-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OxexyzLz6yJ60xj7QlWwKDLEgC3naad2gs1n37yt7gZ2ncHIxL6TCCw1S+z4yhrB HHA+AXlcW4A3Zx50InNjDQ== 0000950137-05-015393.txt : 20051229 0000950137-05-015393.hdr.sgml : 20051229 20051229163537 ACCESSION NUMBER: 0000950137-05-015393 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20051031 FILED AS OF DATE: 20051229 DATE AS OF CHANGE: 20051229 EFFECTIVENESS DATE: 20051229 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEMBERS MUTUAL FUNDS CENTRAL INDEX KEY: 0001040612 IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-08261 FILM NUMBER: 051291818 BUSINESS ADDRESS: STREET 1: 5910 MINERAL POINT RD CITY: MADISON STATE: WI ZIP: 53705 BUSINESS PHONE: 6082326111 MAIL ADDRESS: STREET 1: 5910 MINERAL POINT ROAD CITY: MADISON STATE: WI ZIP: 53705 N-CSR 1 c01072nvcsr.txt ANNUAL REPORT As filed with the Securities and Exchange Commission on December 29, 2005 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N - CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act File No. 811-08261 MEMBERS Mutual Funds 5910 Mineral Point Road Madison, WI 53705 (608) 238-5851 (Registrant's Exact Name, Address and Telephone Number) Steve Suleski Vice President, Deputy General Counsel CUNA Mutual Group 5910 Mineral Point Road Madison, WI 53705 (Name and Address of Agent for Service) Copy to: Stephen E. Roth, Esq. Sutherland Asbill & Brennan LLP 1275 Pennsylvania Avenue, N.W. Washington, D. C. 20004-2404 ------------------------------ ITEM 1. REPORTS TO STOCKHOLDERS A copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Investment Company Act of 1940 (the "1940 Act") appears beginning on the following page. 2 MEMBERS(R) MUTUAL FUNDS ANNUAL REPORT OCTOBER 31, 2005 CASH RESERVES FUND BOND FUND HIGH INCOME FUND BALANCED FUND GROWTH AND INCOME FUND CAPITAL APPRECIATION FUND MID-CAP FUND MULTI-CAP GROWTH FUND INTERNATIONAL STOCK FUND [MEMBERS LOGO] LETTER TO SHAREHOLDERS [PHOTO OF LAWRENCE R. HALVERSON] Dear Fellow Shareholder: The twelve month period ended October 31, 2005 was probably more rewarding for most investors than they realize based on the level of comfort and confidence they felt as the year progressed. Domestic stocks as represented by the Standard & Poor's 500 returned 8.72% over this 12-month period. International stocks' returns were more than double that rate at 18.59% for the Morgan Stanley Europe, Australasia and Far East Index. U. S. (and international) bond market returns were more modest, but were broadly positive in spite of the Federal Reserve Board's relentless raising of short-term interest rates to counter anticipated increases in inflation rates and perhaps to dampen rapidly rising home prices in some areas of the country. MEMBERS(R) Mutual Funds investors shared in these generally favorable markets, realizing positive returns for the year from all of the nine funds, and double digit returns from three of the nine: 10.97% for Multi-Cap Growth, 13.95% for Mid-Cap, and 20.81% for International Stock (Class A shares at net asset value). The attached Annual Report contains descriptions of each fund's activities and returns for the year and longer periods. The factors that propelled stocks higher this past year - led by strong earnings gains in most sectors of the economy - are generally expected to dissipate somewhat in the months ahead. Corporate profitability growth is being constrained by the high costs of energy and increasing labor costs, as well as the pricing pressures of intense global competition. Continuing increases in short-term interest rates should also increase corporate costs, and could finally begin to push longer-term interest rates higher. Long-term investors sometimes become overly cautious in this kind of environment, believing that slower profit growth and rising interest rates mandate the liquidation of stocks and bonds and increased allocations to short-term investments. Investors with near-term investment horizons can and probably should be moving some of their investments in this direction of greater safety and reduced price risk. Investors with time horizons of ten years or more, however, rarely benefit from such attempts to protect their asset values in times of increasing concerns. In fact, it is often just such times that increased allocations to quality stocks and intermediate-term bonds prove to be most beneficial. We see particular value currently in the stocks and bonds of the larger, more established and proven issuers, and have been positioning our portfolios accordingly. No investor gets to know what the future will hold, but we remain confident in the ability of well-run companies to continue to grow and provide patient investors with attractive long-term returns. We appreciate the confidence in us indicated by your investments in MEMBERS Funds, and remain committed to serving your investment needs to the very best of our abilities. Sincerely, /s/ Lawrence R. Halverson - ------------------------------------ Lawrence R. Halverson, CFA President Not part of the Annual Report. SUMMARY OF U.S. ECONOMIC AND FINANCIAL MARKET CONDITIONS U.S. ECONOMY The U.S. economy expanded at a healthy pace in the twelve months ended October 31, 2005, growing above what is believed to be its long-term potential growth rate of 3.5%. Consumer spending saw a "soft spot" in April caused by a surge in gasoline prices, but recovered in May and June as renewed discounting by automakers stimulated demand. Another "soft spot" developed after Hurricane Katrina, with soaring gasoline prices eating into household budgets. Manufacturing was strong early in the period, driven by robust corporate capital spending and export growth, but softened in April and May as companies worked through an overhang in inventories and capital spending moderated. Manufacturing also slowed after the disruptions and higher energy prices brought by the Gulf hurricanes, but economic data in October suggested that activity was rebounding. The housing market and housing construction made large contributions to economic growth during the period, although some hints of softening home prices were evident late in the year. Inflationary pressures picked up during the period, with higher energy and commodity prices and the after-effects of the aggressive monetary stimulus that the U.S. Federal Reserve (the "Fed") applied in 2002-3 leading to a rise in both wholesale and consumer prices. Improving productivity helped to keep unit labor costs low, but despite the highly competitive business environment some companies were able to pass on increases in energy and raw-material prices on to consumers. Including more volatile food and energy prices, consumer inflation was well above its historical average during the period. The labor market continued to stabilize, with a modest but relatively consistent pace of job creation and a gradually falling unemployment rate. U.S. STOCKS U.S. stocks performed well over the period, with the S&P 500 Index rising 8.72%. Early in the period, equity markets continued a rally that had begun after the uncertainties surrounding the Presidential election were removed. However, concerns about inflation, oil prices, and the chance of more aggressive Fed tightening capped the rally in March, and signs of softness first in consumer spending and then manufacturing weighed on the minds of market participants. Shrinking liquidity and money supply exerted downward pressure on stock prices throughout the period, and took particular effect in March and April, when most major stock indexes retouched levels last seen before the 2004 election. Equities began to rise again in late May and into June as conditions improved in the technology sector and economic uncertainties diminished. The Gulf hurricanes hurt investor sentiment, but did not sap the strength of the rally, which resumed in early October. Value out-performed growth, and mid-caps out-performed both larger and smaller stocks. U.S. BONDS U.S. bonds posted positive returns overall, with the Merrill Lynch U.S. Domestic Master Index returning 1.26%. The Fed increased short-term interest rates eight times during the period in 25 basis-point increments, taking the benchmark Federal Funds rate from 1.75% to 3.75%. U.S. Treasury bonds at shorter and longer durations out-performed intermediate-duration bonds in terms of price as the yield curve "flattened." Early on in the period, lower-quality investment grade corporate bonds and high-yield corporate bonds out-performed less-risky bonds, continuing a long run of superior relative performance. However, the bond market suffered a series of blows in the spring that hit lower-quality bonds the hardest: the unexpected downgrade of Ford and GM bonds to "junk" status, the fears that one or more hedge funds would implode and destabilize the financial system, and the U.S. Treasury's surprising announcement that it was reconsidering issuing the 30-year bond. Investment-grade and high-yield corporate bond spreads are still higher than they were before the Ford/GM downgrade, but they have come in considerably from the highs they reached during the crisis. However, concerns about rising inflation, shrinking profit margins and slower corporate earnings growth have held back returns of both investment-grade and high-yield corporate bonds. INTERNATIONAL ECONOMIES AND FINANCIAL MARKETS Economic growth slowed to a crawl in the euro-zone but remained strong in Asia, with China continuing to post 9%+ real GDP growth and consumer spending picking up in Japan and the developing economies of southeast Asia. Weakness in the euro-zone derived from a number of sources, including falling business and consumer confidence, a stronger euro hitting exports, and generalized weakness in the industrial sector due to higher energy and commodity prices. Emerging economies focused on the export of natural resources such as Brazil performed well during the period, although hints of cracks in commodity markets midway through the period caused some unease. Overall, global growth slowed gradually during the period as higher energy and commodity prices acted as "natural stabilizers" for a global economy that had been growing at an impressive but unsustainable pace since the summer of 2003. Emerging markets stocks continued to out-perform all other major classifications of stocks during the period. The extended rally in emerging markets stocks may suggest that market participants are lowering the risk premium that they require to buy these stocks. Japanese stocks out-performed U.S. stocks in local currency-denominated terms, but the advantage versus U.S. stocks dwindled in U.S. dollar-denominated terms as the dollar strengthened against the yen and euro due to the relative strength of the U.S. economy. The MSCI Emerging Markets Free Index rose 34.34% during the period, while the MSCI EAFE Index of developed markets stocks rose 18.59%. Not part of the Annual Report. TABLE OF CONTENTS
PAGE ---- FUND PERFORMANCE REVIEWS Bond Fund .......................................................... 2 High Income Fund ................................................... 4 Balanced Fund ...................................................... 6 Growth and Income Fund ............................................. 8 Capital Appreciation Fund .......................................... 10 Mid-Cap Fund ....................................................... 12 Multi-Cap Growth Fund .............................................. 14 International Stock Fund ........................................... 16 PORTFOLIOS OF INVESTMENTS Cash Reserves Fund ................................................. 18 Bond Fund .......................................................... 20 High Income Fund ................................................... 26 Balanced Fund ...................................................... 36 Growth and Income Fund ............................................. 43 Capital Appreciation Fund .......................................... 46 Mid-Cap Fund ....................................................... 49 Multi-Cap Growth Fund .............................................. 53 International Stock Fund ........................................... 56 FINANCIAL STATEMENTS Statements of Assets and Liabilities ............................... 64 Statements of Operations ........................................... 66 Statements of Changes in Net Assets ................................ 68 Financial Highlights ............................................... 72 NOTES TO FINANCIAL STATEMENTS ........................................... 82 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ................. 89 OTHER INFORMATION ....................................................... 90 TRUSTEES AND OFFICERS ................................................... 92
NONDEPOSIT INVESTMENT PRODUCTS ARE NOT FEDERALLY INSURED, INVOLVE INVESTMENT RISK, MAY LOSE VALUE AND ARE NOT OBLIGATIONS OF OR GUARANTEED BY THE CREDIT UNION. For more complete information about MEMBERS Mutual Funds, including charges and expenses, request a prospectus from your registered representative or from MEMBERS Mutual Funds, P.O. Box 8390, Boston, MA 02266-8390. Consider the investment objectives, risks, and charges and expenses of the investment carefully before investing. The prospectus contains this and other information about the investment company. For more current performance information, please call 1-800-877-6089 or visit our website at www.membersfunds.com. Current performance may be lower or higher than the performance data quoted within. Past performance does not guarantee future results. 1 BOND FUND PERFORMANCE REVIEW INVESTMENT OBJECTIVE The Bond Fund seeks to generate a high level of current income, consistent with the prudent limitation of investment risk. PORTFOLIO MANAGEMENT The fund is managed by a team of MEMBERS Capital Advisors' portfolio managers. PRINCIPAL INVESTMENT STRATEGIES Under normal circumstances, the fund invests at least 80% of its assets in bonds. To keep current income relatively stable and to limit share price volatility, the Bond Fund emphasizes investment grade securities and maintains an intermediate (typically 3-6 year) average portfolio duration. The fund may invest in the following instruments: - - CORPORATE DEBT SECURITIES: securities issued by domestic and foreign corporations which have a rating within the four highest categories and, to a limited extent (up to 20% of its assets), in securities not rated within the four highest categories; - - U.S. GOVERNMENT DEBT SECURITIES: securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities; - - FOREIGN GOVERNMENT DEBT SECURITIES: securities issued or guaranteed by a foreign government or its agencies or instrumentalities, payable in U.S. dollars, which have a rating within the four highest categories; and - - NON-RATED DEBT SECURITIES: securities issued or guaranteed by corporations, financial institutions, and others which, although not rated by a national rating service, are considered by the fund's investment advisor to have an investment quality equivalent to the four highest categories. The MEMBERS Bond Fund returned 0.74% (Class A shares at net asset value) during the twelve month period ended October 31, 2005, lagging the Merrill Lynch U.S. Domestic Master Index, which returned 1.26%. Performance was helped by management's strategic decision to overweight bonds of longer and shorter maturities. This so-called "barbell" strategy generally contributes to performance when the yield curve flattens, as it did during the reporting period, with the spread between 2-Year U.S. Treasury Notes and 10-Year U.S. Treasury Bonds narrowing from 157 to 18 basis points. Performance was also helped by an underweight in lower-quality investment-grade BBB and high-yield bonds, a general underweight and shorter-duration posture in corporate bonds, and an overweight in asset-backed and commercial mortgage-backed securities ("CMBS"). Performance was hurt by an underweight in mortgage-backed and U.S. Agency securities. At the tactical level, performance was helped by security selection in CMBS and short-term corporate bonds. In the corporate segment of the portfolio, performance was helped by underweights in the bonds of industrial, auto, and communications companies, but hurt by overweights in the bonds of paper, energy, and transportation companies and an underweight in financials. The portfolio's lack of exposure to the bonds of tobacco companies also detracted from performance. We have reduced the "barbelling" of the portfolio, believing that the potential excess returns of the strategy have diminished. We think that short-term interest rates will continue to rise gradually in the near-term, however, and have not abandoned the strategy altogether. Management maintains a generally cautious stance towards seeking excess return via reaching for yield as spreads are fairly tight and most sectors of the fixed-income market appear to be fully or richly valued. We are also concerned about "event risk" in a rising-rate environment and are monitoring the portfolio's holdings very closely. MEMBERS Capital Advisors' Fixed Income Portfolio Management Team--Advisor 2 BOND FUND PERFORMANCE REVIEW CUMULATIVE PERFORMANCE OF $10,000 SINCE INCEPTION(1) [PERFORMANCE GRAPH]
12/29/97 Inception 04/30/98 10/31/98 04/30/99 10/31/99 04/30/00 10/31/00 04/30/01 10/31/01 Class A Shares (includes maximum sales charge)(2) 9,525 9.654 10,104 10,252 10,266 10,372 10,768 11,338 12,175 Class B Shares (includes maximum applicable CDSC)(3) 10,000 9,667 10,086 10,195 10,235 10,372 10,721 11,418 12,225 Merrill Lynch U.S. Domestic Master Index 10,000 10,219 10,803 10,870 10,840 11,005 11,634 12,350 13,331 04/30/02 10/31/02 04/30/03 10/31/03 04/30/04 10/31/04 04/30/05 10/31/05 Class A Shares (includes maximum sales charge)(2) 12,095 12,688 13,174 13,132 13,204 13,717 13,835 13,818 Class B Shares (includes maximum applicable CDSC)(3) 12,286 12,852 13,184 13,091 13,214 13,676 13,744 13,675 Merrill Lynch U.S. Domestic Master Index 13,311 14,129 14,739 14,825 15,012 15,648 15,817 15,845
(1) This chart compares a $10,000 investment made in the fund on its inception date to a $10,000 investment made in the index. All dividends and capital gains are reinvested. Further information relating to the fund's performance, including expense reimbursements, is contained in the Prospectus and elsewhere in this report. Past performance is not indicative of future performance. Investment return and principal value will fluctuate, so an investor's shares, when redeemed, may be worth more or less than when purchased. Indices are unmanaged and investors cannot invest in them. Index returns do not reflect expenses or sales charges. The graph above and the table below do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. SECTOR ALLOCATION AS A PERCENTAGE OF NET ASSETS [PIE CHART] Corporate Notes and Bonds 27% Cash & Other Net Assets 3% Commercial Mortage Backed 7% U.S. Government and Agency Obligations 28% Mortgage Backed 28% Asset Backed 7%
AVERAGE ANNUAL TOTAL RETURN THROUGH OCTOBER 31, 2005
% RETURN WITHOUT SALES CHARGE % RETURN AFTER SALES CHARGE(4) Since Since 1 Year 3 Years 5 Years Inception(5) 1 Year 3 Years 5 Years Inception(5) ------ ------- ------- ------------ ------ ------- ------- ----------- Class A Shares(2) 0.74% 2.89% 5.12% 4.86% -4.07% 1.23% 4.09% 4.21% Class B Shares(3) -0.01 2.09 4.32 4.07 -4.37 1.00 3.98 4.07 Merrill Lynch U.S. Domestic Master Index 1.26 3.89 6.37 6.04 -- -- -- --
(2) Maximum Sales Charge is 4.75% for A Shares. (3) Maximum Contingent Deferred Sales Charge is 4.5% for B Shares; reduced after 12 months and eliminated after six years. (4) Assuming Maximum Applicable Sales Charge. (5) Fund commenced investment operations on December 29, 1997. 3 HIGH INCOME FUND PERFORMANCE REVIEW INVESTMENT OBJECTIVE The High Income Fund seeks high current income. The fund also seeks capital appreciation, but only when consistent with its primary goal. PORTFOLIO MANAGEMENT The fund is managed by a team of MEMBERS Capital Advisors' portfolio managers, which may use one or more subadvisors under a "manager of managers" approach to make investment decisions for some or all of the assets of this fund. Shenkman Capital Management, Inc. ("SCM") is the only subadvisor currently used by MEMBERS Capital Advisors to manage the assets of the fund. PRINCIPAL INVESTMENT STRATEGIES The High Income Fund invests primarily in lower-rated, higher-yielding income bearing securities, such as "junk" bonds. Because the performance of these securities has historically been strongly influenced by economic conditions, the fund may rotate securities selection by business sector according to the economic outlook. Under normal market conditions, the fund invests at least 80% of its assets in bonds rated lower than investment grade (BBB/Baa) and their unrated equivalents or other high-yielding securities. Types of bonds and other securities include, but are not limited to, domestic and foreign corporate bonds, debentures, notes, convertible securities, preferred stocks, municipal obligations and government obligations. The fund may invest in mortgage-backed securities. During the twelve month period ended October 31, 2005, the MEMBERS High Income Fund returned 2.85% (Class A shares at net asset value), modestly under-performing the Merrill Lynch U.S. High Yield Master II Index, which returned 3.92%. Throughout this reporting period the Fund's lower duration and underweighting of double-B credits (which tend to be more interest rate sensitive) had an adverse effect on performance as the yield curve flattened. Performance benefited from investments in the telecom and media sectors. The Fund also benefited by avoiding the airline sector and deep discount and lower-quality securities, which significantly under-performed the overall market. After rallying in late 2004, the high yield market began 2005 with a small negative return in January, breaking a streak of seven consecutive months of positive performance. The market then rallied sharply in February and early March as spreads broke through 300 basis points, an all time record low. However, the market then underwent a sharp correction that continued through early May, as concerns regarding the economy, the uncertain impact of General Motors' impending entry into the high yield market, rumored hedge fund troubles, and interest rate volatility resulted in heightened risk aversion. By mid-year, conditions markedly improved and concerns subsided as encouraging economic news, the realization of GM's downgrade along with its fairly smooth entry into the high yield market, and relatively attractive spreads sparked a strong rally that lasted through early September. The market then struggled through the end of the period due to weak equity markets and a lack of liquidity. Currently, there is an uncertain tone to the high yield market due to the concerns over rising interest rates, energy prices, and a potential slowdown in GDP growth. We expect the Federal Reserve to continue to raise interest rates at least through the end of 2005, and that energy prices will subside somewhat from their recent peak levels. Our expectation is that the pace of 2006 GDP growth will be somewhat lower than in 2005, possibly in the range of 2.5% to 3.0%. We believe default rates over the next year should continue to be well below the historical average. We expect the high yield market to trade within a narrow range of 400 to 425 basis points over U.S. Treasury bonds over the next several quarters, which should enable the high yield market to out-perform other fixed-income sectors over the intermediate term. The Fund maintained its bias towards higher quality credits, with an average rating of B2/B and average price of $101.56 at the end of October. The Fund also remained well-diversified with 230 issuers in 32 industries. MEMBERS Capital Advisors' Fixed-Income Portfolio Management Team - Advisor Shenkman Capital Management, Inc. - Subadvisor 4 HIGH INCOME FUND PERFORMANCE REVIEW CUMULATIVE PERFORMANCE OF $10,000 SINCE INCEPTION(1) [PERFORMANCE GRAPH]
12/29/97 Inception 04/30/98 10/31/98 04/30/99 10/31/99 04/30/00 10/31/00 04/30/01 10/31/01 Class A Shares (includes maximum sales charge)(2) 9,525 9,799 8,974 10,171 9,843 10,085 9,763 9,992 9,574 Class B Shares (includes maximum applicable CDSC)(3) 10,000 9,800 8,962 10,091 9,805 10,114 9,698 10,001 9,571 Lehman Brothers High Yield Bond Index 10,000 10,398 9,790 10,444 10,215 10,223 10,050 10,334 10,035 Merrill Lynch U.S. High Yield Master II Index 10,000 10,346 9,809 10,679 10,359 10,385 10,185 10,453 10,191 04/30/02 10/31/02 04/30/03 10/31/03 04/30/04 10/31/04 04/30/05 10/31/05 Class A Shares (includes maximum sales charge)(2) 10,054 9,606 10,902 11,630 12,113 12,877 12,773 13,244 Class B Shares (includes maximum applicable CDSC)(3) 10,223 9,745 10,947 11,617 12,145 12,862 12,710 13,127 Lehman Brothers High Yield Bond Index 10,701 9,484 11,642 12,687 13,388 14,250 14,261 14,832 Merrill Lynch U.S. High Yield Master II Index 10,818 9,525 11,641 12,678 13,356 14,223 14,224 14,780
(1) This chart compares a $10,000 investment made in the fund on its inception date to a $10,000 investment made in the index. All dividends and capital gains are reinvested. Further information relating to the fund's performance, including expense reimbursements, is contained in the Prospectus and elsewhere in this report. Past performance is not indicative of future performance. Investment return and principal value will fluctuate, so an investor's shares, when redeemed, may be worth more or less than when purchased. Indices are unmanaged and investors cannot invest in them. Index returns do not reflect expenses or sales charges. The graph above and the table below do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. SECTOR ALLOCATION AS A PERCENTAGE OF NET ASSETS Telecommunications 11% Gaming 9% Utilities 8% Health Care 7% Oil and Gas 6% Support Services 4% Aerospace/Defense 4% Chemicals 4% Media - Cable 4% Technology 4% Forestry/Paper 3% Cash and Other Net Assets 3% Printing and Publishing 3% Consumer Products 3% Media - Diversified and Services 3% Media - Broadcasting 2% Packaging 2% Hotels 2% Beverage/Food 2% Non Food and Drug Retailers 2% Building Materials 2% Metals and Mining 2% Leisure and Entertainment 1% Food and Drug Retailers 1% Auto Parts & Equipment 1% General Industrial & Manufacturing 1% Apparel/Textiles 1% Environmental 1% Transportation 1% Building and Construction 1% Restaurants 1% Steel 1%
AVERAGE ANNUAL TOTAL RETURN THROUGH OCTOBER 31, 2005
% RETURN WITHOUT SALES CHARGE % RETURN AFTER SALES CHARGE(4) Since Since 1 Year 3 Years 5 Years Inception(5) 1 Year 3 Years 5 Years Inception(5) ------ ------- ------- ------------ ------ ------- ------- ------------ Class A Shares(2) 2.85% 11.31% 6.29% 4.30% -2.07% 9.50% 5.26% 3.65% Class B Shares(3) 2.06 10.44 5.49 3.53 -2.28 9.47 5.19 3.53 Lehman Brothers High Yield Bond Index 4.08 16.07 8.09 5.15 -- -- -- -- Merrill Lynch U.S. High Yield Master II Index 3.92 15.76 7.73 5.11 -- -- -- --
(2) Maximum Sales Charge is 4.75% for A Shares. (3) Maximum Contingent Deferred Sales Charge is 4.5% for B Shares; reduced after 12 months and eliminated after six years. (4) Assuming Maximum Applicable Sales Charge. (5) Fund commenced investment operations on December 29, 1997. 5 BALANCED FUND PERFORMANCE REVIEW INVESTMENT OBJECTIVE The Balanced Fund seeks a high total return through the combination of income and capital appreciation. PORTFOLIO MANAGEMENT The fund is managed by a team of MEMBERS Capital Advisors' portfolio managers. PRINCIPAL INVESTMENT STRATEGIES The Balanced Fund invests in a broadly diversified array of securities including common stocks, bonds and money market instruments. Stock, bond and cash components will vary, however, reflecting the relative availability of attractively priced stocks and bonds. Generally, however, common stocks will constitute 50% to 70% of the fund's assets, bonds will constitute 25% to 50% of the fund's assets and money market instruments may constitute up to 25% of the fund's assets. The Balanced Fund will invest in the same types of equity securities in which the Capital Appreciation Fund and Growth and Income Fund invest, the same type of bonds in which the Bond Fund invests, and the same types of money market instruments in which the Cash Reserves Fund invests. During the twelve month period ended October 31, 2005, the MEMBERS Balanced Fund returned 5.74% (Class A shares at net asset value) while the Russell 1000(R) Index returned 10.47% and the Merrill Lynch U.S. Domestic Master Index returned 1.26%. Equity performance was helped by a strategic overweight in the energy sector. Performance was also helped by stock selection in the information technology sector as overweight positions, established when Hewlett-Packard and Motorola were poor performers, paid off as both companies showed signs of success in their restructuring efforts. Our position in enterprise software concern Peoplesoft also helped performance in the information technology sector after it was acquired by Oracle. Performance was hurt by stock selection in the consumer staples sector as diversified food company Sara Lee and cosmetics company Estee Lauder both under-performed as their fundamentals deteriorated. Equity performance was also hurt by stock selection in the health care sector as the portfolio's holdings in the health care providers & services subsector under-performed. Bond performance was helped by management's decision to overweight shorter and longer maturities in the portfolio, by good security selection in short-term corporate bonds and commercial mortgage-backed securities, and by management's choice of sector weightings in the corporate bond segment of the portfolio. Performance was hurt by underweights in mortgage-backed and U.S. Agency securities and under-exposure to longer-duration corporate bonds. MEMBERS Capital Advisors' Common Stock and Fixed-Income Portfolio Management Teams -- Advisor 6 BALANCED FUND PERFORMANCE REVIEW CUMULATIVE PERFORMANCE OF $10,000 SINCE INCEPTION(1) [PERFORMANCE GRAPH]
12/29/97 Inception 04/30/98 10/31/98 04/30/99 10/31/99 04/30/00 10/31/00 04/30/01 10/31/01 Class A Shares (includes maximum sales charge(2) 9,425 10,281 10,266 11,736 11,866 12,653 12,893 12,579 11,792 Class B Shares (includes maximum applicable CDSC)(3) 10,000 10,432 10,374 11,420 11,922 12,852 13,053 12,728 11,867 Merrill Lynch U.S. Domestic Master Index 10,000 10,219 10,803 10,870 10,840 11,005 11,634 12,350 13,331 Russell 1000(R) Index 10,000 11,671 11,459 14,041 14,391 15,789 15,694 13,632 11,608 04/30/02 10/31/02 04/30/03 10/31/03 04/30/04 10/31/04 04/30/05 10/31/05 Class A Shares (includes maximum sales charge(2) 11,993 10,897 11,228 12,284 12,792 13,231 13,607 13,991 Class B Shares (includes maximum applicable CDSC)(3) 12,329 11,161 11,357 12,385 12,952 13,347 13,675 14,006 Merrill Lynch U.S. Domestic Master Index 13,311 14,129 14,739 14,825 15,012 15,648 15,817 15,845 Russell 1000(R) Index 11,999 9,913 10,384 12,125 12,866 13,256 13,792 14,644
(1) This chart compares a $10,000 investment made in the fund on its inception date to a $10,000 investment made in the index. All dividends and capital gains are reinvested. Further information relating to the fund's performance, including expense reimbursements, is contained in the Prospectus and elsewhere in this report. Past performance is not indicative of future performance. Investment return and principal value will fluctuate, so an investor's shares, when redeemed, may be worth more-or less than when purchased. Indices are unmanaged and investors cannot invest in them. Index returns do not reflect expenses or sales charges. The graph above and the table below do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. SECTOR ALLOCATION AS A PERCENTAGE OF NET ASSETS [PIE CHART] Cash & Other Net Assets 2% U.S. Government and Agency Obligation 11% Mortgage Backed 9% Corporate Notes and Bonds 9% Commercial Mortgage Backed 2% Asset Backed 2% Common Stocks 65%
AVERAGE ANNUAL TOTAL RETURN THROUGH OCTOBER 31, 2005
% RETURN WITHOUT SALES CHARGE % RETURN AFTER SALES CHARGE(4) Since Since 1 Year 3 Years 5 Years Inception(5) 1 Year 3 Years 5 Years Inception(5) ------ ------- ------- ------------ ------ ------- ------- ------------ Class A Shares(2) 5.74% 8.69% 1.65% 5.17% -0.33% 6.56% 0.45% 4.38% Class B Shares(3) 4.94 7.86 0.89 4.39 0.44 6.85 0.51 4.39 Merrill Lynch U.S. Domestic Master Index 1.26 3.89 6.37 6.04 -- -- -- -- Russell 1000(R) Index 10.47 13.89 -1.38 4.98 -- -- -- --
(2) Maximum Sales Charge is 5.75% for A Shares. (3) Maximum Contingent Deferred Sales Charge is 4.5% for B Shares; reduced after 12 months and eliminated after six years. (4) Assuming Maximum Applicable Sales Charge. (5) Fund commenced investment operations on December 29, 1997. 7 GROWTH AND INCOME FUND PERFORMANCE REVIEW INVESTMENT OBJECTIVE The Growth and Income Fund seeks long-term capital growth with income as a secondary consideration. PORTFOLIO MANAGEMENT The fund is managed by a team of MEMBERS Capital Advisors' portfolio managers. PRINCIPAL INVESTMENT STRATEGIES The Growth and Income Fund will focus on stocks of companies with financial and market strength and a long-term record of financial performance, and will, under normal market conditions, maintain at least 80% of its assets in such stocks. Primarily through ownership of a diversified portfolio of common stocks and securities convertible into common stocks, the fund will seek a rate of return in excess of returns typically available from less variable investment alternatives. The fund generally follows what is known as a "value" approach which generally means that the managers seek to invest in stocks at prices below their perceived intrinsic value as estimated based on fundamental analysis of the issuing company and its prospects. By investing in value stocks, the fund attempts to limit the downside risk over time but may also produce smaller gains than other stock funds if their intrinsic values are not realized by the market or if growth-oriented investments are favored by investors. During the twelve months ended October 31, 2005, the MEMBERS Growth and Income Fund returned 9.56% (Class A shares at net asset value), lagging the Russell 1000(R) Value Index, which returned 11.86%. Performance was hurt by an underweight in the utilities sector while performance was helped by an overweight in the information technology sector. Much of the fund's under-performance versus the Russell 1000(R) Value Index can be attributed to under-performing holdings in the consumer staples sector, which was a strong relative performer during the period. The Altria Group performed well, but the portfolio was significantly underweight in the stock versus the index. Three stocks the fund was overweighted versus the index -- Kimberly-Clark, General Mills and Procter & Gamble -- lagged the sector, and Sara Lee fell sharply after missing earnings estimates. We have reduced our position in Sara Lee on concerns about its ability to execute its restructuring plans. Stock selection in the materials sector also detracted from performance as an overweight of sluggish performer DuPont versus the index and positions in aluminum companies Alcan and Alcoa were hit hard by rising natural gas costs, which rose unexpectedly after the destruction wrought by the Gulf hurricanes. We have eliminated our position in Alcan because we think that upward pressure on natural gas prices may continue to affect the company's fundamentals. The fund's performance was helped by stock selection and positioning in the telecommunications services sector, where Alltel benefited from continuing growth in the wireless sector. We continue to favor mega-cap and high-quality stocks, which have under-performed smaller and low quality stocks for five years. We believe that these stocks should see improved relative performance as a gradually slowing economy and increased competition exert downward pressure on profit margins. In many cases we now find their valuations compelling, and believe the market will eventually reward the competitive and financial strengths of these companies. MEMBERS Capital Advisors' Common Stock Portfolio Management Team -- Advisor 8 GROWTH AND INCOME FUND PERFORMANCE REVIEW CUMULATIVE PERFORMANCE OF $10,000 SINCE INCEPTION(1) [PERFORMANCE GRAPH]
