, 1998
($ IN THOUSANDS)
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
- --------- -------- -------- -----
<S> <C> <C> <C>
MORTGAGE BACKED OBLIGATIONS (81.4%)
Adjustable Rate Federal National Mortgage Association (FNMA)(a) (4.2%)
$17,694 7.60% 01/01/21 $18,413
-------
FHLMC Gold 15-yr Fixed (4.2%)
$ 1,126 6.50% 04/01/13 $ 1,140
1,970 6.50 04/01/13 1,995
1,974 6.50 04/01/13 2,000
1,963 6.50 05/01/13 1,988
949 6.50 05/01/13 961
998 6.50 06/01/13 1,011
1,004 6.50 07/01/13 1,017
4,006 6.50 07/01/13 4,057
1,490 6.50 07/01/13 1,509
3,018 6.50 07/01/13 3,056
-------
Total FHLMC Gold 15-yr Fixed...................... $18,734
-------
FHLMC Gold 30-yr Fixed (1.1%)
$ 3,438 8.50% 05/01/28 $ 3,586
1,297 8.50 05/01/28 1,353
-------
Total FHLMC Gold 30-yr Fixed...................... $ 4,939
-------
Fixed Rate Federal National Mortgage Association (FNMA) (1.5%)
$ 2,254 6.00% 09/01/07 $ 2,256
1,108 6.00 10/01/08 1,111
2,440 6.00 06/01/09 2,446
977 6.00 11/01/09 979
-------
Total Fixed Rate FNMA............................. $ 6,792
-------
Fixed Rate Government National Mortgage Association (GNMA) (3.7%)
$ 15 8.50% 07/15/09 $ 16
20 8.50 07/15/09 21
21 8.50 09/15/09 22
18 8.50 12/15/09 19
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
- --------- -------- -------- -----
<S> <C> <C> <C>
MORTGAGE BACKED OBLIGATIONS--(CONTINUED)
Fixed Rate GNMA--(Continued)
$ 245 8.50% 01/15/10 $ 257
368 8.50 01/15/10 386
444 8.50 01/15/10 465
281 8.50 02/15/10 295
283 8.50 02/15/10 297
221 8.50 02/15/10 231
236 8.50 02/15/10 247
88 8.50 02/15/10 92
54 8.50 03/15/10 57
726 8.50 03/15/10 762
369 8.50 04/15/10 388
41 8.50 04/15/10 43
150 8.50 05/15/10 157
15 8.50 05/15/10 16
190 8.50 05/15/10 200
343 8.50 06/15/10 360
525 8.50 06/15/10 552
178 8.50 06/15/10 187
339 8.50 06/15/10 355
224 8.50 07/15/10 235
275 8.50 08/15/10 289
244 8.50 10/15/10 256
1,001 8.50 11/15/10 1,051
633 8.50 12/15/10 665
628 8.50 12/15/10 660
802 8.50 09/15/11 835
755 8.50 10/15/11 786
799 8.50 03/15/12 841
936 8.50 07/15/12 974
3,886 9.00 12/15/17 4,169
-------
Total Fixed Rate GNMA............................. $16,186
-------
</TABLE>
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
TRUST FOR CREDIT UNIONS
---------------
MORTGAGE SECURITIES PORTFOLIO--(CONTINUED)
STATEMENT OF INVESTMENTS
AUGUST 31, 1998
($ IN THOUSANDS)
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
- --------- -------- -------- -----
<S> <C> <C> <C>
MORTGAGE BACKED OBLIGATIONS--(CONTINUED)
Collateralized Mortgage Obligations (66.7%)
Adjustable Rate CMOs(a) (10.9%)
Citicorp Mortgage Securities, Inc. Series 1992-17, Class A
$ 4,531 5.20% 10/25/22 $ 4,672
CMC Securities Corp. II Series 1993-I, Class A2
1,872 6.88 09/25/23 1,874
Imperial Savings Association Series 1988-3, Class A
1,280 7.42 01/25/18 1,275
Independent National Mortgage Corp. Series 1994-W, Class A1
1,295 8.03 12/25/24 1,304
Merrill Lynch Mortgage Investors, Inc. Series 1994-I, Class A1
3,234 8.01 01/25/05 3,346
Prudential Home Mortgage Series 1992-8, Class A1
562 8.03 04/25/22 562
Resolution Trust Corp. Series 1992-04, Class B2
4,500 7.56 07/25/28 4,530
Resolution Trust Corp. Series 1992-11, Class B2
10,201 7.26 10/25/24 10,123
Resolution Trust Corp. Series 1994-1, Class M3
4,829 7.96 09/25/29 4,930
Resolution Trust Corp. Series 1995-1, Class A3
6,842 7.17 10/25/28 6,936
Resolution Trust Corp. Series 1995-1, Class M3
2,027 7.23 10/25/28 2,048
Ryland Mortgage Securities Corp. Series 1989-FN1,
Class A
732 7.49 11/01/18 735
Ryland Mortgage Securities Corp. Series 1991-B1, Class 1
828 7.29 03/25/20 828
Ryland Mortgage Securities Corp. Series 1992-3, Class A2
219 7.35 06/25/20 219
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
- --------- -------- -------- -----
<S> <C> <C> <C>
MORTGAGE BACKED OBLIGATIONS--(CONTINUED)
Adjustable Rate CMOs--(Continued)
Salomon Brothers Mortgage Securities Series 1990-3A, Class 1
$ 937 6.76% 11/25/20 $ 935
