N-CSR 1 e37364.txt As filed with the Securities and Exchange Commission on December 30, 2004 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) Kevin S. Thompson, Esq. 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 MUTUAL FUNDS ANNUAL REPORT OCTOBER 31, 2004 -------------------------------------------------------------------------------- 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 [LOGO OF MEMBERS] M U T U A L F U N D S -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- LETTER TO SHAREHOLDERS -------------------------------------------------------------------------------- [PHOTO OF LAWRENCE R. HALVERSON] Dear Fellow Shareholder: The election is over and many investors may be wondering, "What next"? The stock market has often moved favorably following elections as the uncertainty of the outcome is replaced by longer-term optimism. But, the future never exactly replicates the past and often behaves quite differently from historical patterns. So, as usual, investors must prepare for whatever the future may hold. We can all hope, however, that the coming year will build on the past year's generally favorable patterns. Both bonds and stocks provided attractive returns for the Funds' fiscal year ended October 31, 2004. Those returns were lower than in the prior year and they also were more erratic reflecting the changing domestic and international economic situations, the spike in energy prices, the din of national and world politics, continued threats of terrorism, and the waging of a very difficult war. Still, returns were generally above historical averages and, by the close of the fiscal year, investors appeared to be adopting a more favorable near-term outlook. Each of the funds provided nicely positive performance in this twelve-month period, with some of the funds' returns well into the teens. Each fund's specific performance and the primary influences on their returns are summarized in the attached Annual Report. We share the current concerns of many investors regarding rising interest rates, tightening monetary and fiscal policy, stubbornly high energy prices and continued conflicts overseas. At the same time, we look for continued economic growth in the United States and generally worldwide. So, in spite of the near-term issues, we encourage long-term investors to maintain or even accelerate their investment accumulation programs in the months immediately ahead. We are saddened to report that we lost a good friend and outstanding director for MEMBERS(R) Mutual Funds. Tom Watt died this September after a valiant battle with cancer, leaving a legacy of shareholder advocacy, charitable giving and strong community and business leadership. More importantly, he left behind a loving family who cherished his companionship and guidance as husband, father and grandfather. He will be missed by all of us. Richard Struthers, an individual with direct involvement in the asset management business who is also an attorney with extensive experience in investment regulatory issues, was elected to the Board by the independent directors to succeed Tom. This reflects the Board's commitment to assure continuing capable representation of shareholders. In addition, all Board members will be presented for shareholder vote early next year. Information on this will be mailed to shareholders in January. As another year draws to a close, we thank you once again for your confidence and trust, and remain committed to your long-term investment success. 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 grew at a healthy rate in the twelve months ended October 31, 2004. As the period began, consumers were quite active as low interest rates and tax refunds spurred heavy purchases of durable goods. To an extent, this surge in consumer buying of durable goods "stole" from growth for the remainder of the period, although automakers, for instance, were still able to attract buyers with incentives and discounts. Consumer spending, particularly among lower-income consumers, was pinched in the spring as oil and gasoline prices rose, causing something of a "soft spot" in overall economic growth. Consumer activity picked up again during the summer of 2004, however, and recent revisions of economic data suggest that the "soft spot" was not as soft as it initially appeared. Corporations, meanwhile, took up the slack. Profitable, and with healthy balance sheets, companies increased their capital spending during the period. They favored investments in technology infrastructure during the first part of the period, but over time rotated towards "old economy" investments such as transportation equipment and machinery. The housing market was also a significant contributor to economic growth. Inflation stayed below its historical average of about 3% as intense competition, globalization, and increasingly transparent markets made it difficult for companies to pass along higher costs to consumers. The labor market improved throughout the period, although the economy added fewer jobs than in most past expansions. U.S. STOCKS Stocks generally did well during the period as low interest rates, low inflation, and solid economic growth provided a favorable environment for corporate earnings. Smaller was better, with the S&P 500 Index of large-cap stocks returning 9.42% for the period while the S&P 600 Index of small-cap stocks returned 16.74%. Smaller companies took advantage of low interest rates to restructure and boost profit margins. Smaller stocks had "fallen behind" large stocks after a period of under-performance in the late 1990s, and part of their out-performance during the period was likely due to market participants adjusting for their under-valuation. Growth out-performed value early in the period as market participants responded enthusiastically to the resurgence in corporate spending on information technology. Later in the period, value out-performed growth as "old economy" manufacturers took the lead and smaller and more distressed companies were able to reorganize and return to profitability. U.S. BONDS Bonds under-performed stocks, but bond returns still generally out-paced inflation. As had been the case during the previous annual reporting period, riskier bonds out-performed. The Lehman Brothers Intermediate Government/Credit Index of investment grade bonds returned 4.33%, while the Lehman Brothers High Yield Bond Index returned 12.32%. A mild inflation scare in the spring of 2004 drove bond prices down as market participants feared that an aggressive campaign of monetary tightening by the U.S. Federal Reserve (the "Fed") was coming. The Fed did indeed raise short-term interest rates in three quarter-point increments over the summer and fall, but inflationary fears subsided and market participants came to believe that short-term rates would only rise gradually going forward. Shorter-term bond yields rose along with the Fed's moves, but longer-term bond yields stayed essentially the same or even fell. INTERNATIONAL ECONOMIES AND FINANCIAL MARKETS Japan surprised economists and market participants by posting relatively strong growth as exports made up for lackluster domestic demand and deflationary conditions. Exporters of commodities, such as Australia and Canada, did very well as the rapidly growing Chinese economy demanded huge amounts of raw materials to build its infrastructure. East Asia as a whole grew very strongly, led by China and India. European economies were much more sluggish, hurt by a steady rise in the euro that crimped demand for exports from the euro-zone, persistent inflation, relatively high interest rates, and rising energy prices. In the spring, emerging markets stocks sold off sharply as market participants worried that the combination of Fed tightening and higher oil prices would choke off growth in Asian and Latin American economies. When strong growth persisted over the summer, stock markets recovered, and emerging markets stocks provided generous returns. Returns from Japanese and European equity markets were more modest, but benefited from synchronized global economic expansion during the period. For U.S. investors, stock returns from international markets were generally enhanced by a decline in the relative value of the U.S. dollar. (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 ................................................. 24 Balanced Fund .................................................... 34 Growth and Income Fund ........................................... 39 Capital Appreciation Fund ........................................ 41 Mid-Cap Fund ..................................................... 43 Multi-Cap Growth Fund ............................................ 46 International Stock Fund ......................................... 48 FINANCIAL STATEMENTS Statements of Assets and Liabilities ............................. 54 Statements of Operations ......................................... 56 Statements of Changes in Net Assets .............................. 58 Financial Highlights ............................................. 62 NOTES TO FINANCIAL STATEMENTS ........................................ 72 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM .............. 79 OTHER INFORMATION .................................................... 80 TRUSTEES AND OFFICERS ................................................ 82
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 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. Under normal circumstances, the fund invests at least 80% of its assets in such securities. The fund may invest in the following instruments: o 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; o U.S. GOVERNMENT DEBT SECURITIES: securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities; o 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 o 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 adviser to have an investment quality equivalent to the four highest categories. The MEMBERS Bond Fund (Class A shares at net asset value) returned 4.46% during the twelve-month period ended October 31, 2004, under-performing the Merrill Lynch U.S. Domestic Master Index, which returned 5.55%. The fund also modestly under-performed the 4.95% average return of its peer intermediate-term bond mutual funds as categorized by Morningstar. The fund's under-performance can be attributed primarily to its conservative posture with regard to duration, or interest-rate sensitivity, and credit quality versus indexes and peers during the early part of the reporting period. The fund has historically attempted to minimize interest-rate and credit risk, which tends to hold back performance during bull markets for fixed-income securities. During the reporting period, management gradually and modestly extended duration to better align the fund with its peer funds, which could increase both absolute returns and interest-rate risk going forward. This modest extension of the fund's duration, accomplished as bond market participants were pricing in a more aggressive monetary tightening campaign on the part of the Fed than eventually occurred, helped returns later in the reporting period, as did improved security selection. Investors should note that the fund's basic investment strategy has not changed. It is still being managed with the goal of providing current income and diversification for an investor's portfolio that contains stocks or stock mutual funds. MEMBERS CAPITAL ADVISORS' FIXED-INCOME PORTFOLIO MANAGEMENT TEAM - ADVISOR -------------------------------------------------------------------------------- 2 -------------------------------------------------------------------------------- BOND FUND PERFORMANCE REVIEW -------------------------------------------------------------------------------- CUMULATIVE PERFORMANCE OF $10,000 SINCE INCEPTION(1) [CHART OF CUMULATIVE PERFORMANCE OF $10,000 SINCE INCEPTION]
Lehman Brothers Class A Shares Class B Shares Merrill Lynch Intermediate (includes maximum (includes maximum U.S. Domestic Government/Credit sales charge)(2) applicable CDSC)(3) Master Index Bond Index ----------------- ------------------- ------------- ----------------- 12/29/1997 9,525 10,000 10,000 10,000 4/30/1998 9,654 9,667 10,219 10,213 10/31/1998 10,104 10,086 10,803 10,808 4/30/1999 10,252 10,195 10,870 10,863 10/31/1999 10,266 10,235 10,840 10,914 4/30/2000 10,372 10,372 11,005 11,031 10/31/2000 10,768 10,721 11,634 11,619 4/30/2001 11,338 11,418 12,350 12,368 10/31/2001 12,175 12,225 13,331 13,275 4/30/2002 12,095 12,286 13,311 13,256 10/31/2002 12,688 12,852 14,129 14,060 4/30/2003 13,174 13,184 14,739 14,682 10/31/2003 13,132 13,091 14,825 14,824 4/30/2004 13,204 13,214 15,012 14,980 10/31/2004 13,717 13,676 15,648 15,465
[END CHART] (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 OF SECTOR ALLOCATION AS A PERCENTAGE OF NET ASSETS] Mortgage Backed 32% Corporate Notes and Bonds 28% U.S. Government and Agency Obligations 25% Asset Backed 6% Commercial Mortgage Backed 6% Cash & Other Net Assets 2% Private Label Mortgage Backed 1%
[END PIE CHART] AVERAGE ANNUAL TOTAL RETURN THROUGH OCTOBER 31, 2004
% 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) 4.46% 4.06% 5.97% 5.48% -0.46% 2.39% 4.93% 4.73% Class B Shares(3) 3.68 3.25 5.16 4.68 -0.82 2.15 4.83 4.68 Merrill Lynch U.S. Domestic Master Index 5.55 5.48 7.61 6.76 -- -- -- -- Lehman Brothers Intermediate Government/Credit Bond Index 4.33 5.22 7.22 6.58 -- -- -- --
(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. Massachusetts Financial Services Company ("MFS") 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. The MEMBERS High Income Fund (Class A shares at net asset value) returned 10.73% during the twelve-month period ended October 31, 2004, underperforming the Lehman Brothers High Yield Bond Index, which returned 12.32%. High-yield bonds historically have been influenced less by the level of interest rates and more by economic activity and the balance of supply and demand. At the beginning of the period, high-yield bonds had been performing well for some time. At that point, the market experienced some volatility as, in management's view, investors worried that high yield issues were about to fall out of favor with the market. That did not come to pass, however. While retail investors did shift assets out of the high yield sector, institutional investors remained hungry for the additional yield offered by the asset class. This consistent demand helped support high-yield bond prices. Default rates continued to improve along with corporate credit quality. New bond issuance remained healthy during the first 10 months of 2004, with levels similar to 2003, indicating that high-yield companies were encountering few problems accessing capital. Any concerns currently revolve around how much further high-yield bond prices can improve relative to Treasuries after having enjoyed such a run-up. Investors may not view high-yield issues as being priced fairly if Treasury yields back up more due to additional Fed rate hikes. There were several individual investments that significantly added to the portfolio's relative performance. In the consumer products sector, Safilo, which manufactures eyewear frames, rebounded from undervalued status because of a turnaround strategy implemented by company management. In addition, IMC Global, a producer of crop nutrients including phosphates and potash, merged with Cargill's crop nutrition businesses, and the bonds were subsequently upgraded. Finally, Dex Media, the yellow-pages conglom-erate spun out of Qwest Communications, saw its zero-coupon bonds rise in price. The company attracted investors because of its free cash flow, recurring revenues, low capital expenditures, and progressive deleveraging. A number of security selections hurt relative performance. Rural wireless telecommunications service provider Dobson Communications declined because of rising competitive pressures brought on in part by the merger between AT&T Wireless and Cingular. This transaction likely will force Dobson to renegotiate its roaming rates. Another detractor was Calpine, a highly levered merchant power producer, which struggled in the face of rising natural gas prices. The company uses natural gas to run its power plants, and higher energy prices reduced the firm's margins. The company added to capacity through the issuance of debt, and it is working to maintain liquidity. Finally, Telewest, the European cable TV company, was also an under-performer. MEMBERS CAPITAL ADVISORS' FIXED-INCOME PORTFOLIO MANAGEMENT TEAM - ADVISOR MASSACHUSETTS FINANCIAL SERVICES COMPANY - SUBADVISOR -------------------------------------------------------------------------------- 4 -------------------------------------------------------------------------------- HIGH INCOME FUND PERFORMANCE REVIEW -------------------------------------------------------------------------------- CUMULATIVE PERFORMANCE OF $10,000 SINCE INCEPTION(1) [CHART OF CUMULATIVE PERFORMANCE OF $10,000 SINCE INCEPTION]
Class A Shares Class B Shares Lehman Brothers (includes maximum (includes maximum High Yield sales charge)(2) applicable CDSC)(3) Bond Index ----------------- ------------------- --------------- 12/29/1997 9,525 10,000 10,000 4/30/1998 9,799 9,800 10,398 10/31/1998 8,974 8,962 9,790 4/30/1999 10,171 10,091 10,444 10/31/1999 9,843 9,805 10,215 4/30/2000 10,085 10,114 10,223 10/31/2000 9,763 9,698 10,050 4/30/2001 9,992 10,001 10,334 10/31/2001 9,574 9,571 10,035 4/30/2002 10,054 10,223 10,701 10/31/2002 9,606 9,745 9,484 4/30/2003 10,902 10,947 11,642 10/31/2003 11,630 11,617 12,687 4/30/2004 12,113 12,145 13,388 10/31/2004 12,877 12,862 14,250
[END CHART] (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 Energy 11% Industrials 8% Communication 7% Recreation 7% Telecommunications 7% U.S. Government & Agency 7% Media 6% Basic Materials 5% Containers & Packaging 4% Retail 4% Chemicals & Drugs 3% Health Care Services 3% Commercial Mortgage Backed 2% Building & Construction 2% Consumer Services 2% Consumer Staples 2% Durable Goods 2% Finance 2% Metals and Mining 2% Pipeline 2% Utilities 2% Asset Backed 1% Aerospace/Defense 1% Consumer Cyclicals 1% Machinery 1% Printing 1% Technology 1% Transportation 1% Waste Disposal 1% Foreign Government & Agency 1% Cash & Other Net Assets 1% REITS 0%* Schools 0%*
*Rounds to 0% AVERAGE ANNUAL TOTAL RETURN THROUGH OCTOBER 31, 2004
% 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) 10.73% 10.39% 5.52% 4.51% 5.43% 8.59% 4.51% 3.77% Class B Shares(3) 10.02 9.59 4.73 3.75 5.52 8.61 4.45 3.75 Lehman Brothers High Yield Bond Index 12.32 12.40 6.89 5.31 -- -- -- --
(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. The fund employs regular rebalancing to maintain a relatively static asset allocation. 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. The MEMBERS Balanced Fund (Class A shares at net asset value) returned 7.71% in the twelve-month period ended October 31, 2004. During the same period, the Russell 1000(R) Index returned 9.33% and the Merrill Lynch U.S. Domestic Master Index returned 5.55%. Performance of the stock component of the fund versus the Russell 1000(R) Index was positively affected by an overweight in the energy sector and an underweight in the health care sector. Performance was hurt by stock selection in the health care sector, where holdings Applied Biosystems and Wyeth lagged behind the overall performance of the sector. Stock selection in the information technology sector was a significant positive contributor to performance, as Autodesk rose after posting consistently strong earnings, Motorola gained market share in the highly-competitive market for cellular telephones, and IT services provider Computer Sciences and data transfer specialist Concord EFS out-performed their sub-sectors. Performance was also helped by stock selection in the consumer discretionary sector as Carnival appreciated after cruise bookings and profits exceeded consensus expectations. Management gradually and moderately increased the fund's allocation to equities for strategic reasons during the period, although it generally will maintain a conservative posture in regard to security selection in both equity and fixed-income markets. Management's objective has not changed; it is to manage the fund to be a "core" investment providing both income and capital appreciation via a broadly diversified array of stocks, bonds, and money market instruments. 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) [CHART OF CUMULATIVE PERFORMANCE OF $10,000 SINCE INCEPTION]
Blended Synthetic Index (45% S&P 500 Index return, 40% Lehman Brothers Intermediate Goverment/ Class A Shares Class B Shares Merrill Lynch Credit Bond Index return, (includes maximum (includes maximum U.S. Domestic Russell 1000 15% 90-Day U.S. Treasury sales charge)(2) applicable CDSC)(3) Master Index Index Bill return) ----------------- ------------------- ------------- ------------ -------------------------- 12/29/1997 9,425 10,000 10,000 10,000 10,000 4/30/1998 10,281 10,432 10,219 11,671 10,867 10/31/1998 10,266 10,374 10,803 11,459 11,190 4/30/1999 11,736 11,420 10,870 14,041 12,334 10/31/1999 11,866 11,922 10,840 14,391 12,566 4/30/2000 12,653 12,852 11,005 15,789 13,096 10/31/2000 12,893 13,053 11,634 15,694 13,381 4/30/2001 12,579 12,728 12,350 13,632 13,053 10/31/2001 11,792 11,867 13,331 11,608 12,567 4/30/2002 11,993 12,329 13,311 11,999 12,733 10/31/2002 10,897 11,161 14,129 9,913 12,060 4/30/2003 11,228 11,357 14,739 10,384 12,553 10/31/2003 12,284 12,385 14,825 12,125 13,476 4/30/2004 12,792 12,952 15,012 12,866 13,924 10/31/2004 13,231 13,347 15,648 13,256 14,307
[END CHART] (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 OF SECTOR ALLOCATION AS A PERCENTAGE OF NET ASSETS] Common Stocks 64% U.S. Government and Agency Obligations 10% Corporate Notes and Bonds 9% Mortgage Backed 9% Cash & Other Net Assets 3% Asset Backed 2% Commercial Mortgage Backed 2% Private Label Mortgage Backed 1%
[END PIE CHART] AVERAGE ANNUAL TOTAL RETURN THROUGH OCTOBER 31, 2004
% 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) 7.71% 3.91% 2.20% 5.08% 1.54% 1.88% 0.99% 4.18% Class B Shares(3) 6.90 3.13 1.45 4.31 2.40 2.02 1.08 4.31 Russell 1000(R) Index 9.33 4.53 -1.63 4.46 -- -- -- -- Merrill Lynch U.S. Domestic Master Index 5.55 5.48 7.61 6.67 -- -- -- -- Blended Synthetic Index 7.64 5.07 2.14 5.64 -- -- -- --
(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. The MEMBERS Growth and Income Fund (Class A shares at net asset value) returned 11.48% during the twelve-month period ended October 31, 2004, under-performing the Russell 1000(R) Value Index, which returned 15.45%. The fund's performance versus the Russell 1000(R) Value Index was hurt by overweights in the health care and information technology sectors. Performance was helped by stock selection in the consumer discretionary sector as management's decision to purchase shares of McDonald's and Target when they appeared to be losing ground to competitors was rewarded when both companies posted improved results. Performance was hurt by stock selection in the utilities sector, as the fund's holdings in Ameren, Consolidated Edison, FPL Group, and Progress Energy - all more conservative, regulated utilities -- underperformed in the sector. At-risk, unregulated utilities outperformed during the early part of the period as market participants apparently decided that they had overestimated the risks inherent in these shares and bid prices up. This out-performance persisted later in the period as market participants came to believe that interest rates would rise less rapidly than they had expected and higher-yielding utilities saw considerable buying interest. Management continues to find good values including some higher quality stocks of industry leaders with solid track records of earnings growth and healthier balance sheets than possessed by the stereotypical "value" stock. Management believes that market participants, lured by the exceptional returns that riskier "deep value" and speculative growth shares provided during 2003, are still undervaluing a number of these stocks. MEMBERS CAPITAL ADVISORS' COMMON STOCK PORTFOLIO MANAGEMENT TEAM - ADVISOR -------------------------------------------------------------------------------- 8 -------------------------------------------------------------------------------- GROWTH AND INCOME FUND PERFORMANCE REVIEW -------------------------------------------------------------------------------- CUMULATIVE PERFORMANCE OF $10,000 SINCE INCEPTION(1) [CHART OF CUMULATIVE PERFORMANCE OF $10,000 SINCE INCEPTION]
Class A Shares Class B Shares (includes maximum (includes maximum Russell 1000(R) sales charge)(2) applicable CDSC)(3) Value Index S&P 500 Index ----------------- ------------------- --------------- ------------- 12/29/1997 9,425 10,000 10,000 10,000 4/30/1998 10,928 11,114 11,429 11,717 10/31/1998 10,327 10,447 10,864 11,670 4/30/1999 12,910 12,287 13,039 13,057 10/31/1999 12,634 12,821 12,659 14,667 4/30/2000 13,654 13,893 12,533 15,725 10/31/2000 13,506 13,682 13,358 15,560 4/30/2001 12,430 12,566 13,339 13,677 10/31/2001 10,748 10,777 11,773 11,680 4/30/2002 11,300 11,609 12,817 11,948 10/31/2002 9,081 9,295 10,593 9,915 4/30/2003 9,286 9,365 11,150 10,359 10/31/2003 10,801 10,861 13,017 11,977 4/30/2004 11,577 11,709 14,078 12,729 10/31/2004 11,903 12,134 15,028 13,105
[END CHART] (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 OF SECTOR ALLOCATION AS A PERCENTAGE OF NET ASSETS] Financials 26% Energy 13% Consumer Discretionary 11% Industrials 11% Information Technology 10% Consumer Staples 7% Health Care 7% Telecommunication Services 5% Materials 4% Cash & Other Net Assets 3% Utilities 3%
[END PIE CHART] AVERAGE ANNUAL TOTAL RETURN THROUGH OCTOBER 31, 2004
% 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) 11.48% 3.86% -0.96% 3.65% 5.11% 1.83% -2.13% 2.75% Class B Shares(3) 10.70 3.09 -1.70 2.87 6.20 1.98 -2.09 2.87 Russell 1000(R) Value Index 15.45 8.48 3.49 6.36 -- -- -- -- S&P 500 Index 9.42 3.92 -2.22 4.31 -- -- -- --
(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, but may often be less diversified then the Growth and Income Fund. 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 (Class A shares at net asset value) returned 8.33% during the twelve-month period ended October 31, 2004, modestly under-performing the Russell 1000(R) Stock Index, which returned 9.33%. The fund's performance versus the Russell 1000(R) Index was helped by an overweight in the energy sector. Performance was hurt by stock selection in the telecommunications services sector, as holdings BellSouth, CenturyTel, and SBC Communications under-performed as investors preferred stocks with more direct exposure to the rapidly growing wireless business. Major index component Verizon, not held in the fund, was also a strong performer during the period, which detracted from the fund's relative performance. Performance was helped by stock selection in the information technology sector, as market participants rewarded computer-aided design software provider Autodesk for posting consistent earnings growth. Management is currently maintaining an overweight in the energy sector, believing that demand for fossil fuels will tend to exceed production capacity for the foreseeable future. Management is pleased that the fund's performance has stabilized in the two years after a difficult period in 2002, and continues to pursue shares of companies with attractive growth prospects which it believes are being under-valued due to transitory factors with the goal of continuing the fund's record of providing long-term capital appreciation for the fund's investors. MEMBERS CAPITAL ADVISORS' COMMON STOCK PORTFOLIO MANAGEMENT TEAM - ADVISOR -------------------------------------------------------------------------------- 10 -------------------------------------------------------------------------------- CAPITAL APPRECIATION FUND PERFORMANCE REVIEW -------------------------------------------------------------------------------- CUMULATIVE PERFORMANCE OF $10,000 SINCE INCEPTION(1) [CHART OF CUMULATIVE PERFORMANCE OF $10,000 SINCE INCEPTION]
Class A Shares Class B Shares (includes maximum (includes maximum Russell 1000(R) S&P SuperComposite sales charge)(2) applicable CDSC)(3) Index 1500 Index ----------------- ------------------- --------------- ------------------ 12/29/1997 9,425 10,000 10,000 10,000 4/30/1998 11,057 11,261 11,671 11,691 10/31/1998 10,415 10,541 11,459 11,433 4/30/1999 12,558 12,034 14,041 13,911 10/31/1999 12,945 13,153 14,391 14,285 4/30/2000 14,585 14,870 15,789 15,481 10/31/2000 15,550 15,812 15,694 15,460 4/30/2001 14,708 14,940 13,632 13,755 10/31/2001 12,116 12,205 11,608 11,828 4/30/2002 12,057 12,401 11,999 12,334 10/31/2002 9,142 9,364 9,913 10,168 4/30/2003 9,674 9,779 10,384 10,616 10/31/2003 11,278 11,366 12,125 12,406 4/30/2004 11,801 11,969 12,866 13,202 10/31/2004 12,218 12,341 13,256 13,626
[END CHART] (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 OF SECTOR ALLOCATION AS A PERCENTAGE OF NET ASSETS] Financials 18% Information Technology 17% Consumer Discretionary 12% Health Care 12% Industrials 12% Consumer Staples 10% Energy 10% Telecommunication Services 3% Cash & Other Net Assets 2% Materials 2% Utilities 2%
[END PIE CHART] AVERAGE ANNUAL TOTAL RETURN THROUGH OCTOBER 31, 2004
% 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) 8.33% 0.28% -1.15% 3.87% 2.14% -1.68% -2.32% 2.97% Class B Shares(3) 7.63 -0.44 -1.86 3.12 3.13 -1.61 -2.25 3.12 Russell 1000(R) Index 9.33 4.53 -1.63 4.46 -- -- -- -- S&P SuperComposite 1500 Index 9.83 4.83 -0.99 4.62 -- -- -- --
(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 of less than $12 billion, but more than $2 billion, at the time of purchase), 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 either grown beyond $12 billion, or fallen below $2 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 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. They often use profits to expand rather than to pay dividends. 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 Mid-Cap Fund (Class A shares at net asset value) returned 11.87% during the twelve-month period ended October 31, 2004, under-performing the Russell Midcap(R) Value Index, which returned 19.74%. The fund's performance was helped by overweights in the energy and industrials sectors and by stock selection in the health care sector, where medical device makers Apogent Technologies and Becton Dickinson performed strongly, and Biogen shares appreciated in price due to a merger. Performance was hurt by an underweight in utilities and by stock selection in the consumer discretionary sector, where holdings Linens 'N Things, Talbots, Interpublic Group, and Newell Rubbermaid under-performed their sector. Performance was also hurt by an underweight in utilities and stock selection in the information technology sector, where the computers & peripherals (McDATA) and software (Reynolds & Reynolds and Synopsys) subsectors were problematic areas. Shares of financially distressed and troubled companies - so-called "deep value" stocks - were the strongest performers in the mid-cap space during the period, as these companies were able to take advantage of higher-than-expected earnings and an exceptionally low cost of capital to refinance, restructure, and shore up their balance sheets. Management tends to avoid the riskiest shares in the mid-cap universe. This can lead to periods of under-performance versus its peer funds, many of which devote a significant portion of their portfolios to "deep value" stocks, and versus value indexes such as the Russell Midcap(R) Value Index, which typically includes significant exposure to such shares. MEMBERS CAPITAL ADVISORS' COMMON STOCK PORTFOLIO MANAGEMENT TEAM - ADVISOR WELLINGTON MANAGEMENT COMPANY, LLP - SUBADVISOR -------------------------------------------------------------------------------- 12 -------------------------------------------------------------------------------- MID-CAP FUND PERFORMANCE REVIEW -------------------------------------------------------------------------------- CUMULATIVE PERFORMANCE OF $10,000 SINCE INCEPTION(1) [CHART OF CUMULATIVE PERFORMANCE OF $10,000 SINCE INCEPTION]
Class A Shares Class B Shares (includes maximum (includes maximum Russell Midcap(R) S&P MidCap sales charge)(2) applicable CDSC)(3) Value Index 400 Index ----------------- ------------------- ----------------- ---------- 2/28/2001 9,425 10,000 10,000 10,000 4/30/2001 9,793 9,930 10,258 10,278 10/31/2001 8,935 9,006 9,255 9,126 4/30/2002 10,601 11,160 11,121 10,954 10/31/2002 8,149 8,540 8,980 8,691 4/30/2003 8,630 8,705 9,621 9,036 10/31/2003 10,488 10,560 11,986 11,362 4/30/2004 11,281 11,370 12,981 12,150 10/31/2004 11,733 11,790 14,352 12,616
[END CHART] (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 OF SECTOR ALLOCATION AS A PERCENTAGE OF NET ASSETS] Financials 24% Consumer Discretionary 15% Industrials 15% Information Technology 9% Energy 8% Materials 7% Utilities 7% Consumer Staples 5% Health Care 5% Cash & Other Net Assets 4% Telecommunication Services 1%
[END PIE CHART] AVERAGE ANNUAL TOTAL RETURN THROUGH OCTOBER 31, 2004
% 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) 11.87% 9.51% 6.14% 5.42% 7.36% 4.45% Class B Shares(3) 10.82 8.64 5.30 6.32 7.64 4.58 Russell Midcap(R) Value Index 19.74 15.75 10.18 -- -- -- S&P MidCap 400 Index 11.04 11.39 6.27 -- -- --