12/29/97 Inception 04/30/98 10/31/98 04/30/99 10/31/99 04/30/00 10/31/00 04/30/01 10/31/01 Class A Shares (includes maximum sales charge(2) 9,425 10,928 10,327 12,910 12,634 13,654 13,506 12,430 10,748 Class B Shares (includes maximum applicable CDSC)(3) 10,000 11,114 10,447 12,287 12,821 13,893 13,682 12,566 10,777 Russell 1000(R) Value Index 10,000 11,429 10,864 13,039 12,659 12,533 13,358 13,339 11,773 04/30/02 10/31/02 04/30/03 10/31/03 04/30/04 10/31/04 04/30/05 10/31/05 Class A Shares (includes maximum sales charge(2) 11,300 9,081 9,286 10,801 11,577 12,041 12,643 13,193 Class B Shares (includes maximum applicable CDSC)(3) 11,609 9,295 9,365 10,861 11,709 12,134 12,695 13,194 Russell 1000(R) Value Index 12,817 10,593 11,150 13,017 14,078 15,028 16,039 16,811
(1) This chart compares a $10,000 investment made in the fund on its inception date to a $10,000 investment made in the index. All dividends and capital gains are reinvested. Further information relating to the fund's performance, including expense reimbursements, is contained in the Prospectus and elsewhere in this report. Past performance is not indicative of future performance. Investment return and principal value will fluctuate, so an investor's shares, when redeemed, may be worth more or less than when purchased. Indices are unmanaged and investors cannot invest in them. Index returns do not reflect expenses or sales charges. The graph above and the table below do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. SECTOR ALLOCATION AS A PERCENTAGE OF NET ASSETS [PIE CHART] Materials 4% Information Technology 11% Consumer Discretionary 10% Health Care 9% Financials 26% Telecommunication Services 4% Utilities 4% Cash & Other Net Assets 1% Industrials 11% Consumer Staples 7% Energy 13%
AVERAGE ANNUAL TOTAL RETURN THROUGH OCTOBER 31, 2005
% RETURN WITHOUT SALES CHARGE % RETURN AFTER SALES CHARGE(4) Since Since 1 Year 3 Years 5 Years Inception(5) 1 Year 3 Years 5 Years Inception(5) ------ ------- ------- ------------ ------ ------- ------- ------------ Class A Shares(2) 9.56% 13.26% -0.47% 4.38% 3.29% 11.05% -1.64% 3.60% Class B Shares(3) 8.73 12.38 -1.22 3.60 4.23 11.45 -1.62 3.60 Russell 1000(R) Value Index 11.86 16.64 4.71 6.85 -- -- -- --
(2) Maximum Sales Charge is 5.75% for A Shares. (3) Maximum Contingent Deferred Sales Charge is 4.5% for B Shares; reduced after 12 months and eliminated after six years. (4) Assuming Maximum Applicable Sales Charge. (5) Fund commenced investment operations on December 29, 1997. 9 CAPITAL APPRECIATION FUND PERFORMANCE REVIEW INVESTMENT OBJECTIVE The Capital Appreciation Fund seeks long-term capital appreciation. PORTFOLIO MANAGEMENT The fund is managed by a team of MEMBERS Capital Advisors' portfolio managers. PRINCIPAL INVESTMENT STRATEGIES The Capital Appreciation Fund invests primarily in common stocks, and will, under normal market conditions, maintain at least 80% of its assets in such securities. The fund seeks stocks that have low market prices relative to their perceived intrinsic value and growth capabilities as estimated based on fundamental analysis of the issuing companies and their prospects. This is sometimes referred to as a "core" or "blend" approach. Relative to the Growth and Income Fund, the Capital Appreciation Fund will seek more earnings growth capability in the stocks it purchases, and will include some smaller, less developed issuers and some companies undergoing more significant changes in their operations or experiencing significant changes in their markets. The fund will diversify its holdings among various industries and among companies within those industries. The combination of these factors introduces greater investment risk than the Growth and Income Fund, but can also provide higher long-term returns than are typically available from less risky investments. The MEMBERS Capital Appreciation Fund returned 6.61% (Class A shares at net asset value) in the twelve month period ended October 31, 2005, under-performing the Russell 1000(R) Index, which returned 10.47%. Performance was helped by a strategic overweight in the energy sector as oil prices remained high and elevated expectations for long-term growth in the demand for oil caused market participants to adjust valuations in the sector upward. Performance was also helped by stock selection in the consumer discretionary sector as restaurant company Brinker International rose on strong operating results from its Chili's and Macaroni Grill franchises and luxury retailer Tiffany appreciated on impressive earnings growth. Performance was hurt by stock selection in the consumer staples sector, where Wal-Mart, Kraft Foods, and Estee Lauder declined after disappointing earnings. Performance was also hurt by stock selection in the health care sector, where medical-device maker Boston Scientific declined in the wake of a recall of its Taxus heart stent and questions about the future growth rate of the market for heart stents. The portfolio's stock selection in and relative weighting of the health care providers and services stocks was also a significant negative contributor to the fund's performance. The portfolio retains a modest overweight in the energy sector as we believe the supply/demand balance for oil will keep money flowing through this area of the economy. We are particularly focused on oil-services and equipment stocks in the belief that political pressure and growing demand will lead major oil companies to boost production capacity over the next several years. We continue to focus on higher-quality stocks -- stocks of companies that have demonstrated consistent earnings and cash flow growth and are in a strong financial position. Higher quality stocks have lagged in the current bull market, and we believe that in many cases they provide very attractive relative value. MEMBERS Capital Advisors Common Stock Portfolio Management Team -- Advisor 10 CAPITAL APPRECIATION FUND PERFORMANCE REVIEW CUMULATIVE PERFORMANCE OF $10,000 SINCE INCEPTION(1) [PERFORMANCE GRAPH]
12/29/97 Inception 04/30/98 10/31/98 04/30/99 10/31/99 04/30/00 10/31/00 04/30/01 10/31/01 Class A Shares (includes maximum sales charge)(2) 9,425 11,057 10,415 12,558 12,945 14,585 15,550 14,708 12,116 Class B Shares (includes maximum applicable CDSC)(3) 10,000 11,261 10,541 12,034 13,153 14,870 15,812 14,940 12,205 Russell 1000(R) Index 10,000 11,671 11,459 14,041 14,391 15,789 15,694 13,632 11,608 04/30/02 10/31/02 04/30/03 10/31/03 04/30/04 10/31/04 04/30/05 10/31/05 Class A Shares (includes maximum sales charge)(2) 12,057 9,142 9,674 11,278 11,801 12,218 12,475 13,026 Class B Shares (includes maximum applicable CDSC)(3) 12,401 9,364 9,779 11,366 11,969 12,341 12,552 13,055 Russell 1000(R) Index 11,999 9,913 10,384 12,125 12,866 13,256 13,792 14,644
(1) This chart compares a $10,000 investment made in the fund on its inception date to a $10,000 investment made in the index. All dividends and capital gains are reinvested. Further information relating to the fund's performance, including expense reimbursements, is contained in the Prospectus and elsewhere in this report. Past performance is not indicative of future performance. Investment return and principal value will fluctuate, so an investor's shares, when redeemed, may be worth more or less than when purchased. Indices are unmanaged and investors cannot invest in them. Index returns do not reflect expenses or sales charges. The graph above and the table below do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. SECTOR ALLOCATION AS A PERCENTAGE OF NET ASSETS [PIE CHART] Materials 3% Information Technology 17% Consumer Staples 9% Consumer Discretionary 11% Financials 19% Telecommunication Services 3% Cash & Other Net Assets 2% Utilities 2% Health Care 12% Industrials 11% Energy 11%
AVERAGE ANNUAL TOTAL RETURN THROUGH OCTOBER 31, 2005
% RETURN WITHOUT SALES CHARGE % RETURN AFTER SALES CHARGE(4) Since Since 1 Year 3 Years 5 Years Inception(5) 1 Year 3 Years 5 Years Inception(5) ------ ------- ------- ------------ ------ ------- ------- ------------ Class A Shares(2) 6.61% 12.53% -3.48% 4.21% 0.44% 10.32% -4.61% 3.43% Class B Shares(3) 5.79 11.71 -4.18 3.46 1.29 10.77 -4.56 3.46 Russell 1000(R) Index 10.47 13.89 -1.38 4.98 -- -- -- --
(2) Maximum Sales Charge is 5.75% for A Shares. (3) Maximum Contingent Deferred Sales Charge is 4.5% for B Shares; reduced after 12 months and eliminated after six years. (4) Assuming Maximum Applicable Sales Charge. (5) Fund commenced investment operations on December 29, 1997. 11 MID-CAP FUND PERFORMANCE REVIEW INVESTMENT OBJECTIVE The Mid-Cap Fund seeks long-term capital appreciation. PORTFOLIO MANAGEMENT The fund is managed by a team of MEMBERS Capital Advisors' portfolio managers, which may use one or more subadvisors under a "manager of managers" approach to make investment decisions for some or all of the assets of this fund. Wellington Management Company, LLP is the only subadvisor currently used by MEMBERS Capital Advisors to manage the assets within the smaller-cap portion of the fund. PRINCIPAL INVESTMENT STRATEGIES The Mid-Cap Fund invests primarily in common stocks of midsize and smaller companies (market capitalization at the time of purchase of less than $12 billion, but more than $1 billion), and will under normal market conditions, maintain at least 80% of its assets in such securities. However, the fund will not automatically sell a stock just because the company's market capitalization has grown beyond $12 billion, or fallen below $1 billion, and such positions may be increased through additional purchases. The fund seeks stocks in this midsize to smaller range that have a low market price relative to their value as estimated based on fundamental analysis of the issuing company and its prospects. This is sometimes referred to as a "value" approach. Relative to both the Growth and Income and Capital Appreciation Funds, the Mid-Cap Fund includes more small, less developed issuers. These midsize and smaller companies often have difficulty competing with larger companies, but the successful ones tend to grow faster than larger companies, using profits to expand rather than to pay dividends. The fund diversifies its holdings among various industries and among companies within those industries. The combination of these factors introduces greater investment risk than the Growth and Income Fund, but can also provide higher long-term returns than are typically available from less risky investments. During the twelve month period ended October 31, 2005, the MEMBERS Mid-Cap Fund returned 13.95% (Class A shares at net asset value), under-performing the Russell MidCap(R) Value Index, which returned 19.50%. Relative performance was helped by a strategic overweight in the energy sector, which was by far the best performing sector in the mid-cap space during the period. Performance was also helped by stock selection in the information technology sector, where the portfolio's holdings in the semiconductors & semiconductor equipment subsector, including Intersil and LSI Logic, out-performed the sector. Electronic device maker Arrow Electronics and enterprise software concern Peoplesoft were also both strong performers as the former saw improving fundamentals and the latter was acquired by Oracle. Performance was hurt by stock selection in the consumer staples sector, where the portfolio's positions in McCormick, Estee Lauder, and Sara Lee under-performed the sector after posting disappointing earnings. Performance was also hurt by stock selection in the health care sector, where the fund's holdings in the health care providers & services subsector significantly lagged the subsector's strong performance during the period. Among the small-cap shares in the portfolio, stock selection was strongest within consumer discretionary, energy and information technology. These positive results were partially offset by weaker stock selection in the health care and materials sectors. Key individual contributors to performance were Vintage Petroleum, Herbalife, Gildan Activewear, and Hibbett Sporting. Detractors from relative performance during the period included NBTY, IPC Holdings, and Yankee Candle. MEMBERS Capital Advisors' Common Stock Portfolio Management Teams -- Advisor Wellington Management Company, LLP -- Subadvisor 12 MID-CAP FUND PERFORMANCE REVIEW CUMULATIVE PERFORMANCE OF $10,000 SINCE INCEPTION(1) [PERFORMANCE GRAPH]
2-28-01 Inception 04/30/01 10/31/01 04/30/02 10/31/02 04/30/03 10/31/03 04/30/04 10/31/04 04/30/05 10/31/05 Class A Shares (includes maximum sales charge)(2) 9,425 9,793 8,935 10,601 8,149 8,630 10,488 11,281 11,733 12,212 13,370 Class B Shares (includes maximum applicable CDSC)(3) 10,000 9,930 9,006 11,160 8,540 8,705 10,560 11,370 11,790 12,330 13,471 Russell Midcap(R) Value Index 10,000 10,258 9,255 11,121 8,980 9,621 11,986 12,981 14,352 15,616 17,151
(1) This chart compares a $10,000 investment made in the fund on its inception date to a $10,000 investment made in the index. All dividends and capital gains are reinvested. Further information relating to the fund's performance, including expense reimbursements, is contained in the Prospectus and elsewhere in this report. Past performance is not indicative of future performance. Investment return and principal value will fluctuate, so an investor's shares, when redeemed, may be worth more or less than when purchased. Indices are unmanaged and investors cannot invest in them. Index returns do not reflect expenses or sales charges. The graph above and the table below do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. SECTOR ALLOCATION AS A PERCENTAGE OF NET ASSETS [PIE CHART] Materials 7% Information technology 9% Industrials 14% Heatlth Care 7% Financials 26% Telecommunication services 1% Utilities 6% Cash & Other Net Assets 2% Consumer Discretionary 12% Consumer Staples 5% Energy 11%
AVERAGE ANNUAL TOTAL RETURN THROUGH OCTOBER 31, 2005
% RETURN WITHOUT SALES CHARGE % RETURN AFTER SALES CHARGE(4) Since Since 1 Year 3 Years Inception(5) 1 Year 3 Years Inception(5) ------ ------- ------------ ------ ------- ------------ Class A Shares(2) 13.95% 17.94% 7.77% 7.39% 15.63% 6.41% Class B Shares(3) 13.07 16.98 6.92 8.57 16.12 6.58 Russell Midcap(R) Value Index 19.50 24.07 12.24 -- -- --
(2) Maximum Sales Charge is 5.75% for A Shares. (3) Maximum Contingent Deferred Sales Charge is 4.5% for B Shares; reduced after 12 months and eliminated after six years. (4) Assuming Maximum Applicable Sales Charge. (5) Fund commenced investment operations on February 28, 2001. 13 MULTI-CAP GROWTH FUND PERFORMANCE REVIEW INVESTMENT OBJECTIVE The Muti-Cap Growth Fund seeks long-term capital appreciation. PORTFOLIO MANAGEMENT The fund is managed by a team of MEMBERS Capital Advisors' portfolio managers, which may use one or more subadvisors under a "manager of managers" approach to make investment decisions for some or all of the assets of this fund. Wellington Management Company, LLP, is the only subadvisor currently used by MEMBERS Capital Advisors to manage the assets of the fund. PRINCIPAL INVESTMENT STRATEGIES The Multi-Cap Growth Fund invests generally in common stocks, securities convertible into common stocks and related equity securities. Under normal market conditions, the fund will maintain at least 80% of its assets in these securities. The fund is managed by a team of portfolio managers of the subadvisor, each with expertise in a specific range of market capitalization. Typically, between 60% to 90% of the fund will be invested in large capitalization companies (generally over $10 billion of market capitalization). The subadvisor may invest up to 25% of the fund in mid capitalization companies (generally between $2 billion and $10 billion of market capitalization) and up to 20% in smaller capitalization companies (generally under $2 billion of market capitalization). The fund seeks securities of growth companies across a broad range of market capitalization, which are companies that may be: - - major enterprises that have demonstrated and are expected to sustain above-average growth or whose rates of earnings growth are anticipated to accelerate because of factors such as superior management, new or unique products, superior market position, changes in demand for the company's products, or changes in the economy or segments of the economy affecting the company; or - - early in their life cycle, but have the potential to become much larger enterprises. The MEMBERS Multi-Cap Growth Fund returned 10.97% (Class A shares at net asset value) during the twelve month period ended October 31, 2005, out-performing the 8.99% gain of the Russell 3000(R) Growth Index. Favorable stock selection produced positive benchmark-relative returns during the twelve month period. Stock selection was strongest within the information technology, industrials and financials sectors. The fund's overweight allocation to the top performing energy sector also contributed positively to performance. Positive relative results were somewhat offset by weak stock selection in health care and consumer discretionary, as well as the fund's underweight position in the health care sector. Key individual contributors to relative performance were Google, Petro-Canada, and Electronic Arts. Internet search and advertising company Google benefited from both a strong secular trend toward increased online advertising and a greater investor appreciation of its exceptional growth dynamics. Petro-Canada advanced on the continued rise in oil prices. Electronic Arts, the largest U.S. publisher of video games, gained as it signed licensing agreements to solidify its competitive position. Positive results were partially offset by Research in Motion, eBay, and XM Satellite Radio. Research in Motion, a wireless email solutions firm, fell as investors saw signs of slowing growth ahead of an increasingly competitive environment. Internet auctioneer eBay declined in response to concerns of slowing growth and increasing competition. Lastly, XM Satellite Radio fell during the first half of the year as investors expressed concerns about the rising cost of adding subscribers as the company reported increased marketing and advertising expenditures. As always, the fund's managers continue to utilize security-specific research to a build the fund one stock at a time. They seek to identify individual companies that possess an explicit sustainable growth advantage or barrier to entry that will enable them to maintain an above average growth rate for an extended period. At the conclusion of the twelve month period, these bottom-up, stock-specific decisions resulted in greater-than-benchmark weights in the financials, information technology, and health care sectors, and underweight positions in consumer staples and consumer discretionary sectors. MEMBERS Capital Advisors' Common Stock Management Team--Advisor Wellington Management Company, LLP--Subadvisor 14 MULTI-CAP GROWTH FUND PERFORMANCE REVIEW CUMULATIVE PERFORMANCE OF $10,000 SINCE INCEPTION(1) [LINE GRAPH]
2-29-00 Inception 04/30/00 10/31/00 04/30/01 10/31/01 04/30/02 10/31/02 Class A Shares (includes maximum sales charge(2) 9,425 8,087 7,417 5,353 4,024 3,949 3,289 Class B Shares (includes maximum applicable CDSC)(3) 10,000 8,194 7,478 5,405 4,051 4,130 3,420 Russell 3000(R) Growth Index 10,000 10,022 9,222 6,840 5,594 5,521 4,491 04/30/03 10/31/03 04/30/04 10/31/04 04/30/05 10/31/05 Class A Shares (includes maximum sales charge(2) 3,450 4,204 4,486 4,552 4,562 5,052 Class B Shares (includes maximum applicable CDSC)(3) 3,473 4,210 4,528 4,577 4,613 5,089 Russell 3000(R) Growth Index 4,692 5,540 5,768 5,736 5,786 6,251
- ----------- (1) This chart compares a $10,000 investment made in the fund on its inception date to a $10,000 investment made in the index. All dividends and capital gains are reinvested. Further information relating to the fund's performance, including expense reimbursements, is contained in the Prospectus and elsewhere in this report. Past performance is not indicative of future performance. Investment return and principal value will fluctuate, so an investor's shares, when redeemed, may be worth more or less than when purchased. Indices are unmanaged and investors cannot invest in them. Index returns do not reflect expenses or sales charges. The graph above and the table below do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. SECTOR ALLOCATION AS A PERCENTAGE OF NET ASSETS [PIE CHART] Information Technology 30% Industrials 13% Heatlth Care 22% Financials 12% Telecommunication Services 1% Cash & Other Net Assets 5% Consumer Discretionary 9% Consumer Staples 2% Energy 6%
AVERAGE ANNUAL TOTAL RETURN THROUGH OCTOBER 31, 2005
% RETURN WITHOUT SALES CHARGE % RETURN AFTER SALES CHARGE(4) Since Since 1 Year 3 Years 5 Years Inception(5) 1 Year 3 Years 5 Years Inception(5) ------ ------- ------- ------------ ------ ------- ------- ------------ Class A Shares(2) 10.97% 15.38% -7.39% -10.41% 4.69% 13.15% -8.48% -11.34% Class B Shares(3) 10.06 14.55 -8.07 -11.07 5.56 13.65 -8.44 -11.23 Russell 3000(R) Growth Index 8.99 11.66 -7.48 -7.95 -- -- -- --
- ----------- (2) Maximum Sales Charge is 5.75% for A Shares. (3) Maximum Contingent Deferred Sales Charge is 4.5% for B Shares; reduced after 12 months and eliminated after six years. (4) Assuming Maximum Applicable Sales Charge. (5) Fund commenced investment operations on February 29, 2000. 15 INTERNATIONAL STOCK FUND PERFORMANCE REVIEW INVESTMENT OBJECTIVE The International Stock Fund seeks long-term growth of capital. PORTFOLIO MANAGEMENT The fund is managed by a team of MEMBERS Capital Advisors' portfolio managers, which may use one or more subadvisors under a "manager of managers" approach to make investment decisions for some or all of the assets of this fund. Lazard Asset Management LLC is the only subadvisor currently used by MEMBERS Capital Advisors to manage the assets of the fund. PRINCIPAL INVESTMENT STRATEGIES Under normal market conditions, the International Stock Fund invests at least 80% of its assets in foreign equity securities. Foreign equity securities are securities that are issued by companies organized or whose principal operations are outside the U.S., are principally traded outside of the U.S., or are quoted or denominated in a foreign currency. Equity securities include common stocks, securities convertible into common stocks, preferred stocks, and other securities representing equity interests such as American Depository Receipts ("ADRs" - receipts typically issued by a U.S. financial institution which evidence ownership of underlying securities of foreign corporate issuers), European Depository Receipts ("EDRs") and Global Depository Receipts ("GDRs"). EDRs and GDRs are receipts evidencing an arrangement with a non-U.S. financial institution similar to that for ADRs and are designed for use in non-U.S. securities markets. The fund may also invest in debt securities, foreign money market instruments, and other income bearing securities as well as forward foreign currency exchange contracts and other derivative securities and contracts. The fund always holds securities of issuers located in at least three countries other than the U.S. The MEMBERS International Stock Fund returned 20.81% (Class A shares at net asset value) during the twelve month period ended October 31, 2005, out-performing the MSCI EAFE Index, which returned 18.59%. The fund benefited from its positions in emerging market and developed market small-cap stocks, which both out-performed developed market stocks during the period. After a strong 2004 year-end rally in international stocks during November and December, the year 2005 began with the markets weakening in January but rebounding in February. International stocks fell again in March and April, due to rising oil prices and signs of slowing economic growth. However, international equities began a sustained rally in May that could be attributed to lower interest rates as ten-year government bond yields hit record lows in Germany, Sweden, and Switzerland. The rally continued through September as investors became more confident that companies' profit forecasts could withstand higher energy prices. Although petroleum prices dipped to pre-Katrina levels in October, natural gas prices surged to a record high because of persistent capacity outages in the aftermath of the Gulf hurricanes. The markets then weakened as inflation worries sent gold prices to a nearly 18-year high. Among developed markets, Japan out-performed as consumer and capital spending have fueled a robust economic rebound. European economies have benefited from a weak euro this year, making their goods more attractive abroad. From a sector perspective, energy, materials and industrials were among the best performers, while telecommunications and technology stocks lagged. The portfolio was hurt by stock selection in financials (particularly banks), industrials, and telecommunications services. Conversely, stock selection in the technology and consumer discretionary sectors contributed to returns. Of the top 10 stocks by weight the most positive contributors were Mitsubishi UJF and Total, while Sony and Nissan were detractors for the period. During November and December of 2004 and through the first three quarters of 2005, international small caps generally out-performed large caps. The portfolio was up solidly for the year in absolute terms when measured in local currency but under-performed the MSCI Small Cap EAFE Index, which posted very strong returns for the third year in a row. Stock selection in health care benefited performance, led by Elekta. Stock selection in Spain also boosted returns, as Abengoa and Indra performed well. Although the portolio's energy stocks posted gains, it under-performed the index in this sector. Stock selection and an overweight position in the consumer discretionary sector detracted from performance. Emerging markets equities experienced a very strong November and finished 2004 with a solid performance in December (in U.S. dollar terms). Returns for the following months were erratic until the third quarter of 2005, which witnessed solid gains in emerging markets equities. The portfolio benefited from good stock selection in consumer staples, financials, and materials. Within consumer staples, HM Sampoerna (Indonesia), the subject of an acquisition, contributed the most to performance. Financials benefited from the good relative performance of Kookmin Bank (South Korea). Caemi and CVRD (both Brazilian) drove out-performance within the materials sector. From a regional perspective, the portfolio's underweight position in Asia, particularly Taiwan, added value. A large weighting in Brazil also boosted returns. Overweight positions in Venezuela, Croatia, and companies CANTV and Pliva detracted from performance. Poor stock selection in health care and China also hurt returns. MEMBERS Capital Advisors' Common Stock Portfolio Management Team--Advisor Lazard Asset Management LLC--Subadvisor 16 INTERNATIONAL STOCK FUND PERFORMANCE REVIEW CUMULATIVE PERFORMANCE OF $10,000 SINCE INCEPTION(1) [LINE GRAPH]
12/29/97 Inception 04/30/98 10/31/98 04/30/99 10/31/99 04/30/00 10/31/00 04/30/01 --------- -------- -------- -------- -------- -------- -------- -------- Class A Shares (includes maximum sales charge)(2) 9,425 11,104 9,764 11,084 11,413 10,981 10,353 9,632 Class B Shares (includes maximum applicable CDSC)(3) 10,000 11,301 9,840 10,916 11,545 11,103 10,413 9,703 Morgan Stanley Capital International Europe, Australasia & Far East Index (MSCI EAFE Index) 10,000 11,659 11,090 12,802 13,681 14,616 13,317 12,270
10/31/01 04/30/02 10/31/02 04/30/03 10/31/03 04/30/04 10/31/04 04/30/05 10/31/05 -------- -------- -------- -------- -------- -------- -------- -------- -------- Class A Shares (includes maximum sales charge)(2) 7,984 9,044 7,646 7,895 9,822 10,942 11,743 12,920 14,187 Class B Shares (includes maximum applicable CDSC)(3) 8,017 9,291 7,826 7,983 9,885 11,062 11,835 12,984 14,202 Morgan Stanley Capital International Europe, Australasia & Far East Index (MSCI EAFE Index) 10,031 10,599 8,734 8,912 11,141 12,543 13,288 14,477 15,758
- ----------- (1) This chart compares a $10,000 investment made in the fund on its inception date to a $10,000 investment made in the index. All dividends and capital gains are reinvested. Further information relating to the fund's performance, including expense reimbursements, is contained in the Prospectus and elsewhere in this report. Past performance is not indicative of future performance. Investment return and principal value will fluctuate, so an investor's shares, when redeemed, may be worth more or less than when purchased. Indices are unmanaged and investors cannot invest in them. Index returns do not reflect expenses or sales charges. The graph above and the table below do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. GEOGRAPHICAL ALLOCATION AS A PERCENTAGE OF NET ASSETS [PIE CHART] Africa 2% Latin America 5% Other Countries 3% United Kingdom 18% Pacific Basin 8% Cash & Other Net Assets 4% Japan 21% Europe (excluding United Kingdom) 39%
AVERAGE ANNUAL TOTAL RETURN THROUGH OCTOBER 31, 2005
% RETURN WITHOUT SALES CHARGE % RETURN AFTER SALES CHARGE(4) Since Since 1 Year 3 Years 5 Years Inception(5) 1 Year 3 Years 5 Years Inception(5) ------ ------- ------- ------------ ------ ------- ------- ------------ Class A Shares(2) 20.81% 22.88% 6.50% 5.35% 13.91% 20.46% 5.26% 4.56% Class B Shares(3) 20.00 21.98 5.71 4.58 15.50 21.19 5.38 4.58 MSCI EAFE Index 18.59 21.74 3.42 5.97 -- -- -- --
- --------- (2) Maximum Sales Charge is 5.75% for A Shares. (3) Maximum Contingent Deferred Sales Charge is 4.5% for B Shares; reduced after 12 months and eliminated after six years. (4) Assuming Maximum Applicable Sales Charge. (5) Fund commenced investment operations on December 29, 1997. 17 CASH RESERVES FUND PORTFOLIO OF INVESTMENTS
Value Par Value (Note 2) - --------- --------- COMMERCIAL PAPER (A) - 66.35% CHEMICALS - 4.00% $ 695,000 E.I. du Pont de Nemours & Co. 3.740%, due 11/15/05 $ 693,989 ---------- CONSUMER STAPLES - 17.15% 375,000 Anheuser Busch, Inc. 3.680%, due 12/16/05 373,275 450,000 Coca-Cola Co. 3.800%, due 11/14/05 449,383 705,000 Nestle Capital Corp. 3.730%, due 12/14/05 701,859 750,000 PepsiCo, Inc. 3.840%, due 11/09/05 749,360 530,000 Procter & Gamble 3.740%, due 12/14/05 527,632 175,000 Procter & Gamble 3.820%, due 12/14/05 174,202 ---------- 2,975,711 ---------- FINANCE - 38.17% 715,000 American Express Credit Corp. 3.570%, due 11/02/05 714,929 690,000 American General Finance Corp. 3.940%, due 12/09/05 687,130 690,000 American Honda Finance 3.900%, due 11/07/05 689,551 200,000 Caterpillar Financial Services Corp. 3.900%, due 11/02/05 199,978 300,000 Caterpillar Financial Services Corp. 3.950%, due 11/21/05 299,342 335,000 CIT Group, Inc. 3.810%, due 11/15/05 334,504 350,000 CIT Group, Inc. 4.080%, due 01/09/06 347,263 700,000 Citigroup Funding, Inc. 3.850%, due 11/28/05 697,979 695,000 General Electric Capital Corp. 3.780%, due 11/15/05 693,978 185,000 Toyota Motor Credit Co. 3.770%, due 11/09/05 184,845 500,000 Toyota Motor Credit Co. 3.770%, due 11/10/05 499,529 645,000 UBS Finance Delaware LLC 3.830%, due 11/14/05 644,108 630,000 Wells Fargo and Co. 4.040%, due 12/01/05 627,879 ---------- 6,621,015 ---------- FOREIGN - 3.01% 525,000 Government of Quebec 3.760%, due 12/19/05 522,368 ---------- RETAIL - 4.02% 700,000 Wal-Mart Stores, Inc. 3.900%, due 11/28/05 697,953 ---------- TOTAL COMMERCIAL PAPER 11,511,036 ---------- ( Cost $11,511,036 ) CORPORATE NOTES AND BONDS - 18.41% FINANCE - 15.52% 475,000 Bank of America Corp. 7.125%, due 09/15/06 486,768 700,000 Goldman Sachs Group, Inc., Series B (G) 3.900%, due 08/01/06 700,354 500,000 HSBC Finance Corp. 3.375%, due 02/21/06 499,552 500,000 Merrill Lynch & Co., Inc., Series B (G) 4.439%, due 04/18/06 500,704 500,000 Morgan Stanley 6.100%, due 04/15/06 504,369 ---------- 2,691,747 ----------
See accompanying Notes to Financial Statements. 18 CASH RESERVES FUND PORTFOLIO OF INVESTMENTS
Value Par Value (Note 2) - --------- ------------ CORPORATE NOTES AND BONDS (CONTINUED) HEALTH CARE - 2.89% $ 500,000 Merck & Co., Inc. (C) 4.726%, due 02/22/06 $ 501,119 ------------ TOTAL CORPORATE NOTES AND BONDS 3,192,866 ------------ (Cost $3,192,866) U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 9.79% FEDERAL FARM CREDIT BANK - 4.03% 700,000 3.750%, due 06/01/06 (G) 699,919 ------------ FEDERAL NATIONAL MORTGAGE ASSOCIATION (A) - 5.76% 500,000 3.640%, due 11/01/05 500,000 500,000 3.790%, due 11/21/05 498,947 ------------ 998,947 ------------ TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS 1,698,866 ------------ (Cost $1,698,866) Shares - ------ INVESTMENT COMPANIES - 5.16% 777,410 J.P. Morgan Prime Money Market Fund 777,410 117,968 SSgA Prime Money Market Fund 117,968 ------------ TOTAL INVESTMENT COMPANIES 895,378 ------------ (Cost $895,378) TOTAL INVESTMENTS - 99.71% 17,298,146 ------------ (Cost $17,298,146**) NET OTHER ASSETS AND LIABILITIES - 0.29% 49,694 ------------ TOTAL NET ASSETS - 100.00% $ 17,347,840 ------------
- ------------- ** Aggregate cost for Federal tax purposes was $ 17,298,146. (A) Rate noted represents annualized yield at time of purchase. (C) Security sold within terms of a private placement memorandum exempt from registration under section 144A of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "qualified institutional investors." The securities have been determined to be liquid under guidelines established by the Board of Trustees. (G) Floating rate note. Date shown is next reset date. See accompanying Notes to Financial Statements. 19 BOND FUND PORTFOLIO OF INVESTMENTS
Value Par Value (Note 2) - --------- ------------ ASSET BACKED - 7.18% $ 73,515 ABSC Long Beach Home Equity Loan Trust, Series 2000-LB1, Class AF5 (M) 8.550%, due 09/21/30 $ 73,328 300,000 Ameriquest Mortgage Securities, Inc., Series 2004-FR1, Class M2 (M) 296,058 860,000 Citibank Credit Card Issuance Trust, Series 2004-FR1, Class M2 2.550%, due 01/20/09 836,886 1,000,000 Countrywide Asset-Backed Certificates, Series 2003-S1, Class A4 (M) 5.009%, due 12/25/32 998,992 560,000 GMAC Mortgage Corp. Loan Trust, Series 2004-HE2, Class M1 (G) 3.950%, due 10/25/33 542,518 494,890 Green Tree Financial Corp., Series 1998-2, Class A6 6.810%, due 12/01/27 502,806 700,000 Green Tree Home Equity Loan Trust, Series 1999-A, Class B1 8.970%, due 11/15/27 728,801 1,500,000 New Century Home Equity Loan Trust, Series 2000-LB1, Class AF5 5.500%, due 11/25/33 1,507,806 1,621,000 Residential Asset Mortgage Products, Inc., Series 2003-RS9, Class AI5 4.990%, due 03/25/31 1,616,153 315,000 Soundview Home Equity Loan Trust, Series 2005-B, Class M6 (M) 6.175%, due 05/25/35 313,819 440,000 Wells Fargo Home Equity Trust, Series 2004-2, Class M8A (C)(G) 7.038%, due 03/25/33 439,978 ------------ TOTAL ASSET BACKED 7,857,145 ------------ ( Cost $7,865,780 ) COMMERCIAL MORTGAGE BACKED - 6.71% 898,307 Bear Stearns Commercial Mortgage Securities, Series 2001-TOP4, Class A1 5.060%, due 11/15/16 899,275 325,000 Bear Stearns Commercial Mortgage Securities, Series 2005-T20, Class F (C)(G) 5.303%, due 10/12/42 313,726 525,000 Bear Stearns Commercial Mortgage Securities, Series 2004-T16, Class A2 3.700%, due 02/13/46 509,705 525,000 Bear Stearns Commercial Mortgage Securities, Series 2004-T16, Class A6 (G) 4.750%, due 02/13/46 503,845 1,200,000 Greenwich Capital Commercial Funding Corp., Series 2004-GG1, Class A7 (G) 5.317%, due 06/10/36 1,202,278 800,000 LB-UBS Commercial Mortgage Trust, Series 2004-C8, Class A6 (G) 4.799%, due 12/15/29 774,236 385,193 Morgan Stanley Capital I, Series 1999-CAM1, Class A3 6.920%, due 03/15/32 392,500 1,150,000 Morgan Stanley Capital I, Series 2004-HQ4, Class A7 4.970%, due 04/14/40 1,123,459 500,000 Morgan Stanley Capital I, Series 2004-T13, Class A3 4.390%, due 09/13/45 478,018 330,000 Multi Security Asset Trust, Series 2005-RR4A, Class J (C)(G) 5.880%, due 11/28/35 283,349 892,392 Wachovia Bank Commercial Mortgage Trust, Series 2003-C6, Class A1 3.364%, due 08/15/35 866,926 ------------ TOTAL COMMERCIAL MORTGAGE BACKED 7,347,317 ------------ (Cost $7,531,961)