Salomon Brothers Mortgage Securities Series 1994-20, Class A
3,104 8.19 08/01/24 3,147
Saxon Mortgage Securities Corp. Series 1994-11, Class A
936 8.03 12/25/24 947
-------
Total Adjustable Rate CMOs........................ $48,411
-------
Planned Amortization Class (PAC) CMOs (43.3%)
Chemical Mortgage Securities, Inc. Series 1994-1, Class A1
$4,051 6.25% 01/25/09 $ 4,069
CMC Securities Corp. IV Series 1997-2, Class IA13
1,238 6.60 11/25/27 1,246
Countrywide Funding Corp. Series 1993-9, Class A3
3,000 6.50 01/25/09 3,061
Countrywide Funding Corp. Series 1993-11, Class A9
10,750 6.25 02/25/09 11,032
Countrywide Funding Corp. Series 1994-13, Class A4
10,097 6.50 06/25/09 10,147
Countrywide Home Loans Series 1998-11, Class A10
13,172 6.25 08/25/28 13,300
Countrywide Mortgage Backed Securities, Inc. Series 1994-I, Class A4
7,215 6.25 07/25/09 7,213
FHLMC Series 15, Class H
5,000 6.50 06/25/19 5,116
FHLMC Series 1556, Class G
5,000 6.35 10/15/10 5,114
FHLMC Series 1645, Class ZA
723 5.50 04/15/05 722
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
TRUST FOR CREDIT UNIONS
---------------
MORTGAGE SECURITIES PORTFOLIO--(CONTINUED)
STATEMENT OF INVESTMENTS
AUGUST 31, 1998
($ IN THOUSANDS)
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
- --------- -------- -------- -----
<S> <C> <C> <C>
MORTGAGE BACKED OBLIGATIONS--(CONTINUED)
Planned Amortization Class (PAC) CMOs--(Continued)
FHLMC Series 1985, Class PC
$18,000 6.35% 05/17/18 $ 18,428
FHLMC Series 1987, Class L
10,000 6.20 08/25/22 10,202
FHLMC Series 2055, Class OD
15,000 6.00 01/15/12 15,260
FNMA REMIC Trust 1997-84, Class PA
14,000 5.90 11/25/21 14,114
FNMA REMIC Trust 1997-84, Class PB
7,000 5.50 01/25/08 6,948
FNMA REMIC Trust X-188B, Class ZA
6,597 5.75 09/25/10 6,580
GE Capital Mortgage Services, Inc.
Series 1994-07, Class A6
1,194 5.50 02/25/09 1,189
GE Capital Mortgage Services, Inc.
Series 1994-13, Class A1
1,674 6.50 04/25/24 1,682
GE Capital Mortgage Services, Inc.
Series 1994-15, Class A8
5,362 6.00 04/25/09 5,341
GE Capital Mortgage Services, Inc.
Series 1997-8, Class A13
13,722 7.25 10/25/27 14,006
Housing Securities, Inc. Series 1993-E, Class E8
3,405 10.00 02/25/08 3,533
Norwest Asset Securities Corp.
Series 1998-17, Class A2
17,053 6.25 08/25/28 17,206
Paine Webber Mortgage Acceptance Corp. Series 1993-6,
Class A3
6,213 6.90 08/25/08 6,290
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
- --------- -------- -------- -----
<S> <C> <C> <C>
MORTGAGE BACKED OBLIGATIONS--(CONTINUED)
Planned Amortization Class (PAC) CMOs--(Continued)
PNC Mortgage Securities Corp.
Series 1998-2, Class 5A2
$ 5,108 6.63% 03/25/28 $ 5,179
Prudential Home Mortgage Securities Series 1993-54,
Class A4
4,436 6.50 01/25/24 4,471
--------
Total PAC CMOs.................................... $191,449
--------
Regular Floater CMOs(a) (2.3%)
CMC Securities Corp. III Series 1994-A, Class A17
$ 4,867 6.84% 02/25/24 $ 5,002
Countrywide Funding Corp. Series 1993-10, Class A9
4,931 6.69 01/25/24 5,153
--------
Total Regular Floater CMOs........................ $ 10,155
--------
Sequential Fixed Rate CMOs (7.9%)
Bear Stearns Secured Investors Trust Series 1987-2,
Class D
$ 1,518 9.95% 10/20/18 $ 1,582
CMC Securities Corp. Series 1993-C, Class C3
2,256 9.55 04/25/08 2,324
Collateralized Mortgage Obligation Trust Series 64,
Class Z
9,083 9.00 11/20/20 9,711
FHLMC Series 1293, Class Z
2,499 7.50 07/15/99 2,525
FNMA REMIC Trust Series 1988-12, Class A
2,675 10.00 02/25/18 2,959
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
TRUST FOR CREDIT UNIONS
---------------
MORTGAGE SECURITIES PORTFOLIO--(CONTINUED)
STATEMENT OF INVESTMENTS
AUGUST 31, 1998
($ IN THOUSANDS)
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
- --------- -------- -------- -----
<S> <C> <C> <C>
MORTGAGE BACKED OBLIGATIONS--(CONTINUED)
Sequential Fixed Rate CMOs--(Continued)
FNMA REMIC Trust Series 1989-59, Class H
$ 1,586 7.75% 10/25/18 $ 1,585
Norwest Asset Securities Corp.
