-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NfLs7CbLjne9Ldq1n1dJeAgmMaab0wyowy5S1lmh7FV1wMAwF9/8NIaOv17oQqap 6VP23ZuRRg6pFhXrX4o5qA== 0001209286-09-000111.txt : 20090225 0001209286-09-000111.hdr.sgml : 20090225 20090225140642 ACCESSION NUMBER: 0001209286-09-000111 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20081231 FILED AS OF DATE: 20090225 DATE AS OF CHANGE: 20090225 EFFECTIVENESS DATE: 20090225 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ULTRA SERIES FUND CENTRAL INDEX KEY: 0000732697 IRS NUMBER: 000000000 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-04815 FILM NUMBER: 09633349 BUSINESS ADDRESS: STREET 1: 2000 HERITAGE WAY CITY: WAVERLY STATE: IA ZIP: 50677 BUSINESS PHONE: 3193524090 MAIL ADDRESS: STREET 1: 2000 HERITAGE WAY CITY: WAVERLY STATE: IA ZIP: 50677 0000732697 S000019110 Target Retirement 2020 Fund C000052853 Target Retirement 2020 Fund Class Z 0000732697 S000019111 Target Retirement 2030 Fund C000052854 Target Retirement 2030 Fund Class Z 0000732697 S000019112 Target Retirement 2040 Fund C000052855 Target Retirement 2040 Fund Class Z 0000732697 S000019976 Money Market Fund C000056034 Money Market Fund Class Z 0000732697 S000019977 International Stock Fund C000056035 International Stock Fund Class Z 0000732697 S000019978 Bond Fund C000056036 Bond Fund Class Z 0000732697 S000019979 High Income Fund C000056037 High Income Fund Class Z 0000732697 S000019980 Diversified Income Fund C000056038 Diversified Income Fund Class Z 0000732697 S000019981 Large Cap Value Fund C000056039 Large Cap Value Fund Class Z 0000732697 S000019982 Large Cap Growth Fund C000056040 Large Cap Growth Fund Class Z 0000732697 S000019983 Mid Cap Value Fund C000056041 Mid Cap Value Fund Class Z 0000732697 S000019984 Mid Cap Growth Fund C000056042 Mid Cap Growth Fund Class Z 0000732697 S000019985 Global Securities Fund C000056043 Global Securities Fund Class Z 0000732697 S000019999 Conservative Allocation Fund C000056077 Conservative Allocation Fund Class Z 0000732697 S000020000 Aggressive Allocation Fund C000056078 Aggressive Allocation Fund Class Z 0000732697 S000020001 Moderate Allocation Fund C000056079 Moderate Allocation Fund Class Z 0000732697 S000020002 Small Cap Growth Fund C000056080 Small Cap Growth Fund Class Z 0000732697 S000020003 Small Cap Value Fund C000056081 Small Cap Value Fund Class Z N-CSR 1 e68654.txt As filed with the Securities and Exchange Commission on February 25, 2009 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. 811-04815 Ultra Series Fund 5910 Mineral Point Road Madison, WI 53705 (608) 238-5851 (Registrant's Exact Name, Address and Telephone Number) Pamela M. Krill, Esquire CUNA Mutual Insurance Society Managing Associate General Counsel 5910 Mineral Point Road Madison, WI 53705 (Name and Address of Agent for Service) -------------------------------------------- Date of fiscal year end: December 31 Date of reporting period: December 31, 2008 ITEM 1. REPORTS TO STOCKHOLDERS - -------------------------------------------------------------------------------- A N N U A L R E P O R T - -------------------------------------------------------------------------------- FOR PERIOD ENDED DECEMBER 31, 2008 Conservative Allocation, Moderate Allocation, Aggressive Allocation, Money Market, Bond, High Income, Diversified Income, Large Cap Value, Large Cap Growth, Mid Cap Value, Mid Cap Growth, Small Cap Value, Small Cap Growth, Global Securities, International Stock, Target Retirement 2020, Target Retirement 2030, and Target Retirement 2040 Funds of the Ultra Series Fund MEMBERS(R) Variable Annuity MEMBERS(R) Variable Annuity II MEMBERS(R) Choice Variable Annuity MEMBERS(R) Variable Annuity III MEMBERS(R) Variable Universal Life MEMBERS(R) Variable Universal Life II DISTRIBUTED BY: CUNA Brokerage Services, Inc. Office of Supervisory Jurisdiction 2000 Heritage Way Waverly, IA 50677 Member FINRA & SIPC TELEPHONE: (319) 352-4090 (800) 798-5500 [LOGO OF MEMBERS](TM) INSURANCE & INVESTMENTS This material is for reporting purposes only and shall not be used in connection with a solicitation, offer or any proposed sale or purchase of securities unless preceded or accompanied by a prospectus. - -------------------------------------------------------------------------------- MOVE CONFIDENTLY INTO THE FUTURE(TM) ANNUAL REPORT This booklet contains an annual report for the Ultra Series Fund. The Ultra Series Fund is one of the mutual funds in which the subaccounts of the CUNA Mutual Variable Life Insurance Account and CUNA Mutual Variable Annuity Account invest. If you own a MEMBERS(R) Variable Annuity or MEMBERS(R) Variable Universal Life contracts, you may allocate amounts to the subaccounts that invest in the Ultra Series Fund. The Ultra Series Fund includes the Conservative Allocation, Moderate Allocation, Aggressive Allocation, Money Market, Bond, High Income, Diversified Income, Large Cap Value, Large Cap Growth, Mid Cap Value, Mid Cap Growth, Small Cap Value, Small Cap Growth, Global Securities, International Stock, Target Retirement 2020, Target Retirement 2030, and Target Retirement 2040 Funds. If you own a MEMBERS(R) Variable Universal Life or Ultra Vers-ALL LIFE(SM) policy, as you refer to the annual report for the Ultra Series Fund, the subaccounts available on your policy invest in the Mid Cap Growth Fund, Large Cap Growth Fund, Large Cap Value Fund, Diversified Income Fund, Bond Fund, and Money Market Funds. If you own a MEMBERS(R) Variable Annuity, MEMBERS(R) Variable Annuity II, MEMBERS(R) Choice Variable Annuity, MEMBERS(R) Variable Annuity III, or MEMBERS(R) Variable Universal Life II policy, as you refer to the annual report for the Ultra Series Fund, the subaccounts available on your policy invest in the Conservative Allocation, Moderate Allocation, Aggressive Allocation, Money Market, Bond, High Income, Diversified Income, Large Cap Value, Large Cap Growth, Mid Cap Value, Mid Cap Growth, Small Cap Value, Small Cap Growth, Global Securities and International Stock Funds. Nothing in this report represents a recommendation of a security by the investment adviser. Manager views and portfolio holdings may have changed since the date of this report. For more complete information including charges and expenses, obtain a prospectus from your representative or call the Home Office at 1-800-798-5500, Monday through Friday, 7 a.m. to 8 p.m. Central time. Consider the investment objectives, risks and charges and expenses of the investment carefully before investing. As with all securities, the Securities and Exchange Commission ("SEC") has not approved or disapproved of these securities, nor does the SEC guarantee the accuracy or adequacy of the prospectus. Any statement to the contrary is a criminal offense. ================================================================================ LETTER TO INVESTORS - -------------------------------------------------------------------------------- [PHOTO OF DAVID P. MARKS] David P. Marks Dear Investor: I am pleased to present the annual report for the Ultra Series Fund. The past 12 months have been marked by unforeseen volatility and failures across the global financial landscape. The credit markets remain in a frozen state impacting both Wall Street and Main Street in a number of critical ways. What began as a crisis in the sub-prime mortgage market in the U.S. rapidly cascaded far and wide throughout the economy and across the globe; in some cases resulting in calamity for businesses and individuals alike. The resultant impacts, regardless of degree, were that nearly every major asset class within the stock and bond universe lost real value. For anyone invested in stocks or bonds, it has been a remarkable test of investor patience. The last time intermediate-term government bonds AND the S&P 500 stock index delivered negative returns over a 12 month period was in 1969 and before that 1931(1). Modern day investors have been used to expecting more from our investments and the past 12 months have disappointed nearly everyone. While we are not predicting when the markets bottom; they will at some point and the recovery could be very significant as it has in the past. History does show that in times like these opportunities abound and those with the ability to stay focused can make attractive returns if their time horizon is longer than the next 12 months. Patience in these markets is truly a major virtue. As a manager of portfolios of bonds and stocks, this environment demands a disciplined approach including vigilant and in depth research, astute decisions and well established relationships with market makers in order to execute strategies. The investment professionals at MEMBERS Capital Advisors who manage the investment portfolios of the Ultra Series Fund have done stellar work in this very difficult environment. Performance through December 2008 for the investment portfolios of the Ultra Series Funds was generally above average and in some cases exceptional. In particular, six of our portfolios have performed in the top 25% of their respective peers according to Morningstar. That is exceptional when even some of the world's best managers over the last 5 and 10 years have fallen off the performance track in a serious manner. During all market environments the investment professionals of MEMBERS Capital Advisors that manage your investments are working diligently to identify prevailing risks and prudently choose stocks and bonds that present sound investment opportunities. The reports that follow this letter provide insight on each fund's performance and portfolio position. As always, your long-term success as a investor in the Ultra Series Fund is our top priority. We appreciate the confidence you have placed in us as managers of your assets and we are determined to be good stewards in this role. Please call me directly with any questions you may have. Sincerely, /s/ David P. Marks David P. Marks, CFA President, Ultra Series Fund (1) SBBI/Morningstar Data Not part of the Annual Report. - -------------------------------------------------------------------------------- ================================================================================ - -------------------------------------------------------------------------------- FUND RETURNS AND PEER GROUP RANK AS OF 12/31/2008 -------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS ---------------------- --------------------- --------------------- --------------------- % RANK/# % RANK/# % RANK/# % RANK/# OF FUNDS IN OF FUNDS IN OF FUNDS IN OF FUNDS IN FUND AND PEER GROUP RETURN PEER GROUP RETURN PEER GROUP RETURN PEER GROUP RETURN PEER GROUP - ------------------- ------- ---------- ------ ---------- ------ ---------- ------ ---------- CONSERVATIVE ALLOCATION -17.89% 41/85 N/A N/A N/A N/A N/A N/A COnservative ALlocation* -15.56% N/A N/A N/A MODERATE ALLOCATION -30.23% 67/230 N/A N/A N/A N/A N/A N/A Moderate Allocation* -28.03% N/A N/A N/A AGGRESSIVE ALLOCATION -41.09% 79/369 N/A N/A N/A N/A N/A N/A Large Blend* -37.64% N/A N/A N/A BOND 2.86% 21/140 3.97% 24/137 3.55% 23/135 4.62% 32/112 Intermediate-Term Bond* -5.18% 1.41% 2.24% 3.99% HIGH INCOME -14.74% 3/91 -1.67% 3/91 1.20% 4/87 N/A N/A High Yield Bond* -27.25% -6.82% -1.92% N/A DIVERSIFIED INCOME -13.25% 2/230 -0.74% 6/193 1.94% 9/166 2.79% 19/131 Moderate Allocation* -28.03% -5.04% -0.30% 1.14% LARGE CAP VALUE -35.99% 42/225 -8.09% 41/203 -1.62% 48/187 -0.34% 72/119 Large Value* -37.19% -8.93% -2.05% 0.62% LARGE CAP GROWTH -37.20% 22/354 -8.69% 29/333 -3.22% 45/316 -1.13% 31/186 Large Growth* -41.67% -10.87% -3.56% -2.51% MID CAP VALUE -36.45% 47/76 -9.34% 45/70 -0.97% 51/56 N/A N/A Mid-Cap Value* -37.24% -10.11% -1.62% N/A MID CAP GROWTH -46.89% 70/157 -13.76% 78/153 -4.58% 76/146 N/A N/A Mid-Cap Growth* -45.02% -11.53% -2.72% N/A SMALL CAP VALUE -25.55% 7/42 N/A N/A N/A N/A N/A N/A Small Value* -32.33% N/A N/A N/A SMALL CAP GROWTH -43.41% 67/96 N/A N/A N/A N/A N/A N/A Small Growth* -40.97% N/A N/A N/A GLOBAL SECURITIES -38.14% 23/81 -8.42% 46/67 0.72 33/64 N/A N/A World Stock* -41.76 -7.85 0.42 N/A INTERNATIONAL STOCK -38.62% 6/103 -5.30% 16/92 3.58% 15/88 N/A N/A Foreign Large Blend* -43.33% -7.36% 1.47% N/A TARGET RETIREMENT 2020 -35.31% 79/30 N/A N/A N/A N/A N/A N/A Target-Date 2015-2029* -30.24% N/A N/A N/A TARGET RETIREMENT 2030 -38.35% 56/23 N/A N/A N/A N/A N/A N/A Target-Date 2030+* -36.26% N/A N/A N/A TARGET RETIREMENT 2040 -41.65% 97/23 N/A N/A N/A N/A N/A N/A Target-Date 2030+* -36.26% N/A N/A N/A
* Source of Peer Group category returns and ranks: Morningstar Direct; The Morningstar Average Peer Returns represents the average annual composite performance of all U.S. insurance mutual funds listed in each fund category by Morningstar. The highest (or most favorable) percentile rank is 1 and the lowest (or least favorable) percentile rank is 100. The funds' ranking data shown is for returns calculated after fund level expenses have been subtracted, but do not include any separate account fees, charges or expenses imposed by the variable annuity and variable life insurance contracts that invest in the fund. For more current performance information, please call 1-800-798-5500. Current performance may be lower or higher than the performance data quoted above. Past performance does not guarantee future results. (C) 2009 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. - -------------------------------------------------------------------------------- ================================================================================ TABLE OF CONTENTS - --------------------------------------------------------------------------------
PAGE ---- FUND PERFORMANCE REVIEWS Conservative Allocation Fund ................................ 2 Moderate Allocation Fund .................................... 4 Aggressive Allocation Fund .................................. 6 Bond Fund ................................................... 8 High Income Fund ............................................ 10 Diversified Income Fund ..................................... 13 Large Cap Value Fund ........................................ 16 Large Cap Growth Fund ....................................... 18 Mid Cap Value Fund .......................................... 21 Mid Cap Growth Fund ......................................... 24 Small Cap Value Fund ........................................ 26 Small Cap Growth Fund ....................................... 28 Global Securities Fund ...................................... 30 International Stock Fund .................................... 32 Target Retirement 2020 Fund ................................. 36 Target Retirement 2030 Fund ................................. 38 Target Retirement 2040 Fund ................................. 40 PORTFOLIOS OF INVESTMENTS Conservative Allocation Fund ................................ 42 Moderate Allocation Fund .................................... 43 Aggressive Allocation Fund .................................. 45 Money Market Fund ........................................... 46 Bond Fund ................................................... 48 High Income Fund ............................................ 54 Diversified Income Fund ..................................... 59 Large Cap Value Fund ........................................ 66 Large Cap Growth Fund ....................................... 69 Mid Cap Value Fund .......................................... 72 Mid Cap Growth Fund ......................................... 76 Small Cap Value Fund ........................................ 78 Small Cap Growth Fund ....................................... 80 Global Securities Fund ...................................... 83 International Stock Fund .................................... 86 Target Retirement 2020 Fund ................................. 92 Target Retirement 2030 Fund ................................. 94 Target Retirement 2040 Fund 96 FINANCIAL STATEMENTS Statements of Assets and Liabilities ........................ 98 Statements of Operations .................................... 102 Statements of Changes in Net Assets ......................... 106 Financial Highlights ........................................ 114 NOTES TO FINANCIAL STATEMENTS .......................................... 123 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ................ 136 OTHER INFORMATION ...................................................... 137 TRUSTEES AND OFFICERS .................................................. 141
Non-deposit investment products are not federally insured, involve investment risk, may lose value and are not obligations of or guaranteed by the financial institution. For more complete information about the Ultra Series Fund, including charges and expenses, request a prospectus from your registered representative or from CUNA Mutual Insurance Society, 2000 Heritage Way, Waverly, IA 50677. Consider the investment objectives, risks, charges and expenses of the investment carefully before investing. The prospectus contains this and other information about the investment company. For current performance information, please call 1-800-798-5500. Current performance may be lower or higher than the performance data quoted within. Past performance does not guarantee future results. - -------------------------------------------------------------------------------- ================================================================================ CONSERVATIVE ALLOCATION FUND PERFORMANCE REVIEW - -------------------------------------------------------------------------------- PERFORMANCE AND ECONOMIC & MARKET REVIEW For the twelve month period ended December 31, 2008, the Ultra Series Conservative Allocation Fund returned -17.89%, underperforming the Conservative Allocation Custom Index return of - 9.36%, the Merrill Lynch U.S. Corporate, Government & Mortgage Index return of 6.20%, and the Morningstar Insurance Fund Conservative Allocation category average return of -15.56%. With every major equity and fixed income asset class (except for government-backed paper and cash) dropping in unison as a result of the ongoing financial crisis, the long-term benefits of asset allocation went unrealized this year. There was truly no where to turn for protection in these declining markets. PORTFOLIO REVIEW One asset class that held up nicely during the financial crisis was high-quality government bonds. Investors sought out the safety of the full faith and credit of the U.S. Government, rallying the U.S. Treasury market and benefiting the portfolio accordingly. On the corporate bond side, both investment-grade and non-investment grade (high yield) bonds performed poorly due to the frozen credit markets. Normally staid investment-grade corporate bonds funds were hit with substantial price declines, as interest rate spreads between U.S. Treasuries widened to some of the highest levels ever recorded. High yield bonds, as measured by the Merrill Lynch U.S. High Yield Master II Index returned - -26.39% over the past year. Intermediate-term investment grade bonds are also down -- with the Barclays Capital U.S. Intermediate-Term Credit Index down - -2.76%. The portfolio's diversified equity funds had the largest negative impact on the fund's return. As mentioned above, major equity markets the world over all experienced significant price declines. No equity asset class was spared. The deleveraging process accelerated in the capital markets, with institutional and hedge fund investors being forced to unwind their leveraged positions to raise liquidity. The resulting heavy selling placed tremendous downward pressure on equity prices. The Russell 3000(R) Index returned -37.31% for the year. International and emerging market equities provided no relief, experiencing even steeper declines, with the MSCI EAFE Index down -43.06% and the MSCI Emerging Markets Index down -53.18%. ECONOMIC & MARKET OUTLOOK As painful as 2008 was, the year did manage to end on a high note. After bottoming out in late November, equities rallied significantly throughout December. Bonds also posted nice gains in the final five weeks of the year. Unfortunately, we expect the heightened market volatility of the past several months to persist into 2009. Until the credit markets unfreeze, and the overall deleveraging process is substantially complete, the markets will remain unsettled. However, with volatility comes opportunity, and we plan to take advantage of historically low prices in certain asset classes, with corporate bonds being at the top of the list. With yield spreads at record highs, we believe investors are being more than adequately compensated for holding both investment and non-investment grade corporate bonds. Pending any further deterioration in the credit markets, we intend to opportunistically increase our positions in these asset classes over the coming year. We expect equities to be attractively priced on both a historical absolute basis and relative basis vs. U.S. Treasuries. Once the market completes a bottoming process, we plan to selectively purchase equities in an effort to rebalance the portfolio back to its targeted stock/bond allocation. Moving forward, we will continue to employ caution in our overall asset allocation strategies within the fund while awaiting more positive economic news. At the same time we stand ready to capitalize on the aforementioned opportunities in 2009. MEMBERS Capital Advisors, Inc. - Adviser David M. Schlimgen, CIMA(R), CIMC(R) and Patrick F. Ryan, CIMA(R) Portfolio Managers - -------------------------------------------------------------------------------- 2 ================================================================================ CONSERVATIVE ALLOCATION FUND PERFORMANCE REVIEW - -------------------------------------------------------------------------------- CUMULATIVE PERFORMANCE OF $10,000 INVESTMENT SINCE INCEPTION(1,4,6) [CHART OF CUMULATIVE PERFORMANCE]
Conservative Conservative Allocation Fund Merrill Lynch U.S. Corporate, Allocation Fund Custom Index(2) Government & Mortgage Index(3) 6/30/2006 $10,000 $10,000 $10,000 12/31/2006 10,734 10,701 10,550 12/31/2007 11,155 11,398 11,306 12/31/2008 9,159 10,331 12,008
[END CHART]
- --------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN THROUGH DECEMBER 31, 2008(4,6) Annual Expense 1 Year Since Inception(5) Ratio ------------------------------ ------- CONSERVATIVE ALLOCATION FUND -17.89% -3.44% 0.96% Conservative Allocation Fund Custom Index(2) -9.36 1.31 NA Merrill Lynch U.S. Corporate, Government & Mortgage Index(3) 6.20 7.56 NA - ---------------------------------------------------------------------------------------------------------
NA Not Applicable. Index returns do not reflect fees or expenses. (1) This chart compares a $10,000 investment made in the fund to a $10,000 investment made in the securities that make up the index. (2) The Conservative Allocation Fund Custom Index consists of 55% Merrill Lynch U.S. Corporate, Government & Mortgage Index, 30% Russell 1000(R) Index, and 15% 90-Day U.S. Treasury Bills. A description of the Merrill Lynch U.S. Corporate, Government & Mortgage Index is set forth below. The Russell 1000(R) Index is a large-cap market index which measures the performance of the 1,000 largest companies in the Russell 3000(R) Index (the Russell 3000(R) Index measures the performance of the 3,000 largest U.S. companies based on total market capitalization). (3) The Merrill Lynch U.S. Corporate, Government & Mortgage Index, formerly the Merrill Lynch U.S. Domestic Master Index, is broad-based measure of the total rate of return performance of the U.S. investment-grade bond markets. The index is a capitalization-weighted aggregation of outstanding U.S. treasury, agency and supranational mortgage pass-through, and investment-grade corporate bonds meeting specified selection criteria. (4) Fund returns are calculated after fund level expenses have been subtracted, but do not include any separate account fees, charges or expenses imposed by the variable annuity and variable life insurance contracts that invest in the fund, as described in the Prospectus. If these fees, charges, or expenses were included, fund returns would have been lower. Fund returns also assume that dividends and capital gains are reinvested in additional shares of the fund. Investment return and principal value will fluctuate, so an investor's shares, when redeemed, may be worth more or less than when purchased. Further information relating to the fund's performance is contained in the Prospectus and elsewhere in this report. The fund's past performance is not indicative of future performance. Current performance may be lower or higher than the performance data cited. For fund performance data current to the most recent month-end, please call 1-800-798-5500. Indices are unmanaged and investors cannot invest in them directly. Index returns do not reflect fees or expenses. (5) The fund commenced investment operations on June 30, 2006. The since inception index returns are also from June 30, 2006. (6) MEMBERS Capital Advisors reduced its management fee for the Conservative Allocation Fund from June 30, 2006 through April 30, 2008. If the management fee had not been reduced, returns would have been lower. - -------------------------------------------------------------------------------- 3 ================================================================================ MODERATE ALLOCATION FUND PERFORMANCE REVIEW - -------------------------------------------------------------------------------- PERFORMANCE AND ECONOMIC & MARKET REVIEW For the twelve month period ended December 31, 2008, the Ultra Series Moderate Allocation Fund returned -30.23%, underperforming the Moderate Allocation Custom Index return of -22.92%, outperforming the Russell 1000(R) Index return of - -37.60% and underperforming the Morningstar Insurance Fund Moderate Allocation category average return of -28.03%. With every major equity and fixed income asset class (except government-backed paper and cash) dropping in unison as a result of the ongoing financial crisis, the long-term benefits of asset allocation went unrealized this year. There was truly no where to turn for protection in these declining markets. PORTFOLIO REVIEW One asset class that held up nicely during the financial crisis was high-quality government bonds. Investors sought out the safety of the full faith and credit of the U.S. Government, rallying the U.S. Treasury market and benefiting the portfolio accordingly. On the corporate bond side, both investment-grade and non-investment grade (high yield) bonds performed poorly due to the frozen credit markets. Normally staid investment-grade corporate bonds funds were hit with substantial price declines, as interest rate spreads between U.S. Treasuries widened to some of the highest levels ever recorded. High Yield Bonds, as measured by the Merrill Lynch U.S. High Yield Master II Index returned - -26.39% over the past year. Intermediate-term investment grade bonds are also down -- with the Barclays Capital U.S. Intermediate-Term Credit Index off - -2.76%. The portfolio's diversified equity funds had the largest negative impact on the fund's return. As mentioned above, major equity markets the world over all experienced significant price declines. No equity asset class was spared. The deleveraging process accelerated in the capital markets, with institutional and hedge fund investors being forced to unwind their leveraged positions to raise liquidity. The resulting heavy selling placed tremendous downward pressure on equity prices. The Russell 3000(R) Index returned -37.31% for the year. International and emerging market equities provided no relief, experiencing even steeper declines, with the MSCI EAFE Index down -43.06% and the MSCI Emerging Markets Index down -53.18%. Additionally, the fund's exposure to energy and natural resources followed the dramatic rise and fall of oil and other industrial metals prices. Returns for the sector were enhanced during oil's dramatic rise to $147 a barrel. Subsequently, returns suffered when oil dropped back down just as rapidly to under $40 per barrel. ECONOMIC & MARKET OUTLOOK As painful as 2008 was, the year did manage to end on a high note. After bottoming out in late November, equities rallied significantly throughout December. Bonds also posted nice gains in the final five weeks of the year. Unfortunately, we expect the heightened market volatility of the past several months to persist into 2009. Until the credit markets unfreeze, and the overall deleveraging process is substantially complete, the markets will remain unsettled. However, with volatility comes opportunity, and we plan to take advantage of historically low prices in certain asset classes, with corporate bonds being at the top of the list. With yield spreads at record highs, we believe investors are being more than adequately compensated for holding both investment and non-investment grade corporate bonds. Pending any further deterioration in the credit markets, we intend to opportunistically increase our positions in these asset classes over the coming year. We expect equities to be attractively priced on both a historical absolute basis and relative basis vs. U.S. Treasuries. Once the market completes a bottoming process, we plan to selectively purchase equities in an effort to rebalance the portfolio back to its targeted stock/bond allocation. Moving forward, we will continue to employ caution in our overall asset allocation strategies within the fund while awaiting more positive economic news. At the same time we stand ready to capitalize on the aforementioned opportunities in 2009. MEMBERS Capital Advisors, Inc. - Adviser David M. Schlimgen, CIMA(R), CIMC(R), And Patrick F. Ryan, CIMA(R), Portfolio Managers - -------------------------------------------------------------------------------- 4 ================================================================================ MODERATE ALLOCATION FUND PERFORMANCE REVIEW - -------------------------------------------------------------------------------- CUMULATIVE PERFORMANCE OF $10,000 INVESTMENT SINCE INCEPTION(1,4,6) [CHART OF CUMULATIVE PERFORMANCE]
Moderate Moderate Allocation Allocation Fund Fund Custom Index(2) Russell 1000(R) Index(3) 6/30/2006 $10,000 $10,000 $10,000 12/31/2006 10,987 10,976 11,216 12/31/2007 11,598 11,688 11,864 12/31/2008 8,092 9,010 7,403
[END CHART]
- --------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN THROUGH DECEMBER 31, 2008(4,6) Annual Expense 1 Year Since Inception(5) Ratio ------------------------------ ------- MODERATE ALLOCATION FUND -30.23% -8.10% 1.18% Moderate Allocation Fund Custom Index(2) -22.92 -4.07 NA Russell 1000(R) Index(3) -37.60 -11.29 NA - ---------------------------------------------------------------------------------------------------------
NA Not Applicable. Index returns do not reflect fees or expenses. (1) This chart compares a $10,000 investment made in the fund to a $10,000 investment made in the securities that make up the index. (2) The Moderate Allocation Fund Custom Index consists of 50% Russell 3000(R) Index, 30% Merrill Lynch U.S. Corporate, Government & Mortgage Index, 10% MSCI EAFE Index and 10% 90-Day U.S. Treasury Bills. A description of the Russell 3000(R) Index is set forth below. The Merrill Lynch U.S. Corporate, Government & Mortgage Index, formerly the Merrill Lynch U.S. Domestic Master Index, is a broad-based measure of the total rate of return performance of the U.S. investment-grade bond markets. The index is a capitalization-weighted aggregation of outstanding U.S. treasury, agency and supranational mortgage pass-through, and investment-grade corporate bonds meeting specified selection criteria. The MSCI EAFE (Europe, Australasia & Far East) Index is a free float-adjusted market capitalization index that is designed to measure developed market equity performance, excluding the U.S. and Canada. (3) The Russell 1000(R) Index is a large-cap market index which measures the performance of the 1,000 largest companies in the Russell 3000(R) Index (the Russell 3000(R) Index measures the performance of the 3,000 largest U.S. companies based on total market capitalization). (4) Fund returns are calculated after fund level expenses have been subtracted, but do not include any separate account fees, charges or expenses imposed by the variable annuity and variable life insurance contracts that invest in the fund, as described in the Prospectus. If these fees, charges, or expenses were included, fund returns would have been lower. Fund returns also assume that dividends and capital gains are reinvested in additional shares of the fund. Investment return and principal value will fluctuate, so an investor's shares, when redeemed, may be worth more or less than when purchased. Further information relating to the fund's performance is contained in the Prospectus and elsewhere in this report. The fund's past performance is not indicative of future performance. Current performance may be lower or higher than the performance data cited. For fund performance data current to the most recent month-end, please call 1-800-798-5500. Indices are unmanaged and investors cannot invest in them directly. Index returns do not reflect fees or expenses. (5) The fund commenced investment operations on June 30, 2006. The since inception index returns are also from June 30, 2006. (6) MEMBERS Capital Advisors reduced its management fee for the Moderate Allocation Fund from June 30, 2006 through April 30, 2008. If the management fee had not been reduced, returns would have been lower. - -------------------------------------------------------------------------------- 5 ================================================================================ AGGRESSIVE ALLOCATION FUND PERFORMANCE REVIEW - -------------------------------------------------------------------------------- PERFORMANCE AND ECONOMIC & MARKET REVIEW For the twelve month period ended December 31, 2008, the Ultra Series Aggressive Allocation Fund returned -41.09%, underperforming the Aggressive Allocation Custom Index return of -39.49%, the Russell 3000(R) Index return of -37.31, and the Morningstar Insurance Fund Large Blend category average return of -37.64. With every major equity and fixed income asset class (except government-backed paper and cash) dropping in unison as a result of the ongoing financial crisis, the long-term benefits of asset allocation have gone unrealized this year. There was truly no where to turn for protection in these declining markets - especially in an aggressive allocation fund, with equity-based asset classes making up nearly all of the portfolio. PORTFOLIO REVIEW As mentioned above, major equity markets the world over all experienced significant price declines. No equity asset class was spared. The deleveraging process accelerated in the capital markets, with institutional and hedge fund investors being forced to unwind their leveraged positions to raise liquidity. The resulting heavy selling placed tremendous downward pressure on equity prices. The Russell 3000(R) Index returned -37.31% for the year. International and emerging market equities provided no relief, experiencing even steeper declines, with the MSCI EAFE Index down -43.06% and the MSCI Emerging Markets Index down -53.18%. Additionally, the fund's exposure to energy and natural resources followed the dramatic rise and fall of oil and other industrial metals prices. Returns for the sector were enhanced during oil's dramatic rise to $147 a barrel. Subsequently, returns suffered when oil dropped back down just as rapidly to under $40 per barrel. The lone bright spot was our small cap value position. Contrary to the consensus opinion that large caps would lead the way in 2008, small cap value stocks outperformed large caps on a relative basis, with the Russell 2000(R) Value Index down -28.92% for the year. ECONOMIC & MARKET OUTLOOK As painful as 2008 was, the year did manage to end on a high note. After bottoming out in late November, equities rallied significantly throughout December. Bonds also posted nice gains in the final five weeks of the year. Unfortunately, we expect the heightened market volatility of the past several months to persist into 2009. Until the credit markets unfreeze, and the overall deleveraging process is substantially complete, the markets will remain unsettled. However, with volatility comes opportunity, and we plan to take advantage of historically low prices in certain asset classes, with corporate bonds being at the top of the list. With yield spreads at record highs, we believe investors are being more than adequately compensated for holding both investment and non-investment grade corporate bonds. Pending any further deterioration in the credit markets, we intend to opportunistically increase our positions in these asset classes over the coming year. We expect equities to be attractively priced on both a historical absolute basis and relative basis vs. U.S. Treasuries. Once the market completes a bottoming process, we plan to selectively purchase equities to slowly increase the risk profile of the portfolio. Moving forward, we will continue to employ caution in our overall asset allocation strategies within the fund while awaiting more positive economic news. At the same time we stand ready to capitalize on the aforementioned opportunities in 2009. MEMBERS Capital Advisors, Inc. - Adviser David M. Schlimgen, CIMA(R), CIMC(R) and Patrick F. Ryan, CIMA(R), Portfolio Managers - -------------------------------------------------------------------------------- 6 ================================================================================ AGGRESSIVE ALLOCATION FUND PERFORMANCE REVIEW - -------------------------------------------------------------------------------- CUMULATIVE PERFORMANCE OF $10,000 INVESTMENT SINCE INCEPTION(1,4,6) [CHART OF CUMULATIVE PERFORMANCE]
Aggressive Aggressive Allocation Fund Russell 3000(R) Allocation Fund Custom Index(2) Index(3) 6/30/2006 $10,000 $10,000 $10,000 12/31/2006 11,249 11,467 11,206 12/31/2007 12,115 12,435 11,782 12/31/2008 7,137 7,524 7,386
[END CHART]
- --------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN THROUGH DECEMBER 31, 2008(4,6) Annual Expense 1 Year Since Inception(5) Ratio ------------------------------ ------- AGGRESSIVE ALLOCATION FUND -41.09% -12.60% 1.37% Aggressive Allocation Fund Custom Index(2) -39.49 -10.72 NA Russell 3000(R) Index(3) -37.31 -11.37 NA - ---------------------------------------------------------------------------------------------------------
NA Not Applicable. Index returns do not reflect fees or expenses. (1) This chart compares a $10,000 investment made in the fund to a $10,000 investment made in the securities that make up the index. (2) The Aggressive Allocation Fund Custom Index consists of 55% Russell 1000(R) Index, 22% MSCI EAFE Index, 15% Russell 2000(R) Index, and 8% MSCI Emerging Markets Index. The Russell 1000(R) Index is a large-cap market index which measures the performance of the 1,000 largest companies in the Russell 3000(R) Index (see definition below). The Russell 2000(R) Index is a small-cap market index which measures the performance of the remaining 2,000 companies in the Russell 3000(R) Index. The MSCI EAFE (Europe, Australasia & Far East) Index is a free float-adjusted market capitalization index that is designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a free-float adjusted market capitalization index that measures equity performance in global emerging markets. (3) The Russell 3000(R) Index measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents 98% of the investable U.S. equity market. (4) Fund returns are calculated after fund level expenses have been subtracted, but do not include any separate account fees, charges or expenses imposed by the variable annuity and variable life insurance contracts that invest in the fund, as described in the Prospectus. If these fees, charges, or expenses were included, fund returns would have been lower. Fund returns also assume that dividends and capital gains are reinvested in additional shares of the fund. Investment return and principal value will fluctuate, so an investor's shares, when redeemed, may be worth more or less than when purchased. Further information relating to the fund's performance is contained in the Prospectus and elsewhere in this report. The fund's past performance is not indicative of future performance. Current performance may be lower or higher than the performance data cited. For fund performance data current to the most recent month-end, please call 1-800-798-5500. Indices are unmanaged and investors cannot invest in them directly. Index returns do not reflect fees or expenses. (5) The fund commenced investment operations on June 30, 2006. The since inception index returns are also from June 30, 2006. (6) MEMBERS Capital Advisors reduced its management fee for the Aggressive Allocation Fund from June 30, 2006 through April 30, 2008. If the management fee had not been reduced, returns would have been lower. - -------------------------------------------------------------------------------- 7 ================================================================================ BOND FUND PERFORMANCE REVIEW - -------------------------------------------------------------------------------- PERFORMANCE REVIEW Over the twelve month period ended December 31, 2008, the broad bond market represented by the Merrill Lynch U.S. Corporate, Government & Mortgage Index returned 6.20% while the Ultra Series Bond Fund returned 2.86% and the Morningstar Insurance Fund Intermediate-Term Bond category average returned - -5.18%. ECONOMIC & MARKET REVIEW Over the period, the yield curve bull-steepened as the two-year U.S. Treasury rate fell by approximately 47 basis points more than the ten-year U.S. Treasury rate. Consistent with a flight to quality, all investment-grade and high-yield sectors posted negative excess returns relative to U.S. Treasury returns. Despite an overall negative tone to the prior twelve month period, April, May and December provided a reprieve from the carnage. April and May followed the Bear Stearns bailout and investors turned optimistic that government intervention would stem the contagion. Similarly, the December respite came, in part, to a new administration touting massive fiscal stimulus and the optimism that a new year brings. PORTFOLIO REVIEW Sector weighting was the single most important factor for fund performance versus both the index and peers. We remained underweight in agencies, mortgages and corporate bonds while holding outsized positions in U.S. Treasuries and cash relative to the index. We were also less invested in investment-grade and high-yield corporate bonds relative to our peers. Within the corporate sector, having relatively more exposure to the better performing subsectors in industrials and utilities while significantly underweighting the worst performing subsector, financials, contributed positively to performance. Overweighting asset-backed securities and commercial mortgage-backed securities was detrimental to performance over the period. Normally these sectors perform better than many other spread sectors when credit uncertainty arises. However, given the initial problems which arose in structured securities, this has not been the case. That being said, the decision to be in these sectors in lieu of investment-grade or high-yield corporate bonds was a good decision. Yield curve positioning over the period was neither an overwhelming positive nor negative for performance. On the plus side, we maintained a slightly concentrated holding structure around a targeted duration which benefited the fund as the yield curve steepened. However, overall fund duration was at times less than that of the index which was a negative for performance as interest rates declined. ECONOMIC & MARKET OUTLOOK The future remains uncertain with respect to the economy, financial markets, and government initiatives. As a result, we expect to maintain our defensive yet nimble posture. We plan to be net underweight the index in riskier asset classes, and overweight U.S. Treasury securities which have benefited from general risk aversion by many market participants. The U.S. Treasury securities also provide liquidity that enables us to take advantage of unique opportunities and leave us in a good position to add beaten-down assets should the market turn. MEMBERS Capital Advisors, Inc. - Adviser Dean "Jack" Call, D.B.A, CFA, Portfolio Manager - -------------------------------------------------------------------------------- 8 ================================================================================ BOND FUND PERFORMANCE REVIEW - -------------------------------------------------------------------------------- CUMULATIVE PERFORMANCE OF $10,000 INVESTMENT(1,3) [CHART OF CUMULATIVE PERFORMANCE]
Merrill Lynch U.S. Corporate, Bond Fund Government & Mortgage Index(2) 12/31/1998 $10,000 $10,000 12/31/1999 10,073 9,904 12/31/2000 10,890 11,066 12/31/2001 11,796 11,987 12/31/2002 12,804 13,235 12/31/2003 13,194 13,780 12/31/2004 13,638 14,378 12/31/2005 13,981 14,746 12/31/2006 14,541 15,384 12/31/2007 15,275 16,487 12/31/2008 15,712 17,510
[END CHART]
- ----------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN THROUGH DECEMBER 31, 2008(3) Annual Expense 1 Year 3 Years 5 Years 10 Years Ratio -------------------------------------------- ------- BOND FUND 2.86% 3.97% 3.56% 4.62% 0.56% Merrill Lynch U.S. Corporate, Government & Mortgage Index(2) 6.20 5.89 4.90 5.76 NA - -----------------------------------------------------------------------------------------------------------------------
NA Not Applicable. Index returns do not reflect fees or expenses. (1) This chart compares a $10,000 investment made in the fund to a $10,000 investment made in the securities that make up the index. (2) The Merrill Lynch U.S. Corporate, Government & Mortgage Index, formerly the Merrill Lynch U.S. Domestic Master Index, is a broad-based measure of the total rate of return performance of the U.S. investment-grade bond markets. The index is a capitalization-weighted aggregation of outstanding U.S. treasury, agency and supranational mortgage pass-through, and investment-grade corporate bonds meeting specified selection criteria. (3) Fund returns are calculated after fund level expenses have been subtracted, but do not include any separate account fees, charges or expenses imposed by the variable annuity and variable life insurance contracts that invest in the fund, as described in the Prospectus. If these fees, charges, or expenses were included, fund returns would have been lower. Fund returns also assume that dividends and capital gains are reinvested in additional shares of the fund. Investment return and principal value will fluctuate, so an investor's shares, when redeemed, may be worth more or less than when purchased. Further information relating to the fund's performance is contained in the Prospectus and elsewhere in this report. The fund's past performance is not indicative of future performance. Current performance may be lower or higher than the performance data cited. For fund performance data current to the most recent month-end, please call 1-800-798-5500. Indices are unmanaged and investors cannot invest in them directly. Index returns do not reflect fees or expenses. - -------------------------------------------------------------------------------- 9 ================================================================================ HIGH INCOME FUND PERFORMANCE REVIEW - -------------------------------------------------------------------------------- PERFORMANCE REVIEW For the twelve month period ended December 31, 2008, the Ultra Series High Income Fund returned -14.74%, outperforming both the Merrill Lynch U.S. High Yield Master II Constrained Index which returned -26.11% and the Morningstar Insurance Fund High Yield Bond category average which returned -27.25%. ECONOMIC & MARKET REVIEW The high-yield market ended 2008 on a high note for December. This positive month was in clear contrast to the market's brutal quarter and year-to-date performance. For the fourth quarter, the high-yield market returned -18.20% and produced a jaw-dropping -26.29% return for the year. In the market's previous worst year, high-yield bonds returned only -5.1% in 2000. The carnage in the high-yield market was also reflected in the average price of a bond, which plummeted from $92.86 at the end of 2007 to $61.15 at year end 2008. Meanwhile, yield spreads over 10-year U.S. Treasuries widened 1,220 bps to 1,812 bps in 2008, according to the Merrill Lynch High Yield Index. The market's strength in December was driven by optimism of an economic stimulus plan, short covering, and high cash levels. This improvement occurred on little volume due to the holiday calendar and many bonds were quoted up without actual trades taking place. The U.S. economic picture is bleak, with no clear signs of a recovery on the horizon. Plunging home values, sharply rising unemployment, overburdened consumers, and a retrenching industrial sector point to an extended economic contraction. The U.S. economy cannot recover without stable home prices. According to the S&P/Case-Shiller Home Price Index, the average home price declined by 18% over the 12 months ended in October 2008, including a 2.2% decrease in October alone. Even with 30-year fixed-rate mortgages averaging 5.01%, the lowest on record, home sales and prices have continued to slide. For the second consecutive month, none of the 20 cities represented in the S&P/Case-Shiller index posted a month-to-month increase. On a brighter note, housing values remained 58% higher than they were in 2000, on average. The job market seems to be the most grim indicator of the economic slump. The number of Americans collecting unemployment benefits surged to a 26-year high in December with a total of 4.6 million jobless claims. The U.S. lost 524,000 jobs in December. Approximately 2.6 million jobs vanished in 2008, the most since 1945. Clearly, consumer confidence and spending will continue to be adversely affected by the hemorrhaging of jobs. Indeed, the Conference Board's consumer confidence index fell to an all-time low of 38.0 in December from 44.7 in November and 90.6 at the end of December 2007. PORTFOLIO REVIEW Security selection was a primary contributor to the fund's outperformance for the period, particularly in the media/cable, support services, and technology sectors. The fund's underweight relative to the index and ultimately zero weighting in printing & publishing and building materials, and zero exposure to mortgage bank & thrifts, consumer/commercial/lease financing and real estate, positively contributed to returns for the period while an underweight position in automotive negatively impacted returns. During the period, CCC-rated bonds and deeply discounted bonds (i.e., bonds priced below $80) were the worst performing quality sectors within the overall market. The fund's underweight position and positive selection in these sectors was a significant contributor to the fund's outperformance for the reporting period. The fund outperformed by a wide margin in 2008 due to our conservative and disciplined investment philosophy. Accordingly, the fund will enter 2009 with a significantly more conservative credit profile than the overall high yield market. At end-of-period levels, the U.S. credit markets appeared to be discounting a much more severe recession than the U.S. equity markets. For instance, high-yield spreads were 67% higher than the spread levels set during the last U.S. recession. As such, the market had already discounted an expected sharp spike in default rates. Given the oversold condition of the high-yield market, we expect a significant allocation of new money to flow to this asset class over the near term, which should foster demand for existing bonds as well as help revitalize the new issue market. We expect the fund to continue to be positioned with the expectation that the U.S economy will experience a protracted and potentially severe recession. We have strategically minimized the portfolio's exposure to sectors that rely on consumer discretionary spending or that are exposed to the homebuilding or automotive sectors. Moreover, we have focused our investments on issuers that we believe have reasonable debt levels and flexibility within their capital structures to withstand a protracted economic downturn. - -------------------------------------------------------------------------------- 10 ================================================================================ HIGH INCOME FUND PERFORMANCE REVIEW - -------------------------------------------------------------------------------- ECONOMIC & MARKET OUTLOOK On a historical basis, corporate credits appear to be a bargain. Consequently, many investors are looking for the storm to subside in the second half of 2009 and have started to commit funds to capitalize on distressed prices and attractive yields. We believe the U.S. economy has not yet hit the bottom of the current cycle. There is no doubt that this recession will be the worst of the last 70 years. The biggest problem confronting the economy is: what will be the growth drivers for the private sector? In previous downturns, rebuilding of inventories, new home construction, job growth and consumer spending fueled an economic rebound. However, these drivers do not appear likely any time in the foreseeable future. Only unprecedented government spending and a super-accommodative monetary policy are available to drive growth. From our perspective, an eventual economic recovery is likely to be shallow and anemic, without any real momentum until mid-2010 or 2011. U.S. deficit spending could reach 27% of GDP, suggesting to us that the nation is likely to enter a very slow-growth era in which government policies will favor consumers over businesses, which signifies a failure to recognize that businesses are not the problem but the solution. The high yield and bank loan markets are at a crossroads. On one hand, the market already has discounted a sharp spike in default rates. On the other hand, a significant allocation of new money to high yield securities may revitalize the new issue market. In any snap-back rally, the technical drivers usually overtake credit fundamentals, and new money typically gravitates toward lower dollar-price issues. Moreover, in euphoric markets, investors and traders purchase the largest and most liquid issues with little consideration of their creditworthiness. However, this is a tricky strategy due to the likelihood of higher defaults over the next two years, as possibly two out of every 10 high yield companies may default. In our judgment, strong analytical skills are a prerequisite for navigating around unexpected credit problems. One should never forget the difference between investing and gambling in risky, leveraged credits! We see both opportunities and challenges in 2009. Opportunities may be derived from the severity of last year's correction, while challenges are presented by an embattled economy. The biggest challenge will be to find the right risk-adjusted opportunities. Eventually, this storm will pass, and investors who have insight, patience and discipline should be the beneficiaries of staying the course while others are rudderless. MEMBERS Capital Advisors, Inc. - Adviser Shenkman Capital Management, Inc. - Subadviser Mark R. Shenkman; Frank X. Whitley; Mark J. Flanagan, CPA, CFA, Portfolio Managers - -------------------------------------------------------------------------------- 11 ================================================================================ HIGH INCOME FUND PERFORMANCE REVIEW - -------------------------------------------------------------------------------- CUMULATIVE PERFORMANCE OF $10,000 INVESTMENT SINCE INCEPTION(1,4) [CHART OF CUMULATIVE PERFORMANCE]
Merrill Lynch U.S. High Yield Merrill Lynch U.S. High High Income Fund Master II Constrained Index(2) Yield Master II Index(3) 10/31/2000 $10,000 $10,000 $10,000 12/31/2000 9,997 9,797 9,796 12/31/2001 10,342 10,236 10,235 12/31/2002 10,659 10,182 10,041 12/31/2003 12,628 13,030 12,867 12/31/2004 13,755 14,446 14,266 12/31/2005 14,100 14,847 14,657 12/31/2006 15,376 16,444 16,382 12/31/2007 15,727 16,861 16,741 12/31/2008 13,409 12,459 12,323
[END CHART]
- --------------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN THROUGH DECEMBER 31, 2008(4) Annual Expense 1 Year 3 Years 5 Years Since Inception(5) Ratio ------------------------------------------------------ ------- HIGH INCOME FUND -14.74% -1.66% 1.21% 3.66% 0.76% Merrill Lynch U.S. High Yield Master II Constrained Index(2) -26.11 -5.67 -0.89 2.73 NA Merrill Lynch U.S. High Yield Master II Index(3) -26.39 -5.61 -0.86 2.59 NA - ----------------------------------------------------------------------------------------------------------------------------------