See accompanying Notes to Financial Statements. 20 BOND FUND PORTFOLIO OF INVESTMENTS
Value Par Value (Note 2) - --------- ------------ CORPORATE NOTES AND BONDS - 27.29% CAPITAL GOODS - 0.89% $ 1,000,000 Caterpillar Financial Services Corp., Series F, 2.500%, due 10/03/06 $ 979,386 ------------ CONSUMER DISCRETIONARY - 2.93% 750,000 American Association of Retired Persons (C) 7.500%, due 05/01/31 906,634 700,000 Carnival Corp. (D) 3.750%, due 11/15/07 684,558 1,000,000 Cendant Corp. 6.250%, due 01/15/08 1,017,262 575,000 Erac USA Finance Co. (C) 6.700%, due 06/01/34 601,539 ------------ 3,209,993 ------------ CONSUMER STAPLES - 0.67% 750,000 Coca-Cola Enterprises, Inc. (O) 4.375%, due 09/15/09 737,537 ------------ ENERGY - 2.01% 240,000 Amerada Hess Corp. 7.875%, due 10/01/29 285,356 500,000 Burlington Resources Finance Co. (D) 5.700%, due 03/01/07 504,223 400,000 Pemex Project Funding Master Trust 7.375%, due 12/15/14 437,200 450,000 Texaco Capital, Inc. 5.700%, due 12/01/08 450,305 450,000 Valero Energy Corp. 7.500%, due 04/15/32 530,847 ------------ 2,207,931 ------------ FINANCE - 6.16% 500,000 AIG SunAmerica Global Financing XII (C) 5.300%, due 05/30/07 503,271 500,000 American General Finance Corp., Series H 4.625%, due 09/01/10 487,768 500,000 Bear Stearns Cos., Inc. 7.800%, due 08/15/07 525,486 500,000 CIT Group, Inc. 7.375%, due 04/02/07 517,045 500,000 GE Global Insurance Holding Corp. 7.000%, due 02/15/26 503,775 330,000 GE Global Insurance Holding Corp. 7.750%, due 06/15/30 358,463 750,000 Goldman Sachs Group, Inc. (O) 5.700%, due 09/01/12 766,068 750,000 HSBC Finance Corp. 6.500%, due 11/15/08 781,427 500,000 Merrill Lynch & Co., Inc. 7.375%, due 05/15/06 506,905 500,000 U.S. Bank N.A. 6.300%, due 02/04/14 537,628 750,000 Wachovia Corp. 4.950%, due 11/01/06 750,726 500,000 Washington Mutual Finance Corp. 6.250%, due 05/15/06 504,440 ------------ 6,743,002 ------------ FORESTRY/PAPER - 0.34% 325,000 Westvaco Corp. 8.200%, due 01/15/30 371,790 ------------ HEALTH CARE - 1.07% 500,000 Eli Lilly & Co. 6.570%, due 01/01/16 556,270 345,000 Merck & Co., Inc. 6.400%, due 03/01/28 362,694 230,000 Wyeth (O) 6.500%, due 02/01/34 250,177 ------------ 1,169,141 ------------ INDUSTRIALS - 5.06% 240,000 Boeing Co. 8.625%, due 11/15/31 331,734 215,000 D.R. Horton, Inc. (O) 5.250%, due 02/15/15 196,338 500,000 DaimlerChrysler N.A. Holding Corp. 4.750%, due 01/15/08 494,808 1,000,000 Dow Chemical Co. 5.750%, due 12/15/08 1,027,071
See accompanying Notes to Financial Statements. 21 BOND FUND PORTFOLIO OF INVESTMENTS
Value Par Value (Note 2) - --------- ------------ CORPORATE NOTES AND BONDS (CONTINUED) INDUSTRIALS (CONTINUED) $ 800,000 General Electric Co. 5.000%, due 02/01/13 $ 793,263 250,000 General Motors Acceptance Corp. 6.125%, due 08/28/07 246,151 275,000 General Motors Acceptance Corp. 7.250%, due 03/02/11 270,490 325,000 Genetech, Inc. (C) 5.250%, due 07/15/35 305,031 200,000 International Paper Co. 7.875%, due 08/01/06 203,832 215,000 Pulte Homes, Inc. (O) 5.200%, due 02/15/15 199,140 192,000 Raytheon Co. 4.500%, due 11/15/07 190,226 235,000 Waste Management, Inc. 7.125%, due 12/15/17 260,728 500,000 Weyerhaeuser Co. 6.875%, due 12/15/33 508,968 525,000 WM. Wrigley Jr. Co. 4.300%, due 07/15/10 512,960 ------------ 5,540,740 ------------ PIPELINE - 0.35% 345,000 Kinder Morgan, Inc. 7.250%, due 03/01/28 382,406 ------------ REITS - 0.25% 270,000 Simon Property Group, L.P. 5.625%, due 08/15/14 270,898 ------------ TELECOMMUNICATIONS - 1.63% 500,000 Bellsouth Capital Funding 7.875%, due 02/15/30 589,853 250,000 Sprint Capital Corp. 7.125%, due 01/30/06 251,467 200,000 Telephone & Data Systems, Inc. 7.000%, due 08/01/06 202,179 250,000 Verizon Wireless Capital LLC 5.375%, due 12/15/06 251,379 500,000 Vodafone Group PLC (D)(O) 5.000%, due 12/16/13 490,855 ------------ 1,785,733 ------------ TRANSPORTATION - 1.75% 750,000 Burlington Northern Santa Fe Corp. 6.375%, due 12/15/05 751,592 285,000 Burlington Northern Santa Fe Corp. 8.125%, due 04/15/20 353,697 359,000 Norfolk Southern Corp. 5.590%, due 05/17/25 351,852 390,000 Norfolk Southern Corp. 7.050%, due 05/01/37 454,777 ------------ 1,911,918 ------------ UTILITIES - 4.18% 550,000 Constellation Energy Group, Inc. 4.550%, due 06/15/15 503,293 750,000 DTE Energy Co. 6.450%, due 06/01/06 756,991 500,000 Energy East Corp. 8.050%, due 11/15/10 560,109 750,000 Niagara Mohawk Power Corp. 7.750%, due 05/15/06 762,602 285,000 Pacific Gas and Electric Co. 6.050%, due 03/01/34 286,320 250,000 Progress Energy, Inc. 7.750%, due 03/01/31 286,643 600,000 Virginia Electric and Power Co., Series A 5.750%, due 03/31/06 602,498 750,000 Wisconsin Electric Power 6.500%, due 06/01/28 825,119 ------------ 4,583,575 ------------ TOTAL CORPORATE NOTES AND BONDS 29,894,050 ------------ ( Cost $29, 697,660 )
See accompanying Notes to Financial Statements. 22 BOND FUND PORTFOLIO OF INVESTMENTS
Value Par Value (Note 2) - --------- ------------ MORTGAGE BACKED - 28.29% FEDERAL HOME LOAN MORTGAGE CORP. - 5.60% $ 936,602 5.000%, due 05/01/18 Pool # E96322 $ 924,589 10,062 8.000%, due 06/01/30 Pool # C01005 10,718 73,777 7.000%, due 03/01/31 Pool # C48133 77,021 179,804 6.500%, due 01/01/32 Pool # C62333 184,690 386,226 6.000%, due 09/01/32 Pool # C70558 390,451 2,726,211 5.000%, due 07/01/33 Pool # A11325 2,632,676 521,815 6.000%, due 09/01/34 Pool # A26682 527,181 291,517 6.000%, due 10/01/34 Pool # A28439 294,514 282,737 6.000%, due 10/01/34 Pool # A28598 285,644 313,599 6.000%, due 11/01/34 Pool # A28556 316,824 247,038 5.000%, due 04/01/35 Pool # A32315 237,760 263,032 5.000%, due 04/01/35 Pool # A32316 253,152 ------------ 6,135,220 ------------ FEDERAL NATIONAL MORTGAGE ASSOCIATION - 21.53% 1,469,595 4.000%, due 04/01/15 Pool # 255719 1,411,592 71,370 6.000%, due 05/01/16 Pool # 582558 73,028 944,186 5.500%, due 02/01/18 Pool # 673194 951,062 1,179,938 4.500%, due 09/01/18 Pool # 737144 1,142,993 1,100,000 5.000%, due 05/01/20 Pool # 813965 1,085,459 129,726 6.000%, due 05/01/21 Pool # 253847 131,823 FEDERAL NATIONAL MORTGAGE ASSOCIATION (CONTINUED) 841,811 5.500%, due 12/01/22 Pool # 254587 837,125 48,795 7.000%, due 12/01/29 Pool # 762813 51,164 122,182 7.000%, due 11/01/31 Pool # 607515 127,817 176,741 6.000%, due 02/01/32 Pool # 611619 178,485 578,136 6.500%, due 03/01/32 Pool # 631377 594,271 14,679 7.000%, due 04/01/32 Pool # 641518 15,352 56,191 7.000%, due 05/01/32 Pool # 644591 58,783 1,463,499 6.500%, due 06/01/32 Pool # 545691 1,504,342 7,421 7.000%, due 08/01/32 Pool # 641302 7,761 449,866 6.000%, due 12/01/32 Pool # 676552 454,304 2,366,099 5.500%, due 04/01/33 Pool # 690206 2,337,975 483,735 6.000%, due 08/01/33 Pool # 729418 488,128 878,225 6.000%, due 08/01/33 Pool # 729423 886,201 1,162,162 5.000%, due 10/01/33 Pool # 254903 1,122,441 1,902,825 5.500%, due 11/01/33 Pool # 555880 1,880,208 174,669 5.000%, due 05/01/34 Pool # 775604 168,450 439,303 5.000%, due 05/01/34 Pool # 780890 423,663 275,876 5.000%, due 06/01/34 Pool # 255230 266,054 2,359,490 5.500%, due 06/01/34 Pool # 780384 2,329,506 57,377 7.000%, due 07/01/34 Pool # 792636 59,985 465,488 5.500%, due 08/01/34 Pool # 793647 459,572
See accompanying Notes to Financial Statements. 23 BOND FUND PORTFOLIO OF INVESTMENTS
Value Par Value (Note 2) - --------- ------------ MORTGAGE BACKED (CONTINUED) FEDERAL NATIONAL MORTGAGE ASSOCIATION (CONTINUED) $ 1,641,380 5.500%, due 03/01/35 Pool # 815976 $ 1,619,738 1,073,701 5.000%, due 08/01/35 Pool # 829670 1,033,557 853,225 5.000%, due 09/01/35 Pool # 820347 821,323 1,100,000 5.000%, due 10/01/35 Pool # 797669 1,058,872 ------------ 23,581,034 ------------ GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 1.16% 28,844 8.000%, due 10/20/15 Pool # 002995 30,747 1,100,000 5.008%, due 12/16/25, Series 2004-43, Class C(G) 1,089,579 86,264 6.500%, due 02/20/29 Pool # 002714 89,113 62,634 6.500%, due 04/20/31 Pool # 003068 64,616 ------------ 1,274,055 ------------ TOTAL MORTGAGE BACKED 30,990,309 ------------ ( Cost $31,363,259 ) U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 27.85% FEDERAL FARM CREDIT BANK - 0.49% 500,000 5.875%, due 10/03/16 536,185 ------------ FEDERAL HOME LOAN MORTGAGE CORP. - 2.63% 2,500,000 4.875%, due 11/15/13 2,495,498 400,000 4.500%, due 01/15/14 389,259 ------------ 2,884,757 ------------ FEDERAL NATIONAL MORTGAGE ASSOCIATION - 3.33% 1,400,000 4.000%, due 09/02/08 1,371,399 1,095,000 4.625%, due 10/15/14 (O) 1,069,584 1,000,000 6.625%, due 11/15/30 1,203,001 ------------ 3,643,984 ------------ U.S. TREASURY BONDS - 2.48% 1,745,000 6.250%, due 05/15/30 (O) 2,108,450 560,000 5.375%, due 02/15/31 (O) 610,750 ------------ 2,719,200 ------------ U.S. TREASURY NOTES - 18.92% 3,500,000 2.250%, due 04/30/06 (O) 3,466,232 1,450,000 2.000%, due 05/15/06 (O) 1,432,838 2,250,000 2.625%, due 11/15/06 (O) 2,210,362 1,500,000 3.125%, due 01/31/07 (O) 1,476,972 800,000 3.375%, due 02/28/07 (O) 789,531 1,000,000 4.000%, due 08/31/07 (O) 993,125 1,470,000 3.750%, due 05/15/08 (O) 1,446,745 1,280,000 3.250%, due 01/15/09 (O) 1,234,900 1,000,000 3.500%, due 08/15/09 (O) 967,031 1,150,000 3.875%, due 05/15/10 (O) 1,121,879 1,000,000 3.875%, due 07/15/10 (O) 974,844 2,500,000 3.875%, due 09/15/10 (O) 2,434,570 1,250,000 4.000%, due 02/15/15 (O) 1,195,264 1,000,000 4.250%, due 08/15/15 (O) 975,781 ------------ 20,720,074 ------------ TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS 30,504,200 ------------ ( Cost $30,734,257 )
See accompanying Notes to Financial Statements. 24 BOND FUND PORTFOLIO OF INVESTMENTS
Shares (Note 2) ------ ------------- INVESTMENT COMPANIES - 27.24% 3,086,038 SSgA Prime Money Market Fund $ 3,086,038 26,751,508 State Street Navigator Securities Lending Portfolio (I) 26,751,508 ------------- TOTAL INVESTMENT COMPANIES 29,837,546 ------------- ( Cost $29,837,546 ) TOTAL INVESTMENTS - 124.56% 136,430,567 ------------- ( Cost $ 137,030,463** ) NET OTHER ASSETS AND LIABILITIES - (24.56)% (26,900,352) ------------- TOTAL NET ASSETS - 100.00% $ 109,530,215 =============
- ----------- ** Aggregate cost for Federal tax purposes was $137,101,706. (C) Security sold within terms of a private placement memorandum exempt from registration under section 144A of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "qualified institutional investors." The securities have been determined to be liquid under guidelines established by the Board of Trustees. (D) Notes and bonds, issued by foreign entities denominated in U.S. dollars. The aggregate of these securities is 1.53% of total net assets. (G) Floating rate or variable rate note. Rate shown is as of October 31, 2005. (I) Represents investments of cash collateral received in connection with securities lending. (M) Stated interest rate is contingent upon sufficient collateral market value. If collateral market value falls below a stated level, the issuer will either initiate a clean-up call or increase the stated interest rate. (O) All (or portion of security) on loan. PLC Public Limited Company. See accompanying Notes to Financial Statements. 25 HIGH INCOME FUND PORTFOLIO OF INVESTMENTS
Value Par Value (Note 2) - ---------- ------------ CORPORATE NOTES AND BONDS - 93.56% AEROSPACE/DEFENSE - 4.40% $ 100,000 Alliant Techsystems, Inc. 8.500%, due 05/15/11 $ 104,500 185,000 Argo-Tech Corp. 9.250%, due 06/01/11 190,550 250,000 Armor Holdings, Inc. (O) 8.250%, due 08/15/13 270,000 250,000 BE Aerospace, Inc., Series B (O) 8.000%, due 03/01/08 249,375 260,000 BE Aerospace, Inc., Series B (O) 8.875%, due 05/01/11 272,350 300,000 DI Finance/DynCorp. International (C) 9.500%, due 02/15/13 311,250 250,000 DRS Technologies, Inc. (O) 6.875%, due 11/01/13 237,500 200,000 Esterline Technologies Corp. 7.750%, due 06/15/13 208,500 155,000 K&F Acquisition, Inc. (O) 7.750%, due 11/15/14 155,000 205,000 L-3 Communications Corp. 6.125%, due 01/15/14 200,387 145,000 L-3 Communications Corp. 5.875%, due 01/15/15 137,750 200,000 L-3 Communications Corp. (C) 6.375%, due 10/15/15 197,500 150,000 Standard Aero Holdings, Inc. 8.250%, due 09/01/14 142,500 185,000 TransDigm, Inc. 8.375%, due 07/15/11 192,400 ------------ 2,869,562 ------------ APPAREL/TEXTILES - 0.81% 100,000 Levi Strauss & Co. (G) 8.804%, due 04/01/12 99,250 195,000 Levi Strauss & Co. 12.250%, due 12/15/12 214,012 200,000 Warnaco, Inc. 8.875%, due 06/15/13 215,500 ------------ 528,762 ------------ AUTO PARTS & EQUIPMENT - 0.36% 250,000 Navistar International Corp. (O) 7.500%, due 06/15/11 237,500 ------------ BEVERAGE/FOOD - 1.94% 150,000 B&G Foods, Inc. 8.000%, due 10/01/11 151,313 250,000 Del Monte Corp. (C) 6.750%, due 02/15/15 242,812 300,000 Doane Pet Care Co. (C) 10. 625%, due 11/15/15 303,750 150,000 Dole Food Co., Inc. 7.250%, due 06/15/10 147,750 125,000 Michael Foods, Inc. 8.000%, due 11/15/13 126,875 200,000 NBTY, Inc. (C) 7.125%, due 10/01/15 195,000 100,000 Pinnacle Foods Holding Corp. 8.250%, due 12/01/13 92,500 ------------ 1,260,000 ------------ BUILDING AND CONSTRUCTION - 0.69% 65,000 Technical Olympic USA, Inc. 9.000%, due 07/01/10 64,675 40,000 Technical Olympic USA, Inc. 7.500%, due 03/15/11 35,300 135,000 Technical Olympic USA, Inc. 7.500%, due 01/15/15 112,050 250,000 WCI Communities, Inc. 7.875%, due 10/01/13 236,875 ------------ 448,900 ------------ BUILDING MATERIALS - 1.64% 300,000 Goodman Global Holding Co., Inc. (C)(O) 7.875%, due 12/15/12 282,000 500,000 Interface, Inc. 7.300%, due 04/01/08 498,125 172,000 Interface, Inc. 10.375%, due 02/01/10 185,330
See accompanying Notes to Financial Statements. 26 HIGH INCOME FUND PORTFOLIO OF INVESTMENTS
Value Par Value (Note 2) - ---------- ------------ CORPORATE NOTES AND BONDS (CONTINUED) BUILDING MATERIALS (CONTINUED) $ 65,000 Jacuzzi Brands, Inc. (O) 9.625%, due 07/01/10 $ 67,925 40,000 Nortek, Inc. 8.500%, due 09/01/14 38,200 ------------ 1,071,580 ------------ CHEMICALS - 4.17% 120,000 Arco Chemical Co. 9.800%, due 02/01/20 133,800 310,000 Equistar Chemicals L.P./ Equistar Funding Corp. 10. 625%, due 05/01/11 337,900 190,000 Hercules, Inc. 6.750%, due 10/15/29 183,350 288,000 Huntsman International LLC 10.125%, due 07/01/09 296,280 175,000 Lyondell Chemical Co. 9.500%, due 12/15/08 183,312 115,000 Lyondell Chemical Co. 11.125%, due 07/15/12 128,225 60,000 Nalco Co. 7.750%, due 11/15/11 61,275 160,000 Nalco Co. (O) 8.875%, due 11/15/13 163,400 253,000 Nalco Finance Holdings, Inc. (B)(O) 0.000%, due 02/01/14 185,323 150,000 PQ Corp. (C) 7.500%, due 02/15/13 138,000 375,000 Resolution Performance Products, Inc. (O) 13.500%, due 11/15/10 395,156 200,000 Rhodia S.A. (D)(O) 10.250%, due 06/01/10 213,000 95,000 Rockwood Specialties Group, Inc. 10. 625%, due 05/15/11 101,650 200,000 Rockwood Specialties Group, Inc. (C) 7.500%, due 11/15/14 193,000 ------------ 2,713,671 ------------ CONSUMER PRODUCTS - 3.12% 100,000 ACCO Brands Corp. (C) 7.625%, due 08/15/15 95,000 250,000 American Achievement Corp. 8.250%, due 04/01/12 250,000 300,000 Central Garden and Pet Co. 9.125%, due 02/01/13 315,000 150,000 Chattem, Inc. (O) 7.000%, due 03/01/14 151,500 300,000 Church & Dwight Co., Inc. 6.000%, due 12/15/12 291,000 185,000 Da-Lite Screen Co., Inc. 9.500%, due 05/15/11 195,175 150,000 Elizabeth Arden, Inc. 7.750%, due 01/15/14 149,063 100,000 Leslie's Poolmart 7.750%, due 02/01/13 100,000 185,000 Samsonite Corp. 8.875%, due 06/01/11 190,550 300,000 Visant Corp. 7. 625%, due 10/01/12 295,500 ------------ 2,032,788 ------------ ENVIRONMENTAL - 0.81% 315,000 Allied Waste North America 6.500%, due 11/15/10 305,550 60,000 Allied Waste North America 7.875%, due 04/15/13 61,500 150,000 Casella Waste Systems, Inc. 9.750%, due 02/01/13 1 61,062 ------------ 528,112 ------------ FOOD & DRUG RETAILERS - 1.13% 250,000 Rite Aid Corp. 7.125%, due 01/15/07 250,000 310,000 Roundy's, Inc., Series B 8.875%, due 06/15/12 341,738 150,000 Stater Brothers Holdings 8.125%, due 06/15/12 146,625 ------------ 738,363 ------------
See accompanying Notes to Financial Statements. 27 HIGH INCOME FUND PORTFOLIO OF INVESTMENTS
Value Par Value (Note 2) - ---------- ------------ CORPORATE NOTES AND BONDS (CONTINUED) FORESTRY/PAPER - 3.20% $ 150,000 Abitibi-Consolidated, Inc. (D)(G) 7.370%, due 06/15/11 $ 141,000 200,000 Boise Cascade LLC, Series B (G) 7.025%, due 10/15/12 193,000 250,000 Caraustar Industries, Inc. (O) 9.875%, due 04/01/11 245,000 195,000 Catalyst Paper Corp. (D)(O) 8.625%, due 06/15/11 188,175 190,000 Catalyst Paper Corp. (D) 7.375%, due 03/01/14 169,100 300,000 Georgia-Pacific Corp. 9.375%, due 02/01/13 330,750 160,000 Graphic Packaging International Corp. (O) 9.500%, due 08/15/13 143,600 175,000 Jefferson Smurfit Corp., U.S. 8.250%, due 10/01/12 164,938 220,000 JSG Funding PLC (D) 9.625%, due 10/01/12 211,200 300,000 Smurfit Capital Funding PLC 6.750%, due 11/20/05 299,625 ------------ 2,086,388 ------------ GAMING - 8.99% 300,000 American Casino & Entertainment Properties LLC 7.850%, due 02/01/12 307,500 300,000 Ameristar Casinos, Inc. 10.750%, due 02/15/09 319,500 300,000 Aztar Corp. 9.000%, due 08/15/11 317,250 185,000 Aztar Corp. (O) 7.875%, due 06/15/14 190,550 285,000 Boyd Gaming Corp. (O) 6.750%, due 04/15/14 281,081 500,000 CCM Merger, Inc. (C) 8.000%, due 08/01/13 495,000 100,000 Chukchansi Economic Development Authority (C)(G)(H) 8.010%, due 11/15/12 100,450 200,000 Chukchansi Economic Development Authority (C)(H) 8.000%, due 11/15/13 200,600 195,000 Global Cash Access LLC/ Global Cash Finance Corp. 8.750%, due 03/15/12 207,431 300,000 Hard Rock Hotel, Inc. 8.875%, due 06/01/13 319,500 250,000 Herbst Gaming, Inc. 7.000%, due 11/15/14 246,875 100,000 Isle of Capri Casinos, Inc. 9.000%, due 03/15/12 104,000 185,000 Isle of Capri Casinos, Inc. 7.000%, due 03/01/14 174,825 350,000 Kerzner International, Inc. (C) 6.750%, due 10/01/15 332,500 200,000 Las Vegas Sands Corp. (O) 6.375%, due 02/15/15 189,500 155,000 Mandalay Resort Group (O) 9.375%, due 02/15/10 168,950 150,000 Mandalay Resort Group, Series B 10.250%, due 08/01/07 159,750 345,000 MGM Mirage (O) 8.375%, due 02/01/11 364,837 70,000 MGM Mirage (O) 5.875%, due 02/27/14 65,450 300,000 Penn National Gaming, Inc. 8.875%, due 03/15/10 313,125 150,000 Pinnacle Entertainment, Inc. (O) 8.750%, due 10/01/13 153,563 100,000 Scientific Games Corp. 6.250%, due 12/15/12 99,125 200,000 Seneca Gaming Corp. 7.250%, due 05/01/12 204,250 200,000 Seneca Gaming Corp. (C) 7.250%, due 05/01/12 204,250 195,000 Station Casinos, Inc. (O) 6.500%, due 02/01/14 194,513 150,000 Wynn Las Vegas LLC/ Wynn Las Vegas Capital Corp. 6.625%, due 12/01/14 142,875 ------------ 5,857,250 ------------
See accompanying Notes to Financial Statements. 28 HIGH INCOME FUND PORTFOLIO OF INVESTMENTS
Value Par Value (Note 2) - ---------- ------------ CORPORATE NOTES AND BONDS (CONTINUED) GENERAL INDUSTRIAL & MANUFACTURING - 0.99% $ 250,000 Chart Industries, Inc. (C) 9.125%, due 10/15/15 $ 247,500 150,000 Hexcel Corp. 6.750%, due 02/01/15 147,000 250,000 Wesco Distribution, Inc. (C) 7.500%, due 10/15/17 249,688 ------------ 644,188 ------------ HEALTH CARE - 6.78% 100,000 Accellent Corp., Series B 10.000%, due 07/15/12 117,000 300,000 Alderwoods Group, Inc. 7.750%, due 09/15/12 309,750 100,000 Alliance Imaging, Inc. 7.250%, due 12/15/12 87,500 350,000 Carriage Services, Inc. 7.875%, due 01/15/15 358,750 350,000 DaVita, Inc. (O) 7.250%, due 03/15/15 353,500 105,000 Extendicare Health Services, Inc. 6.875%, due 05/01/14 102,375 100,000 Fisher Scientific International, Inc. (C) 6.125%, due 07/01/15 99,250 565,000 HCA, Inc. 7.875%, due 02/01/11 600,337 165,000 HCA, Inc. (O) 6.375%, due 01/15/15 161,905 200,000 IASIS Healthcare LLC/ IASIS Capital Corp. 8.750%, due 06/15/14 205,000 300,000 Omega Healthcare Investors, Inc. 7.000%, due 04/01/14 301,500 250,000 Res-Care, Inc. (C) 7.750%, due 10/15/13 251,250 300,000 Select Medical Corp. 7.625%, due 02/01/15 278,250 200,000 Service Corp. International/U.S. (O) 7.700%, due 04/15/09 208,500 250,000 Sybron Dental Specialties, Inc. 8.125%, due 06/15/12 263,125 150,000 Teva Pharmaceutical Finance LLC, Series A (P) 0.500%, due 02/01/24 164,250 200,000 Triad Hospitals, Inc. 7.000%, due 11/15/13 200,000 220,000 Warner Chilcott Corp. (C) 8.750%, due 02/01/15 202,400 150,000 Watson Pharmaceuticals, Inc. (P) 1.750%, due 03/15/23 148,875 ------------ 4,413,517 ------------ HOTELS - 1.99% 250,000 Felcor Lodging L.P. (G) 7.780%, due 06/01/11 257,187 300,000 Gaylord Entertainment Co. 8.000%, due 11/15/13 312,750 100,000 Host Marriott L.P., Series O 6.375%, due 03/15/15 97,000 200,000 La Quinta Properties, Inc. (O) 7.000%, due 08/15/12 204,000 395,000 Starwood Hotels & Resorts Worldwide, Inc. 7.875%, due 05/01/12 425,613 ------------ 1,296,550 ------------ LEISURE & ENTERTAINMENT - 1.21% 245,000 AMC Entertainment, Inc., Series B (O) 8.625%, due 08/15/12 246,837 150,000 Cinemark, Inc. (B) 0.000%, due 03/15/14 106,125 55,000 Intrawest Corp. (D) 7.500%, due 10/15/13 55,963 200,000 NCL Corp. (C) 11.625%, due 07/15/14 205,500 165,000 Royal Caribbean Cruises, Ltd. (D) 6.875%, due 12/01/13 170,775 ------------ 785,200 ------------
See accompanying Notes to Financial Statements. 29 HIGH INCOME FUND PORTFOLIO OF INVESTMENTS
Value Par Value (Note 2) - ---------- ------------ CORPORATE NOTES AND BONDS (CONTINUED) MEDIA - BROADCASTING - 2.26% $ 260,000 Allbritton Communications Co. 7.750%, due 12/15/12 $ 256,750 250,000 Gray Television, Inc. 9.250%, due 12/15/11 269,375 300,000 LIN Television Corp. (C)(O) 6.500%, due 05/15/13 284,250 150,000 Radio One, Inc. 6.375%, due 02/15/13 146,437 500,000 Sinclair Broadcast Group, Inc. 8.000%, due 03/15/12 513,750 ------------ 1,470,562 ------------ MEDIA - CABLE - 4.08% 150,000 Cablevision Systems Corp., Series B 8.000%, due 04/15/12 143,250 435,000 CSC Holdings, Inc., Series B 8.125%, due 08/15/09 444,787 107,000 DirecTV Holdings LLC/ DirecTV Financing Co. 8.375%, due 03/15/13 115,827 250,000 Echostar Communications Corp. (P) 5.750%, due 05/15/08 244,688 300,000 Echostar DBS Corp. 6.375%, due 10/01/11 291,750 200,000 Insight Communications Co., Inc. (B)(O) 0.000%, due 02/15/11 205,500 200,000 Kabel Deutschland GmbH (C)(D) 10.625%, due 07/01/14 215,250 150,000 Lodgenet Entertainment Corp. 9.500%, due 06/15/13 162,375 250,000 Mediacom Broadband LLC (C) 8.500%, due 10/15/15 230,000 450,000 Telenet Group Holding N.V. (B)(C)(D) 0.000%, due 06/15/14 357,750 250,000 Videotron Ltee (C)(D) 6.375%, due 12/15/15 246,875 ------------ 2, 658,052 ------------ MEDIA - DIVERSIFIED & SERVICES - 3.02% 250,000 Advanstar Communications, Inc. 10.750%, due 08/15/10 276,875 300,000 Advanstar Communications, Inc., Series B 12.000%, due 02/15/11 318,375 250,000 Corus Entertainment, Inc. (D) 8.750%, due 03/01/12 266,875 150,000 Intelsat Bermuda, Ltd. (C)(D)(G) 8.695%, due 01/15/12 151,875 210,000 Intelsat Bermuda, Ltd. (C)(D) 8.625%, due 01/15/15 212,625 100,000 Intelsat, Ltd. (D) 5.250%, due 11/01/08 91,500 125,000 Lamar Media Corp. 7.250%, due 01/01/13 129,688 100,000 Lamar Media Corp. (C) 6.625%, due 08/15/15 100,750 200,000 New Skies Satellites N.V. (D)(G) 8.539%, due 11/01/11 205,000 310,000 PanAmSat Holding Corp. (B)(O) 0.000%, due 11/01/14 211,575 ------------ 1,965,138 ------------ METALS AND MINING - 1.54% 300,000 Alpha Natural Resources LLC/ Alpha Natural Resources Capital Corp. 10.000%, due 06/01/12 330,000 200,000 Foundation PA Coal Co. 7.250%, due 08/01/14 204,500 150,000 Massey Energy Co. 152,250 185,000 Peabody Energy Corp. (O) 5.875%, due 04/15/16 178,987 130,000 Peabody Energy Corp., Series B 6.875%, due 03/15/13 134,225 ------------ 999,962 ------------
See accompanying Notes to Financial Statements. 30 HIGH INCOME FUND PORTFOLIO OF INVESTMENTS
Value Par Value (Note 2) - ---------- ------------ CORPORATE NOTES AND BONDS (CONTINUED) NON FOOD & DRUG RETAILERS - 1.85% $ 300,000 Affinity Group, Inc. 9.000%, due 02/15/12 $ 297,000 300,000 Buhrmann US, Inc. 7.875%, due 03/01/15 296,250 260,000 Couche-Tard U.S. L.P./ Couche-Tard Finance Corp. 7.500%, due 12/15/13 263,900 100,000 GSC Holdings Corp. (C)(G) 7.875%, due 10/01/11 100,000 100,000 GSC Holdings Corp. (C)(O) 8.000%, due 10/01/12 97,250 150,000 Pantry, Inc. 7.750%, due 02/15/14 147,750 ------------ 1,202,150 ------------ OIL & GAS - 4.96% 203,000 Chesapeake Energy Corp. 7.000%, due 08/15/14 211,120 105,000 Chesapeake Energy Corp. 6.375%, due 06/15/15 103,162 285,000 Chesapeake Energy Corp. 6.875%, due 01/15/16 288,563 100,000 Compagnie Generale de Geophysique S.A. (D) 7.500%, due 05/15/15 103,500 250,000 Comstock Resources, Inc. 6.875%, due 03/01/12 246,875 150,000 Denbury Resources, Inc. 7.500%, due 04/01/13 154,500 175,000 Encore Acquisition Co. 6.250%, due 04/15/14 169,750 200,000 Encore Acquisition Co. 6.000%, due 07/15/15 189,000 115,000 Exco Resources, Inc. 7.250%, due 01/15/11 116,150 250,000 Frontier Oil Corp. 6.625%, due 10/01/11 255,000 100,000 Hanover Compressor Co. 8. 625%, due 12/15/10 106,000 190,000 Hanover Compressor Co. 9.000%, due 06/01/14 207,575 150,000 Harvest Operations Corp. 7.875%, due 10/15/11 145,500 135,000 Newfield Exploration Co. 6.625%, due 09/01/14 137,363 190,000 Plains Exploration & Production Co. (O) 7.125%, due 06/15/14 197,125 300,000 Range Resources Corp. 6.375%, due 03/15/15 297,000 100,000 Transmontaigne, Inc. 9.125%, due 06/01/10 99,000 200,000 Whiting Petroleum Corp. 7.250%, due 05/01/13 201,500 ------------ 3,228,683 ------------ PACKAGING - 2.10% 150,000 BWAY Corp. 10.000%, due 10/15/10 156,000 250,000 Crown European Holdings S.A. (D) 9.500%, due 03/01/11 275,000 250,000 Crown European Holdings S.A. (D) 10.875%, due 03/01/13 294,375 190,000 Greif, Inc. (O) 8.875%, due 08/01/12 203,300 190,000 Owens-Brockway Glass Container, Inc. 8.875%, due 02/15/09 198,550 115,000 Owens-Brockway Glass Container, Inc. 8.750%, due 11/15/12 123,338 105,000 Plastipak Holdings, Inc. 10.750%, due 09/01/11 114,975 ------------ 1,365,538 ------------
See accompanying Notes to Financial Statements. 31 HIGH INCOME FUND PORTFOLIO OF INVESTMENTS
Value Par Value (Note 2) - ---------- ------------ CORPORATE NOTES AND BONDS (CONTINUED) PRINTING & PUBLISHING - 3.06% $ 100,000 CBD Media, Inc. 8.625%, due 06/01/11 $ 101,500 153,000 Dex Media East LLC/ Dex Media East Finance Co. 12.125%, due 11/15/12 178, 628 132,000 Dex Media West LLC/ Dex Media Finance Co., Series B 9.875%, due 08/15/13 145,530 665,000 Dex Media, Inc. (B)(O) 0.000%, due 11/15/13 515,375 300,000 Houghton Mifflin Co. 9.875%, due 02/01/13 309,750 200,000 Medianews Group, Inc. 6.875%, due 10/01/13 197,500 100,000 Morris Publishing Group LLC 7.000%, due 08/01/13 98,250 125,000 Primedia, Inc. 8.875%, due 05/15/11 121,875 50,000 Primedia, Inc. 8.000%, due 05/15/13 45,626 250,000 R. H. Donnelley, Inc. 10.875%, due 12/15/12 280,000 ------------ 1,994,034 ------------ RESTAURANTS - 0.32% 200,000 Domino's, Inc. 8.250%, due 07/01/11 207,000 ------------ STEEL - 0.29% 185,000 Valmont Industries, Inc. 6.875%, due 05/01/14 188,700 ------------ SUPPORT SERVICES - 4.46% 150,000 Ahern Rentals, Inc. (C) 9.250%, due 08/15/13 152,250 100,000 Ashtead Holdings PLC (C) 8.625%, due 08/01/15 103,250 150,000 Cardtronics, Inc. (C) 9.250%, due 08/15/13 151,500 450,000 Coinmach Corp. 9.000%, due 02/01/10 454,500 75,000 Corrections Corp. of America 7.500%, due 05/01/11 77,531 200,000 Corrections Corp. of America 6.250%, due 03/15/13 196,750 410,000 Iron Mountain, Inc. 8.625%, due 04/01/13 427,425 70,000 Iron Mountain, Inc. 7.750%, due 01/15/15 69,650 115,000 Knowledge Learning Corp., Inc. (C) 7.750%, due 02/01/15 106,950 350,000 Mac-Gray Corp. (C) 7.625%, due 08/15/15 353,500 500,000 NationsRent Cos., Inc. (O) 9.500%, due 05/01/15 518,750 75,000 Quanta Services, Inc. (P) 4.500%, due 10/01/23 90,094 200,000 Williams Scotsman, Inc. (C) 8.500%, due 10/01/15 203,000 ------------ 2,905,150 ------------ TECHNOLOGY - 3.93% 250,000 Activant Solutions, Inc. (C)(G)(O) 10.054%, due 04/01/10 255,625 300,000 Flextronics International, Ltd. (D) 6.500%, due 05/15/13 300,750 235,000 Lucent Technologies, Inc. (O) 5.500%, due 11/15/08 234,412 450,000 Lucent Technologies, Inc. 6.450%, due 03/15/29 384,750 400,000 Sungard Data Systems, Inc. (C) 9.125%, due 08/15/13 406,000 250,000 Sungard Data Systems, Inc. (C) 10.250%, due 08/15/15 247,813 300,000 Syniverse Technologies, Inc. (C) 7.750%, due 08/15/13 302,250 405,000 Xerox Corp. (O) 7.625%, due 06/15/13 425,250 ------------ 2,556,850 ------------
See accompanying Notes to Financial Statements. 32 HIGH INCOME FUND PORTFOLIO OF INVESTMENTS
Value Par Value (Note 2) - ---------- ------------ CORPORATE NOTES AND BONDS (CONTINUED) TELECOMMUNICATIONS - 10.79% $ 200,000 Alamosa Delaware, Inc. 12.000%, due 07/31/09 $ 219,000 450,000 American Cellular Corp., Series B 10.000%, due 08/01/11 486,000 125,000 American Tower Corp. 7.125%, due 10/15/12 128,906 128,000 AT&T Corp. 9.050%, due 11/15/11 141,440 240,000 Centennial Cellular Operating Co./ Centennial Communications Corp. 10.125%, due 0 6/15/13 268,200 200,000 Cincinnati Bell, Inc. (O) 8.375%, due 01/15/14 194,500 100,000 Cincinnati Bell, Inc. 7.000%, due 02/15/15 94,500 345,000 Citizens Communications Co. 9.250%, due 05/15/11 373,463 195,000 Citizens Communications Co. 6.250%, due 01/15/13 184,762 165,000 Eircom Funding (D) 8.250%, due 08/15/13 177,787 150,000 MCI, Inc. 6.908%, due 05/01/07 151,500 210,000 MCI, Inc. 7. 688%, due 05/01/09 217,612 100,000 MCI, Inc. 8.735%, due 05/01/14 110,750 855,000 Nextel Communications, Inc. Series D 7.375%, due 08/01/15 904,981 280,000 Qwest Capital Funding, Inc. (O) 7.250%, due 02/15/11 267,400 270,000 Qwest Corp. 7.875%, due 09/01/11 282,825 265,000 Qwest Corp. 8.875%, due 03/15/12 290,837 805,000 Qwest Services Corp. 13.500%, due 12/15/10 919,713 100,000 Rogers Wireless, Inc. (D) 6.375%, due 03/01/14 99,750 95,000 Rogers Wireless, Inc. (D) 7.500%, due 03/15/15 101,888 300,000 Rural Cellular Corp. 8.250%, due 03/15/12 312,000 100,000 Rural Cellular Corp., Series B (O) 9.625%, due 05/15/08 101,750 200,000 SBA Telecommunications, Inc./ SBA Communications Corp. (B) 0.000%, due 12/15/11 180,500 260,000 Time Warner Telecom Holdings, Inc. (O) 9.250%, due 02/15/14 260,000 145,000 Time Warner Telecom, Inc. (O) 10.125%, due 02/01/11 147,175 185,000 UbiquiTel Operating Co. 9.875%, due 03/01/11 202,113 215,000 Valor Telecommunications Enterprise LLC/Finance Corp. 7.750%, due 02/15/15 210,431 ------------ 7,029,783 ------------ TRANSPORTATION - 0.71% 150,000 CHC Helicopter Corp. (D) 7.375%, due 05/01/14 150,375 300,000 Gulfmark Offshore, Inc. 7.750%, due 07/15/14 315,000 ------------ 465,375 ------------ UTILITIES - 7.96% 440,000 AES Corp. (C) 8.750%, due 05/15/13 475,200 250,000 Allegheny Energy Supply (C)(O) 8.250%, due 04/15/12 276,250 750,000 Edison Mission Energy 7.730%, due 06/15/09 778,125 100,000 El Paso Corp. 7.625%, due 08/16/07 101,500 200,000 El Paso Corp. (O) 7.000%, due 05/15/11 197,000 245,000 El Paso Natural Gas Co., Series A 7.625%, due 08/01/10 257,109
See accompanying Notes to Financial Statements. 33 HIGH INCOME FUND PORTFOLIO OF INVESTMENTS
Value Par Value (Note 2) - ---------- ------------ CORPORATE NOTES AND BONDS (CONTINUED) UTILITIES (CONTINUED) $ 93,000 Enterprise Products Operating L.P., Series B 6.375%, due 02/01/13 $ 96,282 200,000 Holly Energy Partners L.P. (C) 6.250%, due 03/01/15 194,000 250,000 Inergy LP/Inergy Finance Corp 6.875%, due 12/15/14 236,875 135,000 MarkWest Energy Partners L.P./ MarkWest Energy Finance Corp. (C) 6.875%, due 11/01/14 129,600 360,000 Midwest Generation LLC 8.750%, due 05/01/34 394,200 290,000 Mission Energy Holding Co. 13.500%, due 07/15/08 335,675 35,000 Nevada Power Co. 6.500%, due 04/15/12 35,612 120,000 Nevada Power Co., Series L 5.875%, due 01/15/15 117,703 200,000 Northwestern Corp. 5.875%, due 11/01/14 198,158 100,000 Reliant Energy, Inc. 6.750%, due 12/15/14 93,000 90,000 Sierra Pacific Power Co. 6.250%, due 04/15/12 90,225 110,000 Sierra Pacific Resources 8.625%, due 03/15/14 119,900 250,000 Suburban Propane Partners L.P./ Suburban Energy Finance Corp. 6.875%, due 12/15/13 230,000 350,000 Texas Genco LLC/ Texas Genco Financing Corp. (C) 6.875%, due 12/15/14 374,500 437,000 Williams Cos., Inc. 7.125%, due 09/01/11 450,656 ------------ 5,181,570 ------------ TOTAL CORPORATE NOTES AND BONDS 60,930,878 ------------ ( Cost $60,976,884 ) COMMON STOCKS - 0.00% AUTO PARTS & EQUIPMENT - 0.00% 16 Oxford Automotive, Inc. * (L) - ------------ TOTAL COMMON STOCKS - ------------ ( Cost $3,800 ) PREFERRED STOCKS - 3.22% AUTO PARTS & EQUIPMENT - 0.72% 20,000 General Motors Corp., Series A, 4.500% (P) 466,400 ------------ LEISURE & ENTERTAINMENT - 0.28% 8,000 Six Flags, Inc. 7.25% (O)(P) 184,400 ------------ OIL & GAS - 0.55% 3,500 Chesapeake Energy Corp., 4.500% (O)(P) 359,187 ------------ TELECOMMUNICATIONS - 1.67% 21,000 Crown Castle International Corp., 6.250%, (P) 1,088,325 ------------ TOTAL PREFERRED STOCKS 2,098,312 ------------ ( Cost $2,000,336 ) WARRANTS AND RIGHTS - 0.00% MEDIA - BROADCASTING - 0.00% 55 XM Satellite Radio Holdings, Inc. Exp. 03/03/10 (Exercise Price $49.50) * 2,612 ------------ TOTAL WARRANTS AND RIGHTS 2,612 ------------ ( Cost $0 )
See accompanying Notes to Financial Statements. 34 HIGH INCOME FUND PORTFOLIO OF INVESTMENTS
Value Shares (Note 2) - ---------- ------------ INVESTMENT COMPANIES - 17.04% 781,202 SSgA Prime Money Market Fund (N) $ 781,202 10,313,907 State Street Navigator Securities Lending Portfolio (I) 10,313,907 ------------ TOTAL INVESTMENT COMPANIES 11,095,109 ------------ ( Cost $11,095,109 ) TOTAL INVESTMENTS - 113.82% 74,126,911 ------------ ( Cost $74,076,129** ) NET OTHER ASSETS AND LIABILITIES - (13.82)% (9,000,339) ------------ TOTAL NET ASSETS - 100.00% $ 65,126,572 ============
- ---------- * Non-income producing. ** Aggregate cost for Federal tax purposes was $74,085,023. (B) Represents a security with a specified coupon until a predetermined date, at which time the stated rate is adjusted to a new contract rate. (C) Security sold within terms of a private placement memorandum exempt from registration under section 144A of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "qualified institutional investors." The securities have been determined to be liquid under guidelines established by the Board of Trustees. (D) Notes and bonds, issued by foreign entities, denominated in U.S. dollars. The aggregate of these securities is 6.76% of total net assets. (G) Floating rate or variable rate note. Rate shown is as of October 31, 2005. (H) Security purchased on a delayed delivery or when-issued basis. Rate shown is at issue date. (I) Represents investments of cash collateral received in connection with securities lending. (L) Security valued at fair value using methods determined in good faith by and under the general supervision of the Board of Trustees (see note 2). (N) Security pledged as collateral for when- issue purchase commitments outstanding as of October 31, 2005. (O) All (or portion of security) on loan. (P) Convertible. PLC Public Limited Company. See accompanying Notes to Financial Statements. 35 BALANCED FUND PORTFOLIO OF INVESTMENTS