Series 1997-5, Class A5
8,025 7.00 04/25/12 8,274
Salomon Brothers Mortgage Securities Series 1984-2,
Class Z
5,633 10.00 12/01/14 5,885
--------
Total Sequential Fixed Rate CMOs.................. $ 34,845
--------
Support CMO (1.2%)
Countrywide Mortgage Backed Securities, Inc. Series
1993-A, Class A9
$ 5,379 6.50% 10/25/08 $ 5,408
--------
Targeted Amortization Class (TAC) CMO (1.1%)
Paine Webber Mortgage Acceptance Corp. Series 1994-6,
Class A7
$ 5,000 6.00% 04/25/09 $ 5,038
--------
Total CMOs........................................ $295,306
--------
Total Mortgage Backed Obligations (cost
$357,441)........................................ $360,370
--------
AGENCY DEBENTURES (5.0%)
Federal Home Loan Bank
$ 5,500 5.76% 03/23/01 $ 5,548
Federal National Mortgage Association
16,300 5.63 03/15/01 16,463
--------
Total Agency Debentures
(cost $21,781)................................... $ 22,011
--------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
- --------- -------- -------- -----
<S> <C> <C> <C>
U.S. TREASURY OBLIGATIONS (13.3%)
U.S. Treasury Notes
$14,400 5.63% 11/30/00 $ 14,596
19,100 6.63 07/31/01 19,918
U.S. Treasury Principal Only Stripped Securities(b)
33,310 5.12 11/15/04 24,342
--------
Total U.S. Treasury Obligations (cost $57,912).... $ 58,856
--------
REPURCHASE AGREEMENT (2.5%)
Joint Account II
$11,200 5.85% 09/01/98 $ 11,200
--------
Total Repurchase Agreement (cost $11,200)......... $ 11,200
--------
Total Investments
(cost $448,334(c))............................... $452,437
========
- -------------------------------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION:
Gross unrealized gain for investments in which value
exceeds cost....................................... $ 4,971
Gross unrealized loss for investments in which cost
exceeds value...................................... (868)
--------
Net unrealized gain................................. $ 4,103
========
- -------------------------------------------------------------------------------------------------------
</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, 1998.
(b) The interest rate disclosed for the security represents effective yield to
maturity.
(c) The amount stated also represents aggregate cost for federal income tax
purposes.
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
TRUST FOR CREDIT UNIONS
---------------
STATEMENTS OF ASSETS AND LIABILITIES
AUGUST 31, 1998
<TABLE>
<CAPTION>
MONEY GOVERNMENT MORTGAGE
MARKET SECURITIES SECURITIES
PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
Investment in securities, at value
(identified cost $971,765,293,
$670,366,424, $448,334,331,
respectively)........................ $971,765,293 $669,436,734 $452,437,485
Cash.................................. 48,831 64,945 80,003
Receivables:
Investment securities sold........... -- 3,919,272 12,332,624
Interest............................. 5,925,075 5,563,220 2,946,420
Other assets.......................... 5,971 40,069 935
------------ ------------ ------------
Total assets...................... 977,745,170 679,024,240 467,797,467
------------ ------------ ------------
LIABILITIES
Payables:
Investment securities purchased...... -- 20,607,533 23,228,144
Fund units repurchased............... -- 1,000,000 148,500
Dividends............................ 4,782,326 2,539,024 1,726,579
Advisory fees........................ 52,106 111,427 75,022
Administration fees.................. 17,368 55,714 18,755
Accrued expenses and other
liabilities.......................... 36,594 58,000 50,671
------------ ------------ ------------
Total liabilities................. 4,888,394 24,371,698 25,247,671
------------ ------------ ------------
NET ASSETS
Paid-in capital....................... 972,856,776 675,112,823 446,672,853
Accumulated distributions in excess of
net investment income................ -- (1,343,152) (608,717)
Accumulated net realized loss on
investment transactions.............. -- (18,187,439) (7,617,494)
Net unrealized gain (loss) on
investments.......................... -- (929,690) 4,103,154
------------ ------------ ------------
Net assets........................ $972,856,776 $654,652,542 $442,549,796
============ ============ ============
Net asset value & public offering
price per unit (net assets/units
outstanding)......................... $1.00 $9.79 $9.90
============ ============ ============
UNITS OUTSTANDING
Total units outstanding, $0.001 par
value (unlimited number of
units authorized).................... 972,856,776 66,893,980 44,704,857
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
TRUST FOR CREDIT UNIONS
---------------
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 1998
<TABLE>
<CAPTION>
MONEY GOVERNMENT MORTGAGE
MARKET SECURITIES SECURITIES
PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- -----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest Income..................... $44,828,905 $36,483,752 $26,294,156