NA Not Applicable. Index returns do not reflect fees or expenses. (1) This chart compares a $10,000 investment made in the fund to a $10,000 investment made in the securities that make up the index. (2) Effective May 2008, the benchmark for the fund changed from the Merrill Lynch U.S. High Yield Master II Index to the Merrill Lynch U.S. High Yield Master II Constrained Index to better reflect the fund's portfolio. The Merrill Lynch U.S. High Yield Master II Constrained Index tracks the performance of below investment grade U.S. dollar denominated corporate bonds publicly issued in the U.S. domestic market, but limits any individual issuer to a maximum weighting of 2%. (3) The Merrill Lynch U.S. High Yield Master II Index tracks the performance of below-investment-grade U.S. dollar denominated corporate bonds publicly issued in the U.S. domestic market. (4) Fund returns are calculated after fund level expenses have been subtracted, but do not include any separate account fees, charges or expenses imposed by the variable annuity and variable life insurance contracts that invest in the fund, as described in the Prospectus. If these fees, charges, or expenses were included, fund returns would have been lower. Fund returns also assume that dividends and capital gains are reinvested in additional shares of the fund. Investment return and principal value will fluctuate, so an investor's shares, when redeemed, may be worth more or less than when purchased. Further information relating to the fund's performance is contained in the Prospectus and elsewhere in this report. The fund's past performance is not indicative of future performance. Current performance may be lower or higher than the performance data cited. For fund performance data current to the most recent month-end, please call 1-800-798-5500. Indices are unmanaged and investors cannot invest in them directly. Index returns do not reflect fees or expenses. (5) The fund commenced investment operations on October 31, 2000. The since inception index returns are also from October 31, 2000. - -------------------------------------------------------------------------------- 12 ================================================================================ DIVERSIFIED INCOME FUND PERFORMANCE REVIEW - -------------------------------------------------------------------------------- PERFORMANCE REVIEW For the twelve month period ended December 31, 2008, the Ultra Series Diversified Income Fund returned -13.25% while the Russell 1000(R) Index returned -37.60%, the Merrill Lynch U.S. Corporate, Government & Mortgage Index returned 6.20%, and the Morningstar Insurance Fund Moderate Allocation category average returned -28.03%. Of the sectors within the stock portfolio, financials contributed to performance due primarily to our more conservative stock selection, and partly due to being underweight the index. Also adding was stock selection in utilities, although an underweight position relative to the index detracted from performance. Also hurting performance within consumer discretionary was an underweight position in one of last year's best performing large cap stocks, McDonald's. ECONOMIC & MARKET REVIEW The U.S. economy entered into a recession in December 2007, and remained in recession during 2008. The stock market as measured by the S&P 500 Index started 2008 by falling -6.0% in January, and never was in positive return territory during the year. The steepest portion of the decline came in two months, from September 19 to November 20, when the S&P 500 fell from 1,255 to 752, or 40%. From November 20 to year end, the S&P 500 moved back up to 903, or by +20%, ending the year on a positive note. Also over the period, the yield curve bull-steepened as the two-year U.S. Treasury rate fell by approximately 47 basis points more than the ten-year U.S. Treasury rate. Consistent with a flight to quality, all investment-grade and high-yield sectors posted negative excess returns relative to U.S. Treasury returns. Despite an overall negative tone to the prior twelve month period, April, May and December provided a reprieve from the carnage. April and May followed the Bear Stearns bailout and investors turned optimistic that government intervention would stem the contagion. Similarly, the December respite came, in part, to a new administration touting massive fiscal stimulus and the optimism that a new year brings. PORTFOLIO REVIEW Within the stock portion of the fund, portfolio turnover started the year in a normal steady fashion, and accelerated rapidly during the fourth quarter when the steep market decline presented many buying and selling opportunities. Early in 2008, we initiated positions in a diverse group of stocks, including the steel-maker Nucor, Pepsi, and Waste Management. During the fourth quarter as activity picked up, we eliminated our holdings in Carnival Cruise, Harley Davidson, Anheuser Busch, Hartford, Prologis, Waste Management, Dow Chemical, Freeport McMoran, and Embarq. We bought numerous new stocks in the fourth quarter, including Stanley Works, VF Corp, Avon, Allstate, Boeing, Emerson Electric, Honeywell, Illinois Tool Works, Northrop, Molex, Air Products, Alcoa, and Public Services Group. The high pace of new names added into the portfolio is likely to slow substantially should the market return to a more normal phase of price movement. Within the bond portion of the fund, sector weighting was the single most important factor for fund performance versus both the index and peers. We remained underweight in agencies, mortgages and corporate bonds while holding outsized positions in U.S. Treasuries and cash relative to the index. We were also less invested in investment-grade and high-yield corporate bonds relative to our peers. Within the corporate sector, having relatively more exposure to the better performing sub sectors in industrials and utilities while significantly underweighting the worst performing sub sector, financials, contributed positively to performance. Overweighting asset-backed securities and commercial mortgage-backed securities was detrimental to performance over the period. Normally these sectors perform better than many other spread sectors when credit uncertainty arises. However, given the initial problems which arose in structured securities, this has not been the case. That being said, the decision to be in these sectors in lieu of investment-grade or high-yield corporate bonds was a good decision based upon the relative outperformance that was generated. REVIEW OF TOP TEN HOLDINGS Our top ten holdings for the stock allocation by average weight during 2008 were 5.6% Johnson & Johnson, 4.8% GE, 4.7% Chevron, 4.5% AT&T, 4.1% Pfizer, 3.8% JP Morgan, 3.7% Bank of America, 3.6% Wells Fargo, 3.3% US Bancorp, and 2.7% Verizon. The top ten averaged just over 40% of the stock portfolio weight during the period. Performance of the top ten added +0.43% in total, including +0.37% US Bancorp and +0.23% Wells Fargo, while GE detracted by -0.17% and Verizon by - -0.09%. ECONOMIC & MARKET OUTLOOK Stocks normally rally off the bottom at midpoint during recessions, with recessions usually lasting a year to a year and a half. The current recession is already over one year old, so we believe there is some chance that we have passed the midpoint of this recession, and stocks could eventually begin a new bull market. However, for the stock portion of the fund, we expect to focus our investments in companies with stronger balance sheets due to the current difficult funding environment and - -------------------------------------------------------------------------------- 13 ================================================================================ DIVERSIFIED INCOME FUND PERFORMANCE REVIEW - -------------------------------------------------------------------------------- high level of debt in the U.S. economy. Our stock portfolio positioning as we enter 2009 is fairly conservative, although we expect to move into more economically sensitive stocks as the recognition that we have been in a recession for over a year depresses the stock valuations of cyclical stocks to very attractive levels. Versus our index, we expect the stock portfolio to remain overweight in health care, materials, and consumer staples, and we plan to close the underweight in industrials. In addition, the stock portfolio is underweight in financials and utilities. However, given the rich valuation of utilities, we question whether they will act defensively going forward and are concerned they may perform poorly if U.S. Treasury Bond yields return to more normal (higher) levels. The future remains uncertain with respect to the economy, financial markets, and government initiatives. As a result, we expect to maintain our defensive yet nimble posture. We plan to be net underweight the index in riskier asset classes, and overweight U.S. Treasury securities which have benefited from general risk aversion by many market participants. The U.S. Treasury securities also provide liquidity that enables us to take advantage of unique opportunities and leave us in a good position to add beaten-down assets should the market turn. MEMBERS Capital Advisors, Inc. - Adviser John H. Brown, CFA; and Dean "Jack" Call, D.B.A, CFA, Portfolio Managers - -------------------------------------------------------------------------------- 14 ================================================================================ DIVERSIFIED INCOME FUND PERFORMANCE REVIEW - -------------------------------------------------------------------------------- CUMULATIVE PERFORMANCE OF $10,000 INVESTMENT(1,4) [CHART OF CUMULATIVE PERFORMANCE]
Diversified Russell 1000(R) Merrill Lynch U.S. Corporate, Income Fund Index(2) Government & Mortgage Index(3) 12/31/1998 $10,000 $10,000 $10,000 12/31/1999 11,449 12,091 9,904 12/31/2000 11,890 11,149 11,066 12/31/2001 11,526 9,761 11,987 12/31/2002 10,243 7,648 13,235 12/31/2003 11,965 9,934 13,780 12/31/2004 12,963 11,066 14,378 12/31/2005 13,468 11,760 14,746 12/31/2006 14,811 13,578 15,384 12/31/2007 15,182 14,362 16,487 12/31/2008 13,171 8,962 17,510
[END CHART]
- ------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN THROUGH DECEMBER 31, 2008(4) Annual Expense 1 Year 3 Years 5 Years 10 Years Ratio --------------------------------------------- ------- DIVERSIFIED INCOME FUND -13.25% -0.74% 1.94% 2.79% 0.71% Russell 1000(R) Index(2) -37.60 -8.66 -2.04 -1.09 NA Merrill Lynch U.S. Corporate, Government & Mortgage Index(3) 6.20 5.89 4.90 5.76 NA - -------------------------------------------------------------------------------------------------------------------------
NA Not Applicable. Index returns do not reflect fees or expenses. (1) This chart compares a $10,000 investment made in the fund to a $10,000 investment made in the securities that make up the index. (2) The Russell 1000(R) Index is a large-cap market index which measures the performance of the 1,000 largest companies in the Russell 3000(R) Index (the Russell 3000(R) Index measures the performance of the 3,000 largest U.S. companies based on total market capitalization). (3) The Merrill Lynch U.S. Corporate, Government & Mortgage Index, formerly the Merrill Lynch U.S. Domestic Master Index, is a broad-based measure of the total rate of return performance of the U.S. investment-grade bond markets. The index is a capitalization-weighted aggregation of outstanding U.S. treasury, agency and supranational mortgage pass-through, and investment-grade corporate bonds meeting specified selection criteria. (4) Fund returns are calculated after fund level expenses have been subtracted, but do not include any separate account fees, charges or expenses imposed by the variable annuity and variable life insurance contracts that invest in the fund, as described in the Prospectus. If these fees, charges, or expenses were included, fund returns would have been lower. Fund returns also assume that dividends and capital gains are reinvested in additional shares of the fund. Investment return and principal value will fluctuate, so an investor's shares, when redeemed, may be worth more or less than when purchased. Further information relating to the fund's performance is contained in the Prospectus and elsewhere in this report. The fund's past performance is not indicative of future performance. Current performance may be lower or higher than the performance data cited. For fund performance data current to the most recent month-end, please call 1-800-798-5500. Indices are unmanaged and investors cannot invest in them directly. Index returns do not reflect fees or expenses. - -------------------------------------------------------------------------------- 15 ================================================================================ LARGE CAP VALUE FUND PERFORMANCE REVIEW - -------------------------------------------------------------------------------- PERFORMANCE AND ECONOMIC & MARKET REVIEW The Ultra Series Large Cap Value Fund experienced a return of -35.99% for the year, outperforming the Russell 1000(R) Value Index which returned -36.85% and the Morningstar Insurance Fund Large Value category average which returned - -37.19%. These extraordinary negative returns were the result of a severe bear market brought on by the financial crisis, a global economic slowdown, and a continuing drop in corporate profitability and earnings expectations. We began to see signs of widespread weakness in mid 2007 and positioned the fund in a defensive manner. We entered this year with an underweight relative to the index in financials and maintained an underweight position most of the year, expecting the credit crisis to produce losses greater than the market appeared to anticipate. Conversely, the fund was overweight the consumer staples sector. Staples include products that consumers purchase and use frequently, meaning sales and profits hold up reasonably well in a recession. Both of these strategic positions benefited the fund this year, as the consumer staples sector was the best performing sector by a wide margin (down "only" -17%) while financial stocks were the worst performers returning approximately -52%. PORTFOLIO REVIEW Stock selection was generally positive for the year. Within consumer staples, the fund benefited from owning Wal-Mart as consumers traded down their spending habits in a weakening economy. The fund also saw outperformance from its holdings in Heinz, Kellogg and General Mills well ahead of the index. Overweight positions relative to the index in Proctor & Gamble, Johnson & Johnson and Clorox performed a similar role in the consumer products space. Within financials, our preference for high quality, lower credit risk companies was rewarded as significant holdings in strong banks such as Wells Fargo, US Bancorp and BB&T each outperformed the sector by more than 30%. We did suffer negative return contributions from some credit exposed financial stocks such as Lehman Brothers, XL Capital and Prudential. In these cases, the value of the firm's balance sheet assets came into question and led to significant stock declines. We also saw negative return contributions from commodity stocks Alcoa and Freeport McMoRan Copper as we underestimated the speed and severity of the global economic slowdown which translated into a rapid decline in the price of raw materials. REVIEW OF TOP TEN HOLDINGS As of year end, the top ten active overweight positions relative to the fund's index were Wal-Mart, Travelers, MetLife, Waste Management, Johnson & Johnson, US Bancorp, IBM, Target, Public Service Enterprise Group, and Sempra Energy. Although they represent different sectors, these companies share the common traits of being high quality, well managed, more defensive businesses that are leaders in their industry that should perform relatively well in an economic slowdown. ECONOMIC AND MARKET OUTLOOK As we exit year end 2008, the fund remains defensively positioned. We foresee continued economic distress throughout the developed world and expect the economic and profits recession to last well into 2009. We also expect to remain tilted toward higher quality financial companies, but plan to reduce our underweight relative to the index in that sector on the belief that government programs and policies will lead to a stabilized financial system in the next year. Furthermore, many valuation indicators we monitor suggest that stocks are selling at below average prices, so we expect to direct a portion of our research efforts toward identifying currently depressed companies that may offer better than average return potential in an eventual recovery scenario that may favor more cyclical opportunities. MEMBERS Capital Advisors, Inc. - Adviser Scott D. Opsal, CFA, Portfolio Manager - -------------------------------------------------------------------------------- 16 ================================================================================ LARGE CAP VALUE FUND PERFORMANCE REVIEW - -------------------------------------------------------------------------------- CUMULATIVE PERFORMANCE OF $10,000 INVESTMENT(1,3) [CHART OF CUMULATIVE PERFORMANCE]
Large Cap Value Fund Russell 1000(R) Value Index(2) 12/31/1998 $10,000 $10,000 12/31/1999 11,795 10,735 12/31/2000 11,891 11,488 12/31/2001 10,618 10,846 12/31/2002 8,331 9,162 12/31/2003 10,487 11,913 12/31/2004 11,790 13,879 12/31/2005 12,448 14,857 12/31/2006 15,007 18,163 12/31/2007 15,096 18,131 12/31/2008 9,663 11,450
[END CHART]
- ------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN THROUGH DECEMBER 31, 2008(3) Annual Expense 1 Year 3 Years 5 Years 10 Years Ratio --------------------------------------------- ------- LARGE CAP VALUE FUND -35.99% -8.10% -1.62% -0.34% 0.61% Russell 1000(R) Value Index(2) -36.85 -8.32 -0.79 1.36 NA - -------------------------------------------------------------------------------------------------------------------------
NA Not Applicable. Index returns do not reflect fees or expenses. (1) This chart compares a $10,000 investment made in the fund to a $10,000 investment made in the securities that make up the index. (2) The Russell 1000(R) Value Index is a large-cap market index which measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. (3) Fund returns are calculated after fund level expenses have been subtracted, but do not include any separate account fees, charges or expenses imposed by the variable annuity and variable life insurance contracts that invest in the fund, as described in the Prospectus. If these fees, charges, or expenses were included, fund returns would have been lower. Fund returns also assume that dividends and capital gains are reinvested in additional shares of the fund. Investment return and principal value will fluctuate, so an investor's shares, when redeemed, may be worth more or less than when purchased. Further information relating to the fund's performance is contained in the Prospectus and elsewhere in this report. The fund's past performance is not indicative of future performance. Current performance may be lower or higher than the performance data cited. For fund performance data current to the most recent month-end, please call 1-800-798-5500. Indices are unmanaged and investors cannot invest in them directly. Index returns do not reflect fees or expenses. - -------------------------------------------------------------------------------- 17 ================================================================================ LARGE CAP GROWTH FUND PERFORMANCE REVIEW - -------------------------------------------------------------------------------- PERFORMANCE REVIEW For the twelve month period ended December 31, 2008, the Ultra Series Large Cap Growth Fund outperformed its benchmark, the Russell 1000(R) Growth Index, by 1.24% despite extreme market volatility throughout the year. Brutal bear market conditions gripped virtually all financial asset classes, including equities. The Russell 1000(R) Growth Index returned -38.44% for the period and the Morningstar Insurance Fund Large Growth category average returned -41.67%, while the fund outperformed both and returned -37.20%. No active manager controls the markets; however we do strive to add incremental relative value each period. Sector emphasis on healthcare, energy, and technology aided performance, as did underweight positions relative to the index in consumer discretionary and utilities. Within the healthcare sector, we targeted biotechnology. Genentech, one of our top ten holdings, was up 23% during the year. Roche, its controlling shareholder, recognized its undervaluation by bidding for the remaining 44% of the company it does not own. Vertex, another top ten holding, is expected to have a first-to-market treatment for hepatitis C, a large chronic viral condition. The stock reacted favorably to this scientific breakthrough. Within energy, we are emphasizing natural gas stocks because we believe natural gas is undervalued versus crude oil. In addition, we believed this domestically produced clean fuel source will be preferred in the future. Winners in the natural gas production area were Petrohawk Energy and EOG Resources, both companies with excellent acreage positions for future development. Within technology, we benefited from owning Google, IBM, and Microchip Technologies. Google not only remained an innovative growth franchise, but like IBM and Microchip, had steady earnings prospects and a solid balance sheet. The most significant detractor from the fund's return relative to the index was its underweight in consumer staples stocks, traditionally a defensive group. While we did own Coca Cola, Wal-Mart, and Colgate to name a few, we believed other consumer staples stocks were too expensive compared to alternatives. ECONOMIC & MARKET REVIEW The market peaked in mid-October of 2007, then trended sideways to down in an orderly fashion until plummeting in September of 2008. In hindsight, the seizing up of the credit markets last August was a prescient event triggering massive deleveraging which ultimately drove the global economy into a deep recession. Because of the enormity of the scale of the credit bubble, an accurate prediction of the dimensions of its unwinding was elusive for most participants in any traded market. The economic effects from the peaking in credit were slow to develop because interest rates were low and global growth was robust, as reflected in the ensuing boom in commodities prices. For example, the price of crude oil was $90 per barrel on October 31, 2007 and did not peak until July of 2008 at $147 per barrel. This 50% increase bolstered investors' confidence that economic growth was more sustainable than it turned out to be. Concerns now have rapidly shifted from inflationary fears to capital preservation. We believe the global recession will be the worst in over 50 years. PORTFOLIO REVIEW During the period, we initiated significant positions in Petrohawk, Hologic, and Axis Capital during the year. Petrohawk is a prime beneficiary of a new unconventional natural gas field in the Haynesville formation in East Texas and Louisiana. Hologic is the leading provider of digital mammography screening equipment. Axis Capital is a property casualty re-insurer which will benefit from an expected incipient turn in the pricing cycle. Significant positions we sold out of during the year were Goldman Sachs, Harley Davidson, and Applied Materials. Goldman Sachs, a leading investment bank, was sold because its future profitability will likely be permanently lowered due to a reduction in the debt leverage used in its businesses. Harley Davidson motorcycles are highly discretionary purchases, and given the recession, further earnings deterioration is likely. Applied Materials is a semi-conductor equipment manufacturer which also has a solar division. While a promising technology, we believed its solar production will miss expectations for growth. REVIEW OF TOP TEN HOLDINGS The top ten holdings of the fund accounted for approximately 35% of portfolio assets, as our strategy is to concentrate fund assets toward our best ideas. We strongly believed sustainable global growth franchises, such as these top five holdings - -------------------------------------------------------------------------------- 18 ================================================================================ LARGE CAP GROWTH FUND PERFORMANCE REVIEW - -------------------------------------------------------------------------------- listed below, will likely reward shareholders over time. These companies have the balance sheet strength providing financial flexibility, are innovative, and sell into global markets. o Cisco Systems was selling as 12 times earnings, had $5 per share in cash, no debt, over 20% net income margins. o Google sold at 14 times earnings, had $45 per share in cash, no debt, over 20% net income margins. o Genentech was selling at 20 times earnings, had $5.50 per share in cash, low debt, over 20% net income margins. o Microsoft sold at 10 times earnings, had $2.50 per share in cash, no debt, over 20% net income margins. o IBM sold at 9 times earnings, had $7.25 per share in cash, had 30% debt to total capital, is estimated to generate over $9.00 per share in free cash flow this year, and 75% of its business is services and software with involvement in 150 different countries. We do not simply buy and hold stocks; instead we actively manage our top ten as drivers of portfolio performance. We believe different types of growth stocks will be successful holdings under different economic and market conditions. In 2008, we focused on high-quality companies. ECONOMIC & MARKET OUTLOOK The rapidity and breadth of the economic collapse stemming in part from poorly collateralized credit is stunning. Given the magnitude of the shock, it will likely take time to recover. Policy responses have been equally forceful and rapid, and we believe it is not a matter of "if" the massive government fiscal and monetary stimulus will turn things around, but rather "when". There is an old saying on Wall Street "Don't fight the Fed"; meaning once the Fed got involved in a situation, its will would ultimately prevail. Given that in this downturn, since not only is the Federal Reserve involved but so are U.S. Treasury, Congress, foreign central banks, and foreign governments, it will likely be true once again. We believe equities will be priced at very attractive levels. While the economic stress has caused earnings to deteriorate and induced some investors to sell, a portion of the decline in stock prices is due to forced selling of positions as the leverage in hedge funds and other entities is reduced. It is the latter that is creating opportunities. We believe that equity volatility will remain above average. This means that stock prices will likely have wide swings, both down and up. Therefore, we expect to buy favored issues such as our top ten holdings on dips and take profits when sentiment improves. The United States is at a cross roads. On one path are the "old" systems and attitudes which had developed over years of easy credit and overconfidence on the part of all economic participants. On the other path is a potential "re-engineered" country, which relatively quickly adapts its systems and attitudes to the new global economic order. Should we effectively be able to make this transition of re-aligning resources to solve legacy problems, we can retain global financial leadership. We believe the markets are currently debating the likelihood of which path we will take, and there are strong arguments on both sides of the aisle. We are positioned with a bias towards success in that transition, given current stock price levels and coordinated policy responses. MEMBERS Capital Advisors, Inc. - Adviser Bruce A. Ebel, CFA, CIC, CFP(R), Portfolio Manager - -------------------------------------------------------------------------------- 19 ================================================================================ LARGE CAP GROWTH FUND PERFORMANCE REVIEW - -------------------------------------------------------------------------------- CUMULATIVE PERFORMANCE OF $10,000 INVESTMENT(1,3) [CHART OF CUMULATIVE PERFORMANCE]
Large Cap Growth Fund Russell 1000(R) Growth Index(2) 12/31/1998 $10,000 $10,000 12/31/1999 12,519 13,316 12/31/2000 13,055 10,330 12/31/2001 11,866 8,220 12/31/2002 8,139 5,928 12/31/2003 10,510 7,692 12/31/2004 11,449 8,176 12/31/2005 11,726 8,606 12/31/2006 12,650 9,387 12/31/2007 14,214 10,496 12/31/2008 8,926 6,462
[END CHART]
- ------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN THROUGH DECEMBER 31, 2008(3) Annual Expense 1 Year 3 Years 5 Years 10 Years Ratio --------------------------------------------- ------- LARGE CAP GROWTH FUND -37.20% -8.69% -3.21% -1.13% 0.82% Russell 1000(R) Growth Index(2) -38.44 -9.11 -3.42 -4.27 NA - -------------------------------------------------------------------------------------------------------------------------
NA Not Applicable. Index returns do not reflect fees or expenses. (1) This chart compares a $10,000 investment made in the fund to a $10,000 investment made in the securities that make up the index. (2) The Russell 1000(R) Growth Index is a large-cap market index which measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. (3) Fund returns are calculated after fund level expenses have been subtracted, but do not include any separate account fees, charges or expenses imposed by the variable annuity and variable life insurance contracts that invest in the fund, as described in the Prospectus. If these fees, charges, or expenses were included, fund returns would have been lower. Fund returns also assume that dividends and capital gains are reinvested in additional shares of the fund. Investment return and principal value will fluctuate, so an investor's shares, when redeemed, may be worth more or less than when purchased. Further information relating to the fund's performance is contained in the Prospectus and elsewhere in this report. The fund's past performance is not indicative of future performance. Current performance may be lower or higher than the performance data cited. For fund performance data current to the most recent month-end, please call 1-800-798-5500. Indices are unmanaged and investors cannot invest in them directly. Index returns do not reflect fees or expenses. - -------------------------------------------------------------------------------- 20 ================================================================================ MID CAP VALUE FUND PERFORMANCE REVIEW - -------------------------------------------------------------------------------- PERFORMANCE REVIEW For the twelve month period ended December 31, 2008, the Ultra Series Mid Cap Value Fund returned -36.45% compared with -38.44% for the Russell Midcap(R) Value Index and -37.24 for the Morningstar Insurance Fund Mid-Cap Value category average return of -37.24%. ECONOMIC & MARKET REVIEW The period was characterized by the ongoing bursting of the housing bubble that in turn morphed into a broad-based economic slow-down. Rising delinquencies in subprime mortgages began the downward spiral of house price declines, rising foreclosures, mark-downs in securitized bonds of every stripe, earnings losses for multiple financial institutions, and broad-based contagion across the global financial system. The next leg of that is appearing to manifest itself in a global economic slowdown that is negatively impacting consumer spending and in turn reducing manufacturing, sales, and services across all sectors as well as causing a sharp reversal in commodity prices including oil, metals, and gold. PORTFOLIO REVIEW The fund's segment managed by MEMBERS Capital Advisors, Inc. started off the year overweight relative to the index in both materials and energy believing that even with the economic slowdown in the U.S., the urbanization and expansion of emerging markets would sustain demand in metals, fertilizers, and energy. The fund was concurrently underweight relative to the index in financials due to the expanding problems of housing, and in consumer discretionary on the slowing economy and poor outlook for consumer spending. Defensive positions were held in health care and consumer staples. As the year unfolded, and particularly in the summer, the fund reversed course and reduced materials to underweight and energy to neutral relative to the index as it became clearer that the downdraft in the U.S. was affecting the global economy as well, and the demand for those products would not hold. For example, one of the fund's largest holdings during the year was The Mosaic Company, a fertilizer company, whose position was cut by two-thirds. Similarly, the fund reduced positions in metal companies Nucor Corporation and Freeport-McMoRan. Within consumer discretionary, we virtually eliminated home builders from our holdings. And in financials, we expanded our underweight relative to the index within commercial banks and REITs while building our positions in better quality companies including BlackRock, Inc. and JPMorgan Chase & Co. For the year, the greatest positive contributions came from the fund's underweight relative to the index of consumer discretionary stocks based on our outlook for reduced consumer spending. Performance was also driven by stock selection which was strongest in the consumer discretionary and consumer staples sectors. The fund also saw a large benefit from holding larger-than-normal cash reserves in a declining market. The greatest negatives came from holdings within energy and materials, both sectors that strongly outperformed in the early part of the fiscal year, but then sharply reversed beginning in mid-July 2008. Stock selection in the industrials and health care sectors also detracted from performance. For the segment of the fund subadvised by Wellington Management Company, LLP, the relative outperformance was driven by stock selection in the consumer discretionary, materials, and information technology sectors. Sector allocation, which is a fall-out of our bottom-up stock selections, also aided performance as an overweight relative to the index to industrials and to the defensive consumer staples sectors contributed positively to results. Stock selection in the industrials and health care sectors detracted from performance as did an overweight to consumer discretionary and an underweight of financials. Key individual contributors to relative performance were Whiting Petroleum (energy), O'Reilly Automotive (retailing), and Lance (food, beverage & tobacco). Detractors from relative performance during the period included Orthofix International (health care equipment & services), ACCO Brands (commercial & professional services), and Arbitron (media). REVIEW OF TOP TEN HOLDINGS The fund was not highly concentrated given our outlook for continued economic distress and the potential for negative surprises. The top ten holdings (including cash) accounted for only 17% of the portfolio with only half-dozen individual names over 100 basis points of relative overweight versus the index. The list is an eclectic group that focused on higher quality names with sound balance sheets and sustainable dividends; companies with some advantage in the current environment, and attractive valuation, including JPMorgan Chase & Co. and BlackRock, Inc.; TJX Companies, Inc., Costco Wholesale Corp., and Wal-Mart; Maxim Integrated Products Inc. and Hologic Inc. - -------------------------------------------------------------------------------- 21 ================================================================================ MID CAP VALUE FUND PERFORMANCE REVIEW - -------------------------------------------------------------------------------- ECONOMIC & MARKET OUTLOOK The markets already have severely corrected, but the timing of the ultimate bottom remains unknown. Still, we expect valuations to become more attractive, the Federal Reserve and U.S. Treasury have and are expected to continue to add stimulus and liquidity to financial markets, and the "oil tax" has been cut in half. The markets, therefore, have the makings for a recovery. As such, the fund is positioned to take advantage of those factors and has built a cash position to be ready to more aggressively add to holdings when appropriate. In addition, we anticipate the quality of the portfolio will continue to be upgraded as we swap companies with poorer outlooks and balance sheets for stronger competitors at bargain prices. MEMBERS Capital Advisors, Inc. - Adviser Livia S. Asher, Portfolio Manager Wellington Management Company, LLP - Subadviser Timothy J. Mccormack, CFA; Shaun F. Pedersen, Portfolio Managers - -------------------------------------------------------------------------------- 22 ================================================================================ MID CAP VALUE FUND PERFORMANCE REVIEW - -------------------------------------------------------------------------------- CUMULATIVE PERFORMANCE OF $10,000 INVESTMENT SINCE INCEPTION(1,3) [CHART OF CUMULATIVE PERFORMANCE]
Mid Cap Russell Midcap(R) Value Fund Value Index(2) 5/01/1999 $10,000 $10,000 12/31/1999 11,368 9,418 12/31/2000 14,079 11,224 12/31/2001 15,651 11,486 12/31/2002 12,926 10,378 12/31/2003 16,960 14,328 12/31/2004 19,651 17,725 12/31/2005 21,678 19,968 12/31/2006 25,355 24,004 12/31/2007 25,419 23,664 12/31/2008 16,155 14,566
[END CHART]
- ------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN THROUGH DECEMBER 31, 2008(3) Annual Expense 1 Year 3 Years 5 Years Since Inception(4) Ratio -------------------------------------------------------- --------- MID CAP VALUE FUND -36.45% -9.34% -0.97% 5.09% 1.02% Russell Midcap(R) Value Index(2) -38.44 -9.98 0.33 3.96 NA - -------------------------------------------------------------------------------------------------------------------------
NA Not Applicable. Index returns do not reflect fees or expenses. (1) This chart compares a $10,000 investment made in the fund to a $10,000 investment made in the securities that make up the index. (2) The Russell Midcap(R) Value Index is a mid-cap market index which measures the performance of those Russell Midcap companies with lower price-to-book ratios and lower forecasted growth values. (3) Fund returns are calculated after fund level expenses have been subtracted, but do not include any separate account fees, charges or expenses imposed by the variable annuity and variable life insurance contracts that invest in the fund, as described in the Prospectus. If these fees, charges, or expenses were included, fund returns would have been lower. Fund returns also assume that dividends and capital gains are reinvested in additional shares of the fund. Investment return and principal value will fluctuate, so an investor's shares, when redeemed, may be worth more or less than when purchased. Further information relating to the fund's performance is contained in the Prospectus and elsewhere in this report. The fund's past performance is not indicative of future performance. Current performance may be lower or higher than the performance data cited. For fund performance data current to the most recent month-end, please call 1-800-798-5500. Indices are unmanaged and investors cannot invest in them directly. Index returns do not reflect fees or expenses. (4) The fund commenced investment operations on May 1, 1999. The since inception index returns are also from May 1, 1999. - -------------------------------------------------------------------------------- 23 ================================================================================ MID CAP GROWTH FUND PERFORMANCE REVIEW - -------------------------------------------------------------------------------- PERFORMANCE REVIEW For the twelve month period ended December 31, 2008, the Ultra Series Mid Cap Growth Fund returned -46.89% while the Russell Midcap(R) Growth Index returned - -44.32% and the Morningstar Insurance Fund Mid-Cap Growth category average returned -45.02%. ECONOMIC & MARKET REVIEW During the year, most major indices suffered double-digit negative returns. Equity markets fell sharply amid a significant deterioration in both credit market conditions and investor confidence. Forced deleveraging by financial institutions triggered an unprecedented set of bank failures and mergers, significantly reshaping the global financial map. Impaired access to capital threatened to spill over into the real economy, reducing expectations for global growth and forcing energy and commodity prices sharply lower. Economic data reported during the most recent quarter provided little encouragement to investors, as housing, employment, and manufacturing metrics all trended downward. Within the Russell Midcap(R) Growth Index, all ten broad economic sectors posted double-digit negative returns with five falling in excess of 45%. PORTFOLIO REVIEW Stock selection in the industrials, health care, and consumer staples sectors detracted the most from relative performance. These negative results were partially offset by strong stock selection in the information technology and financials sectors. Though sector weights are a fall-out of bottom-up stock selection, our underweight relative to the index to the underperforming utilities sector and overweight to the defensive health care sector were positive contributors to relative returns. Key individual contributors to relative performance were Cephalon (pharma, biotech & life sciences), Perot Systems (software & services), and Hub Group (transportation). Shares of Cephalon, a Pennsylvania-based biopharmaceutical firm, moved higher after the company raised its fiscal year 2008 sales and earnings guidance and issued fiscal year 2009 earnings guidance above consensus estimates. Perot Systems, a worldwide provider of information technology services and business solutions, rallied as the company announced better-than-expected revenue and earnings for the second quarter. Shares of Hub Group, a freight transportation management company, increased as the company reported strong quarterly earnings during the year. International mining company Cliffs Natural Resources (formerly Cleveland-Cliffs), specialty retailer of automotive aftermarket parts and accessories O'Reilly Automotive, and oilfield service provider Complete Production Services were among the top contributors to absolute performance during the period. Detractors from relative performance included Coventry Health Care (health care equipment & services), Terex (capital goods), and Hercules Offshore (energy). Shares of Coventry Health Care, a diversified managed healthcare company, fell sharply after the company posted a significant decline in quarterly earnings hurt by charges on investment impairments, and lowered the midpoint of its full year earnings outlook. Terex, a global manufacturer of mining and building equipment, suffered from declining quarterly earnings and a reduced full-year outlook, and the subsequent removal from the S&P 500 Index. Shares of Hercules Offshore, provider of shallow-water drilling and marine services to the oil and natural gas exploration & production industry, fell after the company reported second quarter earnings that were weaker-than-expected, hurt by a steep escalation in costs and expenses. Atwood Oceanics was among the names detracting from absolute returns during the period. ECONOMIC & MARKET OUTLOOK We plan to continue to look for high-quality sustainable growth companies at attractive valuations that we think will deliver improving margins, growing profits, and higher returns on investments. We ended the period with an overweight to the health care, energy, and information technology sectors and an underweight to the utilities, consumer discretionary, and industrials sectors relative to the index. MEMBERS Capital Advisors, Inc. - Adviser Wellington Management Company, LLP - Subadviser Francis J. Boggan, CFA, Portfolio Manager - -------------------------------------------------------------------------------- 24 ================================================================================ MID CAP GROWTH FUND PERFORMANCE REVIEW - -------------------------------------------------------------------------------- CUMULATIVE PERFORMANCE OF $10,000 INVESTMENT SINCE INCEPTION(1,3) [CHART OF CUMULATIVE PERFORMANCE]
Mid Cap Russell Midcap(R) Growth Fund Growth Index(2) 10/31/2000 $10,000 $10,000 12/31/2000 9,047 8,715 12/31/2001 6,252 6,959 12/31/2002 4,676 5,052 12/31/2003 6,238 7,210 12/31/2004 7,076 8,326 12/31/2005 7,695 9,333 12/31/2006 8,571 10,327 12/31/2007 9,294 11,508 12/31/2008 4,936 6,407
[END CHART]
- ------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN THROUGH DECEMBER 31, 2008(3) Annual Expense 1 Year 3 Years 5 Years Since Inception(4) Ratio -------------------------------------------------------- --------- MID CAP GROWTH FUND -46.89% -13.76% -4.58% -8.28% 0.87% Russell Midcap(R) Growth Index(2) -44.32 -11.78 -2.33 -5.30 NA - -------------------------------------------------------------------------------------------------------------------------
NA Not Applicable. Index returns do not reflect fees or expenses. (1) This chart compares a $10,000 investment made in the fund to a $10,000 investment made in the securities that make up the index. (2) The Russell Midcap(R) Growth Index is a mid-cap market index which measures the performance of those Russell Midcap companies with higher price-to-book ratios and higher forecasted growth values. (3) Fund returns are calculated after fund level expenses have been subtracted, but do not include any separate account fees, charges or expenses imposed by the variable annuity and variable life insurance contracts that invest in the fund, as described in the Prospectus. If these fees, charges, or expenses were included, fund returns would have been lower. Fund returns also assume that dividends and capital gains are reinvested in additional shares of the fund. Investment return and principal value will fluctuate, so an investor's shares, when redeemed, may be worth more or less than when purchased. Further information relating to the fund's performance is contained in the Prospectus and elsewhere in this report. The fund's past performance is not indicative of future performance. Current performance may be lower or higher than the performance data cited. For fund performance data current to the most recent month-end, please call 1-800-798-5500. Indices are unmanaged and investors cannot invest in them directly. Index returns do not reflect fees or expenses. (4) The fund commenced investment operations on October 31, 2000. The since inception index returns are also from October 31, 2000. - -------------------------------------------------------------------------------- 25 ================================================================================ SMALL CAP VALUE FUND PERFORMANCE REVIEW - -------------------------------------------------------------------------------- PERFORMANCE REVIEW For the twelve month period ended December 31, 2008, the Ultra Series Small Cap Value Fund returned -25.54%, outperforming both the Russell 2000(R) Value Index which returned -28.92% and the Morningstar Insurance Fund Small Value category average which returned -32.33%. Within the Russell 2000(R) Value Index, all ten broad economic sectors posted negative returns. The telecommunications services, consumer discretionary, and energy sectors were the weakest performers, while the utilities and consumer staples suffered the least. ECONOMIC & MARKET REVIEW During the year, most major indices suffered double-digit negative returns. Equity markets fell sharply amid a significant deterioration in both credit market conditions and investor confidence. Forced deleveraging by financial institutions triggered an unprecedented set of bank failures and mergers, significantly reshaping the global financial map. Impaired access to capital threatened to spill over into the real economy, reducing expectations for global growth and forcing energy and commodity prices sharply lower. Economic data reported during the past quarter provided little encouragement to investors, as housing, employment, and manufacturing metrics all trended downward. PORTFOLIO REVIEW Stock selection during the one year period drove the favorable relative return as strong stock selection in consumer discretionary, materials, and energy helped offset weak stock selection in industrials, health care, and financials. Although sector allocation is a residual of our bottom-up stock selection, the fund's underweight relative to the index in information technology contributed positively while an overweight to the weakening consumer discretionary sector and underweight to financials detracted from relative returns. Key individual contributors to relative performance were Zep (materials), Whiting Petroleum (energy), and Lance (food, beverage & tobacco). Cleaning solutions provider, Zep, reported higher earnings due to favorable foreign currency translation on international sales. Oil and gas exploration and production company, Whiting Petroleum, profited during the first half of 2008 from the unprecedented run-up in oil prices. Shares of snack food manufacturer Lance, Inc. benefited from news of the successful acquisition of Archway Cookies. Other contributors to the fund's absolute performance were Compass Minerals, a salt producer in North America and the U.K., and hotel franchisor Choice Hotels International. Detractors from relative performance during the period included Orthofix International (health care equipment & services), ACCO Brands (commercial & professional services), and ASTA Funding (diversified financials). Orthopedic products manufacturer Orthofix International shares fell with concerns of higher debt servicing costs and lowered earnings expectations related to changes in the company's spine distributor network. ACCO Brands, a leading branded office products supplier, declined after reporting lower than expected earnings driven by weak end market demand and cost pressures. Shares of ASTA Funding, a consumer receivable asset management and liquidation company, declined along with the financial sector as earnings and cash flow slowed during the year. Cable manufacturer Belden, media and marketing research firm Arbitron, and diversified manufacturing company Carlisle were among other names detracting from absolute returns during the period. ECONOMIC & MARKET OUTLOOK The Small Cap Value investment approach emphasizes individual stock selection; sector weights are a residual of the process. We do, however, carefully consider diversification across economic sectors to limit risk. We ended the one-year period as of December 31, 2008 with an overweight to the industrials, consumer discretionary, and health care sectors and an underweight to the financials, information technology, and utilities sectors relative to the index. MEMBERS Capital Advisors, Inc. - Adviser Wellington Management Company, LLP - Subadviser Timothy J. McCormack, CFA and Shaun F. Pederson, Portfolio Managers - -------------------------------------------------------------------------------- 26 ================================================================================ SMALL CAP VALUE FUND PERFORMANCE REVIEW - -------------------------------------------------------------------------------- CUMULATIVE PERFORMANCE OF $10,000 INVESTMENT SINCE INCEPTION(1,3) [CHART OF CUMULATIVE PERFORMANCE]
Small Cap Russell 2000(R) Value Fund Value Index(2) 5/01/2007 $10,000 $10,000 12/31/2007 9,038 8,801 12/31/2008 6,729 6,255
[END CHART]
- ----------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN THROUGH DECEMBER 31, 2008(3) Annual Expense 1 Year Since Inception(4) Ratio ------------------------------ --------- SMALL CAP VALUE FUND -25.54% -21.12% 1.12% Russell 2000(R) Value Index(2) -28.92 -24.44 NA - -----------------------------------------------------------------------------------------------------------------------
NA Not Applicable. Index returns do not reflect fees or expenses. (1) This chart compares a $10,000 investment made in the fund to a $10,000 investment made in the securities that make up the index. (2) The Russell 2000(R) Value Index is a small-cap market index which measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. (3) Fund returns are calculated after fund level expenses have been subtracted, but do not include any separate account fees, charges or expenses imposed by the variable annuity and variable life insurance contracts that invest in the fund, as described in the Prospectus. If these fees, charges, or expenses were included, fund returns would have been lower. Fund returns also assume that dividends and capital gains are reinvested in additional shares of the fund. Investment return and principal value will fluctuate, so an investor's shares, when redeemed, may be worth more or less than when purchased. Further information relating to the fund's performance is contained in the Prospectus and elsewhere in this report. The fund's past performance is not indicative of future performance. Current performance may be lower or higher than the performance data cited. For fund performance data current to the most recent month-end, please call 1-800-798-5500. Indices are unmanaged and investors cannot invest in them directly. Index returns do not reflect fees or expenses. (4) The fund commenced investment operations on May 1, 2007. The since inception index returns are also from May 1, 2007. - -------------------------------------------------------------------------------- 27 ================================================================================ SMALL CAP GROWTH FUND PERFORMANCE REVIEW - -------------------------------------------------------------------------------- PERFORMANCE REVIEW For the twelve month period ended December 31, 2008, the Ultra Series Small Cap Growth Fund returned -43.41%, while the Russell 2000(R) Growth Index returned - -38.54% and the Morningstar Insurance Fund Small Growth category average returned -40.97%. ECONOMIC & MARKET REVIEW The market as a whole was led drastically down by a failing economy and banking system. While small capitalization companies were rewarded for their size, their stock prices were also symmetrically penalized for their above average risk relative to large company stocks during the downward trending market. That said, the Russell 2000(R) Growth Index (-38.54%) marginally underperformed the broad market Russell 3000(R) Index (-37.31%) and S&P 500 Index (-37.00%) amidst a total breakdown in investor confidence and uncertainty about future earnings. PORTFOLIO REVIEW For the year, the fund did benefit from its underexposure relative to the index to earnings variation and leverage. Also, the fund's negative active beta policy, amidst one of the worst years in the market's history, accounted for a significant contribution to the fund's return. Stock selection represented the single largest detractor from the portfolio's performance accounting for 300 bps of the loss. Additionally, an underexposure relative to the index to volatility and the fund's larger relative size detracted from performance. Wabtec (rail industry technology-based equipment provider), Forrester Research (independent technology and market research company), and Greenhill & Co. (independent investment banking firm) were among the fund's leading contributors to return for the year. BE Aerospace (commercial aircraft and business jet interior products manufacturer), Pharmnet Development Group (drug development services company), and Walter Industries (producer and exporter of metallurgical coal for the global steel industry) were among the fund's leading detractors from return for the year. ECONOMIC & MARKET OUTLOOK In the face of a slowing global economy, we expect the fund to continue to reduce its exposures to energy and materials and to a lesser extent, industrials. At the same time, modest increases to financials due to attractive valuations and the typically recession-proof telecommunications are anticipated. We also plan to reduce the fund's exposure to companies whose earnings are sensitive to currency fluctuation, which should play well if the dollar continues to strengthen. MEMBERS Capital Advisors, Inc. - Adviser Paradigm Asset Management Company, LLC - Subadviser James E. Francis, Jeffrey Marcus and Gregory Pai, Portfolio Managers - -------------------------------------------------------------------------------- 28 ================================================================================ SMALL CAP GROWTH FUND PERFORMANCE REVIEW - -------------------------------------------------------------------------------- CUMULATIVE PERFORMANCE OF $10,000 INVESTMENT SINCE INCEPTION(1,3) [CHART OF CUMULATIVE PERFORMANCE]
Small Cap Russell 2000(R) Growth Fund Growth Index(2) 5/01/2007 $10,000 $10,000 12/31/2007 10,026 10,179 12/31/2008 5,674 6,256
[END CHART]
- ------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN THROUGH DECEMBER 31, 2008(3) Annual Expense 1 Year Since Inception(4) Ratio ------------------------------ --------- SMALL CAP GROWTH FUND -43.41% -28.78% 1.12% Russell 2000(R) Growth Index(2) -38.54 -24.44 NA - -------------------------------------------------------------------------------------------------------------------------
NA Not Applicable. Index returns do not reflect fees or expenses. (1) This chart compares a $10,000 investment made in the fund to a $10,000 investment made in the securities that make up the index. (2) The Russell 2000(R) Growth Index is a small-cap market index which measures the performance of those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values. (3) Fund returns are calculated after fund level expenses have been subtracted, but do not include any separate account fees, charges or expenses imposed by the variable annuity and variable life insurance contracts that invest in the fund, as described in the Prospectus. If these fees, charges, or expenses were included, fund returns would have been lower. Fund returns also assume that dividends and capital gains are reinvested in additional shares of the fund. Investment return and principal value will fluctuate, so an investor's shares, when redeemed, may be worth more or less than when purchased. Further information relating to the fund's performance is contained in the Prospectus and elsewhere in this report. The fund's past performance is not indicative of future performance. Current performance may be lower or higher than the performance data cited. For fund performance data current to the most recent month-end, please call 1-800-798-5500. Indices are unmanaged and investors cannot invest in them directly. Index returns do not reflect fees or expenses. (4) The fund commenced investment operations on May 1, 2007. The since inception index returns are also from May 1, 2007. - -------------------------------------------------------------------------------- 29 ================================================================================ GLOBAL SECURITIES FUND PERFORMANCE REVIEW - -------------------------------------------------------------------------------- PERFORMANCE REVIEW For the twelve month period ended December 31, 2008, the Ultra Series Global Securities Fund returned -38.14%, compared with the MSCI World Index which returned -40.33% and the Morningstar Insurance Fund World Stock category average which returned -41.76%. ECONOMIC & MARKET REVIEW A lackluster start to 2008 for both the U.S. economy and most global markets was followed by a catastrophically weak second half. Certain areas of the economy had been deteriorating for some time, in particular, homebuilding. But the freezing up of the interbank lending market brought about the cessation of normal financial activity across many parts of the globe. Forced selling of assets by hedge funds reinforced the downward spiral, with Lehman Brothers an early victim of the turmoil. The crisis initially was confined to financial firms, but soon it spread further afield, as lenders reduced the amount of credit available in an attempt to strengthen their capital base. The year ended with most economies weakening further, unemployment rising and a slump in equity prices. PORTFOLIO REVIEW Our investment approach has a value-oriented defensive style. We assess value by analysis of the potential for company earnings and dividends to grow over time. By relating these to current share prices, we seek to find companies that are under-valued. Our process emphasizes in-depth business analysis and a long time horizon for researching a company's potential going forward. One aim of this is to include in the portfolio businesses with more resilient cash flows, which should reduce the volatility of returns. Stock selection is the primary driver for structuring the portfolio. This is combined with a top-down overlay which assesses the relative valuation of equity markets around the world. In the period we made a number of transactions, of particular note, earlier in the year we increased our exposure to Japan by increasing holdings in the likes of Seven & I, the convenience-to-department stores retailer, and Canon, the manufacturer of printers, copiers and digital cameras. Also, we added to information technology with the purchase of a position in TSMC. TSMC is a Taiwanese-based semi-conductor manufacturer. It has a dominant position in the integrated-circuit foundry business and is committed to returning value to shareholders through both dividends and share buy-backs. Further, we added to our telecoms weight with the addition of two new names: AT&T and Singapore Telecommunications. AT&T is the largest telecommunications company in the U.S. It offers wireline and wireless services that we believe should prove relatively defensive over time. Also, its ability to bundle various telephony services is, we believe, a key long-term competitive strength. Singapore Telecommunications is the incumbent telecoms provider in Singapore. Further, the company has operations in Australia and owns minority stakes in other operators across Asia. We are attracted by the combination of defensive characteristics and growth potential in emerging markets. A dramatic part of events in equity markets last year was the weakness of financials stocks with the sector as a whole more than halving in value over the 12 months to December. Over the year, our allocation to this sector was underweight, but stock performance was weak, which was a drag on performance. ECONOMIC & MARKET OUTLOOK Governments across the world have responded to the situation with new spending packages designed to arrest the deterioration in economic activity and kick-start recovery. It is too early to say if the current round of stimuli will work. Major parts of the plans in the U.S. and U.K. have been attempts to stabilize the banking sector, which is key to any revival. Again it is too early to say whether current measures will be sufficient to generate more appropriate levels of bank lending. However, a number of economies are carrying debt levels well above historical norms. Bringing down the ratio of debt to income will be difficult as it is likely to require a combination of weaker household spending and reduced investment. That implies not only a weak year ahead in 2009, but also only moderate growth in the economy in the medium term. Outside of the financial area, equity prices have also dropped sharply. We believe that some of these reductions have been indiscriminate and offer investors opportunities. We will maintain our disciplined, value-focused approach to look for attractive investments. MEMBERS Capital Advisors, Inc. - Adviser Mondrian Investment Partners (U.S.), Inc. - Subadviser Managed by Global Investment Committee; Members: Nigel G. May, Elizabeth A. Desmond, Clive A. Gillmore, Brendan Baker, Andrew Porter and Jonathan Spread - -------------------------------------------------------------------------------- 30 ================================================================================ GLOBAL SECURITIES FUND PERFORMANCE REVIEW - -------------------------------------------------------------------------------- CUMULATIVE PERFORMANCE OF $10,000 INVESTMENT SINCE INCEPTION(1,3) [CHART OF CUMULATIVE PERFORMANCE]
Global Morgan Stanley Capital International Securities World Index(2) Fund (MSCI World Index) 10/31/2000 $10,000 $10,000 12/31/2000 9,989 9,699 12/31/2001 8,959 8,096 12/31/2002 7,008 6,514 12/31/2003 9,899 8,713 12/31/2004 11,723 10,042 12/31/2005 13,360 11,049 12/31/2006 15,683 13,331 12/31/2007 16,588 14,605 12/31/2008 10,261 8,714
[END CHART]
- ------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN THROUGH DECEMBER 31, 2008(3) Annual Expense 1 Year 3 Years 5 Years Since Inception(4) Ratio -------------------------------------------------------- --------- GLOBAL SECURITIES FUND -38.14% -8.42% 0.72% 0.32% 0.97% MSCI World Index(2) -40.33 -7.61 0.00 -1.67 NA - -------------------------------------------------------------------------------------------------------------------------