(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 subadviser, each with expertise in a specific range of the market capitalization spectrum. Each of the portfolio managers has a distinct sub-portfolio that is focused on the manager's area of market capitalization expertise. Typically, between 60% to 90% of the fund will be invested in large capitalization companies (generally over $12 billion of market capitalization). The subadvisor may invest up to 25% of the fund in mid capitalization companies (generally between $2 billion and $12 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: o 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 expectations relative to 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 o early in their life cycle, but have the potential to become much larger enterprises. The MEMBERS Multi-Cap Growth Fund (Class A shares at net asset value) returned 8.30% during the twelve-month period ended October 31, 2004, out-performing the Russell 3000(R) Growth Stock Index, which returned 3.54%. Stock selection drove positive benchmark-relative returns during the period. Selection was strongest within the information technology and financials sectors. Success in these areas more than offset weaker stock selection in the health care and industrials sectors. Key individual contributors to performance were Research in Motion, Yahoo! and eBay. Research in Motion, which designs, manufactures and markets devices that facilitate wireless communications, rose sharply in recognition of continued strong growth in subscribers and from the introduction of an appealing new messaging and communication device that closely resembles a wireless handheld phone. Shares of Yahoo! appreciated on favorable trends for online advertising and paid search. eBay's stock rose steadily over the twelve-month period as a result of robust earnings growth, increased listings on its online trading marketplace and growth of its PayPal email payment services. Positive results were partially offset by the decline of KLA-Tencor, Eli Lilly and Cardinal Health. Concerns about excess capacity in the semiconductor industry contributed to a fall in the share price of KLA-Tencor, which management has eliminated from the fund. Eli Lilly was hurt by concerns about Zyprexa's share in the U.S. market for mental illness drugs. Lastly, Cardinal Health was a poor performer during the period due to disappointing earnings and an SEC investigation into the company's accounting methods. Cardinal Health was also sold during the twelve-month period. Management continues to emphasize competitively-advantaged, market share leaders that are likely to further differentiate themselves from competitors in most economic scenarios. The fund's investment approach is a "bottom-up" process; stocks are selected one at a time based on the fundamentals of each holding. As such, the fund's industry weights are a fallout of the process of finding undervalued growth companies. At the conclusion of the twelve-month period, the fund continues to have an overweight position in the information technology sector relative to the Russell 3000(R) Growth Index. Underweight allocations include consumer staples, health care and consumer discretionary sectors. MEMBERS CAPITAL ADVISORS' COMMON STOCK PORTFOLIO MANAGEMENT TEAM - ADVISOR WELLINGTON MANAGEMENT COMPANY, LLP - SUBADVISOR -------------------------------------------------------------------------------- 14 -------------------------------------------------------------------------------- MULTI-CAP GROWTH FUND PERFORMANCE REVIEW -------------------------------------------------------------------------------- CUMULATIVE PERFORMANCE OF $10,000 SINCE INCEPTION(1) [CHART OF CUMULATIVE PERFORMANCE OF $10,000 SINCE INCEPTION]
Class A Shares Class B Shares (includes maximum (includes maximum Russell 3000(R) sales charge)(2) applicable CDSC)(3) Growth Index ----------------- ------------------- --------------- 2/29/2000 9,425 10,000 10,000 4/30/2000 8,087 8,194 10,022 10/31/2000 7,417 7,478 9,222 4/30/2001 5,353 5,405 6,840 10/31/2001 4,024 4,051 5,594 4/30/2002 3,949 4,130 5,521 10/31/2002 3,289 3,420 4,491 4/30/2003 3,450 3,473 4,692 10/31/2003 4,204 4,210 5,540 4/30/2004 4,486 4,528 5,768 10/31/2004 4,552 4,577 5,736
[END CHART] (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 OF SECTOR ALLOCATION AS A PERCENTAGE OF NET ASSETS] Information Technology 31% Health Care 17% Consumer Services 14% Financials 9% Cash & Other Net Assets 6% Consumer Discretionary 5% Industrials 5% Technology 4% Energy 3% Telecommunications 3% Consumer Staples 2% Transportation 1%
[END PIE CHART] AVERAGE ANNUAL TOTAL RETURN THROUGH OCTOBER 31, 2004
% 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) 8.30% 4.19% -14.42% 2.11% 2.16% -15.50% Class B Shares(3) 7.60 3.44 -15.04 3.10 2.33 -15.41 Russell 3000(R) Growth Index 3.54 0.84 -10.87 -- -- --
(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 (Class A shares at net asset value) returned 19.56% during the twelve-month period ended October 31, 2004, performing in-line with the MSCI EAFE Index, which returned 19.27%. INTERNATIONAL EQUITY The portfolio benefited from stock selection in the health care sector, particularly in pharmaceuticals and biotechnology. Regionally, an underweight position in Japan contributed to relative performance. Conversely, stock selection in the financials sector detracted from returns, as Nomura Holdings was the biggest detractor for this sector, as well as the overall portfolio. Being underweight in Australia also detracted from relative performance. EMERGING MARKETS EQUITY The portfolio benefited from an underweight position in the information technology sector, particularly in semiconductors. Stock selection in the materials and energy sectors also added to performance. Within energy, PTT, SK Corp. and MOL contributed the most to relative performance. Within materials, Brazilian iron ore producers, particularly Caemi and CVRD, were top performers. From a regional standpoint, an overweight position in emerging Latin America was the biggest relative contributor. Conversely, an overweight position in diversified financials, and stock selection in the consumer staples sector detracted from relative returns. INTERNATIONAL SMALL CAP The portfolio benefited from an overweight position as well as from stock selection in the consumer discretionary sector. Stock selection in the industrials sector, and particularly in capital goods, contributed to relative performance. Kidde PLC was the top relative contributor to performance in capital goods, and the second largest relative contributor to performance in the portfolio. From a regional perspective, the portfolio benefited from an underweight position in Japan. Conversely, stock selection in energy and in health care detracted the most from relative performance. Being underweight in Australia also detracted from relative returns. MEMBERS CAPITAL ADVISORS' COMMON STOCK PORTFOLIO MANAGEMENT TEAM - ADVISOR LAZARD ASSET MANAGEMENT - SUBADVISOR -------------------------------------------------------------------------------- 16 -------------------------------------------------------------------------------- INTERNATIONAL STOCK FUND PERFORMANCE REVIEW -------------------------------------------------------------------------------- CUMULATIVE PERFORMANCE OF $10,000 SINCE INCEPTION(1) [CHART OF CUMULATIVE PERFORMANCE OF $10,000 SINCE INCEPTION]
Morgan Stanley Capital Class A Shares Class B Shares International Europe, (includes maximum (includes maximum Australasia & Far East sales charge)(2) applicable CDSC)(3) Index (MSCI EAFE Index) ----------------- ------------------- ----------------------- 12/29/1997 9,425 10,000 10,000 4/30/1998 11,104 11,301 11,659 10/31/1998 9,764 9,840 11,090 4/30/1999 11,084 10,916 12,802 10/31/1999 11,413 11,545 13,681 4/30/2000 10,981 11,103 14,616 10/31/2000 10,353 10,413 13,317 4/30/2001 9,632 9,703 12,270 10/31/2001 7,984 8,017 10,031 4/30/2002 9,044 9,291 10,599 10/31/2002 7,646 7,826 8,734 4/30/2003 7,895 7,983 8,912 10/31/2003 9,822 9,885 11,141 4/30/2004 10,942 11,062 12,543 10/31/2004 11,743 11,835 13,288
[END CHART] (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 OF GEOGRAPHICAL ALLOCATION AS A PERCENTAGE OF NET ASSETS] Europe (excluding United Kingdom) 38% United Kingdom 20% Japan 13% Pacific Basin 11% Latin Amercia 6% Africa 4% Cash & Other Net Assets 4% Other Countries 4%
[END PIE CHART] AVERAGE ANNUAL TOTAL RETURN THROUGH OCTOBER 31, 2004
% 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) 19.56% 13.72% 0.57% 3.27% 12.74% 11.48% -0.61% 2.38% Class B Shares(3) 18.67 12.85 -0.19 2.49 14.17 11.93 -0.56 2.49 MSCI EAFE Index 19.27 9.83 -0.58 4.24 -- -- -- --
(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 December 29, 1997. -------------------------------------------------------------------------------- 17 -------------------------------------------------------------------------------- CASH RESERVES FUND PORTFOLIO OF INVESTMENTS --------------------------------------------------------------------------------
Par Value Value (Note 2) --------- -------------- COMMERICAL PAPER - 64.70% -------------------------------------------------------------------------- CHEMICALS - 3.93% $ 800,000 E.I. du Pont de Nemours & Co. 1.750%, due 11/09/04 (A) .................... $ 799,689 ------------- CONSUMER STAPLES - 12.76% 800,000 Anheuser Busch, Inc. 1.780%, due 12/13/04 (A) .................... 798,339 800,000 Nestle Capital Corp. 1.750%, due 11/17/04 (A)(D) ................. 799,378 1,000,000 Proctor & Gamble 1.880%, due 12/01/04 (A) .................... 998,433 ------------- 2,596,150 ------------- FINANCE - 30.93% 800,000 Bank Of America NA 1.790%, due 11/22/04 (A) .................... 799,165 800,000 CXC, Inc. 1.680%, due 11/19/04 (A)(C) ................. 799,328 800,000 Fountain Square Commercial Funding 1.810%, due 12/15/04 (A)(C) ................. 798,230 500,000 General Electric Capital Corp. 1.760%, due 11/01/04 (A) .................... 500,000 800,000 Goldman Sachs Group, Inc. 1.620%, due 11/23/04 (A) .................... 799,208 800,000 Household Finance Corp. 1.760%, due 11/08/04 (A) .................... 799,726 1,000,000 Morgan Stanley Dean Witter & Co. 1.890%, due 11/01/04 (G) .................... 1,000,000 800,000 Toyota Motor Credit Co. 1.930%, due 12/07/04 (A)(D) ................. 798,456 ------------- 6,294,113 ------------- FOREIGN - 4.42% 400,000 Government Of Quebec 1.730%, due 11/15/04 (A)(D) ................. 399,731 500,000 Government Of Quebec 1.740%, due 11/15/04 (A)(D) ................. 499,662 ------------- 899,393 ------------- HEALTH CARE - 4.31% 500,000 Merck & Co., Inc. 1.740%, due 11/08/04 (A) .................... 499,831 378,000 Pfizer, Inc. 1.630%, due 11/18/04 (A) .................... 377,709 ------------- 877,540 ------------- INDUSTRIALS - 3.93% 800,000 Caterpillar, Inc. 1.780%, due 11/29/04 (A) .................... 798,892 ------------- RETAIL - 4.42% 900,000 Wal-Mart Stores, Inc. 1.740%, due 11/03/04 (A) .................... 899,913 ------------- TOTAL COMMERCIAL PAPER (Cost $13,165,690) .......................... 13,165,690 CORPORATE NOTES AND BONDS - 8.85% -------------------------------------------------------------------------- FINANCE - 6.39% 800,000 American Honda Finance Corp. 1.813%, due 12/10/04 (C)(G) ................. 800,000 500,000 CIT Group, Inc. 1.981%, due 11/15/04 (G) .................... 500,329 ------------- 1,300,329 ------------- HEALTH CARE - 2.46% 500,000 Pfizer, Inc. 3.625%, due 11/01/04 ........................ 500,000 ------------- TOTAL CORPORATE NOTES AND BONDS (Cost $1,800,329) ........................... 1,800,329 U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 21.06% -------------------------------------------------------------------------- Federal Farm Credit Bank (A) - 4.90% 1,000,000 1.330%, due 01/05/05 ........................ 997,598 ------------- Federal Home Loan Bank - 2.46% 500,000 1.305%, due 04/22/05 ........................ 500,000 ------------- Federal Home Loan Mortgage Corp. (A) - 3.93% 800,000 1.800%, due 11/24/04 ........................ 799,080 ------------- Federal National Mortgage Association - 2.45% 500,000 1.798%, due 11/01/04 (G) .................... 499,921 ------------- U.S. Treasury Bill (A) - 4.87% 1,000,000 1.975%, due 04/21/05 ........................ 990,619 ------------- U.S. Treasury Strip (A) - 2.45% 500,000 1.420%, due 02/15/05 ........................ 497,965 ------------- TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS (Cost $4,285,183) ........................... 4,285,183
See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 18 -------------------------------------------------------------------------------- CASH RESERVES FUND PORTFOLIO OF INVESTMENTS --------------------------------------------------------------------------------
Shares Value (Note 2) ------ -------------- INVESTMENT COMPANIES - 5.53% -------------------------------------------------------------------------- 806,540 One Group Institutional Prime Money Market Fund ................................. $ 806,540 318,711 SSgA Prime Money Market Fund 318,711 ------------- TOTAL INVESTMENT COMPANIES (Cost $1,125,251) ........................... 1,125,251 TOTAL INVESTMENTS - 100.14% -------------------------------------------------------------------------- (Cost $20,376,453**) ................................... 20,376,453 NET OTHER ASSETS AND LIABILITIES - (0.14)% -------------------------------------------------------------------------- (28,431) TOTAL NET ASSETS - 100.00% -------------------------------------------------------------------------- $ 20,348,022
** Aggregate cost for Federal tax purposes was $20,376,453. (A) Rate noted represents annualized yield at time of purchase. (C) Security sold within the 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 12.28% of total net assets. (G) Floating rate note. Rate shown is as of October 31, 2004. Date shown is next reset date. See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 19 -------------------------------------------------------------------------------- BOND FUND PORTFOLIO OF INVESTMENTS --------------------------------------------------------------------------------
Par Value Value (Note 2) --------- -------------- ASSET BACKED - 5.92% -------------------------------------------------------------------------- $ 123,990 ABSC Long Beach Home Equity Loan Trust, Series 2000-LB1, Class AF5 (M) 8.050%, due 09/21/30 ........................ $ 125,268 300,000 Ameriquest Mortgage Co., Series 2004-FR1, Class M2 (M) 5.207%, due 05/25/34 ........................ 299,533 860,000 Citibank Credit Card Issuance Trust, Series 2004-A1, Class A1 2.550%, due 01/20/09 ........................ 852,017 1,000,000 Countrywide Asset-Backed Certificates, Series 2003-S1, Class A4 (M) 5.009%, due 12/25/32 ........................ 1,021,980 560,000 GMAC Home Equity Loan Trust, Series 2004-HE2, Class M1 (G) 3.950%, due 10/25/33 549,473 700,000 Green Tree Home Equity Loan Trust, Series 1999-A, Class B1 8.970%, due 11/15/27 ........................ 763,180 1,500,000 New Century Home Equity Loan Trust, Series 2003-5, Class AI5 5.500%, due 11/25/33 ........................ 1,554,376 1,621,000 Residential Asset Mortgage Products, Inc., Series 2003-RS9, Class AI5 4.990%, due 03/25/31 ........................ 1,646,663 ------------- TOTAL ASSET BACKED (Cost $6,651,394) ......................... 6,812,490 COMMERCIAL MORTGAGE BACKED - 6.20% -------------------------------------------------------------------------- 1,040,681 Bear Stearns Commercial Mortgage Securities, Inc., Series 2001-TOP4, Class A1 5.060%, due 11/15/16 ........................ 1,081,969 525,000 Bear Stearns Commercial Mortgage Securities, Inc., Series 2004-T16, Class A2 (H)(L) 3.700%, due 08/13/46 ........................ 527,877 525,000 Bear Stearns Commercial Mortgage Securities, Inc., Series 2004-T16, Class A6 (H)(L) 4.750%, due 08/13/46 ........................ 527,690 1,200,000 Greenwich Capital Commercial Funding Corp., Series 2004-GG1, Class A7 (G) 5.317%, due 06/10/36 ........................ 1,258,114 988,696 Morgan Stanley Capital I, Inc., Series 1999-CAM1, Class A3 6.920%, due 03/15/32 ........................ 1,057,174 1,150,000 Morgan Stanley Capital I, Inc., Series 2004-HQ4, Class A7 4.970%, due 04/14/40 ........................ 1,173,722 500,000 Morgan Stanley Capital I, Inc., Series 2004-TP13, Class A3 4.390%, due 09/13/45 ........................ 499,690 1,022,564 Wachovia Bank Commercial Mortgage Trust, Series 2003-C6, Class A1 3.364%, due 08/15/35 ........................ 1,019,253 ------------- TOTAL COMMERCIAL MORTGAGE BACKED (Cost $7,040,019) ......................... 7,145,489 PRIVATE LABEL MORTGAGE BACKED - 1.11% -------------------------------------------------------------------------- 1,270,658 Countrywide Alternative Loan Trust, Series 2002-5, Class A10 6.750%, due 06/25/32 ........................ 1,278,530 ------------- TOTAL PRIVATE LABEL MORTGAGE BACKED (Cost $1,294,637) ......................... 1,278,530 CORPORATE NOTES AND BONDS - 28.45% -------------------------------------------------------------------------- CABLE - 1.15% 800,000 Comcast Corp. 5.300%, due 01/15/14 ........................ 815,749 500,000 Cox Communications, Inc. 6.875%, due 06/15/05 ........................ 511,942 ------------- 1,327,691 ------------- CAPITAL GOODS - 1.30% 1,000,000 Caterpillar Financial Services Corp. 2.500%, due 10/03/06 ........................ 991,281 500,000 United Technologies Corp. 6.625%, due 11/15/04 ........................ 500,646 ------------- 1,491,927 ------------- COMMUNICATION SERVICES - 0.43% 500,000 Clear Channel Communications, Inc. 4.250%, due 05/15/09 497,550 ------------- CONSUMER DISCRETIONARY - 2.34% 750,000 American Association of Retired Persons (C) 7.500%, due 05/01/31 ........................ 905,195 700,000 Carnival Corp. (D) 3.750%, due 11/15/07 ........................ 705,469 1,000,000 Cendant Corp. 6.250%, due 01/15/08 ........................ 1,079,166 ------------- 2,689,830 -------------
See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 20 -------------------------------------------------------------------------------- BOND FUND PORTFOLIO OF INVESTMENTS --------------------------------------------------------------------------------
Par Value Value (Note 2) --------- -------------- CORPORATE NOTES AND BONDS (CONTINUED) -------------------------------------------------------------------------- CONSUMER STAPLES - 0.67% $ 750,000 Coca-Cola Enterprises, Inc. 4.375%, due 09/15/09 ................ $ 769,638 ------------- ENERGY - 3.13% 500,000 Burlington Resources Finance Co. 5.700%, due 03/01/07 ................ 527,374 500,000 Occidental Petroleum Corp. 5.875%, due 01/15/07 ................ 528,986 800,000 Pemex Project Funding Master Trust 7.375%, due 12/15/14 ................ 886,400 450,000 Texaco Capital, Inc. 5.700%, due 12/01/08 ................ 460,577 1,000,000 Valero Energy Corp. 7.500%, due 04/15/32 ................ 1,196,004 ------------- 3,599,341 ------------- FINANCE - 6.59% 500,000 AIG SunAmerica Global Financing XII (C) 5.300%, due 05/30/07 ................ 523,664 500,000 American General Finance Corp. 4.625%, due 09/01/10 ................ 506,706 850,000 Bank of America Corp. 4.875%, due 01/15/13 ................ 868,012 500,000 Bear Stearns Cos., Inc. 7.800%, due 08/15/07 ................ 559,461 500,000 CIT Group, Inc. 7.375%, due 04/02/07 ................ 547,634 500,000 GE Global Insurance Holding Corp. 7.000%, due 02/15/26 ................ 547,486 750,000 Goldman Sachs Group, Inc. 5.700%, due 09/01/12 ................ 798,850 750,000 Household Finance Corp. 6.500%, due 11/15/08 ................ 827,830 500,000 Merrill Lynch & Co., Inc. 7.375%, due 05/15/06 ................ 536,806 500,000 U.S. Bank N.A. 6.300%, due 02/04/14 ................ 562,085 750,000 Wachovia Corp. 4.950%, due 11/01/06 ................ 779,553 500,000 Washington Mutual Finance Corp. 6.250%, due 05/15/06 ................ 526,558 ------------- 7,584,645 ------------- INDUSTRIALS - 5.00% 500,000 DaimlerChrysler NA Holding Corp. 4.750%, due 01/15/08 ................ 515,131 1,000,000 Dow Chemical Co. 5.750%, due 12/15/08 ................ 1,073,224 500,000 Ford Motor Credit Co. 7.600%, due 08/01/05 ................ 517,052 800,000 General Electric Co. 5.000%, due 02/01/13 ................ 829,262 500,000 General Motors Acceptance Corp. 6.125%, due 08/28/07 ................ 521,529 600,000 General Motors Acceptance Corp. 6.875%, due 09/15/11 ................ 624,591 200,000 International Paper Co. 7.875%, due 08/01/06 ................ 215,454 400,000 Raytheon Co. 4.500%, due 11/15/07 ................ 413,906 450,000 Waste Management, Inc. 6.375%, due 11/15/12 ................ 499,941 500,000 Weyerhaeuser Co. 6.875%, due 12/15/33 ................ 550,973 ------------- 5,761,063 ------------- PIPELINE - 0.66% 750,000 Kinder Morgan, Inc. 6.650%, due 03/01/05 ................ 759,777 ------------- REITS - 0.24% 270,000 Simon Property Group, L.P. (C) 5.625%, due 08/15/14 ................ 279,032 ------------- TELECOMMUNICATIONS - 1.62% 500,000 Bellsouth Capital Funding Corp. 7.875%, due 02/15/30 ................ 616,203 250,000 Sprint Capital Corp. 7.125%, due 01/30/06 ................ 262,951 200,000 Telephone & Data Systems, Inc. 7.000%, due 08/01/06 ................ 212,301 250,000 Verizon Wireless Capital LLC 5.375%, due 12/15/06 ................ 262,033 500,000 Vodafone Group PLC (D) 5.000%, due 12/16/13 ................ 511,778 ------------- 1,865,266 ------------- TRANSPORTATION - 1.44% 750,000 Burlington Northern Santa Fe Corp. 6.375%, due 12/15/05 ................ 777,047 750,000 Norfolk Southern Corp. 7.250%, due 02/15/31 ................ 887,348 ------------- 1,664,395 ------------- UTILITIES - 3.88% 550,000 Constellation Energy Group, Inc. 4.550%, due 06/15/15 ................ 525,451 750,000 DTE Energy Co. 6.450%, due 06/01/06 ................ 787,852 500,000 Energy East Corp. 8.050%, due 11/15/10 ................ 595,046 750,000 Niagara Mohawk Power Co. 7.750%, due 05/15/06 ................ 803,758
See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 21 -------------------------------------------------------------------------------- BOND FUND PORTFOLIO OF INVESTMENTS --------------------------------------------------------------------------------
Par Value Value (Note 2) --------- -------------- CORPORATE NOTES AND BONDS (CONTINUED) -------------------------------------------------------------------------- UTILITIES - (CONTINUED) $ 250,000 Progress Energy, Inc. 7.750%, due 03/01/31 ........................ $ 296,814 600,000 Virginia Electric and Power Co., Series A 5.750%, due 03/31/06 ........................ 623,886 750,000 Wisconsin Electric Power Co. 6.500%, due 06/01/28 ........................ 840,361 ------------- 4,473,168 ------------- TOTAL CORPORATE NOTES AND BONDS (Cost $31,302,807) .......................... 32,763,323 MORTGAGE BACKED - 31.51% -------------------------------------------------------------------------- FEDERAL HOME LOAN MORTGAGE CORP. - 8.03% 1,203,709 5.000%, due 05/01/18 Pool # E96322 ............................... 1,229,109 898,479 7.000%, due 07/15/27 Series 1974, Class ZA ....................... 942,695 2,500,000 5.500%, due 05/15/28 Series 2519, Class NG (N) ................... 2,609,112 16,861 8.000%, due 06/01/30 Pool # C01005 ............................... 18,311 158,912 7.000%, due 03/01/31 Pool # C48133 ............................... 168,878 300,198 6.500%, due 01/01/32 Pool # C62333 ............................... 316,032 819,112 6.000%, due 09/01/32 Pool # C70558 ............................... 849,235 3,118,924 5.000%, due 07/01/33 Pool # A11325 ............................... 3,118,432 ------------- 9,251,804 ------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION - 18.29% 105,133 6.000%, due 05/01/16 Pool # 582558 ............................... 110,382 1,215,442 5.500%, due 02/01/18 Pool # 673194 ............................... 1,260,864 1,409,885 4.500%, due 09/01/18 Pool # 737144 ............................... 1,417,365 179,121 6.000%, due 05/01/21 Pool # 253847 ............................... 186,837 1,081,509 5.500%, due 12/01/22 Pool # 254587 ............................... 1,112,177 55,000 7.000%, due 12/01/29 Pool # 762813 ............................... 58,779 205,847 7.000%, due 11/01/31 Pool # 607515 ............................... 218,757 241,824 6.000%, due 02/01/32 Pool # 611619 ............................... 251,127 826,746 6.500%, due 03/01/32 Pool # 631377 ............................... 870,765 20,000 7.000%, due 04/01/32 Pool # 641518 ............................... 21,247 88,273 7.000%, due 05/01/32 Pool # 644591 ............................... 93,809 2,261,603 6.500%, due 06/01/32 Pool # 545691 ............................... 2,382,017 35,000 7.000%, due 08/01/32 Pool # 641302 ............................... 37,182 632,776 6.000%, due 12/01/32 Pool # 676552 ............................... 657,119 2,593,651 5.500%, due 04/01/33 Pool # 690206 ............................... 2,645,998 683,625 6.000%, due 08/01/33 Pool # 729418 ............................... 709,789 1,156,829 6.000%, due 08/01/33 Pool # 729423 ............................... 1,201,102 1,375,906 5.000%, due 10/01/33 Pool # 254903 ............................... 1,374,791 2,470,692 5.500%, due 11/01/33 Pool # 555880 ............................... 2,520,557 205,631 5.000%, due 05/01/34 Pool # 775604 ............................... 205,131 490,905 5.000%, due 05/01/34 Pool # 780890 ............................... 489,712 315,995 5.000%, due 06/01/34 Pool # 255230 ............................... 315,226 2,680,883 5.500%, due 06/01/34 Pool # 780384 ............................... 2,733,401 175,000 7.000%, due 07/01/34 Pool # 792636 ............................... 185,902 ------------- 21,060,036 ------------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 5.19% 32,793 8.000%, due 10/20/15 Pool # 002995 ............................... 35,004 1,100,000 5.008%, due 12/16/25 Series 2004-43, Class C (G) ................. 1,135,793 1,903,626 6.500%, due 09/20/28 Series 1998-21, Class ZB .................... 1,988,752 140,235 6.500%, due 02/20/29 Pool # 002714 ............................... 148,220 20,884 7.500%, due 05/20/30 Pool # 002921 ............................... 22,387 44,833 7.500%, due 08/20/30 Pool # 002957 ............................... 48,061 107,282 6.500%, due 04/20/31 Pool # 003068 ............................... 113,304
See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 22 -------------------------------------------------------------------------------- BOND FUND PORTFOLIO OF INVESTMENTS --------------------------------------------------------------------------------
Par Value Value (Note 2) --------- -------------- MORTGAGE BACKED (CONTINUED) -------------------------------------------------------------------------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (CONTINUED) $2,400,000 6.000%, due 07/20/32 Series 2002-50, Class PE .................... $ 2,486,876 ------------- 5,978,397 ------------- TOTAL MORTGAGE BACKED (Cost $35,534,215) .......................... 36,290,237 U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 25.23% -------------------------------------------------------------------------- FEDERAL FARM CREDIT BANK - 0.97% 500,000 6.125%, due 12/29/15 (N)..................... 561,457 500,000 5.875%, due 10/03/16 (N)..................... 549,639 ------------- 1,111,096 ------------- FEDERAL HOME LOAN MORTGAGE CORP. - 3.55% 2,500,000 4.875%, due 11/15/13 (N)..................... 2,584,808 1,500,000 4.500%, due 01/15/14 ........................ 1,508,280 ------------- 4,093,088 ------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION - 4.78% 3,000,000 4.000%, due 09/02/08 ........................ 3,050,457 1,300,000 4.125%, due 04/15/14 ........................ 1,268,134 1,000,000 6.625%, due 11/15/30 ........................ 1,187,531 ------------- 5,506,122 ------------- U.S. TREASURY BOND - 3.45% 3,300,000 6.250%, due 05/15/30 ........................ 3,968,250 ------------- U.S. TREASURY NOTES - 12.48% 600,000 1.500%, due 03/31/06 ........................ 592,945 3,500,000 2.000%, due 05/15/06 ........................ 3,479,903 2,500,000 2.625%, due 11/15/06 ........................ 2,502,735 3,780,000 3.250%, due 01/15/09 ........................ 3,796,390 2,135,000 5.000%, due 02/15/11 ........................ 2,305,467 950,000 4.250%, due 11/15/13 ........................ 969,296 730,000 4.000%, due 02/15/14 ........................ 730,029 ------------- 14,376,765 ------------- TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS (Cost $28,549,504) .......................... 29,055,321 Shares ------ INVESTMENT COMPANIES - 23.30% -------------------------------------------------------------------------- 2,254,041 SSgA Prime Money Market Fund 2,254,041 24,582,491 State Street Navigator Securities Lending Prime Portfolio (I) 24,582,491 ------------- TOTAL INVESTMENT COMPANIES (Cost $26,836,532) .......................... 26,836,532 TOTAL INVESTMENTS - 121.72% (Cost $137,209,108**)................................... 140,181,922 NET OTHER ASSETS AND LIABILITIES - (21.72)% -------------------------------------------------------------------------- (25,012,431) TOTAL NET ASSETS - 100.00% -------------------------------------------------------------------------- $ 115,169,491
* Non-income producing. ** Aggregate cost for Federal tax purposes was $137,425,399. (C) Security sold within the 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 1.06% of total net assets. (G) Floating rate or variable rate note. Rate shown is as of October 31, 2004. (H) Security purchased on a delayed delivery or when-issued basis. (I) Represents collateral held 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). (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. (N) Security pledged as collateral for when-issued purchase committments outstanding as of October 31, 2004. See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 23 -------------------------------------------------------------------------------- HIGH INCOME FUND PORTFOLIO OF INVESTMENTS --------------------------------------------------------------------------------
Par Value Value (Note 2) --------- -------------- ASSET BACKED - 0.61% -------------------------------------------------------------------------- $ 66,447 Continental Airlines, Inc., Series 1997-4, Class B 6.900%, due 01/02/17 ........................ $ 49,891 43,369 Continental Airlines, Inc., Series 1998-1, Class B 6.748%, due 03/15/17 ........................ 32,042 116,423 Continental Airlines, Inc., Series 1999-1, Class B 6.795%, due 08/02/18 ........................ 91,968 134,132 Continental Airlines, Inc., Series 1999-2, Class B 7.566%, due 03/15/20 ........................ 103,998 139,500 Crest, Ltd., Series 2004-1A, Class G2 (C)(H)(L) 7.000%, due 01/28/40 ........................ 135,350 ------------- TOTAL ASSET BACKED (Cost $416,916) ............................. 413,249 COMMERCIAL MORTGAGE BACKED - 1.79% -------------------------------------------------------------------------- 147,840 Arcap Reit, Inc., Series 2004-RR3, Class H (C) 6.100%, due 09/21/45 ........................ 124,530 352,233 Asset Securitization Corp., Series 1996-MD6, Class A7 (G) 8.005%, due 11/13/29 ........................ 374,719 180,000 Commercial Mortgage Acceptance Corp., Series 1998-C2, Class F (C)(G) 5.440%, due 09/15/30 ........................ 184,577 100,000 CS First Boston Mortgage Securities Corp., Series 1998-C2, Class F (C) 6.750%, due 11/11/30 ........................ 99,695 120,000 First Union National Bank Commercial Mortgage, Series 2000-C2, Class H 6.750%, due 10/15/32 ........................ 119,143 85,000 GE Capital Commerical Mortgage Corp., Series 2000-1, Class F (C)(G) 7.512%, due 01/15/33 ........................ 95,909 115,000 GMAC Commercial Mortgage Securities, Inc., Series 2001-C1, Class G (C)(G) 7.653%, due 04/15/34 ........................ 130,872 1,003,958 Morgan Stanley Capital I, Inc., Series 2004-RR, Class FX (C) 13.925%, due 04/28/39 IO .................... 77,295 ------------- TOTAL COMMERCIAL MORTGAGE BACKED (Cost $1,097,376) ........................... 1,206,740 CORPORATE NOTES AND BONDS - 87.32% -------------------------------------------------------------------------- AEROSPACE/DEFENSE - 0.94% 110,000 K & F Industries, Inc., Series B 9.250%, due 10/15/07 ........................ 112,200 55,000 K & F Industries, Inc., Series B 9.625%, due 12/15/10 ........................ 63,800 235,000 L-3 Communications Corp. 7.625%, due 06/15/12 ........................ 259,675 185,000 TransDigm, Inc. 8.375%, due 07/15/11 ........................ 198,875 ------------- 634,550 ------------- BASIC MATERIALS - 5.38% 305,000 Abitibi-Consolidated, Inc. (D) 8.550%, due 08/01/10 ........................ 333,975 155,000 Buckeye Technologies, Inc. 8.500%, due 10/01/13 ........................ 171,275 120,000 Dresser, Inc. 9.375%, due 04/15/11 ........................ 133,200 310,000 Equistar Chemicals LP/Equistar Funding Corp. 10.625%, due 05/01/11 ....................... 358,050 555,000 Georgia-Pacific Corp. 9.375%, due 02/01/13 ........................ 653,513 30,000 Hexcel Corp. 9.875%, due 10/01/08 ........................ 33,600 220,000 Hexcel Corp. 9.750%, due 01/15/09 ........................ 231,550 30,000 Huntsman International LLC 9.875%, due 03/01/09 ........................ 33,300 350,000 Huntsman International LLC 10.125%, due 07/01/09 ....................... 367,500 137,000 Interface, Inc. 10.375%, due 02/01/10 ....................... 157,550 170,000 Newark Group, Inc. (C) 9.750%, due 03/15/14 ........................ 176,800 195,000 Norske Skog Canada, Ltd., Series D (D) 8.625%, due 06/15/11 ........................ 210,600 190,000 Norske Skog Canada, Ltd. (D) 7.375%, due 03/01/14 ........................ 197,600 455,000 Rhodia S.A. (D) 8.875%, due 06/01/11 ........................ 425,425 65,000 Sovereign Specialty Chemicals, Inc. 11.875%, due 03/15/10 ....................... 69,875 65,000 United States Steel Corp. 9.750%, due 05/15/10 ........................ 74,425 ------------- 3,628,238 -------------