----------- ----------- -----------
EXPENSES:
Advisory fees....................... 1,343,962 1,181,065 779,686
Administration fees................. 795,974 590,533 194,922
Custodian fees...................... 115,141 108,656 83,374
Professional fees................... 52,441 69,574 58,664
Trustees' fees...................... 25,799 25,701 16,299
Other expenses...................... 40,784 54,438 51,489
----------- ----------- -----------
Total expenses...................... 2,374,101 2,029,967 1,184,434
Less--Fee waivers.................... (1,503,156) -- --
----------- ----------- -----------
Net expenses........................ 870,945 2,029,967 1,184,434
----------- ----------- -----------
NET INVESTMENT INCOME................ 43,957,960 34,453,785 25,109,722
NET REALIZED GAIN ON INVESTMENT
TRANSACTIONS........................ -- 276,048 2,639,413
NET CHANGE IN UNREALIZED GAIN (LOSS)
ON INVESTMENTS...................... -- (2,665,524) 2,780,412
----------- ----------- -----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS..................... $43,957,960 $32,064,309 $30,529,547
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
TRUST FOR CREDIT UNIONS
---------------
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED AUGUST 31, 1998
<TABLE>
<CAPTION>
MONEY GOVERNMENT MORTGAGE
MARKET SECURITIES SECURITIES
PORTFOLIO PORTFOLIO PORTFOLIO
--------------- ------------ ------------
<S> <C> <C> <C>
FROM OPERATIONS:
Net investment income........... $ 43,957,960 $ 34,453,785 $ 25,109,722
Net realized gain from
investment transactions........ -- 276,048 2,639,413
Net change in unrealized gain
(loss) on investments.......... -- (2,665,524) 2,780,412
--------------- ------------ ------------
Net increase in net assets
resulting from operations...... 43,957,960 32,064,309 30,529,547
--------------- ------------ ------------
DISTRIBUTIONS TO UNITHOLDERS:
From net investment income...... (43,957,960) (34,453,785) (24,417,759)
In excess of net investment
income......................... -- (762,530) --
--------------- ------------ ------------
Total distributions to
Unitholders.................... (43,957,960) (35,216,315) (24,417,759)
--------------- ------------ ------------
FROM UNIT TRANSACTIONS:
Proceeds from sales of units.... 7,453,527,751 286,851,659 123,443,287
Reinvestment of dividends and
distributions.................. 20,341,734 8,074,557 5,950,306
Cost of units repurchased....... (6,942,217,385) (201,763,429) (43,270,804)
--------------- ------------ ------------
Net increase in net assets re-
sulting from unit transactions. 531,652,100 93,162,787 86,122,789
--------------- ------------ ------------
Total Increase.................. 531,652,100 90,010,781 92,234,577
NET ASSETS:
Beginning of year............... 441,204,676 564,641,761 350,315,219
--------------- ------------ ------------
End of year..................... $ 972,856,776 $654,652,542 $442,549,796
=============== ============ ============
ACCUMULATED DISTRIBUTIONS IN EX-
CESS OF NET INVESTMENT INCOME... $ -- $ (1,343,152) $ (608,717)
=============== ============ ============
SUMMARY OF UNIT TRANSACTIONS:
Units sold...................... 7,453,527,751 29,195,793 12,565,758
Reinvestment of dividends and
distributions.................. 20,341,734 822,455 605,881
Units repurchased............... (6,942,217,385) (20,521,732) (4,391,995)
--------------- ------------ ------------
Increase in units outstanding... 531,652,100 9,496,516 8,779,644
=============== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
TRUST FOR CREDIT UNIONS
---------------
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED AUGUST 31, 1997
<TABLE>
<CAPTION>
MONEY GOVERNMENT MORTGAGE
MARKET SECURITIES SECURITIES
PORTFOLIO PORTFOLIO PORTFOLIO
--------------- ------------ ------------
<S> <C> <C> <C>
FROM OPERATIONS:
Net investment income........... $ 22,889,935 $ 32,571,231 $ 21,988,908
Net realized gain (loss) on
investment transactions........ -- (1,471,081) 901,649
Net change in unrealized gain on
investments.................... -- 5,778,256 2,440,462
--------------- ------------ ------------
Net increase in net assets
resulting from operations...... 22,889,935 36,878,406 25,331,019
--------------- ------------ ------------
DISTRIBUTION TO UNITHOLDERS:
From net investment income...... (22,889,935) (32,571,231) (21,988,908)
In excess of net investment
income......................... -- (184,815) (35,416)
--------------- ------------ ------------
Total distributions to
unitholders.................... (22,889,935) (32,756,046) (22,024,324)
--------------- ------------ ------------
FROM UNIT TRANSACTIONS:
Proceeds from sales of units.... 4,961,231,607 107,339,190 39,341,948
Reinvestment of dividends and
distributions.................. 11,661,004 6,072,657 4,572,906