NA Not Applicable. Index returns do not reflect fees or expenses. (1) This chart compares a $10,000 investment made in the fund to a $10,000 investment made in the index. (2) The MSCI World Index is free float-adjusted market capitalization index that is designed to measure global developed market equity performance, including the U.S. and Canada. (3) Fund returns are calculated after fund level expenses have been subtracted, but do not include any separate account fees, charges or expenses imposed by the variable annuity and variable life insurance contracts that invest in the fund, as described in the Prospectus. If these fees, charges, or expenses were included, fund returns would have been lower. Fund returns also assume that dividends and capital gains are reinvested in additional shares of the fund. Investment return and principal value will fluctuate, so an investor's shares, when redeemed, may be worth more or less than when purchased. Further information relating to the fund's performance is contained in the Prospectus and elsewhere in this report. The fund's past performance is not indicative of future performance. Current performance may be lower or higher than the performance data cited. For fund performance data current to the most recent month-end, please call 1-800-798-5500. Indices are unmanaged and investors cannot invest in them directly. Index returns do not reflect fees or expenses. (4) The fund commenced investment operations on October 31, 2000. The since inception index returns are also from October 31, 2000. - -------------------------------------------------------------------------------- 31 ================================================================================ INTERNATIONAL STOCK FUND PERFORMANCE REVIEW - -------------------------------------------------------------------------------- PERFORMANCE REVIEW The Ultra Series International Stock Fund returned -38.62% for the twelve month period ended December 31, 2008, while the MSCI EAFE Index returned -43.06% and the Morningstar Insurance Fund Foreign Large Blend category average returned - -43.33%. Fund performance was hindered by exposure to the emerging markets which returned approximately -53% during the year as measured by the MSCI Emerging Markets Index. Global equity markets finished higher in December, but ended with one of the worst quarters and years on record. ECONOMIC & MARKET REVIEW International equity markets experienced one of their worst years in history amid further signs of deepening global weakness, with the MSCI EAFE Index returning over -43% for the full calendar year. For U.S. dollar investors, the strength of the U.S. dollar in 2008 impacted returns. The steep fall in equities came as investors witnessed the collapse in debt markets and its impact on real economic activity around the world. The bankruptcy of Lehman Brothers in the middle of September precipitated a sharp worsening of the availability and cost of credit, and led to a sudden, global deterioration in sentiment among both consumers and businesses. This resulted in a severe curtailment of discretionary expenditures for consumers, as well as curtailed capital expenditures and inventory purchases for companies. Several of the world's largest economies (the United States, Europe, and Japan) faltered into recession in 2008. In addition, the slowdown exposed the vulnerability of emerging economies, sending the prices of many commodities to the lowest levels seen in recent years. Oil prices, which earlier this year traded above $140 per barrel, plunged to five-year lows. As a result, central banks around the world took aggressive, coordinated action to combat the lack of liquidity, the loss of confidence, and the risk of deflation. The year was characterized by outperformance of the classic defensive sectors, including health care, consumer staples, telecom services, and utilities (especially in Japan, which performed strongly in U.S. dollar terms as the yen appreciated). Among the weaker areas were the materials and consumer discretionary sectors, driven by a fall in commodity prices and auto sales, which also affected emerging market stocks. Financial stocks underperformed following the realization that most of these companies require material capital injections, which has the potential to substantially dilute existing equity holders. PORTFOLIO REVIEW The fund's allocation to large capitalization developed markets finished ahead of the MSCI EAFE Index for 2008. For the year, the fund benefited from its very low exposure to the financials and materials sectors. Recent purchases near market lows in October and November performed well, positively contributing for the year. Examples included Japanese security company Secom, French telecommunication and construction group Bouygues, and the newly-combined Anheuser-Busch InBev, which we believe was even more attractively valued due to concerns over its debt burden. French gas company GDF Suez, Swiss pharmaceutical company Novartis, and Japanese apartment-builder Daito Trust Construction were strong performers for the year. Weaker stocks for the year included Old Mutual, which fell on concerns over the nature of its South African domicile as well as the sensitivity to equities inherent in its insurance/asset management businesses, and Telenor, which declined due to shareholder concerns over the dilutive effects of a potential capital raising. Within the small capitalization developed markets segment, stock selection in Japan and the Netherlands detracted from performance, while stock selection in France was strong. In terms of sectors, stock selection in the energy and consumer discretionary sectors hampered performance, while stock selection in the utilities and health care sectors contributed positively. A top performer for the year was Neopost, the French manufacturer of mailing systems. Neopost is the only global competitor to Pitney Bowes in the mailing systems industry. These two dominant players enjoy a relatively stable product demand, and Neopost has been a consistently profitable business. An underperformer for the year was Dutch oil service company Fugro, after the price of oil peaked in July and then fell dramatically through the remainder of the year. Other energy-related names, such as Norway-based companies Odim and Songa Offshore, were also underperformers in sympathy with the declining price of oil. For the emerging markets segment, by sector, the most defensive were health care and consumer staples, followed by utilities and telecom services. Financials performed worst of all, followed by industrials, energy, and materials. Positive stock performance was recorded in Truworths International, a South African retailer, based on decent earnings results. Shares of Eurasian Natural Resources, a Kazakh ferrochrome company, rose sharply due to strong metals prices earlier in the year. - -------------------------------------------------------------------------------- 32 ================================================================================ INTERNATIONAL STOCK FUND PERFORMANCE REVIEW - -------------------------------------------------------------------------------- Cemig, a Brazilian electric utility company, performed well as a result of its defensive nature, with stable cash flows and an attractive dividend. Shares of Oil & Natural Gas Corp., an Indian oil and gas company, fell on investor concerns regarding the price of oil. Mobile TeleSystems, a Russian telecommunication services company, experienced weakness due to forced selling within the Russian market and currency concerns. ECONOMIC & MARKET OUTLOOK The material changes in the global credit markets since the summer of 2007 has meant that both consumers and companies are finding it much harder and more expensive to borrow money to spend or invest. Coupled with a clear shift in sentiment, this has materially impacted demand for consumer and industrial products. Despite government stimulus efforts, this condition will likely be prolonged. Many companies enjoyed record profit margins and returns in the past, but are vulnerable to clear downside profit levels across the globe. However, we believe value will begin to emerge in some of the more economically sensitive companies, as well as in strong, resilient businesses caught up in the general sell-off. We believe that investors' profit expectations, while still too high, will become much more realistic. The portfolio team plans to continue to focus on stock selection, and remains confident that the strong track record of this philosophy will continue in a variety of market conditions. MEMBERS Capital Advisors, Inc. - Adviser Lazard Asset Management - Subadviser John R. Reinsberg, Lead Portfolio Manager; Gabrielle M. Boyle; Michael A. Bennett; Michael G. Fry; Michael Powers; Brian Pessin, CFA; Edward Rosenfeld: James M. McDonald, CFA; Rohit Chopra; and Erik McKee, Portfolio Managers - -------------------------------------------------------------------------------- 33 ================================================================================ INTERNATIONAL STOCK FUND PERFORMANCE REVIEW - -------------------------------------------------------------------------------- CUMULATIVE PERFORMANCE OF $10,000 INVESTMENT SINCE INCEPTION(1,3) [CHART OF CUMULATIVE PERFORMANCE]
International Morgan Stanley Capital International Europe, Stock Fund Australasia & Far East Index(2) (MSCI EAFE) 10/31/2000 $10,000 $10,000 12/31/2000 9,745 10,033 12/31/2001 7,946 7,906 12/31/2002 7,312 6,668 12/31/2003 9,769 9,280 12/31/2004 11,771 11,200 12/31/2005 13,717 12,769 12/31/2006 17,034 16,198 12/31/2007 18,980 18,082 12/31/2008 11,650 10,296
[END CHART]
- ------------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN THROUGH DECEMBER 31, 2008(3) Annual Expense 1 Year 3 Years 5 Years Since Inception(4) Ratio -------------------------------------------------------- --------- INTERNATIONAL STOCK FUND -38.62% -5.30% 3.58% 1.89% 1.22% MSCI EAFE Index(2) -43.06 -6.92 2.10 0.36 NA - -------------------------------------------------------------------------------------------------------------------------
NA Not Applicable. Index returns do not reflect fees or expenses. (1) This chart compares a $10,000 investment made in the fund to a $10,000 investment made in the securities that make up the index. (2) The MSCI EAFE (Europe, Australasia & Far East) Index is a free float-adjusted market capitalization index that is designed to measure developed market equity performance, excluding the U.S. and Canada. (3) Fund returns are calculated after fund level expenses have been subtracted, but do not include any separate account fees, charges or expenses imposed by the variable annuity and variable life insurance contracts that invest in the fund, as described in the Prospectus. If these fees, charges, or expenses were included, fund returns would have been lower. Fund returns also assume that dividends and capital gains are reinvested in additional shares of the fund. Investment return and principal value will fluctuate, so an investor's shares, when redeemed, may be worth more or less than when purchased. Further information relating to the fund's performance is contained in the Prospectus and elsewhere in this report. The fund's past performance is not indicative of future performance. Current performance may be lower or higher than the performance data cited. For fund performance data current to the most recent month-end, please call 1-800-798-5500. Indices are unmanaged and investors cannot invest in them directly. Index returns do not reflect fees or expenses. (4) The fund commenced investment operations on October 31, 2000. The since inception index returns are also from October 31, 2000. - -------------------------------------------------------------------------------- 34 ================================================================================ - -------------------------------------------------------------------------------- This page is left blank intentionally - -------------------------------------------------------------------------------- 35 ================================================================================ TARGET RETIREMENT 2020 FUND PERFORMANCE REVIEW - -------------------------------------------------------------------------------- PERFORMANCE REVIEW For the twelve month period ended December 31, 2008, the Ultra Series Target Retirement 2020 Fund returned -35.31%, underperforming the Dow Jones Global Target 2020 Index return of -22.30 and the Morningstar Insurance Fund Target Date 2015-2029 category average return of -30.24. PORTFOLIO REVIEW With every major equity and fixed income asset class (except for government-backed paper and cash) dropping in unison as a result of the ongoing financial crisis, the long-term benefits of asset allocation went unrealized this year. Major equity markets the world over all experienced significant price declines. No equity asset class was spared. The deleveraging process accelerated in the capital markets, with institutional and hedge fund investors being forced to unwind their leveraged positions to raise liquidity. The resulting heavy selling placed tremendous downward pressure on equity prices. The primary detractor from the fund's performance was its higher allocation to equities versus the benchmark index. The Russell 3000(R) Index returned -37.31% for the year, and bonds as measured by the Barclays Capital Aggregate Bond Index, faired much better returning 5.24%. In keeping with the long-term investment time horizon of the fund, we expect to remain overweight to equities, which have historically offered the potential for higher long-term returns. International and emerging market equities experienced even steeper declines, with the MSCI EAFE Index down -43.06% and the MSCI Emerging Markets Index down - -53.18%. Weightings to both developed and emerging international markets provided a substantial drag on the fund's performance. Additionally, the fund had a number of holdings that experienced sizeable losses brought on by the steep decline in energy and materials stocks. ECONOMIC & MARKET OUTLOOK As painful as 2008 was, the year did manage to end on a high note. After bottoming out in late November, equities rallied significantly throughout December. Bonds also posted nice gains in the final five weeks of the year. However, until the credit markets unfreeze and the overall deleveraging process is substantially complete, the markets will remain unsettled. On a positive note, the historic declines suffered in many asset classes have created numerous opportunities from a valuation standpoint, with corporate bonds being at the top of the list. With yield spreads at record highs, we believe investors are being more than adequately compensated for holding both investment and non-investment grade corporate bonds. Pending any further deterioration in the credit markets, we intend to opportunistically increase our positions in these asset classes over the coming year. Moving forward, we will continue to employ caution in our overall asset allocation strategies within the fund, while awaiting more positive economic news. At the same time we stand ready to capitalize on the aforementioned opportunities in 2009. MEMBERS Capital Advisors, Inc. - Adviser David M. Schlimgen, CIMA(R), CIMC(R) and Patrick F. Ryan, CIMA(R) Portfolio Managers - -------------------------------------------------------------------------------- 36 ================================================================================ TARGET RETIREMENT 2020 FUND PERFORMANCE REVIEW - -------------------------------------------------------------------------------- CUMULATIVE PERFORMANCE OF $10,000 INVESTMENT SINCE INCEPTION(1,3) [CHART OF CUMULATIVE PERFORMANCE]
Target Retirement Dow Jones Global Target 2020 Fund 2020 Index(2) 10/01/2007 $10,000 $10,000 12/31/2007 9,806 9,978 12/31/2008 6,343 7,753
[END CHART]
- ------------------------------------------------------------------------------------------------------------------------- CUMULATIVE TOTAL RETURN THROUGH DECEMBER 31, 2008(3) Annual Expense 1 Year Since Inception(4) Ratio ------------------------------ --------- TARGET RETIREMENT 2020 FUND -35.31% -30.50% 1.34% Dow Jones Global Target 2020 Index(2) -22.30 -18.36 NA - -------------------------------------------------------------------------------------------------------------------------
NA Not Applicable. Index returns do not reflect fees or expenses. (1) This chart compares a $10,000 investment made in the fund to a $10,000 investment made in the securities that make up the index. (2) The Dow Jones Global Target 2020 Index is a benchmark for multi-asset class portfolios with risk profiles that become more conservative as the year 2020 approaches. The index is a composite of other indexes that represent stocks, bonds and cash. (3) Fund returns are calculated after fund level expenses have been subtracted, but do not include any separate account fees, charges or expenses imposed by the variable annuity and variable life insurance contracts that invest in the fund, as described in the Prospectus. If these fees, charges, or expenses were included, fund returns would have been lower. Fund returns also assume that dividends and capital gains are reinvested in additional shares of the fund. Investment return and principal value will fluctuate, so an investor's shares, when redeemed, may be worth more or less than when purchased. Further information relating to the fund's performance is contained in the Prospectus and elsewhere in this report. The fund's past performance is not indicative of future performance. Current performance may be lower or higher than the performance data cited. For fund performance data current to the most recent month-end, please call 1-800-798-5500. Indices are unmanaged and investors cannot invest in them directly. Index returns do not reflect fees or expenses. (4) The fund commenced investment operations on October 1, 2007. The since inception index returns are also from October 1, 2007. - -------------------------------------------------------------------------------- 37 ================================================================================ TARGET RETIREMENT 2030 FUND PERFORMANCE REVIEW - -------------------------------------------------------------------------------- PERFORMANCE REVIEW For the twelve month period ended December 31, 2008, the Ultra Series Target Retirement 2030 Fund returned -38.35%, underperforming the Dow Jones Global Target 2030 Index return of -32.02 and the Morningstar Insurance Fund Target-Date 2030+ category average return of -36.26. PORTFOLIO REVIEW With every major equity and fixed income asset class (except for government-backed paper and cash) dropping in unison as a result of the ongoing financial crisis, the long-term benefits of asset allocation went unrealized this year. Major equity markets the world over all experienced significant price declines. No equity asset class was spared. The deleveraging process accelerated in the capital markets, with institutional and hedge fund investors being forced to unwind their leveraged positions to raise liquidity. The resulting heavy selling placed tremendous downward pressure on equity prices. The primary detractors from the fund's performance were its international equity allocations and exposure to energy and materials stocks. The Russell 3000(R) Index returned -37.31% for the year, international stocks as measured by the MSCI EAFE Index, experienced even steeper declines down -43.06% and the MSCI Emerging Markets Index returned -53.18%. Weightings to both developed and emerging international markets provided a substantial drag on the fund's performance. Additionally, a number of funds in the portfolio had sizeable weightings to energy and materials stocks, which provided very strong first half of the year returns. However, once the seriousness of the economic downturn became better recognized, these cyclical sectors were hit especially hard as evidenced by the Dow Jones AIG Energy Index return of -47.33%. Bonds fared much better, as measured by the Barclays Capital Aggregate Index, returning 5.24%. ECONOMIC & MARKET OUTLOOK As painful as 2008 was, the year did manage to end on a high note. After bottoming out in late November, equities rallied significantly throughout December. Bonds also posted nice gains in the final five weeks of the year. However, until the credit markets unfreeze, and the overall deleveraging process is substantially complete, the markets will remain unsettled. On a positive note, the historic declines suffered in many asset classes have created numerous opportunities from a valuation standpoint, corporate bonds being at the top of the list. With yield spreads at record highs, we believe investors are being more than adequately compensated for holding both investment and non-investment grade corporate bonds. Pending any further deterioration in the credit markets, we intend to opportunistically increase our positions in these asset classes over the coming year. Moving forward, we will continue to employ caution in our overall asset allocation strategies within the fund, while awaiting more positive economic news. At the same time we stand ready to capitalize on the aforementioned opportunities in 2009. MEMBERS Capital Advisors, Inc. - Adviser David M. Schlimgen, CIMA(R), CIMC(R) and Patrick F. Ryan, CIMA(R), Portfolio Managers - -------------------------------------------------------------------------------- 38 ================================================================================ TARGET RETIREMENT 2030 FUND PERFORMANCE REVIEW - -------------------------------------------------------------------------------- CUMULATIVE PERFORMANCE OF $10,000 INVESTMENT SINCE INCEPTION(1,3) [CHART OF CUMULATIVE PERFORMANCE]
Target Retirement Dow Jones Global Target 2030 Fund 2030 Index(2) 10/01/2007 $10,000 $10,000 12/31/2007 9,749 9,843 12/31/2008 6,010 6,692
[END CHART]
- ------------------------------------------------------------------------------------------------------------------------- CUMULATIVE TOTAL RETURN THROUGH DECEMBER 31, 2008(3) Annual Expense 1 Year Since Inception(4) Ratio ------------------------------ --------- TARGET RETIREMENT 2030 FUND -38.35% -33.43% 1.42% Dow Jones Global Target 2030 Index(2) -32.02 -27.40 NA - -------------------------------------------------------------------------------------------------------------------------
NA Not Applicable. Index returns do not reflect fees or expenses. (1) This chart compares a $10,000 investment made in the fund to a $10,000 investment made in the securities that make up the index. (2) The Dow Jones Global Target 2030 Index is a benchmark for multi-asset class portfolios with risk profiles that become more conservative as the year 2030 approaches. The index is a composite of other indexes that represent stocks, bonds and cash. (3) Fund returns are calculated after fund level expenses have been subtracted, but do not include any separate account fees, charges or expenses imposed by the variable annuity and variable life insurance contracts that invest in the fund, as described in the Prospectus. If these fees, charges, or expenses were included, fund returns would have been lower. Fund returns also assume that dividends and capital gains are reinvested in additional shares of the fund. Investment return and principal value will fluctuate, so an investor's shares, when redeemed, may be worth more or less than when purchased. Further information relating to the fund's performance is contained in the Prospectus and elsewhere in this report. The fund's past performance is not indicative of future performance. Current performance may be lower or higher than the performance data cited. For fund performance data current to the most recent month-end, please call 1-800-798-5500. Indices are unmanaged and investors cannot invest in them directly. Index returns do not reflect fees or expenses. (4) The fund commenced investment operations on October 1, 2007. The since inception index returns are also from October 1, 2007. - -------------------------------------------------------------------------------- 39 ================================================================================ TARGET RETIREMENT 2040 FUND PERFORMANCE REVIEW - -------------------------------------------------------------------------------- PERFORMANCE REVIEW For the twelve month period ended December 31, 2008, the Ultra Series Target Retirement 2040 Fund returned -41.65%, underperforming the Dow Jones Global Target 2040 Index return of -36.80, and the Morningstar Insurance Fund Target-Date 2030+ category average return of -36.26. PORTFOLIO REVIEW With every major equity and fixed income asset class (except for government-backed paper and cash) dropping in unison as a result of the ongoing financial crisis, the long-term benefits of asset allocation went unrealized this year. Major equity markets the world over all experienced significant price declines. No equity asset class was spared. The deleveraging process accelerated in the capital markets, with institutional and hedge fund investors being forced to unwind their leveraged positions to raise liquidity. The resulting heavy selling placed tremendous downward pressure on equity prices. The primary detractors from the fund's performance were its international equity allocations and exposure to energy and materials stocks. The Russell 3000(R) Index returned -37.31% for the year, international stocks as measured by the MSCI EAFE Index, experienced even steeper declines down -43.06% and the MSCI Emerging Markets Index returned -53.18%. Weightings to both developed and emerging international markets provided a substantial drag on the fund's performance. Additionally, a number of funds in the portfolio had sizeable weightings to energy and materials stocks, which provided very strong first half of the year returns. However, once the seriousness of the economic downturn became better recognized, these cyclical sectors were hit especially hard as evidenced by the Dow Jones AIG Energy Index return of -47.33%. Bonds fared much better, as measured by the Barclays Capital Aggregate Index, returning 5.24%. ECONOMIC & MARKET OUTLOOK As painful as 2008 was, the year did manage to end on a high note. After bottoming out in late November, equities rallied significantly throughout December. Bonds also posted nice gains in the final five weeks of the year. However, until the credit markets unfreeze, and the overall deleveraging process is substantially complete, the markets will remain unsettled. On a positive note, the historic declines suffered in many asset classes have created numerous opportunities from a valuation standpoint, corporate bonds being at the top of the list. With yield spreads at record highs, we believe investors are being more than adequately compensated for holding both investment and non-investment grade corporate bonds. Pending any further deterioration in the credit markets, we intend to opportunistically increase our positions in these asset classes over the coming year. Moving forward, we will continue to employ caution in our overall asset allocation strategies within the fund, while awaiting more positive economic news. At the same time we stand ready to capitalize on the aforementioned opportunities in 2009. MEMBERS Capital Advisors, Inc. - Adviser David M. Schlimgen, CIMA(R), CIMC(R) and Patrick F. Ryan, CIMA(R), Portfolio Managers - -------------------------------------------------------------------------------- 40 ================================================================================ TARGET RETIREMENT 2040 FUND PERFORMANCE REVIEW - -------------------------------------------------------------------------------- CUMULATIVE PERFORMANCE OF $10,000 INVESTMENT SINCE INCEPTION(1,3) [CHART OF CUMULATIVE PERFORMANCE]
Target Retirement Dow Jones Global Target 2040 Fund 2040 Index(2) 10/01/2007 $10,000 $10,000 12/31/2007 9,714 9,777 12/31/2008 5,668 6,179
[END CHART]
- ------------------------------------------------------------------------------------------------------------------------- CUMULATIVE TOTAL RETURN THROUGH DECEMBER 31, 2008(3) Annual Expense 1 Year Since Inception(4) Ratio ------------------------------ --------- TARGET RETIREMENT 2040 FUND -41.65% -36.47% 1.41% Dow Jones Global Target 2040 Index(2) -36.80 -31.87 NA - -------------------------------------------------------------------------------------------------------------------------
NA Not Applicable. Index returns do not reflect fees or expenses. (1) This chart compares a $10,000 investment made in the fund to a $10,000 investment made in the securities that make up the index. (2) The Dow Jones Global Target 2040 Index is a benchmark for multi-asset class portfolios with risk profiles that become more conservative as the year 2040 approaches. The index is a composite of other indexes that represent stocks, bonds and cash. (3) Fund returns are calculated after fund level expenses have been subtracted, but do not include any separate account fees, charges or expenses imposed by the variable annuity and variable life insurance contracts that invest in the fund, as described in the Prospectus. If these fees, charges, or expenses were included, fund returns would have been lower. Fund returns also assume that dividends and capital gains are reinvested in additional shares of the fund. Investment return and principal value will fluctuate, so an investor's shares, when redeemed, may be worth more or less than when purchased. Further information relating to the fund's performance is contained in the Prospectus and elsewhere in this report. The fund's past performance is not indicative of future performance. Current performance may be lower or higher than the performance data cited. For fund performance data current to the most recent month-end, please call 1-800-798-5500. Indices are unmanaged and investors cannot invest in them directly. Index returns do not reflect fees or expenses. (4) The fund commenced investment operations on October 1, 2007. The since inception index returns are also from October 1, 2007. - -------------------------------------------------------------------------------- 41 ================================================================================ CONSERVATIVE ALLOCATION FUND PORTFOLIO OF INVESTMENTS - -------------------------------------------------------------------------------- PORTFOLIO ALLOCATION AS A PERCENTAGE OF NET ASSETS AS OF DECEMBER 31, 2008 [PIE CHART OF PORTFOLIO ALLOCATION] Debt Securities 65% Equity Securities 25% Foreign Equity Securities 9% Money Market Securities and Other Net Assets 1%
[END CHART] PORTFOLIO HOLDINGS AS A PERCENTAGE OF TOTAL MARKET VALUE AS OF DECEMBER 31, 2008 MEMBERS Bond Fund, Class Y 30% T. Rowe Price Spectrum Income Fund 14% Oppenheimer International Bond Fund, Class Y 11% MEMBERS High Income Fund, Class Y 10% MEMBERS International Stock Fund, Class Y 9% MEMBERS Large Cap Growth Fund, Class Y 9% MEMBERS Large Cap Value Fund, Class Y 6% Victory Special Value Fund, Class I 6% Fairholme Fund 4% SSgA Prime Money Market Fund 1%
- --------------------------------------------------------------------------------
Shares Value (Note 2) - ------ -------------- INVESTMENT COMPANIES - 100.03% - -------------------------------------------------------------------------------------------------- DEBT SECURITIES - 65.26% 3,534,383 MEMBERS Bond Fund, Class Y (R) ..................................................... $ 35,379,173 2,112,869 MEMBERS High Income Fund, Class Y (R) ..................................................... 11,747,551 2,236,649 Oppenheimer International Bond Fund, Class Y .............................................. 13,240,964 1,527,238 T. Rowe Price Spectrum Income Fund ..................................................... 15,776,370 ------------ 76,144,058 ------------ EQUITY SECURITIES - 24.94% 212,814 Fairholme Fund .................................................. 4,647,859 966,640 MEMBERS Large Cap Growth Fund, Class Y (R) ..................................................... 10,101,384 738,536 MEMBERS Large Cap Value Fund, Class Y (R) ..................................................... 7,230,266 695,099 Victory Special Value Fund, Class I ......................................................... 7,124,762 ------------ 29,104,271 ------------ FOREIGN EQUITY SECURITIES - 9.22% 1,309,422 MEMBERS International Stock Fund, Class Y (R) ............................................... 10,763,450 ------------ MONEY MARKET SECURITIES - 0.60% 694,484 SSgA Prime Money Market Fund ............................................................ 694,484 ------------ TOTAL INVESTMENT COMPANIES - 100.02% (Cost $139,127,930*) ............................................ 116,706,263 NET OTHER ASSETS AND LIABILITIES - (0.02)% - -------------------------------------------------------------------------------------------------- (28,195) TOTAL NET ASSETS - 100.00% - -------------------------------------------------------------------------------------------------- $116,678,068
- -------------------------------------------------------------------------------- * Aggregate cost for Federal tax purposes was $141,077,287. (R) Affiliated Company (see Note 10). See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 42 ================================================================================ MODERATE ALLOCATION FUND PORTFOLIO OF INVESTMENTS - -------------------------------------------------------------------------------- PORTFOLIO ALLOCATION AS A PERCENTAGE OF NET ASSETS AS OF DECEMBER 31, 2008 [PIE CHART OF PORTFOLIO ALLOCATION] Equity Securities 39% Debt Securities 38% Foreign Equity Securities 17% Alternative Asset Classes 5% Money Market Securities and Other Net Assets 1%
[END CHART] PORTFOLIO HOLDINGS AS A PERCENTAGE OF TOTAL MARKET VALUE AS OF DECEMBER 31, 2008 MEMBERS Bond Fund, Class Y 17% MEMBERS International Stock Fund, Class Y 15% MEMBERS Large Cap Growth Fund, Class Y 11% MEMBERS Large Cap Value Fund, Class Y 9% MEMBERS High Income Fund, Class Y 9% T. Rowe Price Spectrum Income Fund 7% Victory Special Value Fund, Class I 6% Gateway Fund, Class Y 5% Fairholme Fund 5% Oppenheimer International Bond Fund, Class Y 5% MEMBERS Small Cap Value Fund, Class Y 3% MEMBERS Mid Cap Growth Fund, Class Y 3% MEMBERS Small Cap Growth Fund, Class Y 3% Principal International Emerging Markets Fund, Institutional Class 1% SSgA Prime Money Market Fund 1%
- --------------------------------------------------------------------------------
Shares Value (Note 2) - ------ -------------- INVESTMENT COMPANIES - 100.03% - -------------------------------------------------------------------------------------------------- ALTERNATIVE ASSET CLASSES - 5.42% 546,609 Gateway Fund, Class Y ........................................... $ 13,206,076 ------------ DEBT SECURITIES - 38.34% 4,203,715 MEMBERS Bond Fund, Class Y (R) ..................................................... 42,079,187 3,744,129 MEMBERS High Income Fund, Class Y (R) ..................................................... 20,817,355 2,085,183 Oppenheimer International Bond Fund, Class Y .............................................. 12,344,285 1,764,475 T. Rowe Price Spectrum Income Fund ............................................................ 18,227,026 ------------ 93,467,853 ------------ EQUITY SECURITIES - 39.11% 590,007 Fairholme Fund .................................................. 12,885,751 2,616,124 MEMBERS Large Cap Growth Fund, Class Y (R) ............................................... 27,338,491 2,135,409 MEMBERS Large Cap Value Fund, Class Y (R) ..................................................... 20,905,657 1,698,065 MEMBERS Mid Cap Growth Fund, Class Y (R)* .................................................... 6,248,878 1,063,762 MEMBERS Small Cap Growth Fund, Class Y (R)* .................................................... 5,999,620 958,708 MEMBERS Small Cap Value Fund, Class Y (R) ......................................... 6,557,561 1,503,232 Victory Special Value Fund, Class I ......................................................... 15,408,123 ------------ 95,344,081 ------------ FOREIGN EQUITY SECURITIES - 16.50% 4,532,060 MEMBERS International Stock Fund, Class Y (R) ............................................... 37,253,534 217,960 Principal International Emerging Markets Fund, Institutional Class ............................................. 2,957,723 ------------ 40,211,257 ------------ MONEY MARKET SECURITIES - 0.65% 1,590,257 SSgA Prime Money Market Fund ............................................................ 1,590,257 TOTAL INVESTMENT COMPANIES - 100.02% (Cost $316,873,798**) ........................................... 243,819,524
See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 43 ================================================================================ MODERATE ALLOCATION FUND PORTFOLIO OF INVESTMENTS - --------------------------------------------------------------------------------
Value (Note 2) -------------- NET OTHER ASSETS AND LIABILITIES - (0.02)% - -------------------------------------------------------------------------------------------------- $ (58,445) TOTAL NET ASSETS - 100.00% - -------------------------------------------------------------------------------------------------- $243,761,079
- -------------------------------------------------------------------------------- * Non-income producing. ** Aggregate cost for Federal tax purposes was $320,032,522. (R) Affiliated Company (see Note 10). See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 44 ================================================================================ AGGRESSIVE ALLOCATION FUND PORTFOLIO OF INVESTMENTS - -------------------------------------------------------------------------------- PORTFOLIO ALLOCATION AS A PERCENTAGE OF NET ASSETS AS OF DECEMBER 31, 2008 [PIE CHART OF PORTFOLIO ALLOCATION] Equity Securities 55% Foreign Equity Securities 28% Debt Securities 9% Alternative Asset Classes 7% Money Market Securities and Other Net Assets 1%
[END CHART] PORTFOLIO HOLDINGS AS A PERCENTAGE OF TOTAL MARKET VALUE AS OF DECEMBER 31, 2008 MEMBERS International Stock Fund, Class Y 21% MEMBERS Large Cap Growth Fund, Class Y 15% Victory Special Value Fund, Class I 10% MEMBERS Large Cap Value Fund, Class Y 9% Gateway Fund, Class Y 7% MEMBERS Mid Cap Growth Fund, Class Y 6% MEMBERS Small Cap Value Fund, Class Y 5% MEMBERS High Income Fund, Class Y 5% Laudus International MarketMasters Fund 5% Fairholme Fund 5% MEMBERS Small Cap Growth Fund, Class Y 5% MEMBERS Bond Fund, Class Y 4% Principal International Emerging Markets Fund, Institutional Class 2% SSgA Prime Money Market Fund 1%
- --------------------------------------------------------------------------------
Shares Value (Note 2) - ------ -------------- INVESTMENT COMPANIES - 100.02% - -------------------------------------------------------------------------------------------------- ALTERNATIVE ASSET CLASSES - 7.34% 211,324 Gateway Fund, Class Y ........................................... $ 5,105,586 ----------- DEBT SECURITIES - 8.91% 261,024 MEMBERS Bond Fund, Class Y (R) ..................................................... 2,612,846 646,053 MEMBERS High Income Fund, Class Y (R) ..................................................... 3,592,055 ----------- 6,204,901 ----------- EQUITY SECURITIES - 55.26% 156,008 Fairholme Fund .................................................. 3,407,210 993,435 MEMBERS Large Cap Growth Fund, Class Y (R) ..................................................... 10,381,392 653,959 MEMBERS Large Cap Value Fund, Class Y (R) ..................................................... 6,402,258 1,114,917 MEMBERS Mid Cap Growth Fund, Class Y (R)* .................................................... 4,102,894 552,772 MEMBERS Small Cap Growth Fund, Class Y (R)* .................................................... 3,117,633 555,395 MEMBERS Small Cap Value Fund, Class Y (R) ..................................................... 3,798,901 708,459 Victory Special Value Fund, Class I ......................................................... 7,261,702 ----------- 38,471,990 ----------- FOREIGN EQUITY SECURITIES - 27.93% 314,369 Laudus International Market Masters Fund ............................................................ 3,432,908 1,749,982 MEMBERS International Stock Fund, Class Y (R) ..................................................... 14,384,856 119,879 Principal International Emerging Markets Fund, Institutional Class ............................................. 1,626,764 ----------- 19,444,528 ----------- MONEY MARKET SECURITIES - 0.58% 405,285 SSgA Prime Money Market Fund ............................................................ 405,285 ----------- TOTAL INVESTMENT COMPANIES - 100.02% (Cost $99,316,354**) ............................................ 69,632,290 NET OTHER ASSETS AND LIABILITIES - (0.02)% - -------------------------------------------------------------------------------------------------- (16,279) TOTAL NET ASSETS - 100.00% - -------------------------------------------------------------------------------------------------- $69,616,011
- -------------------------------------------------------------------------------- * Non-income producing. ** Aggregate cost for Federal tax purposes was $100,653,519. (R) Affiliated Company (see Note 10). See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 45 ================================================================================ MONEY MARKET FUND PORTFOLIO OF INVESTMENTS - -------------------------------------------------------------------------------- PORTFOLIO ALLOCATION AS A PERCENTAGE OF NET ASSETS AS OF DECEMBER 31, 2008 [PIE CHART OF PORTFOLIO ALLOCATION] Federal Home Loan Mortgage Corp. 27% Federal National Mortgage Association 27% U.S. Treasury Bills 19% Federal Home Loan Bank 12% Commercial Paper 8% Cash and Other Net Assets 7%
[END CHART] - --------------------------------------------------------------------------------
Par Value Value (Note 2) - --------- -------------- COMMERCIAL PAPER - 7.84% (A) - -------------------------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS - 2.51% $4,000,000 Proctor & Gamble Co. 2.100%, due 01/06/09 ............................................ $ 3,998,833 ------------ OIL, GAS & CONSUMABLE FUELS - 1.88% 3,000,000 Chevron Corp. 1.050%, due 01/13/09 ............................................ 2,998,950 ------------ PHARMACEUTICALS - 3.45% 5,500,000 Johnson & Johnson 0.750%, due 01/12/09 ............................................ 5,498,740 ------------ TOTAL COMMERCIAL PAPER (Cost $12,496,523) .............................................. 12,496,523 U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 85.06% - -------------------------------------------------------------------------------------------------- FEDERAL HOME LOAN BANK - 12.12% (A) 3,000,000 0.040%, due 01/05/09 ............................................ 2,999,987 2,053,000 0.010%, due 01/06/09 ............................................ 2,052,997 4,500,000 0.010%, due 01/07/09 ............................................ 4,499,992 760,000 0.050%, due 01/07/09 ............................................ 759,994 5,500,000 0.010%, due 01/08/09 ............................................ 5,499,989 3,500,000 0.030%, due 01/09/09 ............................................ 3,499,977 ------------ 19,312,936 ------------ FEDERAL HOME LOAN MORTGAGE CORP. - 27.29% 2,500,000 0.500%, due 01/02/09 (A)......................................... 2,499,965 4,585,000 0.010%, due 01/09/09 (A)......................................... 4,584,990 650,000 5.250%, due 01/12/09 ............................................ 650,990 3,000,000 0.050%, due 01/27/09 (A)......................................... 2,999,892 2,500,000 0.120%, due 01/30/09 (A)......................................... 2,499,758 2,500,000 0.550%, due 02/03/09 (A)......................................... 2,498,740 1,500,000 0.600%, due 02/03/09 (A)......................................... 1,499,175 5,500,000 0.900%, due 02/09/09 (A)......................................... 5,494,637 3,600,000 0.751%, due 02/11/09 (A)......................................... 3,596,921 5,250,000 1.000%, due 02/23/09 (A)......................................... 5,242,271 500,000 0.200%, due 03/09/09 (A)......................................... 499,814 2,500,000 0.250%, due 03/13/09 (A)......................................... 2,498,767 915,000 5.750%, due 03/15/09 ............................................ 925,188 3,000,000 0.320%, due 06/09/09 (A)......................................... 2,995,760 5,000,000 1.801%, due 10/08/09 (G) ........................................ 4,997,979 ------------ 43,484,847 ------------ FEDERAL NATIONAL MORTGAGE ASSOCIATION - 26.53% 7,508,000 5.250%, due 01/15/09 ............................................ 7,522,188 1,000,000 0.700%, due 01/20/09 (A)......................................... 999,631 5,750,000 0.750%, due 01/26/09 (A)......................................... 5,747,005 2,250,000 4.000%, due 01/26/09 ............................................ 2,255,330 5,000,000 1.010%, due 01/28/09 (A)......................................... 4,996,213 2,750,000 0.500%, due 01/30/09 (A)......................................... 2,748,892 3,907,000 0.600%, due 02/02/09 (A)......................................... 3,904,916 2,000,000 0.550%, due 02/09/09 (A)......................................... 1,998,808 3,766,000 0.050%, due 02/17/09 (A)......................................... 3,765,754 1,000,000 0.200%, due 02/17/09 (A)......................................... 999,739 5,500,000 1.220%, due 02/17/09 (A)......................................... 5,491,240 1,850,000 1.020%, due 02/27/09 (A)......................................... 1,847,012 ------------ 42,276,728 ------------ U.S. TREASURY BILLS - 19.12% (A) 1,750,000 0.727%, due 01/02/09 ............................................ 1,749,965 5,000,000 1.812%, due 01/29/09 ............................................ 4,992,953 5,750,000 0.490%, due 02/05/09 ............................................ 5,747,264 6,250,000 0.018%, due 03/12/09 ............................................ 6,249,787 6,000,000 0.010%, due 04/02/09 ............................................ 5,999,848 5,750,000 1.480%, due 04/23/09 ............................................ 5,723,534 ------------ 30,463,351 ------------ TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS (Cost $135,537,862) ............................................. 135,537,862
See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 46 ================================================================================ MONEY MARKET FUND PORTFOLIO OF INVESTMENTS - --------------------------------------------------------------------------------
Shares Value (Note 2) - ------ -------------- INVESTMENT COMPANIES - 6.79% 5,502,602 SEI Daily Income Trust Treasury II Fund ................................................ $ 5,502,602 5,310,174 SSgA US Treasury Money Market Fund ............................................................ 5,310,174 ------------ TOTAL INVESTMENT COMPANIES (Cost $10,812,776) .............................................. 10,812,776 TOTAL INVESTMENTS - 99.69% - -------------------------------------------------------------------------------------------------- (Cost $158,847,161**) ......................................................... 158,847,161 NET OTHER ASSETS AND LIABILITIES - 0.31% - -------------------------------------------------------------------------------------------------- 501,504 TOTAL NET ASSETS - 100.00% - -------------------------------------------------------------------------------------------------- $159,348,665
- -------------------------------------------------------------------------------- ** Aggregate cost for Federal tax purposes was $158,847,161. (A) Rate noted represents annualized yield at time of purchase. (G) Floating rate note. Date shown is next reset date. The industry classification method used for purposes of this report's allocation charts and portfolio of investments schedules may differ from the industry subclassification(s) used for Trust compliance purposes. See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 47 ================================================================================ BOND FUND PORTFOLIO OF INVESTMENTS - -------------------------------------------------------------------------------- PORTFOLIO ALLOCATION AS A PERCENTAGE OF NET ASSETS AS OF DECEMBER 31, 2008 [PIE CHART OF PORTFOLIO ALLOCATION] U.S. Government and Agency Obligations 33% Mortgage Backed 30% Corporate Notes and Bonds 24% Commercial Mortgage Backed 7% Asset Backed 3% Cash and Other Net Assets 2% Private Label Mortgage Backed 1%
[END CHART] - --------------------------------------------------------------------------------
Par Value Value (Note 2) - --------- -------------- ASSET BACKED - 2.89% - -------------------------------------------------------------------------------------------------- $ 652,045 ABSC Long Beach Home Equity Loan Trust, Series 2000-LB1, Class AF5 (M) 8.550%, due 09/21/30 ............................................ $ 649,924 1,543,674 Ameriquest Mortgage Securities, Inc., Series 2004-FR1, Class M2 (M) 5.207%, due 05/25/34 ............................................ 417,142 3,820,000 Chase Issuance Trust, Series 2007-A17, Class A 5.120%, due 10/15/14 ............................................ 3,433,718 2,720,000 Daimler Chrysler Auto Trust, Series 2007-A, Class A3A 5.000%, due 02/08/12 ............................................ 2,639,052 2,000,000 GMAC Mortgage Corp. Loan Trust, Series 2004-HE2, Class M1 (G) 3.950%, due 10/25/33 ............................................ 1,780,825 1,575,432 Green Tree Financial Corp., Series 1998-2, Class A6 (G) 6.810%, due 12/01/27 ............................................ 1,216,959 2,750,000 MBNA Master Credit Card Trust, Series 1999-B, Class A 5.900%, due 08/15/11 ............................................ 2,738,983 3,500,000 New Century Home Equity Loan Trust, Series 2003-5, Class AI5 (G) 5.500%, due 11/25/33 ............................................ 2,373,004 2,475,000 Renaissance Home Equity Loan Trust, Series 2005-4, Class M9 (M) 7.000%, due 02/25/36 ............................................ 1,202,221 1,395,104 Wells Fargo Home Equity Trust, Series 2004-2, Class M8A (C)(G) 3.471%, due 05/25/34 ............................................ 124,248 ------------ TOTAL ASSET BACKED (Cost $22,267,270) .............................................. 16,576,076 COMMERCIAL MORTGAGE BACKED - 6.91% - -------------------------------------------------------------------------------------------------- 626,103 Bear Stearns Commercial Mortgage Securities, Series 2001-TOP4, Class A1 5.060%, due 11/15/16 ............................................ 610,429 4,100,000 Bear Stearns Commercial Mortgage Securities, Series 2003-T10, Class E (C)(G) 5.540%, due 03/13/40 ............................................ 1,465,317 2,800,000 Bear Stearns Commercial Mortgage Securities, Series 2004-T16, Class A6 (G) 4.750%, due 02/13/46 ............................................ 2,299,248 1,810,000 Bear Stearns Commercial Mortgage Securities, Series 2005-T20, Class F (C)(G) 5.151%, due 10/12/42 ............................................ 438,096 4,200,000 Government National Mortgage Association, Series 2004-43, Class C (G) 5.008%, due 12/16/25 ............................................ 4,308,654 3,000,000 Greenwich Capital Commercial Funding Corp., Series 2004-GG1, Class A7 (G) 5.317%, due 06/10/36 ............................................ 2,495,830 3,549,866 LB-UBS Commercial Mortgage Trust, Series 2004-C1, Class A2 3.624%, due 01/15/29 ............................................ 3,447,243 3,200,000 LB-UBS Commercial Mortgage Trust, Series 2004-C8, Class A6 (G) 4.799%, due 12/15/29 ............................................ 2,646,496 5,550,000 Morgan Stanley Capital I, Series 2004-HQ4, Class A7 4.970%, due 04/14/40 ............................................ 4,661,697 5,740,000 Morgan Stanley Capital I, Series 2006-IQ12, Class ANM 5.310%, due 12/15/43 ............................................ 5,229,227 7,000,000 Morgan Stanley Capital I, Series 2004-T13, Class A3 4.390%, due 09/13/45 ............................................ 6,289,970 1,695,000 Multi Security Asset Trust, Series 2005-RR4A, Class J (C)(G) 5.880%, due 11/28/35 ............................................ 204,332
See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 48 ================================================================================ BOND FUND PORTFOLIO OF INVESTMENTS - --------------------------------------------------------------------------------
Par Value Value (Note 2) - --------- -------------- COMMERCIAL MORTGAGE BACKED (CONTINUED) - -------------------------------------------------------------------------------------------------- $5,490,258 Wachovia Bank Commercial Mortgage Trust, Series 2003-C8, Class A2 3.894%, due 11/15/35 ............................................ $ 5,473,558 ------------ TOTAL COMMERCIAL MORTGAGE BACKED (Cost $48,516,715) .............................................. 39,570,097 PRIVATE LABEL MORTGAGE BACKED - 0.92% - -------------------------------------------------------------------------------------------------- 5,241,906 Banc of America Alternative Loan Trust, Series 2005-12, Class 3CB1 6.000%, due 01/25/36 ............................................ 4,085,411 2,450,950 Banc of America Alternative Loan Trust, Series 2006-3, Class 2CB1 6.000%, due 04/25/36 ............................................ 1,174,924 ------------ TOTAL PRIVATE LABEL MORTGAGE BACKED (Cost $7,673,565) ............................................... 5,260,335 CORPORATE NOTES AND BONDS - 24.01% - -------------------------------------------------------------------------------------------------- CONSUMER DISCRETIONARY - 0.88% 2,500,000 American Association of Retired Persons (C) 7.500%, due 05/01/31 ............................................ 2,587,963 4,400,000 Erac USA Finance Co. (C) 6.700%, due 06/01/34 ............................................ 2,417,870 ------------ 5,005,833 ------------ CONSUMER STAPLES - 0.82% 1,250,000 Coca-Cola Enterprises, Inc. 4.375%, due 09/15/09 ............................................ 1,254,258 2,330,000 Diageo Capital PLC (D) 5.500%, due 09/30/16 ............................................ 2,233,335 1,165,000 PepsiCo, Inc./NC 4.650%, due 02/15/13 ............................................ 1,197,830 ------------ 4,685,423 ------------ ENERGY - 1.33% 2,460,000 Hess Corp. 7.875%, due 10/01/29 ............................................ 2,361,556 1,400,000 Transocean, Inc. 6.000%, due 03/15/18 ............................................ 1,275,121 2,310,000 Transocean, Ltd. 7.500%, due 04/15/31 ............................................ 2,172,162 2,275,000 Valero Energy Corp. 7.500%, due 04/15/32 ............................................ 1,818,915 ------------ 7,627,754 ------------ FINANCE - 4.70% 2,500,000 American General Finance Corp., Series H 4.625%, due 09/01/10 ............................................ 1,266,482 2,885,000 American General Finance Corp. 5.850%, due 06/01/13 ............................................ 1,095,763 1,165,000 Bank of America Corp. 5.750%, due 12/01/17 ............................................ 1,163,184 2,200,000 Bear Stearns Cos. LLC/The 7.250%, due 02/01/18 ............................................ 2,410,883 2,725,000 CIT Group, Inc. 7.625%, due 11/30/12 ............................................ 2,300,361 1,250,000 General Electric Global Insurance Holding Corp. 7.000%, due 02/15/26 ............................................ 1,183,999 1,680,000 General Electric Global Insurance Holding Corp. 7.750%, due 06/15/30 ............................................ 1,648,320 2,750,000 Goldman Sachs Group, Inc./The 5.700%, due 09/01/12 ............................................ 2,622,227 3,135,000 Lehman Brothers Holdings, Inc. (E) 5.750%, due 01/03/17 ............................................ 313 2,740,000 Merrill Lynch & Co., Inc. 6.150%, due 04/25/13 ............................................ 2,715,036 2,700,000 SLM Corp. 5.125%, due 08/27/12 ............................................ 2,020,569 1,250,000 Textron Financial Corp. 6.000%, due 11/20/09 ............................................ 1,167,544 750,000 UBS AG/Stamford Branch 5.750%, due 04/25/18 ............................................ 680,696 2,000,000 US Bank NA/Cincinnati, OH 6.300%, due 02/04/14 ............................................ 2,071,092 2,735,000 Wells Fargo & Co. 5.250%, due 10/23/12 ............................................ 2,804,456 2,065,000 Western Union Co./The 5.930%, due 10/01/16 ............................................ 1,764,782 ------------ 26,915,707 ------------ FOOD & DRUG RETAILERS - 0.58% 3,450,000 Medco Health Solutions, Inc. 7.250%, due 08/15/13 ............................................ 3,345,044 ------------ FORESTRY/PAPER - 0.34% 3,000,000 Weyerhaeuser Co. 7.375%, due 03/15/32 ............................................ 1,947,750 ------------ HEALTH CARE - 3.05% 2,600,000 Eli Lilly & Co. 6.570%, due 01/01/16 ............................................ 2,833,329 1,740,000 Genentech, Inc. 5.250%, due 07/15/35 ............................................ 1,649,457
See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 49 ================================================================================ BOND FUND PORTFOLIO OF INVESTMENTS - --------------------------------------------------------------------------------
Par Value Value (Note 2) - --------- -------------- CORPORATE NOTES AND BONDS (CONTINUED) - -------------------------------------------------------------------------------------------------- HEALTH CARE (CONTINUED) $3,960,000 Merck & Co., Inc./NJ 5.750%, due 11/15/36 ............................................ $ 4,169,975 3,500,000 Quest Diagnostics, Inc./DE 5.450%, due 11/01/15 ............................................ 3,070,585 3,600,000 WellPoint, Inc. 5.000%, due 12/15/14 ............................................ 3,127,011 2,370,000 Wyeth 6.500%, due 02/01/34 ............................................ 2,627,991 ------------ 17,478,348 ------------ INDUSTRIALS - 2.94% 760,000 Boeing Co. 8.625%, due 11/15/31 ............................................ 963,683 1,380,000 Boeing Co. 6.875%, due 10/15/43 ............................................ 1,439,055 1,140,000 DR Horton, Inc. 5.250%, due 02/15/15 ............................................ 718,200 585,000 EI Du Pont de Nemours & Co. 5.000%, due 01/15/13 ............................................ 590,293 3,200,000 General Electric Co. 5.000%, due 02/01/13 ............................................ 3,236,131 1,800,000 GMAC LLC 7.250%, due 03/02/11 ............................................ 1,529,703 1,450,000 Lockheed Martin Corp. 7.650%, due 05/01/16 ............................................ 1,671,202 2,465,000 Waste Management, Inc. 7.125%, due 12/15/17 ............................................ 2,296,236 2,250,000 Westvaco Corp. 8.200%, due 01/15/30 ............................................ 1,712,439 2,870,000 WM Wrigley Jr. Co. 4.300%, due 07/15/10 ............................................ 2,669,100 ------------ 16,826,042 ------------ MEDIA - 1.11% 3,080,000 Comcast Cable Communications Holdings, Inc. 9.455%, due 11/15/22 ............................................ 3,450,703 3,000,000 Rogers Cable, Inc. (D) 6.250%, due 06/15/13 ............................................ 2,871,549 ------------ 6,322,252 ------------ OFFICE ELECTRONICS - 0.40% 2,640,000 Xerox Corp. 6.875%, due 08/15/11 ............................................ 2,282,034 ------------ REAL ESTATE INVESTMENT TRUSTS - 0.35% 2,725,000 HCP, Inc. 6.700%, due 01/30/18 ............................................ 1,306,700 1,060,000 Simon Property Group L.P. 5.875%, due 03/01/17 ............................................ 707,883 ------------ 2,014,583 ------------ TELECOMMUNICATIONS - 1.42% 2,400,000 Cisco Systems, Inc. 5.500%, due 02/22/16 ............................................ 2,542,022 4,225,000 New Cingular Wireless Services, Inc. 7.875%, due 03/01/11 ............................................ 4,373,902 1,750,000 Sprint Nextel Corp. 6.000%, due 12/01/16 ............................................ 1,233,750 ------------ 8,149,674 ------------ TRANSPORTATION - 1.01% 2,925,000 Burlington Northern Santa Fe Corp. 8.125%, due 04/15/20 ............................................ 3,185,331 1,268,000 Norfolk Southern Corp. 5.590%, due 05/17/25 ............................................ 1,136,517 1,400,000 Norfolk Southern Corp. 7.050%, due 05/01/37 ............................................ 1,464,014 7,633 Southwest Airlines Co. 1994-A Pass Through Trust, Series A3 8.700%, due 07/01/11 ............................................ 7,623 ------------ 5,793,485 ------------ UTILITIES - 5.08% 2,750,000 Consumers Energy Co. 5.650%, due 04/15/20 ............................................ 2,575,339 2,000,000 Energy East Corp. 8.050%, due 11/15/10 ............................................ 2,079,260 2,940,000 Illinois Power Co. 7.500%, due 06/15/09 ............................................ 2,951,448 3,445,000 Indianapolis Power & Light Co. (C) 6.050%, due 10/01/36 ............................................ 3,032,324 2,925,000 Pacific Gas & Electric Co. 6.050%, due 03/01/34 ............................................ 3,106,523 2,400,000 Progress Energy, Inc. 7.750%, due 03/01/31 ............................................ 2,402,906 3,250,000 Sierra Pacific Power Co., Series M 6.000%, due 05/15/16 ............................................ 3,110,123 3,500,000 Southern Power Co., Series B 6.250%, due 07/15/12 ............................................ 3,577,735 2,165,000 Southwestern Electric Power Co., Series E 5.550%, due 01/15/17 ............................................ 1,993,391 1,165,000 Virginia Electric and Power Co. 5.100%, due 11/30/12 ............................................ 1,138,930 3,000,000 Wisconsin Electric Power Co. 6.500%, due 06/01/28 ............................................ 3,105,006 ------------ 29,072,985 ------------ TOTAL CORPORATE NOTES AND BONDS (Cost $158,193,212) ............................................. 137,466,914