See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 24 -------------------------------------------------------------------------------- HIGH INCOME FUND PORTFOLIO OF INVESTMENTS --------------------------------------------------------------------------------
Par Value Value (Note 2) --------- -------------- CORPORATE NOTES AND BONDS (CONTINUED) -------------------------------------------------------------------------- BUILDING AND CONSTRUCTION - 2.25% $ 120,000 American Standard, Inc. 7.375%, due 02/01/08 ........................ $ 132,600 255,000 Building Materials Corp. of America (C) 7.750%, due 08/01/14 ........................ 253,087 85,000 Corrections Corp. of America 9.875%, due 05/01/09 ........................ 95,625 75,000 Corrections Corp. of America 7.500%, due 05/01/11 ........................ 81,094 260,000 D. R. Horton, Inc. 8.000%, due 02/01/09 ........................ 293,150 175,000 Joy Global, Inc., Series B 8.750%, due 03/15/12 ........................ 197,750 135,000 Nortek, Inc. (C) 8.500%, due 09/01/14 ........................ 143,100 55,000 Ply Gem Industries, Inc. (C) 9.000%, due 02/15/12 ........................ 54,863 250,000 WCI Communities, Inc. 7.875%, due 10/01/13 ........................ 266,250 ------------- 1,517,519 ------------- CHEMICALS AND DRUGS - 2.88% 165,000 Acetex Corp. (D) 10.875%, due 08/01/09 ....................... 181,500 120,000 ARCO Chemical, Co. 9.800%, due 02/01/20 ........................ 133,200 190,000 Hercules, Inc. 6.750%, due 10/15/29 ........................ 193,800 210,000 IMC Global, Inc. 10.875%, due 08/01/13 ....................... 265,125 10,000 Kronos International, Inc. (F) 8.875%, due 06/30/09 ........................ 13,704 175,000 Lyondell Chemical Co. 9.500%, due 12/15/08 ........................ 190,750 115,000 Lyondell Chemical Co. 11.125%, due 07/15/12 ....................... 135,556 60,000 Nalco Co. 7.750%, due 11/15/11 ........................ 64,950 60,000 Nalco Co. 8.875%, due 11/15/13 ........................ 65,775 185,000 Nalco Finance Holdings, Inc. (B)(C) 0.000%, due 02/01/14 ........................ 137,363 200,000 Nova Chemicals Corp. (D) 6.500%, due 01/15/12 ........................ 210,500 210,000 Resolution Performance Products LLC 13.500%, due 11/15/10 ....................... 207,900 130,000 Rockwood Specialties Group, Inc. 10.625%, due 05/15/11 ....................... 144,300 ------------- 1,944,423 ------------- COMMUNICATION - 6.76% 98,000 American Tower Corp. 9.375%, due 02/01/09 ........................ 103,635 125,000 American Tower Corp. (C) 7.125%, due 10/15/12 ........................ 127,187 85,000 CCO Holdings LLC/ CCO Holdings Capital Corp. 8.750%, due 11/15/13 ........................ 84,788 80,000 Charter Communciations Operating LLC/ Charter Communications Capital Corp. (C) 8.375%, due 04/30/14 ........................ 80,700 820,000 Charter Communications Holdings LLC/ Charter Communications Capital Corp. 8.625%, due 04/01/09 ........................ 660,100 520,000 Charter Communications Holdings LLC/ Charter Communications Capital Corp. 9.920%, due 04/01/11 ........................ 417,300 305,000 Citizens Communications Co. 9.250%, due 05/15/11 ........................ 350,750 15,000 Esprit Telecom Group PLC (D)(E) 10.875%, due 06/15/08 ....................... 2 845,000 Nextel Communications, Inc. 7.375%, due 08/01/15 ........................ 937,950 280,000 Qwest Capital Funding, Inc. 7.250%, due 02/15/11 ........................ 261,100 270,000 Qwest Corp. (C) 7.875%, due 09/01/11 ........................ 287,550 265,000 Qwest Corp. (C) 9.125%, due 03/15/12 ........................ 298,787 805,000 Qwest Services Corp. (C) 14.000%, due 12/15/10 ....................... 955,937 ------------- 4,565,786 ------------- CONSUMER CYCLICALS - 1.42% 40,000 Advanced Accesory Systems LLC, Series B 10.750%, due 06/15/11 ....................... 36,400 255,000 Burns, Philp Capital Property, Ltd. (D) 9.750%, due 07/15/12 ........................ 280,500 150,000 Dura Operating Corp., Series B 8.625%, due 04/15/12 ........................ 154,687 300,000 Safilo Capital International S.A. (C)(F) 9.625%, due 05/15/13 ........................ 373,835 65,000 Technical Olympic USA, Inc. 9.000%, due 07/01/10 ........................ 70,850 40,000 Technical Olympic USA, Inc. 7.500%, due 03/15/11 ........................ 40,700 ------------- 956,972 -------------
See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 25 -------------------------------------------------------------------------------- HIGH INCOME FUND PORTFOLIO OF INVESTMENTS --------------------------------------------------------------------------------
Par Value Value (Note 2) --------- -------------- CORPORATE NOTES AND BONDS (CONTINUED) -------------------------------------------------------------------------- CONSUMER SERVICES - 2.26% $ 65,000 GEO Group, Inc. 8.250%, due 07/15/13 ........................ $ 68,250 425,000 Iron Mountain, Inc. 8.625%, due 04/01/13 ........................ 460,062 70,000 Iron Mountain, Inc. 7.750%, due 01/15/15 ........................ 75,600 110,000 Merisant Co. (C) 9.750%, due 07/15/13 ........................ 102,300 285,000 Roundy's, Inc., Series B 8.875%, due 06/15/12 ........................ 309,938 80,000 United Biscuits Finance PLC (F) 10.625%, due 04/15/11 ....................... 110,653 115,000 United Rentals North America, Inc. 6.500%, due 02/15/12 ........................ 113,850 150,000 United Rentals North America, Inc. 7.750%, due 11/15/13 ........................ 145,125 150,000 United Rentals North America, Inc. 7.000%, due 02/15/14 ........................ 138,375 -------------- 1,524,153 -------------- CONSUMER STAPLES - 1.56% 185,000 K2, Inc. (C) 7.375%, due 07/01/14 ........................ 201,650 200,000 Levi Strauss & Co. 7.000%, due 11/01/06 ........................ 195,750 125,000 Michael Foods, Inc. 8.000%, due 11/15/13 ........................ 131,875 200,000 Revlon Consumer Products Corp. 8.625%, due 02/01/08 ........................ 165,000 185,000 Samsonite Corp. 8.875%, due 06/01/11 ........................ 197,025 145,000 Seminis Vegetable Seeds, Inc. 10.250%, due 10/01/13 ....................... 162,400 -------------- 1,053,700 -------------- CONTAINERS/PACKAGING - 4.29% 7,000 Corp Durango, S.A. de C.V. (D)(E) 13.125%, due 08/01/06 ....................... 4,340 3,000 Corp Durango, S.A. de C.V. (D)(E) 13.500%, due 08/01/08 ....................... 1,860 279,000 Corp Durango, S.A. de C.V., Series A (C)(D)(E) 13.750%, due 07/15/09 ....................... 172,980 250,000 Crown European Holdings S.A. (D) 9.500%, due 03/01/11 ........................ 285,000 250,000 Crown European Holdings S.A. (D) 10.875%, due 03/01/13 ....................... 296,875 260,000 Graphic Packaging Corp. 9.500%, due 08/15/13 ........................ 299,650 235,000 Greif, Inc. 8.875%, due 08/01/12 ........................ 261,438 175,000 Jefferson Smurfit Corp. 8.250%, due 10/01/12 ........................ 194,250 170,000 Kappa Beheer BV (D) 10.625%, due 07/15/09 ....................... 180,200 190,000 Owens-Brockway Glass Container, Inc. 8.875%, due 02/15/09 ........................ 208,525 115,000 Owens-Brockway Glass Container, Inc. 8.750%, due 11/15/12 ........................ 129,662 310,000 Owens-Brockway Glass Container, Inc. 8.250%, due 05/15/13 ........................ 341,000 105,000 Plastipak Holdings, Inc. 10.750%, due 09/01/11 ....................... 117,600 25,000 Pliant Corp. (B) 0.000%, due 06/15/09 ........................ 22,250 175,000 Pliant Corp. 13.000%, due 06/01/10 ....................... 163,187 150,000 Pliant Corp. 13.000%, due 06/01/10 ....................... 139,875 75,000 Stone Container Finance Co. (C)(D) 7.375%, due 07/15/14 ........................ 80,063 -------------- 2,898,755 -------------- DURABLE GOODS - 1.89% 240,000 Dana Corp 7.000%, due 03/01/29 ........................ 235,200 150,000 Dana Corp. 6.500%, due 03/01/09 ........................ 157,875 30,000 Dana Corp. 10.125%, due 03/15/10 ....................... 33,825 60,000 Dana Corp. 9.000%, due 08/15/11 ........................ 71,400 65,000 Metaldyne Corp. 11.000%, due 06/15/12 ....................... 54,600 100,000 Metaldyne Corp. (C) 10.000%, due 11/01/13 ....................... 95,500 310,000 Navistar International Corp. 7.500%, due 06/15/11 ........................ 334,800 155,000 Rexnord Corp. 10.125%, due 12/15/12 ....................... 175,150 100,000 Tenneco Automotive, Inc., Series B 10.250%, due 07/15/13 ....................... 116,500 -------------- 1,274,850 -------------- ENERGY - 10.89% 440,000 AES Corp. (C) 8.750%, due 05/15/13 ........................ 508,200 125,000 AES Corp. (C) 9.000%, due 05/15/15 ........................ 145,625 250,000 Allegheny Energy Supply Co., LLC (C) 8.250%, due 04/15/12 ........................ 281,875
See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 26 -------------------------------------------------------------------------------- HIGH INCOME FUND PORTFOLIO OF INVESTMENTS --------------------------------------------------------------------------------
Par Value Value (Note 2) --------- -------------- CORPORATE NOTES AND BONDS (CONTINUED) -------------------------------------------------------------------------- ENERGY (CONTINUED) $ 135,000 AmeriGas Partners, L.P./ AmeriGas Eagle Finance Corp., Series B 8.875%, due 05/20/11 ........................ $ 147,825 125,000 Belden & Blake Corp. (C) 8.750%, due 07/15/12 ........................ 135,000 130,000 Calpine Canada Energy Finance ULC (D) 8.500%, due 05/01/08 ........................ 79,950 500,000 Calpine Corp. (C) 8.750%, due 07/15/13 ........................ 362,500 184,000 Centerpoint Energy, Inc, Series B 7.250%, due 09/01/10 ........................ 205,921 120,000 Chesapeake Energy Corp. 8.125%, due 04/01/11 ........................ 131,400 83,000 Chesapeake Energy Corp. 7.000%, due 08/15/14 ........................ 90,055 285,000 Chesapeake Energy Corp. 6.875%, due 01/15/16 ........................ 304,950 235,000 CMS Energy Corp. 8.500%, due 04/15/11 ........................ 266,725 100,000 Edison Mission Energy 7.730%, due 06/15/09 ........................ 106,500 455,000 El Paso Corp. 7.000%, due 05/15/11 ........................ 457,275 245,000 El Paso Natural Gas Co., Series A 7.625%, due 08/01/10 ........................ 264,906 360,000 El Paso Production Holding Co. 7.750%, due 06/01/13 ........................ 375,300 120,000 Encore Acquisition Co. 8.375%, due 06/15/12 ........................ 133,200 35,000 Encore Acquisition Co. 6.250%, due 04/15/14 ........................ 35,875 93,000 Enterprise Products Operating LP, Series B 6.375%, due 02/01/13 ........................ 100,566 112,000 Enterprise Products Operating LP (C) 5.600%, due 10/15/14 ........................ 114,130 335,000 FirstEnergy Corp., Series B (N) 6.450%, due 11/15/11 ........................ 367,051 175,000 Foundation Pennsylvania Coal Co. (C) 7.250%, due 08/01/14 ........................ 187,031 160,000 Gaz Capital S.A. (C)(D) 8.625%, due 04/28/34 ........................ 178,000 230,000 Hanover Compressor Co. 9.000%, due 06/01/14 ........................ 256,450 100,000 MSW Energy Holdings LLC/MSW Energy Finance Co., Inc., Series B 7.375%, due 09/01/10 ........................ 105,000 65,000 Newfield Exploration Co. (C) 6.625%, due 09/01/14 ........................ 69,713 355,000 NRG Energy, Inc. (C) 8.000%, due 12/15/13 ........................ 390,944 100,000 OAO Gazprom (C)(D) 9.625%, due 03/01/13 ........................ 115,000 130,000 Peabody Energy Corp., Series B 6.875%, due 03/15/13 ........................ 142,675 185,000 Peabody Energy Corp. 5.875%, due 04/15/16 ........................ 188,700 150,000 Petroleum Geo-Services ASA (D) 10.000%, due 11/05/10 ....................... 171,000 35,000 PG&E Corp. 6.875%, due 07/15/08 ........................ 37,975 95,000 Plains Exploration & Production Co. 7.125%, due 06/15/14 ........................ 105,450 170,000 Premcor Refining Group, Inc. 7.750%, due 02/01/12 ........................ 188,275 120,000 Pride International, Inc. (C) 7.375%, due 07/15/14 ........................ 135,000 50,000 PSE&G Power LLC 7.750%, due 04/15/11 ........................ 58,372 185,000 Reliant Energy, Inc. 9.250%, due 07/15/10 ........................ 205,350 100,000 Reliant Energy, Inc. 9.500%, due 07/15/13 ........................ 112,500 80,000 SESI LLC 8.875%, due 05/15/11 ........................ 87,600 -------------- 7,349,864 -------------- FINANCE - 2.13% 191,000 Alamosa, Inc. (B) 0.000%, due 07/31/09 ........................ 203,415 32,000 Alamosa, Inc. 11.000%, due 07/31/10 ....................... 37,440 120,000 BCP Caylux Holdings Luxembourg S.C.A. (C)(D) 9.625%, due 06/15/14 ........................ 134,400 170,000 Bombardier Recreational Products, Inc. (C)(D) 8.375%, due 12/15/13 ........................ 182,750 210,000 Eircom Funding (D) 8.250%, due 08/15/13 ........................ 233,625 220,000 JSG Funding PLC (D) 9.625%, due 10/01/12 ........................ 250,800 165,000 PCA LLC/ PCA Finance Corp. 11.875%, due 08/01/09 ....................... 156,750 130,000 Refco Finance Holdings LLC (C) 9.000%, due 08/01/12 ........................ 140,400 90,000 Standard Aero Holdings, Inc. (C) 8.250%, due 09/01/14 ........................ 95,175 -------------- 1,434,755 --------------
See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 27 -------------------------------------------------------------------------------- HIGH INCOME FUND PORTFOLIO OF INVESTMENTS --------------------------------------------------------------------------------
Par Value Value (Note 2) --------- -------------- CORPORATE NOTES AND BONDS (CONTINUED) -------------------------------------------------------------------------- HEALTH CARE SERVICES - 3.16% $ 190,000 Alliance Imaging, Inc. 10.375%, due 04/15/11 ....................... $ 209,950 140,000 Beverly Enterprises, Inc. (C) 7.875%, due 06/15/14 ........................ 149,975 105,000 Extendicare Health Services, Inc. 6.875%, due 05/01/14 ........................ 107,887 565,000 HCA, Inc. 7.875%, due 02/01/11 ........................ 625,406 135,000 InSight Health Services Corp., Series B 9.875%, due 11/01/11 ........................ 135,000 190,000 Mariner Health Care, Inc. (C) 8.250%, due 12/15/13 ........................ 215,650 55,000 MedCath Holdings Corp. (C) 9.875%, due 07/15/12 ........................ 58,988 215,000 Tenet Healthcare Corp. 6.500%, due 06/01/12 ........................ 195,112 190,000 Tenet Healthcare Corp. (C) 9.875%, due 07/01/14 ........................ 199,025 215,000 US Oncology, Inc. (C) 10.750%, due 08/15/14 ....................... 234,350 -------------- 2,131,343 -------------- INDUSTRIALS - 7.06% 280,000 AMSTED Industries, Inc. (C) 10.250%, due 10/15/11 ....................... 308,000 260,000 BE Aerospace, Inc., Series B 8.875%, due 05/01/11 ........................ 273,520 185,000 Da-Lite Screen Co., Inc. 9.500%, due 05/15/11 ........................ 196,100 300,000 Flextronics International, Ltd. (D) 6.500%, due 05/15/13 ........................ 315,000 195,000 General Binding Corp. 9.375%, due 06/01/08 ........................ 198,900 35,000 Grupo Transportacion Ferroviaria Mexicana, S.A. de C.V. (D) 12.500%, due 06/15/12 ....................... 39,725 180,000 Invensys PLC (C)(D) 9.875%, due 03/15/11 ........................ 188,100 65,000 Jacuzzi Brands, Inc. 9.625%, due 07/01/10 ........................ 73,125 185,000 JLG Industries, Inc. 8.250%, due 05/01/08 ........................ 197,950 480,000 Johnsondiversey Holdings, Inc. (B) 0.000%, due 05/15/13 ........................ 410,400 230,000 Johnsondiversey, Inc., Series B 9.625%, due 05/15/12 ........................ 258,750 150,000 Manitowoc Co., Inc. (F) 10.375%, due 05/15/11 ....................... 213,210 95,000 Manitowoc Co., Inc. 10.500%, due 08/01/12 ....................... 109,844 205,000 Milacron Escrow Corp. (C) 11.500%, due 05/15/11 ....................... 213,200 145,000 Muzak LLC/ Muzak Finance Corp. 10.000%, due 02/15/09 ....................... 129,775 135,000 Ocean Rig Norway AS (D) 10.250%, due 06/01/08 ....................... 139,050 35,000 Oxford Automotive, Inc. (C)(E) 12.000%, due 10/15/10 ....................... 12,950 180,000 SPX Corp. 7.500%, due 01/01/13 ........................ 192,600 100,000 Thermadyne Holdings Corp. 9.250%, due 02/01/14 ........................ 95,000 132,000 TRW Automotive, Inc. 9.375%, due 02/15/13 ........................ 151,800 130,000 TRW Automotive, Inc. 11.000%, due 02/15/13 ....................... 154,700 185,000 Valmont Industries, Inc. (C) 6.875%, due 05/01/14 ........................ 190,550 135,000 Visteon Corp. 7.000%, due 03/10/14 ........................ 126,900 140,000 Werner Holding Co., Inc., Series A 10.000%, due 11/15/07 ....................... 129,500 405,000 Xerox Corp. 7.625%, due 06/15/13 ........................ 445,500 -------------- 4,764,149 -------------- MACHINERY - 0.91% 85,000 AGCO Corp. (F) 6.875%, due 04/15/14 ........................ 108,900 170,000 Case New Holland, Inc. (C) 9.250%, due 08/01/11 ........................ 193,800 230,000 Terex Corp., Series B 10.375%, due 04/01/11 ....................... 258,750 50,000 Terex Corp. 7.375%, due 01/15/14 ........................ 53,500 -------------- 614,950 -------------- MEDIA - 6.18% 310,000 Allbritton Communications Co. 7.750%, due 12/15/12 ........................ 323,175 250,000 Cablevision Systems Corp. (C) 8.000%, due 04/15/12 ........................ 268,750 135,000 CBD Media Holdings LLC/CBD Holdings Finance, Inc. (C) 9.250%, due 07/15/12 ........................ 135,675 435,000 CSC Holdings, Inc., Series B 8.125%, due 08/15/09 ........................ 478,500 150,000 CSC Holdings, Inc. (C) 6.750%, due 04/15/12 ........................ 155,250
See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 28 -------------------------------------------------------------------------------- HIGH INCOME FUND PORTFOLIO OF INVESTMENTS --------------------------------------------------------------------------------
Par Value Value (Note 2) --------- -------------- CORPORATE NOTES AND BONDS (CONTINUED) -------------------------------------------------------------------------- MEDIA (CONTINUED) $ 153,000 Dex Media East LLC/ Dex Media East Finance Co. 12.125%, due 11/15/12 ....................... $ 190,102 132,000 Dex Media West LLC, Series B 9.875%, due 08/15/13 ........................ 156,090 475,000 Dex Media, Inc. (B) 0.000%, due 11/15/13 ........................ 361,000 165,000 DirecTV Holdings LLC 8.375%, due 03/15/13 ........................ 188,100 130,000 Emmis Operating Co. 6.875%, due 05/15/12 ........................ 136,500 345,000 Granite Broadcasting Corp. 9.750%, due 12/01/10 ........................ 318,262 285,000 Lamar Media Corp. 7.250%, due 01/01/13 ........................ 309,225 250,000 Lighthouse International Co. S.A.(C) (F) 8.000%, due 04/30/14 ........................ 312,326 85,000 MediaCom Broadband LLC 11.000%, due 07/15/13 ....................... 91,375 100,000 MediaCom LLC/ Media Capital Corp. 9.500%, due 01/15/13 ........................ 98,000 200,000 Medianews Group, Inc. 6.875%, due 10/01/13 ........................ 207,500 130,000 PRIMEDIA, Inc. 8.875%, due 05/15/11 ........................ 135,525 50,000 PRIMEDIA, Inc. (C) 8.000%, due 05/15/13 ........................ 50,125 130,000 Spanish Broadcasting Systems, Inc. 9.625%, due 11/01/09 ........................ 136,663 110,000 Young Broadcasting, Inc. 8.500%, due 12/15/08 ........................ 117,700 -------------- 4,169,843 -------------- METALS AND MINING - 1.85% 150,000 Century Aluminum Co. (C) 7.500%, due 08/15/14 ........................ 159,000 85,000 Commonwealth Industries, Inc. 10.750%, due 10/01/06 ....................... 85,212 43,337 Doe Run Resources Corp., Series AI (K) 14.500%, due 11/01/08 PIK ................... 37,270 40,000 IMCO Recycling Escrow, Inc. (C)(H) 9.000%, due 11/15/14 ........................ 40,000 240,000 Ispat Inland ULC (D) 9.750%, due 04/01/14 ........................ 291,600 150,000 Oregon Steel Mills, Inc. 10.000%, due 07/15/09 ....................... 166,500 225,000 Russel Metals, Inc. (D) 6.375%, due 03/01/14 ........................ 225,000 60,000 SGL Carbon Luxembourg S.A. (C)(F) 8.500%, due 02/01/12 ........................ 81,460 145,000 Steel Dynamics, Inc. 9.500%, due 03/15/09 ........................ 160,406 -------------- 1,246,448 -------------- PIPELINE - 2.15% 265,000 ANR Pipeline, Co. 9.625%, due 11/01/21 ........................ 325,950 175,000 Dynegy Holdings, Inc. (C) 9.875%, due 07/15/10 ........................ 198,844 155,000 Dynegy Holdings, Inc. 6.875%, due 04/01/11 ........................ 149,962 135,000 Markwest Energy Partners, L.P. (C) 6.875%, due 11/01/14 ........................ 137,700 572,000 Williams Cos., Inc. 7.125%, due 09/01/11 ........................ 640,640 -------------- 1,453,096 -------------- PRINTING - 0.57% 135,000 Cenveo Corp. 7.875%, due 12/01/13 ........................ 130,275 42,000 Hollinger, Inc. (C)(D) 12.875%, due 03/01/11 ....................... 46,200 115,000 Houghton Mifflin Co. 9.875%, due 02/01/13 ........................ 124,775 75,000 Mail-Well I Corp. 9.625%, due 03/15/12 ........................ 83,250 -------------- 384,500 -------------- REITS - 0.36% 165,000 Host Marriott LP 7.125%, due 11/01/13 ........................ 178,200 60,000 MeriStar Hospitality Operating Partnership LP/ MeriStar Hospitality Finance Corp. 10.500%, due 06/15/09 ....................... 66,000 -------------- 244,200 -------------- RECREATION - 6.95% 122,000 AMC Entertainment, Inc. 9.500%, due 02/01/11 ........................ 125,965 245,000 AMC Entertainment, Inc. (C) 8.625%, due 08/15/12 ........................ 267,663 95,000 AMF Bowling Worldwide, Inc. (C) 10.000%, due 03/01/10 ....................... 101,650 185,000 Aztar Corp. 7.875%, due 06/15/14 ........................ 200,725 320,000 Boyd Gaming Corp. 6.750%, due 04/15/14 ........................ 335,600 140,000 Caesars Entertainment, Inc. 8.875%, due 09/15/08 ........................ 161,175
See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 29 -------------------------------------------------------------------------------- HIGH INCOME FUND PORTFOLIO OF INVESTMENTS --------------------------------------------------------------------------------
Par Value Value (Note 2) --------- -------------- CORPORATE NOTES AND BONDS (CONTINUED) -------------------------------------------------------------------------- RECREATION (CONTINUED) $ 290,000 Caesars Entertainment, Inc. 8.125%, due 05/15/11 ........................ $ 338,937 470,000 Hilton Hotels Corp. (N) 7.625%, due 12/01/12 ........................ 552,850 55,000 Intrawest Corp. (C)(D) 7.500%, due 10/15/13 ........................ 58,850 185,000 Isle of Capri Casinos, Inc. 7.000%, due 03/01/14 ........................ 191,475 190,000 Loews Cineplex Entertainment Corp. (C) 9.000%, due 08/01/14 ........................ 199,025 155,000 Mandalay Resort Group 9.375%, due 02/15/10 ........................ 179,800 160,000 MGM Mirage, Inc. 8.500%, due 09/15/10 ........................ 184,000 345,000 MGM Mirage, Inc. 8.375%, due 02/01/11 ........................ 388,987 130,000 Pinnacle Entertainment, Inc. 8.250%, due 03/15/12 ........................ 134,225 150,000 Pinnacle Entertainment, Inc., Series B 8.750%, due 10/01/13 ........................ 159,375 165,000 Royal Caribbean Cruises, Ltd. 6.875%, due 12/01/13 ........................ 181,088 260,000 Six Flags, Inc. 9.750%, due 04/15/13 ........................ 250,575 395,000 Starwood Hotels & Resorts Worldwide, Inc. 7.875%, due 05/01/12 ........................ 463,138 205,000 Station Casinos, Inc. 6.500%, due 02/01/14 ........................ 216,275 -------------- 4,691,378 -------------- RETAIL - 3.73% 180,000 Cole National Group, Inc. 8.875%, due 05/15/12 ........................ 210,375 360,000 Couche Tard US L.P. 7.500%, due 12/15/13 ........................ 387,900 220,000 Dollar General Corp. 8.625%, due 06/15/10 ........................ 251,350 125,000 Duane Reade, Inc. (C) 9.750%, due 08/01/11 ........................ 120,000 180,000 Finlay Fine Jewelry Corp. 8.375%, due 06/01/12 ........................ 196,650 180,000 J Crew Operating Corp. 10.375%, due 10/15/07 ....................... 184,950 10,000 Jitney-Jungle Stores of America, Inc. (E) 10.375%, due 09/15/07 ....................... 1 155,000 Remington Arms Co., Inc. 10.500%, due 02/01/11 ....................... 137,175 60,000 Rite Aid Corp. 9.500%, due 02/15/11 ........................ 66,450 385,000 Rite Aid Corp. 9.250%, due 06/01/13 ........................ 401,363 85,000 Rite Aid Corp. 6.875%, due 08/15/13 ........................ 76,075 185,000 Saks, Inc. 7.000%, due 12/01/13 ........................ 187,775 270,000 Williams Scotsman, Inc. 9.875%, due 06/01/07 ........................ 259,200 35,000 Williams Scotsman, Inc. 10.000%, due 08/15/08 ....................... 38,150 -------------- 2,517,414 -------------- SCHOOLS - 0.25% 164,000 KinderCare Learning Centers, Inc., Series B 9.500%, due 02/15/09 ........................ 166,050 -------------- TECHNOLOGY - 0.86% 185,000 Argo-Tech Corp. (C) 9.250%, due 06/01/11 ........................ 201,650 80,000 BE Aerospace, Inc. 9.500%, due 11/01/08 ........................ 82,534 223,000 Fisher Scientific International, Inc. 8.125%, due 05/01/12 ........................ 248,645 45,000 ON Semiconductor Corp. 13.000%, due 05/15/08 ....................... 50,850 -------------- 583,679 -------------- TELECOMMUNICATIONS - 7.09% 280,000 AT&T Corp. (G) 8.050%, due 11/15/11 ........................ 320,950 240,000 Centennial Cellular Corp Operating Co./ Centennial Communications Corp. LLC 10.125%, due 06/15/13 ....................... 260,400 225,000 Cincinnati Bell, Inc. 8.375%, due 01/15/14 ........................ 214,875 38,000 Citizens Communications Co. 9.000%, due 08/15/31 ........................ 40,565 175,000 Crown Castle International Corp., Series B 7.500%, due 12/01/13 187,250 50,000 Dobson Cellular Systems, Inc. (C)(H) 8.375%, due 11/01/11 ........................ 51,563 90,000 Dobson Communications Corp. 8.875%, due 10/01/13 ........................ 60,525 400,000 EchoStar DBS Corp. 6.375%, due 10/01/11 ........................ 414,500 50,000 FrontierVision Holdings LP (E) 11.875%, due 09/15/07 ....................... 63,750 165,000 FrontierVision Operating Partners LP (E) 11.000%, due 10/15/06 ....................... 207,075 190,000 GCI, Inc. 7.250%, due 02/15/14 ........................ 188,100
See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 30 -------------------------------------------------------------------------------- HIGH INCOME FUND PORTFOLIO OF INVESTMENTS --------------------------------------------------------------------------------
Par Value Value (Note 2) --------- -------------- CORPORATE NOTES AND BONDS (CONTINUED) -------------------------------------------------------------------------- TELECOMMUNICATIONS (CONTINUED) $ 150,000 Innova S de RL de CV (D) 9.375%, due 09/19/13 ........................ $ 166,875 95,000 Insight Midwest L.P. / Insight Capital, Inc. 9.750%, due 10/01/09 ........................ 99,869 210,000 Lucent Technologies, Inc. 5.500%, due 11/15/08 ........................ 215,250 150,000 MCI, Inc. 5.908%, due 05/01/07 ........................ 149,625 210,000 MCI, Inc. 6.688%, due 05/01/09 ........................ 207,112 21,000 MCI, Inc. 7.735%, due 05/01/14 ........................ 20,239 360,000 Nortel Networks, Ltd. (D) 6.125%, due 02/15/06 ........................ 368,100 540,000 Paxson Communications Corp. (B) 0.000%, due 01/15/09 ........................ 469,800 100,000 Rogers Wireless Communications, Inc. (D) 6.375%, due 03/01/14 ........................ 95,500 180,000 Rural Cellular Corp. 9.875%, due 02/01/10 ........................ 181,350 40,000 Rural Cellular Corp. (C) 8.250%, due 03/15/12 ........................ 42,000 215,000 Time Warner Telecom Holdings, Inc. 9.250%, due 02/15/14 ........................ 216,075 145,000 Time Warner Telecom, Inc. 10.125%, due 02/01/11 ....................... 140,650 185,000 UbiquiTel Operating Co. 9.875%, due 03/01/11 ........................ 200,262 185,000 US Unwired, Inc., Series B 10.000%, due 06/15/12 ....................... 200,262 -------------- 4,782,522 -------------- TRANSPORTATION - 0.88% 110,000 CHC Helicopter Corp. (D) 7.375%, due 05/01/14 ........................ 117,150 160,000 GulfMark Offshore, Inc. (C) 7.750%, due 07/15/14 ........................ 168,000 235,000 Kansas City Southern Railway Co. 7.500%, due 06/15/09 ........................ 244,400 60,000 Stena AB (D) 9.625%, due 12/01/12 ........................ 67,575 -------------- 597,125 -------------- UTILITIES - 2.13% 300,000 Crystal US Holdings 3 LLC/Crystal US Sub 3 Corp. (B)(C) 0.000%, due 10/01/14 ........................ 189,000 150,000 Empresa Nacional de Electricidad S.A. (D) 8.350%, due 08/01/13 ........................ 168,489 295,000 Midwest Generation LLC 8.750%, due 05/01/34 ........................ 334,087 120,000 Mission Energy Holding Co. 13.500%, due 07/15/08 ....................... 152,100 35,000 Nevada Power Co. 6.500%, due 04/15/12 ........................ 36,400 60,000 NorthWestern Corp. (C)(H) 5.875%, due 11/01/14 ........................ 61,875 250,000 PSEG Energy Holdings, Inc. 8.625%, due 02/15/08 ........................ 276,250 90,000 Sierra Pacific Power Co. 6.250%, due 04/15/12 ........................ 93,150 110,000 Sierra Pacific Resources 8.625%, due 03/15/14 ........................ 124,850 -------------- 1,436,201 -------------- WASTE DISPOSAL - 0.54% 315,000 Allied Waste Industries, Inc. 6.500%, due 11/15/10 ........................ 303,188 60,000 Allied Waste Industries, Inc. 7.875%, due 04/15/13 ........................ 61,050 -------------- 364,238 -------------- TOTAL CORPORATE NOTES AND BONDS (Cost $55,751,676) .......................... 58,930,701 Shares ------ COMMON STOCKS - 1.00% -------------------------------------------------------------------------- CHEMICALS AND DRUGS - 0.00% 5 Sterling Chemicals, Inc. * .................. 123 -------------- INDUSTRIALS - 0.34% 2,015 Hayes Lemmerz International, Inc. * ......... 16,765 2,700 Magna International, Inc., Class A .......... 196,965 16 Oxford Automotive, Inc. * ................... 0 1,447 Thermadyne Holdings Corp. * ................. 15,193 -------------- 228,923 -------------- TELECOMMUNICATIONS - 0.43% 452 Manitoba Telecom Services, Inc. ............. 15,623 3,572 MCI, Inc. ................................... 61,617 921 NTL, Inc. * ................................. 61,256 12,393 Telewest Global, Inc. * ..................... 152,434 480 Versatel Telecom International N.V. * 1,004 -------------- 291,934 -------------- UTILITIES - 0.23% 7,046 DPL, Inc. ................................... 152,193 -------------- TOTAL COMMON STOCKS (Cost $778,320) ............................. 673,173
See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 31 -------------------------------------------------------------------------------- HIGH INCOME FUND PORTFOLIO OF INVESTMENTS --------------------------------------------------------------------------------