Cost of units repurchased....... (4,958,397,761) (88,594,881) (29,452,760)
--------------- ------------ ------------
Net increase in net assets
resulting from unit
transactions................... 14,494,850 24,816,966 14,462,094
--------------- ------------ ------------
Total Increase.................. 14,494,850 28,939,326 17,768,789
NET ASSETS:
Beginning of year............... 426,709,826 535,702,435 332,546,430
--------------- ------------ ------------
End of year..................... $ 441,204,676 $564,641,761 $350,315,219
=============== ============ ============
ACCUMULATED UNDISTRIBUTED
(DISTRIBUTIONS IN EXCESS OF) NET
INVESTMENT INCOME............... $ -- $ (580,622) $ (1,300,680)
=============== ============ ============
SUMMARY OF UNIT TRANSACTIONS:
Units sold...................... 4,961,231,607 10,921,160 4,039,134
Reinvestment of dividends and
distributions.................. 11,661,004 618,333 469,421
Units repurchased............... (4,958,397,761) (9,016,857) (3,026,928)
--------------- ------------ ------------
Increase in units outstanding... 14,494,850 2,522,636 1,481,627
=============== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
TRUST FOR CREDIT UNIONS
---------
MONEY MARKET PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A UNIT OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INCOME FROM DISTRIBUTIONS TO
INVESTMENT OPERATIONS(b) UNITHOLDERS
------------------------- ----------------------------
RATIO OF
NET
FROM RATIO OF INVEST-
NET IN NET NET NET MENT
ASSET NET FROM EXCESS REAL- ASSET EXPENSES INCOME
VALUE AT NET REALIZED NET OF NET IZED VALUE TO TO
BEGIN- INVEST- GAIN ON INVEST- INVEST- GAIN ON AT AVERAGE AVERAGE
NING OF MENT INVEST- MENT MENT INVEST- END OF TOTAL NET NET
PERIOD INCOME MENTS INCOME INCOME MENTS PERIOD RETURN(a) ASSETS ASSETS
-------- ------------ ------------ -------- -------- -------- ------ --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Year ended:8/31/98.. $1.00 $0.0552 $ -- $(0.0552) $ -- $ -- $1.00 5.67% 0.11% 5.52%
8/31/97......... 1.00 0.0530 -- (0.0530) -- -- 1.00 5.43 0.18 5.31
8/31/96......... 1.00 0.0539 -- (0.0539) -- -- 1.00 5.51 0.19 5.37
8/31/95......... 1.00 0.0555 -- (0.0553) -- -- 1.00 5.56 0.20 5.55
8/31/94......... 1.00 0.0329 0.0002 (0.0342) (0.0001) (0.0002) 1.00 3.50 0.25 3.29
<CAPTION>
RATIO INFORMATION
ASSUMING NO WAIVER
OF FEES OR EXPENSE
REIMBURSEMENTS
-------------------
RATIO OF
NET
NET RATIO OF INVESTMENT
ASSETS EXPENSES INCOME
AT END TO TO
OF AVERAGE AVERAGE
PERIOD NET NET
(000'S) ASSETS ASSETS
-------- -------- ----------
<S> <C> <C> <C>
Year ended:8/31/98.. $972,857 0.30% 5.33%
8/31/97......... 441,205 0.33 5.16
8/31/96......... 426,710 0.31 5.25
8/31/95......... 382,096 0.33 5.42
8/31/94......... 216,989 0.34 3.20
</TABLE>
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the
investment at the net asset value at the end of the period.
(b) Calculated based on average shares outstanding methodology.
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
TRUST FOR CREDIT UNIONS
---------
GOVERNMENT SECURITIES PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A UNIT OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INCOME FROM DISTRIBUTIONS TO
INVESTMENT OPERATIONS UNITHOLDERS
----------------------- ------------------
RATIO OF
NET
NET RATIO OF INVEST-
NET REALIZED IN NET NET MENT
ASSET AND FROM EXCESS ASSET EXPENSES INCOME
VALUE AT NET UNREALIZED NET OF NET VALUE TO TO
BEGIN- INVEST- GAIN (LOSS) INVEST- INVEST- AT AVERAGE AVERAGE
NING OF MENT ON INVEST- MENT MENT END OF TOTAL NET NET
PERIOD INCOME MENTS(a) INCOME INCOME PERIOD RETURN(b) ASSETS ASSETS
-------- ---------- ------------ -------- -------- ------ --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Year ended:
8/31/98......... $9.84 $ 0.5764 $ (0.0400) $(0.5764) $(0.0100) $9.79 5.60% 0.34% 5.83%
8/31/97......... 9.76 0.5911 0.0829 (0.5911) (0.0029) 9.84 7.09 0.34 6.02
8/31/96......... 9.76 0.6024 (0.0055) (0.5969) -- 9.76 6.26 0.35 6.16
8/31/95......... 9.78 0.5515 (0.0011) (0.5582) (0.0122) 9.76 5.82 0.34 5.65
8/31/94......... 9.97 0.4286 (0.1974) (0.4212) -- 9.78 2.33 0.35 4.25
<CAPTION>
RATIO INFORMATION
ASSUMING NO WAIVER
OF FEES OR EXPENSE
REIMBURSEMENTS
-------------------
RATIO OF
NET
NET RATIO OF INVESTMENT
PORT- ASSETS EXPENSES INCOME
FOLIO AT END TO TO
TURN- OF AVERAGE AVERAGE
OVER PERIOD NET NET
RATE(c) (000'S) ASSETS ASSETS
-------- -------- -------- ----------
<S> <C> <C> <C> <C>
Year ended:
8/31/98......... 93.77% $654,653 0.34% 5.83%
8/31/97......... 88.02 564,642 0.34 6.02
8/31/96......... 149.66 535,702 0.35 6.16
8/31/95......... 70.58 529,659 0.34 5.65
8/31/94......... 42.27 594,331 0.37 4.23
</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 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.
The accompanying notes are an integral part of these financial statements.