See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 50 ================================================================================ BOND FUND PORTFOLIO OF INVESTMENTS - --------------------------------------------------------------------------------
Par Value Value (Note 2) - --------- -------------- MORTGAGE BACKED - 30.26% - -------------------------------------------------------------------------------------------------- FEDERAL HOME LOAN MORTGAGE CORP. - 4.36% $3,293,856 5.000%, due 05/01/18 Pool # E96322 ................................................... $ 3,400,318 103,137 8.000%, due 06/01/30 Pool # C01005 ................................................... 109,403 437,857 7.000%, due 03/01/31 Pool # C48129 ................................................... 460,146 258,972 6.500%, due 03/01/32 Pool # C65648 ................................................... 270,221 3,806,621 5.000%, due 07/01/33 Pool # A11325 ................................................... 3,899,569 799,640 6.000%, due 10/01/34 Pool # A28439 ................................................... 825,537 813,709 6.000%, due 10/01/34 Pool # A28598 ................................................... 840,062 5,856,620 5.500%, due 11/01/34 Pool # A28282 ................................................... 6,006,030 506,906 5.000%, due 04/01/35 Pool # A32314 ................................................... 518,729 1,257,402 5.000%, due 04/01/35 Pool # A32315 ................................................... 1,286,730 1,305,002 5.000%, due 04/01/35 Pool # A32316 ................................................... 1,335,440 384,479 5.000%, due 04/01/35 Pool # A32509 ................................................... 393,446 5,528,537 5.000%, due 01/01/37 Pool # A56371 ................................................... 5,656,620 ------------ 25,002,251 ------------ FEDERAL NATIONAL MORTGAGE ASSOCIATION - 25.80% 2,526,269 4.000%, due 04/01/15 Pool # 255719 ................................................... 2,562,119 3,292,380 5.500%, due 04/01/16 Pool # 745444 ................................................... 3,442,839 177,951 6.000%, due 05/01/16 Pool # 582558 ................................................... 185,402 861,563 5.500%, due 09/01/17 Pool # 657335 ................................................... 891,980 1,122,195 5.500%, due 02/01/18 Pool # 673194 ................................................... 1,161,813 3,483,044 5.000%, due 05/01/20 Pool # 813965 ................................................... 3,584,736 3,371,840 4.500%, due 09/01/20 Pool # 835465 ................................................... 3,455,534 444,512 6.000%, due 05/01/21 Pool # 253847 ................................................... 460,284 148,090 7.000%, due 12/01/29 Pool # 762813 ................................................... 156,803 201,187 7.000%, due 11/01/31 Pool # 607515 ................................................... 212,885 324,135 6.500%, due 03/01/32 Pool # 631377 ................................................... 338,215 5,285 7.000%, due 04/01/32 Pool # 641518 ................................................... 5,592 381,523 7.000%, due 05/01/32 Pool # 644591 ................................................... 403,706 3,283,329 6.500%, due 06/01/32 Pool # 545691 ................................................... 3,425,948 4,594,285 5.500%, due 04/01/33 Pool # 690206 ................................................... 4,720,824 5,765,287 5.000%, due 10/01/33 Pool # 254903 ................................................... 5,901,557 5,849,565 5.500%, due 11/01/33 Pool # 555880 ................................................... 6,010,678 106,819 5.000%, due 05/01/34 Pool # 782214 ................................................... 109,277 1,456,435 5.000%, due 06/01/34 Pool # 778891 ................................................... 1,489,950 5,764,002 5.500%, due 06/01/34 Pool # 780384 ................................................... 5,919,155 85,152 7.000%, due 07/01/34 Pool # 792636 ................................................... 89,631 642,197 5.500%, due 08/01/34 Pool # 793647 ................................................... 659,484 2,837,144 5.500%, due 03/01/35 Pool # 810075 ................................................... 2,911,740 3,053,021 5.500%, due 03/01/35 Pool # 815976 ................................................... 3,133,293 3,580,556 5.500%, due 07/01/35 Pool # 825283 ................................................... 3,674,698 4,441,950 5.000%, due 08/01/35 Pool # 829670 ................................................... 4,541,389 2,110,259 5.500%, due 08/01/35 Pool # 826872 ................................................... 2,165,743 3,447,389 5.000%, due 09/01/35 Pool # 820347 ................................................... 3,524,563 3,594,087 5.000%, due 09/01/35 Pool # 835699 ................................................... 3,674,545 6,014,843 5.000%, due 10/01/35 Pool # 797669 ................................................... 6,149,493 862,310 5.500%, due 10/01/35 Pool # 836912 ................................................... 884,982 4,915,192 5.000%, due 11/01/35 Pool # 844809 ................................................... 5,025,225 4,870,021 5.000%, due 12/01/35 Pool # 850561 ................................................... 4,979,043 1,732,415 5.500%, due 02/01/36 Pool # 851330 ................................................... 1,777,965 1,805,443 5.500%, due 10/01/36 Pool # 896340 ................................................... 1,852,913
See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 51 ================================================================================ BOND FUND PORTFOLIO OF INVESTMENTS - --------------------------------------------------------------------------------
Par Value Value (Note 2) - --------- -------------- MORTGAGE BACKED (CONTINUED) - -------------------------------------------------------------------------------------------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION (CONTINUED) $ 9,285,492 5.500%, due 10/01/36 Pool # 901723 ................................................... $ 9,529,632 4,941,080 6.500%, due 10/01/36 Pool # 894118 ................................................... 5,137,951 5,417,432 6.000%, due 11/01/36 Pool # 902510 ................................................... 5,599,779 4,664,088 5.500%, due 02/01/37 Pool # 905140 ................................................... 4,786,719 5,045,170 5.500%, due 05/01/37 Pool # 899323 ................................................... 5,177,537 3,127,402 5.500%, due 05/01/37 Pool # 928292 ................................................... 3,209,454 5,688,572 6.000%, due 10/01/37 Pool # 947563 ................................................... 5,862,707 6,089,477 5.500%, due 07/01/38 Pool # 986973 ................................................... 6,248,633 6,146,812 5.000%, due 08/01/38 Pool # 988934 ................................................... 6,282,495 6,158,558 6.500%, due 08/01/38 Pool # 987711 ................................................... 6,402,976 ------------ 147,721,887 ------------ GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 0.10% 73,136 8.000%, due 10/20/15 Pool # 002995 ................................................... 77,755 245,553 6.500%, due 02/20/29 Pool # 002714 ................................................... 258,516 215,925 6.500%, due 04/20/31 Pool # 003068 ................................................... 227,382 ------------ 563,653 ------------ TOTAL MORTGAGE BACKED (Cost $166,995,915) ............................................. 173,287,791 U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 32.56% - -------------------------------------------------------------------------------------------------- FEDERAL FARM CREDIT BANK - 0.83% 4,000,000 5.875%, due 10/03/16 ............................................ 4,781,868 ------------ FEDERAL HOME LOAN MORTGAGE CORP. - 1.55% 2,500,000 4.875%, due 11/15/13 ............................................ 2,789,335 5,500,000 4.500%, due 01/15/14 ............................................ 6,066,500 ------------ 8,855,835 ------------ FEDERAL NATIONAL MORTGAGE ASSOCIATION - 1.20% 2,400,000 5.250%, due 08/01/12 ............................................ 2,529,648 3,905,000 4.625%, due 10/15/14 ............................................ 4,335,847 ------------ 6,865,495 ------------ U.S. TREASURY BONDS - 3.14% 1,000,000 10.625%, due 08/15/15 ........................................... 1,513,984 7,350,000 6.625%, due 02/15/27 ............................................ 10,991,697 4,000,000 4.500%, due 05/15/38 ............................................ 5,459,376 ------------ 17,965,057 ------------ U.S. TREASURY NOTES - 25.84% 12,000,000 2.625%, due 03/15/09 ............................................ 12,058,596 3,640,000 4.875%, due 05/31/09 ............................................ 3,709,386 2,000,000 3.500%, due 02/15/10 ............................................ 2,071,094 1,400,000 2.125%, due 04/30/10 ............................................ 1,433,468 9,625,000 3.875%, due 05/15/10 ............................................ 10,090,831 4,750,000 3.875%, due 09/15/10 ............................................ 5,030,174 13,000,000 4.500%, due 11/15/10 ............................................ 13,957,736 1,485,000 4.750%, due 03/31/11 ............................................ 1,617,141 23,100,000 4.625%, due 12/31/11 ............................................ 25,581,448 6,425,000 4.625%, due 02/29/12 ............................................ 7,134,763 6,000,000 4.875%, due 06/30/12 ............................................ 6,743,904 4,000,000 3.625%, due 05/15/13 ............................................ 4,395,000 6,150,000 4.250%, due 08/15/14 ............................................ 7,068,656 6,565,000 4.250%, due 11/15/14 ............................................ 7,595,397 2,750,000 4.000%, due 02/15/15 ............................................ 3,133,281 8,900,000 4.250%, due 08/15/15 ............................................ 10,335,125 13,100,000 4.625%, due 02/15/17 ............................................ 15,492,794 5,370,000 4.500%, due 05/15/17 ............................................ 6,301,362 3,600,000 4.250%, due 11/15/17 ............................................ 4,193,719 ------------ 147,943,875 ------------ TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS (Cost $166,104,101) ................ 186,412,130 Shares - ------ INVESTMENT COMPANY - 1.29% - -------------------------------------------------------------------------------------------------- 7,367,332 SSgA Prime Money Market Fund ............................................................ 7,367,332 ------------ TOTAL INVESTMENT COMPANY (Cost $7,367,332) ............................................... 7,367,332 TOTAL INVESTMENTS - 98.84% - -------------------------------------------------------------------------------------------------- (Cost $577,118,110**) ......................................................... 565,940,675 NET OTHER ASSETS AND LIABILITIES - 1.16% - -------------------------------------------------------------------------------------------------- 6,621,728 TOTAL NET ASSETS - 100.00% - -------------------------------------------------------------------------------------------------- $572,562,403
See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 52 ================================================================================ BOND FUND PORTFOLIO OF INVESTMENTS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ** Aggregate cost for Federal tax purposes was $577,424,124. (C) Security sold within terms of a private placement memorandum exempt from registration under section 144A of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "qualified institutional investors." The securities have been determined to be liquid under guidelines established by the Board of Trustees. (D) Notes and bonds, issued by foreign entities, denominated in U.S. dollars. The aggregate of these securities is 0.89% of total net assets. (E) In Default. Issuer is bankrupt. (G) Floating rate or variable rate note. Rate shown is as of December 31, 2008. (M) Stated interest rate is contingent upon sufficient collateral market value. If collateral market value falls below a stated level, the issuer will either initiate a clean-up call or increase the stated interest rate. PLC Public Limited Company. The industry classification method used for purposes of this report's allocation charts and portfolio of investments schedules may differ from the industry subclassification(s) used for Trust compliance purposes. See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 53 ================================================================================ HIGH INCOME FUND PORTFOLIO OF INVESTMENTS - -------------------------------------------------------------------------------- SECTOR ALLOCATION AS A PERCENTAGE OF NET ASSETS AS OF DECEMBER 31, 2008 Health Care 12% Utilities 11% Cash and Other Net Assets 9% Media - Cable 8% Telecommunications 8% Support Services 7% Media - Diversified and Services 5% Oil and Gas 5% Environmental 4% Technology 4% Gaming 3% Beverage/Food 3% Packaging 3% Consumer Products 3% Forestry/Paper 2% Transportation 2% Media - Broadcasting 2% General Industrial and Manufacturing 1% Chemicals 1% Automotive 1% Aerospace/Defense 1% Metals and Mining 1% Leisure and Entertainment 1% Food and Drug Retailers 1% Non Food and Drug Retailers 1% Real Estate Investment Trusts 1% Restaurants 0%* Hotels 0%* Investment Management 0%*
* Rounds to 0% - --------------------------------------------------------------------------------
Par Value Value (Note 2) - --------- -------------- CORPORATE NOTES AND BONDS - 90.73% - -------------------------------------------------------------------------------------------------- AEROSPACE/DEFENSE - 1.24% $ 250,000 Alliant Techsystems, Inc. 6.750%, due 04/01/16 ............................................ $ 225,000 500,000 DRS Techologies, Inc. 6.625%, due 02/01/16 ............................................ 500,000 500,000 Moog, Inc. (C) 7.250%, due 06/15/18 ............................................ 400,000 ------------ 1,125,000 ------------ AUTOMOTIVE - 1.30% 1,300,000 Goodyear Tire & Rubber Co./The (G) 6.318%, due 12/01/09 ............................................ 1,183,000 ------------ BEVERAGE/FOOD - 2.76% 500,000 B&G Foods, Inc. 8.000%, due 10/01/11 ............................................ 425,000 500,000 Constellation Brands, Inc. 7.250%, due 05/15/17 ............................................ 472,500 250,000 Constellation Brands, Inc., Series B 8.125%, due 01/15/12 ............................................ 236,250 1,000,000 Del Monte Corp. 8.625%, due 12/15/12 ............................................ 970,000 180,000 Michael Foods, Inc. 8.000%, due 11/15/13 ............................................ 154,800 350,000 NBTY, Inc. 7.125%, due 10/01/15 ............................................ 248,500 ------------ 2,507,050 ------------ CHEMICALS - 1.51% 450,000 Airgas, Inc. (C) 7.125%, due 10/01/18 ............................................ 384,750 500,000 Nalco Co. 7.750%, due 11/15/11 ............................................ 480,000 600,000 Nalco Co. 8.875%, due 11/15/13 ............................................ 507,000 ------------ 1,371,750 ------------ CONSUMER PRODUCTS - 2.63% 150,000 Church & Dwight Co., Inc. 6.000%, due 12/15/12 ............................................ 144,000 240,000 Da-Lite Screen Co., Inc. 9.500%, due 05/15/11 ............................................ 211,200 500,000 Jarden Corp. 7.500%, due 05/01/17 ............................................ 341,250 900,000 Leslie's Poolmart 7.750%, due 02/01/13 ............................................ 720,000 500,000 Visant Corp. 7.625%, due 10/01/12 ............................................ 410,000 750,000 Visant Holding Corp. 8.750%, due 12/01/13 ............................................ 555,000 ------------ 2,381,450 ------------ ENVIRONMENTAL - 3.59% 1,500,000 Allied Waste North America, Inc., Series B 7.125%, due 05/15/16 ............................................ 1,365,000 1,000,000 Casella Waste Systems, Inc. 9.750%, due 02/01/13 ............................................ 800,000 500,000 Waste Services, Inc. 9.500%, due 04/15/14 ............................................ 355,000 1,000,000 WCA Waste Corp. 9.250%, due 06/15/14 ............................................ 740,000 ------------ 3,260,000 ------------ FOOD & DRUG RETAILERS - 0.71% 250,000 Stater Brothers Holdings 8.125%, due 06/15/12 ............................................ 226,250
See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 54 ================================================================================ HIGH INCOME FUND PORTFOLIO OF INVESTMENTS - --------------------------------------------------------------------------------
Par Value Value (Note 2) - --------- -------------- CORPORATE NOTES AND BONDS (CONTINUED) - -------------------------------------------------------------------------------------------------- FOOD & DRUG RETAILERS (CONTINUED) $ 500,000 Stater Brothers Holdings 7.750%, due 04/15/15 ............................................ $ 420,000 ------------ 646,250 ------------ FORESTRY/PAPER - 2.02% 250,000 Domtar Corp. 7.875%, due 10/15/11 ............................................ 212,500 750,000 Georgia-Pacific LLC (C) 7.125%, due 01/15/17 ............................................ 630,000 250,000 Graphic Packaging International, Inc. 8.500%, due 08/15/11 ............................................ 208,750 750,000 Rock-Tenn Co. (C) 9.250%, due 03/15/16 ............................................ 697,500 200,000 Verso Paper Holdings LLC/ Verso Paper, Inc., Series B 9.125%, due 08/01/14 ............................................ 79,000 ------------ 1,827,750 ------------ GAMING - 3.31% 200,000 Chukchansi Economic Development Authority (C)(G) 6.095%, due 11/15/12 ............................................ 99,500 650,000 Global Cash Access LLC/ Global Cash Finance Corp. 8.750%, due 03/15/12 ............................................ 520,000 300,000 Penn National Gaming, Inc. 6.750%, due 03/01/15 ............................................ 228,000 100,000 Pinnacle Entertainment, Inc. 8.250%, due 03/15/12 ............................................ 76,000 750,000 Scientific Games Corp. (C) 7.875%, due 06/15/16 ............................................ 603,750 1,000,000 Seneca Gaming Corp., Series B 7.250%, due 05/01/12 ............................................ 805,000 750,000 Shuffle Master, Inc. (P) 1.250%, due 04/15/24 ............................................ 671,250 ------------ 3,003,500 ------------ GENERAL INDUSTRIAL & MANUFACTURING - 1.54% 750,000 Baldor Electric Co. 8.625%, due 02/15/17 ............................................ 558,750 250,000 Chart Industries, Inc. 9.125%, due 10/15/15 ............................................ 187,500 750,000 SPX Corp. (C) 7.625%, due 12/15/14 ............................................ 652,500 ------------ 1,398,750 ------------ HEALTH CARE - 11.58% 400,000 Advanced Medical Optics, Inc. (P) 3.250%, due 08/01/26 ............................................ 140,000 750,000 Biomet, Inc. 10.000%, due 10/15/17 ........................................... 720,000 750,000 Carriage Services, Inc. 7.875%, due 01/15/15 ............................................ 592,500 1,250,000 CHS/Community Health Systems, Inc. 8.875%, due 07/15/15 ............................................ 1,150,000 1,500,000 DaVita, Inc. 7.250%, due 03/15/15 ............................................ 1,425,000 650,000 DJO Finance LLC/DJO Finance Corp. 10.875%, due 11/15/14 ........................................... 468,000 750,000 HCA, Inc./DE 8.750%, due 09/01/10 ............................................ 720,000 500,000 HCA, Inc./DE 6.750%, due 07/15/13 ............................................ 315,000 1,250,000 HCA, Inc./DE 9.250%, due 11/15/16 ............................................ 1,146,875 500,000 IASIS Healthcare LLC/ IASIS Capital Corp. 8.750%, due 06/15/14 ............................................ 387,500 750,000 Psychiatric Solutions, Inc. 7.750%, due 07/15/15 ............................................ 551,250 350,000 Res-Care, Inc. 7.750%, due 10/15/13 ............................................ 285,250 500,000 Service Corp. International/US 7.375%, due 10/01/14 ............................................ 425,000 500,000 Stewart Enterprises, Inc. 6.250%, due 02/15/13 ............................................ 387,500 650,000 Universal Hospital Services, Inc. (G) 5.943%, due 06/01/15 ............................................ 396,500 600,000 Vanguard Health Holding Co. II LLC 9.000%, due 10/01/14 ............................................ 501,000 1,000,000 Warner Chilcott Corp. 8.750%, due 02/01/15 ............................................ 890,000 ------------ 10,501,375 ------------ HOTELS - 0.16% 200,000 Host Hotels & Resorts L.P., Series O, REIT 6.375%, due 03/15/15 ............................................ 149,000 ------------ INVESTMENT MANAGEMENT - 0.07% 300,000 Nuveen Investments, Inc. (C) 10.500%, due 11/15/15 ........................................... 66,375 ------------
See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 55 ================================================================================ HIGH INCOME FUND PORTFOLIO OF INVESTMENTS - --------------------------------------------------------------------------------
Par Value Value (Note 2) - --------- -------------- CORPORATE NOTES AND BONDS (CONTINUED) - -------------------------------------------------------------------------------------------------- LEISURE & ENTERTAINMENT - 0.84% $ 650,000 Speedway Motorsports, Inc. 6.750%, due 06/01/13 ............................................ $ 468,000 400,000 Vail Resorts, Inc. 6.750%, due 02/15/14 ............................................ 298,000 ------------ 766,000 ------------ MEDIA - BROADCASTING - 1.61% 314,000 Allbritton Communications Co. 7.750%, due 12/15/12 ............................................ 154,252 750,000 British Sky Broadcasting Group PLC (D) 6.875%, due 02/23/09 ............................................ 753,440 500,000 British Sky Broadcasting Group PLC (D) 8.200%, due 07/15/09 ............................................ 508,272 64,000 Sinclair Television Group, Inc. 8.000%, due 03/15/12 ............................................ 48,160 ------------ 1,464,124 ------------ MEDIA - CABLE - 8.38% 1,500,000 Cablevision Systems Corp., Series B (G) 8.334%, due 04/01/09 ............................................ 1,496,250 750,000 Cablevision Systems Corp., Series B 8.000%, due 04/15/12 ............................................ 667,500 250,000 Comcast Cable Communications LLC 6.875%, due 06/15/09 ............................................ 251,172 1,000,000 Comcast Corp. (G) 5.119%, due 07/14/09 ............................................ 986,340 500,000 DirecTV Holdings LLC/ DirecTV Financing Co. 8.375%, due 03/15/13 ............................................ 497,500 1,250,000 Echostar DBS Corp. 7.125%, due 02/01/16 ............................................ 1,043,750 600,000 Mediacom Broadband LLC/ Mediacom Broadband Corp. 8.500%, due 10/15/15 ............................................ 390,750 1,000,000 Time Warner, Inc. (G) 2.405%, due 11/13/09 ............................................ 962,525 500,000 Videotron Ltee (D) 6.875%, due 01/15/14 ............................................ 442,500 250,000 Videotron Ltee (C)(D) 9.125%, due 04/15/18 ............................................ 232,500 850,000 Virgin Media Finance PLC (D) 9.125%, due 08/15/16 ............................................ 629,000 ------------ 7,599,787 ------------ MEDIA - DIVERSIFIED & SERVICES - 5.38% 1,000,000 Hughes Network Systems LLC/ HNS Finance Corp. 9.500%, due 04/15/14 ............................................ 812,500 750,000 Intelsat Jackson Holdings, Ltd. (D) 11.250%, due 06/15/16 ........................................... 682,500 1,000,000 Intelsat Subsidiary Holding Co., Ltd. (C)(D) 8.500%, due 01/15/13 ............................................ 925,000 210,000 Lamar Media Corp. 7.250%, due 01/01/13 ............................................ 167,475 500,000 Lamar Media Corp., Series C 6.625%, due 08/15/15 ............................................ 361,250 750,000 Quebecor Media, Inc. (D) 7.750%, due 03/15/16 ............................................ 506,250 1,450,000 Viacom, Inc. (G) 2.271%, due 06/16/09 ............................................ 1,422,665 ------------ 4,877,640 ------------ METALS AND MINING - 1.22% 500,000 Arch Western Finance LLC 6.750%, due 07/01/13 ............................................ 435,000 250,000 Freeport-McMoRan Copper & Gold, Inc. 8.375%, due 04/01/17 ............................................ 205,000 500,000 Peabody Energy Corp. 7.375%, due 11/01/16 ............................................ 470,000 ------------ 1,110,000 ------------ NON FOOD & DRUG RETAILERS - 0.71% 750,000 Sally Holdings LLC/ Sally Capital, Inc. 9.250%, due 11/15/14 ............................................ 645,000 ------------ OIL & GAS - 5.24% 500,000 Cimarex Energy Co. 7.125%, due 05/01/17 ............................................ 390,000 1,000,000 Complete Production Services, Inc. 8.000%, due 12/15/16 ............................................ 630,000 700,000 Compton Petroleum Finance Corp. 7.625%, due 12/01/13 ............................................ 210,000 500,000 Encore Acquisition Co. 6.000%, due 07/15/15 ............................................ 322,500 1,000,000 EXCO Resources, Inc. 7.250%, due 01/15/11 ............................................ 780,000 250,000 Helix Energy Solutions Group, Inc. (C) 9.500%, due 01/15/16 ............................................ 132,500
See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 56 ================================================================================ HIGH INCOME FUND PORTFOLIO OF INVESTMENTS - --------------------------------------------------------------------------------
Par Value Value (Note 2) - --------- -------------- CORPORATE NOTES AND BONDS (CONTINUED) - -------------------------------------------------------------------------------------------------- OIL & GAS (CONTINUED) $ 750,000 Key Energy Services, Inc. 8.375%, due 12/01/14 ............................................ $ 495,000 500,000 Mariner Energy, Inc. 8.000%, due 05/15/17 ............................................ 260,000 1,500,000 Petroplus Finance, Ltd. (C)(D) 7.000%, due 05/01/17 ............................................ 915,000 250,000 Range Resources Corp. 6.375%, due 03/15/15 ............................................ 202,500 500,000 Range Resources Corp. 7.250%, due 05/01/18 ............................................ 417,500 ------------ 4,755,000 ------------ PACKAGING - 2.75% 1,000,000 Ball Corp. 6.625%, due 03/15/18 ............................................ 895,000 750,000 BWAY Corp. 10.000%, due 10/15/10 ........................................... 637,500 500,000 Crown Americas LLC/ Crown Americas Capital Corp. 7.625%, due 11/15/13 ............................................ 495,000 250,000 Greif, Inc. 6.750%, due 02/01/17 ............................................ 221,250 250,000 Owens-Illinois, Inc. 7.500%, due 05/15/10 ............................................ 247,500 ------------ 2,496,250 ------------ REAL ESTATE INVESTMENT TRUSTS - 0.59% 700,000 Ventas Realty L.P./ Ventas Capital Corp. 6.750%, due 04/01/17 ............................................ 532,000 ------------ RESTAURANTS - 0.28% 500,000 Seminole Hard Rock Entertainment, Inc. (C)(G) 4.496%, due 03/15/14 ............................................ 253,750 ------------ SUPPORT SERVICES - 7.13% 1,750,000 ARAMARK Corp. 8.500%, due 02/01/15 ............................................ 1,583,750 500,000 Cardtronics, Inc. 9.250%, due 08/15/13 ............................................ 335,000 1,000,000 Corrections Corp. of America 7.500%, due 05/01/11 ............................................ 990,000 750,000 Education Management LLC/ Education Management Finance Corp. 10.250%, due 06/01/16 ........................................... 543,750 1,000,000 FTI Consulting, Inc. 7.750%, due 10/01/16 ............................................ 822,500 300,000 Iron Mountain, Inc. 8.625%, due 04/01/13 ............................................ 282,000 990,000 Iron Mountain, Inc. 7.750%, due 01/15/15 ............................................ 888,525 500,000 Mac-Gray Corp. 7.625%, due 08/15/15 ............................................ 460,000 750,000 VeriFone Holdings, Inc. (C)(P) 1.375%, due 06/15/12 ............................................ 315,000 450,000 West Corp. 9.500%, due 10/15/14 ............................................ 247,500 ------------ 6,468,025 ------------ TECHNOLOGY - 3.56% 750,000 Celestica, Inc. (D) 7.625%, due 07/01/13 ............................................ 615,000 500,000 Flextronics International, Ltd. (D) 6.500%, due 05/15/13 ............................................ 395,000 1,000,000 Sungard Data Systems, Inc. 9.125%, due 08/15/13 ............................................ 865,000 750,000 Sungard Data Systems, Inc. (C) 10.625%, due 05/15/15 ........................................... 641,250 500,000 Sungard Data Systems, Inc. 10.250%, due 08/15/15 ........................................... 330,000 750,000 Syniverse Technologies, Inc., Series B 7.750%, due 08/15/13 ............................................ 383,438 ------------ 3,229,688 ------------ TELECOMMUNICATIONS - 7.57% 1,000,000 Centennial Communications Corp. (G) 9.633%, due 01/01/13 ............................................ 970,000 1,000,000 Cincinnati Bell, Inc. 8.375%, due 01/15/14 ............................................ 770,000 700,000 Cincinnati Bell Telephone Co. LLC 6.300%, due 12/01/28 ............................................ 441,000 1,250,000 Frontier Communications Corp. 6.625%, due 03/15/15 ............................................ 912,500 1,500,000 Nordic Telephone Co. Holdings ApS (C)(D) 8.875%, due 05/01/16 ............................................ 1,050,000 400,000 Qwest Capital Funding, Inc. 7.250%, due 02/15/11 ............................................ 336,000 625,000 Qwest Communications International, Inc. (G) 5.649%, due 02/15/09 ............................................ 621,875 750,000 Qwest Corp. 7.875%, due 09/01/11 ............................................ 690,000 1,000,000 Windstream Corp. 8.625%, due 08/01/16 ............................................ 885,000 250,000 Windstream Corp. 7.000%, due 03/15/19 ............................................ 192,500 ------------ 6,868,875 ------------ TRANSPORTATION - 1.83% 500,000 Bristow Group, Inc. 6.125%, due 06/15/13 ............................................ 360,000
See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 57 ================================================================================ HIGH INCOME FUND PORTFOLIO OF INVESTMENTS - --------------------------------------------------------------------------------
Par Value Value (Note 2) - --------- -------------- CORPORATE NOTES AND BONDS (CONTINUED) - -------------------------------------------------------------------------------------------------- TRANSPORTATION (CONTINUED) $ 750,000 Bristow Group, Inc. 7.500%, due 09/15/17 ............................................ $ 502,500 755,000 Gulfmark Offshore, Inc. 7.750%, due 07/15/14 ............................................ 536,050 400,000 Hornbeck Offshore Services, Inc., Series B 6.125%, due 12/01/14 ............................................ 260,000 ------------ 1,658,550 ------------ UTILITIES - 11.22% 500,000 Dynegy Holdings, Inc. 6.875%, due 04/01/11 ............................................ 437,500 500,000 Dynegy Holdings, Inc. 8.375%, due 05/01/16 ............................................ 355,000 1,500,000 Edison Mission Energy 7.200%, due 05/15/19 ............................................ 1,230,000 1,700,000 El Paso Corp. 7.250%, due 06/01/18 ............................................ 1,349,242 1,000,000 Energy Future Holdings Corp. (C) 10.875%, due 11/01/17 ........................................... 710,000 1,000,000 Ferrellgas Partners L.P./ Ferrellgas Partners Finance Corp. 8.750%, due 06/15/12 ............................................ 700,000 500,000 Inergy L.P./Inergy Finance Corp. 6.875%, due 12/15/14 ............................................ 390,000 1,000,000 MarkWest Energy Partners L.P./ MarkWest Energy Finance Corp., Series B 8.750%, due 04/15/18 ............................................ 620,000 500,000 Mirant Americas Generation LLC 8.300%, due 05/01/11 ............................................ 485,000 1,750,000 NRG Energy, Inc. 7.375%, due 02/01/16 ............................................ 1,627,500 500,000 NRG Energy, Inc. 7.375%, due 01/15/17 ............................................ 460,000 1,000,000 Suburban Propane Partners L.P./ Suburban Energy Finance Corp. 6.875%, due 12/15/13 ............................................ 820,000 750,000 Texas Competitive Electric Holdings Co. LLC (B)(C) 10.500%, due 11/01/15 ........................................... 532,500 500,000 Williams Cos., Inc. 7.125%, due 09/01/11 ............................................ 460,000 ------------ 10,176,742 ------------ TOTAL CORPORATE NOTES AND BONDS (Cost $100,424,100) ............................................. 82,322,681 CERTIFICATE OF DEPOSIT - 3.04% 2,756,324 State Street Eurodollar 0.010%, due 01/02/09 ............................................ 2,756,324 ------------ TOTAL CERTIFICATE OF DEPOSIT (Cost $2,756,324) ............................................... 2,756,324 Shares - ------ INVESTMENT COMPANY - 4.06% - -------------------------------------------------------------------------------------------------- 3,680,562 SSgA Prime Money Market Fund ..................................................... 3,680,562 ------------ TOTAL INVESTMENT COMPANY (Cost $3,680,562) ............................................... 3,680,562 TOTAL INVESTMENTS - 97.83% - -------------------------------------------------------------------------------------------------- (Cost $106,860,986**) ......................................................... 88,759,567 NET OTHER ASSETS AND LIABILITIES - 2.17% - -------------------------------------------------------------------------------------------------- 1,968,832 TOTAL NET ASSETS - 100.00% - -------------------------------------------------------------------------------------------------- $ 90,728,399
- -------------------------------------------------------------------------------- ** Aggregate cost for Federal tax purposes was $106,968,770. (B) Represents a security with a specified coupon until a predetermined date, at which time the stated rate is adjusted to a new contract rate. (C) Security sold within terms of a private placement memorandum exempt from registration under section 144A of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "qualified institutional investors." The securities have been determined to be liquid under guidelines established by the Board of Trustees. (D) Notes and bonds, issued by foreign entities, denominated in U.S. dollars. The aggregate of these securities is 8.44% of total net assets. (G) Floating rate or variable rate note. Rate shown is as of December 31, 2008. (P) Convertible. PLC Public Limited Company. REIT Real Estate Investment Trust. The industry classification method used for purposes of this report's allocation charts and portfolio of investments schedules may differ from the industry subclassification(s) used for Trust compliance purposes. See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 58 ================================================================================ DIVERSIFIED INCOME FUND PORTFOLIO OF INVESTMENTS - -------------------------------------------------------------------------------- PORTFOLIO ALLOCATION AS A PERCENTAGE OF NET ASSETS AS OF DECEMBER 31, 2008 [PIE CHART OF PORTFOLIO ALLOCATION] Common Stocks 40% Corporate Notes and Bonds 20% Mortgage Backed 19% U.S. Government and Agency Obligations 11% Commercial Mortgage Backed 5% Asset Backed 2% Cash and Other Net Assets 2% Private Label Mortgage Backed 1%
[END CHART] - --------------------------------------------------------------------------------
Shares Value (Note 2) - ------ -------------- COMMON STOCKS - 40.08% - -------------------------------------------------------------------------------------------------- CONSUMER DISCRETIONARY - 1.64% 135,000 Home Depot, Inc. ................................................ $ 3,107,700 52,000 McDonald's Corp. ................................................ 3,233,880 15,000 VF Corp. ........................................................ 821,550 ------------ 7,163,130 ------------ CONSUMER STAPLES - 5.07% 159,000 Altria Group, Inc. .............................................. 2,394,540 20,000 Avon Products, Inc. ............................................. 480,600 64,000 Coca-Cola Co./The ............................................... 2,897,280 56,500 Kimberly-Clark Corp. ............................................ 2,979,810 81,918 Kraft Foods, Inc., Class A....................................... 2,199,498 19,000 PepsiCo, Inc./NC ................................................ 1,040,630 151,000 Philip Morris International, Inc. ............................................................ 6,570,010 19,000 Procter & Gamble Co. ............................................ 1,174,580 107,000 SYSCO Corp. ..................................................... 2,454,580 ------------ 22,191,528 ------------ ENERGY - 3.02% 42,000 BP PLC, ADR ..................................................... 1,963,080 115,000 Chevron Corp. ................................................... 8,506,550 53,500 ConocoPhillips .................................................. 2,771,300 ------------ 13,240,930 ------------ FINANCIALS - 7.81% 18,000 Allstate Corp./The .............................................. 589,680 268,996 Bank of America Corp. ........................................... 3,787,464 67,000 Bank of New York Mellon Corp./The ....................................................... 1,898,110 59,000 BB&T Corp. ...................................................... 1,620,140 200,005 Citigroup, Inc. ................................................. 1,342,034 227,054 JPMorgan Chase & Co. ............................................ 7,159,013 71,000 Marsh & McLennan Cos., Inc. ..................................... 1,723,170 39,000 PNC Financial Services Group, Inc. ..................................................... 1,911,000 51,000 Travelers Cos., Inc./The ........................................ 2,305,200 186,000 US Banccorp ..................................................... 4,651,860 245,000 Wells Fargo & Co. ............................................... 7,222,600 ------------ 34,210,271 ------------ HEALTH CARE - 8.23% 59,000 Abbott Laboratories ............................................. 3,148,830 193,000 Bristol-Myers Squibb Co. ........................................ 4,487,250 28,000 Eli Lilly & Co. ................................................. 1,127,560 152,000 Johnson & Johnson ............................................... 9,094,160 168,000 Merck & Co., Inc./NJ ............................................ 5,107,200 492,019 Pfizer, Inc. .................................................... 8,713,656 117,000 Wyeth ........................................................... 4,388,670 ------------ 36,067,326 ------------ INDUSTRIALS - 4.44% 46,500 3M Co. .......................................................... 2,675,610 44,000 Boeing Co. ...................................................... 1,877,480 58,000 Emerson Electric Co. ............................................ 2,123,380 383,000 General Electric Co. ............................................ 6,204,600 17,000 Honeywell International, Inc. ................................... 558,110 28,000 Illinois Tool Works, Inc. ....................................... 981,400 21,500 Northrop Grumman Corp. .......................................... 968,360 14,000 Stanley Works/The ............................................... 477,400 65,000 United Parcel Service, Inc., Class B ......................................................... 3,585,400 ------------ 19,451,740 ------------ INFORMATION TECHNOLOGY - 1.75% 50,000 Automatic Data Processing, Inc. ................................. 1,967,000 222,000 Intel Corp. ..................................................... 3,254,520 46,000 Molex, Inc. ..................................................... 666,540
See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 59 ================================================================================ DIVERSIFIED INCOME FUND PORTFOLIO OF INVESTMENTS - --------------------------------------------------------------------------------
Shares Value (Note 2) - ------ -------------- COMMON STOCKS (CONTINUED) - -------------------------------------------------------------------------------------------------- INFORMATION TECHNOLOGY (CONTINUED) 68,000 Paychex, Inc. ................................................... $ 1,787,040 ------------ 7,675,100 ------------ MATERIALS - 1.78% 20,000 Air Products & Chemicals, Inc. .................................. 1,005,400 70,000 Alcoa, Inc. ..................................................... 788,200 130,500 EI Du Pont de Nemours & Co. ..................................... 3,301,650 40,000 Nucor Corp. ..................................................... 1,848,000 28,500 Weyerhaeuser Co. ................................................ 872,385 ------------ 7,815,635 ------------ TELECOMMUNICATION SERVICES - 3.53% 330,015 AT&T, Inc. ...................................................... 9,405,427 178,000 Verizon Communications, Inc. .................................... 6,034,200 ------------ 15,439,627 ------------ UTILITIES - 2.81% 44,000 Consolidated Edison, Inc. ....................................... 1,712,920 123,000 Duke Energy Corp. ............................................... 1,846,230 30,500 FirstEnergy Corp. ............................................... 1,481,690 47,500 PG&E Corp. ...................................................... 1,838,725 47,500 Progress Energy, Inc. ........................................... 1,892,875 61,000 Public Service Enterprise Group, Inc. ........................... 1,779,370 48,000 Southern Co. .................................................... 1,776,000 ------------ 12,327,810 ------------ TOTAL COMMON STOCKS (Cost $206,014,491) ............................................. 175,583,097 COMMON STOCK UNIT - 0.18% - -------------------------------------------------------------------------------------------------- FINANCIALS - 0.18% 38,000 AllianceBernstein Holding L.P. .................................. 790,020 ------------ TOTAL COMMON STOCK UNIT (Cost $3,229,736) ............................................... 790,020 Par Value - --------- ASSET BACKED - 2.05% - -------------------------------------------------------------------------------------------------- $ 599,648 ABSC Long Beach Home Equity Loan Trust, Series 2000-LB1, Class AF5 (M) 8.550%, due 09/21/30 ............................................ $ 597,698 808,591 Ameriquest Mortgage Securities, Inc., Series 2004-FR1, Class M2 (M) 5.207%, due 05/25/34 ............................................ 218,503 1,975,000 Carmax Auto Owner Trust, Series 2007-2, Class B 5.370%, due 03/15/13 ............................................ 1,531,014 2,045,000 Chase Issuance Trust, Series 2007-A17, Class A 5.120%, due 10/15/14 ............................................ 1,838,208 1,300,372 CIT Group Home Equity Loan Trust, Series 2002-2, Class BF (M) 6.830%, due 06/25/33 ............................................ 58,717 1,460,000 Daimler Chrysler Auto Trust, Series 2007-A, Class A3A 5.000%, due 02/08/12 ............................................ 1,416,550 1,120,000 GMAC Mortgage Corp. Loan Trust, Series 2004-HE2, Class M1 (G) 3.950%, due 10/25/33 ............................................ 997,262 699,985 Green Tree Financial Corp., Series 1998-2, Class A6 (G) 6.810%, due 12/01/27 ............................................ 540,710 1,250,000 MBNA Master Credit Card Trust, Series 1999-B, Class A 5.900%, due 08/15/11 ............................................ 1,244,992 1,025,000 Renaissance Home Equity Loan Trust, Series 2005-4, Class M9 (M) 7.000%, due 02/25/36 ............................................ 497,889 649,392 Wells Fargo Home Equity Trust, Series 2004-2, Class M8A (C)(G) 3.471%, due 05/25/34 ............................................ 57,835 ------------ TOTAL ASSET BACKED (Cost $12,863,268) .............................................. 8,999,378 COMMERCIAL MORTGAGE BACKED - 4.82% - -------------------------------------------------------------------------------------------------- 293,309 Bear Stearns Commercial Mortgage Securities, Series 2001-TOP4, Class A1 5.060%, due 11/15/16 ............................................ 285,967 1,815,000 Bear Stearns Commercial Mortgage Securities, Series 2003-T10, Class E (C)(G) 5.540%, due 03/13/40 ............................................ 648,671 1,325,000 Bear Stearns Commercial Mortgage Securities, Series 2004-T16, Class A6 (G) 4.750%, due 02/13/46 ............................................ 1,088,037 765,000 Bear Stearns Commercial Mortgage Securities, Series 2005-T20, Class F (C)(G) 5.151%, due 10/12/42 ............................................ 185,162 2,929,835 GMAC Commercial Mortgage Securities, Inc., Series 2000-C1, Class A2 (G) 7.724%, due 03/15/33 ............................................ 2,929,657 2,100,000 Government National Mortgage Association, Series 2004-43, Class C (G) 5.008%, due 12/16/25 ............................................ 2,154,327
See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 60 ================================================================================ DIVERSIFIED INCOME FUND PORTFOLIO OF INVESTMENTS - --------------------------------------------------------------------------------
Par Value Value (Note 2) - --------- -------------- COMMERCIAL MORTGAGE BACKED (CONTINUED) - -------------------------------------------------------------------------------------------------- $1,400,000 Greenwich Capital Commercial Funding Corp., Series 2004-GG1, Class A7 (G) 5.317%, due 06/10/36 ............................................ $ 1,164,721 1,596,064 LB-UBS Commercial Mortgage Trust, Series 2004-C1, Class A2 3.624%, due 01/15/29 ............................................ 1,549,923 1,600,000 LB-UBS Commercial Mortgage Trust, Series 2004-C8, Class A6 (G) 4.799%, due 12/15/29 ............................................ 1,323,248 2,600,000 Morgan Stanley Capital I, Series 2004-HQ4, Class A7 4.970%, due 04/14/40 ............................................ 2,183,858 2,500,000 Morgan Stanley Capital I, Series 2004-T13, Class A3 4.390%, due 09/13/45 ............................................ 2,246,418 2,710,000 Morgan Stanley Capital I, Series 2006-IQ12, Class ANM 5.310%, due 12/15/43 ............................................ 2,468,851 2,690,000 Multi Security Asset Trust, Series 2005-RR4A, Class H (C)(G) 5.880%, due 11/28/35 ............................................ 337,703 775,000 Multi Security Asset Trust, Series 2005-RR4A, Class J (C)(G) 5.880%, due 11/28/35 ............................................ 93,426 2,443,002 Wachovia Bank Commercial Mortgage Trust, Series 2003-C8, Class A2 3.894%, due 11/15/35 ............................................ 2,435,571 ------------ TOTAL COMMERCIAL MORTGAGE BACKED (Cost $27,434,396) .............................................. 21,095,540 PRIVATE LABEL MORTGAGE BACKED - 0.99% - -------------------------------------------------------------------------------------------------- 2,026,870 Banc of America Alternative Loan Trust, Series 2005-12, Class 3CB1 6.000%, due 01/25/36 ............................................ 1,579,692 2,721,134 Banc of America Alternative Loan Trust, Series 2006-3, Class 2CB1 6.000%, due 04/25/36 ............................................ 1,304,443 2,938,022 Banc of America Alternative Loan Trust, Series 2006-4, Class 5CB1 6.500%, due 05/25/46 ............................................ 1,435,042 ------------ TOTAL PRIVATE LABEL MORTGAGE BACKED (Cost $7,687,762) ............................................... 4,319,177 CORPORATE NOTES AND BONDS - 20.08% - -------------------------------------------------------------------------------------------------- BEVERAGE/FOOD - 0.44% 2,025,000 Kraft Foods, Inc. 6.500%, due 11/01/31 ............................................ 1,943,526 ------------ CONSUMER DISCRETIONARY - 0.90% 2,000,000 American Association of Retired Persons (C) 7.500%, due 05/01/31 ............................................ 2,070,370 1,850,000 Erac USA Finance Co. (C) 6.700%, due 06/01/34 ............................................ 1,016,605 1,600,000 Royal Caribbean Cruises, Ltd. (D) 7.250%, due 06/15/16 ............................................ 872,000 ------------ 3,958,975 ------------ CONSUMER STAPLES - 0.38% 1,055,000 Diageo Capital PLC (D) 5.500%, due 09/30/16 ............................................ 1,011,231 620,000 PepsiCo, Inc./NC 4.650%, due 02/15/13 ............................................ 637,472 ------------ 1,648,703 ------------ ENERGY - 1.35% 2,000,000 Chesapeake Energy Corp. 6.375%, due 06/15/15 ............................................ 1,580,000 1,500,000 ConocoPhillips 6.650%, due 07/15/18 ............................................ 1,567,717 1,150,000 Hess Corp. 7.875%, due 10/01/29 ............................................ 1,103,979 750,000 Transocean, Inc. 6.000%, due 03/15/18 ............................................ 683,101 1,030,000 Transocean, Ltd. 7.500%, due 04/15/31 ............................................ 968,540 ------------ 5,903,337 ------------ FINANCE - 4.81% 1,115,000 American General Finance Corp. 5.850%, due 06/01/13 ............................................ 423,493 1,500,000 American General Finance Corp., Series H 4.625%, due 09/01/10 ............................................ 759,890 620,000 Bank of America Corp. 5.750%, due 12/01/17 ............................................ 619,033 1,130,000 Bear Stearns Cos. LLC/The 7.250%, due 02/01/18 ............................................ 1,238,317 1,450,000 CIT Group, Inc. 7.625%, due 11/30/12 ............................................ 1,224,045 1,000,000 General Electric Global Insurance Holding Corp. 7.000%, due 02/15/26 ............................................ 947,199 785,000 General Electric Global Insurance Holding Corp. 7.750%, due 06/15/30 ............................................ 770,197 2,000,000 Goldman Sachs Group, Inc./The 6.650%, due 05/15/09 ............................................ 2,006,768 1,735,000 Lehman Brothers Holdings, Inc. (E) 5.750%, due 01/03/17 ............................................ 173 1,415,000 Merrill Lynch & Co., Inc. 6.150%, due 04/25/13 ............................................ 1,402,108
See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 61 ================================================================================ DIVERSIFIED INCOME FUND PORTFOLIO OF INVESTMENTS - --------------------------------------------------------------------------------
Par Value Value (Note 2) - --------- -------------- CORPORATE NOTES AND BONDS (CONTINUED) - -------------------------------------------------------------------------------------------------- FINANCE (CONTINUED) $2,400,000 National Rural Utilities Cooperative Finance Corp., Series C 7.250%, due 03/01/12 ............................................ $ 2,471,098 3,240,000 Nissan Motor Acceptance Corp. (C) 5.625%, due 03/14/11 ............................................ 3,185,620 1,505,000 SLM Corp. 5.125%, due 08/27/12 ............................................ 1,126,280 580,000 Textron Financial Corp. 6.000%, due 11/20/09 ............................................ 541,740 2,000,000 US Bank NA/Cincinnati, OH 6.300%, due 02/04/14 ............................................ 2,071,092 1,450,000 Wells Fargo & Co. 5.250%, due 10/23/12 ............................................ 1,486,823 935,000 Western Union Co./The 5.930%, due 10/01/16 ............................................ 799,066 ------------ 21,072,942 ------------ FOOD & DRUG RETAILERS - 0.34% 1,550,000 Medco Health Solutions, Inc. 7.250%, due 08/15/13 ............................................ 1,502,846 ------------ HEALTH CARE - 2.56% 3,950,000 Amgen, Inc. 5.850%, due 06/01/17 ............................................ 4,079,335 1,200,000 Eli Lilly & Co. 6.570%, due 01/01/16 ............................................ 1,307,690 740,000 Genentech, Inc. 5.250%, due 07/15/35 ............................................ 701,493 1,320,000 Merck & Co., Inc./NJ 5.750%, due 11/15/36 ............................................ 1,389,992 1,500,000 Quest Diagnostics, Inc./DE 5.450%, due 11/01/15 ............................................ 1,315,965 1,400,000 WellPoint, Inc. 5.000%, due 12/15/14 ............................................ 1,216,059 1,100,000 Wyeth 6.500%, due 02/01/34 ............................................ 1,219,743 ------------ 11,230,277 ------------ INDUSTRIALS - 1.43% 350,000 Boeing Co. 8.625%, due 11/15/31 ............................................ 443,801 620,000 Boeing Co. 6.875%, due 10/15/43 ............................................ 646,532 515,000 DR Horton, Inc. 5.250%, due 02/15/15 ............................................ 324,450 310,000 EI Du Pont de Nemours & Co. 5.000%, due 01/15/13 ............................................ 312,805 800,000 GMAC LLC 7.250%, due 03/02/11 ............................................ 679,868 780,000 Lockheed Martin Corp. 7.650%, due 05/01/16 ............................................ 898,991 1,150,000 Waste Management, Inc. 7.125%, due 12/15/17 ............................................ 1,071,267 1,025,000 Westvaco Corp. 8.200%, due 01/15/30 ............................................ 780,111 1,170,000 WM Wrigley Jr. Co. 4.300%, due 07/15/10 ............................................ 1,088,100 ------------ 6,245,925 ------------ MEDIA - 0.74% 1,780,000 Comcast Cable Communications Holdings, Inc. 9.455%, due 11/15/22 ............................................ 1,994,237 1,315,000 Rogers Cable, Inc. (D) 6.250%, due 06/15/13 ............................................ 1,258,696 ------------ 3,252,933 ------------ REAL ESTATE INVESTMENT TRUSTS - 1.30% 2,685,000 Equity One, Inc. 3.875%, due 04/15/09 ............................................ 2,618,713 1,450,000 HCP, Inc. 6.700%, due 01/30/18 ............................................ 695,308 2,400,000 Nationwide Health Properties, Inc., Series D 8.250%, due 07/01/12 ............................................ 2,025,751 530,000 Simon Property Group L.P. 5.875%, due 03/01/17 ............................................ 353,942 ------------ 5,693,714 ------------ TELECOMMUNICATIONS - 0.36% 960,000 Cisco Systems, Inc. 5.500%, due 02/22/16 ............................................ 1,016,809 795,000 Sprint Nextel Corp. 6.000%, due 12/01/16 ............................................ 560,475 ------------ 1,577,284 ------------ TRANSPORTATION - 0.79% 1,365,000 Burlington Northern Santa Fe Corp. 8.125%, due 04/15/20 ............................................ 1,486,488 957,000 Norfolk Southern Corp. 5.590%, due 05/17/25 ............................................ 857,766 1,050,000 Norfolk Southern Corp. 7.050%, due 05/01/37 ............................................ 1,098,010 ------------ 3,442,264 ------------ UTILITIES - 4.68% 1,250,000 Consumers Energy Co. 5.650%, due 04/15/20 ............................................ 1,170,609 2,000,000 Energy East Corp. 8.050%, due 11/15/10 ............................................ 2,079,260 1,300,000 Illinois Power Co. 7.500%, due 06/15/09 ............................................ 1,305,062 1,555,000 Indianapolis Power & Light Co. (C) 6.050%, due 10/01/36 ............................................ 1,368,726 4,000,000 MidAmerican Energy Co. 5.650%, due 07/15/12 ............................................ 4,006,624
See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 62 ================================================================================ DIVERSIFIED INCOME FUND PORTFOLIO OF INVESTMENTS - --------------------------------------------------------------------------------
Par Value Value (Note 2) - --------- -------------- CORPORATE NOTES AND BONDS (CONTINUED) - -------------------------------------------------------------------------------------------------- UTILITIES (CONTINUED) $1,600,000 Nevada Power Co., Series R 6.750%, due 07/01/37 ............................................ $ 1,427,690 1,365,000 Pacific Gas & Electric Co. 6.050%, due 03/01/34 ............................................ 1,449,710 2,000,000 Progress Energy, Inc. 7.750%, due 03/01/31 ............................................ 2,002,422 474,000 Sierra Pacific Power Co., Series M 6.000%, due 05/15/16 ............................................ 453,599 1,500,000 Southern Power Co., Series B 6.250%, due 07/15/12 ............................................ 1,533,315 835,000 Southwestern Electric Power Co., Series E 5.550%, due 01/15/17 ............................................ 768,814 620,000 Virginia Electric and Power Co. 5.100%, due 11/30/12 ............................................ 606,126 2,400,000 Westar Energy, Inc. 6.000%, due 07/01/14 ............................................ 2,318,568 ------------ 20,490,525 ------------ TOTAL CORPORATE NOTES AND BONDS (Cost $99,180,387) .............................................. 87,963,251 MORTGAGE BACKED - 19.15% - -------------------------------------------------------------------------------------------------- FEDERAL HOME LOAN MORTGAGE CORP. - 2.21% 82,509 8.000%, due 06/01/30 Pool # C01005 ................................................... 87,523 387,700 6.500%, due 01/01/32 Pool # C62333 ................................................... 405,025 105,355 6.500%, due 03/01/32 Pool # C65648 ................................................... 109,932 3,806,621 5.000%, due 07/01/33 Pool # A11325 ................................................... 3,899,569 370,847 6.000%, due 10/01/34 Pool # A28439 ................................................... 382,858 377,372 6.000%, due 10/01/34 Pool # A28598 ................................................... 389,594 274,116 5.000%, due 04/01/35 Pool # A32314 ................................................... 280,510 561,486 5.000%, due 04/01/35 Pool # A32315 ................................................... 574,582 448,592 5.000%, due 04/01/35 Pool # A32316 ................................................... 459,055 255,350 5.000%, due 04/01/35 Pool # A32509 ................................................... 261,305 2,764,269 5.000%, due 01/01/37 Pool # A56371 ................................................... 2,828,310 ------------ 9,678,263 ------------ FEDERAL NATIONAL MORTGAGE ASSOCIATION - 16.90% 1,186,042 4.000%, due 04/01/15 Pool # 255719 ................................................... 1,202,873 1,272,365 5.500%, due 04/01/16 Pool # 745444 ................................................... 1,330,511 326,244 6.000%, due 05/01/16 Pool # 582558 ................................................... 339,903 1,989,171 5.000%, due 12/01/17 Pool # 672243 ................................................... 2,059,680 2,072,852 4.500%, due 09/01/20 Pool # 835465 ................................................... 2,124,303 378,167 6.000%, due 05/01/21 Pool # 253847 ................................................... 391,585 69,351 7.000%, due 12/01/29 Pool # 762813 ................................................... 73,432 201,187 7.000%, due 11/01/31 Pool # 607515 ................................................... 212,885 2,830 7.000%, due 04/01/32 Pool # 641518 ................................................... 2,995 209,748 7.000%, due 05/01/32 Pool # 644591 ................................................... 221,943 1,187,050 6.500%, due 06/01/32 Pool # 545691 ................................................... 1,238,612 938,717 6.500%, due 09/01/33 Pool # 737582 ................................................... 978,760 1,584,934 5.500%, due 10/01/33 Pool # 254904 ................................................... 1,628,587 5,849,565 5.500%, due 11/01/33 Pool # 555880 ................................................... 6,010,678 4,538,759 5.000%, due 05/01/34 Pool # 780890 ................................................... 4,643,202 40,757 7.000%, due 07/01/34 Pool # 792636 ................................................... 42,901 620,428 5.500%, due 08/01/34 Pool # 793647 ................................................... 637,129 2,962,108 5.500%, due 03/01/35 Pool # 815976 ................................................... 3,039,989 1,488,586 5.500%, due 07/01/35 Pool # 825283 ................................................... 1,527,724 926,016 5.500%, due 08/01/35 Pool # 826872 ................................................... 950,363 1,408,965 5.000%, due 09/01/35 Pool # 820347 ................................................... 1,440,506 1,504,442 5.000%, due 09/01/35 Pool # 835699 ................................................... 1,538,121 1,884,168 5.000%, due 10/01/35 Pool # 797669 ................................................... 1,926,347 1,884,341 5.500%, due 10/01/35 Pool # 836912 ................................................... 1,933,885