Value Shares (Note 2) - ---------- -------------- COMMON STOCKS - 64.67% CONSUMER DISCRETIONARY - 7.58% 37,600 Brinker International, Inc. * $ 1,433,312 30,800 Carnival Corp. 1,529,836 19,834 Comcast Corp., Class A * 551,980 42,400 Home Depot, Inc. 1,740,096 50,400 Kohl's Corp. * 2,425,752 23,200 McDonald's Corp. 733,120 33,000 Target Corp. 1,837,770 29,000 Tiffany & Co. 1,142,600 61,400 Time Warner, Inc. 1,094,762 50,100 Viacom, Inc., Class B 1,551,597 63,500 Walt Disney Co. 1,547,495 -------------- 15,588,320 -------------- CONSUMER STAPLES - 6.19% 9,700 Altria Group, Inc. 727,985 50,900 Coca-Cola Co. 2,177,502 26,300 CVS Corp. 641,983 18,200 Estee Lauder Cos., Inc., Class A 603,694 38,100 General Mills, Inc. 1,838,706 23,100 Kraft Foods, Inc., Class A 653,730 41,900 Procter & Gamble Co. 2,345,981 31,100 Sysco Corp. 992,401 58,200 Wal-Mart Stores, Inc. 2,753,442 -------------- 12,735,424 -------------- ENERGY - 7.08% 14,500 Anadarko Petroleum Corp. 1,315,295 8,500 Apache Corp. 542,555 15,364 BP PLC, ADR 1,020,169 25,600 Chevron Corp. 1,460,992 14,200 ConocoPhillips 928,396 32,100 Devon Energy Corp. 1,938,198 57,500 Exxon Mobil Corp. 3,228,050 23,700 Marathon Oil Corp. 1,425,792 20,600 Schlumberger, Ltd. 1,869,862 14,516 Transocean, Inc. * 834,525 -------------- 14,563,834 -------------- FINANCIALS - 13.06% 23,600 ACE, Ltd. 1,229,560 19,400 Allstate Corp. 1,024,126 42,200 American International Group, Inc. 2,734,560 87,192 Bank of America Corp. 3,813,778 5,500 Chubb Corp. 511,335 94,600 Citigroup, Inc. 4,330,788 15,000 Fifth Third Bancorp 602,550 18,700 Freddie Mac 1,147,245 10,900 Goldman Sachs Group, Inc. 1,377,433 47,902 J.P. Morgan Chase & Co. 1,754,171 18,900 Marsh & McLennan Cos., Inc. 550,935 14,400 Metlife, Inc. 711,504 29,900 Morgan Stanley 1,626,859 36,400 National City Corp. 1,173,172 16,600 SunTrust Banks, Inc. 1,203,168 36,700 Wells Fargo & Co. 2,209,340 13,600 XL Capital, Ltd., Class A 871,216 -------------- 26,871,740 -------------- HEALTH CARE - 8.04% 36,900 Abbott Laboratories 1,588,545 48,100 Applera Corp. - Applied Biosystems Group 1,167,387 34,800 Baxter International, Inc. 1,330,404 43,000 Bristol-Myers Squibb Co. 910,310 18,600 Community Health Systems, Inc. * 690,246 11,300 Genzyme Corp. * 816,990 28,800 GlaxoSmithKline PLC, ADR 1,497,312 31,200 Health Management Associates, Inc., Class A 667,992 3,500 Hospira, Inc. * 139,475 23,700 IMS Health, Inc. 550,551 35,400 Johnson & Johnson 2,216,748 20,800 Medimmune, Inc. * 727,584 13,400 Merck & Co., Inc. 378,148 70,862 Pfizer, Inc. 1,540,540 9,000 Triad Hospitals, Inc. * 370,170 43,900 Wyeth 1,956,184 -------------- 16,548,586 --------------
See accompanying Notes to Financial Statements. 36 BALANCED FUND PORTFOLIO OF INVESTMENTS
Value Shares (Note 2) - ---------- -------------- COMMON STOCKS (CONTINUED) INDUSTRIALS - 7.98% 9,000 3M Co. $ 683,820 19,300 Burlington Northern Santa Fe Corp. 1,197,758 18,000 Dover Corp. 701,640 7,300 Emerson Electric Co. 507,715 15,100 FedEx Corp. 1,388,143 162,000 General Electric Co. 5,493,420 28,100 Honeywell International, Inc. 961,020 19,200 Illinois Tool Works, Inc. 1,627,392 24,000 Tyco International, Ltd. 633,360 37,200 United Technologies Corp. 1,907,616 44,500 Waste Management, Inc. 1,313,195 -------------- 16,415,079 -------------- INFORMATION TECHNOLOGY - 8.98% 51,400 Applied Materials, Inc. 841,932 39,000 Celestica, Inc. * 372,840 66,500 Cisco Systems, Inc. * 1,160,425 35,100 Computer Sciences Corp. * 1,798,875 34,700 Dell, Inc. * 1,106,236 56,300 EMC Corp./Massachusetts * 785,948 28,865 First Data Corp. 1,167,590 9,473 Freescale Semiconductor, Inc., Class B * 226,215 51,100 Hewlett-Packard Co. 1,432,844 69,700 Intel Corp. 1,637,950 25,700 International Business Machines Corp. 2,104,316 14,038 Koninklijke Philips Electronics N.V. 367,234 39,200 Micron Technology, Inc. (O) * 509,208 73,100 Microsoft Corp. 1,878,670 69,600 Motorola, Inc. 1,542,336 15,959 Symantec Corp. * 380,622 40,800 Texas Instruments, Inc. 1,164,840 -------------- 18,478,081 -------------- MATERIALS - 1.99% 19,900 Alcoa, Inc. 483,371 30,600 E.I. du Pont de Nemours & Co. 1,275,714 22,200 Georgia-Pacific Group 722,166 37,100 Rohm and Haas Co. 1,614,963 -------------- 4,096,214 -------------- TELECOMMUNICATION SERVICES - 1.99% 15,100 Alltell Corp. 934,086 16,300 BellSouth Corp. 424,126 36,500 SBC Communications, Inc. 870,525 35,000 Sprint Nextel Corp. 815,850 33,120 Verizon Communications, Inc. 1,043,611 -------------- 4,088,198 -------------- UTILITIES - 1.78% 32,600 AES Corp. * 518,014 22,000 Consolidated Edison, Inc. (O) 1,001,000 9,200 Dominion Resources, Inc. 699,936 33,500 FPL Group, Inc. 1,442,510 -------------- 3,661,460 -------------- TOTAL COMMON STOCKS 133,046,936 ( Cost $119,829,185 ) --------------
Par Value - ---------- ASSET BACKED - 1.87% $ 113,614 ABSC Long Beach Home Equity Loan Trust, Series 2000-LB1, Class AF5 (M) 8.550%, due 09/21/30 113,325 500,000 ABSC Manufactured Housing Contract Series 2004-OK1, Class A4 (C) 5.019%, due 04/16/30 330,460 500,000 Ameriquest Mortgage Securities, Inc. Series 2004-FR1, Class M2 (M) 5.207%, due 05/25/34 493,429
See accompanying Notes to Financial Statements. 37 BALANCED FUND PORTFOLIO OF INVESTMENTS
Value Par Value (Note 2) - ---------- -------------- ASSET BACKED (CONTINUED) $ 340,000 Citibank Credit Card Issuance Trust, Series 2004-A1, Class A1 2.550%, due 01/20/09 $ 330,862 320,000 GMAC Mortgage Corp. Loan Trust, Series 2004-HE2, Class M1 (G) 3.950%, due 10/25/33 310,010 485,314 Green Tree Financial Corp., Series 1996-1, Class M1 7.000%, due 03/15/27 476,101 300,027 Green Tree Financial Corp., Series 1998-2, Class A6 6.810%, due 12/01/27 304,826 500,000 Green Tree Home Equity Loan Trust, Series 1999-A, Class B1 8.970%, due 11/15/27 520,573 500,000 Residential Asset Mortgage Products, Inc., Series 2003-RS9, Class A15 4.990%, due 03/25/31 498,505 200,000 Soundview Home Equity Loan Trust, Series 2005-B, Class M6 (M) 6.175%, due 05/25/35 199,250 270,000 Wells Fargo Home Equity Trust, Series 2004-2, Class M8A (C)(G) 7.038%, due 03/25/33 269,986 -------------- TOTAL ASSET BACKED 3,847,327 ( Cost $119,829,185 ) -------------- COMMERCIAL MORTGAGE BACKED - 1.93% 546,796 Bear Stearns Commercial Mortgage Securities, Series 2001-TOP4, Class A1 5.060%, due 11/15/16 547,385 200,000 Bear Stearns Commercial Mortgage Securities, Series 2005-T20, Class F (C)(G) 5.303%, due 10/12/42 193,063 350,000 Bear Stearns Commercial Mortgage Securities, Series 2004-T16, Class A2 3.700%, due 02/13/46 339,803 350,000 Bear Stearns Commercial Mortgage Securities, Series 2004-T16, Class A6 (G) 4.750%, due 02/13/46 335,897 400,000 Greenwich Capital Commercial Funding Corp., Series 2004-GG1, Class A7 (G) 5.317%, due 06/10/36 400,759 400,000 LB-UBS Commercial Mortgage Trust, Series 2004-C8, Class A6 (G) 4.799%, due 12/15/29 387,118 385,193 Morgan Stanley Capital I, Series 1999-CAM1, Class A3 6.920%, due 03/15/32 392,500 700,000 Morgan Stanley Capital I, Series 2004-HQ4, Class A7 4.970%, due 04/14/40 683,844 200,000 Multi Security Asset Trust, Series 2005-RR4A, Class J (C) (G) 5.880%, due 11/28/35 171,727 525,391 Wachovia Bank Commercial Mortgage Trust, Series 2003-C6, Class A1 3.364%, due 08/15/35 510,398 -------------- TOTAL COMMERCIAL MORTGAGE BACKED 3,962,494 ( Cost $4,053,878 ) -------------- CORPORATE NOTES AND BONDS - 8.70% CABLE - 0.18% 350,000 Comcast Cable Communications 6.875%, due 06/15/09 368,288 -------------- CAPITAL GOODS - 0.24% 500,000 Caterpillar Financial Services Corp., Series F 2.500%, due 10/03/06 489,693 --------------
See accompanying Notes to Financial Statements. 38 BALANCED FUND PORTFOLIO OF INVESTMENTS
Value Par Value (Note 2) - ---------- -------------- CORPORATE NOTES AND BONDS (CONTINUED) CONSUMER DISCRETIONARY - 1.09% $ 750,000 American Association of Retired Persons (C) 7.500%, due 05/01/31 $ 906,634 500,000 Carnival Corp. (D)(O) 3.750%, due 11/15/07 488,970 500,000 Cendant Corp. 6.250%, due 01/15/08 508,631 325,000 Erac USA Finance Co. (C) 6.700%, due 06/01/34 340,000 -------------- 2,244,235 -------------- CONSUMER STAPLES - 0.19% 400,000 Safeway, Inc. (O) 4.125%, due 11/01/08 387,324 -------------- ENERGY - 0.44% 150,000 Amerada Hess Corp. (O) 7.875%, due 10/01/29 178,348 250,000 Pemex Project Funding Master Trust (O) 7.375%, due 12/15/14 273,250 450,000 Texaco Capital, Inc. 5.700%, due 12/01/08 450,305 -------------- 901,903 -------------- FINANCE - 1.66% 500,000 American General Finance Corp., Series H 4.625%, due 09/01/10 487,768 500,000 Bear Stearns Cos., Inc. 7.800%, due 08/15/07 525,486 500,000 CIT Group, Inc. (O) 7.375%, due 04/02/07 517,045 350,000 GE Global Insurance Holding Corp. 7.000%, due 02/15/26 352,642 205,000 GE Global Insurance Holding Corp. (O) 7.750%, due 06/15/30 222,682 250,000 HSBC Finance Corp. (O) 6.500%, due 11/15/08 260,475 500,000 Merrill Lynch & Co., Inc. 7.375%, due 05/15/06 506,905 500,000 U.S. Bank N.A. 6.300%, due 02/04/14 537,628 -------------- 3,410,631 -------------- FORESTRY/PAPER - 0.10% 175,000 Westvaco Corp. 8.200%, due 01/15/30 200,195 -------------- HEALTH CARE - 0.34% 300,000 Eli Lilly & Co. 6.570%, due 01/01/16 333,762 205,000 Merck & Co., Inc. 6.400%, due 03/01/28 215,514 150,000 Wyeth (O) 6.500%, due 02/01/34 163,159 -------------- 712,435 -------------- INDUSTRIALS - 0.80% 150,000 Boeing Co. 8.625%, due 11/15/31 207,333 130,000 D.R. Horton, Inc. (O) 5.250%, due 02/15/15 118,716 250,000 Ford Motor Credit Co. 5.800%, due 01/12/09 228,963 150,000 General Motors Acceptance Corp. (O) 6.125%, due 08/28/07 147,691 165,000 General Motors Acceptance Corp. 7.250%, due 03/02/11 162,294 195,000 Genetech, Inc. (C) 5.250%, due 07/15/35 183,019 135,000 Pulte Homes, Inc. (O) 5.200%, due 02/15/15 125,041 150,000 Waste Management, Inc. 7.125%, due 12/15/17 166,422 310,000 WM. Wrigley Jr. Co. (O) 4.300%, due 07/15/10 302,891 -------------- 1,642,370 -------------- PIPELINE - 0.11% 205,000 Kinder Morgan, Inc. (O) 7.250%, due 03/01/28 227,227 --------------
See accompanying Notes to Financial Statements. 39 BALANCED FUND PORTFOLIO OF INVESTMENTS
Value Par Value (Note 2) - ---------- -------------- CORPORATE NOTES AND BONDS (CONTINUED) REITS - 0.07% $ 140,000 Simon Property Group, LP (O) 5.625%, due 08/15/14 $ 140,466 -------------- TELECOMMUNICATIONS - 0.91% 500,000 Bellsouth Capital Funding (O) 7.875%, due 02/15/30 589,853 250,000 Sprint Capital Corp. 7.125%, due 01/30/06 251,467 537,000 Telephone & Data Systems, Inc. 7.000%, due 08/01/06 542,851 500,000 Verizon Wireless Capital LLC (O) 5.375%, due 12/15/06 502,759 -------------- 1,886,930 -------------- TRANSPORTATION - 0.66% 600,000 Burlington Northern Santa Fe Corp. 6.375%, due 12/15/05 601,274 175,000 Burlington Northern Santa Fe Corp. 8.125%, due 04/15/20 217,182 239,000 Norfolk Southern Corp. 5.590%, due 05/17/25 234,241 260,000 Norfolk Southern Corp. 7.050%, due 05/01/37 303,185 -------------- 1,355,882 -------------- UTILITIES - 1.91% 375,000 Constellation Energy Group, Inc. 4.550%, due 06/15/15 343,154 500,000 DTE Energy Co. 6.450%, due 06/01/06 504,661 500,000 Energy East Corp. 8.050%, due 11/15/10 560,108 750,000 Niagara Mohawk Power Corp. 7.750%, due 05/15/06 762,601 175,000 Pacific Gas and Electric Co. (O) 6.050%, due 03/01/34 175,811 350,000 Progress Energy, Inc. (O) 7.750%, due 03/01/31 401,301 350,000 Virginia Electric and Power Co., Series A (O) 5.750%, due 03/31/06 351,457 750,000 Wisconsin Electric Power 6.500%, due 06/01/28 825,119 -------------- 3,924,212 -------------- TOTAL CORPORATE NOTES AND BONDS 17,891,791 ( Cost $17,674,975 ) -------------- MORTGAGE BACKED - 9.23% FEDERAL HOME LOAN MORTGAGE CORP - 1.62% 18,614 8.000%, due 06/01/30 Pool # C01005 19,828 269,706 6.500%, due 01/01/32 Pool # C62333 277,036 1,947,294 5.000%, due 07/01/33 Pool # A11325 1,880,483 315,836 6.000%, due 09/01/34 Pool # A26682 319,083 171,330 6.000%, due 10/01/34 Pool # A28439 173,092 166,170 6.000%, due 10/01/34 Pool # A28598 167,879 184,308 6.000%, due 11/01/34 Pool # A28556 186,204 163,045 5.000%, due 04/01/35 Pool # A32315 156,921 148,886 5.000%, due 04/01/35 Pool # A32316 143,293 -------------- 3,323,819 -------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION - 7.20% 528,136 4.000%, due 04/01/15 Pool # 255719 507,291 107,055 6.000%, due 05/01/16 Pool # 582558 109,542
See accompanying Notes to Financial Statements. 40 BALANCED FUND PORTFOLIO OF INVESTMENTS
Value Par Value (Note 2) - ---------- -------------- MORTGAGE BACKED (CONTINUED) FEDERAL NATIONAL MORTGAGE ASSOCIATION (CONTINUED) $1,080,731 5.000%, due 12/01/17 Pool # 672243 $ 1,067,261 1,179,938 4.500%, due 09/01/18 Pool # 737144 1,142,993 900,000 5.000%, due 05/01/20 Pool # 813965 888,103 181,617 6.000%, due 05/01/21 Pool # 253847 184,552 31,051 7.000%, due 12/01/29 Pool # 762813 32,559 122,182 7.000%, due 11/01/31 Pool # 607515 127,817 117,827 6.000%, due 02/01/32 Pool # 611619 118,990 89,905 7.000%, due 05/01/32 Pool # 644591 94,052 702,480 6.500%, due 06/01/32 Pool # 545691 722,084 5,301 7.000%, due 08/01/32 Pool # 641302 5,544 1,598,863 6.000%, due 08/01/33 Pool # 729413 1,613,384 778,660 6.000%, due 08/01/33 Pool # 729418 785,731 873,587 5.500%, due 10/01/33 Pool # 254904 863,204 2,537,100 5.500%, due 11/01/33 Pool # 555880 2,506,943 29,790 5.000%, due 05/01/34 Pool # 782214 28,729 675,086 5.000%, due 06/01/34 Pool # 255230 651,050 36,065 7.000%, due 07/01/34 Pool # 792636 37,704 284,716 5.500%, due 08/01/34 Pool # 793647 281,098 1,007,533 5.500%, due 03/01/35 Pool # 815976 994,248 624,245 5.000%, due 08/01/35 Pool # 829670 600,905 508,941 5.000%, due 09/01/35 Pool # 820347 489,912 1,000,000 5.000%, due 10/01/35 Pool # 797669 962,611 -------------- 14,816,307 -------------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - .41% 18,867 8.000%, due 10/20/15 Pool # 002995 20,112 600,000 5.008%, due 12/16/25 Series 2004-43, Class C(G) 594,316 120,770 6.500%, due 02/20/29 Pool # 002714 124,758 104,390 6.500%, due 04/20/31 Pool # 003068 107,692 -------------- 846,878 -------------- TOTAL MORTGAGE BACKED 18,987,004 ( Cost $19,282,238 ) -------------- U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 11.11% FEDERAL FARM CREDIT BANK - 0.52% 1,000,000 5.875%, due 10/03/16 1,072,370 -------------- FEDERAL HOME LOAN MORTGAGE CORP. - 0.35% 750,000 4.500%, due 01/15/14 729,860 -------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION - 1.10% 600,000 3.800%, due 01/18/08 588,376 525,000 4.000%, due 09/02/08 514,275 500,000 5.250%, due 08/01/12 503,699 675,000 4.625%, due 10/15/14 (O) 659,333 -------------- 2,265,683 --------------
See accompanying Notes to Financial Statements. 41 BALANCED FUND PORTFOLIO OF INVESTMENTS
Value Par Value (Note 2) - ---------- -------------- U.S. GOVERNMENT AND AGENCY OBLIGATIONS (CONTINUED) U.S. TREASURY BONDS - 1.33% $ 1,360,000 6.250%, due 05/15/30 (O) $ 1,643,262 1,000,000 5.375%, due 02/15/31 (O) 1,090, 625 -------------- 2,733,887 -------------- U.S. TREASURY NOTES - 7.81% 560,000 1.500%, due 03/31/06 (O) 554,006 3,685,000 2.000%, due 05/15/06 (O) 3,641,384 1,400,000 3.125%, due 01/31/07 (O) 1,378,507 800,000 3.375%, due 02/28/07 (O) 789,531 700,000 2.750%, due 08/15/07 (O) 680,422 200,000 4.000%, due 08/31/07 (O) 198,625 2,300,000 2.625%, due 05/15/08 (O) 2,202,519 1,410,000 3.000%, due 02/15/09 (O) 1,348,313 200,000 3.500%, due 08/15/09 (O) 193,406 825,000 3.875%, due 05/15/10 (O) 804,826 650,000 3.875%, due 07/15/10 (O) 633,649 1,350,000 3.875%, due 09/15/10 (O) 1,314,668 880,000 4.000%, due 02/15/14 (O) 845,660 725,000 4.125%, due 05/15/15 (O) 699,625 800,000 4.250%, due 08/15/15 (O) 780,625 -------------- 16,065,766 -------------- TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS 22,867,566 ( Cost $23,041,040 ) --------------
Value Shares (Note 2) - ---------- -------------- INVESTMENT COMPANIES - 15.05% 1 J.P. Morgan Prime Money Market Fund 1 5,616,104 SSgA Prime Money Market Fund 5,616,104 25,334,344 State Street Navigator Securities Lending Portfolio (I) 25,334,344 -------------- TOTAL INVESTMENT COMPANIES 30,950,449 (Cost $30,950,449 ) -------------- TOTAL INVESTMENTS - 112.56% $ 231,553,567 (Cost $218,826,788** ) -------------- NET OTHER ASSETS AND LIABILITIES - (12.56)% (25,838,437) -------------- TOTAL NET ASSETS - 100.00% $ 205,715,130 ==============
- ----------------- * Non-income producing. ** Aggregate cost for Federal tax purposes was $218,997,611. (C) Security sold within terms of a private placement memorandum exempt from registration under section 144A of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "qualified institutional investors." The securities have been determined to be liquid under guidelines established by the Board of Trustees. (D) Notes and bonds, issued by foreign entities, of these securities is 2.38% of net assets. (G) Floating rate or variable rate note. Rate shown is as of October 31, 2005. (I) Represents investments of cash collateral received in connection with securities lending. (M) Stated interest rate is contingent upon sufficient collateral market value. If collateral market value falls below the stated level, the issuer will either initiate a clean-up call or increase the stated interest rate. (O) All (or portion of security) on loan. ADR American Depository Receipt. PLC Public Limited Company. See accompanying Notes to Financial Statements. 42 GROWTH AND INCOME FUND PORTFOLIO OF INVESTMENTS
Value Shares (Note 2) - ---------- -------------- COMMON STOCKS - 98.75% CONSUMER DISCRETIONARY - 10.23% 26,600 Belo Corp., Class A $ 574,560 41,791 Comcast Corp., Class A * 1,163,043 84,200 Home Depot, Inc. 3,455,568 82,100 McDonald's Corp. 2,594,360 35,000 Newell Rubbermaid, Inc. 804,650 59,000 Target Corp. 3,285,710 107,100 Time Warner, Inc. 1,909,593 68,400 Viacom, Inc., Class B 2,118,348 93,600 Walt Disney Co. 2,281,032 -------------- 18,186,864 -------------- CONSUMER STAPLES - 6.79% 32,500 Altria Group, Inc. 2,439,125 21,500 Coca-Cola Co. 919,770 69,800 General Mills, Inc. (O) 3,368,548 27,300 Kimberly-Clark Corp. 1,551,732 21,400 Procter & Gamble Co. 1,198,186 145,700 Sara Lee Corp. 2,600,745 -------------- 12,078,106 -------------- ENERGY - 13.18% 18,000 Anadarko Petroleum Corp. 1,632,780 19,700 Apache Corp. 1,257,451 24,606 BP PLC, ADR 1,633,839 57,466 Chevron Corp. 3,279,584 50,600 ConocoPhillips 3,308,228 18,200 Cooper Cameron Corp. * 1,341,886 42,100 Devon Energy Corp. 2,541,998 97,200 Exxon Mobil Corp. 5,456,808 17,800 Schlumberger, Ltd. 1,615,706 23,852 Transocean, Inc. * 1,371,251 -------------- 23,439,531 -------------- FINANCIALS - 25.64% 85,000 Allstate Corp. 4,487,150 21,000 American International Group, Inc. 1,360,800 120,184 Bank of America Corp. 5,256,848 5,000 Bear Stearns Cos., Inc. 529,000 10 Berkshire Hathaway, Inc., Class A (O) * 859,000 147,966 Citigroup, Inc. 6,773,884 19,100 Equity Residential, REIT 749,675 20,000 Freddie Mac 1,227,000 88,268 J.P. Morgan Chase & Co. 3,232,374 12,600 Marsh & McLennan Cos., Inc. 367,290 58,400 Morgan Stanley 3,177,544 57,100 National City Corp. 1,840,333 7,100 Principal Financial Group 352,373 56,700 Prudential Financial, Inc. 4,127,193 20,000 St. Paul Travelers Cos., Inc. 900,600 27,700 SunTrust Banks, Inc. 2,007,696 41,300 U.S. Bancorp 1,221,654 66,000 Wachovia Corp. 3,334,320 56,400 Wells Fargo & Co. 3,395,280 6,000 XL Capital, Ltd., Class A 384,360 -------------- 45,584,374 -------------- HEALTH CARE - 8.52% 35,300 Abbott Laboratories 1,519,665 77,600 Baxter International, Inc. 2,966,648 21,100 Community Health Systems, Inc. (O) * 783,021 46,100 GlaxoSmithKline PLC, ADR 2,396,739
See accompanying Notes to Financial Statements. 43 GROWTH AND INCOME FUND PORTFOLIO OF INVESTMENTS
Value Shares (Note 2) - ---------- -------------- COMMON STOCKS (CONTINUED) HEALTH CARE (CONTINUED) 20,800 HCA, Inc. $ 1,002,352 28,700 Merck & Co., Inc. 809,914 83,640 Pfizer, Inc. 1,818,334 15,400 Triad Hospitals, Inc. * 633,402 29,800 Watson Pharmaceuticals, Inc. * 1,029,888 49,200 Wyeth 2,192,352 -------------- 15,152,315 -------------- INDUSTRIALS - 11.13% 29,300 Burlington Northern Santa Fe Corp. 1,818,358 26,000 Emerson Electric Co. 1,808,300 158,200 General Electric Co. 5,364,562 77,200 Honeywell International, Inc. 2,640,240 22,900 Masco Corp. 652,650 24,000 Textron, Inc. 1,728,960 31,000 Tyco International, Ltd. 818,090 54,600 United Technologies Corp. 2,799,888 72,800 Waste Management, Inc. 2,148,328 -------------- 19,779,376 -------------- INFORMATION TECHNOLOGY - 10.84% 46,500 Applied Materials, Inc. 761,670 43,600 Automatic Data Processing, Inc. 2,034,376 70,042 Computer Associates International, Inc. 1,959,074 40,700 Computer Sciences Corp. * 2,085,875 84,600 EMC Corp./ Massachusetts * 1,181,016 14,894 Freescale Semiconductor, Inc., Class B * 355,669 108,921 Hewlett-Packard Co. 3,054,145 61,500 Intel Corp. 1,445,250 32,100 International Business Machines Corp. 2,628,348 119,400 Motorola, Inc. 2,645,904 38,900 Texas Instruments, Inc. 1,110,595 -------------- 19,261,922 -------------- MATERIALS - 4.18% 13,200 Air Products & Chemicals, Inc. 755,568 34,400 Alcoa, Inc. 835,576 16,400 Dow Chemical Co. 752,104 66,000 E.I. du Pont de Nemours & Co. 2,751,540 15,400 PPG Industries, Inc. 923,538 22,300 Weyerhaeuser Co. 1,412,482 -------------- 7,430,808 -------------- TELECOMMUNICATION SERVICES - 4.52% 50,700 Alltell Corp. 3,136,302 102,000 SBC Communications, Inc. 2,432,700 78,320 Verizon Communications, Inc. 2,467,863 -------------- 8,036,865 -------------- UTILITIES - 3.72% 20,100 Ameren Corp. 1,057,260 34,400 Consolidated Edison, Inc. (O) 1,565,200 15,900 Dominion Resources, Inc. 1,209,672 34,000 FPL Group, Inc. 1,464,040 30,300 Progress Energy, Inc. 1,320,777 -------------- 6,616,949 -------------- TOTAL COMMON STOCKS 175,567,110 ( Cost $151,664,731 ) --------------
See accompanying Notes to Financial Statements. 44 GROWTH AND INCOME FUND PORTFOLIO OF INVESTMENTS
Value Shares (Note 2) - ---------- -------------- INVESTMENT COMPANIES - 5.12% 2,390,033 SSgA Prime Money Market Fund $ 2,390,033 6,715,230 State Street Navigator Securities Lending Portfolio (I) 6,715,230 -------------- TOTAL INVESTMENT COMPANIES 9,105,263 (Cost $9,105,263 ) -------------- TOTAL INVESTMENTS - 103.87% 184,672,373 (Cost $160,769,994** ) -------------- NET OTHER ASSETS AND LIABILITIES - (3.87)% (6,879,184) -------------- TOTAL NET ASSETS - 100.00% $ 177,793,189 ==============
- ----------------- * Non-income producing. ** Aggregate cost for Federal tax purposes was $161,668.453. (I) Represents investments of cash collateral received in connection with securities lending. (O) All (or portion of security) on loan. See accompanying Notes to Financial Statements. 45 CAPITAL APPRECIATION FUND PORTFOLIO OF INVESTMENTS
Value Shares (Note 2) - ---------- -------------- COMMON STOCKS - 97.70% CONSUMER DISCRETIONARY - 11.06% 33,150 Brinker International, Inc. * $ 1,263,678 30,400 Carnival Corp. 1,509,968 23,390 Discovery Holding Co., Class A (O) * 329,565 32,000 Home Depot, Inc. 1,313,280 45,800 Kohl's Corp. * 2,204,354 233,900 Liberty Media Corp., Class A * 1,864,183 22,100 Target Corp. 1,230,749 45,800 Tiffany & Co. 1,804,520 54,200 Time Warner, Inc. 966,386 48,500 Viacom, Inc., Class B 1,502,045 33,000 Walt Disney Co. 804,210 -------------- 14,792,938 -------------- CONSUMER STAPLES - 9.18% 62,800 Coca-Cola Co. 2,686,584 27,100 CVS Corp. 661,511 33,900 Estee Lauder Cos., Inc., Class A 1,124,463 14,800 General Mills, Inc. 714,248 32,100 Kraft Foods, Inc., Class A (O) 908,430 41,400 Procter & Gamble Co. 2,317,986 29,100 Sysco Corp. 928,581 62,100 Wal-Mart Stores, Inc. 2,937,951 -------------- 12,279,754 -------------- ENERGY - 10.56% 27,950 Apache Corp. 1,784,049 25,800 Chevron Corp. 1,472,406 51,600 ConocoPhillips 3,373,608 32,200 Exxon Mobil Corp. 1,807,708 29,100 Marathon Oil Corp. 1,750,656 18,600 Noble Corp. 1,197,468 24,900 Weatherford International, Ltd. * 1,558,740 27,066 XTO Energy, Inc. 1,176,288 -------------- 14,120,923 -------------- FINANCIALS - 19.32% 19,000 ACE, Ltd. 989,900 39,800 American International Group, Inc. 2,579,040 66,700 Bank of America Corp. 2,917,458 40,600 Bank of New York Co., Inc. 1,270,374 3,400 Chubb Corp. 316,098 94,000 Citigroup, Inc. 4,303,320 15,300 Fifth Third Bancorp 614,601 30,600 Freddie Mac 1,877,310 14,300 Goldman Sachs Group, Inc. 1,807,091 18,800 J.P. Morgan Chase & Co. 688,456 19,800 Marsh & McLennan Cos., Inc. 577,170 32,400 Metlife, Inc. 1,600,884 40,100 U.S. Bancorp 1,186,158 17,900 Wachovia Corp. 904,308 42,800 Wells Fargo & Co. 2,576,560 13,300 XL Capital, Ltd., Class A 851,998 10,500 Zions Bancorp. 771,435 -------------- 25,832,161 -------------- HEALTH CARE - 12.15% 46,500 Abbott Laboratories 2,001,825 56,500 Applera Corp. - Applied Biosystems Group 1,371,255 37,500 Boston Scientific Corp. * 942,000 18,300 Community Health Systems, Inc. * 679,113 15,700 Genzyme Corp. * 1,135,110 30,800 Health Management Associates, Inc., Class A (O) 659,428 7,760 Hospira, Inc. * 309,236 61,800 IMS Health, Inc. 1,435,614 35,000 Johnson & Johnson 2,191,700 30,800 Medimmune, Inc. * 1,077,384 14,900 Merck & Co., Inc. 420,478 65,738 Pfizer, Inc. 1,429,144 7,800 Stryker Corp. 322,740
See accompanying Notes to Financial Statements. 46 CAPITAL APPRECIATION FUND PORTFOLIO OF INVESTMENTS
Value Shares (Note 2) - ---------- ------------ COMMON STOCKS (CONTINUED) HEALTH CARE (CONTINUED) 8,900 Triad Hospitals, Inc. * $ 366,057 42,700 Wyeth 1,902,712 ------------ 16,243,796 ------------ INDUSTRIALS - 11.14% 8,700 3M Co. 661,026 11,100 CSX Corp. 508,491 17,600 Dover Corp. 686,048 16,400 FedEx Corp. 1,507,652 10,800 General Dynamics Corp. 1,256,040 156,700 General Electric Co. 5,313,697 29,400 Honeywell International, Inc. 1,005,480 18,900 Illinois Tool Works, Inc. 1,601,964 24,100 Masco Corp. 686,850 23,000 Tyco International, Ltd. 606,970 36,000 Waste Management, Inc. 1,062,360 ------------ 14,896,578 ------------ INFORMATION TECHNOLOGY - 16.49% 13,900 Affiliated Computer Services, Inc., Class A * 752,129 76,400 Altera Corp. * 1,272,060 93,400 Cadence Design Systems, Inc. (O) * 1,492,532 63,100 Celestica, Inc. (O) * 603,236 76,200 Cisco Systems, Inc. * 1,329,690 104,100 EMC Corp./Massachusetts * 1,453,236 46,600 Dell, Inc. * 1,485,608 34,860 First Data Corp. 1,410,087 3,588 Freescale Semiconductor, Inc., Class B * 85, 682 58,700 Hewlett-Packard Co. 1,645,948 41,500 Intel Corp. 975,250 16,500 International Business Machines Corp. 1,351,020 30,000 Kla-Tencor Corp. 1,388,700 86,300 Micron Technology, Inc. (O) * 1,121,037 131,400 Microsoft Corp. 3,376,980 54,000 Motorola, Inc. 1,196,640 20,400 Novellus Systems, Inc. * 445,944 27,911 Symantec Corp. * 665,677 ------------ 22,051,456 ------------ MATERIALS - 2.90% 13,000 Alcoa, Inc. 315,770 20,900 Georgia-Pacific Group 679,877 27,000 Praxair, Inc. 1,334,070 35,600 Rohm and Haas Co. 1,549,668 ------------ 3,879,385 ------------ TELECOMMUNICATION SERVICES - 2.87% 16,700 BellSouth Corp. 434,534 27,500 CenturyTel, Inc. 900,075 34,000 SBC Communications, Inc. 810,900 32,400 Sprint Nextel Corp. 755,244 29,900 Verizon Communications, Inc. 942,149 ------------ 3,842,902 ------------ UTILITIES - 2.03% 31,600 AES Corp. * 502,124 51,500 FPL Group, Inc. 2,217,590 ------------ 2,719,714 ------------ TOTAL COMMON STOCKS (Cost $115,854,088) 130,659,607 ------------
See accompanying Notes to Financial Statements. 47 CAPITAL APPRECIATION FUND PORTFOLIO OF INVESTMENTS
Value Shares (Note 2) - ---------- ------------ INVESTMENT COMPANIES - 5.78% 2,538,079 SSgA Prime Money Market Fund $ 2,538,079 5,183,935 State Street Navigator Navigator Securities Lending Portfolio (I) 5,183,935 ------------ TOTAL INVESTMENT COMPANIES (Cost $7,722,014) 7,722,014 ------------ TOTAL INVESTMENTS - 103.48% ( Cost $123,576,102** ) 138,381,621 ------------ NET OTHER ASSETS AND LIABILITIES - (3.48)% (4,650,391) ------------ TOTAL NET ASSETS - 100.00% $133,731,230 ============
- ---------- * Non-income producing. ** Aggregate cost for Federal tax purposes was $123,603,524. (I) Represents investments of cash collateral received in connection with securities lending. (O) All (or portion of security) on loan. See accompanying Notes to Financial Statements. 48 MID-CAP FUND PORTFOLIO OF INVESTMENTS
Value Shares (Note 2) - ---------- ------------ COMMON STOCKS - 98.42% CONSUMER DISCRETIONARY - 12.46% 4,700 Advo, Inc. $ 116,090 36,500 Belo Corp., Class A 788,400 14,100 Brinker International, Inc. * 537,492 6,300 Cato Corp., Class A 125,874 2,500 CEC Entertainment, Inc. * 84,525 4,454 Federated Department Stores, Inc. 273,342 39,500 Interpublic Group of Cos., Inc. * 408,035 2,800 J.C. Penney Co., Inc. 143,360 22,200 Jones Apparel Group, Inc. 605,616 18,600 Linens 'n Things, Inc. (O) * 467,604 3,400 Matthews International Corp., Class A 122,196 4,000 Modine Manufacturing Co. 132,240 41,300 Newell Rubbermaid, Inc. 949,487 14,400 O'Reilly Automotive, Inc. * 406,080 13,400 Outback Steakhouse, Inc. 504,644 7,600 Ruby Tuesday, Inc. (O) 166,516 8,800 Stage Stores, Inc. 243,936 3,100 Standard-Pacific Corp. 119,598 17,600 Talbots, Inc. (O) 459,184 10,100 Tempur-Pedic International, Inc. (O) * 111,706 15,700 Tiffany & Co. 618,580 24,700 TJX Cos., Inc. 531,791 3,300 Valassis Communications, Inc. * 103,125 5,900 WCI Communities, Inc. (O) * 147,618 6,700 Yankee Candle Co., Inc. (O) 151,487 ------------ 8,318,526 ------------ CONSUMER STAPLES - 5.19% 5,800 Casey's General Stores, Inc. 125,164 12,500 Clorox Co. 676,500 10,400 Estee Lauder Cos., Inc., Class A 344,968 44,500 Hain Celestial Group, Inc. (O) * 859,740 10,200 Herbalife, Ltd. 274,380 5,600 Hormel Foods Corp. 178,080 15,500 McCormick & Co., Inc. (O) 469,495 9,400 NBTY, Inc. * 188,094 11,000 Sara Lee Corp. 196,350 4,000 Universal Corp./ Richmond VA 149,760 ------------ 3,462,531 ------------ ENERGY - 11.37% 5,700 Amerada Hess Corp. 713,070 3,600 Arch Coal, Inc. (O) 277,452 16,600 BJ Services Co. 576,850 6,450 Encore Acquisition Co. * 221,300 17,500 ENSCO International, Inc. 797,825 8,000 EOG Resources, Inc. 542,240 12,300 Forest Oil Corp. * 537,264 12,800 Marathon Oil Corp. 770,048 17,400 Pioneer Natural Resources Co. 870,870 4,800 Plains Exploration and Production Co. * 187,200 20,400 Smith International, Inc. 660,960 9,100 Valero Energy Corp. 957,684 5,100 Vintage Petroleum, Inc. 264,639 5,300 Whiting Petroleum Corp. * 214,915 ------------ 7,592,317 ------------ FINANCIALS - 25.55% 4,300 American Capital Strategies, Ltd. (O) 161,508 19,000 AmSouth Bancorp. 479,370 6,200 Arthur J. Gallagher & Co. (O) 182,404 16,160 Associated Banc-Corp. (O) 504,354 14,100 Assured Guaranty, Ltd. 315,558 11,000 Bear Stearns Cos., Inc. 1,163,800 17,700 Colonial BancGroup, Inc. 430,995 11,000 Compass Bancshares, Inc. 536,360
See accompanying Notes to Financial Statements. 49 MID-CAP FUND PORTFOLIO OF INVESTMENTS
Value Shares (Note 2) - ----------- ------------ COMMON STOCKS (CONTINUED) FINANCIALS (CONTINUED) 4,900 Cousins Properties, Inc., REIT $ 144,746 4,050 Delphi Financial Group, Class A 189,702 9,700 Equity Residential, REIT 380,725 20,000 Federated Investors, Inc., Class B 700,200 9,400 First Horizon National Corp. (O) 363,592 3,300 First Midwest Bancorp, Inc. 125,466 13,800 FirstMerit Corp. (O) 363,906 2,900 IPC Holdings, Ltd. 76,357 14,800 Jefferson-Pilot Corp. 812,224 4,300 M&T Bank Corp. 462,594 13,600 Marshall & Ilsley Corp. 584,256 2,400 MB Financial, Inc. 89,448 10,300 MBIA, Inc. 599,872 7,400 NewAlliance Bancshares, Inc. 106,708 9,400 North Fork Bancorp, Inc. 238,196 10,900 PartnerRe, Ltd. 694,548 7,200 Platinum Underwriters Holdings, Ltd. (Bermuda) 205,128 20,400 Principal Financial Group 1,012,452 12,600 Protective Life Corp. 552,384 7,000 PS Business Parks, Inc., REIT (O) 325,780 15,200 Radian Group, Inc. 791,920 3,300 RAIT Investment Trust, REIT 87,648 5,200 Realty Income Corp., REIT 115,804 6,500 Reinsurance Group of America, Inc. 297,375 16,300 Safeco Corp. 907,910 8,400 Scottish Re Group Ltd. 206,220 6,400 SL Green Realty Corp., REIT 435,392 13,800 TCF Financial Corp. (O) 373,980 4,200 Texas Regional Bancshares, Inc., Class A 123,186 11,600 Torchmark Corp. 612,828 6,800 Universal American Financial Corp. * 100,640 11,000 U-Store-It Trust, REIT 229,460 5,200 Ventas, Inc., REIT 159,276 3,800 Webster Financial Corp. 175,446 2,700 Westamerica Bancorp. 143,937 6,703 Zions Bancorp. 492,469 ------------ 17,056,124 ------------ HEALTH CARE - 6.84% 5,100 Amsurg Corp. * 121,125 10,200 Becton Dickinson & Co. 517,650 11,300 Community Health Systems, Inc. (O) * 419,343 2,400 Dentsply International, Inc. 132,336 3,600 Diagnostic Products Corp. 151,560 12,416 Fisher Scientific International, Inc. * 701,504 9,900 Health Management Associates, Inc., Class A 211,959 9,500 Hospira, Inc. * 378,575 7,800 Idexx Laboratories, Inc. (O) * 547,014 10,600 Omnicare, Inc. 573,460 4,200 PolyMedica Corp. 138,642 8,300 Triad Hospitals, Inc. * 341,379 3,500 Varian, Inc. * 128,695 5,800 Watson Pharmaceuticals, Inc. * 200,448 ------------ 4,563,690 ------------ INDUSTRIALS - 13.90% 7,800 Acuity Brands, Inc. 216,918 9,800 Airtran Holdings, Inc. (O) * 146,608 5,100 Albany International Corp., Class A 197,013 14,400 Avery Dennison Corp. (O) 815,760 5,200 Carlisle Cos., Inc. 346,788
See accompanying Notes to Financial Statements. 50 MID-CAP FUND PORTFOLIO OF INVESTMENTS
Value Shares (Note 2) - ----------- ------------ COMMON STOCKS (CONTINUED) INDUSTRIALS (CONTINUED) 18,900 CSX Corp. $ 865,809 2,400 Curtiss-Wright Corp. 137,640 7,525 Genesee & Wyoming, Inc., Class A * 241,176 18,000 Ingersoll-Rand Co., Ltd., Class A 680,220 20,200 Manpower, Inc. 914,656 13,900 Masco Corp. 396,150 5,100 Mueller Industries, Inc. 140,454 8,400 Parker-Hannifin Corp. 526,512 18,100 R. R. Donnelley & Sons Co. 633,862 26,700 Republic Services, Inc. 943,845 7,400 Simpson Manufacturing Co., Inc. (O) 292,004 9,000 Teleflex, Inc. 595,710 8,700 United Stationers, Inc. * 394,719 11,100 W.W. Grainger, Inc. 743,478 2,600 Werner Enterprises, Inc. 46,592 ------------ 9,275,914 ------------ INFORMATION TECHNOLOGY - 8.82% 12,100 Affiliated Computer Services, Inc., Class A * 654,731 19,100 Arrow Electronics, Inc. * 563,641 7,900 ATMI, Inc. (O) * 215,749 30,600 Avaya, Inc. * 352,512 9,500 Belden CDT, Inc. 189,335 2,800 Black Box Corp. 112,336 7,000 Computer Sciences Corp. * 358,750 22,000 Convergys Corp. * 357,500 2,300 Diebold, Inc. 83,122 7,400 Electronics for Imaging * 185,814 2,900 Intergraph Corp. (O) * 140,302 22,000 Intersil Corp., Class A (O) 500,720 27,200 LSI Logic Corp. (O) * 220,592 94,900 Lucent Technologies, Inc. (O) * 270,465 4,600 MAXIMUS, Inc. 166,750 8,200 Molex, Inc. (O) 207,542 6,600 NAM TAI Electronics, Inc. 149,490 16,900 Reynolds and Reynolds Co., Class A 448,526 53,600 Tellabs, Inc. * 512,416 5,300 Varian Semiconductor Equipment Associates, Inc. (O)* 200,446 ------------ 5,890,739 ------------ MATERIALS - 7.18% 3,000 Aber Diamond Corp. 93,156 12,300 Air Products & Chemicals, Inc. 704,052 3,300 Aptargroup, Inc. 168,927 2,300 Ashland, Inc. 123,073 4,200 Bemis Co. 110,964 4,500 Compass Minerals International, Inc. 100,755 7,000 Georgia-Pacific Group 227,710 3,400 Inco, Ltd. 136,748 7,000 Martin Marietta Materials, Inc. 552,370 4,800 Meridian Gold, Inc. * 90,144 11,800 Novelis, Inc. 232,578 2,500 Nucor Corp. 149,625 9,300 PPG Industries, Inc. 557,721 11,900 Rohm and Haas Co. 518,007 46,000 Smurfit-Stone Container Corp. * 485,760 24,600 Valspar Corp. 542,430 ------------ 4,794,020 ------------ TELECOMMUNICATION SERVICES - 1.08% 22,100 CenturyTel, Inc. 723,333 ------------ UTILITIES - 6.03% 19,800 AES Corp. * 314,622 22,100 Alliant Energy Corp (O) 584,545 6,400 Ameren Corp. 336,640 18,000 CMS Energy Corp. (O) * 268,380
See accompanying Notes to Financial Statements. 51 MID-CAP FUND PORTFOLIO OF INVESTMENTS