25
<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
NET REALIZED IN EXCESS NET
ASSET AND FROM EXCESS OF NET ASSET
VALUE AT NET UNREALIZED NET OF NET REALIZED VALUE
BEGIN- INVEST- GAIN (LOSS) INVEST- INVEST- GAIN ON FROM AT
NING OF MENT ON INVEST- MENT MENT INVEST- PAID-IN END OF TOTAL
PERIOD INCOME MENTS(a) INCOME INCOME MENTS CAPITAL PERIOD RETURN(b)
-------- ---------- ------------ -------- -------- -------- ------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Year ended:
8/31/98......... $9.75 $ 0.6395 $ 0.1272 $(0.6167) $ -- $ -- $ -- $9.90 8.10%
8/31/97......... 9.65 0.6399 0.1011 (0.6399) (0.0011) -- -- 9.75 7.89
8/31/96......... 9.74 0.6604 (0.1195) (0.6309) -- -- -- 9.65 5.67
8/31/95......... 9.62 0.6075 0.1539 (0.6075) (0.0175) -- (0.0164) 9.74 8.20
8/31/94......... 10.13 0.5533 (0.4530) (0.5719) (0.0340) (0.0044) -- 9.62 1.00
<CAPTION>
RATIO INFORMATION
ASSUMING NO WAIVER
OF FEES
-------------------
RATIO OF
NET RATIO OF
RATIO OF INVEST- NET
NET MENT NET RATIO OF INVESTMENT
EXPENSES INCOME PORT- ASSETS EXPENSES INCOME
TO TO FOLIO AT END TO TO
AVERAGE AVERAGE TURN- OF AVERAGE AVERAGE
NET NET OVER PERIOD NET NET
ASSETS ASSETS RATE(c) (000'S) ASSETS ASSETS
-------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Year ended:
8/31/98......... 0.30% 6.44% 108.76% $442,550 0.30% 6.44%
8/31/97......... 0.30 6.57 106.10 350,315 0.30 6.57
8/31/96......... 0.28 6.64 163.42 332,546 0.30 6.62
8/31/95......... 0.26 6.36 130.98 264,409 0.32 6.30
8/31/94......... 0.28 5.66 188.58 283,886 0.29 5.65
</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 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.
The accompanying notes are an integral part of these financial statements.
26
<PAGE>
TRUST FOR CREDIT UNIONS
---------------
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1998
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 three diversified portfolios: the
Money Market Portfolio, Government Securities Portfolio and Mortgage Securities
Portfolio. Units of the Fund are offered for sale solely to state and federally
chartered credit unions.
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 and Mortgage Securities Portfolio,
investments in mortgage backed, asset backed, and U.S. Treasury obligations 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 based on yield equivalents, a pricing matrix or
other sources, under valuation procedures established by the Fund's Board of
Trustees. Securities of the Money Market Portfolio and short-term debt
obligations maturing in sixty days or less for the Government Securities
Portfolio and Mortgage Securities Portfolio are valued at amortized cost, which
approximates market value. Under this method, all investments purchased at a
discount or premium are valued by amortizing the difference between the
original purchase price and maturity value of the issue over the period to
maturity.
B.Security Transactions and Investment Income
Security transactions are recorded on the trade date. Realized gains and
losses on sales of portfolio securities are calculated on the identified cost
basis. For the Money Market Portfolio, interest income is determined on the
basis of interest accrued, premium amortized and discount earned. The Mortgage
Securities Portfolio amortizes market discounts and premiums on certain
mortgage backed securities and treasury obligations.
For the Government Securities Portfolio and Mortgage Securities Portfolio,
premiums on interest-only securities and on collateralized mortgage obligations
with nominal principal amounts are amortized on an
27
<PAGE>
TRUST FOR CREDIT UNIONS
---------------
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
AUGUST 31, 1998
2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
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 as 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 and Mortgage Securities 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 segregate and
maintain cash or liquid debt securities in an amount equal to the forward
purchase price until the settlement date. 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.
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... $18,324,000 1999 - 2005
Mortgage Securities..... 7,333,000 2002 - 2004
</TABLE>
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.
28
<PAGE>
TRUST FOR CREDIT UNIONS
---------------
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
AUGUST 31, 1998
2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
E.Expenses
Expenses incurred by the Fund that do not specifically relate to an
individual portfolio of the Fund are generally 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%
</TABLE>
Effective July 1, 1997, Goldman Sachs voluntarily agreed to limit its
advisory fee with respect to the Money Market Portfolio to .06% of average
daily net assets; prior thereto, Goldman Sachs voluntarily agreed to limit its
advisory fee to .12% of the first $250 million, .10% of the next $250 million,
.09% of the next $250 million and .08% over $750 million of the portfolio's
average daily net assets. For the year ended August 31, 1998, Goldman Sachs
waived advisory fees amounting to $866,377.
29
<PAGE>
TRUST FOR CREDIT UNIONS
---------------
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
AUGUST 31, 1998
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 40
major credit unions are limited partners. Under the Administration Agreement,
CUFSLP, subject to the 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%
</TABLE>
Effective July 1, 1997, CUFSLP voluntarily agreed to limit its administration
fee with respect to the Money Market Portfolio to .02% of average daily net
assets; prior thereto, CUFSLP voluntarily agreed to limit its administration
fee to .05% of the first $500 million, .04% of the next $250 million and .03%
over $750 million of the portfolio's average daily net assets. For the year
ended August 31, 1998, CUFSLP waived administration fees amounting to $636,779.