See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 63 ================================================================================ DIVERSIFIED INCOME FUND PORTFOLIO OF INVESTMENTS - --------------------------------------------------------------------------------
Par Value Value (Note 2) - --------- -------------- MORTGAGE BACKED (CONTINUED) - -------------------------------------------------------------------------------------------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION (CONTINUED) $2,037,260 5.000%, due 12/01/35 Pool # 850561 ................................................... $ 2,082,867 3,722,472 5.500%, due 12/01/35 Pool # 844583 ................................................... 3,820,346 778,095 5.500%, due 02/01/36 Pool # 851330 ................................................... 798,553 2,681,253 5.500%, due 09/01/36 Pool # 831820 ................................................... 2,751,751 3,257,432 6.000%, due 09/01/36 Pool # 831741 ................................................... 3,357,329 812,324 5.500%, due 10/01/36 Pool # 896340 ................................................... 833,682 3,482,060 5.500%, due 10/01/36 Pool # 901723 ................................................... 3,573,612 2,273,550 6.500%, due 10/01/36 Pool # 894118 ................................................... 2,364,136 2,809,773 6.000%, due 11/01/36 Pool # 902510 ................................................... 2,904,348 3,244,114 5.500%, due 12/01/36 Pool # 902853 ................................................... 3,329,410 3,101,809 5.500%, due 12/01/36 Pool # 903059 ................................................... 3,183,363 3,061,980 5.500%, due 12/01/36 Pool # 907512 ................................................... 3,142,487 3,319,627 5.500%, due 12/01/36 Pool # 907635 ................................................... 3,406,908 2,880,247 6.000%, due 12/01/36 Pool # 903002 ................................................... 2,968,577 ------------ 74,014,283 ------------ GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 0.04% 177,821 6.500%, due 04/20/31 Pool # 003068 ................................................... 187,256 ------------ TOTAL MORTGAGE BACKED (Cost $81,062,801) .............................................. 83,879,802 U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 11.03% - -------------------------------------------------------------------------------------------------- FEDERAL HOME LOAN MORTGAGE CORP. - 0.35% 1,400,000 4.500%, due 01/15/14 ............................................ 1,544,200 ------------ FEDERAL NATIONAL MORTGAGE ASSOCIATION - 0.18% 750,000 5.250%, due 08/01/12 ............................................ 790,515 ------------ U.S. TREASURY BONDS - 1.80% 5,270,000 6.625%, due 02/15/27 ............................................ 7,881,122 ------------ U.S. TREASURY NOTES - 8.70% 700,000 2.625%, due 03/15/09 ............................................ 703,418 1,400,000 4.875%, due 05/31/09 ............................................ 1,426,687 1,850,000 3.875%, due 05/15/10 ............................................ 1,939,536 500,000 4.500%, due 11/15/10 ............................................ 536,836 500,000 4.750%, due 03/31/11 ............................................ 544,492 3,900,000 4.875%, due 04/30/11 ............................................ 4,275,679 6,150,000 4.625%, due 12/31/11 ............................................ 6,810,645 3,400,000 4.625%, due 02/29/12 ............................................ 3,775,595 2,500,000 4.000%, due 11/15/12 ............................................ 2,775,195 1,980,000 3.625%, due 05/15/13 ............................................ 2,175,525 310,000 4.000%, due 02/15/14 ............................................ 351,366 2,450,000 4.250%, due 08/15/14 ............................................ 2,815,969 3,550,000 4.500%, due 02/15/16 ............................................ 4,179,017 1,100,000 4.625%, due 02/15/17 ............................................ 1,300,922 3,830,000 4.500%, due 05/15/17 ............................................ 4,494,267 ------------ 38,105,149 ------------ TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS (Cost $42,196,562) .............................................. 48,320,986 Shares - ------ INVESTMENT COMPANY - 0.96% - -------------------------------------------------------------------------------------------------- 4,183,327 SSgA Prime Money Market Fund .................................... 4,183,327 ------------ TOTAL INVESTMENT COMPANY (Cost $4,183,327) ............................................... 4,183,327
See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 64 ================================================================================ DIVERSIFIED INCOME FUND PORTFOLIO OF INVESTMENTS - --------------------------------------------------------------------------------
Value (Note 2) -------------- TOTAL INVESTMENTS - 99.34% - -------------------------------------------------------------------------------------------------- (Cost $483,852,730**) ......................................................... $435,134,578 NET OTHER ASSETS AND LIABILITIES - .66% - -------------------------------------------------------------------------------------------------- 2,912,390 TOTAL NET ASSETS - 100.00% - -------------------------------------------------------------------------------------------------- $438,046,968
- -------------------------------------------------------------------------------- ** Aggregate cost for Federal tax purposes was $485,001,034. (C) Security sold within terms of a private placement memorandum exempt from registration under section 144A of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "qualified institutional investors." The securities have been determined to be liquid underguidelines 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 0.72% of total net assets. (E) In Default. Issuer is bankrupt. (G) Floating rate or variable rate note. Rate shown is as of December 31, 2008. (M) Stated interest rate is contingent upon sufficient collateral market value. If collateral market value falls below a stated level, the issuer will either initiate a clean-up call or increase the stated interest rate. ADR American Depositary Receipt. PLC Public Limited Company. The industry classification method used for purposes of this report's allocation charts and portfolio of investments schedules may differ from the industry subclassification(s) used for Trust compliance purposes. See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 65 ================================================================================ LARGE CAP VALUE FUND PORTFOLIO OF INVESTMENTS - -------------------------------------------------------------------------------- SECTOR ALLOCATION AS A PERCENTAGE OF NET ASSETS AS OF DECEMBER 31, 2008 [PIE CHART OF SECTOR ALLOCATION] Financials 22% Energy 18% Health Care 14% Consumer Staples 10% Industrials 8% Consumer Discretionary 6% Telecommunication Services 6% Utilities 6% Information Technology 4% Cash and Other Net Assets 3% Materials 3%
[END CHART] - --------------------------------------------------------------------------------
Shares Value (Note 2) - ------ -------------- COMMON STOCKS - 96.34% - -------------------------------------------------------------------------------------------------- CONSUMER DISCRETIONARY - 5.88% 89,500 Carnival Corp. .................................................. $ 2,176,640 225,342 Comcast Corp., Class A. ......................................... 3,803,773 105,400 Home Depot, Inc. ................................................ 2,426,308 134,900 Johnson Controls, Inc. .......................................... 2,449,784 43,300 Kohl's Corp. * .................................................. 1,567,460 212,900 Lowe's Cos., Inc. ............................................... 4,581,608 224,800 News Corp., Class A ............................................. 2,043,432 86,600 Omnicom Group, Inc. ............................................. 2,331,272 99,200 Target Corp. .................................................... 3,425,376 117,100 Time Warner Cable, Inc., Class A *............................... 2,511,795 449,500 Time Warner, Inc. ............................................... 4,521,970 175,600 Walt Disney Co./The ............................................. 3,984,364 ------------ 35,823,782 ------------ CONSUMER STAPLES - 10.43% 159,900 Altria Group, Inc. .............................................. 2,408,094 104,700 Archer-Daniels-Midland Co. ...................................... 3,018,501 92,900 Coca-Cola Co./The ............................................... 4,205,583 30,800 Costco Wholesale Corp. .......................................... 1,617,000 121,700 CVS/Caremark Corp. .............................................. 3,497,658 26,300 Energizer Holdings, Inc.* ....................................... 1,423,882 55,500 General Mills, Inc. ............................................. 3,371,625 86,100 HJ Heinz Co. .................................................... 3,237,360 34,600 Kellogg Co. ..................................................... 1,517,210 262,257 Kraft Foods, Inc., Class A. ..................................... 7,041,600 68,400 Molson Coors Brewing Co., Class B ............................... 3,346,128 299,700 Procter & Gamble Co. ............................................ 18,527,454 184,700 Wal-Mart Stores, Inc. ........................................... 10,354,282 ------------ 63,566,377 ------------ ENERGY - 17.91% 80,600 Anadarko Petroleum Corp. ........................................ 3,107,130 79,200 Apache Corp. .................................................... 5,902,776 311,646 Chevron Corp. ................................................... 23,052,455 227,900 ConocoPhillips .................................................. 11,805,220 87,900 Devon Energy Corp. .............................................. 5,775,909 28,300 EOG Resources, Inc. ............................................. 1,884,214 610,500 Exxon Mobil Corp. ............................................... 48,736,215 99,700 Marathon Oil Corp. .............................................. 2,727,792 32,400 Schlumberger, Ltd. .............................................. 1,371,492 57,600 Valero Energy Corp. ............................................. 1,246,464 100,900 XTO Energy, Inc. ................................................ 3,558,743 ------------ 109,168,410 ------------ FINANCIALS - 22.20% 79,126 Allstate Corp./The .............................................. 2,592,168 81,200 AON Corp. ....................................................... 3,709,216 35,700 Arch Capital Group, Ltd. * ...................................... 2,502,570 837,042 Bank of America Corp. ........................................... 11,785,551 186,600 Bank of New York Mellon Corp./The ............................... 5,286,378 133,500 BB&T Corp. ...................................................... 3,665,910 18,600 BlackRock, Inc. ................................................. 2,495,190 66,600 Capital One Financial Corp. ..................................... 2,123,874 52,000 Chubb Corp. ..................................................... 2,652,000 890,814 Citigroup, Inc. ................................................. 5,977,362 66,700 Equity Residential, REIT ........................................ 1,988,994 71,400 Goldman Sachs Group, Inc./The ................................... 6,025,446 112,100 Hartford Financial Services Group, Inc. ......................... 1,840,682 578,588 JPMorgan Chase & Co. ............................................ 18,242,880 91,200 Keycorp ......................................................... 777,024 75,300 Marsh & McLennan Cos., Inc. ..................................... 1,827,531 175,400 MetLife, Inc. ................................................... 6,114,444 153,800 Morgan Stanley .................................................. 2,466,952 83,000 PNC Financial Services Group, Inc. .............................. 4,067,000 128,100 Prudential Financial, Inc. ...................................... 3,876,306 113,900 Regions Financial Corp. ......................................... 906,644 24,200 Simon Property Group, Inc., REIT ................................ 1,285,746 82,900 State Street Corp. .............................................. 3,260,457
See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 66 ================================================================================ LARGE CAP VALUE FUND PORTFOLIO OF INVESTMENTS - --------------------------------------------------------------------------------
Shares Value (Note 2) - ------ -------------- COMMON STOCKS (CONTINUED) - -------------------------------------------------------------------------------------------------- FINANCIALS (CONTINUED) 47,900 SunTrust Banks, Inc. ............................................ $ 1,414,966 199,300 Travelers Cos., Inc./The ........................................ 9,008,360 55,200 Unum Group ...................................................... 1,026,720 364,700 US Banccorp ..................................................... 9,121,147 57,900 Vornado Realty Trust, REIT ...................................... 3,494,265 534,800 Wells Fargo & Co. ............................................... 15,765,904 ------------ 135,301,687 ------------ HEALTH CARE - 13.70% 145,400 Amgen, Inc. * ................................................... 8,396,850 66,400 Coventry Health Care, Inc. *..................................... 988,032 107,175 Covidien, Ltd. .................................................. 3,884,022 53,000 Eli Lilly & Co. ................................................. 2,134,310 337,400 Johnson & Johnson ............................................... 20,186,642 106,600 Life Technologies Corp. * ....................................... 2,484,846 61,700 Medco Health Solutions, Inc. * .................................. 2,585,847 212,000 Merck & Co., Inc./NJ ............................................ 6,444,800 973,400 Pfizer, Inc. .................................................... 17,238,914 82,400 Thermo Fisher Scientific, Inc. * ................................ 2,807,368 168,000 UnitedHealth Group, Inc. ........................................ 4,468,800 70,900 WellPoint, Inc. * ............................................... 2,987,017 236,700 Wyeth ........................................................... 8,878,617 ------------ 83,486,065 ------------ INDUSTRIALS - 7.89% 25,200 Deere & Co. ..................................................... 965,664 43,500 Emerson Electric Co. ............................................ 1,592,535 28,700 FedEx Corp. ..................................................... 1,841,105 1,399,100 General Electric Co. ............................................ 22,665,420 61,400 Illinois Tool Works, Inc. ....................................... 2,152,070 20,600 L-3 Communications Holdings, Inc. .................................................. 1,519,868 50,500 Norfolk Southern Corp. .......................................... 2,376,025 60,600 Northrop Grumman Corp. .......................................... 2,729,424 85,400 Raytheon Co. .................................................... 4,358,816 55,300 United Technologies Corp. ....................................... 2,964,080 147,900 Waste Management, Inc. .......................................... 4,901,406 ------------ 48,066,413 ------------ INFORMATION TECHNOLOGY - 3.58% 63,400 Automatic Data Processing, Inc. ................................. 2,494,156 94,200 Cisco Systems, Inc. * ........................................... 1,535,460 64,200 Computer Sciences Corp. * ....................................... 2,255,988 119,900 EMC Corp./Massachusetts * ....................................... 1,255,353 67,935 Hewlett-Packard Co. ............................................. 2,465,361 166,300 Intel Corp. ..................................................... 2,437,958 37,500 International Business Machines Corp. ........................... 3,156,000 192,600 Maxim Integrated Products, Inc. ................................. 2,199,492 70,500 Microsoft Corp. ................................................. 1,370,520 100,400 Symantec Corp. * ................................................ 1,357,408 79,400 Tyco Electronics, Ltd. .......................................... 1,287,074 ------------ 21,814,770 ------------ MATERIALS - 2.79% 45,800 Air Products & Chemicals, Inc. .................................. 2,302,366 101,400 Alcoa, Inc. ..................................................... 1,141,764 103,900 Dow Chemical Co./The ............................................ 1,567,851 162,900 EI Du Pont de Nemours & Co. ..................................... 4,121,370 87,896 Freeport-McMoRan Copper & Gold, Inc. ............................ 2,148,178 78,400 Nucor Corp. ..................................................... 3,622,080 69,600 Weyerhaeuser Co. ................................................ 2,130,456 ------------ 17,034,065 ------------ TELECOMMUNICATION SERVICES - 5.79% 798,287 AT&T, Inc. ...................................................... 22,751,180 369,335 Verizon Communications, Inc. .................................... 12,520,456 ------------ 35,271,636 ------------ UTILITIES - 6.17% 83,300 American Electric Power Co., Inc. ............................... 2,772,224 184,900 Duke Energy Corp. ............................................... 2,775,349 84,900 Edison International............................................. 2,726,988 55,900 Exelon Corp. .................................................... 3,108,599 55,400 FirstEnergy Corp. ............................................... 2,691,332 86,500 FPL Group, Inc. ................................................. 4,353,545 57,100 NSTAR ........................................................... 2,083,579 93,600 PG&E Corp. ...................................................... 3,623,256 90,600 Public Service Enterprise Group, Inc. ........................... 2,642,802 18,000 Questar Corp. ................................................... 588,420 95,300 Sempra Energy ................................................... 4,062,639 166,700 Southern Co. .................................................... 6,167,900 ------------ 37,596,633 ------------ TOTAL COMMON STOCKS (Cost $665,069,132) ............................................. 587,129,838 INVESTMENT COMPANIES - 3.04% - -------------------------------------------------------------------------------------------------- 280,000 Consumer Discretionary Select Sector SPDR Fund ETF .............. 6,039,600 229,900 SPDR S&P Homebuilders ETF ....................................... 2,751,903 9,723,653 SSgA Prime Money Market Fund .................................... 9,723,653 ------------ TOTAL INVESTMENT COMPANIES (Cost $18,675,266) .............................................. 18,515,156
See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 67 ================================================================================ LARGE CAP VALUE FUND PORTFOLIO OF INVESTMENTS - --------------------------------------------------------------------------------
Value (Note 2) -------------- TOTAL INVESTMENTS - 99.38% - -------------------------------------------------------------------------------------------------- (Cost $683,744,398**) ......................................................... $605,644,994 NET OTHER ASSETS AND LIABILITIES - 0.62% - -------------------------------------------------------------------------------------------------- 3,798,607 TOTAL NET ASSETS - 100.00% - -------------------------------------------------------------------------------------------------- $609,443,601
- -------------------------------------------------------------------------------- * Non-income producing. ** Aggregate cost for Federal tax purposes was $685,854,074. ETF Exchange Traded Fund. REIT Real Estate Investment Trust. The industry classification method used for purposes of this report's allocation charts and portfolio of investments schedules may differ from the industry subclassification(s) used for Trust compliance purposes. See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 68 ================================================================================ LARGE CAP GROWTH FUND PORTFOLIO OF INVESTMENTS - -------------------------------------------------------------------------------- SECTOR ALLOCATION AS A PERCENTAGE OF NET ASSETS AS OF DECEMBER 31, 2008 [PIE CHART OF SECTOR ALLOCATION] Information Technology 32% Health Care 19% Consumer Staples 11% Energy 11% Industrials 10% Consumer Discretionary 8% Financials 4% Materials 3% Cash and Other Net Assets 1% Utilities 1%
[END CHART] - --------------------------------------------------------------------------------
Shares Value (Note 2) - ------ -------------- COMMON STOCKS - 98.18% - -------------------------------------------------------------------------------------------------- CONSUMER DISCRETIONARY - 7.68% 25,200 Amazon.com, Inc. * .............................................. $ 1,292,256 3,200 Autozone, Inc. * ................................................ 446,304 27,900 Coach, Inc. * ................................................... 579,483 64,300 Comcast Corp., Class A .......................................... 1,085,384 1,046,700 Interpublic Group of Cos., Inc. * ............................... 4,144,932 121,500 Kohl's Corp. * .................................................. 4,398,300 80,800 McDonald's Corp. ................................................ 5,024,952 27,700 Nike, Inc., Class B ............................................. 1,412,700 16,200 Polo Ralph Lauren Corp. ......................................... 735,642 47,100 Staples, Inc. ................................................... 844,032 59,700 Starbucks Corp. * ............................................... 564,762 99,300 Target Corp. .................................................... 3,428,829 60,900 Tiffany & Co. ................................................... 1,439,067 34,800 TJX Cos., Inc. .................................................. 715,836 31,000 Yum! Brands, Inc. ............................................... 976,500 ------------ 27,088,979 ------------ CONSUMER STAPLES - 10.81% 131,200 Coca-Cola Co./The ............................................... 5,939,424 100,600 Colgate-Palmolive Co. ........................................... 6,895,124 38,800 Costco Wholesale Corp. .......................................... 2,037,000 272,400 Philip Morris International, Inc. ............................... 11,852,124 202,900 Wal-Mart Stores, Inc. ........................................... 11,374,574 ------------ 38,098,246 ------------ ENERGY - 10.62% 53,200 Cameron International Corp. * ................................... 1,090,600 16,400 Diamond Offshore Drilling, Inc. ................................. 966,616 50,900 EOG Resources, Inc. ............................................. 3,388,922 72,400 Exxon Mobil Corp. ............................................... 5,779,692 58,800 Hess Corp. ...................................................... 3,154,032 53,100 National Oilwell Varco, Inc. * .................................. 1,297,764 44,600 Noble Corp. ..................................................... 985,214 77,400 Occidental Petroleum Corp. ...................................... 4,643,226 46,700 Peabody Energy Corp. ............................................ 1,062,425 312,100 PetroHawk Energy Corp. * ........................................ 4,878,123 25,400 Range Resources Corp. ........................................... 873,506 103,100 Schlumberger, Ltd. .............................................. 4,364,223 41,600 Southwestern Energy Co. * ....................................... 1,205,152 25,161 Transocean, Ltd. * .............................................. 1,188,857 80,000 Weatherford International, Ltd. * ............................... 865,600 47,766 XTO Energy, Inc. ................................................ 1,684,707 ------------ 37,428,659 ------------ FINANCIALS - 3.83% 23,200 Aflac, Inc. ..................................................... 1,063,488 51,000 American Express Co. ............................................ 946,050 121,000 Axis Capital Holdings, Ltd. ..................................... 3,523,520 8,500 BlackRock, Inc. ................................................. 1,140,275 112,100 Charles Schwab Corp./The ........................................ 1,812,657 3,700 CME Group, Inc. ................................................. 770,007 10,000 IntercontinentalExchange, Inc. * ................................ 824,400 13,600 Mastercard, Inc., Class A ....................................... 1,943,848 14,800 Northern Trust Corp. ............................................ 771,672 9,800 PartnerRe, Ltd. ................................................. 698,446 ------------ 13,494,363 ------------ HEALTH CARE - 19.38% 106,600 Abbott Laboratories ............................................. 5,689,242 70,100 Baxter International, Inc. ...................................... 3,756,659 21,100 Becton Dickinson & Co. .......................................... 1,443,029 9,400 Biogen Idec, Inc. * ............................................. 447,722 138,700 Bristol-Myers Squibb Co. ........................................ 3,224,775 82,400 Celgene Corp. * ................................................. 4,555,072 57,300 Express Scripts, Inc. * ......................................... 3,150,354 30,000 Gen-Probe, Inc. * ............................................... 1,285,200 178,400 Genentech, Inc. * ............................................... 14,791,144 32,900 Genzyme Corp. * ................................................. 2,183,573 72,100 Gilead Sciences, Inc. * ......................................... 3,687,194 175,500 Hologic, Inc. * ................................................. 2,293,785 3,000 Intuitive Surgical, Inc. * ...................................... 380,970 67,200 Johnson & Johnson ............................................... 4,020,576 54,700 Medtronic, Inc. ................................................. 1,718,674
See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 69 ================================================================================ LARGE CAP GROWTH FUND PORTFOLIO OF INVESTMENTS - --------------------------------------------------------------------------------
Shares Value (Note 2) - ------ -------------- COMMON STOCKS (CONTINUED) - -------------------------------------------------------------------------------------------------- HEALTH CARE (CONTINUED) 259,581 Schering-Plough Corp. ........................................... $ 4,420,664 35,600 St. Jude Medical, Inc. * ........................................ 1,173,376 207,600 UnitedHealth Group, Inc. ........................................ 5,522,160 150,300 Vertex Pharmaceuticals, Inc. * .................................. 4,566,114 ------------ 68,310,283 ------------ INDUSTRIALS - 9.80% 74,900 Boeing Co. ...................................................... 3,195,983 13,900 Burlington Northern Santa Fe Corp. .............................. 1,052,369 55,400 Caterpillar, Inc. ............................................... 2,474,718 32,500 CH Robinson Worldwide, Inc. ..................................... 1,788,475 35,700 CSX Corp. ....................................................... 1,159,179 20,800 Cummins, Inc. ................................................... 555,984 33,300 Deere & Co. ..................................................... 1,276,056 51,800 Emerson Electric Co. ............................................ 1,896,398 16,500 Expeditors International of Washington, Inc. .................... 548,955 14,300 Flowserve Corp. ................................................. 736,450 200,000 General Electric Co. ............................................ 3,240,000 77,200 Honeywell International, Inc. ................................... 2,534,476 15,700 ITT Corp. ....................................................... 722,043 25,900 Lockheed Martin Corp. ........................................... 2,177,672 160,800 Quanta Services, Inc. * ......................................... 3,183,840 14,600 Union Pacific Corp. ............................................. 697,880 53,900 United Parcel Service, Inc., Class B ............................ 2,973,124 43,600 United Technologies Corp. ....................................... 2,336,960 25,200 WW Grainger, Inc. ............................................... 1,986,768 ------------ 34,537,330 ------------ INFORMATION TECHNOLOGY - 31.96% 47,200 Accenture, Ltd., Class A ........................................ 1,547,688 41,800 Adobe Systems, Inc. * ........................................... 889,922 21,900 Affiliated Computer Services, Inc., Class A * ................... 1,006,305 23,700 Akamai Technologies, Inc. * ..................................... 357,633 31,000 Altera Corp. .................................................... 518,010 87,300 Apple, Inc. * ................................................... 7,451,055 871,500 Cisco Systems, Inc. * ........................................... 14,205,450 59,200 Citrix Systems, Inc. * .......................................... 1,395,344 139,000 Corning, Inc. ................................................... 1,324,670 99,200 Dell, Inc. * .................................................... 1,015,808 62,200 eBay, Inc. * .................................................... 868,312 254,000 EMC Corp./Massachusetts * ....................................... 2,659,380 6,000 First Solar, Inc. * ............................................. 827,760 33,400 Google, Inc., Class A * ......................................... 10,275,510 97,700 Hewlett-Packard Co. ............................................. 3,545,533 675,400 Intel Corp. ..................................................... 9,901,364 121,000 International Business Machines Corp. ........................... 10,183,360 434,305 Maxim Integrated Products, Inc. ................................. 4,959,763 62,400 Microchip Technology, Inc. ...................................... 1,218,672 656,500 Microsoft Corp. ................................................. 12,762,360 59,700 Novellus Systems, Inc. * ........................................ 736,698 86,400 Nuance Communication, Inc. * .................................... 895,104 359,500 Oracle Corp. * .................................................. 6,373,935 25,300 Paychex, Inc. ................................................... 664,884 235,500 QUALCOMM, Inc. .................................................. 8,437,965 38,200 Salesforce.com, Inc. * .......................................... 1,222,782 174,000 Texas Instruments, Inc. ......................................... 2,700,480 39,100 Varian Semiconductor Equipment Associates, Inc. * ............... 708,492 61,300 Visa, Inc., Class A ............................................. 3,215,185 65,400 Yahoo!, Inc. * .................................................. 797,880 ------------ 112,667,304 ------------ MATERIALS - 2.81% 44,500 Monsanto Co. .................................................... 3,130,575 76,600 Nucor Corp. ..................................................... 3,538,920 54,300 Praxair, Inc. ................................................... 3,223,248 ------------ 9,892,743 ------------ TELECOMMUNICATION SERVICES - 0.30% 58,000 NII Holdings, Inc. * ............................................ 1,054,440 ------------ UTILITIES - 0.99% 43,800 FPL Group, Inc. ................................................. 2,204,454 30,300 Sempra Energy ................................................... 1,291,689 ------------ 3,496,143 ------------ TOTAL COMMON STOCKS (Cost $401,716,239) ............................................. 346,068,490 INVESTMENT COMPANY - 0.99% - -------------------------------------------------------------------------------------------------- 3,473,044 SSgA Prime Money Market Fund .................................... 3,473,044 ------------ TOTAL INVESTMENT COMPANY (Cost $3,473,044) ............................................... 3,473,044
See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 70 ================================================================================ LARGE CAP GROWTH FUND PORTFOLIO OF INVESTMENTS - --------------------------------------------------------------------------------
Value (Note 2) -------------- TOTAL INVESTMENTS - 99.17% - -------------------------------------------------------------------------------------------------- (Cost $405,189,283**) ......................................................... $349,541,534 NET OTHER ASSETS AND LIABILITIES - 0.83% - -------------------------------------------------------------------------------------------------- 2,931,755 TOTAL NET ASSETS - 100.00% - -------------------------------------------------------------------------------------------------- $352,473,289
- -------------------------------------------------------------------------------- * Non-income producing. ** Aggregate cost for Federal tax purposes was $414,598,884. The industry classification method used for purposes of this report's allocation charts and portfolio of investments schedules may differ from the industry subclassification(s) used for Trust compliance purposes. See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 71 ================================================================================ MID CAP VALUE FUND PORTFOLIO OF INVESTMENTS - -------------------------------------------------------------------------------- SECTOR ALLOCATION AS A PERCENTAGE OF NET ASSETS AS OF DECEMBER 31, 2008 [PIE CHART OF SECTOR ALLOCATION] Financials 27% Utilities 14% Consumer Discretionary 10% Consumer Staples 10% Industrials 10% Information Technology 8% Health Care 6% Materials 5% Energy 5% Cash and Other Net Assets 4% Telecommunication Services 1%
[END CHART] - --------------------------------------------------------------------------------
Shares Value (Note 2) - ------ -------------- COMMON STOCKS - 96.03% - -------------------------------------------------------------------------------------------------- CONSUMER DISCRETIONARY - 9.93% 32,600 Arbitron, Inc. .................................................. $ 432,928 14,500 Autoliv, Inc. ................................................... 311,170 3,800 Autozone, Inc. * ................................................ 529,986 16,600 Carnival Corp. .................................................. 403,712 44,400 Cato Corp./The, Class A ......................................... 670,440 31,400 CBS Corp., Class B .............................................. 257,166 14,900 CEC Entertainment, Inc. * ....................................... 361,325 17,700 Choice Hotels International, Inc. ............................... 532,062 53,400 Eastman Kodak Co. ............................................... 351,372 144,419 Ford Motor Co. * ................................................ 330,719 19,700 Fortune Brands, Inc. ............................................ 813,216 23,600 Genuine Parts Co. ............................................... 893,496 33,900 Hibbett Sports, Inc. * .......................................... 532,569 174,000 Interpublic Group of Cos., Inc. * ............................... 689,040 24,300 JC Penney Co., Inc. ............................................. 478,710 31,400 KB Home ......................................................... 427,668 15,500 LKQ Corp. * ..................................................... 180,730 138,700 Mattel, Inc. .................................................... 2,219,200 12,500 Matthews International Corp., Class A ........................... 458,500 32,300 O'Reilly Automotive, Inc. * ..................................... 992,902 10,000 Pulte Homes, Inc. ............................................... 109,300 34,400 Saks, Inc. * .................................................... 150,672 32,300 Scripps Networks Interactive, Inc., Class A ..................... 710,600 33,400 Sonic Corp. * ................................................... 406,478 68,600 Stage Stores, Inc. .............................................. 565,950 53,900 TJX Cos., Inc. .................................................. 1,108,723 29,600 Valassis Communications, Inc. * ................................. 39,072 10,300 VF Corp. ........................................................ 564,131 31,500 Virgin Media, Inc. .............................................. 157,185 ------------ 15,679,022 ------------ CONSUMER STAPLES - 9.99% 12,600 Bunge, Ltd. .................................................... 652,302 15,400 Casey's General Stores, Inc. ................................... 350,658 19,400 Clorox Co. ..................................................... 1,077,864 64,100 ConAgra Foods, Inc. ............................................ 1,057,650 46,900 Constellation Brands, Inc., Class A * .......................... 739,613 29,000 Costco Wholesale Corp. ......................................... 1,522,500 13,300 Energizer Holdings, Inc. * ..................................... 720,062 23,900 Herbalife, Ltd. ................................................ 518,152 31,000 HJ Heinz Co. ................................................... 1,165,600 19,300 Hormel Foods Corp. ............................................. 599,844 31,700 Lance, Inc. .................................................... 727,198 21,000 Lorillard, Inc. ................................................ 1,183,350 25,700 Molson Coors Brewing Co., Class B .............................. 1,257,244 40,500 Safeway, Inc. .................................................. 962,685 50,200 Sara Lee Corp. ................................................. 491,458 41,900 Tyson Foods, Inc., Class A ..................................... 367,044 16,300 UST, Inc. ...................................................... 1,130,894 22,400 Wal-Mart Stores, Inc. .......................................... 1,255,744 ------------ 15,779,862 ------------ ENERGY - 5.07% 62,800 BJ Services Co. ................................................ 732,876 20,600 Chesapeake Energy Corp. ........................................ 333,102 95,000 El Paso Corp. .................................................. 743,850 34,300 Forest Oil Corp. * ............................................. 565,607 25,400 Helmerich & Payne, Inc. ........................................ 577,850 18,500 Nabors Industries, Ltd. * ...................................... 221,445 22,400 Newfield Exploration Co. * ..................................... 442,400 26,300 Noble Energy, Inc. ............................................. 1,294,486 9,600 Overseas Shipholding Group, Inc. ............................... 404,256 50,700 PetroHawk Energy Corp. * ....................................... 792,441 19,000 Plains Exploration & Production Co. * .......................... 441,560
See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 72 ================================================================================ MID CAP VALUE FUND PORTFOLIO OF INVESTMENTS - --------------------------------------------------------------------------------
Shares Value (Note 2) - ------ -------------- COMMON STOCKS (CONTINUED) - -------------------------------------------------------------------------------------------------- ENERGY (CONTINUED) 3,800 SEACOR Holdings, Inc. * ......................................... $ 253,270 19,600 St. Mary Land & Exploration Co. ................................. 398,076 36,100 Tesoro Corp. .................................................... 475,437 9,800 Whiting Petroleum Corp. * ....................................... 327,908 ------------ 8,004,564 ------------ FINANCIALS - 26.82% 900 Alleghany Corp. * ............................................... 253,800 18,100 Ameriprise Financial, Inc. ...................................... 422,816 80,500 Annaly Capital Management, Inc., REIT ........................... 1,277,535 45,600 AON Corp. ....................................................... 2,083,008 19,800 Arch Capital Group, Ltd. * ...................................... 1,387,980 53,699 Ares Capital Corp. .............................................. 339,915 11,100 Asset Acceptance Capital Corp. * ................................ 56,721 37,176 Associated Banc-Corp. ........................................... 778,093 13,600 Assurant, Inc. .................................................. 408,000 31,400 Assured Guaranty, Ltd. .......................................... 357,960 16,900 AvalonBay Communities, Inc., REIT................................ 1,023,802 42,200 Axis Capital Holdings, Ltd. ..................................... 1,228,864 14,000 BlackRock, Inc. ................................................. 1,878,100 16,600 Boston Properties, Inc., REIT ................................... 913,000 15,900 Credit Acceptance Corp. * ....................................... 217,830 35,850 Delphi Financial Group, Inc., Class A ........................... 661,074 31,300 Discover Financial Services ..................................... 298,289 36,800 Equity Residential, REIT ........................................ 1,097,376 16,168 Everest Re Group, Ltd. .......................................... 1,231,031 16,000 Fidelity National Financial, Inc., Class A ...................... 284,000 87,500 Fifth Third Bancorp ............................................. 722,750 13,100 Financial Federal Corp. ......................................... 304,837 8,900 First American Corp. ............................................ 257,121 9,100 First Midwest Bankcorp, Inc./IL ................................. 181,727 66,200 Hudson City Bancorp, Inc. ....................................... 1,056,552 22,450 International Bancshares Corp. .................................. 490,084 13,200 IPC Holdings, Ltd. .............................................. 394,680 63,200 JPMorgan Chase & Co. ............................................ 1,992,696 83,200 Keycorp ......................................................... 708,864 25,400 Kimco Realty Corp., REIT ........................................ 464,312 7,000 Leucadia National Corp. * ....................................... 138,600 12,800 M&T Bank Corp. .................................................. 734,848 52,900 Marsh & McLennan Cos., Inc. ..................................... 1,283,883 28,098 Marshall & Ilsley Corp. ......................................... 383,257 11,400 MB Financial, Inc. .............................................. 318,630 235,400 National City Corp. ............................................. 426,074 17,738 NewAlliance Bancshares, Inc. .................................... 233,609 11,600 Northern Trust Corp. ............................................ 604,824 25,400 People's United Financial, Inc. ................................. 452,882 18,300 Platinum Underwriters Holdings, Ltd. ............................ 660,264 34,400 Principal Financial Group, Inc. ................................. 776,408 54,100 Progressive Corp./The ........................................... 801,221 5,400 PS Business Parks, Inc., REIT ................................... 241,164 10,100 Public Storage, REIT ............................................ 802,950 26,800 Realty Income Corp., REIT ....................................... 620,420 75,300 Regions Financial Corp. ......................................... 599,388 18,400 Reinsurance Group of America, Inc. .............................. 787,888 17,900 SL Green Realty Corp., REIT ..................................... 463,610 12,400 State Street Corp. .............................................. 487,692 25,000 Torchmark Corp. ................................................. 1,117,500 103,100 Unum Group ...................................................... 1,917,660 62,700 US Banccorp ..................................................... 1,568,127 9,000 Ventas, Inc., REIT .............................................. 302,130 26,100 Vornado Realty Trust, REIT ...................................... 1,575,135 31,200 Webster Financial Corp. ......................................... 429,936 6,400 Westamerica Bancorporation ...................................... 327,360 37,400 WR Berkley Corp. ................................................ 1,159,400 14,500 XL Capital, Ltd., Class A ....................................... 53,650 13,000 Zions Bancorporation ............................................ 318,630 ------------ 42,359,957 ------------ HEALTH CARE - 6.31% 16,300 AmerisourceBergen Corp. ......................................... 581,258 17,900 Amsurg Corp. * .................................................. 417,786 24,600 Centene Corp. * ................................................. 484,866 19,200 Charles River Laboratories International, Inc. * ................ 503,040 43,200 Cigna Corp. ..................................................... 727,920 36,600 Coventry Health Care, Inc. * .................................... 544,608 30,300 Forest Laboratories, Inc. * ..................................... 771,741 119,600 Hologic, Inc. * ................................................. 1,563,172 20,800 Humana, Inc. * .................................................. 775,424 43,370 Life Technologies Corp. * ....................................... 1,010,955 20,100 Medco Health Solutions, Inc. * .................................. 842,391 22,400 Orthofix International N.V. * ................................... 343,392 13,216 Teva Pharmaceutical Industries, Ltd., ADR ....................... 562,605 66,800 Universal American Corp./NY * ................................... 589,176 6,700 Wyeth ........................................................... 251,317 ------------ 9,969,651 ------------ INDUSTRIALS - 10.53% 72,400 ACCO Brands Corp. * ............................................. 249,780 13,700 Acuity Brands, Inc. ............................................. 478,267 31,200 Albany International Corp., Class A ............................. 400,608 47,025 Belden, Inc. .................................................... 981,882 48,200 Carlisle Cos., Inc. ............................................. 997,740 23,500 Cooper Industries, Ltd., Class A ................................ 686,905 9,800 Danaher Corp. ................................................... 554,778 21,700 Dover Corp. ..................................................... 714,364
See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 73 ================================================================================ MID CAP VALUE FUND PORTFOLIO OF INVESTMENTS - --------------------------------------------------------------------------------
Shares Value (Note 2) - ------ -------------- COMMON STOCKS (CONTINUED) - -------------------------------------------------------------------------------------------------- INDUSTRIALS (CONTINUED) 12,040 ESCO Technologies, Inc. * ....................................... $ 493,038 4,800 Flowserve Corp. ................................................. 247,200 18,300 GATX Corp. ...................................................... 566,751 9,500 General Dynamics Corp. .......................................... 547,105 30,800 General Electric Co. ............................................ 498,960 10,087 Genesee & Wyoming, Inc., Class A * .............................. 307,654 16,900 Graco, Inc. ..................................................... 401,037 37,500 Ingersoll-Rand Co., Ltd., Class A ............................... 650,625 25,600 ITT Corp. ....................................................... 1,177,344 26,000 KBR, Inc. ....................................................... 395,200 10,500 L-3 Communications Holdings, Inc. ............................... 774,690 34,900 Mueller Industries, Inc. ........................................ 875,292 6,000 Norfolk Southern Corp. .......................................... 282,300 12,900 Parker Hannifin Corp. ........................................... 548,766 18,400 Republic Services, Inc. ......................................... 456,136 18,200 RR Donnelley & Sons Co. ......................................... 247,156 8,500 Simpson Manufacturing Co., Inc. ................................. 235,960 105,900 Southwest Airlines Co. .......................................... 912,858 19,500 United Stationers, Inc. * ....................................... 653,055 7,200 URS Corp. * ..................................................... 293,544 12,800 WW Grainger, Inc. ............................................... 1,009,152 ------------ 16,638,147 ------------ INFORMATION TECHNOLOGY - 7.78% 21,300 Affiliated Computer Services, Inc., Class A * ................... 978,735 43,500 Arrow Electronics, Inc. * ....................................... 819,540 74,000 Brocade Communications Systems, Inc. * .......................... 207,200 44,900 CA, Inc. ........................................................ 831,997 38,000 Computer Sciences Corp. * ....................................... 1,335,320 20,300 Diebold, Inc. ................................................... 570,227 33,300 Electronics for Imaging, Inc. * ................................. 318,348 7,200 Fiserv, Inc. * .................................................. 261,864 35,000 Intersil Corp., Class A ......................................... 321,650 128,900 Maxim Integrated Products, Inc. ................................. 1,472,038 18,700 MAXIMUS, Inc. ................................................... 656,557 14,500 Microchip Technology, Inc. ...................................... 283,185 39,600 Molex, Inc. ..................................................... 573,804 39,800 Novellus Systems, Inc. * ........................................ 491,132 20,300 SanDisk Corp. * ................................................. 194,880 41,300 Seagate Technology .............................................. 182,959 62,400 Sun Microsystems, Inc. * ........................................ 238,368 29,500 Synopsys, Inc. * ................................................ 546,340 20,300 Teradata Corp. * ................................................ 301,049 29,700 Websense, Inc. * ................................................ 444,609 93,900 Xerox Corp. ..................................................... 748,383 25,100 Zebra Technologies Corp., Class A * ............................. 508,526 ------------ 12,286,711 ------------ MATERIALS - 4.76% 13,000 Air Products & Chemicals, Inc. .................................. 653,510 14,700 Aptargroup, Inc. ................................................ 518,028 29,100 Celanese Corp., Series A ........................................ 361,713 4,300 Compass Minerals International, Inc. ............................ 252,238 8,300 Deltic Timber Corp. ............................................. 379,725 17,300 Ecolab, Inc. .................................................... 608,095 18,100 EI Du Pont de Nemours & Co. ..................................... 457,930 21,965 Freeport-McMoRan Copper and Gold, Inc. .......................... 536,825 14,500 Mosaic Co./The .................................................. 501,700 22,000 Nucor Corp. ..................................................... 1,016,400 24,900 Owens-Illinois, Inc. * .......................................... 680,517 16,300 Sigma-Aldrich Corp. ............................................. 688,512 28,300 Weyerhaeuser Co. ................................................ 866,263 ------------ 7,521,456 ------------ TELECOMMUNICATION SERVICES - 1.07% 21,400 Crown Castle International Corp. * .............................. 376,212 17,800 Embarq Corp. .................................................... 640,088 97,400 Qwest Communications International, Inc. ........................ 354,536 9,900 Telephone & Data Systems, Inc. .................................. 314,325 ------------ 1,685,161 ------------ UTILITIES - 13.77% 34,300 Ameren Corp. .................................................... 1,140,818 75,900 American Electric Power Co., Inc. ............................... 2,525,952 12,400 Atmos Energy Corp. .............................................. 293,880 49,200 Edison International ............................................ 1,580,304 5,300 Entergy Corp. ................................................... 440,589 7,500 New Jersey Resources Corp. ...................................... 295,125 15,700 NRG Energy, Inc. * .............................................. 366,281 53,500 NSTAR ........................................................... 1,952,215 28,800 Oneok, Inc. ..................................................... 838,656 65,500 PG&E Corp. ...................................................... 2,535,505 51,100 Progress Energy, Inc. ........................................... 2,036,335 15,700 Questar Corp. ................................................... 513,233 47,800 Sempra Energy ................................................... 2,037,714 21,900 UGI Corp. ....................................................... 534,798 18,300 Unisource Energy Corp. .......................................... 537,288 24,600 Westar Energy, Inc. ............................................. 504,546 11,000 WGL Holdings, Inc. .............................................. 359,590 31,500 Wisconsin Energy Corp. .......................................... 1,322,370 104,300 Xcel Energy, Inc. ............................................... 1,934,765 ------------ 21,749,964 ------------
See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 74 ================================================================================ MID CAP VALUE FUND PORTFOLIO OF INVESTMENTS - --------------------------------------------------------------------------------
Shares Value (Note 2) - ------ -------------- COMMON STOCKS (CONTINUED) - -------------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $199,627,344) ............................................. $151,674,495 INVESTMENT COMPANIES - 3.61% - -------------------------------------------------------------------------------------------------- 5,418,894 SSgA Prime Money Market Fund .................................... 5,418,894 24,300 SPDR S&P Homebuilders ETF ....................................... 290,871 ------------ TOTAL INVESTMENT COMPANIES (Cost $5,727,198) ............................................... 5,709,765 TOTAL INVESTMENTS - 99.64% - -------------------------------------------------------------------------------------------------- (Cost $205,354,542**) ......................................................... 157,384,260 NET OTHER ASSETS AND LIABILITIES - 0.36% - -------------------------------------------------------------------------------------------------- 564,656 TOTAL NET ASSETS - 100.00% - -------------------------------------------------------------------------------------------------- $157,948,916
- -------------------------------------------------------------------------------- ** Aggregate cost for Federal tax purposes was $209,010,103. * Non-income producing. ADR American Depositary Receipt ETF Exchange Traded Fund. REIT Real Estate Investment Trust The industry classification method used for purposes of this report's allocation charts and portfolio of investments schedules may differ from the industry subclassification(s) used for Trust compliance purposes. See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 75 ================================================================================ MID CAP GROWTH FUND PORTFOLIO OF INVESTMENTS - -------------------------------------------------------------------------------- SECTOR ALLOCATION AS A PERCENTAGE OF NET ASSETS AS OF DECEMBER 31, 2008 [PIE CHART OF SECTOR ALLOCATION] Information Technology 21% Health Care 17% Industrials 16% Consumer Discretionary 16% Energy 10% Financials 7% Consumer Staples 4% Materials 4% Cash & Other Net Assets 3% Telecommunication Services 1% Utilities 1%
[END CHART] - --------------------------------------------------------------------------------
Shares Value (Note 2) - ------ -------------- COMMON STOCKS - 97.51% - -------------------------------------------------------------------------------------------------- CONSUMER DISCRETIONARY - 15.92% 83,300 Aeropostale, Inc. * ............................................. $ 1,341,130 159,782 Buckle, Inc./The ................................................ 3,486,443 117,800 Chico's FAS, Inc. * ............................................. 492,404 146,600 GameStop Corp., Class A * ....................................... 3,175,356 131,400 Guess ?, Inc. ................................................... 2,016,990 153,095 Gymboree Corp. * ................................................ 3,994,249 96,600 O'Reilly Automotive, Inc. * ..................................... 2,969,484 36,600 priceline.com, Inc. * ........................................... 2,695,590 113,200 Sotheby's ....................................................... 1,006,348 98,282 Steiner Leisure, Ltd. * ......................................... 2,901,285 194,687 True Religion Apparel, Inc. * ................................... 2,421,906 ------------ 26,501,185 ------------ CONSUMER STAPLES - 3.46% 37,900 Avon Products, Inc. ............................................. 910,737 99,800 Herbalife, Ltd. ................................................. 2,163,664 183,800 SUPERVALU, Inc. ................................................. 2,683,480 ------------ 5,757,881 ------------ ENERGY - 10.39% 244,200 Atwood Oceanics, Inc. * ......................................... 3,731,376 34,900 Consol Energy, Inc. ............................................. 997,442 508,500 Hercules Offshore, Inc. * ....................................... 2,415,375 82,800 National Oilwell Varco, Inc. * .................................. 2,023,632 33,300 Noble Corp. ..................................................... 735,597 52,600 Noble Energy, Inc. .............................................. 2,588,972 68,600 St. Mary Land & Exploration Co. ................................. 1,393,266 80,500 Ultra Petroleum Corp. * ......................................... 2,778,055 19,000 Whiting Petroleum Corp. * ....................................... 635,740 ------------ 17,299,455 ------------ FINANCIALS - 7.01% 66,100 Ameriprise Financial, Inc. ...................................... 1,544,096 358,000 Assured Guaranty, Ltd. .......................................... 4,081,200 55,300 Hartford Financial Services Group, Inc. ......................... 908,026 490,325 Huntington Bancshares, Inc./OH .................................. 3,755,889 101,172 TCF Financial Corp. ............................................. 1,382,010 ------------ 11,671,221 ------------ HEALTH CARE - 17.02% 57,000 Beckman Coulter, Inc. ........................................... 2,504,580 38,700 Cephalon, Inc. * ................................................ 2,981,448 68,200 Charles River Laboratories International, Inc. * ................ 1,786,840 235,700 Coventry Health Care, Inc. * .................................... 3,507,216 53,200 Cubist Pharmaceuticals, Inc. * .................................. 1,285,312 45,600 Hospira, Inc. * ................................................. 1,222,992 101,100 Humana, Inc. * .................................................. 3,769,008 145,467 Life Technologies Corp. * ....................................... 3,390,836 108,600 Psychiatric Solutions, Inc. * ................................... 3,024,510 79,100 St. Jude Medical, Inc. * ........................................ 2,607,136 61,700 Waters Corp. * .................................................. 2,261,305 ------------ 28,341,183 ------------ INDUSTRIALS - 16.35% 10,500 DynCorp International, Inc., Class A * .......................... 159,285 62,900 Flowserve Corp. ................................................. 3,239,350 65,800 Foster Wheeler, Ltd. * .......................................... 1,538,404 130,200 Graco, Inc. ..................................................... 3,089,646 191,688 Herman Miller, Inc. ............................................. 2,497,694 128,400 HUB Group, Inc., Class A * ...................................... 3,406,452 71,825 Manpower, Inc. .................................................. 2,441,332 260,800 Oshkosh Corp. ................................................... 2,318,512 53,800 Precision Castparts Corp. ....................................... 3,200,024 95,500 Terex Corp. * ................................................... 1,654,060 153,300 Thomas & Betts Corp. * .......................................... 3,682,266 ------------ 27,227,025 ------------ INFORMATION TECHNOLOGY - 20.98% 239,400 Akamai Technologies, Inc. * ..................................... 3,612,546 91,000 Alliance Data Systems Corp. * ................................... 4,234,230