Shares Value (Note 2) ------ -------------- PREFERRED STOCKS - 0.47% -------------------------------------------------------------------------- INDUSTRIALS - 0.29% 3,945 Ford Motor Co. Capital Trust II ............. $ 197,211 11 HLI Operating Co., Inc. * ................... 913 -------------- 198,124 -------------- MEDIA - 0.17% 1,350 PRIMEDIA, Inc. .............................. 117,450 1 PTV, Inc. ................................... 6 -------------- 117,456 -------------- REITS - 0.01% 100 HRPT Properties Trust ....................... 2,745 -------------- TOTAL PREFERRED STOCKS (Cost $331,842) ............................. 318,325 WARRANTS AND RIGHTS - 0.00% -------------------------------------------------------------------------- CHEMICALS AND DRUGS - 0.00% 8 Sterling Chemicals, Inc., Exp. 12/19/08 (L) * ......................... 4 -------------- COMMUNICATION - 0.00% 175 GT Group Telecom, Inc., Exp. 02/01/10 (C)(L) * ...................... 2 -------------- FINANCE - 0.00% 150 Ono Finance PLC, Series A, Exp. 05/31/09 (C)(L) * ...................... 0 -------------- INDUSTRIALS - 0.00% 270 Thermadyne Holdings Corp., Class B, Exp. 05/23/06 * ............................. 27 -------------- TELECOMMUNICATIONS - 0.00% 55 XM Satellite Radio Holdings, Inc., Exp. 03/03/10 (C) * ......................... 3,300 -------------- TOTAL WARRANTS AND RIGHTS (Cost $4,593) ............................... 3,333 Par Value --------- FOREIGN GOVERNMENT AND AGENCY OBLIGATIONS - 0.66% -------------------------------------------------------------------------- BRAZIL - 0.33% $ 196,000 Federal Republic of Brazil (D) 11.000%, due 08/17/40 ....................... 221,088 -------------- PANAMA - 0.18% 111,000 Panama Government International Bond (D) 9.375%, due 01/16/23 ........................ 120,157 -------------- RUSSIA - 0.15% 65,000 Russia Government International Bond (D) 12.750%, due 06/24/28 ....................... 103,350 -------------- TOTAL FOREIGN GOVERNMENT AND AGENCY OBLIGATIONS (Cost $442,165) ............................. 444,595 U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 6.88% -------------------------------------------------------------------------- FEDERAL HOME LOAN BANK (A) - 6.88% 4,645,000 1.690%, due 11/01/04 ........................ 4,645,000 -------------- TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS (Cost $4,645,000) ........................... 4,645,000 Shares ------ INVESTMENT COMPANIES - 22.83% -------------------------------------------------------------------------- 267 SSgA Prime Money Market Fund ................ 267 15,403,431 State Street Navigator Securities Lending Prime Portfolio (I) ................. 15,403,431 -------------- TOTAL INVESTMENT COMPANIES (Cost $15,403,698) ......................... 15,403,698 TOTAL INVESTMENTS - 121.56% -------------------------------------------------------------------------- (Cost $78,871,586**)...................................... 82,038,814 NET OTHER ASSETS AND LIABILITIES - (21.56)% -------------------------------------------------------------------------- (14,553,004) TOTAL NET ASSETS - 100.00% -------------------------------------------------------------------------- $ 67,485,810
See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 32 -------------------------------------------------------------------------------- HIGH INCOME FUND PORTFOLIO OF INVESTMENTS -------------------------------------------------------------------------------- * Non-income producing. ** Aggregate cost for Federal tax purposes was $78,953,737. (A) Rate noted represents annualized yield at time of purchase. (B) Represents security that remains a specified coupon until a predetermined date, at which time the stated rate becomes the effective rate. (C) Security sold within the 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 10.28% of total net assets. (E) In Default. (F) Notes and bonds denominated in foreign currencies and converted to U.S. dollars at period end exchange rates. The aggregate of these securities is 1.80% of total net assets. (G) Floating rate or variable rate note. Rate shown is as of October 31, 2004. (H) Security purchased on a delayed delivery or when-issued basis. (I) Represents collateral held 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-issued purchase committments outstanding as of October 31, 2004. IO Interest Only. The rate shown is an internal rate of return. PIK Payment-In-Kind. PLC Public Limited Company. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -------------------------------------------
APPRECIATION/ CURRENCY SETTLEMENT DATE LOCAL AMOUNT FACE AMOUNT VALUE (DEPRECIATION) -------- --------------- ------------ ----------- ----- -------------- Euro (sell) 11/15/04 753,561 $919,344 $960,589 $(41,245) Euro (buy) 11/15/04 25,271 32,094 32,214 $ 120 Euro (buy) 11/22/04 55,492 68,872 70,736 $ 1,864 Euro (sell) 11/22/04 205,000 254,712 261,315 $ (6,603) -------- $(45,864) ========
See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 33 -------------------------------------------------------------------------------- BALANCED FUND PORTFOLIO OF INVESTMENTS --------------------------------------------------------------------------------
Shares Value (Note 2) ------ -------------- COMMONSTOCKS - 63.51% -------------------------------------------------------------------------- CONSUMER DISCRETIONARY - 7.49% 45,700 Carnival Corp. .............................. $ 2,310,592 19,834 Comcast Corp., Class A * .................... 585,103 42,400 Home Depot, Inc. ............................ 1,741,792 14,100 Kohl's Corp. * .............................. 715,716 66,200 McDonald's Corp. ............................ 1,929,730 62,700 Target Corp. ................................ 3,136,254 32,500 Tiffany & Co. ............................... 953,225 53,800 Time Warner, Inc. * ......................... 895,232 32,500 Viacom, Inc., Class B ....................... 1,185,925 74,600 Walt Disney Co. ............................. 1,881,412 -------------- 15,334,981 -------------- CONSUMER STAPLES - 6.46% 50,900 Coca-Cola Co. ............................... 2,069,594 45,500 CVS Corp. ................................... 1,977,430 41,000 General Mills, Inc. ......................... 1,814,250 21,900 Kimberly-Clark Corp. ........................ 1,306,773 20,400 Procter & Gamble Co. ........................ 1,044,072 82,200 Sara Lee Corp. .............................. 1,913,616 57,500 Wal-Mart Stores, Inc. ....................... 3,100,400 -------------- 13,226,135 -------------- ENERGY - 5.96% 18,200 Anadarko Petroleum Corp. .................... 1,227,590 26,964 BP PLC, ADR ................................. 1,570,653 25,600 ChevronTexaco Corp. ......................... 1,358,336 21,900 Devon Energy Corp. .......................... 1,619,943 52,600 Exxon Mobil Corp. ........................... 2,588,972 12,500 Kerr-McGee Corp. ............................ 740,250 33,400 Marathon Oil Corp. .......................... 1,272,874 20,600 Schlumberger, Ltd. .......................... 1,296,564 14,516 Transocean, Inc. * .......................... 511,689 -------------- 12,186,871 -------------- FINANCIALS - 12.62% 23,600 ACE, Ltd. ................................... 898,216 49,400 Allstate Corp. .............................. 2,375,646 29,300 American International Group, Inc. .......... 1,778,803 90,592 Bank of America Corp. ....................... 4,057,616 9,400 Chubb Corp. ................................. 678,022 86,700 Citigroup, Inc. ............................. 3,846,879 10,900 Goldman Sachs Group, Inc. ................... 1,072,342 47,902 J.P. Morgan Chase & Co. ..................... 1,849,017 18,900 Marsh & McLennan Cos., Inc. ................. 522,774 29,900 Morgan Stanley .............................. 1,527,591 36,400 National City Corp. ......................... 1,418,508 52,800 Prudential Financial, Inc. .................. 2,453,616 16,600 SunTrust Banks, Inc. ........................ 1,168,308 36,700 Wells Fargo & Co. ........................... 2,191,724 -------------- 25,839,062 -------------- HEALTH CARE - 7.32% 36,900 Abbott Laboratories ......................... 1,573,047 48,100 Applera Corp. - Applied Biosystems Group ....................................... 917,748 47,100 Baxter International, Inc. .................. 1,448,796 60,100 Bristol-Myers Squibb Co. .................... 1,408,143 11,300 Genzyme Corp. * ............................. 592,911 41,200 GlaxoSmithKline PLC, ADR .................... 1,746,880 3,500 Hospira, Inc. * ............................. 111,685 77,500 IMS Health, Inc. ............................ 1,641,450 20,800 MedImmune, Inc. * ........................... 591,136 13,400 Merck & Co., Inc. ........................... 419,554 96,262 Pfizer, Inc. ................................ 2,786,785 43,900 Wyeth ....................................... 1,740,635 -------------- 14,978,770 -------------- INDUSTRIALS - 7.64% 32,000 Burlington Northern Santa Fe Corp. .......... 1,337,920 33,000 Dover Corp. ................................. 1,295,910 19,300 Emerson Electric Co. ........................ 1,236,165 15,900 FedEx Corp. ................................. 1,448,808 82,400 General Electric Co. ........................ 2,811,488 51,300 Honeywell International, Inc. ............... 1,727,784 14,000 Illinois Tool Works, Inc. ................... 1,291,920 20,000 Textron, Inc. ............................... 1,363,000 19,300 United Technologies Corp. ................... 1,791,426 47,000 Waste Management, Inc. ...................... 1,338,560 -------------- 15,642,981 -------------- INFORMATION TECHNOLOGY - 10.17% 87,800 ADC Telecommunications, Inc. * .............. 194,038 39,000 Applied Materials, Inc. * ................... 627,900 48,000 Autodesk, Inc. .............................. 2,532,000 39,000 Celestica, Inc. * ........................... 564,720 53,900 Cisco Systems, Inc. * ....................... 1,035,419 35,100 Computer Sciences Corp. * ................... 1,743,417 26,400 Dell, Inc. * ................................ 925,584 39,700 EMC Corp. * ................................. 510,939 28,865 First Data Corp. ............................ 1,191,547 51,100 Hewlett-Packard Co. ......................... 953,526 35,500 Intel Corp. ................................. 790,230 25,700 International Business Machines Corp......... 2,306,575 30,238 Koninklijke Philips Electronics N.V.......... 720,269 39,200 Micron Technology, Inc. * ................... 477,456
See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 34 -------------------------------------------------------------------------------- BALANCED FUND PORTFOLIO OF INVESTMENTS --------------------------------------------------------------------------------
Shares Value (Note 2) ------ -------------- COMMONSTOCKS (CONTINUED) -------------------------------------------------------------------------- INFORMATION TECHNOLOGY (CONTINUED) 73,100 Microsoft Corp. ............................. $ 2,046,069 85,800 Motorola, Inc. .............................. 1,480,908 57,500 PeopleSoft, Inc. * .......................... 1,194,275 49,800 Texas Instruments, Inc. ..................... 1,217,610 14,196 VERITAS Software Corp. * .................... 310,609 -------------- 20,823,091 -------------- MATERIALS - 1.83% 26,300 Alcoa, Inc. ................................. 854,750 30,600 E.I. du Pont de Nemours & Co. 1,311,822 37,100 Rohm and Haas Co. ........................... 1,572,669 -------------- 3,739,241 -------------- TELECOMMUNICATION SERVICES - 2.41% 29,100 ALLTEL Corp. ................................ 1,598,463 80,900 SBC Communications, Inc. .................... 2,043,534 33,120 Verizon Communications, Inc. ................ 1,294,992 -------------- 4,936,989 -------------- UTILITIES - 1.61% 12,900 Ameren Corp. ................................ 619,200 15,500 Consolidated Edison, Inc. ................... 673,475 19,000 FPL Group, Inc. ............................. 1,309,100 16,500 Progress Energy, Inc. ....................... 681,450 -------------- 3,283,225 -------------- TOTAL COMMON STOCKS (Cost $119,653,507) ......................... 129,991,346 Par Value --------- ASSET BACKED - 1.59% -------------------------------------------------------------------------- $ 191,620 ABSC Long Beach Home Equity Loan Trust, Series 2000-LB1, Class AF5 (M) 8.050%, due 09/21/30 ........................ 193,596 500,000 ABSC Manufactured Housing Contract, Series 2004-OK1, Class A4 (C) 5.019%, due 04/16/30 ........................ 376,000 500,000 Ameriquest Mortgage Co., Series 2004-FR1, Class M2 (M) 5.207%, due 05/25/34 ........................ 499,221 340,000 Citibank Credit Card Issuance Trust, Series 2004-A1, Class A1 2.550%, due 01/20/09 ........................ 336,844 320,000 GMAC Home Equity Loan Trust, Series 2004-HE2, Class M1 (G) 3.950%, due 10/25/33 ........................ 313,984 485,314 Green Tree Financial Corp., Series 1996-1, Class M1 7.000%, due 03/15/27 ........................ 480,461 500,000 Green Tree Home Equity Loan Trust, Series 1999-A, Class B1 8.970%, due 11/15/27 ........................ 545,129 500,000 Residential Asset Mortgage Products, Inc., Series 2003-RS9, Class AI5 4.990%, due 03/25/31 ........................ 507,916 -------------- TOTAL ASSET BACKED (Cost $3,299,481) ........................... 3,253,151 COMMERICAL MORTGAGE BACKED - 2.03% -------------------------------------------------------------------------- 633,458 Bear Stearns Commercial Mortgage Securities, Inc., Series 2001-TOP4, Class A1 5.060%, due 11/15/16 ........................ 658,590 350,000 Bear Stearns Commercial Mortgage Securities, Inc., Series 2004-T16, Class A2 (H)(L) 3.700%, due 08/13/46 ........................ 351,918 350,000 Bear Stearns Commercial Mortgage Securities, Inc., Series 2004-T16, Class A6 (H)(L) 4.750%, due 08/13/46 ........................ 351,793 400,000 Greenwich Capital Commercial Funding Corp., Series 2004-GG1, Class A7 (G) 5.317%, due 06/10/36 ........................ 419,371 988,696 Morgan Stanley Capital I, Inc., Series 1999-CAM1, Class A3 6.920%, due 03/15/32 ........................ 1,057,174 700,000 Morgan Stanley Capital I, Inc., Series 2004-HQ4, Class A7 4.970%, due 04/14/40 ........................ 714,439 602,029 Wachovia Bank Commercial Mortgage Trust, Series 2003-C6, Class A1 3.364%, due 08/15/35 ........................ 600,080 -------------- TOTAL COMMERCIAL MORTGAGE BACKED (Cost $4,078,065) ........................... 4,153,365 PRIVATE LABEL MORTGAGE BACKED - 0.67% -------------------------------------------------------------------------- 1,350,074 Countrywide Alternative Loan Trust, Series 2002-5, Class A10 6.750%, due 06/25/32 ........................ 1,358,439 -------------- TOTAL PRIVATE LABEL MORTGAGE BACKED (Cost $1,370,059) ........................... 1,358,439
See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 35 -------------------------------------------------------------------------------- BALANCED FUND PORTFOLIO OF INVESTMENTS --------------------------------------------------------------------------------
Par Value Value (Note 2) --------- -------------- CORPORATE NOTES AND BONDS - 9.21% -------------------------------------------------------------------------- CABLE - 0.39% $ 350,000 Comcast Cable Communications, Inc. 6.875%, due 06/15/09 ........................ $ 391,546 400,000 Comcast Corp. 5.300%, due 01/15/14 ........................ 407,875 -------------- 799,421 -------------- CAPITAL GOODS - 0.49% 500,000 Caterpillar Financial Services Corp. 2.500%, due 10/03/06 ........................ 495,641 500,000 United Technologies Corp. 6.625%, due 11/15/04 ........................ 500,646 -------------- 996,287 -------------- CONSUMER DISCRETIONARY - 0.69% 750,000 American Association of Retired Persons (C) 7.500%, due 05/01/31 ........................ 905,194 500,000 Carnival Corp. (D) 3.750%, due 11/15/07 ........................ 503,907 -------------- 1,409,101 -------------- CONSUMER STAPLES - 0.20% 400,000 Safeway, Inc. 4.125%, due 11/01/08 ........................ 401,971 -------------- ENERGY - 0.75% 500,000 Occidental Petroleum Corp. 5.875%, due 01/15/07 ........................ 528,986 500,000 Pemex Project Funding Master Trust 7.375%, due 12/15/14 ........................ 554,000 450,000 Texaco Capital, Inc. 5.700%, due 12/01/08 ........................ 460,577 -------------- 1,543,563 -------------- FINANCE - 1.65% 500,000 American General Finance Corp. 4.625%, due 09/01/10 ........................ 506,706 500,000 Bear Stearns Cos., Inc. 7.800%, due 08/15/07 ........................ 559,462 500,000 CIT Group, Inc. 7.375%, due 04/02/07 ........................ 547,634 350,000 GE Global Insurance Holding Corp. 7.000%, due 02/15/26 ........................ 383,240 250,000 Household Finance Corp. 6.500%, due 11/15/08 ........................ 275,943 500,000 Merrill Lynch & Co., Inc. 7.375%, due 05/15/06 ........................ 536,806 500,000 U.S. Bank N.A. 6.300%, due 02/04/14 ........................ 562,085 -------------- 3,371,876 -------------- INDUSTRIALS - 1.19% 350,000 Ford Motor Credit Co. 7.600%, due 08/01/05 ........................ 361,936 500,000 Ford Motor Credit Co. 5.800%, due 01/12/09 ........................ 515,825 1,000,000 General Motors Acceptance Corp. 6.125%, due 08/28/07 ........................ 1,043,058 500,000 General Motors Acceptance Corp. 6.875%, due 09/15/11 ........................ 520,493 -------------- 2,441,312 -------------- PIPELINE - 0.32% 650,000 Kinder Morgan, Inc. 6.650%, due 03/01/05 ........................ 658,473 -------------- REITS - 0.07% 140,000 Simon Property Group, L.P. (C) 5.625%, due 08/15/14 ........................ 144,683 -------------- TELECOMMUNICATIONS - 0.96% 500,000 Bellsouth Capital Funding Corp. 7.875%, due 02/15/30 ........................ 616,202 250,000 Sprint Capital Corp. 7.125%, due 01/30/06 ........................ 262,951 537,000 Telephone & Data Systems, Inc. 7.000%, due 08/01/06 ........................ 570,029 500,000 Verizon Wireless Capital LLC 5.375%, due 12/15/06 ........................ 524,067 -------------- 1,973,249 -------------- TRANSPORTATION - 0.59% 600,000 Burlington Northern Santa Fe Corp. 6.375%, due 12/15/05 ........................ 621,638 500,000 Norfolk Southern Corp. 7.250%, due 02/15/31 ........................ 591,565 -------------- 1,213,203 -------------- UTILITIES - 1.91% 375,000 Constellation Energy Group, Inc. 4.550%, due 06/15/15 ........................ 358,262 500,000 DTE Energy Co. 6.450%, due 06/01/06 ........................ 525,235 500,000 Energy East Corp. 8.050%, due 11/15/10 ........................ 595,046 750,000 Niagara Mohawk Power Co. 7.750%, due 05/15/06 ........................ 803,758 350,000 Progress Energy, Inc. 7.750%, due 03/01/31 ........................ 415,539 350,000 Virginia Electric and Power Co., Series A 5.750%, due 03/31/06 ........................ 363,934 750,000 Wisconsin Electric Power Co. 6.500%, due 06/01/28 ........................ 840,361 -------------- 3,902,135 -------------- TOTAL CORPORATE NOTES AND BONDS (Cost $17,864,582) .......................... 18,855,274
See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 36 -------------------------------------------------------------------------------- BALANCED FUND PORTFOLIO OF INVESTMENTS --------------------------------------------------------------------------------
Par Value Value (Note 2) --------- -------------- MORTGAGE BACKED - 9.53% -------------------------------------------------------------------------- FEDERAL HOME LOAN MORTGAGE CORP. - 1.80% $ 898,479 7.000%, due 07/15/27 Series 1974, Class ZA ....................... $ 942,696 31,192 8.000%, due 06/01/30 Pool # C01005 ............................... 33,875 450,297 6.500%, due 01/01/32 Pool # C62333 ............................... 474,048 2,227,803 5.000%, due 07/01/33 Pool # A11325 ............................... 2,227,451 -------------- 3,678,070 -------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION - 6.52% 157,700 6.000%, due 05/01/16 Pool # 582558 ............................... 165,574 1,337,036 5.000%, due 12/01/17 Pool # 672243 ............................... 1,366,281 1,409,885 4.500%, due 09/01/18 Pool # 737144 ............................... 1,417,365 250,769 6.000%, due 05/01/21 Pool # 253847 ............................... 261,571 35,000 7.000%, due 12/01/29 Pool # 762813 ............................... 37,404 205,847 7.000%, due 11/01/31 Pool # 607515 ............................... 218,757 161,216 6.000%, due 02/01/32 Pool # 611619 ............................... 167,418 141,237 7.000%, due 05/01/32 Pool # 644591 ............................... 150,095 1,085,569 6.500%, due 06/01/32 Pool # 545691 ............................... 1,143,368 25,000 7.000%, due 08/01/32 Pool # 641302 ............................... 26,559 1,723,187 6.000%, due 08/01/33 Pool # 729413 ............................... 1,789,135 1,100,419 6.000%, due 08/01/33 Pool # 729418 ............................... 1,142,534 1,161,401 5.500%, due 10/01/33 Pool # 254904 ............................... 1,184,841 3,294,255 5.500%, due 11/01/33 Pool # 555880 ............................... 3,360,742 34,101 5.000%, due 05/01/34 Pool # 782214 ............................... 34,018 773,258 5.000%, due 06/01/34 Pool # 255230 ............................... 771,378 110,000 7.000%, due 07/01/34 Pool # 792636 ............................... 116,852 -------------- 13,353,892 -------------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 1.21% 21,449 8.000%, due 10/20/15 Pool # 002995 ............................... 22,896 600,000 5.008%, due 12/16/25 Series 2004-43, Class C (G) ................. 619,524 196,330 6.500%, due 02/20/29 Pool # 002714 ............................... 207,508 41,768 7.500%, due 05/20/30 Pool # 002921 ............................... 44,775 44,833 7.500%, due 08/20/30 Pool # 002957 ............................... 48,060 178,804 6.500%, due 04/20/31 Pool # 003068 ............................... 188,840 1,300,000 6.000%, due 07/20/32 Series 2002-50, Class PE .................... 1,347,058 -------------- 2,478,661 -------------- TOTAL MORTGAGE BACKED (Cost $19,170,067) .......................... 19,510,623 U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 10.09% -------------------------------------------------------------------------- FEDERAL FARM CREDIT BANK - 1.09% 1,000,000 6.125%, due 12/29/15 (N)..................... 1,122,914 1,000,000 5.875%, due 10/03/16 ........................ 1,099,277 -------------- 2,222,191 -------------- FEDERAL HOME LOAN MORTGAGE CORP. - 0.74% 1,500,000 4.500%, due 01/15/14 ........................ 1,508,280 -------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION - 1.18% 1,100,000 4.000%, due 09/02/08 ........................ 1,118,501 500,000 5.250%, due 08/01/12 ........................ 522,906 800,000 4.125%, due 04/15/14 ........................ 780,390 -------------- 2,421,797 -------------- U.S. TREASURY BOND - 1.26% 2,150,000 6.250%, due 05/15/30 ........................ 2,585,375 -------------- U.S. TREASURY NOTES - 5.82% 1,000,000 1.500%, due 03/31/06 ........................ 988,242 4,400,000 2.000%, due 05/15/06 ........................ 4,374,735 3,850,000 2.625%, due 05/15/08 ........................ 3,806,988 760,000 5.000%, due 02/15/11 ........................ 820,681 550,000 5.000%, due 08/15/11 ........................ 593,979 1,335,000 4.000%, due 02/15/14 ........................ 1,335,052 -------------- 11,919,677 -------------- TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS (Cost $20,196,290) .......................... 20,657,320
See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 37 -------------------------------------------------------------------------------- BALANCED FUND PORTFOLIO OF INVESTMENTS --------------------------------------------------------------------------------
Shares Value (Note 2) ------ -------------- INVESTMENT COMPANIES - 11.25% -------------------------------------------------------------------------- 1 One Group Institutional Prime Money Market Fund ................................. $ 1 7,414,796 SSgA Prime Money Market Fund ................ 7,414,796 15,610,165 State Street Navigator Securities Lending Prime Portfolio (I) ................. 15,610,165 -------------- TOTAL INVESTMENT COMPANIES (Cost $23,024,962) .......................... 23,024,962 TOTAL INVESTMENTS - 107.88% -------------------------------------------------------------------------- (Cost $208,657,013**)..................................... 220,804,480 NET OTHER ASSETS AND LIABILITIES - (7.88)% -------------------------------------------------------------------------- (16,120,216) TOTAL NET ASSETS - 100.00% -------------------------------------------------------------------------- $ 204,684,264
* Non-income producing. ** Aggregate cost for Federal tax purposes was $208,870,469. (C) Security sold within the 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 0.25% of total net assets. (G) Floating rate or variable rate note. Rate shown is as of October 31, 2004. (H) Security purchased on a delayed delivery or when-issued basis. (I) Represents collateral held 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). (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. (N) Security pledged as collateral for when-issued purchase committments outstanding as of October 31, 2004. ADR American Depository Receipt. PLC Public Limited Company. See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 38 -------------------------------------------------------------------------------- GROWTH AND INCOME FUND PORTFOLIO OF INVESTMENTS --------------------------------------------------------------------------------
Shares Value (Note 2) ------ -------------- COMMON STOCKS - 97.30% -------------------------------------------------------------------------- CONSUMER DISCRETIONARY - 10.97% 41,791 Comcast Corp., Class A * .................... $ 1,232,834 84,200 Home Depot, Inc. ............................ 3,458,936 135,500 McDonald's Corp. ............................ 3,949,825 74,100 Target Corp. ................................ 3,706,482 107,100 Time Warner, Inc. * ......................... 1,782,144 44,000 Viacom, Inc., Class B ....................... 1,605,560 112,400 Walt Disney Co. ............................. 2,834,728 -------------- 18,570,509 -------------- CONSUMER STAPLES - 7.19% 32,500 Altria Group, Inc. .......................... 1,574,950 17,300 Coca-Cola Co. ............................... 703,418 80,300 General Mills, Inc. ......................... 3,553,275 27,300 Kimberly-Clark Corp. ........................ 1,628,991 16,400 Procter & Gamble Co. ........................ 839,352 166,600 Sara Lee Corp. .............................. 3,878,448 -------------- 12,178,434 -------------- ENERGY - 12.49% 25,700 Anadarko Petroleum Corp. .................... 1,733,465 19,700 Apache Corp. ................................ 998,790 44,206 BP PLC, ADR ................................. 2,574,999 59,166 ChevronTexaco Corp. ......................... 3,139,348 29,500 ConocoPhillips .............................. 2,487,145 18,200 Cooper Cameron Corp. * ...................... 879,970 30,000 Devon Energy Corp. .......................... 2,219,100 97,200 Exxon Mobil Corp. ........................... 4,784,184 20,500 Schlumberger, Ltd. .......................... 1,290,270 29,452 Transocean, Inc. * .......................... 1,038,183 -------------- 21,145,454 -------------- FINANCIALS - 25.60% 90,000 Allstate Corp. .............................. 4,328,100 11,000 American International Group, Inc. .......... 667,810 120,184 Bank of America Corp. ....................... 5,383,041 5,000 Bear Stearns Cos., Inc. ..................... 473,750 10 Berkshire Hathaway, Inc., Class A * ......... 842,500 132,866 Citigroup, Inc. ............................. 5,895,265 20,000 Freddie Mac ................................. 1,332,000 88,268 J.P. Morgan Chase & Co. ..................... 3,407,145 12,600 Marsh & McLennan Cos., Inc. ................. 348,516 58,400 Morgan Stanley .............................. 2,983,656 57,100 National City Corp. ......................... 2,225,187 11,000 Principal Financial Group, Inc. ............. 415,360 90,000 Prudential Financial, Inc. .................. 4,182,300 20,000 St. Paul Travelers Cos., Inc. ............... 679,200 27,700 SunTrust Banks, Inc. ........................ 1,949,526 41,300 U.S. Bancorp ................................ 1,181,593 66,000 Wachovia Corp. .............................. 3,247,860 56,400 Wells Fargo & Co. ........................... 3,368,208 6,000 XL Capital, Ltd., Class A ................... 435,000 -------------- 43,346,017 -------------- HEALTH CARE - 7.29% 82,100 Baxter International, Inc. .................. 2,525,396 107,100 Bristol-Myers Squibb Co. .................... 2,509,353 59,600 GlaxoSmithKline PLC, ADR .................... 2,527,040 53,200 Merck & Co., Inc. ........................... 1,665,692 46,040 Pfizer, Inc. ................................ 1,332,858 45,200 Wyeth ....................................... 1,792,180 -------------- 12,352,519 -------------- INDUSTRIALS - 11.20% 52,000 Burlington Northern Santa Fe Corp. .......... 2,174,120 51,700 Emerson Electric Co. ........................ 3,311,385 75,000 General Electric Co. ........................ 2,559,000 107,300 Honeywell International, Inc. ............... 3,613,864 15,000 Masco Corp. ................................. 513,900 32,000 Textron, Inc. ............................... 2,180,800 27,300 United Technologies Corp. ................... 2,533,986 72,800 Waste Management, Inc. ...................... 2,073,344 -------------- 18,960,399 -------------- INFORMATION TECHNOLOGY - 10.34% 46,500 Applied Materials, Inc. * ................... 748,650 39,600 Automatic Data Processing, Inc. ............. 1,718,244 75,600 Computer Associates International, Inc. ..... 2,094,876 44,200 Computer Sciences Corp. * ................... 2,195,414 84,600 EMC Corp. * ................................. 1,088,802 108,921 Hewlett-Packard Co. ......................... 2,032,466 54,000 Intel Corp. ................................. 1,202,040 32,100 International Business Machines Corp. ....... 2,880,975 134,900 Motorola, Inc. .............................. 2,328,374 50,300 Texas Instruments, Inc. ..................... 1,229,835 -------------- 17,519,676 -------------- MATERIALS - 4.33% 9,000 Air Products & Chemicals, Inc. ............... 478,620 17,800 Alcan, Inc. .................................. 824,496 34,900 Alcoa, Inc. .................................. 1,134,250 66,000 E.I. du Pont de Nemours & Co. ................ 2,829,420 13,000 PPG Industries, Inc. ......................... 828,750 19,700 Weyerhaeuser Co. ............................. 1,234,008 -------------- 7,329,544 --------------
See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 39 -------------------------------------------------------------------------------- GROWTH AND INCOME FUND PORTFOLIO OF INVESTMENTS --------------------------------------------------------------------------------
Shares Value (Note 2) ------ -------------- COMMON STOCKS (CONTINUED) -------------------------------------------------------------------------- TELECOMMUNICATION SERVICES - 4.78% 50,700 ALLTEL Corp. ................................ $ 2,784,951 102,000 SBC Communications, Inc. .................... 2,576,520 21,800 Telefonos de Mexico S.A. de C.V., ADR ................................ 746,432 50,820 Verizon Communications, Inc. ................ 1,987,062 -------------- 8,094,965 -------------- UTILITIES - 3.11% 26,800 Ameren Corp. ................................ 1,286,400 30,200 Consolidated Edison, Inc. ................... 1,312,190 17,000 FPL Group, Inc. ............................. 1,171,300 36,200 Progress Energy, Inc. ....................... 1,495,060 -------------- 5,264,950 -------------- TOTAL COMMON STOCKS (Cost $155,006,933).......................... 164,762,467 INVESTMENT COMPANY - 2.73% -------------------------------------------------------------------------- 4,629,593 SSgA Prime Money Market Fund ................ 4,629,593 -------------- TOTAL INVESTMENT COMPANY (Cost $4,629,593) ........................... 4,629,593 TOTAL INVESTMENTS - 100.03% -------------------------------------------------------------------------- (Cost $159,636,526**)..................................... 169,392,060 NET OTHER ASSETS AND LIABILITIES - (0.03)% -------------------------------------------------------------------------- (54,869) TOTAL NET ASSETS - 100.00% -------------------------------------------------------------------------- $169,337,191
* Non-income producing. ** Aggregate cost for Federal tax purposes was $160,536,525. ADR American Depository Receipt. PLC Public Limited Company. See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 40 -------------------------------------------------------------------------- CAPITAL APPRECIATION FUND PORTFOLIO OF INVESTMENTS --------------------------------------------------------------------------