Value Shares (Note 2) - ----------- ------------ COMMON STOCKS (CONTINUED) UTILITIES (CONTINUED) 19,100 Constellation Energy Group, Inc. $ 1,046,680 2,200 New Jersey Resources Corp. 94,952 14,500 Pepco Holdings, Inc. 311,605 7,750 PNM Resources, Inc. 196,463 8,500 Weststar Energy, Inc. 187,850 3,100 WGL Holdings, Inc. 96,348 15,500 Wisconsin Energy Corp. 586,365 ------------ 4,024,450 ------------ TOTAL COMMON STOCKS (Cost $53,032,225) 65,701,644 ------------ INVESTMENT COMPANIES - 15.38% 1,213,224 SSgA Prime Money Market Fund 1,213,224 9,054,350 State Street Navigator Securities Lending Portfolio (I) 9,054,350 ------------ TOTAL INVESTMENT COMPANIES (Cost $10,267,574) 10,267,574 ------------ TOTAL INVESTMENTS - 113.80% ( Cost $63,299,799** ) 75,969,218 ------------ NET OTHER ASSETS AND LIABILITIES - (13.80)% (9,210,627) ------------ TOTAL NET ASSETS - 100.00% $ 66,758,591 ============
- ---------- * Non-income producing. ** Aggregate cost for Federal tax purposes was $63,316,419. (I) Represents investments of cash collateral received in connection with securities lending. (O) All (or portion of security) on loan. See accompanying Notes to Financial Statements. 52 MULTI-CAP GROWTH FUND PORTFOLIO OF INVESTMENTS
Value Shares (Note 2) - ----------- ------------ COMMON STOCKS - 93.20% CONSUMER DISCRETIONARY - 6.86% 6,940 aQuantive, Inc. (O) * $ 150,251 6,700 Chico's FAS, Inc. * 264,918 5,900 D.R. Horton, Inc. 181,071 5,600 Education Management Corp. * 172,704 4,100 Fastenal Co. (O) 287,533 4,680 GameStop Corp., Class A * 151,351 2,049 GameStop Corp., Class B * 72,693 11,683 Geox SpA 111,339 10,260 La Quinta Corp. * 85,671 3,400 Paccar, Inc. 238,068 1,650 Red Robin Gourmet Burgers, Inc. (O) * 79,580 5,000 Univision Communications, Inc., Class A * 130,700 44,730 XM Satellite Radio Holdings, Inc., Class A (O) * 1,289,566 ------------ 3,215,445 ------------ CONSUMER STAPLES - 1.96% 16,380 Procter & Gamble Co. 917,116 ------------ ENERGY - 6.43% 2,300 Alon USA Energy, Inc. (O) * 44,850 2,090 Arch Coal, Inc. (O) 161,076 2,835 Cabot Oil & Gas Corp. 129,815 7,300 Cameco Corp. 348,940 4,900 EOG Resources, Inc. 332,122 9,080 Halliburton Co. 536,628 28,530 Petro-Canada 991,418 3,120 Petroleo Brasileiro, S.A., ADR (O) 199,368 6,133 XTO Energy, Inc. 266,540 ------------ 3,010,757 ------------ FINANCIALS - 12.21% 1,830 Affiliated Managers Group (O) * 140,452 3,050 Arch Capital Group, Ltd. * 150,975 3,230 CB Richard Ellis Group, Inc., Class A * 157,786 3,240 Chicago Mercantile Exchange Holdings, Inc. 1,183,086 54,190 Countrywide Financial Corp. 1,721,616 8,340 Franklin Resources, Inc. 737,006 11,350 Legg Mason, Inc. 1,217,969 6,870 Nasdaq Stock Market, Inc. * 212,214 4,900 Nuveen Investments, Inc., Class A (O) 198,303 ------------ 5,719,407 ------------ HEALTH CARE - 22.42% 6,230 Abgenix, Inc. (O) * 64,792 4,680 Alkermes, Inc. (O) * 76,237 17,380 Amgen, Inc. * 1,316,709 4,430 Amylin Pharmaceuticals, Inc. (O) * 148,848 9,500 Applera Corp. - Applied Biosystems Group 230,565 42,030 AstraZeneca PLC, ADR 1,887,147 6,700 Biomet, Inc. 233,361 3,000 Cephalon, Inc. (O) * 136,770 3,350 Covance, Inc. * 162,977 6,400 DaVita, Inc. * 314,752 7,010 Digene Corp. (O) * 211,702 3,000 Foxhollow Technologies, Inc. (O) * 135,930 5,300 Health Net, Inc. * 248,252 3,930 Hologic, Inc. (O) * 217,958 30,920 Medtronic, Inc. 1,751,927 2,160 Mentor Corp. (O) 97,200 2,540 Pharmaceutical Product Development, Inc. 145,974
See accompanying Notes to Financial Statements. 53 MULTI-CAP GROWTH FUND PORTFOLIO OF INVESTMENTS
Value Shares (Note 2) - ----------- ------------ COMMON STOCKS (CONTINUED) HEALTH CARE (CONTINUED) 15,690 Sanofi-Aventis $ 629,483 43,300 Schering-Plough Corp. 880,722 27,930 UnitedHealth Group, Inc. 1,616,868 ------------ 10,508,174 ------------ INDUSTRIALS - 12.72% 2,680 Advisory Board Co. * 129,310 18,490 Boeing Co. 1,195,194 8,600 CH Robinson Worldwide, Inc. 303,236 2,200 Corporate Executive Board Co. 181,808 4,760 Corrections Corp. of America (O) * 189,829 14,400 Danaher Corp. 750,240 4,400 Expeditors International of Washington, Inc. 266,948 9,050 General Dynamics Corp. 1,052,515 31,040 General Electric Co. 1,052,566 2,300 Gol Linhas Aereas Inteligentes S.A., ADR (O) 79,695 1,930 Jacobs Engineering Group, Inc. * 123,038 5,860 Knight Transportation, Inc. (O) 159,450 9,500 Robert Half International, Inc. 350,360 2,230 Stericycle, Inc. * 128,359 ------------ 5,962,548 ------------ INFORMATION TECHNOLOGY - 29.67% 4,300 Cognizant Technology Solutions Corp., Class A * 189,114 6,800 Cognos, Inc. * 255,204 45,000 Dell, Inc. * 1,434,600 30,510 Electronic Arts, Inc. * 1,735,409 2,400 F5 Networks, Inc. * 124,872 2,560 Google, Inc., Class A * 952,678 5,360 Insight Enterprises, Inc. (O) * 109,987 10,800 Jabil Circuit, Inc. * 322,380 6,400 Linear Technology Corp. 212,544 5,000 Logitech International S.A., ADR (O) * 191,800 3,470 Microsemi Corp. (O) * 80,400 45,500 Microsoft Corp. 1,169,350 8,200 Monster Worldwide, Inc. * 269,042 43,630 Network Appliance, Inc. * 1,193,717 7,900 Nvidia Corp. * 265,045 26,310 Opsware, Inc. (O) * 135,233 6,900 Pixar * 350,037 25,910 Qualcomm, Inc. 1,030,182 26,850 Red Hat, Inc. (O) * 623,457 9,600 Redback Networks, Inc. (O) * 100,896 3,340 Research In Motion, Ltd. * 205,377 3,950 Salesforce.com, Inc. (O) * 98,710 4,600 SanDisk Corp. * 270,894 7,230 THQ, Inc. (O) * 167,591 11,200 VeriFone Holdings, Inc. (O) * 259,840 53,680 Yahoo!, Inc. * 1,984,550 4,000 Zebra Technologies Corp., Class A * 172,440 ------------ 13,905,349 ------------ TELECOMMUNICATION SERVICES - 0.93% 8,250 Alamosa Holdings, Inc. * 122,100 13,100 American Tower Corp., Class A * 312,435 ------------ 434,535 ------------ TOTAL COMMON STOCKS (Cost $37,869,235) 43,673,331 ------------
See accompanying Notes to Financial Statements. 54 MULTI-CAP GROWTH FUND PORTFOLIO OF INVESTMENTS
Value Shares (Note 2) - ----------- ------------ COMMON STOCK UNIT - 1.74% CONSUMER DISCRETIONARY- 1.74% 13,950 Starwood Hotels & Resorts Worldwide, Inc. $ 815,098 ------------ TOTAL COMMON STOCK UNIT (Cost $812,462) 815,098 ------------
Par Value CERTIFICATE OF DEPOSIT - 0.55% $ 259,097 State Street Eurodollar 2.100%, due 11/01/05 259,097 ------------ TOTAL CERTIFICATE OF DEPOSIT (Cost $259,097) 259,097 ------------
Shares INVESTMENT COMPANIES - 14.49% 1,830 iShares Russell 2000 Growth Index Fund (O) 120,231 1,040 Oil Service HOLDRs Trust (O) 121,940 2,088,915 SSgA Prime Money Market Fund 2,088,915 4,459,345 State Street Navigator Securities Lending Portfolio (I) 4,459,345 ------------ TOTAL INVESTMENT COMPANIES (Cost $6,767,419) 6,790,431 ------------ TOTAL INVESTMENTS - 109.98% (Cost $45,708,213**) 51,537,957 ------------ NET OTHER ASSETS AND LIABILITIES - (9.98)% (4,678,507) ------------ TOTAL NET ASSETS - 100.00% $ 46,859,450 ============
- ---------- * Non-income producing. ** Aggregate cost for Federal tax purposes was $45,775,779. (I) Represents investments of cash collateral received in connection with securities lending. (O) All (or portion of security) on loan. ADR American Depository Receipt. PLC Public Limited Company. See accompanying Notes to Financial Statements. 55 INTERNATIONAL STOCK FUND PORTFOLIO OF INVESTMENTS
Value Shares (Note 2) - ----------- ------------ COMMON STOCKS - 94.30% AUSTRALIA - 0.67% 23,742 ABC Learning Centres, Ltd. $ 115,972 18,300 James Hardie Industries N.V. 116,663 27,552 John Fairfax Holdings, Ltd. 85,078 59,221 Macquarie Infrastructure Group 152,425 ------------ 470,138 ------------ AUSTRIA - 0.20% 2,700 Erste Bank der Oesterreichischen Sparkassen AG 140,506 ------------ BELGIUM - 1.21% 13,300 Belgacom S.A. 446,350 10,000 InBev N.V. 399,925 ------------ 846,275 ------------ BRAZIL - 1.91% 4,900 Brasil Telecom Participacoes S.A., ADR 203,889 4,600 Cia Brasileira de Distribuicao Grupo Pao de Acucar, ADR 126,776 660 Cia de Bebidas das Americas, ADR 18,434 6,100 Cia de Concessoes Rodoviarias 161,436 4,900 Cia Vale do Rio Doce, ADR 202,517 9,900 Gerdau S.A., ADR 134,343 10,800 Grendene S.A. 85,074 4,800 Petroleo Brasileiro, S.A., ADR 306,720 8,100 Souza Cruz S.A. 96,195 ------------ 1,335,384 ------------ CHILE - 0.14% 3,300 AFP Provida S.A., ADR 94,677 ------------ CHINA - 0.48% 4,500 China Techfaith Wireless Communication Technology, Ltd., ADR 44,055 1,360 CNOOC, Ltd., ADR 89,352 186,000 People's Food Holdings, Ltd. 94,541 164,000 Yanzhou Coal Mining Co., Ltd., Class H 105,355 ------------ 333,303 ------------ EGYPT - 0.71% 18,705 Commercial International Bank, GDR (C) 175,827 3,345 Eastern Tobacco 133,295 1,900 Orascom Telecom Holding S.A.E. 189,041 ------------ 498,163 ------------ FINLAND - 0.69% 9,000 Amer Sports OYJ 163,913 7,000 Nokian Renkaat OYJ 109,187 9,000 Sampo OYJ 138,148 2,200 Tietoenator OYJ 69,899 ------------ 481,147 ------------ FRANCE - 11.93% 26,500 AXA S.A. 768,121 12,400 BNP Paribas 940,926 3,000 Carbone Lorraine 118,010 7,800 Carrefour S.A. 346,976 30,600 France Telecom S.A. 796,129 5,500 Lafarge S.A. 452,707 9,700 Lagardere S.C.A. 667,033 3,000 Neopost S.A. 289,696 7,545 Sanofi-Aventis 604,652 7,300 Schneider Electric S.A. 599,931 7,200 Total S.A. 1,814,623 29,400 Vivendi Universal S.A. 924,622 ------------ 8,323,426 ------------ GERMANY - 4.56% 5,100 Deutsche Bank AG 478,073 1,400 Fielmann AG 95,637 620 PUMA AG Rudolf Dassler Sport 157,122
See accompanying Notes to Financial Statements. 56 INTERNATIONAL STOCK FUND PORTFOLIO OF INVESTMENTS
Value Shares (Note 2) - ----------- ------------ COMMON STOCKS (CONTINUED) GERMANY (CONTINUED) 2,100 Rheinmetall AG $ 129,250 15,500 Siemens AG 1,153,713 3,211 Techem AG * 127,881 19,000 Volkswagen AG 1,036,038 ------------ 3,177,714 ------------ GREECE - 0.34% 4,790 OPAP S.A. 138,406 5,000 Piraeus Bank S.A. 101,279 ------------ 239,685 ------------ HONG KONG - 0.84% 56,500 China Netcom Group Corp., Hong Kong, Ltd. 89,343 32,100 Esprit Holdings, Ltd. 227,948 72,000 Hutchison Telecommunications International, Ltd. * 90,286 228,000 SA SA International Holdings, Ltd. 84,677 141,000 Texwinca Holdings, Ltd. 96,099 ------------ 588,353 ------------ HUNGARY - 0.28% 720 Gedeon Richter Rt. 118,419 800 MOL Magyar Olaj-es Gazipari Rt. 74,676 ------------ 193,095 ------------ INDIA - 1.42% 8,100 Hero Honda Motors, Ltd. 127,520 33,500 Hindalco Industries, Ltd. 84,936 22,100 Hindustan Lever, Ltd. 79,029 3,900 Oil & Natural Gas Corp., Ltd. 80,086 11,800 Reliance Industries, Ltd. 200,275 13,602 Satyam Computer Services, Ltd. 182,970 12,700 State Bank of India, Ltd. 236,645 ------------ 991,461 ------------ INDONESIA - 0.84% 831,000 Bank Mandiri Persero Tbk PT 108,586 1,457,500 Bumi Resources Tbk PT 112,233 13,500 Telekomunikasi Indonesia Tbk PT, ADR 274,860 251,000 United Tractors Tbk PT 91,924 ------------ 587,603 ------------ IRELAND - 1.75% 15,399 Anglo Irish Bank Corp. PLC 208,626 26,000 Bank of Ireland 395,311 19,387 CRH PLC 485,736 7,000 DCC PLC 130,489 ------------ 1,220,162 ------------ ISRAEL - 0.23% 41,200 Bank Hapoalim B.M. 157,757 ------------ ITALY - 3.75% 25,817 Banco Popolare di Verona e Novara S.c.r.l. 476,849 18,000 Davide Campari - Milano SpA 122,232 37,000 ENI SpA 990,502 3,700 Lottomatica SpA 134,464 306,500 Telecom Italia SpA 887,472 ------------ 2,611,519 ------------ JAPAN - 20.72% 2,200 ABC-Mart, Inc. 59,891 2,200 ABC-Mart, Inc. (Q) 58,039 1,600 Asahi Pretec Corp. 35,143 21,000 Bosch Corp. 111,098 11,000 Chiyoda Corp. 189,516 3,200 Credit Saison Co., Ltd. 145,422 3,000 Daito Trust Construction Co., Ltd. 148,292 1,900 Don Quijote Co., Ltd. 137,381 235 eAccess, Ltd. 145,530 117 East Japan Railway Co. 697,669 88,300 Fujitsu, Ltd. 585,473
See accompanying Notes to Financial Statements. 57 INTERNATIONAL STOCK FUND PORTFOLIO OF INVESTMENTS
Value Shares (Note 2) - ----------- ------------ COMMON STOCKS (CONTINUED) JAPAN (CONTINUED) 5,000 Hisamitsu Pharmaceutical Co., Inc. $ 120,165 6,500 Hoya Corp. 228,546 19,500 Hoya Corp. (Q) 675,303 42,000 Joyo Bank, Ltd. 281,767 5,000 JSR Corp. 117,780 7,700 Leopalace21 Corp. 199,285 3,300 Mars Engineering Corp. 101,049 130 Mitsubishi Tokyo Financial Group, Inc. 1,639,793 13,000 Murata Manufacturing Co., Ltd. 652,612 8,300 Nidec Corp. 485,966 106 Niws Co., Ltd. 115,199 52,400 Nomura Holdings, Inc. 807,156 307 NTT DoCoMo, Inc. 531,583 11,700 OSG Corp. 201,067 3,700 Rinnai Corp. 88,178 2,400 Secom Techno Service Co., Ltd. 90,026 6,000 Shin-Etsu Chemical Co., Ltd. 288,878 74,000 Shinsei Bank, Ltd. 431,540 19,200 Sony Corp. 626,342 61,000 Sumitomo Trust & Banking Co., Ltd. 518,428 14,000 Suruga Bank, Ltd. 171,317 16,100 Takeda Pharmaceutical Co., Ltd. 885,607 166,000 Tokyo Gas Co., Ltd. 654,142 34,100 Toyota Motor Corp. 1,583,684 1,500 USS Co., Ltd. 102,808 32,700 Yokogawa Electric Corp. 481,683 30 Yoshinoya D&C Co., Ltd. 56,786 ------------ 14,450,144 ------------ LUXEMBOURG - 0.16% 10,600 Stolt Offshore S.A. * 109,919 ------------ MEXICO - 0.79% 23,900 America Telecom, S.A.de C.V., Series A1 * 95,246 1,740 Desarrolladora Homex S.A. de C.V., ADR * 52,009 2,170 Fomento Economico Mexicano S.A. de C.V., ADR 147,538 2,000 Grupo Televisa S.A., ADR 146,200 18,600 Kimberly-Clark de Mexico, S.A. de C.V., Class A 61,540 8,100 Urbi Desarrollos Urbanos S.A. de C.V. 51,092 ------------ 553,625 ------------ MOROCCO - 0.13% 8,500 Maroc Telecom 88,203 ------------ NETHERLANDS - 3.90% 2,740 Boskalis Westminster 136,240 6,592 Fugro N.V. 178,313 17,621 Heineken N.V. 558,557 1,935 Hunter Douglas N.V. 92,136 800 Imtech N.V. 25,914 27,800 Royal Dutch Shell PLC, Class A 857,995 1,282 SBM Offshore N.V. 99,185 26,200 TNT N.V. 619,000 4,678 USG People N.V. 151,012 ------------ 2,718,352 ------------ NORWAY - 1.48% 22,800 Den Norske Bank ASA 233,500 5,500 Ekornes ASA 99,831 26,100 Statoil ASA 580,408 12,200 Tandberg ASA 119,886 ------------ 1,033,625 ------------ PERU - 0.17% 4,500 Credicorp, Ltd. 118,350 ------------
See accompanying Notes to Financial Statements. 58 INTERNATIONAL STOCK FUND PORTFOLIO OF INVESTMENTS
Value Shares (Note 2) - ----------- ------------ COMMON STOCKS (CONTINUED) PHILIPPINES - 0.22% 5,000 Philippine Long Distance Telephone Co. $ 150,750 ------------ RUSSIA - 0.81% 4,600 AFK Sistema, GDR (C) 103,040 1,700 Evraz Group S.A., GDR * 28,900 4,820 LUKOIL, ADR 265,823 4,500 Mobile Telesystems OJSC, ADR 166,455 ------------ 564,218 ------------ SINGAPORE - 0.82% 153,600 Oversea-Chinese Banking Corp. 571,628 ------------ SOUTH AFRICA - 1.03% 27,000 Edgars Consolidated Stores, Ltd. 119,969 6,100 Kumba Resources, Ltd. 90,142 31,300 Murray & Roberts Holdings, Ltd. 89,987 68,400 Old Mutual PLC 159,439 28,170 Sanlam * 51,840 78,196 Steinhoff International Holdings, Ltd. 204,707 ------------ 716,084 ------------ SOUTH KOREA - 3.05% 2,500 GS Engineering & Construction Corp. 107,279 850 Hite Brewery Co., Ltd. 103,269 1,200 Hyundai Motor Co. 88,519 6,400 Kangwon Land, Inc. 107,727 6,286 Kookmin Bank 360,667 4,340 KT Corp., ADR 93,527 2,800 LG Electronics, Inc. 183,080 3,000 LG Household & Health Care, Ltd. 164,704 6,100 LG.Philips LCD Co., Ltd., ADR * 115,961 1,719 Samsung Electronics Co., Ltd., GDR (C) 458,979 1,374 Samsung Fire & Marine Insurance Co., Ltd. 131,009 1,120 Samsung SDI Co., Ltd. 110,886 2,000 SK Corp. 102,815 ------------ 2,128,422 ------------ SPAIN - 0.77% 4,000 Abengoa, S.A. 65,646 7,300 Corp. Mapfre S.A. 127,950 8,600 Indra Sistemas, S.A. 176,402 6,900 Prosegur Cia de Seguridad S.A. 168,696 ------------ 538,694 ------------ SWEDEN - 0.61% 15,180 Elekta AB, Class B 231,920 8,600 Getinge AB 107,586 7,650 Swedish Match AB 87,084 ------------ 426,590 ------------ SWITZERLAND - 7.32% 13,900 Compagnie Financiere Richemont AG, Class A 528,768 28,370 Credit Suisse Group 1,254,466 140 Geberit AG 96,906 3,620 Nestle S.A. 1,077,088 27,600 Novartis AG 1,484,074 3,900 Zurich Financial Services AG * 664,989 ------------ 5,106,291 ------------ TAIWAN - 1.41% 45,786 Advantech Co., Ltd. 101,023 160,314 Chinatrust Financial Holding Co. 124,763 3,800 Chunghwa Telecom Co., Ltd., ADR 65,816 41,000 Delta Electronics, Inc. 69,258 7,862 Delta Electronics, Inc., GDR (C) 66,195
See accompanying Notes to Financial Statements. 59 INTERNATIONAL STOCK FUND PORTFOLIO OF INVESTMENTS
Value Shares (Note 2) - ----------- ------------ COMMON STOCKS (CONTINUED) TAIWAN (CONTINUED) 144,000 Fubon Financial Holding Co., Ltd. $ 125,048 38,500 HON HAI Precision Industry Co., Ltd. 167,049 130,649 Taiwan Semiconductor Manufacturing Co., Ltd. 204,347 7,600 Taiwan Semiconductor Manufacturing Co., Ltd., ADR 61,408 ------------ 984,907 ------------ THAILAND - 0.11% 100,100 Thai Union Frozen Products Public Co., Ltd. 75,793 ------------ TURKEY - 0.46% 32,725 Akbank T.A.S. 203,565 8,805 Turkcell Iletisim Hizmet A.S., ADR 116,050 ------------ 319,615 ------------ UNITED KINGDOM - 18.30% 116,900 Barclays PLC 1,157,533 87,400 BP PLC 966,774 52,200 Brit Insurance Holdings PLC * 77,529 10,549 Bunzl PLC 105,379 69,200 Cadbury Schweppes PLC 680,707 5,000 Carpetright PLC 79,384 19,371 Cattles PLC 93,671 92,200 Cobham PLC 251,024 84,600 Diageo PLC 1,249,776 45,000 Enodis PLC * 101,309 7,900 Enterprise Inns PLC 108,857 15,160 Filtrona PLC 72,315 43,700 GlaxoSmithKline PLC 1,136,241 17,400 Halfords Group PLC 85,348 21,700 Imperial Tobacco Group PLC 621,947 12,300 Intertek Group PLC 154,975 5,339 Man Group PLC 145,353 103,000 Marks and Spencer Group PLC 760,420 68,263 National Grid PLC 623,816 9,300 Northgate PLC 164,536 8,300 Premier Oil PLC * 106,606 59,800 Prudential PLC 501,503 74,731 Regus Group PLC * 121,315 44,200 Royal Bank of Scotland Group PLC 1,223,034 8,600 Signet Group PLC, ADR 155,574 47,300 Unilever PLC 479,280 542,881 Vodafone Group PLC 1,423,961 11,900 William Hill PLC 112,451 ------------ 12,760,618 ------------ VENEZUELA - 0.09% 4,734 Cia Anonima Nacional Telefonos de Venezuela - CANTV, ADR 61,069 ------------ TOTAL COMMON STOCKS 65,767,265 (Cost $53,818,747) ------------ COMMON STOCK UNITS - 0.39% BRAZIL - 0.18% 3,200 All America Latina Logistica S.A. 123,816 ------------ IRELAND - 0.21% 15,200 Grafton Group PLC * 149,511 ------------ TOTAL COMMON STOCK UNITS 273,327 (Cost $238,514) ------------
See accompanying Notes to Financial Statements. 60 INTERNATIONAL STOCK FUND PORTFOLIO OF INVESTMENTS
Value Shares (Note 2) - ----------- ------------ PREFERRED STOCKS - 1.46% BRAZIL - 1.46% 316,600 Caemi Mineracao e Metalurgica S.A. $ 504,138 4,900 Cia de Bebidas das Americas, ADR 173,950 7,900 Telemar Norte Leste S.A. 214,344 6,200 Usinas Siderurgicas de Minas Gerais S.A. 125,448 ------------ Total Preferred Stocks (Cost $343,716) 1,017,880 ------------ WARRANTS AND RIGHTS - 0.00% JAPAN - 0.00% 240 Belluna Co., Ltd. (L) * (Exercise Price $34.61) 0 ------------ TOTAL WARRANTS AND RIGHTS (Cost $227) 0 ------------
Par Value CERTIFICATE OF DEPOSIT - 2.86% UNITED STATES - 2.86% $ 1,997,297 State Street Eurodollar 2.100%, due 11/01/05 1,997,297 ------------ TOTAL CERTIFICATE OF DEPOSIT (Cost $1,997,297) 1,997,297 ------------ TOTAL INVESTMENTS - 99.01% (Cost $56,398,501**) 69,055,769 ------------ NET OTHER ASSETS AND LIABILITIES - 0.99% 691,162 ------------ TOTAL NET ASSETS - 100.00% $ 69,746,931 ============
- ---------- * Non-income producing. ** Aggregate cost for Federal tax purposes was $56,452,511. (C) Security sold within terms of a private placement memorandum exempt from registration under section 144A of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "qualified institutional investors." The securities have been determined to be liquid under guidelines established by the Board of Trustees. (L) Security valued at fair value using methods determined in good faith by and under the general supervision of the Board of Trustees (see note 2). (Q) Shares received from stock split. Until pay date the shares received from the stock split will price differently. ADR American Depository Receipt. GDR Global Depository Receipt. PLC Public Limited Company. See accompanying Notes to Financial Statements. 61 INTERNATIONAL STOCK FUND PORTFOLIO OF INVESTMENTS OTHER INFORMATION: Industry Concentration as a Percentage of Net Assets
% of Net Assets --------------- Banks 16.8% Oil, Gas & Consumable Fuels 8.9% Pharmaceuticals 6.2% Diversified Telecommunication Services 5.4% Electronic Equipment & Instruments 4.1% Automobiles 4.0% Beverages 4.0% Net Other Assets & Liabilities 3.9% Insurance 3.8% Food Products 3.5% Wireless Telecommunication Services 3.3% Electrical Equipment 2.7% Media 2.6% Diversified Financial Services 2.0% Metals & Mining 2.0% Household Durables 1.9% Construction Materials 1.7% Commercial Services & Supplies 1.6% Multiline Retail 1.5% Tobacco 1.3% Semiconductors & Semiconductor Equipment 1.3% Textiles, Apparel & Luxury Goods 1.2% Road & Rail 1.2% Computers & Peripherals 1.0% Chemicals 1.0% Gas Utilities 0.9% Electric Utilities 0.9% Air Freight & Logistics 0.9% Specialty Retail 0.9% Real Estate 0.8% Hotels, Restaurants & Leisure 0.8% Construction & Engineering 0.7% Food & Staples Retailing 0.7% Industrial Conglomerates 0.7% IT Services 0.6% Leisure Equipment & Products 0.6% Machinery 0.6% Energy Equipment & Services 0.6% Distributors 0.5% Health Care Equipment & Supplies 0.5% Transportation Infrastructure 0.5% Office Electronics 0.4% Aerospace & Defense 0.3% Auto Components 0.3% Personal Products 0.2% Communications Equipment 0.2% Internet Software & Services 0.2% Household Products 0.2% Building Products 0.1% --------- 100.0% =========
See accompanying Notes to Financial Statements. 62 This page is left blank intentionally. 63 STATEMENTS OF ASSETS AND LIABILITIES AS OF OCTOBER 31, 2005
CASH RESERVES BOND HIGH INCOME FUND FUND FUND ------------- ------------- ------------- ASSETS: Investments: Investments at cost $ 17,298,146 $ 137,030,463 $ 74,076,129 Net unrealized appreciation (depreciation) - (599,896) 50,782 ------------- ------------- ------------- Total investments at value 17,298,146 136,430,567 74,126,911 Cash - - 255,175 Foreign currency (cost of $274,414)(Note 2) - - - Receivables: Investments sold - - 577,814 Fund shares sold 16,904 82,336 32,635 Dividends and interest 34,268 1,099,234 1,304,620 Prepaid insurance and registration fees 487 2,971 1,848 Other assets 25,975 36,153 34,870 ------------- ------------- ------------- Total Assets 17,375,780 137,651,261 76,333,873 ------------- ------------- ------------- LIABILITIES: Payables: Investments purchased - 1,088,694 561,488 Fund shares repurchased 2,229 125,104 122,479 Due to Advisor, net 71 32,341 22,034 Upon return of securities loaned - 26,751,508 10,313,907 Administration and transfer agent fees 4,574 28,049 18,456 Distribution fees - Class B 3,890 30,605 13,623 Shareholder servicing fees - 23,298 14,099 Trustees' fees 56 349 209 Accrued expenses and other payables 17,120 41,098 141,006 ------------- ------------- ------------- Total Liabilities 27,940 28,121,046 11,207,301 ------------- ------------- ------------- NET ASSETS $ 17,347,840 $ 109,530,215 $ 65,126,572 ============= ============= ============= NET ASSETS CONSIST OF: Paid-in capital $ 17,347,044 $ 110,965,122 $ 70,013,869 Accumulated undistributed net investment income (loss) 803 37,296 157,170 Accumulated net realized gain (loss) on investments sold and foreign currency related transactions (7) (872,307) (5,095,249) Net unrealized app (dep) of investments (including app (dep) of foreign currency related transactions) - (599,896) 50,782 ------------- ------------- ------------- NET ASSETS $ 17,347,840 $ 109,530,215 $ 65,126,572 ============= ============= ============= CLASS A SHARES: Net Assets $ 11,243,196 $ 61,942,403 $ 43,871,806 Shares of beneficial interest outstanding 11,265,171 6,287,437 6,021,453 Net Asset Value and redemption price per share(1) $ 1.00 $ 9.85 $ 7.29 Sales charge of offering price (2) 0.06 0.49 0.36 ------------- ------------- ------------- Maximum offering price per share $ 1.06 $ 10.34 $ 7.65 ============= ============= ============= CLASS B SHARES: Net Assets $ 6,104,644 $ 47,587,812 $ 21,254,766 Shares of beneficial interest outstanding 6,119,652 4,829,150 2,907,325 Net Asset Value and redemption price per share(1) $ 1.00 $ 9.85 $ 7.31 ============= ============= =============
(1) If applicable, redemption price per share may be reduced by a contingent deferred sales charge and/or redemption fee. See accompanying Notes to Financial Statements. 64
BALANCED GROWTH AND CAPITAL APP. MID-CAP MULTI-CAP INTERNATIONAL FUND INCOME FUND FUND FUND GROWTH FUND STOCK FUND - ------------- ------------- ------------- ------------- ------------- ------------- $ 218,826,788 $ 160,769,994 $ 123,576,102 $ 63,299,799 $ 45,708,213 $ 56,398,501 12,726,779 23,902,379 14,805,519 12,669,419 5,829,744 12,657,268 - ------------- ------------- ------------- ------------- ------------- ------------- 231,553,567 184,672,373 138,381,621 75,969,218 51,537,957 69,055,769 - - - - - 179,206 - - - - - 272,105 - - 1,310,260 - 165,635 400,492 148,508 25,512 28,763 36,061 26,152 32,823 833,337 185,119 116,877 40,517 22,085 81,734 5,692 4,931 3,740 1,927 1,265 1,800 35,282 30,170 29,121 16,967 16,895 59,657 - ------------- ------------- ------------- ------------- ------------- ------------- 232,576,386 184,918,105 139,870,382 76,064,690 51,769,989 70,083,586 - ------------- ------------- ------------- ------------- ------------- ------------- 890,750 - 560,442 54,522 242,640 192,654 332,563 178,799 189,052 83,448 136,828 18,891 95,878 55,050 58,448 32,975 7,215 31,396 25,334,344 6,715,230 5,183,935 9,054,350 4,459,345 - 58,956 63,142 60,041 27,197 24,678 18,681 62,718 46,868 34,971 14,205 9,116 6,875 46,996 37,379 28,153 14,303 9,850 14,701 3,335 821 318 860 139 835 35,716 27,627 23,792 24,239 20,728 52,622 - ------------- ------------- ------------- ------------- ------------- ------------- 26,861,256 7,124,916 6,139,152 9,306,099 4,910,539 336,655 - ------------- ------------- ------------- ------------- ------------- ------------- $ 205,715,130 $ 177,793,189 $ 133,731,230 $ 66,758,591 $ 46,859,450 $ 69,746,931 ============= ============= ============= ============= ============= ============= 198,370,107 $ 179,182,953 $ 144,114,567 $ 49,638,760 $ 58,613,081 $ 56,491,758 3,909 1,330,889 422,539 - - 608,408 (5,385,665) (26,623,032) (25,611,395) 4,450,412 (17,583,375) 1,057 12,726,779 23,902,379 14,805,519 12,669,419 5,829,744 12,645,708 - ------------- ------------- ------------- ------------- ------------- ------------- $ 205,715,130 $ 177,793,189 $ 133,731,230 $ 66,758,591 $ 46,859,450 $ 69,746,931 ============= ============= ============= ============= ============= ============= $ 107,456,745 $ 103,765,582 $ 78,785,245 $ 44,125,935 $ 32,395,376 $ 58,824,769 8,769,973 7,862,025 5,742,153 3,133,994 6,041,006 4,649,058 $ 12.25 $ 13.20 $ 13.72 $ 14.08 $ 5.36 $ 12.65 0.75 0.81 0.84 0.86 0.33 0.77 - ------------- ------------- ------------- ------------- ------------- ------------- $ 13.00 $ 14.01 $ 14.56 $ 14.94 $ 5.69 $ 13.42 ============= ============= ============= ============= ============= ============= $ 98,258,385 $ 74,027,607 $ 54,945,985 $ 22,632,656 $ 14,464,074 $ 10,922,162 8,011,484 5,707,950 4,231,820 1,655,179 2,813,541 875,393 $ 12.26 $ 12.97 $ 12.98 $ 13.67 $ 5.14 $ 12.48 ============= ============= ============= ============= ============= =============
(2) Sales charge of offering price is 5.75% for the Cash Reserves, Balanced, Growth and Income, Capital Appreciation, Mid-Cap, Multi-Cap Growth, and International Stock Funds; and 4.75% for the Bond and High Income Funds. See accompanying Notes to Financial Statements. 65 STATEMENTS OF OPERATIONS FOR THE YEAR ENDED OCTOBER 31, 2005
CASH RESERVES BOND HIGH INCOME FUND FUND FUND ------------- ----------- ----------- INVESTMENT INCOME: Interest $ 520,124 $ 5,288,139 $ 5,043,101 Dividends - - 61,391 Less: Foreign taxes withheld - - (461) Securities lending income - 30,400 42,173 ----------- ----------- ----------- Total investment income 520,124 5,318,539 5,146,204 ----------- ----------- ----------- EXPENSES: Management fees 73,584 563,848 377,280 Administration and transfer agent fees 44,679 229,163 155,680 Registration expenses 16,442 15,927 17,635 Custodian and accounting fees 15,558 33,725 61,350 Professional fees 22,377 32,110 35,635 Reports to shareholder expense 4,159 26,472 16,132 Trustees' fees 1,383 8,657 5,214 Distribution fees -- Class B 52,923 387,734 170,537 Shareholder servicing fees -- Class A - 152,680 114,645 Shareholder servicing fees -- Class B - 129,245 56,846 Compliance expense 742 742 742 Other expenses 831 5,834 4,784 ----------- ----------- ----------- Total expenses before reimbursement/waiver 232,678 1,586,137 1,016,480 Less reimbursement/waiver (78,715) (187,908) (159,911) ----------- ----------- ----------- Total expenses net of reimbursement/waiver 153,963 1,398,229 856,569 ----------- ----------- ----------- NET INVESTMENT INCOME (LOSS) 366,161 3,920,310 4,289,635 ----------- ----------- ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (including net realized gain(loss) on foreign currency related transactions)* (7) 210,525 493,268 Net change in unrealized appreciation (depreciation) on investments (including net unrealized appreciation (depreciation) on foreign currency related transactions)** - (3,572,710) (3,072,100) ----------- ----------- ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (7) (3,362,185) (2,578,832) ----------- ----------- ----------- NET INCREASE IN NET ASSETS FROM OPERATIONS $ 366,154 $ 558,125 $ 1,710,803 =========== =========== ===========
* Includes foreign capital gains taxes paid of $2,580 for the International Stock Fund. ** Net of deferred foreign capital gains taxes of $9,797 for the International Stock Fund. See accompanying Notes to Financial Statements. 66
BALANCED GROWTH AND CAPITAL APP. MID-CAP MULTI-CAP INTERNATIONAL FUND INCOME FUND FUND FUND FUND STOCK FUND - ------------ ------------ ------------ ------------ ------------ ------------- $ 3,427,466 $ 117,222 $ 60,497 $ 62,894 $ 36,600 $ 23,520 2,841,066 4,019,175 2,485,171 999,108 385,287 1,835,078 (2,333) (846) - (453) (3,025) (142,009) 23,817 2,773 2,745 4,643 5,167 - - ------------ ------------ ------------ ------------ ------------ ------------ 6,290,016 4,138,324 2,548,413 1,066,192 424,029 1,716,589 - ------------ ------------ ------------ ------------ ------------ ------------ 1,367,472 989,033 1,041,788 632,671 332,655 654,726 468,174 501,792 470,152 219,170 200,563 147,803 18,190 17,573 17,050 20,248 18,637 16,991 49,569 39,833 34,998 36,221 41,964 139,104 40,906 37,309 35,021 32,469 29,567 43,390 50,020 42,997 32,717 16,693 10,970 16,418 19,920 14,247 10,708 5,471 3,738 5,562 787,854 613,982 459,639 164,556 104,429 70,702 263,333 244,900 194,050 111,641 76,075 132,320 262,618 204,661 153,213 54,852 34,810 23,567 742 742 742 742 742 742 11,156 9,697 7,616 3,163 3,407 4,420 - ------------ ------------ ------------ ------------ ------------ ------------ 3,339,954 2,716,766 2,457,694 1,297,897 857,557 1,255,745 (238,207) (305,185) (335,822) (201,154) (222,629) (187,015) - ------------ ------------ ------------ ------------ ------------ ------------ 3,101,747 2,411,581 2,121,872 1,096,743 634,928 1,068,730 - ------------ ------------ ------------ ------------ ------------ ------------ 3,188,269 1,726,743 426,541 (30,551) (210,899) 647,859 - ------------ ------------ ------------ ------------ ------------ ------------ 7,310,825 (333,713) 4,642,829 4,522,348 3,883,785 8,668,893 579,312 14,146,845 3,474,748 3,767,022 718,895 1,851,149 - ------------ ------------ ------------ ------------ ------------ ------------ 7,890,137 13,813,132 8,117,577 8,289,370 4,602,680 10,520,042 - ------------ ------------ ------------ ------------ ------------ ------------ $ 11,078,406 $ 15,539,875 $ 8,544,118 $ 8,258,819 $ 4,391,781 $ 11,167,901 ============ ============ ============ ============ ============ ============
See accompanying Notes to Financial Statements. 67 STATEMENTS OF CHANGES IN NET ASSETS
CASH RESERVES FUND BOND FUND -------------------------------- -------------------------------- FOR THE YEAR ENDED OCTOBER 31, 2005 2004 2005 2004 - ------------------------------ ------------- ------------- ------------- ------------- NET ASSETS AT BEGINNING OF PERIOD $ 20,348,022 $ 26,306,927 $ 115,169,491 $ 142,693,847 ------------- ------------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income (loss) 366,161 88,130 3,920,310 4,620,393 Net realized gain (loss) (7) 908 210,525 (289,786) Net change in unrealized appreciation (dep) - - (3,572,710) 949,728 ------------- ------------- ------------- ------------- Net increase in net assets from operations 366,154 89,038 558,125 5,280,335 ------------- ------------- ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class A (261,600) (82,767) (2,405,620) (3,000,397) Class B (105,896) (6,271) (1,647,191) (1,851,451) ------------- ------------- ------------- ------------- TOTAL DISTRIBUTIONS (367,496) (89,038) (4,052,811) (4,851,848) CAPITAL STOCK TRANSACTIONS: CLASS A SHARES Shares sold 6,087,557 5,818,594 13,980,460 19,152,211 Issued to shareholders in reinvestment of distributions 258,400 80,983 2,314,294 2,301,902 Shares redeemed (7,018,403) (8,219,510) (12,352,304) (39,928,294) Redemption fees - - 1,381 954 ------------- ------------- ------------- ------------- Net increase (decrease) from capital stock transactions (672,446) (2,319,933) 3,943,831 (18,473,227) ------------- ------------- ------------- ------------- CLASS B SHARES Shares sold 1,672,418 2,883,164 3,970,780 4,574,795 Issued to shareholders in reinvestment of distributions 97,404 5,850 1,512,182 1,700,162 Shares redeemed (4,096,216) (6,527,986) (11,571,383) (15,754,573) ------------- ------------- ------------- ------------- Net increase (decrease) from capital stock transactions (2,326,394) (3,638,972) (6,088,421) (9,479,616) ------------- ------------- ------------- ------------- TOTAL INCREASE (DECREASE) IN NET ASSETS (3,000,182) (5,958,905) (5,639,276) (27,524,356) ------------- ------------- ------------- ------------- NET ASSETS AT END OF PERIOD $ 17,347,840 $ 20,348,022 $ 109,530,215 $ 115,169,491 ============= ============= ============= ============= Undistributed (distributions in excess of) net investment income $ 803 $ 2,138 $ 37,296 $ 37,296 ============= ============= ============= ============= CAPITAL SHARE TRANSACTIONS: CLASS A SHARES Shares sold 6,087,557 5,818,594 1,394,768 1,893,967 Issued to shareholders in reinvestment of distributions 258,400 80,983 230,356 228,022 Shares redeemed (7,018,403) (8,219,510) (1,229,378) (3,955,230) ------------- ------------- ------------- ------------- Net increase (decrease) from capital share transactions (672,446) (2,319,933) 395,746 (1,833,241) ------------- ------------- ------------- ------------- CLASS B SHARES Shares sold 1,672,418 2,883,164 394,605 452,070 Issued to shareholders in reinvestment of distributions 97,404 5,851 150,443 168,339 Shares redeemed (4,096,216) (6,527,986) (1,150,615) (1,561,244) ------------- ------------- ------------- ------------- Net increase (decrease) from capital share transactions (2,326,394) (3,638,971) (605,567) (940,835) ------------- ------------- ------------- -------------
See accompanying Notes to Financial Statements. 68