CUFSLP has agreed that to the extent the total annualized expenses (excluding
interest, taxes, brokerage and extraordinary expenses) (the "Expenses") of the
Money Market Portfolio exceed .20% of the average daily net assets of the Money
Market Portfolio, CUFSLP will either reduce the administration fees otherwise
payable or pay such Expenses of the Money Market Portfolio. For the year ended
August 31, 1998, no expenses were required to be reimbursed by CUFSLP under
this agreement.
CUFSLP and Goldman Sachs have each voluntarily agreed to limit the other
annualized ordinary expenses (excluding advisory, administration, interest,
taxes, brokerage and extraordinary expenses) of the Government Securities
Portfolio such that CUFSLP will reimburse expenses that exceed .05% up to .10%
of the Government Securities Portfolio's average daily net assets, and Goldman
Sachs will reimburse expenses that exceed .10% up to .15% of the Government
Securities Portfolio's average daily net assets. For the year ended August 31,
1998, no expenses were required to be reimbursed by CUFSLP and Goldman Sachs
under this agreement.
30
<PAGE>
TRUST FOR CREDIT UNIONS
---------------
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
AUGUST 31, 1998
3.AGREEMENTS--(CONTINUED)
Callahan Financial Services, Inc. and Goldman Sachs serve as exclusive
distributors of units of the Fund. For the year ended August 31, 1998, neither
received any compensation for this service. Goldman Sachs also serves as
Transfer Agent of the Fund for a fee.
4.INVESTMENT TRANSACTIONS
Purchases and proceeds of sales or maturities of long-term securities for the
Government Securities Portfolio and Mortgage Securities Portfolio for the year
ended August 31, 1998 were as follows ($ in thousands):
<TABLE>
<CAPTION>
GOVERNMENT MORTGAGE
SECURITIES SECURITIES
PORTFOLIO PORTFOLIO
---------- ----------
<S> <C> <C>
Purchases of U.S. Government and agency obligations...... $557,865 $257,652
Purchases (excluding U.S. Government and agency obliga-
tions).................................................. -- 256,613
Sales or maturities of U.S. Government and agency obliga-
tions................................................... 527,127 183,915
Sales or maturities (excluding U.S. Government and agency
obligations)............................................ -- 227,207
</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.
31
<PAGE>
TRUST FOR CREDIT UNIONS
---------------
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
AUGUST 31, 1998
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, 1998, the Money Market Portfolio had a 2.39% undivided
interest in the repurchase agreements in the following joint account which
equaled $5,299,500,000 in principal amount. As of August 31, 1998, the
repurchase agreements in this joint account, along with the corresponding
underlying securities (including the type of security, market value, interest
rate and maturity date), were as follows ($ in thousands):
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY AMORTIZED
JOINT ACCOUNT I AMOUNT RATE DATE COST
--------------- --------- -------- -------- ----------
<S> <C> <C> <C> <C>
Bear Stearns Companies, Inc., dated
8/31/98, repurchase price $400,065
(U.S. Treasury Interest only
Stripped Securities: $408,461,
5/15/03-5/15/07)................... $400,000 5.81% 9/1/98 $ 400,000
BZW Securities, dated 8/31/98,
repurchase price $800,129 (U.S.
Treasury Interest only Stripped
Securities: $22,245, 11/15/98-
8/15/05) (U.S. Treasury Notes:
$772,701, 4.750-9.125%, 9/30/98-
5/15/05) (U.S. Treasury Principal
Stripped Securities: $21,055,
11/15/98-8/15/05).................. 800,000 5.80 9/1/98 800,000
Credit Suisse First Boston Corp.,
dated 8/31/98, repurchase price
$800,129 (U.S. Treasury Interest
only Stripped Securities: $481,626,
11/15/98-5/15/08) (U.S. Treasury
Principal only Stripped Securities:
$151,863, 11/15/98-2/15/03) (U.S.
Treasury Stripped Securities:
$192,555, 11/15/04-8/15/05)........ 800,000 5.81 9/1/98 800,000
Deutsche Bank, dated 8/31/98,
repurchase price $800,129 (U.S.
Treasury Notes: $816,001, 6.125-
7.750%, 7/15/99-3/31/02)........... 800,000 5.80 9/1/98 800,000
Donaldson Lufkin & Jenrette, Inc.,
dated 8/31/98, repurchase price
$700,113 (U.S. Treasury Bill:
$6,288, 9/3/98) (U.S. Treasury
Interest only Stripped Securities:
$692,955, 11/15/98-2/15/08) (U.S.
Treasury Note: $7,233, 7.75%,
12/31/99) (U.S. Treasury Principal
only Stripped Securities: $7,524,
2/15/99-5/15/05)................... 700,000 5.80 9/1/98 700,000
Goldman, Sachs & Co., dated 8/31/98,
repurchase price $125,021 (U.S.