Shares Value (Note 2) ------ -------------- COMMON STOCKS - 97.43% -------------------------------------------------------------------------- CONSUMER DISCRETIONARY - 12.06% 56,850 Brinker International, Inc. * ............... $ 1,836,255 45,000 Carnival Corp. .............................. 2,275,200 32,000 Home Depot, Inc. ............................ 1,314,560 50,600 Kohl's Corp. * .............................. 2,568,456 247,500 Liberty Media Corp., Class A * .............. 2,207,700 12,670 Liberty Media International, Inc.* .......... 456,753 15,200 Target Corp. ................................ 760,304 72,000 Tiffany & Co. ............................... 2,111,760 54,200 Time Warner, Inc. * ......................... 901,888 35,300 Viacom, Inc., Class B ....................... 1,288,097 33,000 Walt Disney Co. ............................. 832,260 -------------- 16,553,233 -------------- CONSUMER STAPLES - 10.18% 62,800 Coca-Cola Co. ............................... 2,553,448 52,800 CVS Corp. ................................... 2,294,688 33,900 Estee Lauder Cos., Inc., Class A ............ 1,456,005 14,800 General Mills, Inc. ......................... 654,900 58,800 Kraft Foods, Inc., Class A .................. 1,958,628 41,400 Procter & Gamble Co. ........................ 2,118,852 54,400 Wal-Mart Stores, Inc. ....................... 2,933,248 -------------- 13,969,769 -------------- ENERGY - 9.86% 40,850 Apache Corp. ................................ 2,071,095 30,600 ChevronTexaco Corp. ......................... 1,623,636 38,100 ConocoPhillips .............................. 3,212,211 28,000 Exxon Mobil Corp. ........................... 1,378,160 29,100 Marathon Oil Corp. .......................... 1,109,001 27,500 Noble Corp. * ............................... 1,256,200 38,800 Weatherford International, Ltd.* ............ 2,027,688 25,700 XTO Energy, Inc. ............................ 857,866 -------------- 13,535,857 -------------- FINANCIALS - 17.61% 23,400 ACE, Ltd. ................................... 890,604 42,000 American International Group, Inc. .......... 2,549,820 74,600 Bank of America Corp. ....................... 3,341,334 49,400 Bank of New York Co., Inc. .................. 1,603,524 9,500 Chubb Corp. ................................. 685,235 66,000 Citigroup, Inc. ............................. 2,928,420 33,800 Freddie Mac ................................. 2,251,080 16,800 Goldman Sachs Group, Inc. ................... 1,652,784 19,800 Marsh & McLennan Cos., Inc. ................. 547,668 38,200 MetLife, Inc. ............................... 1,464,970 40,100 U.S. Bancorp ................................ 1,147,261 17,900 Wachovia Corp. .............................. 880,859 42,800 Wells Fargo & Co. ........................... 2,556,016 13,300 XL Capital, Ltd., Class A ................... 964,250 10,500 Zions Bancorporation ........................ 694,785 -------------- 24,158,610 -------------- HEALTH CARE - 11.85% 74,800 Abbott Laboratories ......................... 3,188,724 114,200 Applera Corp. - Applied Biosystems Group .... 2,178,936 37,500 Boston Scientific Corp. * ................... 1,323,750 15,700 Genzyme Corp. * ............................. 823,779 7,760 Hospira, Inc. * ............................. 247,622 99,000 IMS Health, Inc. ............................ 2,096,820 30,800 MedImmune, Inc. * ........................... 875,336 14,900 Merck & Co., Inc. ........................... 466,519 140,138 Pfizer, Inc. ................................ 4,056,995 55,300 Schering-Plough Corp. ....................... 1,001,483 -------------- 16,259,964 -------------- INDUSTRIALS - 12.00% 20,000 CSX Corp. ................................... 730,000 63,400 Dover Corp. ................................. 2,489,718 27,000 FedEx Corp. ................................. 2,460,240 16,200 General Dynamics Corp. ...................... 1,654,344 97,700 General Electric Co. ........................ 3,333,524 29,400 Honeywell International, Inc. ............... 990,192 22,000 Illinois Tool Works, Inc. ................... 2,030,160 51,200 Masco Corp. ................................. 1,754,112 36,000 Waste Management, Inc. ...................... 1,025,280 -------------- 16,467,570 -------------- INFORMATION TECHNOLOGY-17.09% 185,600 ADC Telecommunications, Inc.* ............... 410,176 76,400 Altera Corp. * .............................. 1,736,572 42,500 Autodesk, Inc. .............................. 2,241,875 119,700 Cadence Design Systems, Inc.* ............... 1,489,068 63,100 Celestica, Inc. * ........................... 913,688 57,800 Cisco Systems, Inc. * ....................... 1,110,338 46,600 Dell, Inc. * ................................ 1,633,796 104,100 EMC Corp. * ................................. 1,339,767 34,860 First Data Corp. ............................ 1,439,021 30,500 Hewlett-Packard Co. ......................... 569,130 30,000 KLA-Tencor Corp. * .......................... 1,365,900 86,300 Micron Technology, Inc. * ................... 1,051,134 127,100 Microsoft Corp. ............................. 3,557,529 32,500 Motorola, Inc. .............................. 560,950 20,400 Novellus Systems, Inc. * .................... 528,564 133,500 PeopleSoft, Inc. * .......................... 2,772,795 20,724 Skyworks Solutions, Inc. * .................. 184,236 24,828 VERITAS Software Corp. * .................... 543,237 -------------- 23,447,776 --------------
See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 41 -------------------------------------------------------------------------- CAPITAL APPRECIATION FUND PORTFOLIO OF INVESTMENTS --------------------------------------------------------------------------
Shares Value (Note 2) ------ -------------- COMMON STOCKS (CONTINUED) -------------------------------------------------------------------------- MATERIALS - 2.36% 40,900 Praxair, Inc. ............................... $ 1,725,980 35,600 Rohm and Haas Co. ........................... 1,509,084 -------------- 3,235,064 -------------- TELECOMMUNICATION SERVICES - 2.77% 27,100 BellSouth Corp. ............................. 722,757 46,700 CenturyTel, Inc. ............................ 1,498,603 62,500 SBC Communications, Inc. .................... 1,578,750 -------------- 3,800,110 -------------- UTILITIES - 1.65% 32,800 FPL Group, Inc. ............................. 2,259,920 -------------- TOTAL COMMON STOCKS (COST $122,357,102) ......................... 133,687,873 INVESTMENT COMPANIES - 4.19% -------------------------------------------------------------------------- 3,645,744 SSgA Prime Money Market Fund ................ 3,645,744 2,113,262 State Street Navigator Securities Lending Prime Portfolio (I) ................. 2,113,262 -------------- 5,759,006 -------------- TOTAL INVESTMENT COMPANIES (Cost $5,759,006 ) .......................... 5,759,006 TOTAL INVESTMENTS - 101.62% -------------------------------------------------------------------------- (Cost $128,116,108** ) ................................... 139,446,879 NET OTHER ASSETS AND LIABILITIES - 1.62% -------------------------------------------------------------------------- (2,228,843) TOTAL NET ASSETS - 100.00% -------------------------------------------------------------------------- $ 137,218,036
* Non-income producing. ** Aggregate cost for Federal tax purposes was $128,922,653. (I) Represents collateral held in connection with securities lending. See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 42 -------------------------------------------------------------------------- MID-CAP FUND PORTFOLIO OF INVESTMENTS --------------------------------------------------------------------------
Shares Value (Note 2) ------ -------------- COMMON STOCKS - 96.19% -------------------------------------------------------------------------- CONSUMER DISCRETIONARY - 15.02%.............. 19,600 Abercrombie & Fitch Co., Class A ............ $ 767,928 5,600 ADVO, Inc. .................................. 178,920 35,100 Belo Corp., Class A ......................... 816,075 6,400 Cato Corp., Class A ......................... 146,944 3,000 CEC Entertainment, Inc. * ................... 114,060 2,600 Courier Corp. ............................... 113,100 24,900 Darden Restaurants, Inc. .................... 610,050 25,600 Ethan Allen Interiors, Inc. ................. 975,104 4,700 Gildan Activewear, Inc., Class A * .......... 134,843 13,809 Hibbett Sporting Goods, Inc. * .............. 308,769 30,600 Interpublic Group of Companies, Inc. * ...... 375,156 12,600 Interstate Hotels & Resorts, Inc. * ......... 60,480 15,000 Jones Apparel Group, Inc. ................... 529,500 18,600 Linens 'N Things, Inc. * .................... 447,888 2,200 Meritage Corp. * ............................ 195,140 4,900 Modine Manufacturing Co. .................... 150,479 38,800 Newell Rubbermaid, Inc. ..................... 836,528 9,900 O'Reilly Automotive, Inc. * ................. 426,294 9,400 Outback Steakhouse, Inc. .................... 372,146 6,400 Shoe Carnival, Inc. * ....................... 76,608 3,200 Sonic Corp. * ............................... 87,136 10,300 Spartan Motors, Inc. ........................ 111,961 3,700 Stage Stores, Inc. * ........................ 133,237 25,900 Talbots, Inc. ............................... 683,501 8,300 WCI Communities, Inc. * ..................... 195,880 7,100 Yankee Candle Co., Inc. * ................... 196,670 -------------- 9,044,397 -------------- CONSUMER STAPLES - 4.48% 9,600 Casey's General Stores, Inc. ................ 170,880 5,600 Clorox Co. .................................. 305,760 47,300 Hain Celestial Group, Inc. * ................ 765,314 5,300 John B. Sanfilippo & Son, Inc. * ............ 95,559 23,900 McCormick & Co., Inc. ....................... 846,777 10,000 NBTY, Inc. * ................................ 275,400 5,200 Universal Corp. ............................. 238,056 -------------- 2,697,746 -------------- ENERGY - 8.43% 5,400 Amerada Hess Corp. .......................... 435,834 12,100 BJ Services Co. ............................. 617,100 5,300 Encore Aquisition Co. * ..................... 173,045 20,100 ENSCO International, Inc. ................... 614,055 15,500 Forest Oil Corp. * .......................... 472,750 13,200 Magnum Hunter Resources, Inc. * ............. 159,720 9,900 Marathon Oil Corp. .......................... 377,289 16,000 Pioneer Natural Resources Co. ............... 518,400 10,800 Plains Exploration and Production Co. * ..... 270,000 14,300 Smith International, Inc. * ................. 830,544 10,200 Valero Energy Corp. ......................... 438,294 7,900 Vintage Petroleum, Inc. ..................... 165,900 -------------- 5,072,931 -------------- FINANCIALS - 23.64% 5,900 1st Source Corp. ............................ 159,949 8,400 Acadia Realty Trust, REIT.................... 129,360 6,900 American Capital Strategies, Ltd. ........... 213,555 14,760 Associated Banc-Corp. ....................... 512,024 14,500 Assured Guaranty, Ltd. ...................... 238,090 12,200 Bear Stearns Cos., Inc. ..................... 1,155,950 2,600 Century Bancorp, Inc., Class A .............. 81,588 21,700 Colonial BancGroup, Inc. .................... 469,805 8,500 Compass Bancshares, Inc. .................... 406,045 4,950 Delphi Financial Group, Inc., Class A ....... 202,307 2,600 Financial Federal Corp. * ................... 97,006 9,900 First Horizon National Corp. ................ 428,472 4,000 First Midwest Bancorp, Inc. ................. 139,640 15,600 FirstMerit Corp. ............................ 407,628 4,600 Getty Realty Corp., REIT..................... 129,352 21,700 Hibernia Corp., Class A ..................... 629,300 6,100 IPC Holdings, Ltd. .......................... 246,806 13,600 Jefferson-Pilot Corp. ....................... 656,744 5,300 Laurentian Bank Of Canada.................... 110,534 3,500 M&T Bank Corp. .............................. 360,500 3,900 Maguire Properties, Inc., REIT............... 101,985 17,300 Marshall & Ilsley Corp. ..................... 726,081 12,300 NewAlliance Bancshares, Inc. ................ 170,724 8,500 PartnerRe, Ltd. ............................. 494,275 8,800 Platinum Underwriters Holdings, Ltd. (Bermuda)............................. 257,400 22,400 Principal Financial Group, Inc. ............. 845,824 11,500 Protective Life Corp. ....................... 451,950 7,500 PS Business Parks, Inc., REIT ............... 329,400 10,400 Radian Group, Inc. .......................... 498,472 5,000 RAIT Investment Trust, REIT.................. 133,550 8,000 Reinsurance Group of America, Inc. .......... 344,640 16,300 SAFECO Corp. ................................ 753,712 6,000 Scottish Re Group Ltd. ...................... 135,000 7,000 Sky Financial Group, Inc. ................... 188,160 8,100 SL Green Realty Corp., REIT.................. 444,042 12,600 TCF Financial Corp. ......................... 397,152 8,400 Torchmark Corp. ............................. 453,768 3,100 U-Store-It Trust, REIT * .................... 51,801 17,200 Universal American Financial Corp. * ........ 209,152 4,600 Ventas, Inc., REIT........................... 123,740 5,300 Zions Bancorporation......................... 350,701 -------------- 14,236,184 --------------
See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 43 -------------------------------------------------------------------------- MID-CAP FUND PORTFOLIO OF INVESTMENTS --------------------------------------------------------------------------
Shares Value (Note 2) ------ -------------- COMMON STOCKS (CONTINUED) -------------------------------------------------------------------------- HEALTH CARE - 5.33% 2,800 AMERIGROUP Corp. * .......................... $ 168,000 6,900 AmSurg Corp. * .............................. 161,391 16,900 Becton, Dickinson and Co. ................... 887,250 2,900 CorVel Corp. * .............................. 75,820 2,700 Diagnostic Products Corp. ................... 119,205 11,816 Fisher Scientific International, Inc. * ..... 677,766 12,500 IDEXX Laboratories, Inc. * .................. 623,000 11,500 Omnicare, Inc. .............................. 317,285 5,200 PolyMedica Corp. ............................ 182,000 -------------- 3,211,717 -------------- INDUSTRIALS - 14.96% 5,900 Acuity Brands, Inc. ......................... 156,527 12,000 AirTran Holdings, Inc. * .................... 139,440 6,300 Albany International Corp., Class A.......... 189,126 9,800 Avery Dennison Corp. ........................ 596,232 3,400 Carlisle Cos., Inc. ......................... 197,642 16,200 CSX Corp. ................................... 591,300 4,700 Curtiss-Wright Corp., Class B ............... 245,575 9,000 Deswell Industries, Inc. (Hong Kong) ........ 180,450 11,625 Genesee & Wyoming, Inc., Class A * .......... 294,345 8,700 Ingersoll-Rand Co., Class A ................. 595,428 8,900 Kadant, Inc. * .............................. 160,645 18,500 Manpower, Inc. .............................. 837,125 19,000 Mueller Industries, Inc. .................... 506,540 10,800 Parker-Hannifin Corp. ....................... 762,804 8,400 Quixote Corp. ............................... 150,990 14,400 R. R. Donnelley & Sons Co. .................. 452,880 28,800 Republic Services, Inc., Class A ............ 887,040 3,400 Simpson Manufacturing Co., Inc. ............. 218,552 11,800 Teleflex, Inc. .............................. 516,722 10,700 United Stationers, Inc. * ................... 476,150 5,700 USF Corp. ................................... 204,288 9,500 W.W. Grainger, Inc. ......................... 556,605 9,000 Wolverine Tube, Inc. * ...................... 89,550 -------------- 9,005,956 -------------- INFORMATION TECHNOLOGY - 8.99% 11,100 Affiliated Computer Services, Inc., Class A * ................................. 605,505 24,800 Andrew Corp. * .............................. 346,704 17,600 Arrow Electronics, Inc. * ................... 421,696 51,000 Atmel Corp. * ............................... 162,180 9,500 ATMI, Inc. * ................................ 221,825 10,500 Belden CDT, Inc. ............................ 233,415 3,400 Black Box Corp. ............................. 133,552 20,900 Convergys Corp. * ........................... 271,909 9,400 DuPont Photomasks, Inc. * ................... 246,468 8,100 Eletronics For Imaging, Inc. * .............. 146,124 4,500 Intergraph Corp. * .......................... 112,208 20,100 Intersil Corp., Class A ..................... 328,032 25,900 LSI Logic Corp. * ........................... 117,845 7,300 MAXIMUS, Inc. * ............................. 198,414 25,600 McDATA Corp., Class B * ..................... 153,600 7,200 Molex, Inc. ................................. 212,904 800 Nam Tai Electronics, Inc. ................... 16,536 18,300 PeopleSoft, Inc. * .......................... 380,091 10,200 Pericom Semiconductor Corp. * ............... 91,749 15,100 Reynolds and Reynolds Co., Class A .......... 371,611 15,400 SunGard Data Systems, Inc. * ................ 407,946 3,800 Technitrol, Inc. * .......................... 62,016 5,000 Varian Semiconductor Equipment Associates, Inc. * ........................ 173,050 -------------- 5,415,380 -------------- MATERIALS - 7.03% 2,600 Aber Diamond Corp. * ........................ 91,052 19,100 Air Products & Chemicals, Inc. .............. 1,015,738 4,000 AptarGroup, Inc. ............................ 187,680 11,000 Bowater, Inc. ............................... 405,240 2,550 Florida Rock Industries, Inc. ............... 131,708 21,500 Martin Marietta Materials, Inc. ............. 978,895 22,010 MeadWestvaco Corp. .......................... 693,975 8,300 Meridian Gold, Inc. * ....................... 140,270 7,000 PPG Industries, Inc. ........................ 446,250 6,400 Sensient Technologies Corp. ................. 139,008 -------------- 4,229,816 -------------- TELECOMMUNICATION SERVICES - 0.91% 17,100 CenturyTel, Inc. ............................ 548,739 -------------- UTILITIES - 7.40% 30,800 Alliant Energy Corp. ........................ 812,504 14,000 Ameren Corp. ................................ 672,000 4,400 Black Hills Corp. ........................... 129,624 18,400 Constellation Energy Group, Inc. ............ 747,408 3,800 New Jersey Resources Corp. .................. 156,218 34,000 Pepco Holdings, Inc. ........................ 700,740 11,850 PNM Resources, Inc. ......................... 275,868 5,500 Weststar Energy, Inc. ....................... 115,225 5,200 WGL Holdings, Inc. .......................... 147,940 21,300 Wisconsin Energy Corp. ...................... 695,232 -------------- 4,452,759 -------------- TOTAL COMMON STOCKS (Cost $49,013,272) .......................... 57,915,625
See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 44 -------------------------------------------------------------------------- MID-CAP FUND PORTFOLIO OF INVESTMENTS --------------------------------------------------------------------------
Par Value Value (Note 2) --------- -------------- CORPORATE NOTES AND BONDS - 0.26% -------------------------------------------------------------------------- INDUSTRIALS - 0.26% $ 161,500 Mueller Industries, Inc. (N) 6.000%, due 11/01/14 ...................... $ 158,274 -------------- TOTAL CORPORATE NOTES AND BONDS (Cost $158,274) ......................... 158,274 Shares ------ INVESTMENT COMPANIES - 9.15% -------------------------------------------------------------------------- 2,238,272 SSgA Prime Money Market Fund .............. 2,238,272 3,267,745 State Street Navigator Securities Lending Prime Portfolio (I) ............. 3,267,745 -------------- 5,506,017 -------------- TOTAL INVESTMENT COMPANIES (Cost $5,506,017) ....................... 5,506,017 TOTAL INVESTMENTS - 105.60% -------------------------------------------------------------------------- (Cost $54,677,563**) ..................................... 63,579,916 NET OTHER ASSETS AND LIABILITIES - (5.60)% -------------------------------------------------------------------------- (3,372,856) TOTAL NET ASSETS - 100.00% -------------------------------------------------------------------------- $ 60,207,060
* Non-income producing. ** Aggregate cost for Federal tax purposes was $54,675,928. (I) Represents collateral held in connection with securities lending. (N) Represents security received as part of a corporate action. See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 45 -------------------------------------------------------------------------- MULTI-CAP GROWTH FUND PORTFOLIO OF INVESTMENTS --------------------------------------------------------------------------
Shares Value (Note 2) ------ -------------- COMMON STOCKS - 93.36% -------------------------------------------------------------------------- CONSUMER DISCRETIONARY - 4.75% 2,170 A.C. Moore Arts & Crafts, Inc. * ............ $ 55,910 13,100 Accenture, Ltd., Class A * .................. 317,151 2,600 Corporate Executive Board Co. ............... 165,490 6,300 Education Management Corp. * ................ 168,966 2,100 Helen Of Troy, Ltd. * ....................... 55,755 3,110 Landry's Restaurants, Inc. .................. 84,219 15,420 Lions Gate Entertainment Corp. * ............ 151,270 9,000 Michaels Stores, Inc. ....................... 261,900 3,900 New York & Co., Inc. * ...................... 80,730 2,900 Pixar * ..................................... 233,218 26,270 Sirius Satellite Radio, Inc. * .............. 102,453 10,290 TiVo, Inc. * ................................ 69,200 2,700 Williams-Sonoma, Inc. * ..................... 103,059 -------------- 1,849,321 -------------- CONSUMER SERVICES - 14.09% 25,440 Apollo Group, Inc., Class A * ............... 1,679,040 3,640 DiamondCluster International, Inc., Class A * ........................... 44,353 2,700 Lennar Corp., Class A ....................... 121,446 8,370 MPS Group, Inc. * ........................... 88,136 13,425 Omnicom Group, Inc. ......................... 1,059,233 26,520 Research In Motion, Ltd. * .................. 2,339,064 23,160 Service Corp. International * ............... 153,088 -------------- 5,484,360 -------------- CONSUMER STAPLES - 1.80% 14,010 Gillette Co. ................................ 581,135 5,740 Jackson Hewitt Tax Service, Inc. ............ 120,540 -------------- 701,675 -------------- ENERGY - 2.86% 3,980 Arch Coal, Inc. ............................. 129,430 2,180 Cabot Oil & Gas Corp. ....................... 92,236 3,600 EOG Resources, Inc. ......................... 239,616 6,410 Petro-Canada ................................ 349,281 3,830 Whiting Petroleum Corp. * ................... 113,674 5,675 XTO Energy, Inc. ............................ 189,431 -------------- 1,113,668 -------------- FINANCIALS - 9.09% 1,290 Affiliated Managers Group, Inc. * ........... 72,034 1,470 Arch Capital Group, Ltd. * .................. 55,228 16,635 Citigroup, Inc. ............................. 738,095 52,038 Countrywide Financial Corp. ................. 1,661,573 9,730 Freddie Mac ................................. 648,018 3,580 IndyMac Bancorp, Inc. ....................... 115,491 3,150 Legg Mason, Inc. ............................ 200,686 4,960 U.S.I. Holdings Corp. * ..................... 48,186 -------------- 3,539,311 -------------- HEALTH CARE - 17.24% 9,090 Abbott Laboratories ......................... 387,507 4,330 Abgenix, Inc. * ............................. 39,446 29,570 AstraZeneca PLC, ADR ........................ 1,218,284 1,600 AtheroGenics, Inc. * ........................ 47,904 3,000 Cephalon, Inc. * ............................ 143,010 2,500 Elan Corp. PLC, ADR * ....................... 64,500 19,560 Eli Lilly & Co. ............................. 1,074,039 5,080 Forest Laboratories, Inc. * ................. 226,568 26,850 Guidant Corp. ............................... 1,788,747 3,980 Medicines Co. * ............................. 106,027 24,580 Medtronic, Inc. ............................. 1,256,284 21,300 Millennium Pharmaceuticals, Inc. * .......... 276,474 3,260 NPS Pharmaceuticals, Inc. * ................. 55,681 1,590 Symbion, Inc. * ............................. 24,709 -------------- 6,709,180 -------------- INDUSTRIALS - 4.74% 7,840 Fleetwood Enterprises, Inc. * ............... 98,706 2,850 General Dynamics Corp. ...................... 291,042 19,430 General Electric Co. ........................ 662,951 11,350 GrafTech International, Ltd. * .............. 105,101 3,900 PACCAR, Inc. ................................ 270,309 2,600 Parker-Hannifin Corp. ....................... 183,638 6,600 Rockwell Collins, Inc. ...................... 234,102 -------------- 1,845,849 -------------- INFORMATION TECHNOLOGY - 30.80% 4,610 Acxiom Corp. ................................ 115,250 15,700 Aeroflex, Inc. * ............................ 174,270 9,100 Amdocs, Ltd. * .............................. 228,865 24,070 Analog Devices, Inc. ........................ 969,058 3,500 CDW Corp. ................................... 217,105 40,530 Cisco Systems, Inc. * ....................... 778,581 41,870 Dell, Inc. * ................................ 1,467,962 14,000 eBay, Inc. * ................................ 1,366,540 33,110 First Data Corp. ............................ 1,366,781 22,240 MEMC Electronic Materials, Inc. * ........... 209,056 33,230 Microsoft Corp. ............................. 930,108 5,900 Monster Worldwide, Inc. * ................... 165,495 3,750 Navigant Consulting, Inc. * ................. 93,263 5,420 NAVTEQ Corp. * .............................. 218,480 13,300 Network Appliance, Inc. * ................... 325,451 1,750 Plantronics, Inc. ........................... 76,125 6,040 Polycom, Inc. * ............................. 124,726 7,180 Sapient Corp. * ............................. 57,799 3,500 Symantec Corp. * ............................ 199,290 4,200 VeriSign, Inc. * ............................ 112,686 23,550 Xilinx, Inc. ................................ 720,630 57,180 Yahoo!, Inc. * .............................. 2,069,344 -------------- 11,986,865 --------------
See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 46 -------------------------------------------------------------------------- MULTI-CAP GROWTH FUND PORTFOLIO OF INVESTMENTS --------------------------------------------------------------------------
Shares Value (Note 2) ------ -------------- COMMON STOCKS (CONTINUED) -------------------------------------------------------------------------- TECHNOLOGY - 4.32% 6,400 Cognizant Technology Solutions Corp. * ...... $ 217,600 28,900 Electronic Arts, Inc. * ..................... 1,298,188 2,560 Take-Two Interactive Software, Inc.* ........ 84,378 4,280 THQ, Inc. * ................................. 80,892 -------------- 1,681,058 -------------- TELECOMMUNICATIONS - 2.79% 30,070 American Tower Corp., Class A * ............. 516,904 20,620 Crown Castle International Corp. * .......... 315,692 9,600 Nextel Communications, Inc., Class A * ........................... 254,304 -------------- 1,086,900 -------------- TRANSPORTATION - 0.88% 2,040 Arkansas Best Corp. ......................... 79,743 8,060 Sirva, Inc. * ............................... 193,440 1,440 Yellow Roadway Corp. * ...................... 69,106 -------------- 342,289 -------------- TOTAL COMMON STOCKS (Cost $31,229,633) .......................... 36,340,476 Par Value --------- CERTIFICATE OF DEPOSIT - 3.70% -------------------------------------------------------------------------- $1,440,381 State Street Eurodollar ..................... 1,440,381 -------------- TOTAL CERTIFICATE OF DEPOSIT (Cost $1,440,381) ........................... 1,440,381 Shares ------ INVESTMENT COMPANIES - 6.83% -------------------------------------------------------------------------- 1,753,798 SSgA Prime Money Market Fund ................ 1,753,798 905,553 State Street Navigator Securities Lending Prime Portfolio (I) ............... 905,553 -------------- 2,659,351 -------------- TOTAL INVESTMENT COMPANIES (Cost $2,659,351 ) ........................ 2,659,351 TOTAL INVESTMENTS - 103.89% -------------------------------------------------------------------------- (Cost $35,329,365**) ................................... 40,440,208 NET OTHER ASSETS AND LIABILITIES - (3.89)% -------------------------------------------------------------------------- (1,513,150) TOTAL NET ASSETS - 100.00% -------------------------------------------------------------------------- $ 38,927,058
* Non-income producing. ** Aggregate cost for Federal tax purposes was $35,384,307. (I) Represents collateral held in connection with securities lending. ADR American Depository Receipt. PLC Public Limited Company. See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 47 -------------------------------------------------------------------------- INTERNATIONAL STOCK FUND PORTFOLIO OF INVESTMENTS --------------------------------------------------------------------------
Shares Value (Note 2) ------ -------------- COMMON STOCKS - 94.70% -------------------------------------------------------------------------- ARGENTINA - 0.07% 844 Tenaris S.A., ADR ........................... $ 37,786 -------------- AUSTRALIA - 0.97% 14,121 A.B.C. Learning Centres, Ltd. ............... 50,622 28,500 James Hardie Industries N.V. ................ 134,097 38,252 John Fairfax Holdings, Ltd. ................. 122,559 69,262 Macquarie Infrastructure Group .............. 191,912 -------------- 499,190 -------------- AUSTRIA - 0.35% 4,000 Erste Bank der Oesterreichischen Sparkassen AG ............................... 177,911 -------------- BELGIUM - 0.00% 499 Solvus S.A. Strip VVPR (L) * ................ 6 -------------- BRAZIL - 2.64% 2,900 Brasil de Distribuicao Pao de Acucar, ADR ............................ 69,020 2,000 Brasil Telecom Participacoes S.A., ADR ................... 61,320 5,100 Companhia de Bebidas das Americas, ADR ......................... 126,480 12,100 Companhia de Concessoes Rodoviarias ............................... 174,281 15,300 Companhia Vale do Rio Doce, ADR * ........... 323,748 35,200 Copel, ADR .................................. 126,016 3,800 Embraer Aircraft Corp., ADR ................. 100,852 3,300 Grendene SA * ............................... 35,851 5,800 Petroleo Brasileiro, S.A., ADR .............. 205,958 12,100 Souza Cruz S.A. ............................. 136,498 -------------- 1,360,024 -------------- CHILE - 0.30% 6,300 AFP Provida S.A., ADR ....................... 155,673 -------------- CHINA - 0.69% 9,920 China Mobile HK, Ltd., ADR .................. 144,336 2,260 CNOOC, Ltd., ADR ............................ 117,068 132,000 People's Food Holdings, Ltd. ................ 92,033 -------------- 353,437 -------------- CROATIA - 0.29% 9,600 Pliva d.d., GDR (C) ......................... 147,397 -------------- CZECH REPUBLIC - 0.17% 6,800 Cesky Telecom A.S. .......................... 89,167 -------------- EGYPT - 0.91% 27,305 Commercial International Bank of Egypt, GDR (C) .................... 131,883 17,200 Commercial International Bank of Egypt ............................. 95,884 14,600 Orascom Construction Industries.............. 169,083 2,000 Orascom Telecom Holding S.A.E. * ............ 69,342 -------------- 466,192 -------------- FINLAND - 3.57% 4,400 Amer Group, Ltd. ............................ 211,464 62,500 Nokia Oyj ................................... 963,270 9,000 Sampo Oyj ................................... 107,160 25,300 Stora Enso Oyj .............................. 360,905 3,100 TietoEnator Oyj ............................. 86,941 4,400 Vaisala Oyj ................................. 107,134 -------------- 1,836,874 -------------- FRANCE - 6.68% 3,800 Carbone Lorraine S.A. * ..................... 162,331 9,900 Carrefour S.A. .............................. 433,262 22,627 Credit Agricole S.A. ........................ 662,567 4,400 Euronext N.V. ............................... 127,327 4,300 Lagardere S.C.A. ............................ 276,823 4,300 Neopost S.A. ................................ 298,201 9,145 Sanofi-Aventis .............................. 668,006 3,900 Total S.A., Series B ........................ 810,390 -------------- 3,438,907 -------------- GERMANY - 7.41% 7,800 BASF AG ..................................... 486,234 38,000 Deutsche Telekom AG * ....................... 727,605 7,400 E. On AG .................................... 601,670 2,000 Fielmann AG ................................. 125,287 10,300 MG Technologies AG * ........................ 121,851 920 PUMA AG ..................................... 230,224 5,500 Schering AG ................................. 353,304 6,200 Siemens AG .................................. 461,184 4,511 Techem AG * ................................. 144,398 12,700 Volkswagen AG ............................... 563,734 -------------- 3,815,491 -------------- GREECE - 0.34% 8,590 OPAP S.A. ................................... 174,770 -------------- HONG KONG - 1.37% 49,100 Esprit Asia Holdings, Ltd. .................. 262,422 116,000 Hutchison Telecommunications International, Ltd. * ..................... 79,733 281,000 Pacific Basin Shipping, Ltd. * .............. 131,772 254,000 Texwinca Holdings, Ltd. ..................... 230,064 -------------- 703,991 -------------- HUNGARY - 0.50% 1,280 Gedeon Richter Rt. .......................... 150,652 1,900 MOL Magyar Olaj-es Gazipari Rt. ............. 106,221 -------------- 256,873 --------------
See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 48 -------------------------------------------------------------------------- INTERNATIONAL STOCK FUND PORTFOLIO OF INVESTMENTS --------------------------------------------------------------------------