HIGH INCOME FUND BALANCED FUND GROWTH AND INCOME FUND - -------------------------------- -------------------------------- -------------------------------- 2005 2004 2005 2004 2005 2004 - ------------- ------------- ------------- ------------- ------------- ------------- $ 67,485,810 $ 55,015,483 $ 204,684,264 $ 184,392,585 $ 169,337,191 $ 148,170,626 - ------------- ------------- ------------- ------------- ------------- ------------- 4,289,635 4,376,308 3,188,269 2,957,573 1,726,743 1,449,731 493,268 245,439 7,310,825 (150,478) (333,713) 271,099 (3,072,100) 1,500,379 579,312 10,811,839 14,146,845 14,930,904 - ------------- ------------- ------------- ------------- ------------- ------------- 1,710,803 6,122,126 11,078,406 13,618,934 15,539,875 16,651,734 - ------------- ------------- ------------- ------------- ------------- ------------- (2,947,502) (2,905,696) (2,024,516) (1,810,120) (1,084,836) (804,489) (1,279,041) (1,555,115) (1,230,115) (1,265,754) (377,017) (377,317) - ------------- ------------- ------------- ------------- ------------- ------------- (4,226,543) (4,460,811) (3,254,631) (3,075,874) (1,461,853) (1,181,806) 8,513,095 14,199,310 19,500,679 21,954,494 21,817,829 18,849,548 1,770,738 1,744,485 1,999,000 1,786,159 1,072,530 795,498 (8,840,700) (5,887,322) (16,722,892) (13,352,483) (12,359,804) (9,631,271) 198 141 352 - 43 - - ------------- ------------- ------------- ------------- ------------- ------------- 1,443,331 10,056,614 4,777,139 10,388,170 10,530,598 10,013,775 - ------------- ------------- ------------- ------------- ------------- ------------- 2,949,055 4,153,847 9,776,495 14,477,124 5,643,751 8,114,554 1,035,777 1,235,860 1,199,896 1,234,785 368,151 368,285 (5,271,661) (4,637,309) (22,546,439) (16,351,460) (22,164,524) (12,799,977) - ------------- ------------- ------------- ------------- ------------- ------------- (1,286,829) 752,398 (11,570,048) (639,551) (16,152,622) (4,317,138) - ------------- ------------- ------------- ------------- ------------- ------------- (2,359,238) 12,470,327 1,030,866 20,291,679 8,455,998 21,166,565 - ------------- ------------- ------------- ------------- ------------- ------------- $ 65,126,572 $ 67,485,810 $ 205,715,130 $ 204,684,264 $ 177,793,189 $ 169,337,191 ============= ============= ============= ============= ============= ============= $ 157,170 $ 37,025 $ 3,909 $ (3,578) $ 1,330,889 $ 1,065,998 ============= ============= ============= ============= ============= ============= 1,133,885 1,907,202 1,594,151 1,895,246 1,686,415 1,600,186 237,816 235,436 163,465 153,740 82,885 68,166 (1,189,373) (793,191) (1,365,001) (1,150,116) (950,793) (817,828) - ------------- ------------- ------------- ------------- ------------- ------------- 182,328 1,349,447 392,615 898,870 818,507 850,524 - ------------- ------------- ------------- ------------- ------------- ------------- 393,564 556,498 799,826 1,243,866 443,034 699,774 138,631 166,370 98,163 106,275 28,784 31,913 (704,210) (626,335) (1,838,903) (1,405,548) (1,733,043) (1,100,560) - ------------- ------------- ------------- ------------- ------------- ------------- (172,015) 96,533 (940,914) (55,407) (1,261,225) (368,873) - ------------- ------------- ------------- ------------- ------------- -------------
See accompanying Notes to Financial Statements. 69 STATEMENTS OF CHANGES IN NET ASSETS
CAPITAL APPRECIATION FUND MID-CAP FUND -------------------------------- -------------------------------- FOR THE YEAR ENDED OCTOBER 31, 2005 2004 2005 2004 - ------------------------------ ------------- ------------- ------------- ------------- NET ASSETS AT BEGINNING OF PERIOD $ 137,218,036 $ 134,565,037 $ 60,207,060 $ 48,311,492 ------------- ------------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income (loss) 426,541 (371,840) (30,551) 286,217 Net realized gain (loss) 4,642,829 3,583,773 4,522,348 2,589,342 Net change in unrealized appreciation (dep) 3,474,748 7,521,371 3,767,022 2,989,970 ------------- ------------- ------------- ------------- Net increase in net assets from operations 8,544,118 10,733,304 8,258,819 5,865,529 ------------- ------------- ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class A (4,002) - (295,803) - Class B - - - - ------------- ------------- ------------- ------------- TOTAL DISTRIBUTIONS (4,002) - (295,803) - CAPITAL STOCK TRANSACTIONS: CLASS A SHARES Shares sold 11,846,637 16,419,030 6,770,681 8,950,886 Issued to shareholders in reinvestment of distributions 3,921 - 263,976 - Shares redeemed (11,623,924) (20,553,236) (8,335,996) (4,441,192) Redemption fees 13 27 1,213 403 ------------- ------------- ------------- ------------- Net increase (decrease) from capital stock transactions 226,647 (4,134,179) (1,300,126) 4,510,097 ------------- ------------- ------------- ------------- CLASS B SHARES Shares sold 3,402,886 5,818,057 3,467,853 3,918,338 Issued to shareholders in reinvestment of distributions - - - - Shares redeemed (15,656,455) (9,764,183) (3,579,212) (2,398,396) ------------- ------------- ------------- ------------- Net increase (decrease) from capital stock transactions (12,253,569) (3,946,126) (111,359) 1,519,942 ------------- ------------- ------------- ------------- TOTAL INCREASE (DECREASE) IN NET ASSETS $ (3,486,806) $ 2,652,999 $ 6,551,531 $ 11,895,568 ============= ============= ============= ============= NET ASSETS AT END OF PERIOD $ 133,731,230 $ 137,218,036 $ 66,758,591 $ 60,207,060 ============= ============= ============= ============= Undistributed net investment income $ 422,539 $ - $ - $ 265,422 ============= ============= ============= ============= CAPITAL SHARE TRANSACTIONS: CLASS A SHARES Shares sold 871,267 1,310,831 502,042 750,450 Issued to shareholders in reinvestment of distributions 286 - 19,715 - Shares redeemed (853,010) (1,623,309) (610,886) (368,375) ------------- ------------- ------------- ------------- Net increase (decrease) from capital share transactions 18,543 (312,478) (89,129) 382,075 ------------- ------------- ------------- ------------- CLASS B SHARES Shares sold 264,215 481,562 263,787 335,906 Issued to shareholders in reinvestment of distributions - - - - Shares redeemed (1,211,040) (812,620) (271,823) (205,169) ------------- ------------- ------------- ------------- Net increase (decrease) from capital share transactions (946,825) (331,058) (8,036) 130,737 ------------- ------------- ------------- -------------
See accompanying Notes to Financial Statements. 70
MULTI-CAP GROWTH FUND INTERNATIONAL STOCK FUND - ---------------------------- ---------------------------- 2005 2004 2005 2004 - ------------ ------------ ------------ ------------ $ 38,927,058 $ 24,300,185 $ 51,473,800 $ 39,470,149 - ------------ ------------ ------------ ------------ (210,899) (306,678) 647,859 300,299 3,883,785 957,765 8,668,893 3,720,000 718,895 1,550,481 1,851,149 3,942,753 - ------------ ------------ ------------ ------------ 4,391,781 2,201,568 11,167,901 7,963,052 - ------------ ------------ ------------ ------------ - - (419,232) (366,092) - - (8,299) (5,505) - ------------ ------------ ------------ ------------ - - (427,531) (371,597) 9,319,697 12,600,469 8,611,712 4,742,731 - - 404,891 355,467 (5,891,137) (2,485,116) (3,252,531) (1,321,126) 36 - 768 46 - ------------ ------------ ------------ ------------ 3,428,596 10,115,353 5,764,840 3,777,118 - ------------ ------------ ------------ ------------ 2,860,783 4,230,494 3,618,865 1,690,657 - - 8,157 5,362 (2,748,768) (1,920,542) (1,859,101) (1,060,941) - ------------ ------------ ------------ ------------ 112,015 2,309,952 1,767,921 635,078 - ------------ ------------ ------------ ------------ $ 7,932,392 $ 14,626,873 $ 18,273,131 $ 12,003,651 ============ ============ ============ ============ $ 46,859,450 $ 38,927,058 $ 69,746,931 $ 51,473,800 ============ ============ ============ ============ $ - $ - $ 608,408 $ 259,120 ============ ============ ============ ============ 1,823,270 2,658,740 720,801 482,726 - - 34,695 36,951 (1,141,602) (519,535) (265,298) (133,210) - ------------ ------------ ------------ ------------ 681,668 2,139,205 490,198 386,467 - ------------ ------------ ------------ ------------ 579,081 920,954 307,425 172,705 - - 705 562 (557,779) (417,791) (158,736) (108,257) - ------------ ------------ ------------ ------------ 21,302 503,163 149,394 65,010 - ------------ ------------ ------------ ------------
See accompanying Notes to Financial Statements. 71 FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CASH RESERVES FUND --------------------------------------------------------------------------- FOR THE YEAR ENDED OCTOBER 31, 2005 2004 2003 2002 2001 - ------------------------------ --------- ------------ ------------ ------------ -------- CLASS A NET ASSET VALUE at beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 --------- ------------ ------------ ------------ -------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.02 0.01 0.00(1) 0.01 0.04 --------- ------------ ------------ ------------ -------- Total from investment operations 0.02 0.01 0.00 0.01 0.04 --------- ------------ ------------ ------------ -------- LESS DISTRIBUTIONS: Distributions from net investment income (0.02) (0.01) (0.00)(1) (0.01) (0.04) --------- ------------ ------------ ------------ -------- Total distributions (0.02) (0.01) (0.00) (0.01) (0.04) --------- ------------ ------------ ------------ -------- Net increase (decrease) in net asset value - - - - - --------- ------------ ------------ ------------ -------- NET ASSET VALUE at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ========= ============ ============ ============ ======== TOTAL RETURN (2) 2.33% 0.68% 0.75% 1.57% 4.50% RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $ 11,243 $ 11,916 $ 14,236 $ 16,487 $ 11,508 Ratios of expenses to average net assets Before reimbursement of expenses by Advisor 0.98% 0.82% 0.87% 0.99% 1.25% After reimbursement of expenses by Advisor 0.55% 0.55% 0.55% 0.55% 0.55% Ratio of net investment income to average net assets After reimbursement of expenses by Advisor 2.30% 0.68% 0.75% 1.46% 3.96% CLASS B NET ASSET VALUE at beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 --------- ------------ ------------ ------------ -------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.02 0.00(1) 0.00(1) 0.01 0.04 --------- ------------ ------------ ------------ -------- Total from investment operations 0.02 0.00 0.00 0.01 0.04 --------- ------------ ------------ ------------ -------- LESS DISTRIBUTIONS: Distributions from net investment income (0.02) - (0.00)(1) (0.01) (0.04) --------- ------------ ------------ ------------ -------- Total distributions (0.02) - (0.00) (0.01) (0.04) --------- ------------ ------------ ------------ -------- Net increase (decrease) in net asset value - 0.00 - - - --------- ------------ ------------ ------------ -------- NET ASSET VALUE at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ========= ============ ============ ============ ======== TOTAL RETURN (2) 1.57% 0.07% 0.08% 0.81% 3.72% RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $ 6,105 $ 8,432 $ 12,071 $ 17,636 $ 9,571 Ratios of expenses to average net assets: Before reimbursement of expenses by Advisor 1.73% 1.57% 1.62% 1.74% 2.00% After reimbursement of expenses by Advisor 1.30% 1.15%(3) 1.23%(3) 1.30% 1.30% Ratio of net investment income to average net assets After reimbursement of expenses by Advisor 1.49% 0.06% 0.08% 0.71% 3.21%
- ---------- (1) Amounts represent less than $0.005 per share (2) Total return without applicable sales charge. (3) Amount includes fees waived by distributor (Note 3). See accompanying Notes to Financial Statements. 72 FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
BOND FUND ------------------------------------------------------------------------ FOR THE YEAR ENDED OCTOBER 31, 2005 2004 2003 2002 2001 - ------------------------------ ---------- ---------- ---------- ---------- ---------- CLASS A NET ASSET VALUE at beginning of period $ 10.17 $ 10.12 $ 10.17 $ 10.23 $ 9.57 ---------- ---------- ---------- ---------- ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.39 0.37 0.40 0.47 0.55 Net realized and unrealized gain (loss) (0.31) 0.07 (0.05) (0.06)(2) 0.67 ---------- ---------- ---------- ---------- ---------- Total from investment operations 0.08 0.44 0.35 0.41 1.22 ---------- ---------- ---------- ---------- ---------- LESS DISTRIBUTIONS: Distributions from net investment income (0.40) (0.39) (0.40) (0.47) (0.56) ---------- ---------- ---------- ---------- ---------- Total distributions (0.40) (0.39) (0.40) (0.47) (0.56) ---------- ---------- ---------- ---------- ---------- Net increase (decrease) in net asset value (0.32) 0.05 (0.05) (0.06) 0.66 ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE at end of period $ 9.85 $ 10.17 $ 10.12 $ 10.17 $ 10.23 ========== ========== ========== ========== ========== TOTAL RETURN (1) 0.74% 4.46% 3.51% 4.21% 13.07% RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $ 61,942 $ 59,900 $ 78,165 $ 63,069 $ 28,813 Ratios of expenses to average net assets Before reimbursement of expenses by Advisor 1.07% 1.01% 1.10% 1.17% 1.28% After reimbursement of expenses by Advisor 0.90% 0.90% 0.90% 0.90% 0.90% Ratio of net investment income to average net assets After reimbursement of expenses by Advisor 3.82% 3.73% 3.94% 4.62% 5.53% Portfolio Turnover 43% 81% 75% 90% 109% CLASS B NET ASSET VALUE at beginning of period $ 10.17 $ 10.12 $ 10.18 $ 10.24 $ 9.58 ---------- ---------- ---------- ---------- ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.31 0.30 0.33 0.39 0.48 Net realized and unrealized gain (loss) (0.31) 0.07 (0.06) (0.05)(2) 0.66 ---------- ---------- ---------- ---------- ---------- Total from investment operations - 0.37 0.27 0.34 1.14 ---------- ---------- ---------- ---------- ---------- LESS DISTRIBUTIONS: Distributions from net investment income (0.32) (0.32) (0.33) (0.40) (0.48) ---------- ---------- ---------- ---------- ---------- Total distributions (0.32) (0.32) (0.33) (0.40) (0.48) ---------- ---------- ---------- ---------- ---------- Net increase (decrease) in net asset value (0.32) 0.05 (0.06) (0.06) 0.66 ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE at end of period $ 9.85 $ 10.17 $ 10.12 $ 10.18 $ 10.24 ========== ========== ========== ========== ========== TOTAL RETURN (1) (0.01)% 3.68% 2.64% 3.44% 12.23% RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $ 47,588 $ 55,269 $ 64,529 $ 60,517 $ 31,119 Ratios of expenses to average net assets Before reimbursement of expenses by Advisor 1.82% 1.76% 1.85% 1.92% 2.03% After reimbursement of expenses by Advisor 1.65% 1.65% 1.65% 1.65% 1.65% Ratio of net investment income to average net assets After reimbursement of expenses by Advisor 3.08% 2.95% 3.19% 3.87% 4.78% Portfolio Turnover 43% 81% 75% 90% 109%
- ---------- (1) Total return without applicable sales charge. (2) The amount shown for a share outstanding does not correspond with the aggregate net gain (loss) on investments due to the timing of sales and repurchases of shares in relation to fluctuating market values of the investments of the fund. See accompanying Notes to Financial Statements. 73 FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
HIGH INCOME FUND ------------------------------------------------------------------------ FOR THE YEAR ENDED OCTOBER 31, 2005 2004 2003 2002 2001 - ------------------------------ ---------- ---------- ---------- ---------- ---------- CLASS A NET ASSET VALUE at beginning of period $ 7.56 $ 7.36 $ 6.57 $ 7.13 $ 8.02 ---------- ---------- ---------- ---------- ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.49 0.55 0.54 0.58 0.74 Net realized and unrealized gain (loss) (0.28) 0.21 0.80 (0.55) (0.88) ---------- ---------- ---------- ---------- ---------- Total from investment operations 0.21 0.76 1.34 0.03 (0.14) ---------- ---------- ---------- ---------- ---------- LESS DISTRIBUTIONS: Distributions from net investment income (0.48) (0.56) (0.55) (0.59) (0.75) ---------- ---------- ---------- ---------- ---------- Total distributions (0.48) (0.56) (0.55) (0.59) (0.75) ---------- ---------- ---------- ---------- ---------- Net increase (decrease) in net asset value (0.27) 0.20 0.79 (0.56) (0.89) ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE at end of period $ 7.29 $ 7.56 $ 7.36 $ 6.57 $ 7.13 ========== ========== ========== ========== ========== TOTAL RETURN (1) 2.85% 10.73% 21.09% 0.33% (1.94)% RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $ 43,872 $ 44,137 $ 33,024 $ 18,055 $ 10,939 Ratios of expenses to average net assets Before reimbursement of expenses by Advisor 1.23% 1.16% 1.38% 1.59% 1.68% After reimbursement of expenses by Advisor 1.00% 1.00% 1.00% 1.00% 1.00% Ratio of net investment income to average net assets After reimbursement of expenses by Advisor 6.50% 7.37% 7.73% 8.55% 9.75% Portfolio Turnover 81%(2) 60% 58% 47% 38% CLASS B NET ASSET VALUE at beginning of period $ 7.58 $ 7.37 $ 6.59 $ 7.14 $ 8.04 ---------- ---------- ---------- ---------- ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.43 0.49 0.49 0.54 0.69 Net realized and unrealized gain (loss) (0.28) 0.22 0.78 (0.55) (0.89) ---------- ---------- ---------- ---------- ---------- Total from investment operations 0.15 0.71 1.27 (0.01) (0.20) ---------- ---------- ---------- ---------- ---------- LESS DISTRIBUTIONS: Distributions from net investment income (0.42) (0.50) (0.49) (0.54) (0.70) ---------- ---------- ---------- ---------- ---------- Total distributions (0.42) (0.50) (0.49) (0.54) (0.70) ---------- ---------- ---------- ---------- ---------- Net increase (decrease) in net asset value (0.27) 0.21 0.78 (0.55) (0.90) ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE at end of period $ 7.31 $ 7.58 $ 7.37 $ 6.59 $ 7.14 ========== ========== ========== ========== ========== TOTAL RETURN (1) 2.06% 10.02% 19.96% (0.27)% (2.77)% RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $ 21,255 $ 23,349 $ 21,992 $ 15,561 $ 15,063 Ratios of expenses to average net assets Before reimbursement of expenses by Advisor 1.98% 1.91% 2.13% 2.34% 2.43% After reimbursement of expenses by Advisor 1.75% 1.75% 1.75% 1.75% 1.75% Ratio of net investment income to average net assets After reimbursement of expenses by Advisor 5.75% 6.63% 6.98% 7.80% 9.00% Portfolio Turnover 81%(2) 60% 58% 47% 38%
- ---------- (1) Total return without applicable sales charge. (2) Subadvisor change February 28, 2005. See accompanying Notes to Financial Statements. 74 FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
BALANCED FUND --------------------------------------------------------------------------- FOR THE YEAR ENDED OCTOBER 31, 2005 2004 2003 2002 2001 - ------------------------------ ----------- ----------- ----------- ----------- ----------- CLASS A NET ASSET VALUE at beginning of period $ 11.81 $ 11.18 $ 10.16 $ 11.28 $ 12.65 ----------- ----------- ----------- ----------- ----------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.24 0.22 0.25 0.28 0.30 Net realized and unrealized gain (loss) 0.44 0.64 1.02 (1.12) (1.37) ----------- ----------- ----------- ----------- ----------- Total from investment operations 0.68 0.86 1.27 (0.84) (1.07) ----------- ----------- ----------- ----------- ----------- LESS DISTRIBUTIONS: Distributions from net investment income (0.24) (0.23) (0.25) (0.28) (0.30) Distributions from capital gains - - - (0.00)(1) - ----------- ----------- ----------- ----------- ----------- Total distributions (0.24) (0.23) (0.25) (0.28) (0.30) ----------- ----------- ----------- ----------- ----------- Net increase (decrease) in net asset value 0.44 0.63 1.02 (1.12) (1.37) ----------- ----------- ----------- ----------- ----------- NET ASSET VALUE at end of period $ 12.25 $ 11.81 $ 11.18 $ 10.16 $ 11.28 =========== =========== =========== =========== =========== TOTAL RETURN (2) 5.74% 7.71% 12.72% (7.59)% (8.54)% RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $ 107,457 $ 98,900 $ 83,606 $ 70,389 $ 61,836 Ratios of expenses to average net assets Before reimbursement of expenses by Advisor 1.21% 1.17% 1.32% 1.30% 1.35% After reimbursement of expenses by Advisor 1.10% 1.10% 1.10% 1.10% 1.10% Ratio of net investment income to average net assets After reimbursement of expenses by Advisor 1.88% 1.88% 2.38% 2.56% 2.55% Portfolio Turnover 34% 39% 35% 48% 57% CLASS B NET ASSET VALUE at beginning of period $ 11.82 $ 11.19 $ 10.17 $ 11.29 $ 12.66 ----------- ----------- ----------- ----------- ----------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.14 0.13 0.17 0.20 0.21 Net realized and unrealized gain (loss) 0.44 0.64 1.02 (1.12) (1.37) ----------- ----------- ----------- ----------- ----------- Total from investment operations 0.58 0.77 1.19 (0.92) (1.16) ----------- ----------- ----------- ----------- ----------- LESS DISTRIBUTIONS: Distributions from net investment income (0.14) (0.14) (0.17) (0.20) (0.21) Distributions from capital gains - - - (0.00)(1) - ----------- ----------- ----------- ----------- ----------- Total distributions (0.14) (0.14) (0.17) (0.20) (0.21) ----------- ----------- ----------- ----------- ----------- Net increase (decrease) in net asset value 0.44 0.63 1.02 (1.12) (1.37) ----------- ----------- ----------- ----------- ----------- NET ASSET VALUE at end of period $ 12.26 $ 11.82 $ 11.19 $ 10.17 $ 11.29 =========== =========== =========== =========== =========== TOTAL RETURN (2) 4.94% 6.90% 11.87% (8.27)% (9.22)% RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $ 98,258 $ 105,784 $ 100,787 $ 90,903 $ 92,054 Ratios of expenses to average net assets Before reimbursement of expenses by Advisor 1.96% 1.92% 2.07% 2.05% 2.10% After reimbursement of expenses by Advisor 1.85% 1.85% 1.85% 1.85% 1.85% Ratio of net investment income to average net assets After reimbursement of expenses by Advisor 1.15% 1.14% 1.63% 1.81% 1.80% Portfolio Turnover 34% 39% 35% 48% 57%
- ---------- (1) Amounts represent less than $0.005 per share. (2) Total return without applicable sales charge. See accompanying Notes to Financial Statements. 75 FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
GROWTH AND INCOME FUND ---------------------------------------------------------------------------- FOR THE YEAR ENDED OCTOBER 31, 2005 2004 2003 2002 2001 - ------------------------------ ------------ ------------ ------------ ------------ ------------ CLASS A NET ASSET VALUE at beginning of period $ 12.19 $ 11.05 $ 9.37 $ 11.14 $ 14.06 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.16 0.14 0.12 0.10(1) 0.06 Net realized and unrealized gain (loss) 1.00 1.12 1.64 (1.82) (2.92) ------------ ------------ ------------ ------------ ------------ Total from investment operations 1.16 1.26 1.76 (1.72) (2.86) ------------ ------------ ------------ ------------ ------------ LESS DISTRIBUTIONS: Distributions from net investment income (0.15) (0.12) (0.08) (0.05) (0.06) ------------ ------------ ------------ ------------ ------------ Total distributions (0.15) (0.12) (0.08) (0.05) (0.06) ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in net asset value 1.01 1.14 1.68 (1.77) (2.92) ------------ ------------ ------------ ------------ ------------ NET ASSET VALUE at end of period $ 13.20 $ 12.19 $ 11.05 $ 9.37 $ 11.14 ============ ============ ============ ============ ============ TOTAL RETURN (2) 9.56% 11.48% 18.95% (15.51)% (20.42)% RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $ 103,765 $ 85,855 $ 68,406 $ 53,896 $ 55,966 Ratios of expenses to average net assets Before reimbursement of expenses by Advisor 1.17% 1.13% 1.35% 1.30% 1.29% After reimbursement of expenses by Advisor 1.00% 1.00% 1.00% 1.00% 1.00% Ratio of net investment income to average net assets After reimbursement of expenses by Advisor 1.29% 1.26% 1.29% 0.91% 0.60% Portfolio Turnover 12% 16% 20% 18% 24% CLASS B NET ASSET VALUE at beginning of period $ 11.98 $ 10.87 $ 9.24 $ 11.02 $ 13.96 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.09 0.06 0.05 0.02(1) (0.02) Net realized and unrealized gain (loss) 0.96 1.10 1.60 (1.79) (2.92) ------------ ------------ ------------ ------------ ------------ Total from investment operations 1.05 1.16 1.65 (1.77) (2.94) ------------ ------------ ------------ ------------ ------------ LESS DISTRIBUTIONS: Distributions from net investment income (0.06) (0.05) (0.02) (0.01) - ------------ ------------ ------------ ------------ ------------ Total distributions (0.06) (0.05) (0.02) (0.01) - ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in net asset value 0.99 1.11 1.63 (1.78) (2.94) ------------ ------------ ------------ ------------ ------------ NET ASSET VALUE at end of period $ 12.97 $ 11.98 $ 10.87 $ 9.24 $ 11.02 ============ ============ ============ ============ ============ TOTAL RETURN (2) 8.73% 10.70% 17.93% (16.09)% (21.06)% RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $ 74,028 $ 83,482 $ 79,765 $ 72,329 $ 97,081 Ratios of expenses to average net assets Before reimbursement of expenses by Advisor 1.92% 1.89% 2.10% 2.05% 2.04% After reimbursement of expenses by Advisor 1.75% 1.75% 1.75% 1.75% 1.75% Ratio of net investment income to average net assets After reimbursement of expenses by Advisor 0.57% 0.53% 0.54% 0.16% (0.15)% Portfolio Turnover 12% 16% 20% 18% 24%
- ---------- (1) Calculated based on average shares outstanding. (2) Total return without applicable sales charge. See accompanying Notes to Financial Statements. 76 FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CAPITAL APPRECIATION FUND ------------------------------------------------------------------------ FOR THE YEAR ENDED OCTOBER 31, 2005 2004 2003 2002 2001 - ------------------------------ ---------- ---------- ---------- ---------- ---------- CLASS A NET ASSET VALUE at beginning of period $ 12.87 $ 11.88 $ 9.63 $ 12.81 $ 16.44 ---------- ---------- ---------- ---------- ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.08 0.01 (0.00)(1) (0.02)(2) (0.04)(2) Net realized and unrealized gain (loss) 0.77 0.98 2.25 (3.11) (3.59) ---------- ---------- ---------- ---------- ---------- Total from investment operations 0.85 0.99 2.25 (3.13) (3.63) ---------- ---------- ---------- ---------- ---------- LESS DISTRIBUTIONS: Distributions from net investment income (0.00)(1) Distributions from capital gains - - - (0.05) - ---------- ---------- ---------- ---------- ---------- Total distributions - - - (0.05) - ---------- ---------- ---------- ---------- ---------- Net increase (decrease) in net asset value 0.85 0.99 2.25 (3.18) (3.63) ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE at end of period $ 13.72 $ 12.87 $ 11.88 $ 9.63 $ 12.81 ========== ========== ========== ========== ========== TOTAL RETURN (3) 6.61% 8.33% 23.36% (24.54)% (22.08)% RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $ 78,785 $ 73,674 $ 71,733 $ 55,865 $ 59,801 Ratios of expenses to average net assets Before reimbursement of expenses by Advisor 1.44% 1.38% 1.64% 1.58% 1.58% After reimbursement of expenses by Advisor 1.20% 1.20% 1.20% 1.20% 1.20% Ratio of net investment income to average net assets After reimbursement of expenses by Advisor 0.62% 0.08% 0.05% (0.16)% (0.30)% Portfolio Turnover 18% 27% 25% 25% 30% CLASS B NET ASSET VALUE at beginning of period $ 12.27 $ 11.40 $ 9.31 $ 12.48 $ 16.13 ---------- ---------- ---------- ---------- ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (0.01) (0.08) (0.08) (0.11)(2) (0.15)(2) Net realized and unrealized gain (loss) 0.72 0.95 2.17 (3.01) (3.50) ---------- ---------- ---------- ---------- ---------- Total from investment operations 0.71 0.87 2.09 (3.12) (3.65) ---------- ---------- ---------- ---------- ---------- LESS DISTRIBUTIONS: Distributions from capital gains - - - (0.05) - ---------- ---------- ---------- ---------- ---------- Total distributions - - - (0.05) - ---------- ---------- ---------- ---------- ---------- Net increase (decrease) in net asset value 0.71 0.87 2.09 (3.17) (3.65) ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE at end of period $ 12.98 $ 12.27 $ 11.40 $ 9.31 $ 12.48 ========== ========== ========== ========== ========== TOTAL RETURN (3) 5.79% 7.63% 22.45% (25.12)% (22.63)% RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $ 54,946 $ 63,544 $ 62,832 $ 54,600 $ 72,667 Ratios of expenses to average net assets Before reimbursement of expenses by Advisor 2.19% 2.13% 2.39% 2.33% 2.33% After reimbursement of expenses by Advisor 1.94% 1.95% 1.95% 1.95% 1.95% Ratio of net investment income to average net assets After reimbursement of expenses by Advisor (0.09)% (0.67)% (0.70)% (0.91)% (1.05)% Portfolio Turnover 18% 27% 25% 25% 30%
- ---------- (1) Amounts represent less than $0.005 per share. (2) Calculated based on average shares outstanding. (3) Total return without applicable sales charge. See accompanying Notes to Financial Statements. 77 FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
MID-CAP FUND --------------------------------------------------------------------------- INCEPTION FOR THE YEAR ENDED OCTOBER 31, 2005 2004 2003 2002 to 10-31-01(1) - ------------------------------ --------- ------------ ------------ ------------ -------------- CLASS A NET ASSET VALUE at beginning of period $ 12.44 $ 11.12 $ 8.64 $ 9.48 $ 10.00 --------- ------------ ------------ ------------ ----------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.03 0.09 0.01 0.02(2) 0.00(2,3) Net realized and unrealized gain (loss) 1.70 1.23 2.47 (0.85) (0.52) --------- ------------ ------------ ------------ ----------- Total from investment operations 1.73 1.32 2.48 (0.83) (0.52) --------- ------------ ------------ ------------ ----------- LESS DISTRIBUTIONS: Distributions from net investment income (0.09) - - (0.01) - Distributions from capital gains - - - (0.00)(3) - --------- ------------ ------------ ------------ ----------- Total distributions (0.09) - - (0.01) - --------- ------------ ------------ ------------ ----------- Net increase (decrease) in net asset value 1.64 1.32 2.48 (0.84) (0.52) --------- ------------ ------------ ------------ ----------- NET ASSET VALUE at end of period $ 14.08 $ 12.44 $ 11.12 $ 8.64 $ 9.48 ========= ============ ============ ============ =========== TOTAL RETURN (4) 13.95% 11.87% 28.70% (8.79)% (5.20)%(5) RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $ 44,126 $ 40,103 $ 31,591 $ 22,650 $ 15,345 Ratios of expenses to average net assets Before reimbursement of expenses by Advisor 1.70% 1.61% 1.92% 1.97% 2.29%(6) After reimbursement of expenses by Advisor 1.40% 1.40% 1.40% 1.40% 1.40%(6) Ratio of net investment income to average net assets After reimbursement of expenses by Advisor 0.20% 0.77% 0.17% 0.18% 0.03%(6) Portfolio Turnover 37% 21% 25% 31% 30%(5) CLASS B NET ASSET VALUE at beginning of period $ 12.09 $ 10.91 $ 8.54 $ 9.43 $ 10.00 --------- ------------ ------------ ------------ ----------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (0.07) 0.00 3 (0.05) (0.06)(2) (0.05)(2) Net realized and unrealized gain (loss) 1.65 1.18 2.42 (0.83) (0.52) --------- ------------ ------------ ------------ ----------- Total from investment operations 1.58 1.18 2.37 (0.89) (0.57) --------- ------------ ------------ ------------ ----------- LESS DISTRIBUTIONS: Distributions from net investment income - - - - - Distributions from capital gains - - - (0.00)(3) - --------- ------------ ------------ ------------ ----------- Total distributions - - - (0.00) - --------- ------------ ------------ ------------ ----------- Net increase (decrease) in net asset value 1.58 1.18 2.37 (0.89) (0.57) --------- ------------ ------------ ------------ ----------- NET ASSET VALUE at end of period $ 13.67 $ 12.09 $ 10.91 $ 8.54 $ 9.43 ========= ============ ============ ============ =========== TOTAL RETURN (4) 13.07% 10.82% 27.75% (9.43)% (5.70)%(5) RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $ 22,633 $ 20,104 $ 16,721 $ 11,765 $ 6,192 Ratios of expenses to average net assets Before reimbursement of expenses by Advisor 2.45% 2.36% 2.67% 2.72% 3.04%(6) After reimbursement of expenses by Advisor 2.15% 2.15% 2.15% 2.15% 2.15%(6) Ratio of net investment income to average net assets After reimbursement of expenses by Advisor (0.55)% 0.01% (0.58)% (0.57)% (0.72)%(6) Portfolio Turnover 37% 21% 25% 31% 30 %(5)
- ---------- (1) Commenced investment operations 2/28/2001. (2) Calculated based on average shares outstanding. (3) Amounts represent less than $0.005 per share. (4) Total return without applicable sales charge. (5) Not annualized. (6) Annualized. See accompanying Notes to Financial Statements. 78 FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
MULTI-CAP GROWTH FUND ---------------------------------------------------------------------- FOR THE YEAR ENDED OCTOBER 31, 2005 2004 2003 2002 2001 - ------------------------------ ---------- ---------- ---------- ---------- ---------- CLASS A NET ASSET VALUE at beginning of period $ 4.83 $ 4.46 $ 3.49 $ 4.27 $ 7.87 ---------- ---------- ---------- ---------- ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment loss (0.01) (0.03) (0.03) (0.02)(1) (0.02) Net realized and unrealized gain (loss) 0.54 0.40 1.00 (0.76) (3.58) ---------- ---------- ---------- ---------- ---------- Total from investment operations 0.53 0.37 0.97 (0.78) (3.60) ---------- ---------- ---------- ---------- ---------- Net increase (decrease) in net asset value 0.53 0.37 0.97 (0.78) (3.60) ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE at end of period $ 5.36 $ 4.83 $ 4.46 $ 3.49 $ 4.27 ========== ========== ========== ========== ========== TOTAL RETURN (2) 10.97% 8.30% 27.79% (18.27)% (45.74)% RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $ 32,395 $ 25,897 $ 14,366 $ 7,915 $ 13,263 Ratios of expenses to average net assets Before reimbursement of expenses by Advisor 1.69% 1.62% 2.40% 2.60% 2.36% After reimbursement of expenses by Advisor 1.19% 1.20% 1.20% 1.20% 1.20% Ratio of net investment income to average net assets After reimbursement of expenses by Advisor (0.25)% (0.64)% (0.42)% (0.55)% (0.46)% Portfolio Turnover 92% 71% 123% 214% 230% CLASS B NET ASSET VALUE at beginning of period $ 4.67 $ 4.34 $ 3.42 $ 4.22 $ 7.83 ---------- ---------- ---------- ---------- ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment loss (0.05) (0.06) (0.02) (0.05)(1) (0.07) Net realized and unrealized gain (loss) 0.52 0.39 0.94 (0.75) (3.54) ---------- ---------- ---------- ---------- ---------- Total from investment operations 0.47 0.33 0.92 (0.80) (3.61) ---------- ---------- ---------- ---------- ---------- Net increase (decrease) in net asset value 0.47 0.33 0.92 (0.80) (3.61) ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE at end of period $ 5.14 $ 4.67 $ 4.34 $ 3.42 $ 4.22 ========== ========== ========== ========== ========== TOTAL RETURN (2) 10.06% 7.60% 26.90% (18.96)% (46.10)% RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $ 14,464 $ 13,030 $ 9,935 $ 6,050 $ 6,902 Ratios of expenses to average net assets Before reimbursement of expenses by Advisor 2.44% 2.37% 3.15% 3.35% 3.11% After reimbursement of expenses by Advisor 1.94% 1.95% 1.95% 1.95% 1.95% Ratio of net investment income to average net assets After reimbursement of expenses by Advisor (0.98)% (1.39)% (1.17)% (1.30)% (1.21)% Portfolio Turnover 92% 71% 123% 214% 230%
- ---------- (1) Calculated based on average shares outstanding. (2) Total return without applicable sales charge. See accompanying Notes to Financial Statements. 79 FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
INTERNATIONAL STOCK FUND ------------------------------------------------------------------------ FOR THE YEAR ENDED OCTOBER 31, 2005 2004 2003 2002 2001 - ------------------------------ --------- ------------ ------------ ------------ ------- CLASS A NET ASSET VALUE at beginning of period $ 10.56 $ 8.92 $ 7.00 $ 7.31 $ 9.55 --------- ------------ ------------ ------------ ------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.14 0.08 0.10 0.07(2) 0.04 Net realized and unrealized gain (loss) 2.05 1.66 1.88 (0.38) (2.21) --------- ------------ ------------ ------------ ------- Total from investment operations 2.19 1.74 1.98 (0.31) (2.17) --------- ------------ ------------ ------------ ------- LESS DISTRIBUTIONS: Distributions from net investment income (0.10) (0.10) (0.06) - (0.07) --------- ------------ ------------ ------------ ------- Total distributions (0.10) (0.10) (0.06) - (0.07) --------- ------------ ------------ ------------ ------- Net increase (decrease) in net asset value 2.09 1.64 1.92 (0.31) (2.24) --------- ------------ ------------ ------------ ------- NET ASSET VALUE at end of period $ 12.65 $ 10.56 $ 8.92 $ 7.00 $ 7.31 ========= ============ ============ ============ ======= TOTAL RETURN (3) 20.81% 19.56% 28.46% (4.24)% (22.88)% RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $ 58,825 $ 43,915 $ 33,664 $ 25,732 $25,829 Ratios of expenses to average net assets Before reimbursement of expenses by Advisor 1.90% 1.85% 2.11% 2.29% 2.14% After reimbursement of expenses by Advisor 1.60% 1.60% 1.60% 1.60% 1.60% Ratio of net investment income to average net assets After reimbursement of expenses by Advisor 1.15% 0.76% 1.30% 0.69% 0.45% Portfolio Turnover 64% 45% 34% 47% 86% CLASS B NET ASSET VALUE at beginning of period $ 10.41 $ 8.78 $ 6.89 $ 7.25 $ 9.48 --------- ------------ ------------ ------------ ------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.04 (0.00)(1) 0.04 0.02(2) (0.02) Net realized and unrealized gain (loss) 2.04 1.64 1.85 (0.38) (2.20) --------- ------------ ------------ ------------ ------- Total from investment operations 2.08 1.64 1.89 (0.36) (2.22) --------- ------------ ------------ ------------ ------- LESS DISTRIBUTIONS: Distributions from net investment income (0.01) (0.01) (0.00)(1) - (0.01) --------- ------------ ------------ ------------ ------- Total distributions (0.01) (0.01) (0.00) - (0.01) --------- ------------ ------------ ------------ ------- Net increase (decrease) in net asset value 2.07 1.63 1.89 (0.36) (2.23) --------- ------------ ------------ ------------ ------- NET ASSET VALUE at end of period $ 12.48 $ 10.41 $ 8.78 $ 6.89 $ 7.25 ========= ============ ============ ============ ======= TOTAL RETURN (3) 20.00% 18.67% 27.44% (4.97)% (23.48)% RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $ 10,922 $ 7,559 $ 5,806 $ 4,591 $ 4,787 Ratios of expenses to average net assets Before reimbursement of expenses by Advisor 2.65% 2.59% 2.86% 3.04% 2.89% After reimbursement of expenses by Advisor 2.35% 2.35% 2.35% 2.35% 2.35% Ratio of net investment income to average net assets After reimbursement of expenses by Advisor 0.41% 0.03% 0.55% (0.06)% (0.30)% Portfolio Turnover 64% 45% 34% 47% 86%