See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 76 ================================================================================ MID CAP GROWTH FUND PORTFOLIO OF INVESTMENTS - --------------------------------------------------------------------------------
Shares Value (Note 2) - ------ -------------- COMMON STOCKS (CONTINUED) - -------------------------------------------------------------------------------------------------- INFORMATION TECHNOLOGY (CONTINUED) 136,100 Amdocs, Ltd. * .................................................. $ 2,489,269 73,300 Amphenol Corp., Class A ......................................... 1,757,734 121,700 BMC Software, Inc. * ............................................ 3,274,947 175,700 Cognizant Technology Solutions Corp., Class A * ................. 3,173,142 54,400 Flir Systems, Inc. * ............................................ 1,668,992 241,400 NetApp, Inc. * .................................................. 3,372,358 438,800 Perot Systems Corp., Class A * .................................. 5,998,396 137,300 Polycom, Inc. * ................................................. 1,854,923 243,200 Western Union Co./The ........................................... 3,487,488 ------------ 34,924,025 ------------ MATERIALS - 4.22% 53,900 Cliffs Natural Resources, Inc. .................................. 1,380,379 106,000 Pactiv Corp. * .................................................. 2,637,280 121,900 Terra Industries, Inc. .......................................... 2,032,073 125,600 Yamana Gold, Inc. ............................................... 969,632 ------------ 7,019,364 ------------ TELECOMMUNICATION SERVICES - 1.51% 138,000 NII Holdings, Inc. * ............................................ 2,508,840 ------------ UTILITIES - 0.65% 36,600 Idacorp, Inc. ................................................... 1,077,870 ------------ TOTAL COMMON STOCKS (Cost $240,533,774) ............................................. 162,328,049 INVESTMENT COMPANY - 1.72% - -------------------------------------------------------------------------------------------------- 2,862,522 SSgA Prime Money Market Fund .................................... 2,862,522 ------------ TOTAL INVESTMENT COMPANY (Cost $2,862,522) ............................................... 2,862,522 TOTAL INVESTMENTS - 99.23% - -------------------------------------------------------------------------------------------------- (Cost $243,396,296**) ......................................................... 165,190,571 NET OTHER ASSETS AND LIABILITIES - 0.77% - -------------------------------------------------------------------------------------------------- 1,274,342 TOTAL NET ASSETS - 100.00% - -------------------------------------------------------------------------------------------------- $166,464,913
- -------------------------------------------------------------------------------- * Non-income producing. ** Aggregate cost for Federal tax purposes was $267,111,989. The industry classification method used for purposes of this report's allocation charts and portfolio of investments schedules may differ from the industry subclassification(s) used for Trust compliance purposes. See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 77 ================================================================================ SMALL CAP VALUE FUND PORTFOLIO OF INVESTMENTS - -------------------------------------------------------------------------------- SECTOR ALLOCATION AS A PERCENTAGE OF NET ASSETS AS OF DECEMBER 31, 2008 [PIE CHART OF SECTOR ALLOCATION] Industrials 21% Financials 20% Consumer Discretionary 16% Health Care 9% Information Technology 8% Cash and Other Net Assets 6% Utilities 6% Consumer Staples 5% Materials 5% Energy 4%
[END CHART] - --------------------------------------------------------------------------------
Shares Value (Note 2) - ------ -------------- COMMON STOCKS - 94.18% - -------------------------------------------------------------------------------------------------- CONSUMER DISCRETIONARY - 16.22% 6,100 Arbitron, Inc. ................................................. $ 81,008 7,800 Cato Corp./The, Class A ........................................ 117,780 2,700 CEC Entertainment, Inc. * ...................................... 65,475 3,000 Choice Hotels International, Inc. .............................. 90,180 5,700 Helen of Troy, Ltd. * ......................................... 98,952 5,500 Hibbett Sports, Inc. * ......................................... 86,405 2,600 LKQ Corp. * .................................................... 30,316 2,000 Matthews International Corp., Class A ......................... 73,360 7,000 Modine Manufacturing Co. ....................................... 34,090 6,300 Sonic Corp. * .................................................. 76,671 11,700 Stage Stores, Inc. ............................................. 96,525 2,900 Tempur-Pedic International, Inc. ............................... 20,561 3,100 Unifirst Corp./MA ............................................... 92,039 5,800 Valassis Communications, Inc. * ................................ 7,656 ---------- 971,018 ---------- CONSUMER STAPLES - 4.84% 2,800 Casey's General Stores, Inc. ................................... 63,756 4,400 Herbalife, Ltd. ................................................ 95,392 5,700 Lance, Inc. .................................................... 130,758 ---------- 289,906 ---------- ENERGY - 3.46% 3,600 Penn Virginia Corp. ............................................ 93,528 800 SEACOR Holdings, Inc. * ....................................... 53,320 1,800 Whiting Petroleum Corp. * ...................................... 60,228 ---------- 207,076 ---------- FINANCIALS - 20.32% 3,800 Acadia Realty Trust, REIT....................................... 54,226 2,400 American Campus Communities, Inc., REIT ........................ 49,152 9,533 Ares Capital Corp. ............................................. 60,344 5,000 Asset Acceptance Capital Corp. * ............................... 25,550 5,400 Assured Guaranty, Ltd. ......................................... 61,560 3,200 Credit Acceptance Corp. * ...................................... 43,840 6,600 Delphi Financial Group, Inc., Class A ......................... 121,704 2,300 Financial Federal Corp. ........................................ 53,521 1,900 First Midwest Bankcorp, Inc./IL ................................ 37,943 3,690 International Bancshares Corp. ................................. 80,553 2,500 IPC Holdings, Ltd. ............................................. 74,750 2,200 MB Financial, Inc. ............................................. 61,490 2,800 NewAlliance Bancshares, Inc. ................................... 36,876 3,500 Platinum Underwriters Holdings, Ltd. ........................... 126,280 1,400 PS Business Parks, Inc., REIT .................................. 62,524 4,600 Realty Income Corp., REIT ...................................... 106,490 6,200 U-Store-It Trust, REIT ......................................... 27,590 5,500 Webster Financial Corp. ........................................ 75,790 1,100 Westamerica Bancorporation ..................................... 56,265 ---------- 1,216,448 ---------- HEALTH CARE - 8.93% 3,000 Amsurg Corp. * .................................................. 70,020 4,300 Centene Corp. * ................................................. 84,753 3,200 Charles River Laboratories International, Inc. * ................ 83,840 1,800 Corvel Corp. * ................................................. 39,564 2,700 ICU Medical, Inc. * ............................................. 89,478 4,200 Orthofix International N.V. * .................................. 64,386 11,600 Universal American Corp./NY * .................................. 102,312 ---------- 534,353 ---------- INDUSTRIALS - 20.76% 12,700 ACCO Brands Corp. * ............................................. 43,815 2,500 Acuity Brands, Inc. ............................................. 87,275 5,600 Albany International Corp., Class A ............................. 71,904
See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 78 ================================================================================ SMALL CAP VALUE FUND PORTFOLIO OF INVESTMENTS - --------------------------------------------------------------------------------
Shares Value (Note 2) - ------ -------------- COMMON STOCKS (CONTINUED) - -------------------------------------------------------------------------------------------------- INDUSTRIALS (CONTINUED) 8,200 Belden, Inc. ................................................... $ 171,216 6,600 Bowne & Co., Inc. .............................................. 38,808 8,400 Carlisle Cos., Inc. ............................................ 173,880 2,100 ESCO Technologies, Inc. * ..................................... 85,995 3,000 GATX Corp. ..................................................... 92,910 1,900 Genesee & Wyoming, Inc., Class A * ............................. 57,950 5,800 Mueller Industries, Inc. ....................................... 145,464 2,500 Quixote Corp. .................................................. 16,250 1,900 Simpson Manufacturing Co., Inc. ................................ 52,744 2,600 Sterling Construction Co., Inc. * .............................. 48,204 3,400 United Stationers, Inc. * ...................................... 113,866 6,800 Vitran Corp., Inc. * ........................................... 42,160 ---------- 1,242,441 ---------- INFORMATION TECHNOLOGY - 8.50% 3,600 Diebold, Inc. .................................................. 101,124 5,900 Electronics for Imaging, Inc. * ................................ 56,404 3,100 MAXIMUS, Inc. .................................................. 108,841 8,000 NAM TAI Electronics, Inc. ...................................... 44,000 5,200 Websense, Inc. * ............................................... 77,844 10,000 Xyratex, Ltd. * ................................................ 29,500 4,500 Zebra Technologies Corp., Class A * ............................ 91,170 ---------- 508,883 ---------- MATERIALS - 5.19% 2,500 Aptargroup, Inc. ............................................... 88,100 700 Compass Minerals International, Inc. ........................... 41,062 1,500 Deltic Timber Corp. ............................................ 68,625 5,850 Zep, Inc. ...................................................... 112,963 ---------- 310,750 ---------- UTILITIES - 5.96% 2,800 Atmos Energy Corp. ............................................. 66,360 1,250 New Jersey Resources Corp. ..................................... 49,188 3,200 Unisource Energy Corp. ......................................... 93,952 4,000 Westar Energy, Inc. ............................................ 82,040 2,000 WGL Holdings, Inc. ............................................. 65,380 ---------- 356,920 ---------- TOTAL COMMON STOCKS (Cost $7,757,693) .............................................. 5,637,795 Par Value - --------- CERTIFICATE OF DEPOSIT - 0.12% - -------------------------------------------------------------------------------------------------- $6,931 State Street Eurodollar 0.010%, due 01/02/09 ........................................... $ 6,931 ---------- TOTAL CERTIFICATE OF DEPOSIT (Cost $6,931) .................................................. 6,931 Shares - ------ INVESTMENT COMPANY - 4.23% - -------------------------------------------------------------------------------------------------- 253,151 SSgA Prime Money Market Fund .................................................... 253,151 ---------- TOTAL INVESTMENT COMPANY (Cost $253,151) ................................................ 253,151 TOTAL INVESTMENTS - 98.53% - -------------------------------------------------------------------------------------------------- (Cost $8,017,775**) ........................................................... 5,897,877 NET OTHER ASSETS AND LIABILITIES - 1.47% - -------------------------------------------------------------------------------------------------- 87,820 TOTAL NET ASSETS - 100.00% - -------------------------------------------------------------------------------------------------- $5,985,697
- -------------------------------------------------------------------------------- * Non-income producing. ** Aggregate cost for Federal tax purposes was $8,045,712. REIT Real Estate Investment Trust. The industry classification method used for purposes of this report's allocation charts and portfolio of investments schedules may differ from the industry subclassification(s) used for Trust compliance purposes. See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 79 ================================================================================ SMALL CAP GROWTH FUND PORTFOLIO OF INVESTMENTS - -------------------------------------------------------------------------------- SECTOR ALLOCATION AS A PERCENTAGE OF NET ASSETS AS OF DECEMBER 31, 2008 [PIE CHART OF SECTOR ALLOCATION] Industrials 25% Health Care 21% Information Technology 19% Financials 11% Consumer Discretionary 9% Energy 5% Cash and Other Net Assets 3% Materials 4% Consumer Staples 1% Telecommunication Services 1% Utilities 1%
[END CHART] - --------------------------------------------------------------------------------
Shares Value (Note 2) - ------ -------------- COMMON STOCKS - 97.24% - -------------------------------------------------------------------------------------------------- CONSUMER DISCRETIONARY - 8.64% 1,100 Aaron Rents, Inc. .............................................. $ 29,282 1,300 Aeropostale, Inc. * ............................................ 20,930 600 Carter's, Inc. * ............................................... 11,556 1,000 CEC Entertainment, Inc. * ...................................... 24,250 1,900 Corinthian Colleges, Inc. * .................................... 31,103 500 Deckers Outdoor Corp. * ........................................ 39,935 700 DeVry, Inc. .................................................... 40,187 600 DineEquity, Inc. ............................................... 6,936 1,900 Drew Industries, Inc. * ........................................ 22,800 1,100 Ethan Allen Interiors, Inc. .................................... 15,807 900 Interactive Data Corp. ......................................... 22,194 900 Marvel Entertainment, Inc. * ................................... 27,675 1,200 Men's Wearhouse, Inc. .......................................... 16,248 300 NetFlix, Inc. * ................................................ 8,967 2,100 World Wrestling Entertainment, Inc., Class A .................................................. 23,268 1,100 Zumiez, Inc. * ................................................. 8,195 ---------- 349,333 ---------- CONSUMER STAPLES - 1.15% 500 Green Mountain Coffee Roasters, Inc. * ......................................................... 19,350 1,700 Winn-Dixie Stores, Inc. * ...................................... 27,370 ---------- 46,720 ---------- ENERGY - 4.99% 1,200 Atwood Oceanics, Inc. * ........................................ 18,336 600 Bill Barrett Corp. * ........................................... 12,678 700 CARBO Ceramics, Inc. ........................................... 24,871 600 Comstock Resources, Inc. * ..................................... 28,350 1,000 IHS, Inc., Class A * ........................................... 37,420 1,500 Penn Virginia Corp. ............................................ 38,970 700 Petroleum Development Corp. * .................................. 16,849 1,800 Petroquest Energy, Inc. * ...................................... 12,168 700 Walter Industries, Inc. ........................................ 12,257 ---------- 201,899 ---------- FINANCIALS - 11.06% 300 Alexandria Real Estate Equities, Inc., REIT ................... 18,102 800 Corporate Office Properties Trust SBI MD, REIT ................. 24,560 800 EastGroup Properties, Inc., REIT ............................... 28,464 600 GAMCO Investors, Inc., Class A ................................. 16,392 800 Greenhill & Co., Inc. .......................................... 55,816 600 Hancock Holding Co. ............................................ 27,276 900 Highwoods Properties, Inc., REIT ............................... 24,624 800 Home Properties, Inc., REIT .................................... 32,480 900 KBW, Inc. * ................................................... 20,700 900 Knight Capital Group, Inc., Class A * .......................... 14,535 1,100 Mid-America Apartment Communities, Inc., REIT .................. 40,876 700 Nationwide Health Properties, Inc., REIT ...................... 20,104 600 Potlatch Corp., REIT ........................................... 15,606 1,000 Signature Bank/New York, NY * .................................. 28,690 600 Stifel Financial Corp. * ....................................... 27,510 400 SVB Financial Group * .......................................... 10,492 1,000 Waddell & Reed Financial, Inc., Class A ........................ 15,460 900 Washington Real Estate Investment Trust, REIT .................. 25,470 ---------- 447,157 ---------- HEALTH CARE - 21.26% 800 Alexion Pharmaceuticals, Inc. * ................................ 28,952 1,700 Alkermes, Inc. * ............................................... 18,105
See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 80 ================================================================================ SMALL CAP GROWTH FUND PORTFOLIO OF INVESTMENTS - --------------------------------------------------------------------------------
Shares Value (Note 2) - ------ -------------- COMMON STOCKS (CONTINUED) - -------------------------------------------------------------------------------------------------- HEALTH CARE (CONTINUED) 400 AMAG Pharmaceuticals, Inc. * ................................... $ 14,340 800 Amedisys, Inc. * ............................................... 33,072 2,600 AMN Healthcare Services, Inc. * ................................ 21,996 1,100 Arthrocare Corp. * ............................................. 5,247 400 Centene Corp. * ................................................ 7,884 900 Cepheid, Inc. * ................................................ 9,342 1,000 Eclipsys Corp. * ............................................... 14,190 900 Emeritus Corp. * ............................................... 9,027 1,500 Icon PLC, ADR * ................................................ 29,535 900 Immucor, Inc. * ................................................ 23,922 1,200 Isis Pharmaceuticals, Inc. * ................................... 17,016 1,200 KV Pharmaceutical Co., Class A * ............................... 3,456 200 Landauer, Inc. ................................................. 14,660 900 Magellan Health Services, Inc. * ............................... 35,244 600 Martek Biosciences Corp. * ..................................... 18,186 800 Medicines Co./The * ............................................ 11,784 1,800 Medicis Pharmaceutical Corp., Class A .......................... 25,020 1,500 Mednax, Inc. * ................................................. 47,550 800 MWI Veterinary Supply, Inc. * .................................. 21,568 1,000 Myriad Genetics, Inc. * ........................................ 66,260 800 Onyx Pharmaceuticals, Inc. * ................................... 27,328 500 OSI Pharmaceuticals, Inc. * .................................... 19,525 300 Owens & Minor, Inc. ............................................ 11,295 800 Perrigo Co. .................................................... 25,848 1,400 PSS World Medical, Inc. * ...................................... 26,348 1,200 Psychiatric Solutions, Inc. * .................................. 33,420 800 Regeneron Pharmaceuticals, Inc. * .............................. 14,688 900 SonoSite, Inc. * ............................................... 17,172 700 STERIS Corp. ................................................... 16,723 1,300 Thoratec Corp. * ............................................... 42,237 1,200 Valeant Pharmaceuticals International * ........................ 27,480 500 Varian, Inc. * ................................................. 16,755 600 West Pharmaceutical Services, Inc. ............................. 22,662 1,700 Wright Medical Group, Inc. * ................................... 34,731 600 XenoPort, Inc. * ............................................... 15,048 1,700 Zoll Medical Corp. * ........................................... 32,113 ---------- 859,729 ---------- INDUSTRIALS - 24.94% 1,000 Actuant Corp., Class A. ........................................ 19,020 800 Acuity Brands, Inc. ............................................ 27,928 800 Advisory Board Co./The * ....................................... 17,840 500 Ameron International Corp. ..................................... 31,460 1,500 Beacon Roofing Supply, Inc. * .................................. 20,820 1,100 Belden, Inc. ................................................... 22,968 1,100 Bucyrus International, Inc. .................................... 20,372 1,000 Clarcor, Inc. .................................................. 33,180 700 Clean Harbors, Inc. * .......................................... 44,408 500 Curtiss-Wright Corp. ........................................... 16,695 600 Esterline Technologies Corp. * ................................. 22,734 500 Franklin Electric Co., Inc. .................................... 14,055 600 Genesee & Wyoming, Inc., Class A * ...................................................... 18,300 900 GeoEye, Inc. * ................................................. 17,307 800 HUB Group, Inc., Class A * ..................................... 21,224 800 Kaydon Corp. ................................................. 27,480 1,200 Korn/Ferry International * ..................................... 13,704 1,100 Ladish Co., Inc. * ............................................ 15,235 700 Layne Christensen Co. * ........................................ 16,807 200 Lindsay Corp. .................................................. 6,358 500 Madger Meter, Inc. ............................................. 14,510 800 Mcgrath RentCorp. .............................................. 17,088 800 Middleby Corp. * ............................................... 21,816 700 Mine Safety Appliances Co. ..................................... 16,737 500 Moog, Inc., Class A * .......................................... 18,285 1,200 Navigant Consulting, Inc. * .................................... 19,044 700 Nordson Corp. .................................................. 22,603 1,100 RBC Bearings, Inc. * ........................................... 22,308 500 Resources Connection, Inc. * ................................... 8,190 2,600 SYKES Enterprises, Inc. * ...................................... 49,712 500 Teledyne Technologies, Inc. * .................................. 22,275 1,000 Tetra Tech, Inc. * ............................................. 24,150 1,200 TransDigm Group, Inc. * ........................................ 40,284 1,600 Triumph Group, Inc. ............................................ 67,936 700 United Stationers, Inc. * ...................................... 23,443 400 Valmont Industries, Inc. ....................................... 24,544 1,400 Wabtec Corp. ................................................... 55,650 1,600 Waste Connections, Inc. * ...................................... 50,512 300 Watsco, Inc. ................................................. 11,520 800 Watson Wyatt Worldwide, Inc., Class A ........................................................ 38,256 500 Woodward Governor Co. .......................................... 11,510 ---------- 1,008,268 ---------- INFORMATION TECHNOLOGY - 19.37% 400 ACI Worldwide, Inc. * .......................................... 6,360 900 Advanced Energy Industries, Inc. * ............................. 8,955 800 Advent Software, Inc. * ........................................ 15,976 900 Anixter International, Inc. * .................................. 27,108 1,100 Blackboard, Inc. * ............................................. 28,853 1,200 Cabot Microelectonics Corp. * .................................. 31,284 800 CACI International, Inc., Class A * ...................................................... 36,072 700 Comtech Telecommunications Corp. * ........................................................ 32,074 500 CSG Systems International, Inc. * .............................. 8,735 600 Cymer, Inc. * .................................................. 13,146 1,300 EMS Technologies, Inc. * ....................................... 33,631 2,300 Forrester Research, Inc. * ..................................... 64,883 800 Gartner, Inc. * ................................................ 14,264
See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 81 ================================================================================ SMALL CAP GROWTH FUND PORTFOLIO OF INVESTMENTS - --------------------------------------------------------------------------------
Shares Value (Note 2) - ------ -------------- COMMON STOCKS (CONTINUED) - -------------------------------------------------------------------------------------------------- INFORMATION TECHNOLOGY (CONTINUED) 1,800 Informatica Corp. * ............................................ $ 24,714 400 Itron, Inc. * .................................................. 25,496 900 IXYS Corp. ..................................................... 7,434 1,000 Jack Henry & Associates, Inc. .................................. 19,410 700 Littelfuse, Inc. * ............................................. 11,620 2,200 Micros Systems, Inc. * ......................................... 35,904 2,600 Microsemi Corp. * .............................................. 32,864 1,500 Neutral Tandem, Inc. * ......................................... 24,330 1,700 Nice Systems, Ltd., ADR * ...................................... 38,199 1,500 Parametric Technology Corp. * .................................. 18,975 800 Progress Software Corp. * ...................................... 15,408 900 Quest Software, Inc. * ......................................... 11,331 900 Rofin-Sinar Technologies, Inc. * ............................... 18,522 1,100 Scansource, Inc. * ............................................. 21,197 4,300 SkillSoft PLC, ADR * ........................................... 30,702 300 Sohu.com, Inc. * ............................................... 14,202 900 Solera Holdings, Inc. * ........................................ 21,690 900 SPSS, Inc. * ................................................... 24,264 1,300 Standard Microsystems Corp. * .................................. 21,242 800 Sybase, Inc. * ................................................. 19,816 900 Synaptics, Inc. * ............................................. 14,904 800 Ultratech, Inc. * .............................................. 9,568 ---------- 783,133 ---------- MATERIALS - 4.09% 500 Aptargroup, Inc. ............................................... 17,620 700 Arch Chemicals, Inc. ........................................... 18,249 171 Clearwater Paper Corp. * ....................................... 1,434 700 Deltic Timber Corp. ............................................ 32,025 500 Greif, Inc., Class A. .......................................... 16,715 1,100 Silgan Holdings, Inc. .......................................... 52,591 1,600 Terra Industries, Inc. ......................................... 26,672 ---------- 165,306 ---------- TELECOMMUNICATION SERVICES - 0.98% 1,600 NTELOS Holdings Corp. .......................................... 39,456 ---------- UTILITIES - 0.76% 700 ITC Holdings Corp. ............................................. 30,576 ---------- TOTAL COMMON STOCKS (Cost $4,753,824) .............................................. 3,931,577 INVESTMENT COMPANY - 2.74% - -------------------------------------------------------------------------------------------------- 110,875 SSgA Prime Money Market Fund .................................................... 110,875 ---------- TOTAL INVESTMENT COMPANY (Cost $110,875)................................................. 110,875 TOTAL INVESTMENTS - 99.98% - -------------------------------------------------------------------------------------------------- (Cost $4,864,699**)............................................................ 4,042,452 NET OTHER ASSETS AND LIABILITIES - 0.02% - -------------------------------------------------------------------------------------------------- 799 TOTAL NET ASSETS - 100.00% - -------------------------------------------------------------------------------------------------- $4,043,251
- -------------------------------------------------------------------------------- * Non-income producing. ** Aggregate cost for Federal tax purposes was $4,880,177. ADR American Depositary Receipt. PLC Public Limited Company. REIT Real Estate Investment Trust. The industry classification method used for purposes of this report's allocation charts and portfolio of investments schedules may differ from the industry subclassification(s) used for Trust compliance purposes. See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 82 ================================================================================ GLOBAL SECURITIES FUND PORTFOLIO OF INVESTMENTS - -------------------------------------------------------------------------------- GEOGRAPHICAL ALLOCATION AS A PERCENTAGE OF NET ASSETS AS OF DECEMBER 31, 2008 [PIE CHART OF GEOGRAPHICAL ALLOCATION] United States 39% Europe (excluding United Kingdom) 25% Japan 14% United Kingdom 13% Pacific Basin 8% Cash and Other Net Assets 1%
[END CHART] - --------------------------------------------------------------------------------
Shares Value (Note 2) - ------ -------------- COMMON STOCKS - 99.09% - -------------------------------------------------------------------------------------------------- AUSTRALIA - 4.55% 84,089 Amcor, Ltd. .................................................... $ 341,768 85,138 Foster's Group, Ltd. ........................................... 327,540 17,584 National Australia Bank, Ltd. 257,787 151,642 Telstra Corp., Ltd. ............................................ 406,037 ------------ 1,333,132 ------------ BELGIUM - 0.16% 34,957 Fortis ......................................................... 46,275 13,256 Fortis VVPR Strips* ............................................ 18 ------------ 46,293 ------------ FINLAND - 0.52% 11,988 UPM-Kymmene OYJ ................................................ 152,001 ------------ FRANCE - 8.85% 16,490 Carrefour S.A. ................................................. 633,267 20,315 France Telecom S.A. ............................................ 568,234 4,177 Renault S.A. ................................................... 108,954 7,921 Societe Generale ............................................... 401,179 16,201 Total S.A. ..................................................... 883,241 ------------ 2,594,875 ------------ GERMANY - 3.20% 27,061 Deutsche Telekom AG ............................................ 411,153 5,867 RWE AG ......................................................... 527,424 ------------ 938,577 ------------ ITALY - 1.74% 205,473 UniCredit SpA .................................................. 511,534 ------------ JAPAN - 14.46% 10,900 Astellas Pharma, Inc. .......................................... 443,536 15,000 Canon, Inc. .................................................... 470,873 116 Nippon Telegraph & Telephone Corp. (L) ...................................................... 644,404 24,000 Nitto Denko Corp. .............................................. 461,095 18,000 Seven & I Holdings Co., Ltd. ................................... 616,675 12,500 Takeda Pharmaceutical Co., Ltd. ........................................................... 648,406 18,100 Tokio Marine Holdings, Inc. .................................... 530,370 94 West Japan Railway Co. ......................................... 427,689 ------------ 4,243,048 ------------ NETHERLANDS - 2.06% 30,272 ING Groep N.V. ................................................. 316,439 24,407 Reed Elsevier N.V. ............................................. 287,565 ------------ 604,004 ------------ SINGAPORE - 1.83% 71,000 Oversea-Chinese Banking Corp., Ltd. ........................................................... 247,373 163,000 Singapore Telecommunications, Ltd. ........................................................... 290,225 ------------ 537,598 ------------ SPAIN - 5.31% 72,689 Iberdrola S.A. ................................................. 674,932 39,381 Telefonica S.A. ................................................ 882,743 ------------ 1,557,675 ------------ SWITZERLAND - 2.91% 17,060 Novartis AG .................................................... 854,782 ------------ TAIWAN - 1.21% 44,824 Taiwan Semiconductor Manufacturing Co., Ltd., ADR ................................... 354,110 ------------ UNITED KINGDOM - 13.37% 36,044 Aviva PLC ...................................................... 204,025 99,669 BP PLC ......................................................... 763,692 67,613 GKN PLC ........................................................ 95,731 56,646 GlaxoSmithKline PLC ............................................ 1,051,599 100,810 HBOS PLC ....................................................... 102,311 97,694 Lloyds TSB Group PLC ........................................... 178,811
See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 83 ================================================================================ GLOBAL SECURITIES FUND PORTFOLIO OF INVESTMENTS - --------------------------------------------------------------------------------
Shares Value (Note 2) - ------ -------------- COMMON STOCKS (CONTINUED) - -------------------------------------------------------------------------------------------------- UNITED KINGDOM (CONTINUED) 105,740 Royal Bank of Scotland Group PLC....................................................... $ 76,441 27,400 Royal Dutch Shell PLC, A Shares ................................ 714,138 32,424 Unilever PLC ................................................... 736,092 ------------ 3,922,840 ------------ UNITED STATES - 38.92% 9,500 3M Co. ......................................................... 546,630 35,500 Alcoa, Inc. .................................................... 399,730 12,900 AT&T, Inc. ..................................................... 367,650 41,350 Bank of America Corp. .......................................... 582,208 14,200 CBS Corp., Class B.............................................. 116,298 15,800 Chevron Corp. .................................................. 1,168,726 40,000 Citigroup, Inc. ................................................ 268,400 39,100 ConAgra Foods, Inc. ............................................ 645,150 621 Fairpoint Communications, Inc. ................................. 2,037 49,100 General Electric Co. ........................................... 795,420 20,900 Genuine Parts Co. .............................................. 791,274 17,300 HJ Heinz Co. ................................................... 650,480 22,900 Merck & Co., Inc./NJ............................................ 696,160 44,000 Microsoft Corp. ................................................ 855,360 24,400 Oracle Corp. * ................................................. 432,612 47,700 Pfizer, Inc. ................................................... 844,767 25,700 Verizon Communications, Inc. ................................... 871,230 43,900 Wachovia Corp. ................................................. 243,206 30,400 Wyeth........................................................... 1,140,304 ------------ 11,417,642 ------------ TOTAL COMMON STOCKS (Cost $51,115,906) ............................................. 29,068,111 WARRANTS AND RIGHTS - 0.00% - -------------------------------------------------------------------------------------------------- BELGIUM - 0.00% 34,957 Fortis Bank S.A./N.V. Exp. 07/01/14 (L) * ........................................... - ------------ UNITED KINGDOM - 0.00% 139,510 HBOS PLC Exp. 09/01/09 (Exercise Price $1.63) (L)* .................................... - 42,467 Lloyds TSB Group PLC Exp. 09/01/09 (Exercise Price $2.49) (L)* .................................... - ------------ TOTAL WARRANTS AND RIGHTS (Cost $0) ...................................................... - INVESTMENT COMPANY - 0.67% - -------------------------------------------------------------------------------------------------- UNITED STATES - 0.67% 197,080 SSgA Prime Money Market Fund .................................................... 197,080 ------------ TOTAL INVESTMENT COMPANY (Cost $197,080)................................................. 197,080 TOTAL INVESTMENTS - 99.76%*** - -------------------------------------------------------------------------------------------------- (Cost $51,312,986**)........................................................... 29,265,191 NET OTHER ASSETS AND LIABILITIES - 0.24% - -------------------------------------------------------------------------------------------------- 70,533 TOTAL NET ASSETS - 100.00% - -------------------------------------------------------------------------------------------------- $ 29,335,724
- -------------------------------------------------------------------------------- * Non-income producing. ** Aggregate cost for Federal tax purposes was $51,409,842. *** The aggregate amount of foreign securities fair valued pursuant to a systematic fair valuation model as a percent of net assets was 54.02%. (L) Security valued at fair value using methods determined in good faith by or at the discretion of the Board of Trustees (see Note 2). ADR American Depositary Receipt. PLC Public Limited Company. See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 84 ================================================================================ GLOBAL SECURITIES FUND PORTFOLIO OF INVESTMENTS - -------------------------------------------------------------------------------- OTHER INFORMATION: Industry Concentration
% of Net Assets --------------- Pharmaceuticals 19.3% Diversified Telecommunication Services 15.1% Oil, Gas & Consumable Fuels 12.0% Food Products 6.9% Commercial Banks 6.9% Industrial Conglomerates 4.6% Software 4.4% Food & Staples Retailing 4.3% Diversified Financial Services 4.1% Distributors 2.7% Insurance 2.5% Electric Utilities 2.3% Multi-Utilities 1.8% Office Electronics 1.6% Chemicals 1.6% Road & Rail 1.4% Media 1.4% Metals & Mining 1.4% Semiconductors & Semiconductor Equipment 1.2% Containers & Packaging 1.2% Beverages 1.1% Net Other Assets & Liabilities 1.0% Paper & Forest Products 0.5% Automobiles 0.4% Auto Components 0.3% --------------- 100.0% ===============
The industry classification method used for purposes of this report's allocation charts and portfolio of investments schedules may differ from the industry subclassification(s) used for Trust compliance purposes. See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 85 ================================================================================ INTERNATIONAL STOCK FUND PORTFOLIO OF INVESTMENTS - -------------------------------------------------------------------------------- GEOGRAPHICAL ALLOCATION AS A PERCENTAGE OF NET ASSETS AS OF DECEMBER 31, 2008 [PIE CHART OF GEOGRAPHICAL ALLOCATION] Europe (excluding United Kingdom) 41% United Kingdom 20% Japan 17% Pacific Basin 6% Cash & Other Net Assets 5% Latin America 3% Africa 2% Other Countries 6%
[END CHART] - --------------------------------------------------------------------------------
Shares Value (Note 2) - ------ -------------- COMMON STOCKS - 94.77% - -------------------------------------------------------------------------------------------------- ARGENTINA - 0.25% 8,670 Tenaris S.A., ADR. ............................................. $ 181,897 ----------- AUSTRALIA - 0.14% 27,728 ABC Learning Centres, Ltd. (L) - 24,539 Fairfax Media, Ltd. ............................................ 28,154 12,125 James Hardie Industries N.V. ................................... 39,712 28,524 Macquarie Infrastructure Group ................................ 34,212 ----------- 102,078 ----------- AUSTRIA - 0.06% 1,706 Andritz AG ..................................................... 43,605 ----------- BAHRAIN - 0.02% 3,980 Investcorp Bank BSC, GDR (C)(L) ................................ 11,940 ----------- BELGIUM - 0.96% 26,500 Anheuser-Busch InBev N.V. ...................................... 614,384 5,640 Arseus N.V. .................................................... 49,224 1,040 EVS Broadcast Equipment S.A. ................................... 37,079 ----------- 700,687 ----------- BRAZIL - 1.59% 43,840 Banco do Brasil S.A. ........................................... 275,974 13,790 Cia de Concessoes Rodoviarias .................................. 139,733 7,370 Empresa Brasileira de Aeronautica S.A., ADR. ................... 119,468 7,333 Iochpe Maxion S.A. ............................................. 27,514 44,100 JHSF Participacoes S.A. ........................................ 31,203 26,039 Redecard S.A. .................................................. 286,965 9,808 Souza Cruz S.A. ................................................ 185,477 10,880 Tam S.A., ADR. ................................................. 89,651 ----------- 1,155,985 ----------- CANADA - 1.86% 1,000 First Quantum Minerals, Ltd. ................................... 14,265 44,400 TELUS Corp. .................................................... 1,336,855 ----------- 1,351,120 ----------- CHINA - 0.10% 675,000 Shougang Concord International Enterprises Co., Ltd. ........... 75,792 ----------- EGYPT - 0.45% 2,869 Eastern Tobacco ............................................... 93,703 3,927 Egyptian Co. for Mobile Services ............................... 103,318 5,243 Orascom Construction Industries ................................ 132,845 ----------- 329,866 ----------- FINLAND - 1.82% 2,110 Konecranes OYJ ................................................. 36,135 74,300 Nokia OYJ ...................................................... 1,151,868 2,140 Nokian Renkaat OYJ ............................................. 23,993 3,330 Sampo OYJ, A Shares ............................................ 62,198 1,950 Vacon PLC ...................................................... 50,125 ----------- 1,324,319 ----------- FRANCE - 10.45% 10,350 BNP Paribas .................................................... 435,207 16,000 Bouygues ....................................................... 677,241 14,900 Carrefour S.A. ................................................. 572,206 32,300 GDF Suez ....................................................... 1,599,722 10,500 Groupe Danone .................................................. 633,727 776 Neopost S.A. ................................................... 70,239 23,612 Sanofi-Aventis S.A. ............................................ 1,499,690 1,086 Sechilienne-Sidec .............................................. 48,614 1 Societe Generale ............................................... 51 36,887 Total S.A. ..................................................... 2,010,993 747 Virbac S.A. .................................................... 60,163 ----------- 7,607,853 -----------
See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 86 ================================================================================ INTERNATIONAL STOCK FUND PORTFOLIO OF INVESTMENTS - --------------------------------------------------------------------------------
Shares Value (Note 2) - ------ -------------- COMMON STOCKS (CONTINUED) - -------------------------------------------------------------------------------------------------- GERMANY - 7.42% 15,950 Adidas AG ...................................................... $ 613,440 9,400 Allianz SE ..................................................... 1,008,226 10,765 Compugroup Holding AG * ........................................ 45,191 1,700 CTS Eventim AG ................................................ 57,367 16,800 Daimler AG .................................................... 638,337 41,000 E.ON AG. ....................................................... 1,657,923 966 Gerresheimer AG ................................................ 26,484 560 Pfeiffer Vacuum Technology AG .................................. 37,081 1,154 SGL Carbon AG * ................................................ 39,429 16,219 Siemens AG ..................................................... 1,214,811 1,217 Wincor Nixdorf AG .............................................. 58,024 ----------- 5,396,313 ----------- GREECE - 1.69% 22,292 National Bank of Greece S.A. ................................... 412,853 27,013 OPAP S.A. ...................................................... 776,522 4,168 Piraeus Bank S.A. ............................................. 37,533 ----------- 1,226,908 ----------- HONG KONG - 0.08% 10,405 Esprit Holdings, Ltd. .......................................... 59,309 ----------- HUNGARY - 0.06% 2,987 OPT Bank Nyrt. * ............................................... 45,381 ----------- INDIA - 0.94% 5,500 Hero Honda Motors, Ltd. ........................................ 91,657 24,345 Oil & Natural Gas Corp., Ltd. .................................. 335,441 9,886 Punjab National Bank, Ltd. ..................................... 108,082 40,484 Satyam Computer Services, Ltd. ................................. 146,608 ----------- 681,788 ----------- INDONESIA - 1.25% 1,425,900 Bank Mandiri Persero Tbk PT .................................... 271,786 130,500 PT Astra International Tbk. .................................... 131,650 16,560 Telekomunikasi Indonesia Tbk PT, ADR ........................... 415,159 212,000 United Tractors Tbk PT ......................................... 88,081 ----------- 906,676 ----------- IRELAND - 1.17% 31,191 CRH PLC ........................................................ 787,188 4,423 DCC PLC ........................................................ 64,028 ----------- 851,216 ----------- ISLE OF MAN - 0.07% 22,357 Hansard Global PLC ............................................. 50,787 ----------- ISRAEL - 0.54% 79,675 Bank Hapoalim BM * ............................................. 172,876 13,012 Delek Automotive Systems, Ltd. ................................. 67,183 22,264 Israel Chemicals, Ltd. ......................................... 155,029 ----------- 395,088 ----------- ITALY - 2.17% 3,216 Ansaldo STS SpA ................................................ 45,312 62,120 ENI SpA ........................................................ 1,471,988 8,069 MARR SpA ....................................................... 60,868 ----------- 1,578,168 ----------- JAPAN - 17.29% 6,290 Amano Corp. .................................................... 49,375 3,830 Asahi Pretec Corp. ............................................. 44,746 22,900 Canon, Inc. .................................................... 718,866 33,310 Daito Trust Construction Co., Ltd. ............................. 1,744,154 2,690 Don Quijote Co., Ltd. .......................................... 53,590 82 East Japan Railway Co. (L)...................................... 654,851 820 Hisamitsu Pharmaceutical Co., Inc. ............................. 33,478 35,600 HOYA Corp. ..................................................... 618,437 6,340 Ichiyoshi Securities Co., Ltd. ................................. 50,752 83 INPEX Corp. .................................................... 655,746 1,530 Jafco Co., Ltd. ................................................ 39,113 334 Japan Tobacco, Inc. ............................................ 1,106,009 2,940 JSR Corp. ...................................................... 33,089 167 KDDI Corp. ..................................................... 1,189,439 2,590 Konami Corp. ................................................... 66,678 2,890 MISUMI Group, Inc. ............................................. 34,669 45,100 Mitsubishi Corp. ............................................... 633,134 1,600 Nomura Research Institute, Ltd. ................................ 30,366 3,390 Ohara, Inc. .................................................... 27,461 27,500 Olympus Corp. .................................................. 552,222 2,910 Roland DG Corp. ................................................ 43,561 18,500 Secom Co., Ltd. ................................................ 952,910 169 Sumitomo Mitsui Financial Group, Inc. (L) ...................... 754,152 6,620 Suruga Bank, Ltd. .............................................. 65,563 1,820 Sysmex Corp. ................................................... 66,819 4,180 T Hasegawa Co., Ltd. ........................................... 56,311 18,550 T&D Holdings, Inc. ............................................. 777,809 11,200 Tokio Marine Holdings, Inc. .................................... 328,185 215,500 Tokyo Gas Co., Ltd. ............................................ 1,092,041 2,580 Union Tool Co. ................................................. 58,905 900 USS Co., Ltd. .................................................. 47,619 ----------- 12,580,050 ----------- MALAYSIA - 0.24% 6,430 British American Tobacco Malaysia Bhd .......................... 82,826 109,630 PLUS Expressways Bhd ........................................... 94,744 ----------- 177,570 ----------- MEXICO - 0.88% 4,300 America Movil SAB de C.V., ADR ................................. 133,257 5,850 Desarrolladora Homex SAB de C.V., ADR * ........................ 133,555
See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 87 ================================================================================ INTERNATIONAL STOCK FUND PORTFOLIO OF INVESTMENTS - --------------------------------------------------------------------------------
Shares Value (Note 2) - ------ -------------- COMMON STOCKS (CONTINUED) - -------------------------------------------------------------------------------------------------- MEXICO (CONTINUED) 5,510 Fomento Economico Mexicano SAB de C.V., ADR .................... $ 166,016 6,170 Grupo Televisa S.A., ADR. ...................................... 92,180 33,640 Kimberly-Clark de Mexico SAB de C.V., Class A .................. 111,741 ----------- 636,749 ----------- NETHERLANDS - 0.24% 1,825 Fugro N.V. ..................................................... 52,395 5,089 Innoconcepts ................................................... 23,507 1,613 Koninklijke Boskalis Westminster N.V. .......................... 37,467 2,191 SBM Offshore N.V. .............................................. 28,711 1,434 Ten Cate N.V. .................................................. 32,399 ----------- 174,479 ----------- NORWAY - 0.67% 780 Kongsberg Gruppen AS ........................................... 37,060 6,510 ODIM ASA * ..................................................... 27,674 12,690 Songa Offshore SE * ............................................ 24,891 59,100 Telenor ASA .................................................... 395,489 ----------- 485,114 ----------- PHILIPPINES - 0.55% 8,520 Philippine Long Distance Telephone Co., ADR .................... 400,014 ----------- RUSSIA - 1.37% 6,000 Eurasia Drilling Co., Ltd., GDR (C)(L)* ........................ 21,000 5,910 Evraz Group S.A., GDR .......................................... 50,826 12,210 LUKOIL, ADR .................................................... 395,888 3,820 Mechel, ADR .................................................... 15,280 8,300 Mobile Telesystems OJSC, ADR ................................... 221,444 6,448 Oriflame Cosmetics S.A., SDR ................................... 186,833 143,708 TNK-BP Holding ................................................. 93,410 606 Vsmpo-Avisma Corp. ............................................. 12,120 ----------- 996,801 ----------- SINGAPORE - 1.23% 20,340 Cosco Corp. Singapore, Ltd., ADR ............................... 65,698 46,630 Ezra Holdings, Ltd. ............................................ 22,205 454,300 Singapore Telecommunications, Ltd. ............................. 808,890 ----------- 896,793 ----------- SOUTH AFRICA - 1.95% 34,137 Aquarius Platinum, Ltd. ........................................ 86,434 3,333 ArcelorMittal South Africa, Ltd. ............................... 32,220 12,708 Kumba Iron Ore, Ltd. ........................................... 224,514 11,499 Massmart Holdings, Ltd. ........................................ 105,542 21,525 Murray & Roberts Holdings, Ltd. ................................ 112,694 17,036 Nedbank Group, Ltd. ............................................ 177,506 48,846 Pretoria Portland Cement Co., Ltd. ............................. 166,604 104,175 Sanlam, Ltd. ................................................... 192,847 58,641 Steinhoff International Holdings, Ltd. ......................... 79,903 65,576 Truworths International, Ltd. .................................. 243,475 ----------- 1,421,739 ----------- SOUTH KOREA - 1.43% 176 Amorepacific Corp. ............................................. 92,014 2,678 GS Engineering & Construction Corp. ............................ 127,413 1,328 Hite Brewery Co., Ltd. * ....................................... 173,446 7,250 KB Financial Group, Inc. * ..................................... 198,712 940 Samsung Electronics Co., Ltd., GDR (C) ......................... 164,509 5,999 Shinhan Financial Group Co., Ltd. .............................. 138,941 6,900 Woongjin Coway Co., Ltd. ....................................... 148,245 ----------- 1,043,280 ----------- SPAIN - 1.14% 78,125 Banco Santander S.A. ........................................... 753,994 3,461 Indra Sistemas S.A. ............................................ 78,641 ----------- 832,635 ----------- SWEDEN - 1.74% 9,486 Duni AB ........................................................ 29,989 6,430 Elekta AB, B Shares ............................................ 63,667 4,068 Getinge AB, B Shares ........................................... 48,752 435 Getinge AB, Bonus Shares * ..................................... 5,020 4,310 Indutrade AB ................................................... 36,664 140,680 Telefonaktiebolaget LM Ericsson, B Shares ...................... 1,078,946 ----------- 1,263,038 ----------- SWITZERLAND - 11.06% 281 Acino Holding AG .............................................. 60,986 2,200 Bank Sarasin & Cie AG, Series B ................................ 65,722 365 Burckhardt Compression Holding AG .............................. 52,613 43,250 Nestle S.A. .................................................... 1,704,594 42,097 Novartis AG .................................................... 2,109,249 12,250 Roche Holding AG ............................................... 1,885,688 1,955 Swisscom AG .................................................... 631,138 1,858 Swissquote Group Holding S.A. .................................. 65,228 1,040 Tecan Group AG ................................................. 38,456 57,800 UBS AG * ....................................................... 838,319 2,760 Zurich Financial Services AG ................................... 599,128 ----------- 8,051,121 ----------- TAIWAN - 0.58% 198,946 Advanced Semiconductor Engineering, Inc. ....................... 72,065 41,350 Advantech Co., Ltd. ............................................ 60,543
See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 88 ================================================================================ INTERNATIONAL STOCK FUND PORTFOLIO OF INVESTMENTS - --------------------------------------------------------------------------------
Shares Value (Note 2) - ------ -------------- COMMON STOCKS (CONTINUED) - -------------------------------------------------------------------------------------------------- TAIWAN (CONTINUED) 1 Chinatrust Financial Holding Co., Ltd. ......................... $ 1 55,981 HON HAI Precision Industry Co., Ltd. ........................... 110,364 5,000 HTC Corp. ...................................................... 50,436 93,643 Taiwan Semiconductor Manufacturing Co., Ltd. ................... 128,172 ----------- 421,581 ----------- THAILAND - 0.18% 19,170 Banpu PCL ...................................................... 133,770 ----------- TURKEY - 0.91% 18,756 Ford Otomotiv Sanayi AS ........................................ 52,981 77,414 Turkcell Iletisim Hizmet AS .................................... 445,587 60,239 Turkiye Is Bankasi, Series C ................................... 162,024 ----------- 660,592 ----------- UNITED KINGDOM - 20.22% 16,775 Ashmore Group PLC .............................................. 32,328 263,973 BAE Systems PLC ................................................ 1,438,720 36,200 BG Group PLC ................................................... 502,592 175,675 BP PLC ......................................................... 1,346,072 22,530 British American Tobacco PLC ................................... 585,405 4,852 Charter International PLC ...................................... 23,152 2,275 Chemring Group PLC ............................................. 64,055 53,500 Diageo PLC ..................................................... 744,213 3,888 Dignity PLC .................................................... 33,665 58,300 GlaxoSmithKline PLC ............................................ 1,082,304 31,648 Hampson Industries PLC ......................................... 46,753 9,207 Healthcare Locums PLC .......................................... 16,944 76,800 HSBC Holdings PLC .............................................. 735,070 9,351 IG Group Holdings PLC .......................................... 34,602 50,634 Imperial Tobacco Group PLC ..................................... 1,352,593 5,819 Intertek Group PLC ............................................. 65,913 56,812 National Grid PLC .............................................. 561,454 423,488 Old Mutual PLC ................................................. 338,336 172,800 Prudential PLC ................................................. 1,052,042 14,270 Reckitt Benckiser Group PLC .................................... 531,621 45,122 Sepura, Ltd. ................................................... 22,219 151,800 Tesco PLC ...................................................... 790,865 54,400 Unilever PLC ................................................... 1,234,993 6,022 Victrex PLC .................................................... 41,785 1,012,262 Vodafone Group PLC ............................................. 2,037,799 ----------- 14,715,495 ----------- TOTAL COMMON STOCKS (Cost $87,400,019) ............................................. 68,967,597 PREFERRED STOCKS - 0.74% - -------------------------------------------------------------------------------------------------- BRAZIL - 0.67% 13,310 AES Tiete S.A. ................................................. 86,300 22,416 Cia Vale do Rio Doce ........................................... 229,639 3,900 Eletropaulo Metropolitana Eletricidade de Sao Paulo S.A. ....... 43,739 36,570 Klabin S.A. .................................................... 51,907 15,230 Suzano Papele Celulose S.A. .................................... 78,958 ----------- 490,543 ----------- GERMANY - 0.06% 961 Fuchs Petrolub AG .............................................. 46,168 ----------- TOTAL PREFERRED STOCKS (Cost $778,476) ................................................ 536,711 INVESTMENT COMPANY - 4.47% - -------------------------------------------------------------------------------------------------- UNITED STATES - 4.47% 3,251,504 SSgA Prime Money Market Fund ................................... 3,251,504 ----------- TOTAL INVESTMENT COMPANY (Cost $3,251,504) .............................................. 3,251,504 TOTAL INVESTMENTS - 99.98%*** - -------------------------------------------------------------------------------------------------- (Cost $91,429,999**) .......................................................... 72,755,812 NET OTHER ASSETS AND LIABILITIES - 0.02% - -------------------------------------------------------------------------------------------------- 12,402 TOTAL NET ASSETS - 100.00% - -------------------------------------------------------------------------------------------------- $72,768,214