Shares Value (Note 2) ------ -------------- COMMON STOCKS (CONTINUED) -------------------------------------------------------------------------- INDIA - 1.76% 7,200 Hero Honda Motors, Ltd. ..................... $ 67,258 5,650 Hindalco Industries, Ltd. ................... 147,995 34,800 Hindustan Lever, Ltd. ....................... 95,754 17,600 Reliance Industries, Ltd. ................... 205,534 22,200 Satyam Computer Services, Ltd. .............. 183,228 20,800 State Bank of India, Ltd. ................... 205,315 -------------- 905,084 -------------- INDONESIA - 0.95% 419,500 HM Sampoerna Tbk PT ......................... 276,609 11,200 Telekomunikasi Indonesia Tbk PT, ADR ............................... 213,584 -------------- 490,193 -------------- IRELAND - 3.00% 14,316 Allied Irish Banks PLC ...................... 278,781 11,265 Anglo Irish Bank Corp. PLC .................. 213,973 31,900 Bank of Ireland ............................. 437,161 12,587 CRH PLC ..................................... 300,058 10,100 DCC PLC ..................................... 204,567 12,200 Grafton Group PLC * ......................... 110,890 -------------- 1,545,430 -------------- ISRAEL - 0.22% 42,000 Bank Hapoalim, Ltd. ......................... 114,047 -------------- ITALY - 2.47% 2,500 Davide Campari-Milano SpA ................... 141,662 33,000 Enel SpA .................................... 298,265 29,600 Eni SpA ..................................... 671,667 64,600 Terna SpA ................................... 157,292 -------------- 1,268,886 -------------- JAPAN - 12.54% 3,700 ACOM Co., Ltd. .............................. 232,079 1,300 Aiful Corp. ................................. 129,730 4,200 Credit Saison Co., Ltd. ..................... 134,295 5,000 Daito Trust Construction Co., Ltd. .......... 211,281 48 East Japan Railway Co. ...................... 252,179 7,400 Fanuc, Ltd. ................................. 446,708 9,000 Hisamitsu Pharmaceutical Co., Inc. .......... 165,450 7,000 JSR Corp. ................................... 127,297 9,700 Leopalace21 Corp. ........................... 177,129 34,000 Mitsubishi Estate Co., Ltd. ................. 358,857 4,600 NEC Electronics Corp. ....................... 224,750 50,900 Nissan Motor Co., Ltd. ...................... 573,717 43,000 Nomura Holdings, Inc. ....................... 527,259 193 NTT DoCoMo, Inc. ............................ 340,417 3,900 Rinnai Corp. ................................ 106,126 19,000 Sanyo Shokai, Ltd. .......................... 110,753 3,000 Secom Techno Service Co., Ltd. .............. 106,112 3,000 Sega Sammy Holdings, Inc. * ................. 139,219 11,400 Shin-Etsu Chemical Co., Ltd. ................ 433,333 44,000 Sumitomo Trust & Banking Co., Ltd. .......... 256,480 23,000 Suruga Bank, Ltd. ........................... 176,806 5,600 Takeda Pharmaceutical Co., Ltd. ............. 270,440 115,000 Tokyo Gas Co., Ltd. ......................... 428,457 9,000 Uniden Corp. ................................ 194,822 2,100 USS Co., Ltd. ............................... 169,751 2,800 Yamada Denki Co., Ltd. ...................... 99,302 40 Yoshinoya D&C Co., Ltd. ..................... 63,384 -------------- 6,456,133 -------------- MEXICO - 1.61% 46,800 America Telecom, S.A. de C.V., Series A * ....................... 113,573 2,170 Fomento Economico Mexicano S.A. de C.V., ADR .............................. 95,697 2,500 Grupo Televisa, S.A. de C.V., ADR ........... 137,500 26,900 Kimberly-Clark de Mexico, S.A. de C.V., Class A .......................... 80,527 8,600 Telefonos de Mexico S.A. de C.V., ADR .............................. 294,464 28,200 Urbi Desarrollos Urbanos S.A. de C.V. * ................................. 105,096 -------------- 826,857 -------------- NETHERLANDS - 5.73% 4,440 Boskalis Westminster N.V. ................... 119,428 1,100 Efes Breweries International N.V., GDR (C)(L) * ........................ 25,575 2,848 Fugro N.V. .................................. 221,105 8,221 Heineken N.V. ............................... 258,230 6,073 Hunter Douglas N.V. ......................... 287,223 1,482 IHC Caland N.V. ............................. 84,809 4,900 Imtech N.V. ................................. 131,677 21,663 Philips Electronics N.V. .................... 512,277 19,600 Royal Dutch Petroleum Co. ................... 1,064,157 5,300 Telegraaf Holdings MIJ N.V. ................. 120,602 6,078 United Services Group N.V. .................. 124,901 -------------- 2,949,984 -------------- NORWAY - 1.49% 35,900 Den Norske Bank ASA ......................... 303,238 6,300 Ekornes ASA ................................. 143,137 22,200 Statoil ASA ................................. 320,343 -------------- 766,718 -------------- PERU - 0.20% 7,000 Credicorp, Ltd. ............................. 100,800 -------------- PHILIPPINES - 0.19% 4,000 Philippine Long Distance Telephone Co., ADR * ...................... 100,400 --------------
See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 49 -------------------------------------------------------------------------- INTERNATIONAL STOCK FUND PORTFOLIO OF INVESTMENTS --------------------------------------------------------------------------
Shares Value (Note 2) ------ -------------- COMMON STOCKS (CONTINUED) -------------------------------------------------------------------------- RUSSIA - 0.37% 955 LUKOIL, ADR ................................. $ 118,840 4,900 Wimm-Bill-Dann Foods OJSC, ADR * ............ 72,324 -------------- 191,164 -------------- SINGAPORE - 0.69% 43,000 Overseas Chinese Banking Corp., Ltd. ............................... 356,664 -------------- SOUTH AFRICA - 2.92% 4,300 Edgars Consolidated Stores, Ltd. ............ 149,931 3,800 Harmony Gold Mining Co., Ltd., ADR .......... 44,840 2,850 Impala Platinum Holdings, Ltd. .............. 229,022 24,300 Kumba Resources, Ltd. ....................... 168,269 97,900 Old Mutual PLC .............................. 206,997 59,100 Sanlam, Ltd. ................................ 103,804 14,900 Sappi, Ltd. ................................. 213,637 9,500 Sasol, Ltd. ................................. 188,065 115,596 Steinhoff International Holdings, Ltd. ............................ 200,963 -------------- 1,505,528 -------------- SOUTH KOREA - 4.89% 5,700 Daewoo Shipbuilding & Marine Engineering Co., Ltd., GDR (C) ............ 156,750 1,150 Hite Brewery Co., Ltd. ...................... 83,543 2,700 Hyundai Motor Co. ........................... 130,843 9,686 Kookmin Bank * .............................. 323,299 10,540 KT Corp., ADR ............................... 194,569 400 KT Corp. .................................... 12,994 3,200 LG Chem, Ltd. ............................... 119,661 1,500 LG Electronics, Inc. ........................ 84,605 4,400 LG Household & Health Care, Ltd. ............ 113,092 7,400 LG.Philips LCD Co., Ltd., ADR * ............. 100,270 740 POSCO ....................................... 110,620 2,400 POSCO, ADR .................................. 89,736 2,619 Samsung Electronics Co., Ltd., GDR (C) ............................. 513,324 2,074 Samsung Fire & Marine Insurance Co., Ltd. ....................... 123,274 1,120 Samsung SDI Co., Ltd. ....................... 100,955 870 SK Telecom Co., Ltd. ........................ 136,265 6,139 SK Telecom Co., Ltd., ADR ................... 121,123 -------------- 2,514,923 -------------- SPAIN - 2.07% 13,400 Abengoa, S.A. ............................... 124,359 4,200 Aldeasa, S.A. ............................... 139,208 8,700 Altadis, S.A. ............................... 319,081 9,100 Corporacion Mapfre S.A. ..................... 114,847 13,200 Indra Sistemas, S.A. ........................ 195,534 10,100 Prosegur, CIA de Seguridad S.A. ............. 173,819 -------------- 1,066,848 -------------- SWEDEN - 1.41% 9,200 Alfa Laval AB ............................... 128,957 11,260 Elekta AB * ................................. 299,801 10,300 Getinge AB .................................. 114,993 16,400 Swedish Match AB ............................ 180,785 -------------- 724,536 -------------- SWITZERLAND - 3.07% 9,700 Compagnie Financiere Richemont AG, Class A ..................... 274,773 18,170 Credit Suisse Group * ....................... 620,827 320 Edipresse S.A. .............................. 157,530 100 Geberit AG .................................. 65,081 7,500 Swiss Reinsurance Co. ....................... 459,950 -------------- 1,578,161 -------------- TAIWAN - 1.74% 64,624 Advantech Co., Ltd. ......................... 138,321 98,122 Chinatrust Financial Holding Co., Ltd. ................................. 111,913 11,093 Compal Electronics, Inc., GDR ............... 50,142 35,738 Compal Electronics, Inc. .................... 32,095 139,000 Fubon Group Co., Ltd. ....................... 131,073 51,197 Hon Hai Precision Industry Co., Ltd. ........ 188,511 186,000 Taiwan Semiconductor Manufacturing Co., Ltd. ................... 243,880 -------------- 895,935 -------------- THAILAND - 0.19% 62,300 Delta Electronics (Thailand) Public Co., Ltd. ................................. 25,503 114,100 Thai Union Frozen Products Public Co., Ltd. - Foreign ....................... 74,371 -------------- 99,874 -------------- TURKEY - 0.26% 29,250,125 Akbank T.A.S. ............................... 131,918 -------------- UNITED KINGDOM - 20.35% 62,500 Barclays PLC ................................ 610,004 44,800 BP PLC ...................................... 433,553 76,800 BRiT Insurance Holdings PLC ................. 100,389 13,100 Bunzl PLC ................................... 99,197 33,300 Cadbury Schweppes PLC ....................... 276,442 9,400 Carpetright PLC ............................. 187,973 21,900 Cattles PLC ................................. 143,033 191,500 Cookson Group PLC * ......................... 112,424 44,700 Diageo PLC .................................. 597,418 11,300 Emap PLC .................................... 162,946 11,300 Enterprise Inns PLC ......................... 128,325
See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 50 -------------------------------------------------------------------------- INTERNATIONAL STOCK FUND PORTFOLIO OF INVESTMENTS --------------------------------------------------------------------------
Shares Value (Note 2) ------ -------------- COMMON STOCKS (CONTINUED) -------------------------------------------------------------------------- UNITED KINGDOM (CONTINUED) 46,000 GlaxoSmithKline PLC ......................... $ 967,972 22,300 Halfords Group PLC * ........................ 116,598 62,030 HSBC Holdings PLC ........................... 1,000,873 15,300 Imperial Tobacco Group PLC .................. 357,043 17,300 Intertek Group PLC .......................... 218,361 47,960 Kesa Electricals PLC ........................ 239,326 55,200 Kidde PLC ................................... 170,133 7,273 Man Group PLC ............................... 174,394 12,783 Marks and Spencer Group PLC ................. 84,192 17,700 Northgate PLC ............................... 242,244 51,600 Prudential PLC .............................. 379,135 96,831 Regus Group PLC * ........................... 139,452 103,400 Rentokil Initial PLC ........................ 294,031 9,800 Rio Tinto PLC ............................... 256,022 26,900 Royal Bank of Scotland Group PLC ............ 792,079 10,500 Signet Group PLC, ADR ....................... 202,755 10,100 Smiths Group PLC ............................ 138,137 14,100 Trinity Mirror PLC .......................... 166,848 33,000 Unilever PLC ................................ 277,887 439,900 Vodafone Group PLC .......................... 1,125,821 18,200 William Hill PLC ............................ 163,276 18,400 Wimpey George PLC ........................... 118,148 -------------- 10,476,431 -------------- VENEZUELA - 0.32% 7,234 Compania Anonima Nacional Telefonos de Venezuela, ADR ......................... 166,382 -------------- TOTAL COMMON STOCKS (Cost $38,288,756) ........................ 48,746,585 PREFERRED STOCKS - 1.42% -------------------------------------------------------------------------- BRAZIL - 1.15% 454,100 Caemi Mineracao e Metalurgica S.A. * ........................ 272,126 8,000 Telemar Norte Leste S.A. .................... 147,244 11,400 Usinas Siderurgicas de Minas Gerais S.A. ............................... 171,909 -------------- 591,279 -------------- GERMANY - 0.27% 220 Porsche AG .................................. 139,936 -------------- TOTAL PREFERRED STOCKS (Cost $414,877) ............................. 731,215 WARRANTS AND RIGHTS - 0.03% -------------------------------------------------------------------------- JAPAN - 0.00% 240 Belluna Co., Ltd. (L) * ..................... 0 -------------- UNITED KINGDOM - 0.03% 8,600 Prudential PLC * ............................ 14,515 -------------- TOTAL WARRANTS AND RIGHTS (Cost $227) ................................. 14,515 Par Value --------- CERTIFICATE OF DEPOSIT - 3.03% -------------------------------------------------------------------------- $1,557,012 State Street Eurodollar 0.800%, due 11/01/04 ..................... 1,557,012 -------------- TOTAL CERTIFICATE OF DEPOSIT (Cost $1,557,012) ......................... 1,557,012 TOTAL INVESTMENTS - 99.18% -------------------------------------------------------------------------- (Cost $40,260,872**) ...................... 51,049,327 NET OTHER ASSETS AND LIABILITIES - 0.82% -------------------------------------------------------------------------- 424,473 TOTAL NET ASSETS - 100.00% -------------------------------------------------------------------------- $ 51,473,800
* Non-income producing. ** Aggregate cost for Federal tax purposes was $40,433,590. (C) Security sold within the 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). ADR American Depository Receipt. GDR German Depository Receipt. PLC Public Limited Company. See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 51 -------------------------------------------------------------------------------- INTERNATIONAL STOCK FUND PORTFOLIO OF INVESTMENTS -------------------------------------------------------------------------------- OTHER INFORMATION: INDUSTRY CONCENTRATION AS A PERCENTAGE OF NET ASSETS
% OF NET ASSETS --------------- Banks .................................... 13.8% Oil & Gas ................................ 8.8% Telecommunications........................ 6.7% Drugs & Health Care....................... 6.1% Communication Services ................... 5.3% Food & Beverages ......................... 4.1% Retail ................................... 4.1% Financial Services ....................... 3.9% Net Other Assets less Liabilities......... 3.8% Mining.................................... 3.5% Insurance................................. 3.1% Automobiles............................... 2.9% Electronics............................... 2.5% Tobacco .................................. 2.5% Chemicals ................................ 2.4% Household Appliances & Home Furnishings .. 2.4% Electric Utilities........................ 2.3% Business Services......................... 2.0% Computers & Business Equipment............ 1.9% Manufacturing............................. 1.9% Construction & Mining Equipment........... 1.5% Real Estate............................... 1.5% Industrial Machinery ..................... 1.3% Apparel & Textiles ....................... 1.2% Conglomerates............................. 1.1% Leisure Time ............................. 1.1% Railroads & Equipment .................... 1.0% Building Construction..................... 0.9% Publishing................................ 0.9% Computer Software/Services................ 0.7% Forest Products .......................... 0.7% Paper .................................... 0.6% Turnpikes & Toll Roads ................... 0.4% Commercial/Consumer Services.............. 0.3% Electrical Equipment ..................... 0.3% Hotels & Restaurants...................... 0.3% Shipbuilding ............................. 0.3% Toys & Amusements ........................ 0.3% Transportation............................ 0.3% Aerospace................................. 0.2% Auto Parts ............................... 0.3% Construction Materials ................... 0.2% Cosmetics & Toiletries.................... 0.2% Household Products ....................... 0.2% Retail-Specialty ......................... 0.2% School ................................... 0.1% Diversified .............................. 0.0%* ----- 100.0% -----
* Rounds to 0.0%. See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 52 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- This page is left blank intentionally. -------------------------------------------------------------------------------- 53 -------------------------------------------------------------------------------- STATEMENTS OF ASSETS AND LIABILITIES AS OF OCTOBER 31, 2004 --------------------------------------------------------------------------------
CASH RESERVES BOND HIGH INCOME FUND FUND FUND ============================================================================================================= ASSETS: Investments: Investments at cost $ 20,376,453 $ 137,209,108 $ 78,871,586 Net unrealized appreciation -- 2,972,814 3,167,228 ------------------------------------------------- Total investments at value 20,376,453 140,181,922 82,038,814 Cash -- -- 110 Foreign currency (Cost $286,449) -- -- -- Receivables: Investments sold -- -- 312,475 Fund shares sold 6,280 63,113 74,381 Dividends and interest 16,340 1,189,254 1,365,711 Unrealized appreciation on forward foreign currency exchange contracts -- -- 1,984 Prepaid insurance and registration fees 658 4,302 2,016 Other assets 16,106 14,284 20,347 ------------------------------------------------- Total Assets 20,415,837 141,452,875 83,815,838 ------------------------------------------------- LIABILITIES: Payable to custodian-foreign currency (Cost $41,913) -- -- 1,982 Unrealized depreciation on forward foreign currency contracts -- -- 47,848 Payables: Investments purchased -- 1,360,169 603,863 Fund shares repurchased 44,832 176,764 64,829 Due to Advisor, net 5,577 46,707 30,914 Upon return of securities loaned -- 24,582,491 15,403,431 Administration and transfer agent fees 4,440 23,111 7,076 Distribution fees - Class B 5,393 35,048 14,760 Shareholder servicing fees -- 24,311 14,108 Accrued expenses and other payables 7,573 34,783 141,217 ------------------------------------------------- Total Liabilities 67,815 26,283,384 16,330,028 ------------------------------------------------- NET ASSETS $ 20,348,022 $ 115,169,491 $ 67,485,810 ================================================= NET ASSETS CONSIST OF: Paid-in capital $ 20,345,884 $ 113,111,475 $ 69,857,908 Accumulated undistributed net investment income (loss) 2,138 37,296 37,025 Accumulated net realized gain (loss) on investments sold and foreign currency related transactions -- (952,094) (5,532,005) Net unrealized appreciation of investments (including appreciation (depreciation) of foreign currency related transactions) -- 2,972,814 3,122,882 ------------------------------------------------- NET ASSETS $ 20,348,022 $ 115,169,491 $ 67,485,810 ================================================= CLASS A SHARES: Net Assets $ 11,916,444 $ 59,900,136 $ 44,136,471 Shares of beneficial interest outstanding 11,937,617 5,891,691 5,839,125 NET ASSET VALUE and redemption price per share(2) $ 1.00 $ 10.17 $ 7.56 Sales charge of offering price(1) 0.06 0.51 0.38 ------------------------------------------------- Maximum offering price per share $ 1.06 $ 10.68 $ 7.94 ================================================= CLASS B SHARES: Net Assets $ 8,431,578 $ 55,269,355 $ 23,349,339 Shares of beneficial interest outstanding 8,446,046 5,434,717 3,079,340 NET ASSET VALUE offering and redemption price per share(2) $ 1.00 $ 10.17 $ 7.58 =================================================
(1) 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. -------------------------------------------------------------------------------- 54 -------------------------------------------------------------------------------- --------------------------------------------------------------------------------
BALANCED GROWTH AND CAPITAL APP. MID-CAP MULTI-CAP INTERNATIONAL FUND INCOME FUND FUND FUND GROWTH FUND STOCK FUND ================================================================================================================= $ 208,657,013 $ 159,636,526 $ 128,116,108 $ 54,677,563 $ 35,329,365 $ 40,260,872 12,147,467 9,755,534 11,330,771 8,902,353 5,110,843 10,788,455 ----------------------------------------------------------------------------------------------------------------- 220,804,480 169,392,060 139,446,879 63,579,916 40,440,208 51,049,327 -- -- -- -- -- -- -- -- -- -- -- 289,410 49,307 34,805 52,208 128,997 445,337 213,267 57,313 36,052 18,576 7,250 55,834 23,501 895,150 277,972 159,458 191,288 14,664 110,629 -- -- -- -- -- -- 6,443 5,261 4,340 1,836 1,145 1,498 15,634 16,085 16,101 7,692 8,183 16,960 ----------------------------------------------------------------------------------------------------------------- 221,828,327 169,762,235 139,697,562 63,916,979 40,965,371 51,704,592 ----------------------------------------------------------------------------------------------------------------- -- -- -- -- -- -- -- -- -- -- -- -- 885,433 -- -- 215,901 1,046,552 143,591 365,600 204,496 146,980 133,034 33,225 10,920 111,961 75,942 83,938 46,848 19,113 36,625 15,610,165 -- 2,113,262 3,267,745 905,553 -- 32,259 36,027 43,527 12,189 10,532 8,696 67,033 53,008 40,355 12,652 8,178 4,744 46,597 35,605 28,853 12,628 8,034 10,722 25,015 19,966 22,611 8,922 7,126 15,494 ----------------------------------------------------------------------------------------------------------------- 17,144,063 425,044 2,479,526 3,709,919 2,038,313 230,792 ----------------------------------------------------------------------------------------------------------------- $ 204,684,264 $ 169,337,191 $ 137,218,036 $ 60,207,060 $ 38,927,058 $ 51,473,800 ================================================================================================================= $ 205,165,811 $ 184,806,759 $ 156,145,776 $ 51,053,929 $ 55,289,344 $ 48,960,189 (3,578) 1,065,998 -- 265,422 -- 259,120 (12,625,436) (26,291,100) (30,258,511) (14,688) (21,473,135) (8,540,068) 12,147,467 9,755,534 11,330,771 8,902,397 5,110,849 10,794,559 ----------------------------------------------------------------------------------------------------------------- $ 204,684,264 $ 169,337,191 $ 137,218,036 $ 60,207,060 $ 38,927,058 $ 51,473,800 ================================================================================================================= $ 98,899,928 $ 85,855,254 $ 73,673,677 $ 40,102,672 $ 25,897,517 $ 43,915,120 8,377,358 7,043,518 5,723,610 3,223,123 5,359,338 4,158,860 $ 11.81 $ 12.19 $ 12.87 $ 12.44 $ 4.83 $ 10.56 0.72 0.74 0.79 0.76 0.29 0.64 ----------------------------------------------------------------------------------------------------------------- $ 12.53 $ 12.93 $ 13.66 $ 13.20 $ 5.12 $ 11.20 ================================================================================================================= $ 105,784,336 $ 83,481,937 $ 63,544,359 $ 20,104,388 $ 13,029,541 $ 7,558,680 8,952,398 6,969,175 5,178,645 1,663,215 2,792,239 725,999 $ 11.82 $ 11.98 $ 12.27 $ 12.09 $ 4.67 $ 10.41 =================================================================================================================
(2) Redemption price per share is equal to the Net Asset Value per share less any applicable contingent deferred sales charge and/or redemption fee. See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 55 -------------------------------------------------------------------------------- STATEMENTS OF OPERATIONS FOR THE YEAR ENDED OCTOBER 31, 2004 --------------------------------------------------------------------------------
CASH RESERVES BOND HIGH INCOME FUND FUND FUND =========================================================================================================== INVESTMENT INCOME: Interest $ 266,292 $ 6,258,397 $ 5,116,765 Dividends -- -- 21,709 Less: Foreign taxes withheld -- -- (989) Securities lending income -- 32,066 28,370 ----------------------------------------------- Total investment income 266,292 6,290,463 5,165,855 ----------------------------------------------- EXPENSES: Management fees 87,223 681,740 338,945 Administration and transfer agent fees 36,787 230,591 114,634 Registration expenses 20,567 24,836 21,034 Custodian and accounting fees 14,169 39,354 57,060 Professional fees 6,483 14,750 11,559 Reports to shareholder expense 5,977 10,965 5,277 Trustees' fees 2,424 14,621 6,331 Distribution fees - Class B 72,371 443,220 173,429 Shareholder servicing fees - Class A -- 193,130 96,259 Shareholder servicing fees - Class B -- 147,740 57,810 Other expenses 5,204 19,768 4,871 ----------------------------------------------- Total expenses before reimbursement/waiver 251,205 1,820,715 887,209 Less reimbursement/waiver (73,043) (150,645) (97,662) ----------------------------------------------- Total expenses net of reimbursement/waiver 178,162 1,670,070 789,547 ----------------------------------------------- NET INVESTMENT INCOME (LOSS) 88,130 4,620,393 4,376,308 ----------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (including net realized gain (loss) on foreign currency related transactions) 908 (289,786) 245,439 Net change in unrealized appreciation (depreciation) on investments (including net unrealized appreciation (depreciation) on foreign currency related transactions) -- 949,728 1,500,379 ----------------------------------------------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 908 659,942 1,745,818 ----------------------------------------------- NET INCREASE IN NET ASSETS FROM OPERATIONS $ 89,038 $ 5,280,335 $ 6,122,126 ===============================================
See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 56
BALANCED GROWTH AND CAPITAL APP. MID-CAP MULTI-CAP INTERNATIONAL FUND INCOME FUND FUND FUND GROWTH FUND STOCK FUND ==================================================================================================== $ 3,689,125 $ 84,664 $ 62,730 $ 22,433 $ 13,845 $ 9,769 2,239,263 3,650,603 1,751,363 1,181,803 172,458 1,212,840 (12,156) (17,730) -- (289) (2,295) (131,691) 18,782 1,367 1,775 5,647 1,500 -- ---------------------------------------------------------------------------------------------------- 5,935,014 3,718,904 1,815,868 1,209,594 185,508 1,090,918 ---------------------------------------------------------------------------------------------------- 1,290,552 900,945 1,062,750 530,143 250,749 484,408 373,708 407,900 412,463 147,916 133,505 86,548 20,411 25,182 14,998 20,883 20,632 19,560 51,168 41,078 37,167 29,102 35,016 122,599 18,473 16,752 13,692 10,620 7,800 11,224 17,246 15,521 14,570 5,458 4,064 4,111 20,263 16,590 14,584 5,683 3,198 4,546 793,824 632,501 487,429 142,161 91,044 51,732 231,758 198,686 191,774 92,125 53,235 98,092 264,608 210,834 162,476 47,387 30,348 17,244 27,067 23,586 26,514 7,599 3,021 4,567 ---------------------------------------------------------------------------------------------------- 3,109,078 2,489,575 2,438,417 1,039,077 632,612 904,631 (131,637) (220,402) (250,709) (115,700) (140,426) (114,012) ---------------------------------------------------------------------------------------------------- 2,977,441 2,269,173 2,187,708 923,377 492,186 790,619 ---------------------------------------------------------------------------------------------------- 2,957,573 1,449,731 (371,840) 286,217 (306,678) 300,299 ---------------------------------------------------------------------------------------------------- (150,478) 271,099 3,583,773 2,589,342 957,765 3,720,000 10,811,839 14,930,904 7,521,371 2,989,970 1,550,481 3,942,753 ---------------------------------------------------------------------------------------------------- 10,661,361 15,202,003 11,105,144 5,579,312 2,508,246 7,662,753 ---------------------------------------------------------------------------------------------------- $ 13,618,934 $ 16,651,734 $ 10,733,304 $ 5,865,529 $ 2,201,568 $ 7,963,052 ====================================================================================================
See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 57 -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------------------------------------------
CASH RESERVES FUND BOND FUND ------------------------------- -------------------------------- FOR THE YEAR ENDED OCTOBER 31, 2004 2003 2004 2003 ======================================================================================================================== NET ASSETS at beginning of period $ 26,306,927 $ 34,123,598 $ 142,693,847 $ 123,586,409 ------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income (loss) 88,130 131,509 4,620,393 4,788,871 Net realized gain (loss) 908 1,584 (289,786) 356,246 Net change in unrealized appreciation (depreciation) -- -- 949,728 (1,197,091) ------------------------------------------------------------------- Net increase in net assets from operations 89,038 133,093 5,280,335 3,948,026 ------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class A (82,767) (119,661) (3,000,397) (2,879,857) Class B (6,271) (13,432) (1,851,451) (2,109,246) ------------------------------------------------------------------- TOTAL DISTRIBUTIONS (89,038) (133,093) (4,851,848) (4,989,103) CAPITAL SHARE TRANSACTIONS: CLASS A SHARES Shares sold 5,818,594 6,650,455 19,152,211 34,514,506 Issued to shareholders in reinvestment of distributions 80,983 116,802 2,301,902 2,334,521 Shares redeemed (8,219,510) (9,018,299) (39,928,294) (21,156,808) Redemption Fees -- -- 954 -- ------------------------------------------------------------------- Net increase (decrease) from capital share transactions (2,319,933) (2,251,042) (18,473,227) 15,692,219 -------------------------------------------------------------------- CLASS B SHARES Shares sold 2,883,164 5,361,829 4,574,795 19,242,363 Issued to shareholders in reinvestment of distributions 5,850 11,975 1,700,162 1,943,030 Shares redeemed (6,527,986) (10,939,433) (15,754,573) (16,729,097) ------------------------------------------------------------------- Net increase (decrease) from capital share transactions (3,638,972) (5,565,629) (9,479,616) 4,456,296 ------------------------------------------------------------------- TOTAL INCREASE (DECREASE) IN NET ASSETS (5,958,905) (7,816,671) (27,524,356) 19,107,438 ------------------------------------------------------------------- NET ASSETS at end of period (includingline A) $ 20,348,022 $ 26,306,927 $ 115,169,491 $ 142,693,847 =================================================================== (A)Undistributed (distribution in excess of) net investment income $ 2,138 $ 2,133 $ 37,296 $ 37,300 =================================================================== CAPITAL SHARE TRANSACTIONS: CLASS A SHARES Shares sold 5,818,594 6,650,455 1,893,967 3,371,187 Issued to shareholders in reinvestment of distributions 80,893 116,802 228,022 228,188 Shares redeemed (8,219,510) (9,018,299) (3,955,230) (2,072,910) ------------------------------------------------------------------- Net increase (decrease) from capital stock transactions (2,319,933) (2,251,042) (1,833,241) 1,526,465 ------------------------------------------------------------------- CLASS B SHARES Shares sold 2,883,164 5,361,829 452,070 1,878,376 Issued to shareholders in reinvestment of distributions 5,851 11,975 168,339 189,937 Shares redeemed (6,527,986) (10,939,433) (1,561,244) (1,638,293) ------------------------------------------------------------------- Net increase (decrease) from capital stock transactions (3,638,971) (5,565,629) (940,835) 430,020 ===================================================================
See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 58 -------------------------------------------------------------------------------- --------------------------------------------------------------------------------
HIGH INCOME FUND BALANCED FUND GROWTH AND INCOME FUND --------------------------- ------------------------------- ------------------------------ 2004 2003 2004 2003 2004 2003 =============================================================================================== $ 55,015,483 $ 33,615,728 $ 184,392,585 $ 161,291,500 $ 148,170,626 $ 126,224,262 ----------------------------------------------------------------------------------------------- 4,376,308 3,247,553 2,957,573 3,290,800 1,449,731 1,146,296 245,439 (610,601) (150,478) (6,720,304) 271,099 (9,827,820) 1,500,379 5,343,952 10,811,839 23,092,033 14,930,904 30,800,834 ----------------------------------------------------------------------------------------------- 6,122,126 7,980,904 13,618,934 19,662,529 16,651,734 22,119,310 ----------------------------------------------------------------------------------------------- (2,905,696) (1,953,581) (1,810,120) (1,810,597) (804,489) (472,121) (1,555,115) (1,303,045) (1,265,754) (1,539,999) (377,317) (174,442) ----------------------------------------------------------------------------------------------- (4,460,811) (3,256,626) (3,075,874) (3,350,596) (1,181,806) (646,563) 14,199,310 14,165,543 21,954,494 18,447,908 18,849,548 17,771,499 1,744,485 1,279,144 1,786,159 1,784,694 795,498 453,660 (5,887,322) (3,165,724) (13,352,483) (14,351,848) (9,631,271) (13,309,076) 141 -- -- -- -- -- ----------------------------------------------------------------------------------------------- 10,056,614 12,278,963 10,388,170 5,880,754 10,013,775 4,916,083 ----------------------------------------------------------------------------------------------- 4,153,847 7,128,350 14,477,124 16,463,827 8,114,554 9,222,020 1,235,860 1,024,743 1,234,785 1,506,439 368,285 172,432 (4,637,309) (3,756,579) (16,351,460) (17,061,868) (12,799,977) (13,836,918) ----------------------------------------------------------------------------------------------- 752,398 4,396,514 (639,551) 908,398 (4,317,138) (4,442,466) ----------------------------------------------------------------------------------------------- 12,470,327 21,399,755 20,291,679 23,101,085 21,166,565 21,946,364 ----------------------------------------------------------------------------------------------- $ 67,485,810 $ 55,015,483 $ 204,684,264 $ 184,392,585 $ 169,337,191 $ 148,170,626 =============================================================================================== $ 37,025 $ 129,354 $ (3,578) $ (3,596) $ 1,065,998 $ 830,848 =============================================================================================== 1,907,202 2,010,041 1,895,246 1,768,275 1,600,186 1,787,581 235,436 182,036 153,740 170,700 68,166 48,409 (793,191) (448,775) (1,150,116) (1,386,137) (817,828) (1,393,405) ----------------------------------------------------------------------------------------------- 1,349,447 1,743,302 898,870 552,838 850,524 442,585 ----------------------------------------------------------------------------------------------- 556,498 1,010,973 1,243,866 1,533,952 699,774 944,572 166,370 145,682 106,275 144,313 31,913 18,539 (626,335) (535,627) (1,405,548) (1,607,072) (1,100,560) (1,456,011) ----------------------------------------------------------------------------------------------- 96,533 621,028 (55,407) 71,193 (368,873) (492,900) ===============================================================================================