- ---------- (1) Amounts represent less than $0.005 per share. (2) Calculated based on average shares outstanding. (3) Total return without applicable sales charge. See accompanying Notes to Financial Statements. 80 This page is left blank intentionally. 81 NOTES TO FINANCIAL STATEMENTS 1. ORGANIZATION MEMBERS Mutual Funds, a Delaware Business Trust (the "Trust"), is registered under the Investment Company Act of 1940, as amended (the "1940 Act") as an open-end, management investment company. As of the date of this report, the Trust offers nine funds (individually, a "fund," collectively, the "Funds") each with two classes of shares: Class A and Class B. The Declaration of Trust permits the Trustees to issue an unlimited number of shares of beneficial interest of the Trust without par value. Each class of shares represents an interest in the assets of the respective fund and has identical voting, dividend, liquidation and other rights, except that each class of shares bears its own distribution fees and servicing fees, if any, and its proportional share of fund level expenses, is subject to its own sales charges, if any, and has exclusive voting rights on matters pertaining to Rule 12b-1 of the 1940 Act as it relates to that class. The Trust has entered into an Investment Advisory Agreement with MEMBERS Capital Advisors, Inc. (the "Investment Advisor"). The Investment Advisor has entered into subadvisory agreements with certain subadvisors ("Subadvisors") for the management of the investments of the High Income Fund, Multi-Cap Growth Fund, International Stock Fund, and a portion of the Mid-Cap Fund. The accompanying financial statements include the Cash Reserves Fund, Bond Fund, High Income Fund, Balanced Fund, Growth and Income Fund, Capital Appreciation Fund, Mid-Cap Fund, Multi-Cap Growth Fund and International Stock Fund. 2. SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reported period. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by each fund in the preparation of its financial statements. PORTFOLIO VALUATION: Securities and other investments are valued as follows: Equity securities and exchange-traded funds listed on any U.S. or foreign stock exchange or quoted on the National Association of Securities Dealers Automated Quotation System ("NASDAQ") are valued at the last quoted sale price or official closing price on that exchange or NASDAQ on the valuation day (provided that, for securities traded on NASDAQ, the Funds utilize the NASDAQ Official Closing Price). If no sale occurs, (a) equities traded on a U.S. exchange or on NASDAQ are valued at the mean between the closing bid and closing asked prices and (b) equity securities traded on a foreign exchange are valued at the official bid price. Debt securities purchased with a remaining maturity of 61 days or more are valued by a pricing service selected by the Trust or on the basis of dealer-supplied quotations. Investments in shares of open-ended mutual funds, including money market funds, are valued at their daily net asset value (NAV) which is calculated as of 3:00 p.m. Central Time on each day on which the New York Stock Exchange is open for business. NAV per share is determined by dividing each fund's total net assets by the number of shares of such fund outstanding at the time of calculation. Total net assets are determined by adding the total current value of portfolio securities, cash, receivables, and other assets and subtracting liabilities. Short-term instruments having maturities of 60 days or less and all securities in the Cash Reserves Fund are valued on an amortized cost basis. Over-the-counter securities not quoted on NASDAQ are valued at the last sale price on the valuation day. If no sale occurs on the valuation day, an over-the-counter security is valued at the mean between the last bid and asked prices. Over-the-counter options are valued based upon prices provided by market makers in such securities or dealers in such currencies. Financial futures contracts generally are valued at the settlement price established by the exchange on which the contracts are primarily traded. The Advisor's Securities Valuation Committee (the "Committee") shall estimate the fair value of futures positions affected by the daily limit by using its valuation procedures for determining fair value, when necessary. Forward foreign currency exchange contracts are valued based on quotations supplied by dealers in such contracts. The value of all assets and liabilities denominated in foreign currencies will be converted into U.S. dollar values at the noon (Eastern Standard Time) Reuters spot rate. All other securities for which either quotations are not readily available, no other sales have occurred, or do not in the Investment Advisor's opinion, reflect the current market value are appraised at their fair values as determined in good faith by the Investment Advisor and under the general supervision of the Board of Trustees. A fund's investments will be valued at fair value if in the judgment of the Committee an event impacting the value of an investment occurred between the closing time of a security's primary market or exchange (for example, a foreign exchange or market) and the time the fund's share price is calculated at 3:00 p.m. Central Time. Significant events may include, but are not limited to the following: (1) significant fluctuations in domestic markets, foreign markets or foreign currencies; (2) occurrences not directly tied to the securities markets such as natural disasters, armed conflicts or significant government actions; and (3) 82 NOTES TO FINANCIAL STATEMENTS major announcements affecting a single issuer or an entire market or market sector. In responding to a significant event, the Committee would determine the fair value of affected securities considering factors including, but not limited to: index options and futures traded subsequent to the close; ADRs, GDRs or other related receipts; currency spot or forward markets that trade after pricing or foreign exchange; other derivative securities traded after the close such as WEBs and SPDRs. The Committee may rely on an independent fair valuation service to adjust the valuations of foreign equity securities based on specific market-movement parameters established by the Committee and approved by the Trust. SECURITY TRANSACTIONS AND INVESTMENT INCOME: Security transactions are accounted for on a trade date basis. Net realized gains or losses on sales are determined by the identified cost method. Interest income is recorded on an accrual basis. Dividend income is recorded on ex-dividend date. Amortization and accretion are recorded on the effective yield method. FEDERAL INCOME TAXES: It is each fund's policy to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986 applicable to regulated investment companies and to distribute substantially all it's taxable income to its shareholders. Accordingly, no provisions for federal income taxes are recorded in the accompanying financial statements. EXPENSES: Expenses that are directly related to one fund are charged directly to that fund. Other operating expenses are prorated to the Funds on the basis of relative net assets. Class-specific expenses are borne by that class. CLASSES: Income and realized and unrealized gains/losses are allocated to the respective classes on the basis of relative net assets. REPURCHASE AGREEMENTS: Each fund may engage in repurchase agreements. In a repurchase agreement, a security is purchased for a relatively short period (usually not more than 7 days) subject to the obligation to sell it back to the issuer at a fixed time and price plus accrued interest. The Funds will enter into repurchase agreements only with member banks of the Federal Reserve System and with "primary dealers" in U.S. Government securities. As of October 31, 2005, none of the funds have open repurchase agreements. The Trust has established a procedure providing that the securities serving as collateral for each repurchase agreement must be delivered to the Trust's custodian either physically or in book-entry form and that the collateral must be marked to market daily to ensure that each repurchase agreement is fully collateralized at all times. In the event of bankruptcy or other default by a seller of a repurchase agreement, a fund could experience delays in liquidating the underlying securities during the period in which the fund seeks to enforce its rights thereto, possible subnormal levels of income, declines in value of the underlying securities, or lack of access to income during this period and the expense of enforcing its rights. FOREIGN CURRENCY TRANSACTIONS: The books and records are maintained in U.S. dollars. Foreign currency denominated transactions (i.e. market value of investment securities, assets and liabilities, purchases and sales of investment securities, and income and expenses) are translated into U.S. dollars at the current rate of exchange. The High Income Fund, Mid-Cap Fund, Multi-Cap Growth Fund and International Stock Fund report certain foreign currency-related transactions as components of realized gains or losses for financial reporting purposes, whereas such components are treated as ordinary income for federal income tax purposes. The Funds do not isolate the portion of gains and losses on investments in securities that is due to changes in the foreign exchange rates from that which is due to change in market prices of securities. Such amounts are categorized as gain or loss on investments for financial reporting purposes. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS: Each fund, except the Cash Reserves Fund, may purchase and sell forward foreign currency exchange contracts for defensive or hedging purposes. When entering into forward foreign currency exchange contracts, the Funds agree to receive or deliver a fixed quantity of foreign currency for an agreed-upon price on an agreed future date. These contracts are valued daily. The Funds' net assets reflect unrealized gains or losses on the contracts as measured by the difference between the forward foreign currency exchange rates at the dates of entry into the contracts and the forward rates at the reporting date. The Funds realize a gain or a loss at the time the forward foreign currency exchange contracts are settled or closed out with an offsetting contract. Realized and unrealized gains and losses are included in the Statements of Operations. For the year ended October 31, 2005, none of the funds have open forward foreign currency exchange contracts. If a fund enters into a forward foreign currency exchange contract to buy foreign currency for any purpose, the fund will be required to place cash or liquid high grade debt securities in a segregated account with the fund's custodian in an amount equal to the value of the fund's total assets committed to the consummation of the forward contract. If the value of the securities in the segregated account declines, additional cash or securities will be placed in the segregated account so that the value of the account will equal the amount of the fund's commitment with respect to the contract. 83 NOTES TO FINANCIAL STATEMENTS FUTURES CONTRACTS: Each fund, except the Cash Reserves Fund, may purchase and sell futures contracts and purchase and write options on futures contracts. The Funds will engage in futures contracts or related options transactions to hedge certain market positions. Upon entering into a futures contract, the fund is required to pledge to the broker an amount of cash, U.S. Government securities or other assets, equal to a certain percentage of the contract (initial margin deposit). Subsequent payments, known as "variation margin," are made or received by the fund each day, depending on the daily fluctuations in the fair value of the futures contract. When a fund enters into a futures contract, the fund segregates in cash or liquid securities, of any type or maturity, equal in value to the fund's commitment. The fund recognizes a gain or loss equal to the daily change in the value of the futures contracts. Should market conditions move unexpectedly, the fund may not achieve the anticipated benefits of the futures contracts and may realize a loss. As of October 31, 2005, none of the funds have open futures contracts. DELAYED DELIVERY SECURITIES: Each fund may purchase securities on a when-issued or delayed delivery basis. "When-issued" refers to securities whose terms are available and for which a market exists, but that have not been issued. For when-issued or delayed delivery transactions, no payment is made until delivery date, which is typically longer than the normal course of settlement, and often more than a month or more after the purchase. When a fund enters into an agreement to purchase securities on a when-issued or delayed delivery basis, the fund segregates in cash or liquid securities, of any type or maturity, equal in value to the fund's commitment. Losses may arise due to changes in the market value of the underlying securities, if the counterparty does not perform under the contract, or if the issuer does not issue the securities due to political, economic or other factors. For the year ended October 31, 2005, only the High Income Fund entered into such transactions, the market values of which are identified in the fund's Portfolio of Investments. RECLASSIFICATION ADJUSTMENTS: Paid-in capital, undistributed net investment income, and accumulated net realized gain (loss) have been adjusted in the Statements of Assets and Liabilities for permanent book-tax differences for all funds. Differences primarily relate to the tax treatment of net operating losses, paydown gains and losses, foreign currency gains and losses, litigation payments, sales of defaulted bonds, and distributions from real estate investment trusts and passive foreign investment companies. REDEMPTION FEES: The Bond Fund, Balanced Fund, Growth and Income Fund, Capital Appreciation Fund and Multi-Cap Growth Fund will deduct a fee of 2% from redemption proceeds on Class A shares held 5 business days or less. The High Income Fund, Mid-Cap Fund and International Stock Fund will deduct a fee of 2% from redemption proceeds on Class A shares held 30 calendar days or less. Redemption fees are treated as additional paid-in capital to the fund from which the shares are redeemed and are designed to help offset any costs associated with short-term shareholder trading. Please refer to the prospectus for additional information on redemption fees and waivers. 3. ADVISORY, ADMINISTRATION AND DISTRIBUTION AGREEMENTS For its investment advisory services to the Funds, the Investment Advisor is entitled to receive a fee, which is computed at an annualized percentage rate of the average daily value of the net assets of each fund as follows: 0.40% for the Cash Reserves Fund; 0.50% for the Bond Fund; 0.55% for the High Income Fund; 0.65% for the Balanced Fund; 0.55% for the Growth and Income Fund; 0.75% for the Capital Appreciation Fund; 0.95% for the Mid-Cap Fund, 0.75% for the Multi-Cap Growth Fund and 1.05% for the International Stock Fund. The Investment Advisor is solely responsible for the payment of all fees to the Subadvisors. The Subadvisors for the Funds at October 31, 2005, are Shenkman Capital Management, Inc. for the High Income Fund, Wellington Management Company, LLP for a portion of the Mid-Cap Fund and the entire Multi-Cap Growth Fund, and Lazard Asset Management LLC for the International Stock Fund. The Investment Advisor manages the other portion of the Mid-Cap Fund, the Bond Fund, Balanced Fund, Capital Appreciation Fund, Growth and Income Fund, and Cash Reserves Fund. The Investment Advisor has contractually agreed to waive fees and/or reimburse expenses with respect to the Funds ("Expense Cap Agreement") until February 28, 2006, such that total expenses, exclusive of management fees, 12b-1 fees, taxes, interest, service fees, and other extraordinary items will not exceed the following amounts:
FUND CLASS A CLASS B - ---- ------- ------- Cash Reserves .55% 1.30% Bond .90% 1.65% High Income 1.00% 1.75% Balanced 1.10% 1.85% Growth and Income 1.00% 1.75% Capital Appreciation 1.20% 1.95% Mid-Cap 1.40% 2.15% Multi-Cap Growth 1.20% 1.95% International Stock 1.60% 2.35%
For the year ended October 31, 2005, the Investment Advisor reimbursed expenses of $78,715 for the Cash Reserves Fund, $187,908 for the Bond Fund, $159,911 for the High Income Fund, $238,207 for the Balanced Fund, $305,185 for the Growth and 84 NOTES TO FINANCIAL STATEMENTS Income Fund, $335,822 for the Capital Appreciation Fund, $201,154 for the Mid-Cap Fund, $222,629 for the Multi-Cap Growth Fund and $187,015 for the International Stock Fund. Any reimbursements or fee waivers made by the Investment Advisor to a fund are subject to repayment by the fund, to the extent that the fund is able to make the repayment within its Expense Cap Agreement. Under the Expense Cap Agreement, such recoupments must be made within three years, measured on a fiscal year basis, from when the reimbursement or fee reduction occurred.
RECOVERY RECOVERY RECOVERY EXPIRING EXPIRING EXPIRING OCTOBER OCTOBER 31, OCTOBER 31, FUND 31, 2006 2007 2008 - ---- -------- ----------- ---------- Cash Reserves $100,514 $ 58,813 $ 78,715 Bond 284,227 150,645 187,908 High Income 168,808 97,662 159,911 Balanced 363,962 131,637 238,207 Growth and Income 460,975 220,402 305,185 Capital Appreciation 520,392 250,709 335,822 Mid-Cap 205,353 115,700 201,154 Multi-Cap Growth 204,794 140,426 222,629 International Stock 166,715 114,012 187,015
In 2005 the Investment Advisor did not recoup any fees previously waived or reimbursed under the Expense Cap Agreement. CUNA Brokerage Services, Inc. ("CUNA Brokerage") serves as distributor of the Funds. The Trust adopted Distribution Plans (the "Plans") with respect to the Trust's Class A and B shares pursuant to Rule 12b-1 under the 1940 Act. Under the Plans, the Trust will pay service fees for Class A and Class B shares at an aggregate annual rate of 0.25% of each fund's daily net assets attributable to the respective class of shares for all funds except the Cash Reserves Fund. The Trust will also pay distribution fees for Class B shares at an aggregate annual rate of 0.75% of each fund's daily net assets attributable to Class B. The distribution fees are used to reimburse CUNA Brokerage for its distribution expenses with respect to Class B only, including but not limited to: (1) initial and ongoing sales compensation to selling brokers and others engaged in the sale of fund shares, (2) marketing, promotional and overhead expenses incurred in connection with the distribution of fund shares, and (3) interest expenses on unreimbursed distribution expenses. The service fees will be used to compensate selling brokers and others for providing personal and account maintenance services to shareholders. The distributor may from time to time voluntarily agree to waive distribution and/or service fees with respect to the Cash Reserves Fund for the purpose of maintaining a one-day yield or distribution rate of zero. The amount of the daily waiver is equal to the amount required to maintain a minimum daily distribution rate of zero. For the year ended October 31, 2005, no such waivers were made by the distributor. In addition to distribution fees, CUNA Brokerage received sales charges paid by the purchasers or redeemers of the Funds' shares. For the year ended October 31, 2005, sales charges received by CUNA Brokerage were as follows:
AMOUNT PAID ----------------------- FUND CLASS A CLASS B - ---- --------- --------- Cash Reserves $ 51,930 $ 33,748 Bond 243,174 149,699 High Income 118,860 48,514 Balanced 572,383 259,394 Growth and Income 395,195 170,432 Capital Appreciation 230,445 155,300 Mid-Cap 206,425 58,433 Multi-Cap Growth 186,736 43,986 International Stock 160,946 17,855
Certain officers and trustees of the Funds are also officers of the Investment Advisor. The Funds do not compensate their officers or affiliated trustees. Unaffiliated trustees receive from the Trust an attendance fee for each Board or Committee meeting attended, with additional remuneration paid to the "lead" trustee and audit committee chair. 4. DIVIDENDS FROM NET INCOME AND DISTRIBUTIONS OF CAPITAL GAINS With respect to dividends from net investment income, the Cash Reserves Fund and Bond Fund declare dividends daily. The High Income Fund and Balanced Fund declare dividends monthly. The Growth and Income Fund, Capital Appreciation Fund, Mid-Cap Fund, Multi-Cap Growth Fund and the International Stock Fund declare dividends annually. The Funds distribute net realized gains from investment transactions, if any, to shareholders annually. Income and capital gain distributions, if any, are determined in accordance with federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America. Taxable distributions from income and 85 NOTES TO FINANCIAL STATEMENTS realized capital gains in the Funds differ from book amounts earned during the period due to differences in the timing of capital gains recognition, and due to the reclassification of certain gains or losses from capital to income. Dividends from net investment income are determined on a class level. Capital gains are determined on a fund level. 5. SECURITIES TRANSACTIONS For the year ended October 31, 2005, aggregate cost of purchases and proceeds from sales of securities, other than short-term investments, were as follows:
U.S. GOVERNMENT SECURITIES OTHER INVESTMENT SECURITIES ----------------------------- ---------------------------- FUND PURCHASES SALES PURCHASES SALES - ---- ------------- ------------ ----------- ------------ Bond $ 36,891,969 $ 39,011,635 $10,414,060 $ 11,420,594 High Income -- -- 54,964,739 51,747,394 Balanced 31,884,602 29,103,697 37,541,048 45,239,774 Growth and Income -- -- 20,733,911 23,742,373 Capital Appreciation -- -- 23,860,009 35,003,363 Mid-Cap -- -- 23,564,618 23,968,160 Multi-Cap Growth -- -- 43,217,894 39,329,915 International Stock -- -- 45,514,729 38,449,199
6. FOREIGN SECURITIES Each fund may invest in foreign securities, although only the Multi-Cap Growth Fund and International Stock Fund anticipate having significant investments in such securities, and the Cash Reserves Fund is limited to U.S. dollar-denominated foreign money market securities. Foreign securities refer to securities that are: (1) issued by companies organized outside the U.S. or whose principal operations are outside the U.S., (2) issued by foreign governments or their agencies or instrumentalities, (3) principally traded outside the U.S., or (4) quoted or denominated in a foreign currency. Foreign securities include ADRs, EDRs, GDRs, SDRs and foreign money market securities. Dollar-denominated securities that are part of the Merrill Lynch U.S. Domestic Master Index are not considered a foreign security. Certain of the funds have reclaim receivable balances, in which the funds are due a reclaim on the taxes that have been paid to some foreign jurisdictions. The values of all reclaims are not significant for any of the funds and are reflected in Other Assets on the Statement of Assets and Liabilities. On a periodic basis, these receivables are reviewed to ensure the current receivable balance is reflective of the amount deemed to be collectible. 7. SECURITIES LENDING Each fund, except the Cash Reserves Fund, entered into a Securities Lending Agreement (the "Agreement") with State Street Bank and Trust Company ("State Street"). Under the terms of the Agreement, the Funds may lend portfolio securities to qualified borrowers in order to earn additional income. The Agreement requires that loans are collateralized at all times by cash or other liquid assets at least equal to 102% of the value of the securities, which is determined on a daily basis. At October 31, 2005, cash collateral received for Funds engaged in securities lending was invested in the State Street Navigator Securities Lending Prime Portfolio. The value of all collateral is included within the Portfolio of Investments with an offsetting liability, payable upon return of securities loaned, reflected on the Statement of Assets and Liabilities. Amounts earned as interest on investments of cash collateral, net of rebates and fees, are included in the Statement of Operations. The value of securities on loan at October 31, 2005 is as follows:
VALUE OF SECURITIES ON FUND LOAN - ---- ------------- Bond $ 26,214,241 High Income 10,102,223 Balanced 24,827,011 Growth and Income 6,575,769 Capital Appreciation 5,043,145 Mid-Cap 8,828,663 Multi-Cap Growth 4,355,902
The primary risk associated with securities lending is if the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, the funds could experience delays and costs in recovering securities loaned or in gaining access to the collateral. 86 NOTES TO FINANCIAL STATEMENTS 8. TAX INFORMATION The tax character of distributions paid during the years ended October 31, 2005 and 2004 was as follows:
LONG-TERM CAPITAL ORDINARY INCOME GAIN ----------------------------- ------------------ FUND 2005 2004 2005 2004 - ---- ------------ ----------- ------ ------ Cash Reserves $ 367,496 $ 89,038 $ -- $ -- Bond 4,052,811 4,851,848 -- -- High Income 4,226,543 4,460,811 -- -- Balanced 3,254,631 3,075,874 -- -- Growth and Income 1,461,853 1,181,806 -- -- Capital Appreciation 4,002 -- -- -- Mid-Cap 295,803 -- -- -- Multi-Cap Growth -- -- -- -- International Stock 427,531 371,597 -- --
As of October 31, 2005, the components of distributable earnings on a tax basis were as follows:
FUND ORDINARY INCOME LONG-TERM CAPITAL GAIN - ---- --------------- ---------------------- Cash Reserves $ 1,949 $ -- Bond 53,804 -- High Income 271,250 -- Balanced 6,657 -- Growth and Income 1,330,889 -- Capital Appreciation 422,539 -- Mid-Cap 547,791 3,919,466 Multi-Cap Growth -- -- International Stock 625,696 37,757
For federal income tax purposes, the funds listed below have capital loss carryovers as of October 31, 2005, which are available to offset future capital gains, if any:
CARRYOVER EXPIRING IN: --------------------------------------------------------------------------------------- FUND 2008 2009 2010 2011 2012 2013 - ---- ---------- ------------ ------------ ------------ --------- --------- Cash Reserves $ -- $ -- $ -- $ -- $ -- $ 7 Bond 194,286 -- 230,858 -- $ 310,659 65,261 High Income -- 2,026,245 2,445,850 614,259 -- -- Balanced -- -- -- 5,056,953 157,889 -- Growth and Income 1,073,602 2,865,513 11,738,982 9,713,003 -- 333,474 Capital Appreciation -- -- 11,604,803 13,979,170 -- -- Multi-Cap Growth 1,396,518 10,391,144 5,728,147 -- -- --
The High Income Fund, Balanced Fund, Capital Appreciation Fund, Mid-Cap Fund, Multi-Cap Growth Fund, and International Stock Fund utilized $363,500, $7,197,142, $3,867,992, $16,099 and $3,902,385, and $8,519,408, respectively, of prior capital loss carryovers during the year ended October 31, 2005. At October 31, 2005, the aggregate gross unrealized appreciation (depreciation) and net unrealized appreciation (depreciation) for all securities as computed on a federal income tax basis for each fund were as follows:
FUND APPRECIATION DEPRECIATION NET - ---- ------------ ------------ ----------- Bond $ 910,536 $ 1,581,675 $ (671,139) High Income 1,141,553 1,099,665 41,888 Balanced 21,188,944 8,632,988 12,555,956 Growth and Income 30,153,646 7,149,726 23,003,920 Capital Appreciation 23,188,058 8,409,961 14,778,097 Mid-Cap 14,582,857 1,930,058 12,652,799 Multi-Cap Growth 6,265,526 503,348 5,762,178 International Stock 13,711,002 1,107,744 12,603,258
The differences between cost amounts for book purposes and tax purposes are primarily due to the tax deferral of losses. 87 NOTES TO FINANCIAL STATEMENTS 9. CONCENTRATION OF RISK Investing in certain financial instruments, including forward foreign currency contracts and futures contracts, involves risk other than that reflected in the Statements of Assets and Liabilities. Risks associated with these instruments include potential for an illiquid secondary market for the instruments or inability of counterparties to perform under the terms of the contracts, changes in the value of foreign currency relative to the U.S. dollar and financial statement volatility resulting from an imperfect correlation between the movements in the prices of the instruments and the prices of the underlying securities and interest rates being hedged. The High Income Fund, Multi-Cap Growth Fund and International Stock Fund enter into these contracts primarily to protect these Funds from adverse currency movements. Investing in foreign securities involves certain risks not necessarily found in U.S. markets. These include risks associated with adverse changes in economic, political, regulatory and other conditions, changes in currency exchange rates, exchange control regulations, expropriation of assets or nationalization, imposition of withholding taxes on dividend or interest payments or capital gains, and possible difficulty in obtaining and enforcing judgments against foreign entities. Further, issuers of foreign securities are subject to different, and often less comprehensive, accounting, reporting and disclosure requirements than domestic issuers. The High Income Fund invests in securities offering high current income which generally will include bonds in the below investment grade categories of recognized rating agencies (so-called "junk bonds"). These securities generally involve more credit risk than securities in the higher rating categories. In addition, the trading market for high yield securities may be relatively less liquid than the market for higher-rated securities. The fund generally invests at least 80% of its assets in high yield securities. 10. CAPITAL SHARES AND AFFILIATED OWNERSHIP Each fund is authorized to issue an unlimited number of shares of beneficial interest with no par value. Each fund currently offers two classes of shares, Class A and Class B. At October 31, 2005, investments in the Funds by affiliates were as follows:
CUNA CUNA MUTUAL LIFE MUTUAL CUMIS CUNA INSURANCE INSURANCE INSURANCE BROKERAGE FUND CLASS COMPANY SOCIETY SOCIETY, INC. SERVICES, INC. - ---------- ----- ----------- ----------- ------------- -------------- Cash Reserves A $ 1,905,631 $ 1,904,360 $ -- $ -- Bond A 2,176,735 2,175,284 -- -- High Income A 6,954,508 -- -- -- Balanced A 12,980,054 -- 5,650,228 1,405,441 Growth and Income A 2,354,756 2,740,492 3,775,677 -- Capital Appreciation A 13,260,180 1,822,867 -- -- Mid-Cap A 14,184,425 -- -- -- International Stock A 4,515,735 7,524,719 26,882,758 --
88 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Trustees of MEMBERS Mutual Funds: We have audited the accompanying statements of assets and liabilities, including the portfolios of investments of MEMBERS Mutual Funds, including the Cash Reserves Fund, Bond Fund, High Income Fund, Balanced Fund, Growth and Income Fund, Capital Appreciation Fund, Mid-Cap Fund, Multi-Cap Growth Fund and International Stock Fund (collectively, the "Funds"), as of October 31, 2005, and the related statements of operations for the year then ended and the statements of changes in net assets and the financial highlights for each of the two years in the period then ended. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The Funds' financial highlights for the periods ended prior to October 31, 2004 were audited by other auditors whose report, dated December 11, 2003, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds' internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2005, by correspondence with the Funds' custodians and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the Funds as of October 31, 2005, the results of their operations for the year then ended, the changes in their net assets and the financial highlights for each of the two years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Chicago, Illinois December 16, 2005 89 OTHER INFORMATION (UNAUDITED) FUND EXPENSES PAID BY SHAREHOLDERS As a shareholder of the Funds, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, and redemption fees; (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other fund expenses. In the most recent six-month period, the Funds limited these ongoing costs; had it not done so, expenses would have been higher. The examples below are intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds. The examples below are based on an investment of $1,000 invested at the beginning of the period and held for the entire six month period ended October 31, 2005. Expenses paid during the period in the tables below are equal to the fund's annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half fiscal year period). ACTUAL EXPENSES The table below provides information about actual account values using actual expenses and actual returns for the Funds. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table for the fund you own under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
CLASS A CLASS B ------------------------------------------------ --------------------------------- EXPENSES EXPENSES BEGINNING ENDING ANNUAL PAID ENDING ANNUAL PAID ACCOUNT ACCOUNT EXPENSE DURING ACCOUNT EXPENSE DURING FUND VALUE VALUE RATIO PERIOD VALUE RATIO PERIOD - ---- --------- ---------- ------- -------- ---------- ------- -------- Cash Reserves $ 1,000 $ 1,014.40 .55% $ 2.79 $ 1,010.50 1.30% $ 6.59 Bond 1,000 998.80 .90% 4.53 995.00 1.65% 8.30 High Income 1,000 1,036.90 1.00% 5.13 1,032.80 1.75% 8.97 Balanced 1,000 1,028.20 1.10% 5.62 1,024.20 1.85% 9.44 Growth and Income 1,000 1,043.50 1.00% 5.15 1,039.30 1.75% 9.00 Capital Appreciation 1,000 1,044.10 1.20% 6.18 1,040.10 1.95% 10.03 Mid-Cap 1,000 1,094.90 1.40% 7.39 1,091.00 2.15% 11.33 Multi-Cap Growth 1,000 1,107.40 1.20% 6.37 1,103.00 1.95% 10.34 International Stock 1,000 1,098.10 1.60% 8.46 1,093.80 2.35% 12.40
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below provides information about hypothetical account values and hypothetical expenses based on the Funds' actual expense ratios and an assumed rate of return of 5% per year before expenses, which are not the Funds' actual returns. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare the 5% hypothetical example of the funds you own with the 5% hypothetical examples that appear in the shareholder reports of other similar funds.