- -------------------------------------------------------------------------------- * Non-income producing. ** Aggregate cost for Federal tax purposes was $94,194,143. *** The aggregate amount of foreign securities fair valued pursuant to a systematic fair valuation model as a percent of net assets was 84.06%. (C) Security sold within terms of a private placement memorandum exempt from registration under section 144A of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "qualified institutional investors." The securities have been determined to be liquid under guidelines established by the Board of Trustees. See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 89 ================================================================================ INTERNATIONAL STOCK FUND PORTFOLIO OF INVESTMENTS - -------------------------------------------------------------------------------- (L) Security valued at fair value using methods determined in good faith by or at the discretion of the Board of Trustees (see Note 2). ADR American Depositary Receipt. GDR Global Depositary Receipt. PLC Public Limited Company. SDR Swedish Depositary Receipt. See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 90 ================================================================================ INTERNATIONAL STOCK FUND PORTFOLIO OF INVESTMENTS - --------------------------------------------------------------------------------
OTHER INFORMATION: Industry Concentration % of Net Assets --------------- Oil, Gas & Consumable Fuels 9.7% Pharmaceuticals 9.2% Insurance 6.1% Wireless Telecommunication Services 5.7% Diversified Telecommunication Services 5.4% Commercial Banks 5.0% Food Products 4.9% Tobacco 4.7% Net Other Assets & Liabilities 4.5% Gas Utilities 3.7% Electric Utilities 3.2% Communications Equipment 3.1% Electrical Equipment 3.0% Real Estate Management & Development 2.4% Aerospace & Defense 2.3% Beverages 2.3% Food & Staples Retailing 2.1% Diversified Financial Services 1.6% Capital Markets 1.5% Construction Materials 1.4% Metals & Mining 1.3% Electronic Equipment & Instruments 1.3% Automobiles 1.3% Industrial Conglomerates 1.2% Textiles, Apparel & Luxury Goods 1.2% Commercial Services & Supplies 1.1% Office Electronics 1.1% Hotels, Restaurants & Leisure 1.1% Distributors 1.0% Household Products 0.9% Road & Rail 0.9% IT Services 0.7% Construction & Engineering 0.6% Machinery 0.5% Personal Products 0.5% Transportation Infrastructure 0.4% Health Care Equipment & Supplies 0.4% Household Durables 0.3% Chemicals 0.3% Computers & Peripherals 0.3% Semiconductors & Semiconductor Equipment 0.3% Specialty Retail 0.2% Software 0.2% Paper & Forest Products 0.2% Media 0.2% Air Freight & Logistics 0.1% Energy Equipment & Services 0.1% Leisure Equipment & Products 0.1% Multiline Retail 0.1% Auto Components 0.1% Multi-Utilities 0.1% Marine 0.1% Building Products * 0.0% Health Care Providers & Services * 0.0% --------------- 100.0% ===============
*Rounds to 0.0% The industry classification method used for purposes of this report's allocation charts and portfolio of investments schedules may differ from the industry subclassification(s) used for Trust compliance purposes. See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 91 ================================================================================ TARGET RETIREMENT 2020 FUND PORTFOLIO OF INVESTMENTS - -------------------------------------------------------------------------------- PORTFOLIO ALLOCATION AS A PERCENTAGE OF NET ASSETS AS OF DECEMBER 31, 2008 [PIE CHART OF PORTFOLIO ALLOCATION] Equity Securities 48% Debt Securities 24% Foreign Equity Securities 20% Alternative Asset Classes 7% Money Market Securities and Other Net Assets 1%
[END CHART] PORTFOLIO HOLDINGS AS A PERCENTAGE OF TOTAL MARKET VALUE AS OF DECEMBER 31, 2008 MEMBERS Large Cap Growth Fund, Class Y 12% MEMBERS International Stock Fund, Class Y 9% MEMBERS High Income Fund, Class Y 9% MEMBERS Large Cap Value Fund, Class Y 8% Laudus International MarketMasters Fund 8% MEMBERS Bond Fund, Class Y 7% Manning & Napier Equity Series Fund 6% CRM Mid Cap Value Fund, Institutional Class 5% Victory Special Value Fund, Class I 5% T. Rowe Price Spectrum Income Fund 5% Gateway Fund, Class Y 5% Neuberger Berman Partners Fund, Institutional Class 5% Royce Value Fund, Institutional Class 4% MEMBERS Small Cap Value Fund, Class Y 3% Oppenheimer International Bond Fund, Class Y 3% Principal International Emerging Markets Fund, Institutional Class 3% PIMCO CommodityRealReturn Strategy Fund, Institutional Class 2% SSgA Prime Money Market Fund 1%
- --------------------------------------------------------------------------------
Shares Value (Note 2) - ------ -------------- INVESTMENT COMPANIES - 100.03% - -------------------------------------------------------------------------------------------------- ALTERNATIVE ASSET CLASSES - 6.87% 18,321 Gateway Fund, Class Y .......................................... $ 442,644 24,498 PIMCO Commodity RealReturn Strategy Fund, Institutional Class .. 156,542 ---------- 599,186 ---------- DEBT SECURITIES - 24.31% 58,219 MEMBERS Bond Fund, Class Y (R) ................................. 582,771 143,471 MEMBERS High Income Fund, Class Y (R) .......................... 797,702 48,581 Oppenheimer International Bond Fund, Class Y ................... 287,597 43,676 T. Rowe Price Spectrum Income Fund ............................. 451,176 ---------- 2,119,246 ---------- EQUITY SECURITIES - 48.19% 25,532 CRM Mid Cap Value Fund, Institutional Class .................... 483,836 41,388 Manning & Napier Equity Series Fund ............................ 503,688 98,175 MEMBERS Large Cap Growth Fund, Class Y (R) ..................... 1,025,925 69,828 MEMBERS Large Cap Value Fund, Class Y (R) ...................... 683,613 44,142 MEMBERS Small Cap Value Fund, Class Y (R) ...................... 301,934 26,739 Neuberger Berman Partners Fund, Institutional Class ............ 413,656 45,379 Royce Value Fund, Institutional Class * ........................ 317,650 45,997 Victory Special Value Fund, Class I ............................ 471,469 ---------- 4,201,771 ---------- FOREIGN EQUITY SECURITIES - 19.54% 62,420 Laudus International MarketMasters Fund, Select Shares ......... 681,622 98,160 MEMBERS International Stock Fund, Class Y (R) .................. 806,872 15,825 Principal International Emerging Markets Fund, Institutional Class ............................................ 214,745 ---------- 1,703,239 ----------
See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 92 ================================================================================ TARGET RETIREMENT 2020 FUND PORTFOLIO OF INVESTMENTS - --------------------------------------------------------------------------------
Shares Value (Note 2) - ------ -------------- MONEY MARKET SECURITIES - 1.12% 97,799 SSgA Prime Money Market Fund $ 97,799 ---------- TOTAL INVESTMENT COMPANIES - 100.03% (Cost $10,613,852**) ........................................... 8,721,241 NET OTHER ASSETS AND LIABILITIES - (0.03)% - -------------------------------------------------------------------------------------------------- (2,720) TOTAL NET ASSETS - 100.00% - -------------------------------------------------------------------------------------------------- $8,718,521
- -------------------------------------------------------------------------------- * Non-income producing. ** Aggregate cost for Federal tax purposes was $11,494,980. (R) Affiliated Company (see Note 10). See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 93 ================================================================================ TARGET RETIREMENT 2030 FUND PORTFOLIO OF INVESTMENTS - -------------------------------------------------------------------------------- PORTFOLIO ALLOCATION AS A PERCENTAGE OF NET ASSETS AS OF DECEMBER 31, 2008 [PIE CHART OF PORTFOLIO ALLOCATION] Equity Securities 54% Foreign Equity Securities 23% Debt Securities 14% Alternative Asset Classes 8% Money Market Securities and Other Net Assets 1%
[END CHART] PORTFOLIO HOLDINGS AS A PERCENTAGE OF TOTAL MARKET VALUE AS OF DECEMBER 31, 2008 MEMBERS Large Cap Growth Fund, Class Y 12% MEMBERS International Stock Fund, Class Y 11% Laudus International MarketMasters Fund 9% MEMBERS Large Cap Value Fund, Class Y 8% Victory Special Value Fund, Class I 7% MEMBERS High Income Fund, Class Y 7% CRM Mid Cap Value Fund, Institutional Class 7% Gateway Fund, Class Y 6% Manning & Napier Equity Series Fund 6% Neuberger Berman Partners Fund, Institutional Class 6% Royce Value Fund, Institutional Class 4% MEMBERS Small Cap Value Fund, Class Y 4% T. Rowe Price Spectrum Income Fund 4% Principal International Emerging Markets Fund, Institutional Class 3% MEMBERS Bond Fund, Class Y 3% PIMCO CommodityRealReturn Strategy Fund, Institutional Class 2% SSgA Prime Money Market Fund 1%
- --------------------------------------------------------------------------------
Shares Value (Note 2) - ------ -------------- INVESTMENT COMPANIES - 100.03% - -------------------------------------------------------------------------------------------------- ALTERNATIVE ASSET CLASSES - 7.62% 19,309 Gateway Fund, Class Y .......................................... $ 466,507 22,461 PIMCO CommodityRealReturn Strategy Fund, Institutional Class ... 143,524 ---------- 610,031 ---------- DEBT SECURITIES - 13.97% 25,786 MEMBERS Bond Fund, Class Y (R) ................................. 258,120 102,867 MEMBERS High Income Fund, Class Y (R) .......................... 571,942 27,978 T. Rowe Price Spectrum Income Fund ............................. 289,014 ---------- 1,119,076 ---------- EQUITY SECURITIES - 53.68% 29,430 CRM Mid Cap Value Fund, Institutional Class .................... 557,706 38,192 Manning & Napier Equity Series Fund ............................ 464,791 90,852 MEMBERS Large Cap Growth Fund, Class Y (R) ..................... 949,399 64,790 MEMBERS Large Cap Value Fund, Class Y (R) ...................... 634,292 47,441 MEMBERS Small Cap Value Fund, Class Y (R) ...................... 324,496 29,779 Neuberger Berman Partners Fund, Institutional Class ............ 460,679 47,792 Royce Value Fund, Institutional Class * ........................ 334,547 56,039 Victory Special Value Fund, Class I ............................ 574,396 ---------- 4,300,306 ---------- FOREIGN EQUITY SECURITIES - 23.60% 68,554 Laudus International MarketMasters Fund, Select Shares ......... 748,608 105,380 MEMBERS InternationalStock Fund, Class Y (R) ................... 866,221 20,292 Principal International Emerging Markets Fund, Institutional Class ............................................ 275,359 ---------- 1,890,188 ----------
See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 94 ================================================================================ TARGET RETIREMENT 2030 FUND PORTFOLIO OF INVESTMENTS - --------------------------------------------------------------------------------
Shares Value (Note 2) - ------ -------------- MONEY MARKET SECURITIES - 1.16% 93,187 SSgA Prime Money Market Fund ................................... $ 93,187 ---------- TOTAL INVESTMENT COMPANIES - 100.03% (Cost $10,331,120**) ........................................... 8,012,788 NET OTHER ASSETS AND LIABILITIES - (0.03)% - -------------------------------------------------------------------------------------------------- (2,502) TOTAL NET ASSETS - 100.00% - -------------------------------------------------------------------------------------------------- $8,010,286
- -------------------------------------------------------------------------------- * Non-income producing. ** Aggregate cost for Federal tax purposes was $10,673,598. (R) Affiliated Company (see Note 10). See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 95 ================================================================================ TARGET RETIREMENT 2040 FUND PORTFOLIO OF INVESTMENTS - -------------------------------------------------------------------------------- PORTFOLIO ALLOCATION AS A PERCENTAGE OF NET ASSETS AS OF DECEMBER 31, 2008 [PIE CHART OF PORTFOLIO ALLOCATION] Equity Securities 60% Foreign Equity Securities 27% Alternative Asset Classes 8% Debt Securities 4% Money Market Securities and Other Net Assets 1%
[END CHART] PORTFOLIO HOLDINGS AS A PERCENTAGE OF TOTAL MARKET VALUE AS OF DECEMBER 31, 2008 MEMBERS Large Cap Growth Fund, Class Y 12% MEMBERS International Stock Fund, Class Y 12% Laudus International MarketMasters Fund 11% Victory Special Value Fund, Class I 9% CRM Mid Cap Value Fund, Institutional Class 9% MEMBERS Large Cap Value Fund, Class Y 8% Manning & Napier Equity Series Fund 6% Neuberger Berman Partners Fund, Institutional Class 6% Gateway Fund, Class Y 6% Royce Value Fund, Institutional Class 5% MEMBERS Small Cap Value Fund, Class Y 4% Principal International Emerging Markets Fund, Institutional Class 4% MEMBERS Bond Fund, Class Y 4% PIMCO CommodityRealReturn Strategy Fund, Institutional Class 2% SSgA Prime Money Market Fund 2%
- --------------------------------------------------------------------------------
Shares Value (Note 2) - ------ -------------- INVESTMENT COMPANIES - 100.03% - -------------------------------------------------------------------------------------------------- ALTERNATIVE ASSET CLASSES - 7.65% 15,552 Gateway Fund, Class Y .......................................... $ 375,747 17,636 PIMCO CommodityRealReturn Strategy Fund, Institutional Class ... 112,695 ---------- 488,442 ---------- DEBT SECURITIES - 4.28% 27,282 MEMBERS Bond Fund, Class Y (R) ................................. 273,089 ---------- EQUITY SECURITIES - 59.77% 30,195 CRM Mid Cap Value Fund, Institutional Class .................... 572,189 33,058 Manning & Napier Equity Series Fund ............................ 402,320 72,598 MEMBERS Large Cap Growth Fund, Class Y (R) ..................... 758,646 51,685 MEMBERS Large Cap Value Fund, Class Y (R) ...................... 505,993 42,548 MEMBERS Small Cap Value Fund, Class Y (R) ...................... 291,029 25,548 Neuberger Berman Partners Fund, Institutional Class ............ 395,235 43,072 Royce Value Fund, Institutional Class * ........................ 301,503 57,513 Victory Special Value Fund, Class I ............................ 589,513 ---------- 3,816,428 ---------- FOREIGN EQUITY SECURITIES - 27.13% 63,202 Laudus International MarketMasters Fund, Select Shares ......... 690,162 91,980 MEMBERS International Stock Fund, Class Y (R) .................. 756,076 21,069 Principal International Emerging Markets Fund, Institutional Class ............................................ 285,900 ---------- 1,732,138 ---------- MONEY MARKET SECURITIES - 1.20% 77,057 SSgA Prime Money Market Fund ................................... 77,057 ---------- TOTAL INVESTMENT COMPANIES - 100.03% (Cost $8,110,099**) ............................................ 6,387,154
See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 96 ================================================================================ TARGET RETIREMENT 2040 FUND PORTFOLIO OF INVESTMENTS - --------------------------------------------------------------------------------
Value (Note 2) -------------- NET OTHER ASSETS AND LIABILITIES - (0.03)% - -------------------------------------------------------------------------------------------------- $ (1,910) TOTAL NET ASSETS - 100.00% - -------------------------------------------------------------------------------------------------- $6,385,244
- -------------------------------------------------------------------------------- * Non-income producing. ** Aggregate cost for Federal tax purposes was $8,505,566. (R) Affiliated Company (see Note 10). See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 97 ================================================================================ STATEMENTS OF ASSETS AND LIABILITIES AS OF DECEMBER 31, 2008 - --------------------------------------------------------------------------------
CONSERVATIVE MODERATE AGGRESSIVE ALLOCATION ALLOCATION ALLOCATION FUND FUND FUND ====================================================================================================================== ASSETS: Investments in securities, at cost Unaffiliated issuers $ 49,938,231 $ 97,096,196 $ 30,493,190 Affiliated issuers(1) 89,189,699 219,777,602 68,823,164 Net unrealized (depreciation) Unaffiliated issuers (8,453,792) (20,476,955) (9,253,735) Affiliated issuers(1) (13,967,875) (52,577,319) (20,430,329) ------------------------------------------------ Total investments at value 116,706,263 243,819,524 69,632,290 Cash 44 92 48 Receivables: Investments sold - - - Fund shares sold 149,036 701,593 244,133 Dividends and interest 189 120 203 Other assets - - - ------------------------------------------------ Total Assets 116,855,532 244,521,329 69,876,674 ------------------------------------------------ LIABILITIES: Payables: Investments purchased 102,227 564,781 198,201 Fund shares redeemed 46,809 136,812 45,932 Accrued management fees 28,428 58,657 16,530 ------------------------------------------------ Total Liabilities 177,464 760,250 260,663 ------------------------------------------------ Net assets applicable to outstanding capital stock $116,678,068 $243,761,079 $ 69,616,011 ================================================ REPRESENTED BY: Capital stock and additional paid-in capital $143,800,246 $348,165,776 $112,354,357 Accumulated undistributed (distribution in excess of) net investment income (loss) 240,488 391,722 69,076 Accumulated net realized gain (loss) on investments sold and foreign currency related transactions (4,940,999) (31,742,145) (13,123,358) Unrealized depreciation of investments (including appreciation (depreciation) of foreign currency related transactions) (22,421,667) (73,054,274) $(29,684,064) ------------------------------------------------ Total net assets - representing net assets applicable to outstanding capital stock $116,678,068 $243,761,079 $ 69,616,011 ================================================ Number of Class Z Shares issued and outstanding 13,761,587 32,440,084 10,591,275 ================================================ NET ASSET VALUE per share of outstanding capital stock, offering price and redemption price $ 8.48 $ 7.51 $ 6.57 ================================================
- -------------------------------------------------------- (1) See Note 10 for information on affiliated issuers. See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 98 ================================================================================
MONEY MARKET HIGH INCOME DIVERSIFIED LARGE CAP LARGE CAP FUND BOND FUND FUND INCOME FUND VALUE FUND GROWTH FUND ============================================================================================================ $158,847,161 $577,118,110 $106,860,986 $483,852,730 $683,744,398 $405,189,283 - - - - - - - (11,177,435) (18,101,419) (48,718,152) (78,099,404) (55,647,749) - - - - - - - ----------------------------------------------------------------------------------------------------------- 158,847,161 565,940,675 88,759,567 435,134,578 605,644,994 349,541,534 - - - - - - - - - 433,421 - 1,816,874 297,372 2,217,888 136,501 242,109 3,156,175 1,243,847 259,542 5,052,449 1,933,187 3,231,433 1,492,582 553,289 - 514 - - - - - ----------------------------------------------------------------------------------------------------------- 159,404,075 573,211,526 90,829,255 439,041,541 610,293,751 353,155,544 - ----------------------------------------------------------------------------------------------------------- - - - 415,992 - - - 383,407 45,650 320,671 539,265 435,105 55,410 265,716 55,206 257,910 310,885 247,150 - ----------------------------------------------------------------------------------------------------------- 55,410 649,123 100,856 994,573 850,150 682,255 - ----------------------------------------------------------------------------------------------------------- $159,348,665 $572,562,403 $ 90,728,399 $438,046,968 $609,443,601 $352,473,289 =========================================================================================================== $159,348,665 $589,466,876 $122,656,258 $504,075,613 $786,502,996 $496,141,639 - 555,248 157,472 308,614 362,466 29,904 - (6,282,286) (13,983,912) (17,619,107) (99,322,485) (88,050,505) - (11,177,435) (18,101,419) (48,718,152) (78,099,376) (55,647,749) - ----------------------------------------------------------------------------------------------------------- $159,348,665 $572,562,403 $ 90,728,399 $438,046,968 $609,443,601 $352,473,289 =========================================================================================================== 159,348,665 57,582,102 12,361,840 30,293,190 31,389,766 24,311,073 =========================================================================================================== $ 1.00 $ 9.94 $ 7.34 $ 14.46 $ 19.42 $ 14.50 ===========================================================================================================
See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 99 ================================================================================ STATEMENTS OF ASSETS AND LIABILITIES AS OF DECEMBER 31, 2008 - --------------------------------------------------------------------------------
MID CAP MID CAP SMALL CAP VALUE FUND GROWTH FUND VALUE FUND ====================================================================================================================== ASSETS: Investments in securities, at cost Unaffiliated issuers $205,354,542 $243,396,296 $ 8,017,775 Affiliated issuers(1) - - - Net unrealized appreciation (depreciation) Unaffiliated issuers (47,970,282) (78,205,725) (2,119,898) Affiliated issuers(1) - - - ------------------------------------------------ Total investments at value 157,384,260 165,190,571 5,897,877 Cash - - - Foreign currency(2) - - - Receivables: Investments sold 112,104 2,863,939 8,195 Fund shares sold 247,047 632,455 87,127 Dividends and interest 472,840 124,151 15,120 Other assets 1,102 - - ------------------------------------------------ Total Assets 158,217,353 168,811,116 6,008,319 ------------------------------------------------ LIABILITIES: Payable to custodian - - 2 Payables: Investments purchased - 2,091,423 18,244 Fund shares redeemed 131,941 135,652 378 Accrued management fees 136,496 119,128 3,998 Accrued expenses and other payables - - - ------------------------------------------------ Total Liabilities 268,437 2,346,203 22,622 ------------------------------------------------ Net assets applicable to outstanding capital stock $157,948,916 $166,464,913 $ 5,985,697 ================================================ REPRESENTED BY: Capital stock and additional paid-in capital $248,534,129 $312,104,390 $ 8,535,955 Accumulated undistributed (distribution in excess of) net investment income (loss) 12,168 5,837 - Accumulated net realized loss on investments sold and foreign currency related transactions (42,627,099) (67,439,589) (430,360) Unrealized depreciation of investments (including appreciation (depreciation) of foreign currency related transactions) (47,970,282) (78,205,725) (2,119,898) ------------------------------------------------ Total net assets - representing net assets applicable to outstanding capital stock $157,948,916 $166,464,913 $ 5,985,697 ================================================ Number of Class Z Shares issued and outstanding 16,602,116 55,248,889 917,286 ================================================ NET ASSET VALUE per share of outstanding capital stock, offering price and redemption price $ 9.51 $ 3.01 $ 6.53 ================================================
- --------------------------------------------------------------- (1) See Note 10 for information on affiliated issuers. (2) Cost of Foreign Currency of $1,025 and $264,840 for the Global Securities and International Stock Funds, respectively. See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 100 ================================================================================
GLOBAL TARGET TARGET TARGET SMALL CAP SECURITIES INTERNATIONAL RETIREMENT RETIREMENT RETIREMENT GROWTH FUND FUND STOCK FUND 2020 FUND 2030 FUND 2040 FUND ============================================================================================================= $ 4,864,699 $ 51,312,986 $ 91,429,999 $ 5,736,888 $ 6,028,423 $ 5,091,376 - - - 4,876,964 4,302,697 3,018,723 (822,247) (22,047,795) (18,674,187) (1,214,464) (1,620,105) (1,289,055) - - - (678,147) (698,227) (433,890) - ------------------------------------------------------------------------------------------------------------ 4,042,452 29,265,191 72,755,812 8,721,241 8,012,788 6,387,154 - 2 32,500 - - - - 974 265,382 - - - - - 27,097 27,423 - - 10,026 32,297 166,722 28,115 28,260 32,015 2,145 69,895 179,865 5 7 9 - 1,939 74,535 - - - - ------------------------------------------------------------------------------------------------------------ 4,054,623 29,370,298 73,501,913 8,776,784 8,041,055 6,419,178 - ------------------------------------------------------------------------------------------------------------ - - - - - - - - 612,333 - 4,737 29,740 8,544 11,858 42,123 55,537 23,523 2,275 2,828 22,716 79,002 2,726 2,509 1,919 - - 241 - - - - ------------------------------------------------------------------------------------------------------------ 11,372 34,574 733,699 58,263 30,769 33,934 - ------------------------------------------------------------------------------------------------------------ $ 4,043,251 $ 29,335,724 $ 72,768,214 $ 8,718,521 $ 8,010,286 $ 6,385,244 ============================================================================================================ $ 7,192,093 $ 52,249,626 $105,593,194 $12,358,070 $11,658,949 $ 9,511,079 - 48,913 (62,466) 11,421 33,992 31,910 (2,326,595) (913,666) (14,084,850) (1,758,359) (1,364,323) (1,434,800) (822,247) (22,049,149) (18,677,664) (1,892,611) (2,318,332) (1,722,945) - ------------------------------------------------------------------------------------------------------------ $ 4,043,251 $ 29,335,724 $ 72,768,214 $ 8,718,521 $ 8,010,286 $ 6,385,244 ============================================================================================================ 718,383 5,043,891 9,584,668 1,443,354 1,392,732 1,176,008 ============================================================================================================ $ 5.63 $ 5.82 $ 7.59 $ 6.04 $ 5.75 $ 5.43 ============================================================================================================
See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 101 ================================================================================ STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2008 - --------------------------------------------------------------------------------
CONSERVATIVE MODERATE AGGRESSIVE ALLOCATION ALLOCATION ALLOCATION FUND FUND FUND =========================================================================================================================== INVESTMENT INCOME: Interest $ 2,349 $ 4,981 $ 3,278 Dividends Unaffiliated issuers 1,784,161 2,488,009 372,558 Affiliated issuers(1) 2,123,404 3,818,628 584,270 Less: Foreign taxes withheld - - - Securities lending income - - - ------------------------------------------------------ Total investment income 3,909,914 6,311,618 960,106 ------------------------------------------------------ EXPENSES: Management fees 307,462 763,339 235,825 Trustees' fees 2,028 6,668 2,083 Audit fees 6,636 16,313 6,679 Compliance expense 2,620 8,619 2,694 ------------------------------------------------------ Total expenses before management fee reduction 318,746 794,939 247,281 Less management fee reduction (27,355) (77,619) (24,474) ------------------------------------------------------ Total expenses net of management fee reduction 291,391 717,320 222,807 ------------------------------------------------------ NET INVESTMENT INCOME 3,618,523 5,594,298 737,299 ------------------------------------------------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain (loss) on investments (including net realized gain (loss) on foreign currency related transactions) Unaffiliated issuers (3,000,083) (25,370,798) (10,100,246) Affiliated issuers(1) (2,425,057) (7,252,286) (3,095,203) Capital gain distributions received from underlying funds Unaffiliated issuers 494,501 526,958 64,586 Affiliated issuers(1) 265,726 916,619 354,536 Net change in unrealized depreciation on investments (including net unrealized appreciation (depreciation) on foreign currency related transactions)(2) (20,937,322) (68,550,378) (29,087,936) ------------------------------------------------------ NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (25,602,235) (99,729,885) (41,864,263) ------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $(21,983,712) $(94,135,587) $(41,126,964) ======================================================
- ------------------------------------------------------- (1) See Note 10 for information on affiliated issuers. See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 102 ================================================================================ - --------------------------------------------------------------------------------
MONEY MARKET HIGH INCOME DIVERSIFIED LARGE CAP LARGE CAP FUND BOND FUND FUND INCOME FUND VALUE FUND GROWTH FUND ====================================================================================================================== $2,577,789 $ 32,413,409 $ 9,393,113 $ 17,144,495 $ 126,978 $ 114,442 - - - 9,792,453 27,261,076 7,406,128 - - - - - - - - - - (13,339) (9,806) - 871,432 82,089 375,048 296,886 234,031 - ---------------------------------------------------------------------------------------------------------------------- 2,577,789 33,284,841 9,475,202 27,311,996 27,671,601 7,744,795 - ---------------------------------------------------------------------------------------------------------------------- 542,205 3,391,576 869,758 3,764,258 5,477,468 4,325,277 3,481 19,256 3,795 18,567 34,452 20,276 10,804 29,170 6,046 28,742 41,449 30,107 4,498 24,892 4,908 24,006 44,538 26,213 - ---------------------------------------------------------------------------------------------------------------------- 560,988 3,464,894 884,507 3,835,573 5,597,907 4,401,873 - - - - - - - ---------------------------------------------------------------------------------------------------------------------- 560,988 3,464,894 884,507 3,835,573 5,597,907 4,401,873 - ---------------------------------------------------------------------------------------------------------------------- 2,016,801 29,819,947 8,590,695 23,476,423 22,073,694 3,342,922 - ---------------------------------------------------------------------------------------------------------------------- 19,466 772,456 (11,911,310) (17,051,142) (99,539,308) (86,382,103) - - - - - - - - - - - - - - - - - - - (14,489,323) (14,023,592) (82,034,000) (312,297,708) (151,997,328) - ---------------------------------------------------------------------------------------------------------------------- 19,466 (13,716,867) (25,934,902) (99,085,142) (411,837,016) (238,379,431) - ---------------------------------------------------------------------------------------------------------------------- $2,036,267 $ 16,103,080 $(17,344,207) $(75,608,719) $(389,763,322) $(235,036,509) ======================================================================================================================
See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 103 ================================================================================ STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2008 - --------------------------------------------------------------------------------
MID CAP MID CAP SMALL CAP VALUE FUND GROWTH FUND VALUE FUND ========================================================================================================================== INVESTMENT INCOME: Interest $ 103,841 $ 145,851 $ 7,427 Dividends Unaffiliated issuers 5,917,621 1,772,631 125,972 Affiliated issuers(3) - - - Less: Foreign taxes withheld - (5,647) - Securities lending income 425,537 798,971 - ----------------------------------------------------- Total investment income 6,446,999 2,711,806 133,399 ----------------------------------------------------- EXPENSES: Management fees 2,501,687 2,418,039 68,417 Trustees' fees 8,692 10,544 172 Audit fees 20,811 21,923 640 Compliance expense 11,236 13,634 223 ----------------------------------------------------- Total expenses 2,542,426 2,464,140 69,452 ----------------------------------------------------- NET INVESTMENT INCOME (LOSS) 3,904,573 247,666 63,947 ----------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized loss on investments (including net realized gain (loss) on foreign currency related transactions)(1) Unaffiliated issuers (43,084,929) (62,918,236) (391,085) Affiliated issuers(3) - - - Capital gain distributions received from underlying funds Unaffiliated issuers - - - Affiliated issuers(3) - - - Net change in unrealized depreciation on investments (including net unrealized appreciation (depreciation) on foreign currency related transactions)(2) (67,225,588) (97,671,167) (1,521,635) ----------------------------------------------------- NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS (110,310,517) (160,589,403) (1,912,720) ----------------------------------------------------- NET DECREASE IN NET ASSETS FROM OPERATIONS $(106,405,944) $(160,341,737) $(1,848,773) =====================================================
- ------------------------------------------------------- (1) Includes foreign capital gains taxes paid of $1 and $39,772 for the Global Securities and International Stock Funds, respectively. (2) Net of deferred foreign capital gains taxes of $1,867 for the International Stock Funds. (3) See Note 10 for information on affiliated issuers. See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 104
GLOBAL TARGET TARGET TARGET SMALL CAP SECURITIES INTERNATIONAL RETIREMENT RETIREMENT RETIREMENT GROWTH FUND FUND STOCK FUND 2020 FUND 2030 FUND 2040 FUND ================================================================================================================== $ 7,121 $ 10,817 $ 75,212 $ 166 $ 175 $ 190 46,842 1,925,120 4,748,655 104,885 81,275 54,680 - - - 96,908 80,601 49,026 - (108,727) (386,531) - - - - 61,077 151,387 - - - - ------------------------------------------------------------------------------------------------------------------ 53,963 1,888,287 4,588,723 201,959 162,051 103,896 - ------------------------------------------------------------------------------------------------------------------ 61,742 402,667 1,501,217 25,106 23,258 17,328 187 1,204 4,556 77 48 37 651 2,972 13,674 161 139 128 242 1,559 5,889 99 58 48 - ------------------------------------------------------------------------------------------------------------------ 62,822 408,402 1,525,336 25,443 23,503 17,541 - ------------------------------------------------------------------------------------------------------------------ (8,859) 1,479,885 3,063,387 176,516 138,548 86,355 - ------------------------------------------------------------------------------------------------------------------ (2,289,210) (244,126) (13,589,243) (1,388,066) (957,281) (929,424) - - - (399,642) (441,865) (531,708) - - - 49,377 43,370 29,300 - - - 19,972 21,234 18,442 (826,558) (21,001,971) (48,756,010) (1,774,347) (2,227,775) (1,630,888) - ------------------------------------------------------------------------------------------------------------------ (3,115,768) (21,246,097) (62,345,253) (3,492,706) (3,562,317) (3,044,278) - ------------------------------------------------------------------------------------------------------------------ $(3,124,627) $(19,766,212) $(59,281,866) $(3,316,190) $(3,423,769) $(2,957,923) ==================================================================================================================
See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 105 ================================================================================ STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
CONSERVATIVE MODERATE ALLOCATION FUND ALLOCATION FUND ============================= ============================== FOR THE YEAR ENDED DECEMBER 31, 2008 2007 2008 2007 ================================================================================================================================ OPERATIONS: Net investment income $ 3,618,523 $ 1,315,944 $ 5,594,298 $ 2,980,013 Net realized gain (loss) on investments (4,664,913) 1,131,426 (31,179,507) 5,264,470 Net change in unrealized appreciation (depreciation) on investments (20,937,322) (1,628,228) (68,550,378) (4,924,759) ----------------------------------------------------------------- Increase (decrease) in net assets from operations (21,983,712) 819,142 (94,135,587) 3,319,724 ----------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income (3,634,290) (1,337,594) (5,366,853) (3,543,202) Realized gains on investments (1,067,962) (124,860) (4,983,537) (885,283) ----------------------------------------------------------------- Change in net assets from distributions (4,702,252) (1,462,454) (10,350,390) (4,428,485) CLASS Z SHARE TRANSACTIONS: Proceeds from sale of shares 84,012,864 61,428,617 129,854,947 181,374,016 Net asset value of shares issued in reinvestment of distributions 4,702,252 1,462,454 10,350,390 4,428,485 ----------------------------------------------------------------- 88,715,116 62,891,071 140,205,337 185,802,501 Cost of shares repurchased (12,098,409) (4,613,331) (10,239,275) (3,406,601) ----------------------------------------------------------------- Net increase (decrease) in net assets from capital share transactions 76,616,707 58,277,740 129,966,062 182,395,900 ----------------------------------------------------------------- TOTAL INCREASE (DECREASE) IN NET ASSETS 49,930,743 57,634,428 25,480,085 181,287,139 ----------------------------------------------------------------- NET ASSETS: Beginning of year $ 66,747,325 $ 9,112,897 $218,280,994 $ 36,993,855 ----------------------------------------------------------------- End of year $116,678,068 $66,747,325 $243,761,079 $218,280,994 ================================================================= Undistributed (distribution in excess of) net investment income included in net assets $ 240,488 $ - $ 391,722 $ - ================================================================= OTHER INFORMATION: Class Z Capital Share transactions: Shares sold 8,261,031 5,625,040 12,933,160 15,964,667 Shares issued in reinvestment of distributions 531,666 135,786 1,184,768 393,825 ----------------------------------------------------------------- 8,792,697 5,760,826 14,117,928 16,358,492 Shares redeemed (1,231,070) (420,633) (1,144,403) (299,137) ----------------------------------------------------------------- Net increase (decrease) in shares outstanding 7,561,627 5,340,193 12,973,525 16,059,355 =================================================================
See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 106 ================================================================================ - --------------------------------------------------------------------------------
AGGRESSIVE ALLOCATION FUND MONEY MARKET FUND BOND FUND ============================= ============================== =============================== 2008 2007 2008 2007 2008 2007 ============================================================================================================= $ 737,299 $ 365,406 $ 2,016,801 $ 5,112,129 $ 29,819,947 $ 30,881,540 (12,776,327) 2,991,440 19,466 1,312 772,456 (4,743,510) (29,087,936) (996,895) - - (14,489,323) 5,540,265 - ------------------------------------------------------------------------------------------------------------- (41,126,964) 2,359,951 2,036,267 5,113,441 16,103,080 31,678,295 - ------------------------------------------------------------------------------------------------------------- (668,223) (747,349) (2,036,267) (5,113,441) (29,315,915) (26,026,147) (2,705,263) (1,054,128) - - - - - ------------------------------------------------------------------------------------------------------------- (3,373,486) (1,801,477) (2,036,267) (5,113,441) (29,315,915) (26,026,147) 47,294,376 47,262,363 108,119,221 98,409,862 38,082,556 54,574,518 3,373,486 1,801,477 2,036,267 5,072,748 29,315,915 26,026,147 - ------------------------------------------------------------------------------------------------------------- 50,667,862 49,063,840 110,155,488 103,482,610 67,398,471 80,600,665 (4,671,398) (3,049,096) 62,139,357) (92,612,240) (127,856,686) (99,291,968) - ------------------------------------------------------------------------------------------------------------- 45,996,464 46,014,744 48,016,131 10,870,370 (60,458,215) (18,691,303) - ------------------------------------------------------------------------------------------------------------- 1,496,014 46,573,218 48,016,131 10,870,370 (73,671,050) (13,039,155) - ------------------------------------------------------------------------------------------------------------- $ 68,119,997 $21,546,779 $111,332,534 $100,462,164 $ 646,233,453 $659,272,608 - ------------------------------------------------------------------------------------------------------------- $ 69,616,011 $68,119,997 $159,348,665 $111,332,534 $ 572,562,403 $646,233,453 ============================================================================================================= $ 69,076 $ - $ - $ - $ 555,248 $ 205,601 ============================================================================================================= 4,898,248 4,030,257 108,119,221 98,409,862 3,694,547 5,322,584 353,586 155,012 2,036,267 5,072,748 2,939,189 2,562,733 - ------------------------------------------------------------------------------------------------------------- 5,251,834 4,185,269 110,155,488 103,482,610 6,633,736 7,885,317 (527,898) (258,269) (62,139,357) (92,612,240) (12,480,000) (9,682,054) - ------------------------------------------------------------------------------------------------------------- 4,723,936 3,927,000 48,016,131 10,870,370 (5,846,264) (1,796,737) =============================================================================================================
See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 107 ================================================================================ STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
HIGH INCOME FUND DIVERSIFIED INCOME FUND ============================== ================================ FOR THE YEAR ENDED DECEMBER 31, 2008 2007 2008 2007 =============================================================================================================================== OPERATIONS: Net investment income $ 8,590,695 $ 11,293,723 $ 23,476,423 $ 29,174,710 Net realized gain (loss) on investments (11,911,310) (1,916,036) (17,051,142) 14,511,757 Net change in unrealized appreciation (depreciation) on investments (14,023,592) (6,104,762) (82,034,000) (25,941,465) ------------------------------------------------------------------------- Increase (decrease) in net assets from operations (17,344,207) 3,272,925 (75,608,719) 17,745,002 ------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income (9,037,895) (10,814,779) (23,213,706) (26,851,759) Realized gains on investments - (66,885) (534,313) (17,304,597) ------------------------------------------------------------------------- Change in net assets from distributions (9,037,895) (10,881,664) (23,748,019) (44,156,356) CLASS Z SHARE TRANSACTIONS: Proceeds from sale of shares 3,099,561 9,502,847 5,937,046 9,738,908 Net asset value of shares issued in reinvestment of distributions 9,037,895 10,881,664 23,748,019 44,156,356 ------------------------------------------------------------------------- 12,137,456 20,384,511 29,685,065 53,895,264 Cost of shares repurchased (30,071,870) (30,988,573) (129,887,650) (125,758,306) ------------------------------------------------------------------------- Net increase (decrease) in net assets from capital share transactions (17,934,414) (10,604,062) (100,202,585) (71,863,042) ------------------------------------------------------------------------- TOTAL DECREASE IN NET ASSETS (44,316,516) (18,212,801) (199,559,323) (98,274,396) ------------------------------------------------------------------------- NET ASSETS: Beginning of year $135,044,915 $153,257,716 $ 637,606,291 $ 735,880,687 ------------------------------------------------------------------------- End of year $ 90,728,399 $135,044,915 $ 438,046,968 $ 637,606,291 ========================================================================= Undistributed (distribution in excess of) net investment income included in net assets $ 157,472 $ 461,799 $ 308,614 $ 256,183 ========================================================================= OTHER INFORMATION: Class Z Capital Share transactions: Shares sold 377,537 932,906 360,534 522,491 Shares issued in reinvestment of distributions 1,219,447 1,140,146 1,641,275 2,498,744 ------------------------------------------------------------------------- 1,596,984 2,073,052 2,001,809 3,021,235 Shares redeemed (3,386,525) (3,001,873) (7,897,382) (6,690,445) ------------------------------------------------------------------------- Net increase (decrease) in shares outstanding (1,789,541) (928,821) (5,895,573) (3,669,210) =========================================================================
See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 108 ================================================================================ - --------------------------------------------------------------------------------
LARGE CAP VALUE FUND LARGE CAP GROWTH FUND MID CAP VALUE FUND ================================== ================================ =============================== 2008 2007 2008 2007 2008 2007 ======================================================================================================================= $ 22,073,694 $ 25,140,565 $ 3,342,922 $ 2,277,274 $ 3,904,573 $ 4,046,841 (99,539,308) 110,518,250 (86,382,103) 51,827,163 (43,084,929) 37,003,319 (312,297,708) (122,534,310) (151,997,328) 23,625,381 (67,225,588) (38,436,046) - ----------------------------------------------------------------------------------------------------------------------- (389,763,322) 13,124,505 (235,036,509) 77,729,818 (106,405,944) 2,614,114 - ----------------------------------------------------------------------------------------------------------------------- (21,524,382) (24,834,958) (3,336,233) (2,309,437) (3,619,123) (3,321,111) (840,025) (110,586,111) (1,186,434) (19,098,900) (403,215) (37,639,303) - ----------------------------------------------------------------------------------------------------------------------- (22,364,407) (135,421,069) (4,522,667) (21,408,337) (4,022,338) (40,960,414) 15,895,797 29,802,595 47,534,033 24,927,525 10,959,054 30,738,583 22,364,407 135,421,069 4,522,667 21,408,337 4,022,338 40,960,414 - ----------------------------------------------------------------------------------------------------------------------- 38,260,204 165,223,664 52,056,700 46,335,862 14,981,392 71,698,997 (246,122,223) (204,271,626) (125,263,796) (107,178,673) (63,942,544) (59,227,022) - ----------------------------------------------------------------------------------------------------------------------- (207,862,019) (39,047,962) (73,207,096) (60,842,811) (48,961,152) 12,471,975 - ----------------------------------------------------------------------------------------------------------------------- (619,989,748) (161,344,526) (312,766,272) (4,521,330) (159,389,434) (25,874,325) - ----------------------------------------------------------------------------------------------------------------------- $1,229,433,349 $1,390,777,875 $ 665,239,561 $ 669,760,891 $ 317,338,350 $343,212,675 - ----------------------------------------------------------------------------------------------------------------------- $ 609,443,601 $1,229,433,349 $ 352,473,289 $ 665,239,561 $ 157,948,916 $317,338,350 ======================================================================================================================= $ 362,466 $ 238,093 $ 29,904 $ 32,874 $ 12,168 $ 325,430 ======================================================================================================================= 685,787 838,613 2,377,672 1,072,115 871,303 1,688,545 1,150,037 4,271,398 284,492 909,546 403,077 2,652,712 - ----------------------------------------------------------------------------------------------------------------------- 1,835,824 5,110,011 2,662,164 1,981,661 1,274,380 4,341,257 (9,493,310) (5,645,811) (6,834,822) (4,692,774) (5,364,886) (3,210,992) - ----------------------------------------------------------------------------------------------------------------------- (7,657,486) (535,800) (4,172,658) (2,711,113) (4,090,506) 1,130,265 =======================================================================================================================
See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 109 ================================================================================ STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
MID CAP GROWTH FUND SMALL CAP VALUE FUND =============================== ========================== FOR THE YEAR ENDED DECEMBER 31, 2008 2007 2008 2007(1) ===================================================================================================================== OPERATIONS: Net investment income $ 247,666 $ (1,590,143) $ 63,947 $ 50,654 Net realized gain (loss) on investments (62,918,236) 36,181,585 (391,085) 19,717 Net change in unrealized appreciation (depreciation) on investments (97,671,167) (3,421,053) (1,521,635) (598,263) --------------------------------------------------------------- Increase (decrease) in net assets from operations (160,341,737) 31,170,389 (1,848,773) (527,892) --------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income (241,829) - (58,710) (49,800) Realized gains on investments (3,840,199) (37,588,559) (1,246) (63,900) --------------------------------------------------------------- Change in net assets from distributions (4,082,028) (37,588,559) (59,956) (113,700) CLASS Z SHARE TRANSACTIONS: Proceeds from sale of shares 11,326,492 21,510,473 2,761,819 6,215,991 Net asset value of shares issued in reinvestment of distributions 4,082,028 37,588,559 59,956 113,700 --------------------------------------------------------------- 15,408,520 59,099,032 2,821,775 6,329,691 Cost of shares repurchased (51,838,104) (59,407,053) (551,009) (64,439) --------------------------------------------------------------- Net increase (decrease) in net assets from capital share transactions (36,429,584) (308,021) 2,270,766 6,265,252 --------------------------------------------------------------- TOTAL INCREASE (DECREASE) IN NET ASSETS (200,853,349) (6,726,191) 362,037 5,623,660 --------------------------------------------------------------- NET ASSETS: Beginning of year $ 367,318,262 $374,044,453 $ 5,623,660 $ - --------------------------------------------------------------- End of year $ 166,464,913 $367,318,262 $ 5,985,697 $5,623,660 =============================================================== Undistributed (distribution in excess of) net investment income included in net assets $ 5,837 $ - $ - $ 854 =============================================================== OTHER INFORMATION: Class Z Capital Share transactions: Shares sold 2,778,937 3,337,309 345,858 629,326 Shares issued in reinvestment of distributions 780,262 6,407,545 9,415 12,732 --------------------------------------------------------------- 3,559,199 9,744,854 355,273 642,058 Shares redeemed (12,214,832) (9,354,812) (72,967) (7,078) --------------------------------------------------------------- Net increase (decrease) in shares outstanding (8,655,633) 390,042 282,306 634,980 ===============================================================
- ------------------------------------------------------- (1) Fund commenced investment operations on May 1, 2007. See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 110 ================================================================================ - --------------------------------------------------------------------------------
SMALL CAP GROWTH FUND GLOBAL SECURITIES FUND INTERNATIONAL STOCK FUND =========================== ============================== ============================== 2008 2007(1) 2008 2007 2008 2007 ============================================================================================================= $ (8,859) $ 7,059 $ 1,479,885 $ 1,226,453 $ 3,063,387 $ 2,779,371 (2,289,210) 4,122 (244,126) 17,804,102 (13,589,243) 21,911,188 (826,558) 4,311 (21,001,971) (15,689,251) (48,756,010) (4,910,846) - ------------------------------------------------------------------------------------------------------------- (3,124,627) 15,492 (19,766,212) 3,341,304 (59,281,866) 19,779,713 - ------------------------------------------------------------------------------------------------------------- (559) (6,500) (2,174,907) (1,145,322) (2,364,650) (3,443,415) (788) (41,100) (667,981) (17,308,430) (6,216,528) (18,191,445) - ------------------------------------------------------------------------------------------------------------- (1,347) (47,600) (2,842,888) (18,453,752) (8,581,178) (21,634,860) 1,984,927 6,065,122 1,729,364 5,117,282 5,064,766 22,698,217 1,347 47,600 2,842,888 18,453,752 8,581,178 21,634,860 - ------------------------------------------------------------------------------------------------------------- 1,986,274 6,112,722 4,572,252 23,571,034 13,645,944 44,333,077 (850,945) (46,718) (8,661,497) (9,644,780) (37,165,993) (44,030,376) - ------------------------------------------------------------------------------------------------------------- 1,135,329 6,066,004 (4,089,245) 13,926,254 (23,520,049) 302,701 - ------------------------------------------------------------------------------------------------------------- (1,990,645) 6,033,896 (26,698,345) (1,186,194) (91,383,093) (1,552,446) - ------------------------------------------------------------------------------------------------------------- $ 6,033,896 $ - $ 56,034,069 $ 57,220,263 $164,151,307 $165,703,753 - ------------------------------------------------------------------------------------------------------------- $ 4,043,251 $6,033,896 $ 29,335,724 $ 56,034,069 $ 72,768,214 $164,151,307 ============================================================================================================= $ - $ 559 $ 48,913 $ 82,523 $ (62,466) $ (609,555) ============================================================================================================= 237,028 606,417 216,936 341,627 495,769 1,554,388 145 4,750 440,417 1,762,108 846,956 1,595,705 - ------------------------------------------------------------------------------------------------------------- 237,173 611,167 657,353 2,103,735 1,342,725 3,150,093 (125,383) (4,574) (1,056,000) (645,065) (4,010,459) (2,921,343) - ------------------------------------------------------------------------------------------------------------- 111,790 606,593 (398,647) 1,458,670 (2,667,734) 228,750 =============================================================================================================
See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 111 ================================================================================ STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
TARGET RETIREMENT 2020 FUND TARGET RETIREMENT 2030 FUND ============================= ============================= FOR THE YEAR ENDED DECEMBER 31, 2008 2007(1) 2008 2007(1) ======================================================================================================================== OPERATIONS: Net investment income $ 176,516 $ 22,279 $ 138,548 $ 10,338 Net realized gain (loss) on investments (1,718,359) 64,758 (1,334,542) 52,208 Net change in unrealized depreciation on investments (1,774,347) (118,264) (2,227,775) (90,557) ------------------------------------------------------------------ Decrease in net assets from operations (3,316,190) (31,227) (3,423,769) (28,011) ------------------------------------------------------------------ DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income (211,428) (45,500) (139,545) (31,900) Realized gains on investments (35,204) - (25,438) - ------------------------------------------------------------------ Change in net assets from distributions (246,632) (45,500) (164,983) (31,900) CLASS Z SHARE TRANSACTIONS: Proceeds from sale of shares 11,494,999 2,607,664 10,553,873 1,554,233 Net asset value of shares issued in reinvestment of distributions 246,632 45,500 164,983 31,900 ------------------------------------------------------------------ 11,741,631 2,653,164 10,718,856 1,586,133 Cost of shares repurchased (1,984,280) (52,445) (641,296) (4,744) ------------------------------------------------------------------ Net increase in net assets from capital share transactions 9,757,351 2,600,719 10,077,560 1,581,389 ------------------------------------------------------------------ TOTAL INCREASE IN NET ASSETS 6,194,529 2,523,992 6,488,808 1,521,478 ------------------------------------------------------------------ NET ASSETS: Beginning of year $ 2,523,992 $ - $ 1,521,478 $ - ------------------------------------------------------------------ End of year $ 8,718,521 $2,523,992 $ 8,010,286 $1,521,478 ================================================================== Undistributed (distribution in excess of) net investment income included in net assets $ 11,421 $ 12,789 $ 33,992 $ 5,591 ================================================================== OTHER INFORMATION: Class Z Capital Share transactions: Shares sold 1,407,757 262,957 1,287,487 156,630 Shares issued in reinvestment of distributions 38,543 4,697 26,965 3,329 ------------------------------------------------------------------ 1,446,300 267,654 1,314,452 159,959 Shares redeemed (265,109) (5,491) (81,180) (499) ------------------------------------------------------------------ Net increase in shares outstanding 1,181,191 262,163 1,233,272 159,460 ==================================================================
- ------------------------------------------------------- (1) Fund commenced investment operations on October 1, 2007. See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 112 ================================================================================ - --------------------------------------------------------------------------------
TARGET RETIREMENT 2040 FUND ============================= 2008 2007(1) ============================= $ 86,355 $ 7,786 (1,413,390) 49,483 (1,630,888) (92,057) - ----------------------------- (2,957,923) (34,788) - ----------------------------- (80,259) (28,400) (24,465) - - ----------------------------- (104,724) (28,400) 8,734,729 1,240,553 104,724 28,400 - ----------------------------- 8,839,453 1,268,953 (584,507) (12,820) - ----------------------------- 8,254,946 1,256,133 - ----------------------------- 5,192,299 1,192,945 - ----------------------------- $ 1,192,945 $ - - ----------------------------- $ 6,385,244 $1,192,945 ============================= $ 31,910 $ 5,485 ============================= 1,117,010 124,175 17,272 2,980 - ----------------------------- 1,134,282 127,155 (84,076) (1,353) - ----------------------------- 1,050,206 125,802 =============================
See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 113 ================================================================================ FINANCIAL HIGHLIGHTS FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING - --------------------------------------------------------------------------------