See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 59 -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------------------------------------------
CAPITAL APPRECIATION FUND MID-CAP FUND ------------------------------- ------------------------------ FOR THE YEAR ENDED OCTOBER 31, 2004 2003 2004 2003 ====================================================================================================================== NET ASSETS at beginning of period $ 134,565,037 $ 110,464,831 $ 48,311,492 $ 34,415,066 ------------------------------------------------------------------ INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income (loss) (371,840) (362,743) 286,217 (32,425) Net realized gain (loss) 3,583,773 (13,902,776) 2,589,342 (810,008) Net change in unrealized appreciation 7,521,371 38,761,664 2,989,970 11,016,333 ------------------------------------------------------------------ Net increase in net assets from operations 10,733,304 24,496,145 5,865,529 10,173,900 ------------------------------------------------------------------ DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class A -- -- -- -- Class B -- -- -- -- ------------------------------------------------------------------ TOTAL DISTRIBUTIONS -- -- -- -- CAPITAL SHARE TRANSACTIONS: CLASS A SHARES Shares sold 16,419,030 21,428,076 8,950,886 5,249,495 Issued to shareholders in reinvestment of distributions -- -- -- -- Shares redeemed (20,553,236) (18,606,399) (4,441,192) (3,087,968) Redemption Fees 27 -- 403 -- ------------------------------------------------------------------ Net increase (decrease) from capital share transactions (4,134,179) 2,821,677 4,510,097 2,161,527 ------------------------------------------------------------------ CLASS B SHARES Shares sold 5,818,057 7,443,998 3,918,338 3,617,100 Issued to shareholders in reinvestment of distributions -- -- -- -- Shares redeemed (9,764,183) (10,661,614) (2,398,396) (2,056,101) ------------------------------------------------------------------ Net increase (decrease) from capital share transactions (3,946,126) (3,217,616) 1,519,942 1,560,999 ------------------------------------------------------------------ TOTAL INCREASE IN NET ASSETS 2,652,999 24,100,206 11,895,568 13,896,426 ------------------------------------------------------------------ NET ASSETS at end of period (including line A) $ 137,218,036 $ 134,565,037 $ 60,207,060 $ 48,311,492 ================================================================== (A)Undistributed (distribution in excess of) net investment income $ -- $ -- $ 265,422 $ -- ================================================================== CAPITAL SHARE TRANSACTIONS: CLASS A SHARES Shares sold 1,310,831 2,090,566 750,450 548,389 Issued to shareholders in reinvestment of distributions -- -- -- -- Shares redeemed (1,623,309) (1,854,922) (368,375) (329,777) ------------------------------------------------------------------ Net increase (decrease) from capital stock transactions (312,478) 235,644 382,075 218,612 ------------------------------------------------------------------ CLASS B SHARES Shares sold 481,562 733,844 335,906 380,861 Issued to shareholders in reinvestment of distributions -- -- -- -- Shares redeemed (812,620) (1,087,117) (205,169) (226,039) ------------------------------------------------------------------ Net increase (decrease) from capital stock transactions (331,058) (353,273) 130,737 154,822 ==================================================================
See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 60 -------------------------------------------------------------------------------- --------------------------------------------------------------------------------
MULTI-CAP GROWTH FUND INTERNATIONAL STOCK FUND ------------------------------- -------------------------------- 2004 2003 2004 2003 ==================================================================== $ 24,300,185 $ 13,965,505 $ 39,470,149 $ 30,322,989 -------------------------------------------------------------------- (306,678) (125,701) 300,299 391,549 957,765 458,015 3,720,000 (1,565,592) 1,550,481 4,064,829 3,942,753 9,799,283 -------------------------------------------------------------------- 2,201,568 4,397,143 7,963,052 8,625,240 -------------------------------------------------------------------- -- -- (366,092) (212,471) -- -- (5,505) (404) -------------------------------------------------------------------- -- -- (371,597) (212,875) 12,600,469 5,641,381 4,742,731 1,435,692 -- -- 355,467 206,495 (2,485,116) (1,789,330) (1,321,126) (911,371) -- -- 46 -- -------------------------------------------------------------------- 10,115,353 3,852,051 3,777,118 730,816 -------------------------------------------------------------------- 4,230,494 3,219,398 1,690,657 897,473 -- -- 5,362 393 (1,920,542) (1,133,912) (1,060,941) (893,887) -------------------------------------------------------------------- 2,309,952 2,085,486 635,078 3,979 -------------------------------------------------------------------- 14,626,873 10,334,680 12,003,651 9,147,160 -------------------------------------------------------------------- $ 38,927,058 $ 24,300,185 $ 51,473,800 $ 39,470,149 ==================================================================== $ -- $ -- $ 259,120 $ 339,139 ==================================================================== 2,658,740 1,437,061 482,726 189,540 -- -- 36,951 29,122 (519,535) (482,877) (133,210) (122,562) -------------------------------------------------------------------- 2,139,205 954,184 386,467 96,100 -------------------------------------------------------------------- 920,954 845,667 172,705 119,456 -- -- 562 56 (417,791) (323,851) (108,257) (125,194) -------------------------------------------------------------------- 503,163 521,816 65,010 (5,682) ====================================================================
See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 61 -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS FOR A SHARE OF BENEFICIAL INTERESTS OUTSTANDING --------------------------------------------------------------------------------
CASH RESERVES FUND ----------------------------------------------------------------- FOR THE YEAR ENDED OCTOBER 31, 2004 2003 2002 2001 2000 =============================================================================================================================== 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 0.01 0.00(1) 0.01 0.04 0.06 ----------------------------------------------------------------- Total from investment operations 0.01 0.00 0.01 0.04 0.06 ----------------------------------------------------------------- LESS DISTRIBUTIONS: Distributions from net investment income (0.01) (0.00)(1) (0.01) (0.04) (0.06) ----------------------------------------------------------------- Total distributions (0.01) (0.00) (0.01) (0.04) (0.06) ----------------------------------------------------------------- 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) 0.68% 0.75% 1.57% 4.50% 5.77% RATIOS/SUPPLEMENTAL DATA: Net Assets, End of Period (in 000's) $11,916 $14,236 $16,487 $11,508 $5,104 Ratios of expenses to average net assets Before reimbursement of expenses by Advisor 0.82% 0.87% 0.99% 1.25% 2.07% 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 0.68% 0.75% 1.46% 3.96% 5.61% 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 0.00(1) 0.00(1) 0.01 0.04 0.05 ----------------------------------------------------------------- Total from investment operations 0.00 0.00 0.01 0.04 0.05 ----------------------------------------------------------------- LESS DISTRIBUTIONS: Distributions from net investment income -- (0.00)(1) (0.01) (0.04) (0.05) ----------------------------------------------------------------- Total distributions -- (0.00) (0.01) (0.04) (0.05) ----------------------------------------------------------------- Net increase (decrease) in net asset value 0.00 (0.00) -- -- -- ----------------------------------------------------------------- NET ASSET VALUE at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ================================================================= TOTAL RETURN(2) 0.07% 0.08% 0.81% 3.72% 4.97% RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $ 8,432 $12,071 $17,636 $ 9,571 $2,865 Ratios of expenses to average net assets Before reimbursement of expenses by Advisor 1.57% 1.62% 1.74% 2.00% 2.82% After reimbursement of expenses by Advisor 1.15%(3) 1.23%(3) 1.30% 1.30% 1.30% Ratio of net investment income to average net assets After reimbursement of expenses by Advisor 0.06% 0.08% 0.71% 3.21% 4.86%
(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. -------------------------------------------------------------------------------- 62 -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS FOR A SHARE OF BENEFICIAL INTERESTS OUTSTANDING --------------------------------------------------------------------------------
BOND FUND ----------------------------------------------------------------- FOR THE YEAR ENDED OCTOBER 31, 2004 2003 2002 2001 2000 =============================================================================================================================== CLASS A ------- NET ASSET VALUE at beginning of period $ 10.12 $ 10.17 $ 10.23 $ 9.57 $ 9.74 ----------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.37 0.40 0.47 0.55 0.63 Net realized and unrealized gain (loss) on investments 0.07 (0.05) (0.06)(2) 0.67 (0.17) ----------------------------------------------------------------- Total from investment operations 0.44 0.35 0.41 1.22 0.46 ----------------------------------------------------------------- LESS DISTRIBUTIONS: Distributions from net investment income (0.39) (0.40) (0.47) (0.56) (0.63) ----------------------------------------------------------------- Total distributions (0.39) (0.40) (0.47) (0.56) (0.63) ----------------------------------------------------------------- Net increase (decrease) in net asset value 0.05 (0.05) (0.06) 0.66 (0.17) ----------------------------------------------------------------- NET ASSET VALUE at end of period $ 10.17 $ 10.12 $ 10.17 $ 10.23 $ 9.57 ================================================================= TOTAL RETURN(1) 4.46% 3.51% 4.21% 13.07% 4.89% RATIOS/SUPPLEMENTAL DATA: Net Assets, End of Period (in 000's) $59,900 $78,165 $63,069 $28,813 $13,279 Ratios of expenses to average net assets Before reimbursement of expenses by Advisor 1.01% 1.10% 1.17% 1.28% 1.66% 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 3.73% 3.94% 4.62% 5.53% 6.52% Portfolio Turnover 81% 75% 90% 109% 366% CLASS B ------- NET ASSET VALUE at beginning of period $ 10.12 $ 10.18 $ 10.24 $ 9.58 $ 9.75 ----------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.30 0.33 0.39 0.48 0.55 Net realized and unrealized gain (loss) on investments 0.07 (0.06) (0.05)(2) 0.66 (0.17) ----------------------------------------------------------------- Total from investment operations 0.37 0.27 0.34 1.14 0.38 ----------------------------------------------------------------- LESS DISTRIBUTIONS: Distributions from net investment income (0.32) (0.33) (0.40) (0.48) (0.55) ----------------------------------------------------------------- Total distributions (0.32) (0.33) (0.40) (0.48) (0.55) ----------------------------------------------------------------- Net increase (decrease) in net asset value 0.05 (0.06) (0.06) 0.66 (0.17) ----------------------------------------------------------------- NET ASSET VALUE at end of period $ 10.17 $ 10.12 $ 10.18 $ 10.24 $ 9.58 ================================================================= TOTAL RETURN(1) 3.68% 2.64% 3.44% 12.23% 4.10% RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $55,269 $64,529 $60,517 $31,119 $10,982 Ratios of expenses to average net assets Before reimbursement of expenses by Advisor 1.76% 1.85% 1.92% 2.03% 2.41% 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 2.95% 3.19% 3.87% 4.78% 5.77% Portfolio Turnover 81% 75% 90% 109% 366%
(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. -------------------------------------------------------------------------------- 63 -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS FOR A SHARE OF BENEFICIAL INTERESTS OUTSTANDING --------------------------------------------------------------------------------
HIGH INCOME FUND ----------------------------------------------------------------- FOR THE YEAR ENDED OCTOBER 31, 2004 2003 2002 2001 2000 =============================================================================================================================== CLASS A ------- NET ASSET VALUE at beginning of period $ 7.36 $ 6.57 $ 7.13 $ 8.02 $ 8.88 ----------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.55 0.54 0.58 0.74 0.81 Net realized and unrealized gain (loss) on investments 0.21 0.80 (0.55) (0.88) (0.86) ----------------------------------------------------------------- Total from investment operations 0.76 1.34 0.03 (0.14) (0.05) ----------------------------------------------------------------- LESS DISTRIBUTIONS: Distributions from net investment income (0.56) (0.55) (0.59) (0.75) (0.81) ----------------------------------------------------------------- Total distributions (0.56) (0.55) (0.59) (0.75) (0.81) ----------------------------------------------------------------- Net increase (decrease) in net asset value 0.20 0.79 (0.56) (0.89) (0.86) ----------------------------------------------------------------- NET ASSET VALUE at end of period $ 7.56 $ 7.36 $ 6.57 $ 7.13 $ 8.02 ================================================================= TOTAL RETURN(1) 10.73% 21.09% 0.33% (1.94)% (0.81)% RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $44,137 $33,024 $18,055 $10,939 $ 8,394 Ratios of expenses to average net assets Before reimbursement of expenses by Advisor 1.16% 1.38% 1.59% 1.68% 1.62% 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 7.37% 7.73% 8.55% 9.75% 9.40% Portfolio Turnover 60% 58% 47% 38% 41% CLASS B ------- NET ASSET VALUE at beginning of period $ 7.37 $ 6.59 $ 7.14 $ 8.04 $ 8.90 ----------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.49 0.49 0.54 0.69 0.75 Net realized and unrealized gain (loss) on investments 0.22 0.78 (0.55) (0.89) (0.86) ----------------------------------------------------------------- Total from investment operations 0.71 1.27 (0.01) (0.20) (0.11) ----------------------------------------------------------------- LESS DISTRIBUTIONS: Distributions from net investment income (0.50) (0.49) (0.54) (0.70) (0.75) ----------------------------------------------------------------- Total distributions (0.50) (0.49) (0.54) (0.70) (0.75) ----------------------------------------------------------------- Net increase (decrease) in net asset value 0.21 0.78 (0.55) (0.90) (0.86) ----------------------------------------------------------------- NET ASSET VALUE at end of period $ 7.58 $ 7.37 $ 6.59 $ 7.14 $ 8.04 ================================================================= TOTAL RETURN(1) 10.02% 19.96% (0.27)% (2.77)% (1.54)% RATIOS/SUPPLEMENTAL DATA: Net Assets, End of Period (in 000's) $23,349 $21,992 $15,561 $15,063 $12,271 Ratios of expenses to average net assets: Before reimbursement of expenses by Advisor 1.91% 2.13% 2.34% 2.43% 2.37% 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 6.63% 6.98% 7.80% 9.00% 8.65% Portfolio Turnover 60% 58% 47% 38% 41%
(1) Total return without applicable sales charge. See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 64 -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS FOR A SHARE OF BENEFICIAL INTERESTS OUTSTANDING --------------------------------------------------------------------------------
BALANCED FUND ------------------------------------------------------------------ FOR THE YEAR ENDED OCTOBER 31, 2004 2003 2002 2001 2000 =============================================================================================================================== CLASS A ------- NET ASSET VALUE at beginning of period $ 11.18 $ 10.16 $ 11.28 $ 12.65 $ 12.05 ------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.22 0.25 0.28 0.30 0.34 Net realized and unrealized gain (loss) on investments 0.64 1.02 (1.12) (1.37) 0.69 ------------------------------------------------------------------ Total from investment operations 0.86 1.27 (0.84) (1.07) 1.03 ------------------------------------------------------------------ LESS DISTRIBUTIONS: Distributions from net investment income (0.23) (0.25) (0.28) (0.30) (0.35) Distributions from capital gains -- -- (0.00)(1) -- (0.08) ------------------------------------------------------------------ Total distributions (0.23) (0.25) (0.28) (0.30) (0.43) ------------------------------------------------------------------ Net increase (decrease) in net asset value 0.63 1.02 (1.12) (1.37) 0.60 ------------------------------------------------------------------ NET ASSET VALUE at end of period $ 11.81 $ 11.18 $ 10.16 $ 11.28 $ 12.65 ================================================================== TOTAL RETURN(2) 7.71% 12.72% (7.59)% (8.54)% 8.67% RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $ 98,900 $ 83,606 $70,389 $61,836 $27,088 Ratios of expenses to average net assets Before reimbursement of expenses by Advisor 1.17% 1.32% 1.30% 1.35% 1.28% 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% 2.38% 2.56% 2.55% 2.83% Portfolio Turnover 39% 35% 48% 57% 187% CLASS B ------- NET ASSET VALUE at beginning of period $ 11.19 $ 10.17 $ 11.29 $ 12.66 $ 12.05 ------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.13 0.17 0.20 0.21 0.25 Net realized and unrealized gain (loss) on investments 0.64 1.02 (1.12) (1.37) 0.69 ------------------------------------------------------------------ Total from investment operations 0.77 1.19 (0.92) (1.16) 0.94 ------------------------------------------------------------------ LESS DISTRIBUTIONS: Distributions from net investment income (0.14) (0.17) (0.20) (0.21) (0.25) Distributions from captital gains -- -- (0.00)(1) -- (0.08) ------------------------------------------------------------------ Total distributions (0.14) (0.17) (0.20) (0.21) (0.33) ------------------------------------------------------------------ Net increase (decrease) in net asset value 0.63 1.02 (1.12) (1.37) 0.61 ------------------------------------------------------------------ NET ASSET VALUE at end of period $ 11.82 $ 11.19 $ 10.17 $ 11.29 $ 12.66 ================================================================== TOTAL RETURN(2) 6.90% 11.87% (8.27)% (9.22)% 7.93% RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $105,784 $100,787 $90,903 $92,054 $63,669 Ratios of expenses to average net assets Before reimbursement of expenses by Advisor 1.92% 2.07% 2.05% 2.10% 2.03% 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 1.14% 1.63% 1.81% 1.80% 2.08% Portfolio Turnover 39% 35% 48% 57% 187%
(1) Amounts represent less than $0.005 per share. (2) Total return without applicable sales charge. See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 65 -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS FOR A SHARE OF BENEFICIAL INTERESTS OUTSTANDING --------------------------------------------------------------------------------
GROWTH AND INCOME FUND ------------------------------------------------------------------ FOR THE YEAR ENDED OCTOBER 31, 2004 2003 2002 2001 2000 =============================================================================================================================== CLASS A ------- NET ASSET VALUE at beginning of period $ 11.05 $ 9.37 $ 11.14 $ 14.06 $ 13.21 ------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.14 0.12 0.10(1) 0.06 0.07(1) Net realized and unrealized gain (loss) on investments 1.12 1.64 (1.82) (2.92) 0.84 ------------------------------------------------------------------ Total from investment operations 1.26 1.76 (1.72) (2.86) 0.91 ------------------------------------------------------------------ LESS DISTRIBUTIONS: Distributions from net investment income (0.12) (0.08) (0.05) (0.06) (0.04) Distributions from capital gains -- -- -- -- (0.02) ------------------------------------------------------------------ Total distributions (0.12) (0.08) (0.05) (0.06) (0.06) ------------------------------------------------------------------ Net increase (decrease) in net asset value 1.14 1.68 (1.77) (2.92) 0.85 ------------------------------------------------------------------ NET ASSET VALUE at end of period $ 12.19 $ 11.05 $ 9.37 $ 11.14 $ 14.06 ================================================================== TOTAL RETURN(2) 11.48% 18.95% (15.51)% (20.42)% 6.90% RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $85,855 $68,406 $53,896 $55,966 $ 46,994 Ratios of expenses to average net assets Before reimbursement of expenses by Advisor 1.13% 1.35% 1.30% 1.29% 1.07% 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 1.26% 1.29% 0.91% 0.60% 0.54% Portfolio Turnover 16% 20% 18% 24% 14% CLASS B ------- NET ASSET VALUE at beginning of period $ 10.87 $ 9.24 $ 11.02 $ 13.96 $ 13.18 ------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.06 0.05 0.02(1) (0.02) (0.03)(1) Net realized and unrealized gain (loss) on investments 1.10 1.60 (1.79) (2.92) 0.84 ------------------------------------------------------------------ Total from investment operations 1.16 1.65 (1.77) (2.94) 0.81 ------------------------------------------------------------------ LESS DISTRIBUTIONS: Distributions from net investment income (0.05) (0.02) (0.01) -- (0.01) Distributions from capital gains -- -- -- -- (0.02) ------------------------------------------------------------------ Total distributions (0.05) (0.02) (0.01) -- (0.03) ------------------------------------------------------------------ Net increase (decrease) in net asset value 1.11 1.63 (1.78) (2.94) 0.78 ------------------------------------------------------------------ NET ASSET VALUE at end of period $ 11.98 $ 10.87 $ 9.24 $ 11.02 $ 13.96 ================================================================== TOTAL RETURN(2) 10.70% 17.93% (16.09)% (21.06)% 6.13% RATIOS/SUPPLEMENTAL DATA: Net Assets, End of Period (in 000's) $83,482 $79,765 $72,329 $97,081 $106,762 Ratios of expenses to average net assets Before reimbursement of expenses by Advisor 1.89% 2.10% 2.05% 2.04% 1.85% After reimbursement of expenses by Advisor 1.75% 1.75% 1.75% 1.75% 1.75% Ratio of net investment income (loss) to average net assets After reimbursement of expenses by Advisor 0.53% 0.54% 0.16% (0.15)% (0.21)% Portfolio Turnover 16% 20% 18% 24% 14%
(1) Calculated based on average shares outstanding. (2) Total return without applicable sales charge. See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 66 -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS FOR A SHARE OF BENEFICIAL INTERESTS OUTSTANDING --------------------------------------------------------------------------------
CAPITAL APPRECIATION FUND ------------------------------------------------------------------ FOR THE YEAR ENDED OCTOBER 31, 2004 2003 2002 2001 2000 =============================================================================================================================== CLASS A ------- NET ASSET VALUE at beginning of period $ 11.88 $ 9.63 $ 12.81 $ 16.44 $ 13.70 ------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.01 (0.00)(1) (0.02)(2) (0.04)(2) (0.03)(2) Net realized and unrealized gain (loss) on investments 0.98 2.25 (3.11) (3.59) 2.78 ------------------------------------------------------------------ Total from investment operations 0.99 2.25 (3.13) (3.63) 2.75 ------------------------------------------------------------------ LESS DISTRIBUTIONS: Distributions from capital gains -- -- (0.05) -- (0.01) ------------------------------------------------------------------ Total distributions -- -- (0.05) -- (0.01) ------------------------------------------------------------------ Net increase (decrease) in net asset value 0.99 2.25 (3.18) (3.63) 2.74 ------------------------------------------------------------------ NET ASSET VALUE at end of period $ 12.87 $ 11.88 $ 9.63 $ 12.81 $ 16.44 ================================================================== TOTAL RETURN(3) 8.33% 23.36% (24.54)% (22.08)% 20.12% RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $73,674 $71,733 $55,865 $59,801 $35,889 Ratios of expenses to average net assets Before reimbursement of expenses by Advisor 1.38% 1.64% 1.58% 1.58% 1.37% After reimbursement of expenses by Advisor 1.20% 1.20% 1.20% 1.20% 1.20% Ratio of net investment income (loss) to average net assets After reimbursement of expenses by Advisor 0.08% 0.05% (0.16)% (0.30)% (0.27)% Portfolio Turnover 27% 25% 25% 30% 18% CLASS B ------- NET ASSET VALUE at beginning of period $ 11.40 $ 9.31 $ 12.48 $ 16.13 $ 13.54 ------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (0.08) (0.08) (0.11)(2) (0.15)(2) (0.15)(2) Net realized and unrealized gain (loss) on investments 0.95 2.17 (3.01) (3.50) 2.75 ------------------------------------------------------------------ Total from investment operations 0.87 2.09 (3.12) (3.65) 2.60 ------------------------------------------------------------------ LESS DISTRIBUTIONS: Distributions from capital gains -- -- (0.05) -- (0.01) ------------------------------------------------------------------ Total distributions -- -- (0.05) -- (0.01) ------------------------------------------------------------------ Net increase (decrease) in net asset value 0.87 2.09 (3.17) (3.65) 2.59 ------------------------------------------------------------------ NET ASSET VALUE at end of period $ 12.27 $ 11.40 $ 9.31 $ 12.48 $ 16.13 ================================================================== TOTAL RETURN(3) 7.63% 22.45% (25.12)% (22.63)% 19.25% RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $63,544 $62,832 $54,600 $72,667 $57,082 Ratios of expenses to average net assets Before reimbursement of expenses by Advisor 2.13% 2.39% 2.33% 2.33% 2.12% After reimbursement of expenses by Advisor 1.95% 1.95% 1.95% 1.95% 1.95% Ratio of net investment income (loss) to average net assets After reimbursement of expenses by Advisor (0.67)% (0.70)% (0.91)% (1.05)% (1.02)% Portfolio Turnover 27% 25% 25% 30% 18%
(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. -------------------------------------------------------------------------------- 67 -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS FOR A SHARE OF BENEFICIAL INTERESTS OUTSTANDING --------------------------------------------------------------------------------
MID-CAP FUND -------------------------------------------------------- INCEPTION(1) TO FOR THE YEAR ENDED OCTOBER 31, 2004 2003 2002 10-31-2001 ===================================================================================================================== CLASS A ------- NET ASSET VALUE at beginning of period $ 11.12 $ 8.64 $ 9.48 $ 10.00 -------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.09 0.01 0.02(2) 0.00(2,3) Net realized and unrealized gain (loss) on investments 1.23 2.47 (0.85) (0.52) -------------------------------------------------------- Total from investment operations 1.32 2.48 (0.83) (0.52) -------------------------------------------------------- LESS DISTRIBUTIONS: Distributions from net investment income -- -- (0.01) -- Distributions from capital gains -- -- (0.00)(3) -- -------------------------------------------------------- Total distributions -- -- (0.01) -- -------------------------------------------------------- Net increase (decrease) in net asset value 1.32 2.48 (0.84) (0.52) -------------------------------------------------------- NET ASSET VALUE at end of period $ 12.44 $ 11.12 $ 8.64 $ 9.48 ======================================================== TOTAL RETURN(4) 11.87% 28.70% (8.79)% (5.20)%(5) RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $40,103 $31,591 $22,650 $15,345 Ratios of expenses to average net assets Before reimbursement of expenses by Advisor 1.61% 1.92% 1.97% 2.29%(6) After reimbursement of expenses by Advisor 1.40% 1.40% 1.40% 1.40%(6) Ratio of net investment income to average net assets After reimbursement of expenses by Advisor 0.77% 0.17% 0.18% 0.03%(6) Portfolio Turnover 21% 25% 31% 30% CLASS B ------- NET ASSET VALUE at beginning of period $ 10.91 $ 8.54 $ 9.43 $ 10.00 -------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment loss 0.00(3) (0.05) (0.06)(2) (0.05)(2) Net realized and unrealized gain (loss) on investments 1.18 2.42 (0.83) (0.52) -------------------------------------------------------- Total from investment operations 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 1.18 2.37 (0.89) (0.57) -------------------------------------------------------- NET ASSET VALUE at end of period $ 12.09 $ 10.91 $ 8.54 $ 9.43 ======================================================== TOTAL RETURN(4) 10.82% 27.75% (9.43)% (5.70)%(5) RATIOS/SUPPLEMENTAL DATA: Net Assets, End of Period (in 000's) $20,104 $16,721 $11,765 $ 6,192 Ratios of expenses to average net assets Before reimbursement of expenses by Advisor 2.36% 2.67% 2.72% 3.04%(6) After reimbursement of expenses by Advisor 2.15% 2.15% 2.15% 2.15%(6) Ratio of net investment income (loss) to average net assets After reimbursement of expenses by Advisor 0.01% (0.58)% (0.57)% (0.72)%(6) Portfolio Turnover 21% 25% 31% 30%
(1) Fund commenced investment operations on February 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. -------------------------------------------------------------------------------- 68 -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS FOR A SHARE OF BENEFICIAL INTERESTS OUTSTANDING --------------------------------------------------------------------------------
MULTI-CAP GROWTH FUND -------------------------------------------------------------------- INCEPTION(1) TO FOR THE YEAR ENDED OCTOBER 31, 2004 2003 2002 2001 10-31-2000 ================================================================================================================================= CLASS A ------- NET ASSET VALUE at beginning of period $ 4.46 $ 3.49 $ 4.27 $ 7.87 $ 10.00 -------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment loss (0.03) (0.03) (0.02)(2) (0.02) (0.02)(2) Net realized and unrealized gain (loss) on investments 0.40 1.00 (0.76) (3.58) (2.11) -------------------------------------------------------------------- Total from investment operations 0.37 0.97 (0.78) (3.60) (2.13) -------------------------------------------------------------------- Net increase (decrease) in net asset value 0.37 0.97 (0.78) (3.60) (2.13) -------------------------------------------------------------------- NET ASSET VALUE at end of period $ 4.83 $ 4.46 $ 3.49 $ 4.27 $ 7.87 ==================================================================== TOTAL RETURN(3) 8.30% 27.79% (18.27)% (45.74)% (21.30)%(4) RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $25,897 $14,366 $ 7,915 $13,263 $20,731 Ratios of expenses to average net assets Before reimbursement of expenses by Advisor 1.62% 2.40% 2.60% 2.36% 1.75%(5) After reimbursement of expenses by Advisor 1.20% 1.20% 1.20% 1.20% 1.20%(5) Ratio of net investment loss to average net assets After reimbursement of expenses by Advisor (0.64)% (0.42)% (0.55)% (0.46)% (0.42)%(5) Portfolio Turnover 71% 123% 214% 230% 151% CLASS B ------- NET ASSET VALUE at beginning of period $ 4.34 $ 3.42 $ 4.22 $ 7.83 $ 10.00 -------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (0.06) (0.02) (0.05)(2) (0.07) (0.06)(2) Net realized and unrealized gain (loss) on investments 0.39 0.94 (0.75) (3.54) (2.11) -------------------------------------------------------------------- Total from investment operations 0.33 0.92 (0.80) (3.61) (2.17) -------------------------------------------------------------------- Net increase (decrease) in net asset value 0.33 0.92 (0.80) (3.61) (2.17) -------------------------------------------------------------------- NET ASSET VALUE at end of period $ 4.67 $ 4.34 $ 3.42 $ 4.22 $ 7.83 ==================================================================== TOTAL RETURN(3) 7.60% 26.90% (18.96)% (46.10)% (21.70)%(4) RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $13,030 $ 9,935 $ 6,050 $ 6,902 $ 8,666 Ratios of expenses to average net assets Before reimbursement of expenses by Advisor 2.37% 3.15% 3.35% 3.11% 2.50%(5) After reimbursement of expenses by Advisor 1.95% 1.95% 1.95% 1.95% 1.95%(5) Ratio of net investment loss to average net assets After reimbursement of expenses by Advisor (1.39)% (1.17)% (1.30)% (1.21)% (1.17)%(5) Portfolio Turnover 71% 123% 214% 230% 151%