CLASS A CLASS B -------------------------------------------------- ----------------------------------- EXPENSES EXPENSES BEGINNING ENDING ANNUAL PAID ENDING ANNUAL PAID ACCOUNT ACCOUNT EXPENSE DURING ACCOUNT EXPENSE DURING FUND VALUE VALUE RATIO PERIOD VALUE RATIO PERIOD - ---- --------- ---------- ------- -------- ---------- ------- -------- Cash Reserves $ 1,000 $ 1,022.43 .55% $ 2.80 $ 1,018.65 1.30% $ 6.61 Bond 1,000 1,020.67 .90% 4.58 1,016.89 1.65% 8.39 High Income 1,000 1,020.16 1.00% 5.09 1,016.38 1.75% 8.89 Balanced 1,000 1,019.66 1.10% 5.60 1,015.88 1.85% 9.40 Growth and Income 1,000 1,020.16 1.00% 5.09 1,016.38 1.75% 8.89 Capital Appreciation 1,000 1,019.16 1.20% 6.11 1,015.38 1.95% 9.91 Mid-Cap 1,000 1,018.15 1.40% 7.12 1,014.37 2.15% 10.92 Multi-Cap Growth 1,000 1,019.16 1.20% 6.11 1,015.38 1.95% 9.91 International Stock 1,000 1,017.14 1.60% 8.13 1,013.36 2.35% 11.93
Please note that the expenses shown in both tables are meant to highlight your ongoing costs only and do not reflect any 90 OTHER INFORMATION (UNAUDITED) transactional costs, such as sales charges (loads), or redemption fees. The information provided in the hypothetical example table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULES The Funds file its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Form N-Q is available to shareholders at no cost on the Funds' website at www.membersfunds.com and on the SEC's website at www.sec. gov. Form N-Q may also be reviewed and copied at the Commission's Public Reference Room in Washington, DC. More information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. PROXY VOTING POLICIES, PROCEDURES AND RECORDS A description of the policies and procedures used by the Funds to vote proxies related to portfolio securities is available to shareholders at no cost on the Funds' website at www.membersfunds.com or by calling 1-800-877-6089. The proxy voting records for the Funds for the most recent twelve-month period ended June 30 are available to shareholders at no cost on the Funds' website at www.membersfunds. com and on the SEC's website at www.sec.gov. TAX INFORMATION FOREIGN TAX CREDITS: The International Stock Fund expects to make an election under Internal Revenue Code Section 853 to pass through foreign taxes paid by the fund to its shareholders. For the year ended October 31, 2005, the total amount of foreign taxes that is expected to be passed through to shareholders and foreign source income for information reporting purposes will be $142,000 (all of which represents taxes withheld) and $1,835,078, respectively. Complete information regarding the fund's foreign tax credit pass through to shareholders for 2005, will be reported in conjunction with Form 1099-DIV. CORPORATE DIVIDENDS RECEIVED DEDUCTION: Of the dividends paid by the High Income Fund, Balanced Fund, Growth and Income Fund, Capital Appreciation Fund, and the Mid-Cap Fund, 1.27%, 81.08%, 100.00%, 100.00% and 100.00%, respectively, qualify for the corporate dividends received deduction. QUALIFIED DIVIDEND INCOME: For the fiscal year ended October 31, 2005, the High Income, Balanced, Growth and Income, Capital Appreciation, Mid-Cap, and International Stock Funds paid dividend income totaling $4,226,543, $3,254,631, $1,461,853, $4,002, $295,803, and $427,531, respectively. The Funds hereby designate the maximum amount of dividends allowable pursuant to the Internal Revenue Code, as qualified dividend income ("QDI") eligible for reduced tax rates (the rates range from 5% to 15% depending upon an individual's tax bracket.) Complete information regarding each fund's income distributions paid during the calendar year 2005, including the portion, if any, which qualify as QDI, will be reported in conjunction with Form 1099-DIV. 91 TRUSTEES AND OFFICERS Each trustee and officer oversees 19 portfolios in the fund complex, which consists of the MEMBERS Mutual Funds with 9 portfolios and the Ultra Series Fund with 10 portfolios. The address of each trustee and officer is 5910 Mineral Point Road, Madison WI 53705. The Statement of Additional Information, which includes additional information about the trustees and officers, is available at no cost on the Funds' website at www.membersfunds.com or by calling 1-800-877-6089.
NAME; POSITION(S) HELD WITH THE FUNDS, YEAR ELECTED(1); PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS; YEAR OF BIRTH OTHER OUTSIDE DIRECTORSHIPS INTERESTED TRUSTEES AND OFFICERS Michael S. Daubs, CFA MEMBERS Capital Advisors, Inc.: Senior Vice President (since Sept. 2005) and President Trustee & Chairman (1997) (1982-2005); CUNA Mutual Insurance Society: Chief Officer-Investments (1990-2005); 1943 CUNA Mutual Life Insurance Company: Chief Officer-Investments (1973-2005). Other Directorships: None Lawrence R. Halverson, CFA MEMBERS Capital Advisors, Inc.: Senior Vice President-Equities (since 1996). Trustee, President & Principal Other Directorships: None Executive Officer (1997) 1945 Mary E. Hoffmann, CPA MEMBERS Capital Advisors, Inc.: Assistant Vice President-Finance and Operations Treasurer (1998) (since 2001) and Product Operations and Finance Manager (1998-2001). 1970 Other Directorships: None Holly S. Baggot MEMBERS Capital Advisors, Inc.: Operations Officer-Mutual Funds (since July 2005), Secretary and Assistant Treasurer Senior Manager Product and Fund Operations (2001-June 2005) and Operations and (1999) Administration Manager (1998-2001). 1960 Other Directorships: None Dan P. Owens MEMBERS Capital Advisors, Inc.: Operations Officer-Investments (since July 2005), Assistant Treasurer (2000) Senior Manager Portfolio Operations (2001-June 2005) and Investment Operations 1966 Manager (1999-2001). Other Directorships: None Molly M. Head MEMBERS Capital Advisors, Inc.: Chief Compliance Officer (since May 2005); Chief Compliance Officer (2005) Harris Associates L.P.: Chief Compliance Officer/Advisor (1985-2005). 1962 Other Directorships: None INDEPENDENT TRUSTEES Rolf F. Bjelland, CLU Lutheran Brotherhood Mutual Funds: Chairman and President (1983-2002); Trustee (2003) Lutheran Brotherhood (now Thrivent Financial) Chief Investment Officer (1983-2002). 1938 Other Directorships: Regis Corp, Director (since 1982). Gwendolyn M. Boeke Wartburg Theological Seminary Development Association: Development Associate Trustee (1997) (1997-2003); Evangelical Lutheran Church in America Foundation: Regional Director 1934 (1990-2000); Wartburg College: Director (1986-2001). Other Directorships: None Steven P. Riege The Rgroup: Owner/President (since 2001); Robert W. Baird & Company: Senior Vice Trustee (2005) President Marketing and First Vice President Human Resources (1986-2001). 1954 Other Directorships: None Richard E. Struthers Clearwater Capital Management: Chairman and Chief Executive Officer (since 1998). Trustee (2004) Other Directorships: None 1952
- ---------- (1) The board of trustees adopted term limits authorizing each independent trustee to serve in such capacity until the first to occur: (1) serving one twelve-year term, or (2) reaching the age of 72; provided however, that no independent trustee serving on the Board on the date of adoption of such term limits is required to resign pursuant to the adoption of such limits prior to September 30, 2004. 92 This page is left blank intentionally. 93 This page is left blank intentionally. 94 [MEMBERS LOGO] MUTUAL FUNDS MEMBERS Mutual Funds Post Office Box 8390 Boston, MA 02266-8390 1 (800) 877-6089 www.membersfunds.com Distributed by: CUNA Brokerage Services, Inc. Office of Supervisory Jurisdiction 2000 Heritage Way Waverly, IA 50677-9202 Member NASD/SIPC (4460-P1053(1005) ITEM 2. CODE OF ETHICS. As of the period ended October 31, 2005, MEMBERS Mutual Funds (also referred to herein as the "Registrant," or the "Trust") has adopted a code of ethics ("Code") that applies to the Fund's principal executive officer and principal financial officer, principal accounting officer or controller, or person performing similar functions, a copy of which is posted on the Registrant's Internet website at www.memberscapitaladvisors.com. Registrant intends to disclose on its Internet website information related to (1) any amendment of the Code (with the exception of technical, administrative or other non-substantive amendments), and (2) any waiver from a provision of the Code that has been granted to the Registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, within five business days following the date of such amendment or waiver. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The Registrant's board of trustees has determined that the Registrant has at least one audit committee financial expert serving on its audit committee. The name of the audit committee financial expert is Rolf F. Bjelland, who is an "independent" trustee for purposes of this Item. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. (a) Audit Fees For the fiscal years ended October 31, 2005 and October 31, 2004, respectively, the aggregate fees for professional services rendered by Deloitte & Touche LLP ("Deloitte & Touche"), the Trust's independent public accountant, for the audit of the Trust's annual financial statements and services normally provided by such firm in connection with statutory and regulatory filings and engagements for such fiscal years, totaled $119,280 and $112,000 respectively. (b) Audit Related Fees For the fiscal years ended October 31, 2005 and October 31, 2004 respectively, the aggregate fees for professional services rendered by Deloitte & Touche for assurance and related services by such firm that were reasonably related to the performance of the audit of the Trust's annual financial statements other than those referenced in paragraph (a) above, totaled $0. (c) Tax Fees For the fiscal years ended October 31, 2005 and October 31, 2004, respectively, the aggregate fees for professional services rendered by Deloitte and Touche for tax compliance, tax advice and tax planning for such fiscal years, totaled $20,342 and $19,100 respectively, in each case 100% of which were pre-approved by the Audit Committee. 4 In the scope of services comprising the fees disclosed under this Item 4(c) were the following services: -Review and sign as signature preparer for U.S. Income Tax Return for Regulated Investment Companies, Form 1120-RIC and the Return of Excise Tax on Undistributed Income of Regulated Investment Companies, Form 8613. (d) All Other Fees For the fiscal years ended October 31, 2005 and October 31, 2004 respectively, the aggregate fees for professional services rendered by Deloitte & Touche for products and services other than those reported in subparagraphs (a) through (c) of this Item 4, for such fiscal years, totaled $0. (e)(1) Pursuant to Rule 2-01(a)(c)(7) of Regulation S-X, the Audit Committee has established pre-approval policies and procedures with respect to audit, audit-related, tax, and other non-audit services. A copy of such pre-approval policies and procedures is attached hereto as Appendix A. (e)(2) The Audit Committee has approved, as required by Rule 2-01(c)(7)(i)(C) of Regulation S-X, 100% of the services described in this Item 4(b) through (d), which such services are described above. (f) Not applicable. (g) During the Trust's fiscal years ended October 31, 2005 and October 31, 2004, the aggregate non-audit fees billed by Deloitte & Touche for services rendered to the Trust, and to MEMBERS Capital Advisors, Inc. ("MCA"), the Trust's investment adviser, and to any entity controlling, controlled by, or under common control with MCA that provides ongoing services to the Trust, totaled $0. (h) The Trust's Audit Committee has considered the provision of the non-audit services that were rendered to MCA, and any entity controlling, controlled by, or under common control with MCA that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph Rule 2-01(c)(7)(ii) of Regulation S-X and has determined that the provision of such services is compatible with maintaining Deloitte & Touche's independence. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS The Registrant's board of trustees has determined that the Registrant has a separately-designated standing audit committee. The names of the audit committee are Rolf F. Bjelland, Gwendolyn M. Boeke, Steven P. Riege, and Richard E. Struthers. ITEM 6. SCHEDULE OF INVESTMENTS 5 ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not Applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have not been any material changes to the procedures by which shareholders may recommend nominees to the registrant's board of directors, since those procedures were last disclosed in response to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A or this Item. ITEM 11. CONTROLS AND PROCEDURES. (a) Based on their evaluation of the Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the 1940 Act, the Registrant's principal executive officer and principal financial officer have concluded that such disclosure controls and procedures are reasonably designed and are operating effectively to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to them by others within those entities, particularly during the period in which this report is being prepared, and that the information required in filings on Form N-CSR is recorded, processed, summarized, and reported on a timely basis. This review took place on December 19, 2005. (b) There were no significant changes in the Trust's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the Registrant's most recent second fiscal half-year that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting. 6 ITEM 12. EXHIBITS. (a) Not applicable. (b) Certifications of the principal executive and principal financial officer. 7 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MEMBERS MUTUAL FUNDS BY: /s/ Lawrence R. Halverson --------------------------------- Lawrence R. Halverson President DATE: 12/19/05 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. BY: /s/ Lawrence R. Halverson --------------------------------- Lawrence R. Halverson President, MEMBERS Mutual Funds DATE: 12/19/05 BY: /s/ Mary E. Hoffmann --------------------------------- Mary E. Hoffmann Treasurer, MEMBERS Mutual Funds DATE: 12/19/05 EXHIBIT INDEX 2(f)(1) - Code of Ethics. 11(b)(i) - Certification of Lawrence R. Halverson, President/Principal Executive Officer, MEMBERS Mutual Funds 11(b)(ii) - Certification of Mary E. Hoffman, Treasurer/Principal Financial Officer, MEMBERS Mutual Funds Appendix A - Audit Committee Policy Regarding Pre-Approval of Services Provided by Independent Auditors EX-99.CODE 2 c01072exv99wcode.txt CODE OF ETHICS MEMBERS MUTUAL FUNDS ULTRA SERIES FUND FORM OF CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS AUGUST 31, 2005 I. COVERED OFFICERS/PURPOSE OF THE CODE This code of ethics (this "Code") for each of MEMBERS Mutual Funds and the Ultra Series Fund (each, a "Trust," and collectively, the "Trusts") has been adopted by the board of trustees ("Board") for each Trust and applies to each Trust's Principal Executive (i.e., each Trust's president) and Senior Financial (i.e., each Trust's treasurer and assistant treasurers) Officers (such persons are hereinafter referred to collectively as the "Covered Officers," and each such person is set forth in Exhibit A hereto) for the purpose of promoting: o honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; o full, fair, accurate, timely and understandable disclosure in reports and documents that a registrant files with, or submits to, the SEC and in other public communications made by the Trusts; o compliance with applicable laws and governmental rules and regulations; o the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and o accountability for adherence to the Code. The Board has adopted this Code for the purpose of furthering compliance with Item 2 of Form N-CSR,(1) which implements Section 406 of the Sarbanes-Oxley Act of 2002 (the "2002 Act").(2) Section 406 of the 2002 Act requires disclosure by management investment companies that are registered with the Securities and Exchange Commission - -------- (1) Item 2 of Form N-CSR requires a registered management investment company to disclose annually whether, as of the end of the period covered by the report, that company has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer, or controller, or persons performing similar functions. If the registrant has not adopted such a code of ethics, the registrant must explain why it has not done so. Under Item 2, the registrant also must: (1) file with the SEC a copy of such code as an exhibit to its annual report; (2) post the text of the code on it's internet website and disclose, in its annual report, its internet address, and the fact that it as posted the code on its website; or (3) undertake in its most recently filed semi-annual report on Form N-CSR to provide to any person without charge, upon request, a copy of the code and explain the manner in which this request may be made. Disclosure also is required of amendments to, or waivers (including implicit waivers) from, a provision of the code in the registrant's annual report on Form N-CSR or on the registrant's website. If the registrant intends to satisfy the disclosure requirement by posting this information on its website, the registrant will be required to disclose its internet address and such intention. Investment companies must make the disclosure discussed in this footnote irrespective of whether these officers are employed by the registrant or a third party. (2) The SEC rules require disclosure only about whether the registrant has adopted a code of ethics in accordance with the 2002 Act, but, in view of the seniority of the officers covered by the Code, it has been deemed appropriate that the Trusts' respective Boards of Trustees also adopt this Code for the Trusts. (the "SEC") under the Investment Company Act of 1940 (the "1940 Act"), concerning a code of ethics for senior financial officers of these investment companies. ROLE OF THE DESIGNATED PERSONS. As set forth in greater detail below, the Covered Officers shall report to the Vice President of Corporate Compliance for CUNA Mutual Group, another designated senior legal or compliance officer of the Trusts or of a company ("Control Company") in a control relationship to the Trusts (as such term is defined under Section 2(a)(19) of the 1940 Act, a designated senior legal or compliance officer of a Control Company of the Trusts, or another appropriate designated person (each hereinafter referred to as a "Designated Person").(3) As discussed in footnote 3, given the seniority of the Covered Officers, investigations, interpretations and waivers(4) regarding any existing, actual or potential violation of this Code shall be the responsibility of the Designated Person(s); except that interpretations or waivers sought by the President of the affected Trusts shall be considered by the Audit Committee or the Board of Trustees of such Trust. NOT A 1940 ACT RULE 17J-1 CODE OF ETHICS. This Code is not adopted under, nor intended to serve as a basis for complying with the requirements of, Rule 17j-1 under the 1940 Act. II. COVERED OFFICERS SHOULD ACT HONESTLY AND CANDIDLY This Code is applicable to all Covered Officers of the Trusts. Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest. Each Covered Officer must: o act with integrity, including being honest and candid while still maintaining the confidentiality of information where required by law of the Trust's policies; o observe applicable laws and governmental rules and regulations, accounting standards and Trust policies; o adhere to a high standard of business ethics; and o place the interests of the Trust and its shareholders before the Covered Officer's own personal interests. All activities of Covered Officers should be guided by and adhere to these standards. - --------------- (3) The SEC has indicated that any Designated Person "should have sufficient status within the company to engender respect for the [C]ode and the authority to adequately deal with the persons subject to the [C]ode regardless of their stature in the company." In addition a Designated Person also may be a Trustee of a Trust who is not deemed to be an "interested person" of the Trust, as that term is defined under Section 2(a)(19) of the 1940 Act (hereinafter, an "Independent Trustee"), the chairperson of the Audit Committee of the Board of Trustees ("Audit Committee") of a Trust, or even the counsel to the Independent Trustees, as appropriate. (4) Item 2 of Form N-CSR defines "waiver" as "the approval by the registrant of a material departure from a provision of the code of ethics" and "implicit waiver," which also must be disclosed in the Form N-CSR, as "the registrant's failure to take action within a reasonable period of time regarding a material departure from a provision of the code of ethics that has been made known to an executive officer of the registrant." III. COVERED OFFICERS SHOULD HANDLE ETHICALLY ACTUAL AND APPARENT CONFLICTS OF INTEREST OVERVIEW. The 1940 Act is designed, in part, to address inherent conflicts of interest that exist in the management of an investment company's assets by a third party (i.e., the investment company's investment adviser). Similarly, the Investment Advisers Act of 1940, as amended, (the "Advisers Act"), addresses conflicts of interest faced by an investment adviser in the management of client assets. The principles set forth in this section relating to conflicts of interest reflect the fact that investment companies and investment advisers thereof already are subject to prohibitions on certain activities, including self-dealing, and substantial limitations regarding conflicts of interest by the 1940 Act and the Advisers Act and the SEC rules promulgated thereunder. In light of the existing structural, statutory and regulatory environment for registered investment companies, a code of ethics broader than necessary to meet the new 2002 Act code of ethics requirement may be unnecessary. This Code, however, is intended to reflect the general principal recognizing the need to hold persons responsible for managing other people's money to the highest standards of integrity. GUIDING PRINCIPLES. A "conflict of interest" occurs when a Covered Officer's private interest interferes with the interests of, or his or her service to, a Trust. A conflict of interest can arise when a Covered Officer has interests that may make it difficult to perform that Covered Person's work related to the Trust objectively. For example, a conflict of interest would arise if a Covered Officer, or a member of his or her family, receives improper personal benefits as a result of such Covered Officer's position in the Trust. Service to the Trust should not be subordinated to personal gain and advantage. Certain conflicts of interest arise out of the relationships between Covered Officers and the Trust that already are subject to conflict of interest provisions in the 1940 Act and the Advisers Act. For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Trust because of their status as "affiliated persons" of the Trust, as that term is defined under Section 2(a)(3) of the 1940 Act. The Trust's and the investment adviser's compliance programs and procedures are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code. Although typically not presenting an opportunity for improper personal benefit, conflicts may arise from, or as a result of, the contractual relationship between the Trust and the investment adviser of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for the Trust or for the adviser, or for both), be involved in establishing policies and implementing decisions which will have different effects on the adviser and the Trust. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Trust and the adviser and is consistent with the performance by the Covered Officers of their duties as officers of the Trust and, if addressed in conformity with the provisions of the 1940 Act and the Advisers Act will be deemed to have been handled ethically. In addition, it is recognized by the Board of Trust that the Covered Officers may also be officers or employees of one or more other investment companies covered by this or other Codes. Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Acts. In reading the following examples of conflicts of interest under the Code, Covered Officers should keep in mind that such a list cannot ever be exhaustive by covering every possible scenario. It follows that the overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Trust. * * * * Each Covered Officer must: o not use personal influence or personal relationships improperly to influence investment decisions or financial reporting by a Trust whereby the Covered Officer would benefit personally to the detriment of the Trust; o not cause a Trust to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit the Trust; o not use material non-public knowledge of portfolio transactions made or contemplated for a Trust to profit or cause others to profit in contemplation of the market effect of such transactions; o report at least annually on the Trust's "Trustees and Officers Questionnaire" any and all material transactions, affiliations or relationships that could reasonably expected to give rise to, or be related to, a conflict of interest; and o handle any actual or apparent conflict of interest ethically. Certain conflict of interest situations should always, if material, be discussed with the Designated Persons. Examples of these include: o service as a director or trustee on the board of any non-charitable or commercial company; o the receipt of any gifts of more than de minimis value (i.e., gifts in excess of $100) from any person or entity that does business with or on behalf of a Trust; o the receipt of any entertainment from any company with which a Trust has current or prospective business dealings unless such entertainment is business- related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety; o any ownership interest in, or any consulting or employment relationship with, any of the Trust's service providers, other than its investment adviser, principal underwriter, administrator or any affiliated person thereof; o a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Trust for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment, such as compensation or equity ownership. In addition, any activity or relationship that would present a conflict of interest for a Covered Officer also would likely present a conflict for the Covered Officer if a member of the Covered Officer's family engages in such an activity or has such a relationship. IV. DISCLOSURE AND COMPLIANCE o Each Covered Officer should be familiar with the disclosure requirements generally applicable to the Trusts; o each Covered Officer should not knowingly misrepresent, or cause others to misrepresent, facts about the Trusts to others, whether within or outside the Trusts, including to the Trusts' trustees and auditors, and to governmental regulators and self-regulatory organizations; o each Covered Officer should, to the extent appropriate within his or her area of responsibility, consult with other officers and employees of the Trusts and the adviser with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Trusts file with, or submit to, the SEC and in other public communications made by the Trusts; and o it is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. In addition, each Covered Officer is required to be familiar, and to comply, with the relevant Trust's Disclosure Controls and Procedures in connection with the 2002 Act so that the Trust's subject reports and documents filed with the SEC comply in all material respects with the applicable federal securities laws and SEC rules. Moreover, each Covered Officer having direct or supervisory authority regarding these SEC filings or the relevant Trust's other public communications, also should consult, to the extent appropriate within the Covered Person's area of responsibility, with Control Company officers and employees and take appropriate steps regarding such disclosures with the goal of rendering such disclosures full, fair, accurate, timely and understandable. V. REPORTING AND ACCOUNTABILITY Each Covered Officer must: o upon adoption of the Code, sign and submit to the MCA Chief Compliance Officer a written acknowledgement that he or she has received, read, and understands the Code; o annually thereafter affirm to the MCA Chief Compliance Officer in writing that he or she has complied with the requirements of the Code; o not retaliate against any employee or Covered Officer for reports of potential violations that are made in good faith; and o notify the Designated Person(s) promptly if he or she knows of any violation of this Code. Failure to do so is itself a violation of this Code. Except as otherwise described below, the Designated Person(s) will be responsible for applying this Code to specific situations in which questions are presented under it and shall have the authority to interpret this Code in any particular situation. The Designated Person(s) shall take all actions that such Designated Person(s) may deem necessary and appropriate to investigate any reported existing, actual or potential violations. Such actions will include reporting any existing or actual violations of this Code to the MCA Chief Compliance Officer, as well as reporting, when such Designated Person deems necessary or appropriate, potential violations of this Code to the MCA Chief Compliance Officer. In addition, any conflicts of interest that pertain to a Trust's president shall be submitted for consideration to the Chief Compliance Officer for CUNA Mutual Group (the "CCO"). The CCO shall be responsible for making a recommendation as to any approvals or waivers sought by the President of a Trust and shall refer such recommendation to the MCA Chief Compliance Officer, which shall then follow such recommendation. The MCA Chief Compliance Officer shall report, or cause to be reported, to each Trust's Board, on an annual basis, any issues arising under this Code. The Trusts will follow these procedures in investigating and enforcing this Code: o Designated Person(s) will take all appropriate action to investigate any potential violations reported thereto; o if, after such investigation, a Designated Person determines that no violation has occurred, he or she is not required to take any further action; o any matter that a Designated Person determines is a violation will be reported to the MCA Chief Compliance Officer; o if the MCA Chief Compliance Officer concurs that a violation has occurred, he or she will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures, as well as notification to appropriate personnel of the investment adviser or its board, or of the affected Trust's Control Company. In addition, the MCA Chief Compliance Officer shall determine whether to refer the matter to the affected Trust's Board for a determination of whether to dismiss the Covered Officer is appropriate, if, in its judgment, such corrective action may be warranted; o the Designated Person(s) will be responsible for granting waivers, as appropriate, and will make a report concerning such waivers to the MCA Chief Compliance Officer; and o any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules. VI. OTHER POLICIES AND PROCEDURES This Code shall be the sole code of ethics adopted by the Trusts for purposes of Section 406 of the 2002 Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Trusts, the Trusts' adviser, principal underwriter, or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superceded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Trusts' and their investment adviser's and principal underwriter's codes of ethics under Rule 17j-1 under the 1940 Act and the Advisers Act are separate requirements applying to the Covered Officers and others, and are not part of this Code. VII. AMENDMENTS Except as to Exhibit A, this Code may not be amended except in written form, which is specifically approved or ratified by a majority vote of each Trust's respective Board, including a majority of its independent Trustees. VIII. CONFIDENTIALITY All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the appropriate Board and their counsel, the appropriate Trust and its adviser, the MCA Chief Compliance Officer, Designated Person(s), appropriate personnel within the Office of the General Counsel and other appropriate compliance personnel. IX. INTERNAL USE The Code is intended solely for the internal use by the Trusts and does not constitute an admission, by or on behalf of any Trust, as to any fact, circumstance, or legal conclusion. EXHIBIT A COVERED PRINCIPAL EXECUTIVE AND FINANCIAL OFFICERS MEMBERS MUTUAL FUNDS Lawrence R. Halverson, President Mary E. Hoffmann, Treasurer ULTRA SERIES FUND Michael S. Daubs, President Mary E. Hoffmann, Treasurer EX-99.CERT 3 c01072exv99wcert.txt CERTIFICATION I, Lawrence R. Halverson, certify that: 1. I have reviewed this report on Form N-CSR of MEMBERS Mutual Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Date: 12/19/2005 /s/ Lawrence R. Halverson -------------------------- Lawrence R. Halverson President, MEMBERS Mutual Funds 2 EXHIBIT 11(a)(ii) I, Mary E. Hoffmann, certify that: 1. I have reviewed this report on Form N-CSR of MEMBERS Mutual Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company act of 1940 for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 3 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Date: 12/19/2005 /s/ Mary E. Hoffmann ------------------------------- Mary E. Hoffmann Treasurer, MEMBERS Mutual Funds 4 EX-99.906 4 c01072exv99w906.txt CERTIFICATION FORM OF SECTION 906 CERTIFICATION EX-99.906 CERT MAIL Lawrence R. Halverson, President, and Mary E. Hoffmann, Treasurer, of MEMBERS Mutual Funds (the "Registrant"), to the best of their knowledge, each certify that: 1. The Registrant's periodic report on Form N-CSR for the period ended October 31, 2005 (the "Form N-CSR") fully complies with the requirements of Section 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. PRESIDENT TREASURER /s/ Lawrence R. Halverson /s/ Mary E. Hoffmann - ------------------------------------- ------------------------------ Lawrence R. Halverson Mary E. Hoffmann Date: December 19, 2005 Date: December 19, 2005 EX-99 5 c01072exv99.txt AUDIT COMMITTEE POLICY APPENDIX A MEMBERS MUTUAL FUNDS ULTRA SERIES FUND AUDIT COMMITTEE POLICY REGARDING PRE-APPROVAL OF SERVICES PROVIDED BY INDEPENDENT AUDITOR The Audit Committee (the "Committee") of each of MEMBERS Mutual Funds and the Ultra Series Fund (each, a "Trust" and collectively, the "Trusts") has the responsibility for ensuring that all services performed by the independent audit firm (the "Firm") for the funds do not impair the Firm's independence. This review is intended to provide reasonable oversight without removing management from its responsibility for day-to-day operations. In this regard, the Committee should: o Understand the nature of the professional services expected to be provided and their impact on auditor independence and audit quality; o Examine and evaluate the safeguards implemented by the Trusts and the auditor to safeguard independence; o Meet semi-annually with the partner of the Firm; and o Consider approving categories of service that are not deemed to impair independence for a one-year period. It is important that a qualitative, rather than mere quantitative, evaluation be performed by the Committee in discharging its responsibilities. POLICY FOR AUDIT AND NON-AUDIT SERVICES PROVIDED TO THE TRUSTS On an annual basis, each Trust's Committee will review and consider whether to pre-approve the financial plan for audit fees as well as categories of audit-related and non-audit services that may be performed by the Firm directly for the Trusts. The Committee will receive an annual report from the Firm of all audit and non-audit services that were approved during the year. The engagement of the Firm for any non-audit service requires the written pre-approval of each Trust's Treasurer and all non-audit services performed by the Firm will be disclosed in the required SEC periodic filings. In connection with the Committee review and pre-approval responsibilities, the review by the Committee will consist of the following: Audit Services The categories of audit services and related fees to be reviewed and considered for pre-approval annually by the Committee or its delegate include the following: o Annual fund financial statements audits; o Seed audits (related to new product filings, as required); and o SEC and regulatory filings and consents Audit Related Services In addition, the following categories of audit-related services are deemed to be consistent with the role of the Firm and, as such, will be considered for pre-approval by the Committee or its delegate on an annual basis: o Accounting consultations; o Fund merger support services; o Other accounting related matters; o Agreed Upon Procedures reports o Attestation Reports o Other Internal Control Reports Notwithstanding any annual pre-approval of these categories of services, individual projects with an estimated fee in excess of $25,000 are subject to pre-approval by the Committee Chair or its delegate on a case-by-case basis. Individual projects with an estimated fee in excess of $50,000 are subject to pre-approval by the Committee or its delegate on a case-by-case basis. Tax Services The following categories of tax services are deemed consistent with the role of the Firm and as such, will be considered for pre-approval by the Committee or its delegate on an annual basis: o Tax compliance services related to the filing or amendment made in respect of federal state or local income tax requirements, or sales and use tax requirements; o Timely RIC qualification reviews; o Tax distribution analysis and planning; o Tax authority examination services; o Tax appeals support services; o Accounting methods studies; o Fund merger support services; and o Tax consulting services and related projects. Notwithstanding any annual pre-approval of these categories of services, individual projects with an estimated fee in excess of $25,000 are subject to pre-approval by the Committee Chair or its delegate on a case-by-case basis. Individual projects with an estimated fee in excess of $50,000 are subject to pre-approval by the Committee or its delegate on a case-by-case basis. Other Non-audit Services The SEC auditor independence rules adopted in response to Sarbanes-Oxley Act specifically allow certain non-audit services. Because of their nature, none of these services may be 2 commenced by the Firm without the prior approval of the Committee. The Committee may delegate this responsibility to one or more of the Committee members, with the decisions presented to the full Committee at the next scheduled meeting. Proscribed Services In accordance with SEC rules on independence, the Firm is prohibited from performing services in the following categories of non-audit services: o Management functions; o Accounting and bookkeeping services; o Internal audit services; o Financial information systems design and implementation; o Valuation services supporting the financial statements; o Actuarial services supporting the financial statements; o Executive recruitment; o Expert services (e.g., litigation support); and o Investment banking. POLICY FOR PRE-APPROVAL OF NON-AUDIT SERVICES PROVIDED TO AFFILIATES OF THE TRUSTS Each Trust's Committee is also responsible for pre-approving certain non-audit services provided to affiliates of the Trusts which provide ongoing services to the Trusts. The only non-audit services provided to these entities which require pre-approval are those services that relate directly to the operations and financial reporting of the Trusts. Although neither Trust's Committee is required to pre-approve all services provided to MEMBERS Capital Advisors, Inc. ("MCA"), the Trusts' investment adviser, the Committee will annually receive a report from the Firm on the aggregate fees for all services provided to MCA and affiliates. 3 -----END PRIVACY-ENHANCED MESSAGE-----