Treasury Notes: $127,522, 5.250-
5.875%, 8/31/99-8/15/03)........... 125,000 6.05 9/1/98 125,000
Morgan Stanley Dean Witter & Co.,
dated 8/31/98, repurchase price
$450,074 (U.S. Treasury Bonds:
$3,029, 9.375-10.750%, 2/15/03-
2/15/06) (U.S. Treasury Interest
only Stripped Securities: $37,451,
5/15/01-2/15/08) (U.S. Treasury
Notes: $388,898, 5.500-7.750%,
4/30/99-5/31/03) (U.S. Treasury
Principal only Stripped Securities: 200,000 5.90 9/1/98 200,000
$32,479, 11/15/00-5/15/05)......... 250,000 5.93 9/1/98 250,000
Salomon-Smith Barney, Inc., dated
8/31/98, repurchase price $700,113
(U.S. Treasury Interest only
Stripped Securities: $638,692,
2/15/04-2/15/07) (U.S. Treasury
Principal only Stripped Securities:
$76,162, 11/15/01)................. 700,000 5.80 9/1/98 700,000
Warburg Dillon Read, dated 8/31/98,
repurchase price $524,584 (U.S.
Treasury Bill: $50,485, 11/5/98)
(U.S. Treasury Bond: $39,484,
10.750%, 2/15/03) (U.S. Treasury
Inflation Index Notes: $387,185,
3.375-3.625%, 7/15/02-1/15/08)
(U.S. Treasury Note: $58,085,
4.750-6.625%, 9/30/98-7/31/01)..... 524,500 5.79 9/1/98 524,500
----------
Total Joint Repurchase Agreement
Account............................ $5,299,500
==========
</TABLE>
32
<PAGE>
TRUST FOR CREDIT UNIONS
---------------
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
AUGUST 31, 1998
6.JOINT REPURCHASE AGREEMENT ACCOUNTS--(CONTINUED)
As of August 31, 1998, the Money Market Portfolio, Government Securities
Portfolio and the Mortgage Securities Portfolio had a 12.82%, 6.03% and 0.82%
undivided interest, respectively, in the repurchase agreements in the following
joint account, which equaled $1,365,000,000 in principal amount. As of August
31, 1998, the repurchase agreements in this joint account, along with the
corresponding underlying securities (including the type of security, market
value, interest rate and maturity date), were as follows ($ in thousands):
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY AMORTIZED
JOINT ACCOUNT II AMOUNT RATE DATE COST
---------------- --------- -------- -------- ----------
<S> <C> <C> <C> <C>
Bear Stearns Companies, Inc., dated
8/31/98, repurchase price $300,049
(FHLMC: $211,246, 6.50-7.50%, 12/1/22-
11/1/27) (FNMA: $97,844, 6.50-7.50%,
8/1//25-8/1/28)....................... $300,000 5.85% 9/1/98 $ 300,000
Donaldson Lufkin & Jenrette, Inc.,
dated 8/31/98, repurchase price
$200,033 (FHLMC Gold: $69,048, 7.00%,
8/1/24-2/1/28) (FNMA: $134,993, 5.50-
7.00%, 2/1/09-8/1/28)................. 200,000 5.85 9/1/98 200,000
NationsBank, dated 8/31/98, repurchase
price $400,065 (FNMA: $408,043, 6.50%,
11/1/12).............................. 400,000 5.85 9/1/98 400,000
Nomura Securities Inc., dated 8/31/98,
repurchase price $325,053 (FHLB:
$31,053, 6.05-6.50%, 1/21/99-5/13/08)
(FNMA: $225,458, 5.50-8.50%, 7/1/99-
8/1/28) (FMAC: $54,894, 5.00-9.00%,
12/1/98-8/1/28) (SLMA: $20,090, 5.73%,
2/04/00).............................. 325,000 5.85 9/1/98 325,000
Salomon Brothers, Inc, dated 8/31/98,
repurchase price $140,023 (FHLMC Gold:
$14,253, 7.00-9.00%, 4/1/24-12/1/27)
(FNMA: $128,641, 6.00-8.50%, 11/1//00-
8/1/28)............................... 140,000 5.83 9/1/98 140,000
----------
Total Joint Repurchase Agreement
Account.............................. $1,365,000
==========
</TABLE>
7.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 affiliates, subject to certain limitations as follows: 25% of
eligible security transactions, as defined, and 10% of repurchase agreement
transactions on an annual basis.
33
<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]
Goldman
Sachs
TCUANN98
- -----------------------------
TRUST
for Credit Unions
- -----------------------------
TRUSTEES
Robert M. Coen, Chairman
John T. Collins, Vice-Chairman
Gene R. Artemenko
James C. Barr
Edgar F. Callahan
Thomas S. Condit
Douglas C. Grip
Rudolf J. Hanley
Betty G. Hobbs
Wendell A. Sebastian
OFFICERS
Charles W. Filson, President
James A. Fitzpatrick, Vice President
Gordon Linke, Vice President
Nancy L. Mucker, Vice President
John M. Perlowski, Treasurer
Philip Giuca, Assistant Treasurer
Michael J. Richman, Secretary
Elizabeth Anderson, Assistant Secretary
Deborah A. Farrell, Assistant Secretary
Steven E. Hartstein, Assistant Secretary
Howard B. Surloff, Assistant Secretary
Kaysie Uniacke, 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.
INDEPENDENT AUDITORS
Arthur Andersen
225 Franklin Street
Boston, MA 02110