(1) Fund commenced investment operations on February 29, 2000. (2) Calculated based on average shares outstanding. (3) Total return without applicable sales charge. (4) Not annualized. (5) Annualized. See accompanying Notes to Financial Statements. -------------------------------------------------------------------------------- 69 -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS FOR A SHARE OF BENEFICIAL INTERESTS OUTSTANDING --------------------------------------------------------------------------------
INTERNATIONAL STOCK FUND ------------------------------------------------------------------ FOR THE YEAR ENDED OCTOBER 31, 2004 2003 2002 2001 2000 =============================================================================================================================== CLASS A ------- NET ASSET VALUE at beginning of period $ 8.92 $ 7.00 $ 7.31 $ 9.55 $ 11.45 ------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.08 0.10 0.07(2) 0.04 0.04(2) Net realized and unrealized gain (loss) on investments 1.66 1.88 (0.38) (2.21) (0.98) ------------------------------------------------------------------ Total from investment operations 1.74 1.98 (0.31) (2.17) (0.94) ------------------------------------------------------------------ LESS DISTRIBUTIONS: Distributions from net investment income (0.10) (0.06) -- (0.07) (0.14) Distributions from capital gains -- -- -- -- (0.82) ------------------------------------------------------------------ Total distributions (0.10) (0.06) -- (0.07) (0.96) ------------------------------------------------------------------ Net increase (decrease) in net asset value 1.64 1.92 (0.31) (2.24) (1.90) ------------------------------------------------------------------ NET ASSET VALUE at end of period $ 10.56 $ 8.92 $ 7.00 $ 7.31 $ 9.55 ================================================================== TOTAL RETURN(3) 19.56% 28.46% (4.24)% (22.88)% (9.29)% RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $43,915 $33,664 $25,732 $25,829 $32,071 Ratios of expenses to average net assets Before reimbursement of expenses by Advisor 1.85% 2.11% 2.29% 2.14% 2.06% 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 0.76% 1.30% 0.69% 0.45% 0.43% Portfolio Turnover 45% 34% 47% 86% 117% CLASS B ------- NET ASSET VALUE at beginning of period $ 8.78 $ 6.89 $ 7.25 $ 9.48 $ 11.38 ------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (0.00)(1) 0.04 0.02(2) (0.02) (0.03)(2) Net realized and unrealized gain (loss) on investments 1.64 1.85 (0.38) (2.20) (0.98) ------------------------------------------------------------------ Total from investment operations 1.64 1.89 (0.36) (2.22) (1.01) ------------------------------------------------------------------ LESS DISTRIBUTIONS: Distributions from net investment income (0.01) (0.00)(1) -- (0.01) (0.07) Distributions from capital gains -- -- -- -- (0.82) ------------------------------------------------------------------ Total distributions (0.01) (0.00) -- (0.01) (0.89) ------------------------------------------------------------------ Net increase (decrease) in net asset value 1.63 1.89 (0.36) (2.23) (1.90) ------------------------------------------------------------------ NET ASSET VALUE at end of period $ 10.41 $ 8.78 $ 6.89 $ 7.25 $ 9.48 ================================================================== TOTAL RETURN(3) 18.67% 27.44% (4.97)% (23.48)% (9.92)% RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $ 7,559 $ 5,806 $ 4,591 $ 4,787 $ 5,497 Ratios of expenses to average net assets Before reimbursement of expenses by Advisor 2.59% 2.86% 3.04% 2.89% 2.81% After reimbursement of expenses by Advisor 2.35% 2.35% 2.35% 2.35% 2.35% Ratio of net investment income (loss) to average net assets After reimbursement of expenses by Advisor 0.03% 0.55% (0.06)% (0.30)% (0.32)% Portfolio Turnover 45% 34% 47% 86% 117%
(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. -------------------------------------------------------------------------------- 70 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- This page is left blank intentionally. -------------------------------------------------------------------------------- 71 -------------------------------------------------------------------------------- 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 the 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 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 ("NOCP")). 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. 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 or, if the current market value differs substantially from the amortized cost, by marking to the market. 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 Trust's Securities Valuation 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, 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 Investment Advisor 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. 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) major announcements affecting a single issuer or an entire market or market sector. In responding to a significant event, the Security Valuation 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; and alternative market quotes on the affected securities. -------------------------------------------------------------------------------- 72 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- 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. FEDERAL INCOME TAXES: It is each fund's intention to qualify as a regulated investment company for federal income tax purposes by complying with Subchapter M of the Internal Revenue Code of 1986, as amended. 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. 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: The High Income Fund, Multi-Cap Growth Fund and International Stock Fund may each purchase or sell forward foreign currency exchange contracts for defensive or hedging purposes when the fund's Investment Advisor or Subadvisor, anticipate that the foreign currency will appreciate or depreciate in value. 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, 2004, only the High Income Fund had open forward foreign currency exchange contracts, which are presented in the fund's Portfolio of Investments. FUTURES CONTRACTS: The Funds (other than Cash Reserves) 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. -------------------------------------------------------------------------------- 73 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- 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, 2004, the Bond Fund and Balanced Fund entered into such transactions, the market values of which are identified in each 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, and distributions from real estate investment trusts. 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 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 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, DISTRIBUTION AND TRUSTEE ARRANGEMENTS For its investment advisory services to the Funds, the Investment Advisor is entitled to receive a fee, which is calculated daily and paid monthly, at an annual rate based upon the following percentages of average daily net assets: 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 are Massachusetts Financial Services Company (MFS) 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 for the International Stock Fund. Subsequent to October 31, 2004, the Investment Advisor notified MFS that it is terminating MFS as the subadvisor of the MEMBERS High Income Fund effective February 28, 2005. MEMBERS Capital Advisors will continue as the Investment Advisor to the MEMBER High Income Fund. The Investment Advisor is in negotiations with a replacement subadvisor. Once an agreement is reached with the subadvisor, the contract will be presented to the Board of Trustees for approval and, if approved, the new subadvisor will be disclosed in the prospectus. The Investment Advisor has contractually agreed to waive fees and/or reimburse expenses with respect to the Funds until the effective date of the Funds' post effective amendment scheduled to be filed in February 2005, such that total expenses, exclusive of management, 12b-1, and service fees, will not exceed the following amounts:
FUND CLASS A CLASS B ---- ------- ------- Cash Reserves 0.55% 1.30% Bond 0.90% 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, 2004, the Investment Advisor reimbursed expenses of $58,813 for the Cash Reserves Fund, $150,645 for the Bond Fund, $97,662 for the High Income Fund, $131,637 for the Balanced Fund, $220,402 for the Growth and Income Fund, $250,709 for the Capital Appreciation Fund, $115,700 for the Mid-Cap Fund, $140,426 for the Multi-Cap Growth Fund and $114,012 for the International Stock Fund. -------------------------------------------------------------------------------- 74 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- 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 (the "Expense Cap Agreement"). Under the Expense Cap Agreement, such payments must be made within three years, measured on a fiscal year basis, from when the reimbursement or fee reduction occurred.
RECOVERY EXPIRING RECOVERY EXPIRING RECOVERY EXPIRING FUND OCTOBER 31, 2005 OCTOBER 31, 2006 OCTOBER 31, 2007 ---- ----------------- ----------------- ----------------- Cash Reserves $114,473 $100,514 $ 58,813 Bond 234,662 284,227 150,645 High Income 174,043 168,808 97,662 Balanced 348,289 363,962 131,637 Growth and Income 473,218 460,975 220,402 Capital Appreciation 533,959 520,392 250,709 Mid-Cap 189,165 205,353 115,700 Multi-Cap Growth 247,687 204,794 140,426 International Stock 223,636 166,715 114,012
Through October 31, 2004, none of the Funds made repayments to the Investment Advisor 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 a portion of its fees or expenses related to the Funds. In that regard, the distributor waived a portion of 12b-1 fees on the Cash Reserves Fund Class B Shares for the purpose of maintaining a one-day yield 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, 2004, the waivers totaled $14,230 and are reflected as a portion of the expense reimbursement/waiver in the accompanying Statement of Operations. 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, 2004, sales charges received by CUNA Brokerage were as follows:
FUND CLASS A CLASS B ---- ------- ------- Cash Reserves $ 43,943 $ 73,670 Bond 306,084 217,118 High Income 159,930 64,327 Balanced 684,733 305,293 Growth and Income 527,208 198,700 Capital Appreciation 380,986 188,031 Mid-Cap 216,670 46,061 Multi-Cap Growth 278,079 40,812 International Stock 97,201 17,450
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 declared 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. -------------------------------------------------------------------------------- 75 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- 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 realized capital gains in the Funds differ from book amounts earned during the period due to differences in the timing of capital 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, 2004, 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 $88,985,446 $108,787,911 $18,570,542 $24,150,542 High Income -- -- 41,763,981 34,664,036 Balanced 47,348,475 52,675,096 36,289,928 23,081,002 Growth and Income -- -- 33,575,009 25,108,669 Capital Appreciation -- -- 37,197,209 41,765,793 Mid-Cap -- -- 17,252,124 11,156,778 Multi-Cap Growth -- -- 33,636,240 22,908,578 International Stock -- -- 23,594,572 19,977,713
6. FOREIGN SECURITIES Each fund may invest in foreign securities, although only the High Income Fund, Multi-Cap Growth Fund and International Stock Fund anticipate having significant investments in such securities. The International Stock Fund, High Income Fund and Multi-Cap Growth Fund may invest 100%, 50% and 25%, respectively, of their assets in foreign securities. Foreign securities means securities that are: (1) issued by companies organized outside the U.S. or whose principal operations are outside the U.S. ("foreign issuers"), (2) issued by foreign governments or their agencies or instrumentalities (also "foreign issuers"), (3) principally traded outside the U.S., or (4) quoted or denominated in a foreign currency ("non-U.S. Dollar securities"). Foreign securities include ADRs, EDRs, GDRs, SDRs and foreign money market securities. 7. RESTRICTED SECURITIES Each fund may invest in restricted securities. A restricted security is one that is originally issued in a private placement rather than a public offering and has a contractual restriction on resale or cannot be resold publicly until it is registered under the Securities Act of 1933 (the "1933 Act"). If and when such securities are registered, the costs of registering such securities are paid by the issuer. At the period ended October 31, 2004, only the High Income Fund held a restricted security which is presented in the fund's Portfolio of Investments. The original cost and fair market value of the restricted security held is as follows:
ACQUISITION ACQUISITION VALUE AS A % SECURITY NAME DATE COST FAIR VALUE OF NET ASSETS ------------- ----------- ----------- ---------- ------------- Doe Run Resources Corp Series AI PIK 1/23/03-10/15/04 $69,261 $37,270 .06%
8. SECURITIES LENDING The Funds, excluding 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, 2004, 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 on the Statements of Assets and Liabilities. -------------------------------------------------------------------------------- 76 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- Amounts earned as interest on investments of cash collateral, net of rebates and fees, are included in the Statements of Operations. The value of securities on loan at October 31, 2004 is as follows:
FUND VALUE OF SECURITIES ON LOAN ---- --------------------------- Bond $24,095,109 High Income 15,088,432 Balanced 15,270,192 Capital Appreciation 2,014,635 Mid-Cap 3,184,707 Multi-Cap Growth 879,984
9. TAX INFORMATION The tax character of distributions paid during the years ended October 31, 2004 and 2003 was as follows:
ORDINARY INCOME LONG-TERM CAPITAL GAIN --------------- ---------------------- FUND 2004 2003 2004 2003 ---- ---- ---- ---- ---- Cash Reserves $ 89,038 $ 133,093 $ -- $ -- Bond 4,851,848 4,989,103 -- -- High Income 4,460,811 3,256,626 -- -- Balanced 3,075,874 3,350,596 -- 17,091 Growth and Income 1,181,806 646,563 -- -- Capital Appreciation -- -- -- 567,807 Mid-Cap -- -- -- -- Multi-Cap Growth -- -- -- -- International Stock 371,597 212,875 -- --
As of October 31, 2004, the components of distributable earnings on a tax basis were as follows:
FUND ORDINARY INCOME LONG-TERM CAPITAL GAIN ---- --------------- ---------------------- Cash Reserves $ 2,138 $ -- Bond 37,296 -- High Income 192,570 -- Balanced -- -- Growth and Income 1,065,998 -- Capital Appreciation -- -- Mid-Cap 265,422 -- Multi-Cap Growth -- -- International Stock 411,590 --
For federal income taxes purposes, the funds listed below have capital loss carryovers as of October 31, 2004, which are available to offset future capital gains, if any:
CARRYOVER EXPIRING IN: FUND 2007 2008 2009 2010 2011 2012 ---- ---- ---- ---- ---- ---- ---- Bond $ -- $ 194,286 $ -- $ 230,858 $ -- $310,659 High Income 98,674 237,390 2,053,681 2,445,850 614,259 -- Balanced -- -- -- 5,493,333 6,760,762 157,889 Growth and Income -- 1,073,602 2,865,513 11,738,982 9,713,003 -- Capital Appreciation -- -- -- 15,472,794 13,979,170 -- Mid-Cap -- -- -- -- 16,099 -- Multi-Cap Growth -- 5,298,903 10,391,144 5,728,147 -- -- International Stock -- -- 2,132,735 4,881,331 1,505,342 --
The High Income Fund, Growth and Income Fund, Capital Appreciation Fund, Mid-Cap Fund, Multi-Cap Growth Fund, and International Stock Fund utilized $295,640, $141,344, $3,583,988, $2,599,196, $939,554 and $3,739,841, respectively, of prior capital loss carryovers during the year ended October 31, 2004. -------------------------------------------------------------------------------- 77 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- At October 31, 2004, 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 Fund $ 2,901,740 $ 145,217 $ 2,756,523 High Income Fund 3,798,088 713,011 3,085,077 Balanced Fund 20,965,969 9,031,958 11,934,011 Growth and Income Fund 20,988,843 12,133,308 8,855,535 Capital Appreciation Fund 20,595,616 10,071,390 10,524,226 Mid-Cap Fund 11,282,763 2,378,775 8,903,988 Multi-Cap Fund 6,026,048 970,147 5,055,901 International Stock Fund 11,686,355 1,070,618 10,615,737
The differences between cost amounts for book purposes and tax purposes are primarily due to the tax deferral of losses. 10. 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. 11. 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, 2004, investments in the Funds by affiliates were as follows:
CUNA MUTUAL CUNA MUTUAL CUMIS CUNA LIFE INSURANCE INSURANCE INSURANCE BROKERAGE FUND CLASS COMPANY SOCIETY SOCIETY, INC. SERVICES, INC. ---- ----- -------------- ----------- ------------- -------------- Cash Reserves A $ 1,862,243 $ 1,861,001 $ -- $ -- Bond A 2,160,741 2,159,300 -- -- High Income A 6,761,936 -- -- -- Balanced A 12,275,146 -- 5,343,380 1,329,116 Growth and Income A 2,149,236 2,501,305 3,446,141 -- Capital Appreciation A 12,438,032 1,709,847 -- -- Mid-Cap A 12,447,851 -- -- -- International Stock A 3,727,201 6,210,759 22,188,513 --
-------------------------------------------------------------------------------- 78 -------------------------------------------------------------------------------- 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 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, 2004, the related statements of operations, statements of changes in net assets and the financial highlights for the year 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 statements and 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 statements and 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 audits to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2004, by correspondence with the Funds' custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the Funds as of October 31, 2004, the results of their operations, changes in their net assets and the financial highlights for the year then ended, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Chicago, Illinois December 23, 2004 -------------------------------------------------------------------------------- 79 -------------------------------------------------------------------------------- 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, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (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, 2004. 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 184/366 (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 -------------------------------------------------------------------------------- BEGINNING ENDING ANNUAL EXPENSES ENDING ANNUAL EXPENSES ACCOUNT ACCOUNT EXPENSE PAID DURING ACCOUNT EXPENSE PAID DURING FUND VALUE VALUE RATIO PERIOD VALUE RATIO PERIOD ---- --------- ------- ------- ----------- ------- ------- ----------- Cash Reserves(1) $1,000 $1,004.20 .55% $2.77 $1,000.70 1.23% $ 6.19 Bond $1,000 1,038.90 .90% 4.61 1,035.00 1.65% 8.44 High Income $1,000 1,063.10 1.00% 5.19 1,059.00 1.75% 9.06 Balanced $1,000 1,034.30 1.10% 5.62 1,030.40 1.85% 9.44 Growth and Income $1,000 1,040.10 1.00% 5.13 1,036.30 1.75% 8.96 Capital Appreciation $1,000 1,035.40 1.20% 6.14 1,031.10 1.95% 9.96 Mid-Cap $1,000 1,040.10 1.40% 7.18 1,036.00 2.15% 11.00 Multi-Cap Growth $1,000 1,014.70 1.20% 6.08 1,010.80 1.95% 9.86 International Stock $1,000 1,073.20 1.60% 8.34 1,069.90 2.35% 12.23
(1)Class B expense ratio includes amount waived by distributor (see Note 3), had the distributor not waived the fees the expense ratio would have been 1.30% with an ending account value of $1,000.70 and expenses paid during the period of $6.54. 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. (See table next page.) -------------------------------------------------------------------------------- 80 -------------------------------------------------------------------------------- OTHER INFORMATION (UNAUDITED) --------------------------------------------------------------------------------
CLASS A CLASS B -------------------------------------------------------------------------------- BEGINNING ENDING ANNUAL EXPENSES ENDING ANNUAL EXPENSES ACCOUNT ACCOUNT EXPENSE PAID DURING ACCOUNT EXPENSE PAID DURING FUND VALUE VALUE RATIO PERIOD VALUE RATIO PERIOD ---- --------- ------- ------- ----------- ------- ------- ----------- Cash Reserves(1) $1,000 $1,022.37 .55% $2.80 $1,018.95 1.23% $ 6.24 Bond $1,000 1,020.61 .90% 4.57 1,016.84 1.65% 8.36 High Income $1,000 1,020.11 1.00% 5.08 1,016.34 1.75% 8.87 Balanced $1,000 1,019.61 1.10% 5.58 1,015.84 1.85% 9.37 Growth and Income $1,000 1,020.11 1.00% 5.08 1,016.34 1.75% 8.87 Capital Appreciation $1,000 1,019.10 1.20% 6.09 1,015.33 1.95% 9.88 Mid-Cap $1,000 1,018.10 1.40% 7.10 1,014.33 2.15% 10.89 Multi-Cap Growth $1,000 1,019.10 1.20% 6.09 1,015.33 1.95% 9.88 International Stock $1,000 1,017.09 1.60% 8.11 1,013.32 2.35% 11.89
(1)Class B expense ratio includes amount waived by distributor (see Note 3), had the distributor not waived the fees the expense ratio would have been 1.30% with an ending account value of $1,018.60 and expenses paid during the period of $6.60. Please note that the expenses shown in both tables are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange 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 twelve-month period ended June 30, 2004 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 has made 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, 2004, the total amount of foreign taxes that will be passed through to shareholders and foreign source income for information reporting purposes will be $131,691 (all of which represents taxes withheld) and $1,212,840, respectively. CORPORATE DIVIDENDS RECEIVED DEDUCTION: Of the dividends paid by the High Income Fund, Balanced Fund, and the Growth and Income Fund, 0.43%, 66.53%, and 100.00%, respectively, qualify for the corporate dividends received deduction. QUALIFIED DIVIDEND INCOME: For the fiscal year ended October 31, 2004, the High Income, Balanced, Growth and Income and International Stock Funds paid dividend income totaling $4,460,811, $3,075,874, $1,181,806 and $371,597, 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 calendar year 2004, including the portion, if any, which qualify as QDI, will be reported in conjunction with Form 1099-DIV. CHANGES IN INDEPENDENT ACCOUNTANTS On June 8, 2004, PricewaterhouseCoopers LLP resigned as independent registered public accountants for the MEMBERS Mutual Funds (the "Funds"). The Funds' Board of Trustees, upon the recommendation of the audit committee, appointed Deloitte & Touche LLP as independent accountants for the Funds on August 26, 2004 for the 2004 fiscal year. The reports of PricewaterhouseCoopers LLP on the Funds' financial statements for either of the fiscal years ended October 31, 2003 and October 31, 2002, contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principle. During the Funds' fiscal years ended October 31, 2003 and October 31, 2002, and during the period from October 31, 2003 through June 8, 2004 there have been no disagreements with PricewaterhouseCoopers LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure which, if not resolved to the satisfaction of PricewaterhouseCoopers LLP, would have caused them to make reference thereto in their reports on the financial statements for such years. -------------------------------------------------------------------------------- 81 -------------------------------------------------------------------------------- TRUSTEES AND OFFICERS --------------------------------------------------------------------------------
> NO. OF PORTFOLIOS OTHER POSITION(S) OVERSEEN OUTSIDE NAME, ADDRESS AND HELD WITH LENGTH OF PRINCIPAL OCCUPATION IN FUND DIRECTOR- YEAR OF BIRTH THE FUND SERVICE(1) DURING PAST FIVE YEARS COMPLEX SHIPS ----------------------------------------------------------------------------------------------------------------------------------- Michael S. Daubs, CFA(2)(3) Trustee, 1997 - Present CUNA Mutual Insurance Society 19 --- 5910 Mineral Point Road Chairman Chief Officer - Investments, Madison, WI 53705 1990 - Present Year of Birth: 1943 MEMBERS Capital Advisors, Inc. President, 1982 - Present CUNA Mutual Life Insurance Company Chief Officer - Investments, 1973 - Present ----------------------------------------------------------------------------------------------------------------------------------- Lawrence R. Halverson, CFA(2)(3) Trustee, 1997 - Present MEMBERS Capital Advisors, Inc. 19 --- 5910 Mineral Point Road President Senior Vice President - Equities Madison, WI 53705 1996 - Present Year of Birth: 1945 ----------------------------------------------------------------------------------------------------------------------------------- Mary E. Hoffmann, CPA(2) Treasurer 1998 - Present MEMBERS Capital Advisors, Inc. 19 --- 5910 Mineral Point Road Assistant Vice President - Product Madison, WI 53705 Operations and Finance, Year of Birth: 1970 2001 - Present Product Operations and Finance Manager, 1998 - 2001 ----------------------------------------------------------------------------------------------------------------------------------- Holly S. Baggot(2) Secretary 1999 - Present MEMBERS Capital Advisors, Inc. 19 --- 5910 Mineral Point Road and Senior Manager - Product and Fund Madison, WI 53705 Assistant Operations, 2001 - Present Year of Birth: 1960 Treasurer Operations & Administration Manager 1998 - 2001 ----------------------------------------------------------------------------------------------------------------------------------- Dan Owens(2) Assistant 2000 - Present MEMBERS Capital Advisors, Inc. 19 --- 5910 Mineral Point Road Treasurer Senior Manager - Portfolio Operations, Madison, WI 53705 2001 - Present Year of Birth: 1966 Investment Operations Manager, 1999 - 2001
-------------------------------------------------------------------------------- 82 -------------------------------------------------------------------------------- TRUSTEES AND OFFICERS --------------------------------------------------------------------------------
> NO. OF PORTFOLIOS OTHER POSITION(S) OVERSEEN OUTSIDE NAME, ADDRESS AND HELD WITH LENGTH OF PRINCIPAL OCCUPATION IN FUND DIRECTOR- YEAR OF BIRTH THE FUND SERVICE(1) DURING PAST FIVE YEARS COMPLEX SHIPS ----------------------------------------------------------------------------------------------------------------------------------- Rolf F. Bjelland, CLU Trustee 2003 - Present Fairview Medical Foundation 19 Regis 2000 Heritage Way Director, 2003 - Present Corp., Waverly, IA 50677 Director, Year of Birth: 1938 A.L.S. Society 1982 - Director, 2002 - Present Present Viking Counsel Boy Scouts of America Director, 1967-Present Lutheran Brotherhood Mutual Funds Chairman and President Lutheran Brotherhood Chief Investment Officer (now Thrivent Financial) 1983 - 2002 ----------------------------------------------------------------------------------------------------------------------------------- Gwendolyn M. Boeke Trustee 1997 - Present Wartburg Theological Seminary 19 --- 2000 Heritage Way Development Association, Waverly, IA 50677 Development Associate, Year of Birth: 1934 1997 - Present Evangelical Lutheran Church in America Foundation Regional Director, 1990 - Present Wartburg College Director, 1986 - 2001 ----------------------------------------------------------------------------------------------------------------------------------- Alfred L. Disrud Trustee 1997 - Present Planned Giving Services 19 --- 2000 Heritage Way Owner, 1986 - Present Waverly, IA 50677 Year of Birth: 1921 ----------------------------------------------------------------------------------------------------------------------------------- Richard E. Struthers Trustee 2004 - Present Clearwater Capital Management 19 --- 2000 Heritage Way Chairman and Chief Executive Officer Waverly, IA 50677 1998 - Present Year of Birth: 1952 -----------------------------------------------------------------------------------------------------------------------------------
(1) The board of trustees and officers of the Fund do not currently have term limitations. (2) "Interested person" as defined in the 1940 Act. (3) Considered an "interested" trustee because of the position he holds with the investment advisor of the trust. The Statement of Additional Information (SAI) includes additional information about the Funds' trustees and officers and is available at no cost on the Funds' website at www.membersfunds.com or by calling 1-800-877-6089. -------------------------------------------------------------------------------- 83 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- This page is left blank intentionally. -------------------------------------------------------------------------------- 84 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- This page is left blank intentionally. -------------------------------------------------------------------------------- 85 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- This page is left blank intentionally. -------------------------------------------------------------------------------- 86 [LOGO OF MEMBERS] M U T U A L F U N D S 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(1004) ITEM 2. CODE OF ETHICS. As of the period ended October 31, 2004, 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 year ended 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 $127,750. For the fiscal year ended October 31, 2003, respectively, the aggregate fees for professional services rendered by PricewaterhouseCoopers LLP ("PwC"), 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 $105,500, respectively. (b) Audit Related Fees ------------------ For the fiscal year ended 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, respectively. For the fiscal year ended October 31, 2004 and October 31, 2003, respectively, the aggregate fees for professional services rendered by PwC 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, respectively. INCLUDED IN THE SCOPE OF THE SERVICES COMPRISING THE FEES DISCLOSED UNDER THIS ITEM 4(B) WERE THE FOLLOWING SERVICES: (c) Tax Fees -------- For the fiscal year ended 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 $19,100, respectively, in each case 100% of which were pre-approved by the Audit Committee. For the fiscal year ended October 31, 2003, respectively, the aggregate fees for professional services rendered by PwC for tax compliance, tax advice and tax planning for such fiscal years, totaled $17,500, respectively, in each case 100% of which were preapproved by the Audit Committee. 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. -Excise tax assistance, including review of excise tax distribution calculations prior to distribution and review of Return of Excise Tax on Undistributed Income of Regulated Investment Companies, Form 8613. (d) All Other Fees -------------- For the fiscal year ended 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, respectively. For the fiscal year ended October 31, 2003, respectively, the aggregate fees for professional services rendered by PwC for products and services other than those reported in subparagraphs (a) through (c) of this Item 4, for such fiscal years, totaled $0, respectively. (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 year ended 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, respectively. During the Trust's fiscal year ended October 31, 2003, the aggregate non-audit fees billed by PwC for services rendered to the Trust, and to MCA, and to any entity controlling, controlled by, or under common control with MCA that provides ongoing services to the Trust, totaled $0, respectively. (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 preapproved 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, Alfred L. Disrud, and Richard E. Struthers. ITEM 6. SCHEDULE OF INVESTMENTS ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 9. 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 10. 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 21, 2004. (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. ITEM 11. EXHIBITS. (a) Code of Ethics of Principal Executive Officer and Principal Financial Officer of the Trust. (b) Certifications of Principal Executive Officer and Principal Financial Officer of the Trust. 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: December 21, 2004 ----------------- 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: December 21, 2004 ----------------- BY: /s/Mary E. Hoffmann ------------------- Mary E. Hoffmann Treasurer, MEMBERS Mutual Funds DATE: December 21, 2004 -----------------