CONSERVATIVE ALLOCATION FUND =================================================== FOR THE YEAR ENDED DECEMBER 31, ------------------------------- INCEPTION 2008 2007 to 12/31/06(1) ========================================================================================================================= NET ASSET VALUE at beginning of period $ 10.77 $ 10.60 $ 10.00 --------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income(2) 0.35 0.45 0.23 Net realized and unrealized gain (loss) on investments (2.27) (0.03) 0.51 --------------------------------------------------- Total from investment operations (1.92) 0.42 0.74 --------------------------------------------------- LESS DISTRIBUTIONS: Distributions from net investment income (0.27) (0.23) (0.14) Distributions from capital gains (0.10) (0.02) - --------------------------------------------------- Total distributions (0.37) (0.25) (0.14) --------------------------------------------------- Net increase (decrease) in net asset value (2.29) 0.17 0.60 --------------------------------------------------- NET ASSET VALUE at end of period $ 8.48 $ 10.77 $ 10.60 =================================================== TOTAL RETURN(3) (17.89)% 3.92% 7.34%(5) RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $116,678 $ 66,747 $ 9,113 Ratio of expenses to average net assets Before management fee reduction 0.31% 0.31% 0.34%(6) After management fee reduction 0.28% 0.21% 0.24%(6) Ratio of net investment income to average net assets 3.53% 4.12% 4.25%(6) Portfolio Turnover 71% 28% 24%(5) MODERATE ALLOCATION FUND =================================================== FOR THE YEAR ENDED DECEMBER 31, ------------------------------- INCEPTION 2008 2007 to 12/31/06(1) ========================================================================================================================= NET ASSET VALUE at beginning of period $ 11.21 $ 10.86 $ 10.00 --------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income(2) 0.21 0.28 0.20 Net realized and unrealized gain (loss) on investments (3.55) 0.32 0.79 --------------------------------------------------- Total from investment operations (3.34) 0.60 0.99 --------------------------------------------------- LESS DISTRIBUTIONS: Distributions from net investment income (0.17) (0.19) (0.13) Distributions from capital gains (0.19) (0.06) (0.00)(4) --------------------------------------------------- Total distributions (0.36) (0.25) (0.13) --------------------------------------------------- Net increase (decrease) in net asset value (3.70) 0.35 0.86 --------------------------------------------------- NET ASSET VALUE at end of period $ 7.51 $ 11.21 $ 10.86 =================================================== TOTAL RETURN(3) (30.23)% 5.56% 9.87%(5) RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $243,761 $218,281 $36,994 Ratio of expenses to average net assets Before management fee reduction 0.31% 0.31% 0.34%(6) After management fee reduction 0.28% 0.21% 0.24%(6) Ratio of net investment income to average net assets 2.20% 2.45% 3.74%(6) Portfolio Turnover 69% 29% 23%(5)
- ------------------------------------------------------- (1) Commenced investment operations June 30, 2006. (2) Based on average shares outstanding during the year. (3) These returns are after all charges at the mutual fund level have been subtracted. These returns are higher than the returns at the separate account level because charges made at the separate account level have not been subtracted. Total returns are not annualized for periods less than one year. (4) Amount represents less than $0.005 per share. (5) Not annualized. (6) Annualized. See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 114 ================================================================================ FINANCIAL HIGHLIGHTS FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING - --------------------------------------------------------------------------------
AGGRESSIVE ALLOCATION FUND ========================================================== FOR THE YEAR ENDED DECEMBER 31, ---------------------------------- INCEPTION 2008 2007 to 12/31/06(1) ================================================================================================================================ NET ASSET VALUE at beginning of period $ 11.61 $ 11.10 $ 10.00 -------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income(2) 0.09 0.09 0.15 Net realized and unrealized gain (loss) on investments (4.74) 0.77 1.10 -------------------------------------------------------- Total from investment operations (4.65) 0.86 1.25 -------------------------------------------------------- LESS DISTRIBUTIONS: Distributions from net investment income (0.06) (0.14) (0.15) Distributions from capital gains (0.33) (0.21) - -------------------------------------------------------- Total distributions (0.39) (0.35) (0.15) -------------------------------------------------------- Net increase (decrease) in net asset value (5.04) 0.51 1.10 -------------------------------------------------------- NET ASSET VALUE at end of period $ 6.57 $ 11.61 $ 11.10 ======================================================== TOTAL RETURN(3) (41.09)% 7.69% 12.49%(5) RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $69,616 $68,120 $21,547 Ratio of expenses to average net assets Before management fee reduction 0.31% 0.31% 0.33%(6) After management fee reduction 0.28% 0.21% 0.23%(6) Ratio of net investment income to average net assets 0.94% 0.79% 2.71%(6) Portfolio Turnover 67% 46% 21%(5) MONEY MARKET FUND ============================================================== FOR THE YEAR ENDED DECEMBER 31, -------------------------------------------------------------- 2008 2007 2006 2005 2004 ================================================================================================================================ NET ASSET VALUE at beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 -------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income(2) 0.02 0.05 0.04 0.03 0.01 Net realized and unrealized gain on investments 0.00(4) 0.00(4) 0.00(4) - 0.00(4) -------------------------------------------------------------- Total from investment operations 0.02 0.05 0.04 0.03 0.01 -------------------------------------------------------------- LESS DISTRIBUTIONS: Distributions from net investment income (0.02) (0.05) (0.04) (0.03) (0.01) -------------------------------------------------------------- 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(3) 1.75% 4.71% 4.54% 2.78% 0.92% RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $159,349 $111,333 $100,462 $94,637 $129,004 Ratio of expenses to average net assets 0.47% 0.46% 0.46% 0.46% 0.45% Ratio of net investment income to average net assets 1.67% 4.58% 4.42% 2.73% 0.90%
- ------------------------------------------------------- (1) Commenced investment operations June 30, 2006. (2) Based on average shares outstanding during the year. (3) These returns are after all charges at the mutual fund level have been subtracted. These returns are higher than the returns at the separate account level because charges made at the separate account level have not been subtracted. Total returns are not annualized for periods less than one year. (4) Amount represents less than $0.005 per share. (5) Not annualized. (6) Annualized. See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 115 ================================================================================ FINANCIAL HIGHLIGHTS FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING - --------------------------------------------------------------------------------
BOND FUND ================================================================ FOR THE YEAR ENDED DECEMBER 31, ---------------------------------------------------------------- 2008 2007 2006 2005 2004 ================================================================================================================================= NET ASSET VALUE at beginning of period $ 10.19 $ 10.11 $ 10.17 $ 10.34 $ 10.43 ---------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income(1) 0.50 0.49 0.47 0.42 0.42 Net realized and unrealized gain (loss) on investments (0.21) 0.02 (0.06) (0.16) (0.07) ---------------------------------------------------------------- Total from investment operations 0.29 0.51 0.41 0.26 0.35 ---------------------------------------------------------------- LESS DISTRIBUTIONS: Distributions from net investment income (0.54) (0.43) (0.47) (0.43) (0.44) ---------------------------------------------------------------- Net increase (decrease) in net asset value (0.25) 0.08 (0.06) (0.17) (0.09) ---------------------------------------------------------------- NET ASSET VALUE at end of period $ 9.94 $ 10.19 $ 10.11 $ 10.17 $ 10.34 ================================================================ TOTAL RETURN(2) 2.86% 5.05% 4.01% 2.51% 3.36% RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $572,562 $646,233 $659,273 $623,976 $574,156 Ratio of expenses to average net assets 0.56% 0.56% 0.56% 0.56% 0.55% Ratio of net investment income to average net assets 4.84% 4.81% 4.54% 4.06% 4.02% Portfolio Turnover 12% 29% 27% 51% 67% HIGH INCOME FUND ================================================================ FOR THE YEAR ENDED DECEMBER 31, ---------------------------------------------------------------- 2008 2007 2006 2005 2004 ================================================================================================================================= NET ASSET VALUE at beginning of period $ 9.54 $ 10.16 $ 10.01 $ 10.40 $ 10.16 ---------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income(1) 0.67 0.76 0.74 0.68 0.74 Net realized and unrealized gain (loss) on investments (2.07) (0.53) 0.16 (0.42) 0.16 ---------------------------------------------------------------- Total from investment operations (1.40) 0.23 0.90 0.26 0.90 ---------------------------------------------------------------- LESS DISTRIBUTIONS: Distributions from net investment income (0.80) (0.85) (0.74) (0.65) (0.66) Distributions from capital gains - (0.00)(3) (0.01) - - ---------------------------------------------------------------- Total distributions (0.80) (0.85) (0.75) (0.65) (0.66) ---------------------------------------------------------------- Net increase (decrease) in net asset value (2.20) (0.62) 0.15 (0.39) 0.24 ---------------------------------------------------------------- NET ASSET VALUE at end of period $ 7.34 $ 9.54 $ 10.16 $ 10.01 $ 10.40 ================================================================ TOTAL RETURN(2) (14.74)% 2.29% 9.03% 2.51% 8.92% RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $ 90,728 $135,045 $153,528 $134,032 $118,318 Ratio of expenses to average net assets 0.76% 0.76% 0.77% 0.76% 0.76% Ratio of net investment income to average net assets 7.42% 7.27% 7.12% 6.47% 7.08% Portfolio Turnover 45% 73% 64% 86%(4) 58%
- ------------------------------------------------------- (1) Based on average shares outstanding during the year. (2) These returns are after all charges at the mutual fund level have been subtracted. These returns are higher than the returns at the separate account level because charges made at the separate account level have not been subtracted. Total returns are not annualized for periods less than one year. (3) Amount represents less than $0.005 per share. (4) Subadviser change February 28, 2005. See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 116 ================================================================================ FINANCIAL HIGHLIGHTS FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING - --------------------------------------------------------------------------------
DIVERSIFIED INCOME FUND ==================================================================== FOR THE YEAR ENDED DECEMBER 31, -------------------------------------------------------------------- 2008 2007 2006 2005 2004 =================================================================================================================================== NET ASSET VALUE at beginning of period $ 17.62 $ 18.46 $ 19.40 $ 19.11 $ 18.04 -------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income(1) 0.72 0.79 0.49 0.42 0.43 Net realized and unrealized gain (loss) on investments (3.05) (0.32) 1.45 0.32 1.08 -------------------------------------------------------------------- Total from investment operations (2.33) 0.47 1.94 0.74 1.51 -------------------------------------------------------------------- LESS DISTRIBUTIONS: Distributions from net investment income (0.81) (0.80) (0.55) (0.45) (0.44) Distributions from capital gains (0.02) (0.51) (2.33) - - -------------------------------------------------------------------- Total distributions (0.83) (1.31) (2.88) (0.45) (0.44) -------------------------------------------------------------------- Net increase (decrease) in net asset value (3.16) (0.84) (0.94) 0.29 1.07 -------------------------------------------------------------------- NET ASSET VALUE at end of period $ 14.46 $ 17.62 $ 18.46 $ 19.40 $ 19.11 ==================================================================== TOTAL RETURN(2) (13.25)% 2.51% 9.98%(3) 3.89% 8.34% RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $438,047 $637,606 $735,881 $785,301 $785,856 Ratio of expenses to average net assets 0.71% 0.71% 0.71% 0.71% 0.70% Ratio of net investment income to average net assets 4.37% 4.21% 2.52% 2.18% 2.34% Portfolio Turnover 14% 41% 62% 52% 38% LARGE CAP VALUE FUND ==================================================================== FOR THE YEAR ENDED DECEMBER 31, -------------------------------------------------------------------- 2008 2007 2006 2005 2004 =================================================================================================================================== NET ASSET VALUE at beginning of period $ 31.49 $ 35.14 $ 31.62 $ 30.47 $ 27.52 -------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income(1) 0.65 0.68 0.65 0.54 0.46 Net realized and unrealized gain (loss) on investments (11.99) (0.45) 5.87 1.16 2.95 -------------------------------------------------------------------- Total from investment operations (11.34) 0.23 6.52 1.70 3.41 -------------------------------------------------------------------- LESS DISTRIBUTIONS: Distributions from net investment income (0.71) (0.71) (0.67) (0.55) (0.46) Distributions from capital gains (0.02) (3.17) (2.33) - - -------------------------------------------------------------------- Total distributions (0.73) (3.88) (3.00) (0.55) (0.46) -------------------------------------------------------------------- Net increase (decrease) in net asset value (12.07) (3.65) 3.52 1.15 2.95 -------------------------------------------------------------------- NET ASSET VALUE at end of period $ 19.42 $ 31.49 $ 35.14 $ 31.62 $ 30.47 ==================================================================== TOTAL RETURN(2) (35.99)% 0.60% 20.55% 5.58% 12.43% RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $609,444 $1,229,433 $1,390,778 $1,239,868 $1,205,082 Ratio of expenses to average net assets 0.61% 0.61% 0.61% 0.61% 0.60% Ratio of net investment income to average net assets 2.42% 1.87% 1.91% 1.74% 1.67% Portfolio Turnover 38% 45% 35% 28% 15%
- ------------------------------------------------------- (1) Based on average shares outstanding during the year. (2) These returns are after all charges at the mutual fund level have been subtracted. These returns are higher than the returns at the separate account level because charges made at the separate account level have not been subtracted. Total returns are not annualized for periods less than one year. (3) In 2006, 0.01% of the Fund's total return consisted of a voluntary reimbursement by the Adviser for a realized investment loss. Excluding this reimbursement, the total return would have been 9.97%. See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 117 ================================================================================ FINANCIAL HIGHLIGHTS FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING - --------------------------------------------------------------------------------
LARGE CAP GROWTH FUND ================================================================= FOR THE YEAR ENDED DECEMBER 31, ----------------------------------------------------------------- 2008 2007 2006 2005 2004 ================================================================================================================================== NET ASSET VALUE at beginning of period $ 23.36 $ 21.47 $ 19.97 $ 19.68 $ 18.19 ----------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income(1) 0.12 0.08 0.07 0.17 0.15 Net realized and unrealized gain (loss) on investments (8.80) 2.59 1.51 0.30 1.48 ----------------------------------------------------------------- Total from investment operations (8.68) 2.67 1.58 0.47 1.63 ----------------------------------------------------------------- LESS DISTRIBUTIONS: Distributions from net investment income (0.14) (0.09) (0.08) (0.18) (0.14) Distributions from capital gains (0.04) (0.69) - - - ----------------------------------------------------------------- Total distributions (0.18) (0.78) (0.08) (0.18) (0.14) ----------------------------------------------------------------- Net increase (decrease) in net asset value (8.86) 1.89 1.50 0.29 1.49 ----------------------------------------------------------------- NET ASSET VALUE at end of period $ 14.50 $ 23.36 $ 21.47 $ 19.97 $ 19.68 ================================================================= TOTAL RETURN(2) (37.20)% 12.36% 7.88% 2.42% 8.94% RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $352,473 $665,240 $669,761 $688,812 $693,762 Ratio of expenses to average net assets 0.82% 0.81% 0.81% 0.81% 0.80% Ratio of net investment income to average net assets 0.62% 0.34% 0.35% 0.86% 0.82% Portfolio Turnover 123% 76% 87% 73% 26% MID CAP VALUE FUND ================================================================= FOR THE YEAR ENDED DECEMBER 31, ----------------------------------------------------------------- 2008 2007 2006 2005 2004 ================================================================================================================================== NET ASSET VALUE at beginning of period $ 15.34 $ 17.54 $ 17.30 $ 16.58 $ 14.66 ----------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income(1) 0.21 0.21 0.20 0.11 0.18 Net realized and unrealized gain (loss) on investments (5.80) (0.15) 2.74 1.61 2.14 ----------------------------------------------------------------- Total from investment operations (5.59) 0.06 2.94 1.72 2.32 ----------------------------------------------------------------- LESS DISTRIBUTIONS: Distributions from net investment income (0.22) (0.18) (0.20) (0.11) (0.15) Distributions from capital gains (0.02) (2.08) (2.50) (0.89) (0.25) ----------------------------------------------------------------- Total distributions (0.24) (2.26) (2.70) (1.00) (0.40) ----------------------------------------------------------------- Net increase (decrease) in net asset value (5.83) (2.20) 0.24 0.72 1.92 ----------------------------------------------------------------- NET ASSET VALUE at end of period $ 9.51 $ 15.34 $ 17.54 $ 17.30 $ 16.58 ================================================================= TOTAL RETURN(2) (36.45)% 0.25% 16.96% 10.32% 15.86% RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $157,949 $317,338 $343,213 $275,279 $218,060 Ratio of expenses to average net assets 1.02% 1.01% 1.01% 1.01% 1.00% Ratio of net investment income to average net assets 1.56% 1.16% 1.12% 0.62% 1.20% Portfolio Turnover 81% 68% 95% 29% 25%
- ------------------------------------------------------- (1) Based on average shares outstanding during the year. (2) These returns are after all charges at the mutual fund level have been subtracted. These returns are higher than the returns at the separate account level because charges made at the separate account level have not been subtracted. Total returns are not annualized for periods less than one year. See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 118 ================================================================================ FINANCIAL HIGHLIGHTS FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING - --------------------------------------------------------------------------------
MID CAP GROWTH FUND =========================================================== FOR THE YEAR ENDED DECEMBER 31, ----------------------------------------------------------- 2008 2007 2006 2005 2004 ============================================================================================================================ NET ASSET VALUE at beginning of period $ 5.75 $ 5.89 $ 6.74 $ 6.80 $ 6.20 ----------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income(2) 0.00(4) (0.03) (0.02) (0.01) 0.00(4) Net realized and unrealized gain (loss) on investments (2.68) 0.53 0.78 0.59 0.81 ----------------------------------------------------------- Total from investment operations (2.68) 0.50 0.76 0.58 0.81 ----------------------------------------------------------- LESS DISTRIBUTIONS: Distributions from net investment income (0.00)(4) - - - (0.00)(4) Distributions from capital gains (0.06) (0.64) (1.61) (0.64) (0.21) ----------------------------------------------------------- Total distributions (0.06) (0.64) (1.61) (0.64) (0.21) ----------------------------------------------------------- Net increase (decrease) in net asset value (2.74) (0.14) (0.85) (0.06) 0.60 ----------------------------------------------------------- NET ASSET VALUE at end of period $ 3.01 $ 5.75 $ 5.89 $ 6.74 $ 6.80 =========================================================== TOTAL RETURN(3) (46.89)% 8.44% 11.38% 8.75% 13.41% RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $166,465 $367,318 $374,044 $373,921 $336,673 Ratio of expenses to average net assets 0.87% 0.86% 0.86% 0.86% 0.85% Ratio of net investment income to average net assets 0.09% (0.41)% (0.22)% (0.13)% 0.04% Portfolio Turnover 108% 104% 204% 88% 77% SMALL CAP VALUE FUND ============================= FOR THE YEAR ENDED INCEPTION 2008 to 12/31/07(1) ============================================================================================== NET ASSET VALUE at beginning of period $ 8.86 $ 10.00 ----------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income(2) 0.08 0.09 Net realized and loss on investments (2.34) (1.05) ----------------------------- Total from investment operations (2.26) (0.96) ----------------------------- LESS DISTRIBUTIONS: Distributions from net investment income (0.07) (0.08) Distributions from capital gains (0.00)(4) (0.10) ----------------------------- Total distributions (0.07) (0.18) ----------------------------- Net decrease in net asset value (2.33) (1.14) ----------------------------- NET ASSET VALUE at end of period $ 6.53 $ 8.86 ============================= TOTAL RETURN(3) (25.54)% (9.62)%(5) RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $ 5,986 $ 5,624 Ratio of expenses to average net assets 1.12% 1.04%(6) Ratio of net investment income to average net assets 1.03% 1.45%(6) Portfolio Turnover 28% 13%(5)
- ------------------------------------------------------- (1) Commenced investment operations May 1, 2007. (2) Based on average shares outstanding during the year. (3) These returns are after all charges at the mutual fund level have been subtracted. These returns are higher than the returns at the separate account level because charges made at the separate account level have not been subtracted. Total returns are not annualized for periods less than one year. (4) Amount represents less than $0.005 per share. (5) Not annualized. (6) Annualized. See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 119 ================================================================================ FINANCIAL HIGHLIGHTS FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING - --------------------------------------------------------------------------------
SMALL CAP GROWTH FUND ============================= FOR THE YEAR ENDED INCEPTION 2008 to 12/31/07(1) ============================================================================================= NET ASSET VALUE at beginning of period $ 9.95 $ 10.00 -------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income(2) (0.01) 0.01 Net realized and unrealized gain (loss) on investments (4.31) 0.02 -------------------------- Total from investment operations (4.32) 0.03 -------------------------- LESS DISTRIBUTIONS: Distributions from net investment income (0.00)(4) (0.01) Distributions from capital gains (0.00)(4) (0.07) -------------------------- Total distributions (0.00) (0.08) -------------------------- Net decrease in net asset value (4.32) (0.05) -------------------------- NET ASSET VALUE at end of period $ 5.63 $ 9.95 -------------------------- TOTAL RETURN(3) (43.41)% 0.26%(5) RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $ 4,043 $ 6,034 Ratio of expenses to average net assets 1.12% 1.03%(6) Ratio of net investment income to average net assets (0.16)% 0.19%(6) Portfolio Turnover 109% 75%(5) GLOBAL SECURITIES FUND =============================================================== FOR THE YEAR ENDED DECEMBER 31, --------------------------------------------------------------- 2008 2007 2006 2005 2004 ================================================================================================================================ NET ASSET VALUE at beginning of period $ 10.30 $ 14.36 $ 12.87 $ 11.49 $ 9.72 --------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income(2) 0.29 0.31 0.14 0.09 0.06 Net realized and unrealized gain (loss) on investments (4.18) 0.57 2.07 1.52 1.73 --------------------------------------------------------------- Total from investment operations (3.89) 0.88 2.21 1.61 1.79 --------------------------------------------------------------- LESS DISTRIBUTIONS: Distributions from net investment income (0.46) (0.31) (0.16) (0.09) (0.02) Distributions from capital gains (0.13) (4.63) (0.56) (0.14) - --------------------------------------------------------------- Total distributions (0.59) (4.94) (0.72) (0.23) (0.02) --------------------------------------------------------------- Net increase (decrease) in net asset value (4.48) (4.06) 1.49 1.38 1.77 --------------------------------------------------------------- NET ASSET VALUE at end of period $ 5.82 $ 10.30 $ 14.36 $ 12.87 $ 11.49 =============================================================== TOTAL RETURN(3) (38.14)% 5.77% 17.38% 13.97% 18.42% RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $29,336 $56,034 $57,220 $42,450 $29,979 Ratio of expenses to average net assets 0.97% 0.96% 0.97% 0.97% 0.96% Ratio of net investment income to average net assets 3.50% 2.06% 1.01% 0.80% 0.60% Portfolio Turnover 15% 112%(7) 21% 27% 18%
- ------------------------------------------------------- (1) Commenced investment operations May 1, 2007. (2) Based on average shares outstanding during the year. (3) These returns are after all charges at the mutual fund level have been subtracted. These returns are higher than the returns at the separate account level because charges made at the separate account level have not been subtracted. Total returns are not annualized for periods less than one year. (4) Amount represents less than $0.005 per share. (5) Not annualized. (6) Annualized. (7) Subadviser change May 1, 2007. See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 120 ================================================================================ FINANCIAL HIGHLIGHTS FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING - --------------------------------------------------------------------------------
INTERNATIONAL STOCK FUND =============================================================== FOR THE YEAR ENDED DECEMBER 31, --------------------------------------------------------------- 2008 2007 2006 2005 2004 ================================================================================================================================ NET ASSET VALUE at beginning of period $ 13.40 $ 13.78 $ 12.38 $ 11.36 $ 9.54 --------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income(2) 0.26 0.23 0.19 0.17 0.12 Net realized and unrealized gain (loss) on investments (5.27) 1.36 2.78 1.71 1.84 --------------------------------------------------------------- Total from investment operations (5.01) 1.59 2.97 1.88 1.96 --------------------------------------------------------------- LESS DISTRIBUTIONS: Distributions from net investment income (0.26) (0.32) (0.20) (0.15) (0.14) Distributions from capital gains (0.54) (1.65) (1.37) (0.71) - --------------------------------------------------------------- Total distributions (0.80) (1.97) (1.57) (0.86) (0.14) --------------------------------------------------------------- Net increase (decrease) in net asset value (5.81) (0.38) 1.40 1.02 1.82 --------------------------------------------------------------- NET ASSET VALUE at end of period $ 7.59 $ 13.40 $ 13.78 $ 12.38 $ 11.36 =============================================================== TOTAL RETURN(3) (38.62)% 11.42% 24.19% 16.53% 20.48% RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $72,768 $164,151 $165,704 $108,482 $78,477 Ratio of expenses to average net assets 1.22% 1.21% 1.22% 1.21% 1.21% Ratio of net investment income to average net assets 2.45% 1.60% 1.48% 1.47% 1.16% Portfolio Turnover 43% 62% 62% 52% 46% TARGET RETIREMENT 2020 FUND ============================= FOR THE YEAR ENDED INCEPTION 2008 to 12/31/07(1) ============================================================================================= NET ASSET VALUE at beginning of period $ 9.63 $10.00 --------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income(2) 0.22 0.13 Net realized and unrealized loss on investments (3.60) (0.32) --------------------------- Total from investment operations (3.38) (0.19) --------------------------- LESS DISTRIBUTIONS: Distributions from net investment income (0.16) (0.18) Distributions from capital gains (0.05) - --------------------------- Total distributions (0.21) (0.18) --------------------------- Net decrease in net asset value (3.59) (0.37) --------------------------- NET ASSET VALUE at end of period $ 6.04 $ 9.63 =========================== TOTAL RETURN(3) (35.31)% (1.94)%(4) RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $ 8,719 $2,524 Ratio of expenses to average net assets 0.40% 0.43%(5) Ratio of net investment income to average net assets 2.80% 5.17%(5) Portfolio Turnover 74% 3%(4)
- ------------------------------------------------------- (1) Commenced investment operations October 1, 2007. (2) Based on average shares outstanding during the year. (3) These returns are after all charges at the mutual fund level have been subtracted. These returns are higher than the returns at the separate account level because charges made at the separate account level have not been subtracted. Total returns are not annualized for periods less than one year. (4) Not annualized. (5) Annualized. See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 121 ================================================================================ FINANCIAL HIGHLIGHTS FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING - --------------------------------------------------------------------------------
TARGET RETIREMENT 2030 FUND ============================== FOR THE YEAR ENDED INCEPTION 2008 to 12/31/07(1) ===================================================================================== NET ASSET VALUE at beginning of period $ 9.54 $10.00 -------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income(2) 0.18 0.09 Net realized and unrealized loss on investments (3.82) (0.34) -------------------- Total from investment operations (3.64) (0.25) -------------------- LESS DISTRIBUTIONS: Distributions from net investment income (0.11) (0.21) Distributions from capital gains (0.04) - -------------------- Total distributions (0.15) (0.21) -------------------- Net decrease in net asset value (3.79) (0.46) -------------------- NET ASSET VALUE at end of period $ 5.75 $ 9.54 ==================== TOTAL RETURN(3) (38.35)% (2.51)%(4) RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $ 8,010 $1,521 Ratio of expenses to average net assets 0.40% 0.44%(5) Ratio of net investment income to average net assets 2.38% 3.53%(5) Portfolio Turnover 52% 1%(4) TARGET RETIREMENT 2040 FUND ============================== FOR THE YEAR ENDED INCEPTION 2008 to 12/31/07(1) ===================================================================================== NET ASSET VALUE at beginning of period $ 9.48 $10.00 -------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income(2) 0.14 0.07 Net realized and unrealized loss on investments (4.06) (0.36) -------------------- Total from investment operations (3.92) (0.29) -------------------- LESS DISTRIBUTIONS: Distributions from net investment income (0.08) (0.23) Distributions from capital gains (0.05) - -------------------- Total distributions (0.13) (0.23) -------------------- Net decrease in net asset value (4.05) (0.52) -------------------- NET ASSET VALUE at end of period $ 5.43 $ 9.48 ==================== TOTAL RETURN(3) (41.65)% (2.86)%(4) RATIOS/SUPPLEMENTAL DATA: Net Assets at end of period (in 000's) $ 6,385 $1,193 Ratio of expenses to average net assets 0.40% 0.44%(5) Ratio of net investment income to average net assets 1.99% 2.76(5) Portfolio Turnover 62% 1%(4)
- ------------------------------------------------------- (1) Commenced investment operations October 1, 2007. (2) Based on average shares outstanding during the year. (3) These returns are after all charges at the mutual fund level have been subtracted. These returns are higher than the returns at the separate account level because charges made at the separate account level have not been subtracted. Total returns are not annualized for periods less than one year. (4) Not annualized. (5) Annualized. See accompanying Notes to Financial Statements. - -------------------------------------------------------------------------------- 122 ================================================================================ NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1. DESCRIPTION OF THE FUND The Ultra Series Fund (the "Trust"), a Massachusetts business trust, is registered under the Investment Company Act of 1940 (the "1940 Act"), as amended, as a diversified, open-end management investment company. The Trust is a series fund with 18 investment portfolios (the "funds"), each with different investment objectives and policies. The funds currently available are the Money Market Fund, Bond Fund, High Income Fund, Diversified Income Fund, Large Cap Value Fund, Large Cap Growth Fund, Mid Cap Value Fund, Mid Cap Growth Fund, Small Cap Value Fund, Small Cap Growth Fund, Global Securities Fund, and International Stock Fund (collectively, the "Core Funds"), the Conservative Allocation Fund, Moderate Allocation Fund and Aggressive Allocation Fund (collectively, the "Target Allocation Funds"), and the Target Retirement 2020 Fund, Target Retirement 2030 Fund, and Target Retirement 2040 Fund (collectively, the "Target Date Funds"). The Declaration of Trust permits the Board of Trustees to issue an unlimited number of full and fractional shares of the Trust without par value. As of the date of this report, the trustees have authorized the issuance of one class of shares of the funds designated as Class Z. Class Z shares are offered to separate accounts (the "Accounts") of CUNA Mutual Insurance Society and to qualified pension and retirement plans of CUNA Mutual Insurance Society or its affiliates ("CUNA Mutual Group"). The Trust may, in the future, offer other share classes to separate accounts of insurance companies and to qualified pension and retirement plans that are not affiliated with CUNA Mutual Group. The Trust does not offer shares directly to the general public. In December 2008, the Trust's Board of Trustees approved a reclassification of Class Z shares as Class I shares, effective as of May 1, 2009, and the addition of a class of shares, Class II shares. Class II shares are not currently offered for sale. The Trust has entered into a Management Agreement with MEMBERS Capital Advisors, Inc. (the "Investment Adviser" or "MCA"). The Investment Adviser, in turn, has entered into subadvisory agreements with certain subadvisers ("Subadvisers") for the management of the investments of the High Income, Mid Cap Growth, Small Cap Value, Small Cap Growth, Global Securities, and International Stock Funds and a portion of the Mid Cap Value Fund. 2. SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in conformity with U.S. generally accepted accounting principles ("GAAP") 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: Equity securities and exchange-traded funds ("ETFs") listed on any U.S. or foreign stock exchange or quoted on the National Association of Securities Dealers Automated Quotation System ("NASDAQ") are valued at the last quoted sale price or official closing price on that exchange or NASDAQ on the valuation day (provided that, for securities traded on NASDAQ, the funds utilize the NASDAQ Official Closing Price). If no sale occurs, (a) equities traded on a U.S. exchange or on NASDAQ are valued at the mean between the closing bid and closing asked prices and (b) equity securities traded on a foreign exchange are valued at the official bid price. Debt securities purchased with a remaining maturity of 61 days or more are valued by a pricing service selected by the Trust or on the basis of dealer-supplied quotations. Investments in shares of open-ended mutual funds, including money market funds, are valued at their daily net asset value ("NAV") which is calculated as of the close of regular trading on the New York Stock Exchange (usually 3:00 p.m. Central Time) on each day on which the New York Stock Exchange is open for business. NAV per share is determined by dividing each fund's total net assets by the number of shares of such fund outstanding at the time of calculation. Because the assets of each Target Allocation and each Target Date Fund consist primarily of shares of underlying funds, the NAV of each fund is determined based on the NAV's of the underlying funds. Total net assets are determined by adding the total current value of portfolio securities, cash, receivables, and other assets and subtracting liabilities. Short-term instruments having maturities of 60 days or less and all securities in the Money Market Fund are valued on an amortized cost basis, which approximates market value. Over-the-counter securities not listed or traded 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. Exchange traded options are valued at the last sale or bid price on the exchange where such option contract is principally traded. futures contracts generally are valued at the settlement price established by the exchange(s) on which the contracts are primarily traded. The Trust's Valuation Committee (the "Committee") shall estimate the fair value of futures positions affected by the daily limit by using its valuation procedures for determining fair value, when necessary. Spot and forward foreign currency exchange contracts are valued based on quotations supplied by dealers in such contracts. Overnight - -------------------------------------------------------------------------------- 123 ================================================================================ NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- repurchase agreements are valued at cost, and term repurchase agreements (i.e, those whose maturity exceeds seven days), swaps, caps, collars and floors are valued at the average of the closing bids obtained daily from at least one dealer. The value of all assets and liabilities expressed in foreign currencies will be converted into U.S. dollar values using the then-current exchange rate. All other securities for which either quotations are not readily available, no other sales have occurred, or in the Investment Adviser's opinion, do not reflect the current market value, are appraised at their fair values as determined in good faith by the Committee and under the general supervision of the Board of Trustees. When fair value pricing of securities is employed, the prices of securities used by the funds to calculate NAV may differ from market quotations or official closing prices. Because the Target Allocation and Target Date Funds primarily invest in underlying funds, government securities and short-term paper, it is not anticipated that the Investment Adviser will need to "fair" value any of the investments of these funds. However, an underlying fund may need to "fair" value one or more of its investments, which may, in turn, require a Target Allocation or Target Date Fund to do the same because of delays in obtaining the underlying Fund's NAV. A fund's investments (or underlying fund) will be valued at fair value if in the judgment of the Committee an event impacting the value of an investment occurred between the closing time of a security's primary market or exchange (for example, a foreign exchange or market) and the time the fund's share price is calculated as of the close of regular trading on the New York Stock Exchange (usually 3:00 p.m. Central Time). Significant events may include, but are not limited to, the following: (1) significant fluctuations in domestic markets, foreign markets or foreign currencies; (2) occurrences not directly tied to the securities markets such as natural disasters, armed conflicts or significant government actions; and (3) major announcements affecting a single issuer or an entire market or market sector. In responding to a significant event, the Committee would determine the fair value of affected securities considering factors including, but not limited to: fundamental analytical data relating to the investment; the nature and duration of any restrictions on the disposition of the investment; and the forces influencing the market(s) in which the investment is purchased or sold. The Committee may rely on an independent fair valuation service to adjust the valuations of foreign equity securities based on specific market-movement parameters established by the Committee and approved by the Trust. SECURITY TRANSACTIONS AND INVESTMENT INCOME: Security transactions are accounted for on a trade date basis. Net realized gains or losses on sales are determined by the identified cost method. Interest income is recorded on an accrual basis. Dividend income is recorded on ex-dividend date. Amortization and accretion are recorded on the effective yield method. FEDERAL INCOME TAXES: It is each fund's policy to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986 applicable to regulated investment companies and to distribute substantially all its taxable income to its shareholders. Accordingly, no provisions for federal income taxes are recorded in the accompanying financial statements. In July 2006, the Financial Accounting Standards Board ("FASB") issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes--an Interpretation of FASB Statement No. 109" ("FIN 48"). FIN 48 addresses the accounting for uncertainty in income taxes and establishes for all entities, including pass-through entities, such as the funds, a minimum threshold for financial statement recognition of the benefit of positions taken in filing tax returns (including whether an entity is taxable in a particular jurisdiction), and requires certain expanded tax disclosures. As required, the funds adopted FIN 48 effective June 29, 2007 for all open tax years and have determined that no material uncertain tax positions exist. As a result, the funds have not recorded any liabilities for material unrecognized tax benefits as of December 31, 2008. It is the funds' policy to recognize accrued interest and penalties related to uncertain tax benefits in income taxes, as appropriate. Tax years that remain open to examination by major tax jurisdictions include 2004 through 2008. 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. REPURCHASE AGREEMENTS: Each fund may engage in repurchase agreements. In a repurchase agreement, a security is purchased for a relatively short period (usually not more than 7 days) subject to the obligation to sell it back to the issuer at a fixed time and price plus accrued interest. The funds will enter into repurchase agreements only with member banks of the Federal Reserve System and with "primary dealers" in U.S. Government securities. As of December 31, 2008, none of the funds had open repurchase agreements. The Trust has established a procedure providing that the securities serving as collateral for each repurchase agreement must be delivered to the Trust's custodian either physically or in book-entry form and that the collateral must be marked - -------------------------------------------------------------------------------- 124 ================================================================================ NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- to market daily to ensure that the 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 one of the following: 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. Each fund, except the Money Market Fund, reports 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 Money Market Fund can only invest in U.S. dollar-denominated foreign money market securities. 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 changes in market prices of securities. Such amounts are categorized as gain or loss on investments for financial reporting purposes. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS: Each fund, except the Money Market Fund, may purchase and sell forward foreign currency exchange contracts for defensive or hedging purposes. When entering into forward foreign currency exchange contracts, the funds agree to receive or deliver a fixed quantity of foreign currency for an agreed-upon price on an agreed future date. These contracts are valued daily. The funds' net assets reflect unrealized gains or losses on the contracts as measured by the difference between the forward foreign currency exchange rates at the dates of entry into the contracts and the forward rates at the reporting date. The funds realize a gain or a loss at the time the forward foreign currency exchange contracts are settled or closed out with an offsetting contract. Realized and unrealized gains and losses are included in the Statements of Operations. As of December 31, 2008, none of the funds had open forward foreign currency exchange contracts. If a fund enters into a forward foreign currency exchange contract to buy foreign currency for any purpose, the fund will be required to place cash or other liquid assets in a segregated account with the fund's custodian in an amount equal to the value of the fund's total assets committed to the consummation of the forward contract. If the value of the securities in the segregated account declines, additional cash or securities will be placed in the segregated account so that the value of the account will equal the amount of the fund's commitment with respect to the contract. FUTURES CONTRACTS: Each fund, except the Money Market Fund, may purchase and sell futures contracts and purchase and write options on futures contracts. The funds will engage in futures contracts or related options transactions to hedge certain market positions. Upon entering into a futures contract, the fund is required to pledge to the broker an amount of cash, U.S. Government securities or other assets, equal to a certain percentage of the contract (initial margin deposit). Subsequent payments, known as "variation margin," are made or received by the fund each day, depending on the daily fluctuations in the fair value of the futures contract. When a fund enters into a futures contract, the fund segregates cash or other liquid securities, of any type or maturity, equal in value to the fund's commitment. The fund recognizes a gain or loss equal to the daily change in the value of the futures contracts. Should market conditions move unexpectedly, the fund may not achieve the anticipated benefits of the futures contracts and may realize a loss. As of December 31, 2008, none of the funds have open futures contracts. DELAYED DELIVERY SECURITIES: Each fund may purchase securities on a when-issued or delayed delivery basis. "When-issued" refers to securities whose terms are available and for which a market exists, but that have not been issued. For when-issued or delayed delivery transactions, no payment is made until delivery date, which is typically longer than the normal course of settlement, and often 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 cash or other 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. As of December 31, 2008, none of the funds had entered into such transactions. 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. - -------------------------------------------------------------------------------- 125 ================================================================================ NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 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 and passive foreign investment companies. To the extent these book and tax differences are permanent in nature, such amounts are reclassified at the end of the fiscal year among paid-in capital in excess of par value, undistributed net investment income (loss) and undistributed net realized gain (loss) on investments and foreign currency translations. Accordingly, at December 31, 2008 reclassifications were recorded as follows:
UNDISTRIBUTED NET ACCUMULATED NET FUND PAID-IN CAPITAL INVESMENT INCOME (LOSS) REALIZED GAIN (LOSS) - ---- --------------- ----------------------- -------------------- Conservative Allocation $ - $ 256,255 $ (256,255) Moderate Allocation - 164,277 (164,277) Money Market - 19,466 (19,466) Bond (6,650,383) (154,385) 6,804,768 High Income - 142,873 (142,873) Diversified Income - (210,286) 210,286 Large Cap Value - (424,939) 424,939 Large Cap Growth - (9,659) 9,659 Mid Cap Value - (598,712) 598,712 Small Cap Value (63) (6,091) 6,154 Small Cap Growth (9,240) 8,859 381 Global Securities (290) 661,412 (661,122) International Stock - (151,648) 151,648 Target Retirement 2020 - 33,544 (33,544) Target Retirement 2030 - 29,398 (29,398) Target Retirement 2040 - 20,329 (20,329)
FAIR VALUE MEASUREMENTS: Each fund adopted the Financial Accounting Standards Board ("FASB") Statement of Financial Accounting Standards No. 157, Fair Value Measurements ("FAS 157"), effective January 1, 2008. In accordance with FAS 157, fair value is defined as the price that each fund would receive upon selling an investment in a timely transaction to an independent buyer in the principal or most advantageous market of the investment. FAS 157 has established a three-tier hierarchy to maximize the use of observable market data "inputs" and minimize the use of unobservable "inputs" and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk (for example, the risk inherent in a particular valuation technique used to measure fair value including such a pricing model and/or the risk inherent in the inputs to the valuation technique). Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity's own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The three-tier hierarchy of inputs is summarized in the three broad Levels listed below: o Level 1 - quoted prices in active markets for identical investments o Level 2 - other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) o Level 3 - significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments) The valuation techniques used by the funds to measure fair value for the year ended December 31, 2008 maximized the use of observable inputs and minimized the use of unobservable inputs. The funds utilized the following fair value techniques: multi-dimensional relational pricing model and option adjusted spread pricing; the funds estimated the price that would have prevailed in a liquid market for an international equity security given information available at the time of evaluation. - -------------------------------------------------------------------------------- 126 ================================================================================ NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- The following is a summary of the inputs used as of December 31, 2008 in valuing the funds' investments carried at fair value:
ACTIVE MARKETS FOR SIGNIFICANT OTHER SIGNIFICANT IDENTICAL INVESTMENTS OBSERVABLE INPUTS UNOBSERVABLE INPUTS FAIR VALUE FUND (LEVEL 1) (LEVEL 2) (LEVEL 3) AT 12/31/2008 - ---- --------- --------- --------- ------------- Conservative Allocation $116,706,263 $ - $- $116,706,263 Moderate Allocation 243,819,524 - - 243,819,524 Aggressive Allocation 69,632,290 - - 69,632,290 Money Market 10,812,776 148,034,385 - 158,847,161 Bond 193,779,462 372,161,213 - 565,940,675 High Income 6,436,887 82,322,680 - 88,759,567 Diversified Income 228,877,430 206,257,148 - 435,134,578 Large Cap Value 605,644,994 - - 605,644,994 Large Cap Growth 349,541,534 - - 349,541,534 Mid Cap Value 157,384,260 - - 157,384,260 Mid Cap Growth 165,190,571 - - 165,190,571 Small Cap Value 5,897,877 - - 5,897,877 Small Cap Growth 4,042,452 - - 4,042,452 Global Securities 11,968,832 17,296,359 -(1) 29,265,191 International Stock 7,080,153 65,675,659 -(1) 72,755,812 Target Retirement 2020 8,721,241 - - 8,721,241 Target Retirement 2030 8,012,788 - - 8,012,788 Target Retirement 2040 6,387,154 - - 6,387,154
- ------------------------------------------- (1) Includes securities valued at zero as of December 31, 2008. The following is a reconciliation of the fair valuations using significant unobservable inputs (Level 3) for the Funds during the year ended December 31, 2008:
FAIR VALUE PURCHASES AT FAIR VALUE BEGINNING BALANCE COST/SALES AMORTIZATION REALIZED UNREALIZED ENDING BALANCE FUND 1/1/2008 (PROCEEDS) DISC/(PREM) GAIN/(LOSS) GAIN/(LOSS) 12/31/2008 - ---- -------- ---------- ----------- ----------- ----------- ---------- International Stock $98,068 $- $- $- $(98,068) $-
NEW ACCOUNTING PRONOUNCEMENTS: In March 2008, FASB issued Statement of Financial Accounting Standards No. 161, "Disclosures about Derivative Instruments and Hedging Activities" ("FAS 161"). FAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. FAS 161 requires enhanced disclosures about funds' derivative and hedging activities. Management has evaluated FAS 161 and has determined that there is no impact on the Funds' financial statements as the Funds currently do not hold derivative financial instruments. 3. ADVISORY, ADMINISTRATION AND DISTRIBUTION AGREEMENTS For services under the Management Agreement, MCA is entitled to receive a management fee, which is calculated daily and paid monthly, at an annual rate based upon the following percentages of average daily net assets: 0.45% for the Money Market Fund, 0.55% for the Bond Fund, 0.75% for the High Income Fund, 0.70% for the Diversified Income Fund, 0.60% for the Large Cap Value Fund, 0.80% for the Large Cap Growth Fund, 1.00% for the Mid Cap Value Fund, 0.85% for the Mid Cap Growth Fund, 1.10% for the Small Cap Value and Small Cap Growth Funds, 0.95% for the Global Securities Fund, 1.20% for the International Stock Fund, 0.30% for each of the Target Allocation Funds, and 0.40% for each of the Target Date Funds. MCA contractually agreed to reduce the management fee of the Target Allocation Funds from .30% to .20% until April 30, 2008. That contractual agreement was discontinued effective May 1, 2008. MCA is solely responsible for the payment of all fees to the Subadvisers. The Subadvisers for the funds are Shenkman Capital Management, Inc. for the High Income Fund, Wellington Management Company, LLP for a portion of the Mid Cap Value Fund, the entire Mid Cap Growth Fund and Small Cap Value Fund, Paradigm for the Small Cap Growth Fund, Mondrian Investment Partners Limited for the Global Securities Fund and Lazard Asset Management LLC for the International Stock Fund. MCA manages the other portion of the Mid Cap Value Fund, and the entire Bond Fund, Diversified Income Fund, Large Cap Growth Fund, Large Cap Value Fund, Money Market Fund, Target Allocation Funds and the Target Date Funds. - -------------------------------------------------------------------------------- 127 ================================================================================ NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- In addition to the management fee, the Trust is responsible for fees of the disinterested trustees, brokerage commissions and other expenses incurred in connection with the acquisition or disposition of investments, costs of borrowing money, expenses for independent audits, tax, compliance and extraordinary expenses as approved by a majority of the disinterested trustees. Certain officers and trustees of the Trust are also officers of MCA. With the exception of the Chief Compliance Officer, the Trust does not compensate these officers or trustees. As part of the Trust's required compliance program, the Trust pays a portion of the Chief Compliance Officer's annual salary. Unaffiliated trustees receive from the Trust an annual retainer, which compensates them for each regular Board and Committee meeting attended, with additional remuneration paid to the Chair of the Board and the Chair of the Audit Committee. Unaffiliated trustees also receive a per meeting fee for each special meeting, if any, attended. All fund shares are distributed through CUNA Brokerage Services. Inc. ("CUNA Brokerage"), an affiliated company, pursuant to a distribution agreement between the Trust and CUNA Brokerage. CUNA Brokerage's principal place of business is located at 2000 Heritage Way, Waverly, IA 50677. The Trust has entered into participation agreements with CUNA Mutual Insurance Society setting forth the terms and conditions pursuant to which the Accounts and retirement plans purchase and redeem shares of the funds. Investments in the Trust by the Accounts are made through either variable annuity or variable life insurance contracts. Net purchase payments under the variable contracts are placed in one or more sub-accounts of the Accounts, and the assets of each sub-account are invested (without sales or redemption charges) in shares of the fund corresponding to that sub-account. Shares are purchased and redeemed at a price equal to the shares' net asset value. The assets of each fund are held separate from the assets of the other funds. 4. DIVIDENDS FROM NET INCOME AND DISTRIBUTIONS OF CAPITAL GAINS The Money Market Fund declares dividends from net investment income and net realized gains from investment transactions, if any, daily, which are reinvested in additional full and fractional shares of the Fund. The Bond Fund, High Income Fund, Diversified Income Fund, Large Cap Value Fund, Large Cap Growth Fund, Small Cap Value, Small Cap Growth, Mid Cap Value Fund, Mid Cap Growth Fund, Global Securities Fund, International Stock Fund, Target Allocation Funds, and Target Date Funds declare dividends from net investment income and net realized gains from investment transactions, if any, annually, which are reinvested in additional full and fractional shares of the respective funds. 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 of the funds may differ from book amounts earned during the period due to differences in the timing of capital gains recognition, and due to the reclassification of certain gains or losses from capital to income. 5. SECURITIES TRANSACTIONS For the year ended December 31, 2008, 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 - ---- --------- ----- --------- ----- Conservative Allocation $ - $ - $144,702,051 $ 73,124,404 Moderate Allocation - - 296,070,944 177,061,778 Aggressive Allocation - - 95,650,205 53,286,106 Bond 44,571,909 71,956,827 25,333,090 45,018,983 High Income - - 47,102,332 69,223,998 Diversified Income 2,586,186 49,858,122 71,904,265 120,869,594 Large Cap Value - - 344,520,490 549,549,478 Large Cap Growth - - 661,746,769 738,922,765 Mid Cap Value - - 199,335,671 244,178,909 Mid Cap Growth - - 303,688,155 343,889,894 Small Cap Value - - 3,806,134 1,703,818 Small Cap Growth - - 7,523,327 5,921,002 Global Securities - - 6,415,166 10,582,727 International Stock - - 52,314,937 78,808,278 Target Retirement 2020 - - 14,172,525 4,695,751 Target Retirement 2030 - - 12,928,775 3,050,198 Target Retirement 2040 - - 10,880,643 2,760,999
- -------------------------------------------------------------------------------- 128 ================================================================================ NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 6. FOREIGN SECURITIES Each fund may invest in foreign securities; provided, however, that the Money Market Fund is limited to U.S. dollar-denominated foreign money market securities. Foreign securities refer to securities that are: (1) issued by companies organized outside the U.S. or whose principal operations are outside the U.S., (2) issued by foreign governments or their agencies or instrumentalities, (3) principally traded outside the U.S., or (4) quoted or denominated in a foreign currency. Foreign securities include American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"), Global Depositary Receipts ("GDRs"), Swedish Depositary Receipts ("SDRs") and foreign money market securities. Dollar-denominated securities that are part of the Merrill Lynch U.S. Domestic Master Index are not considered a foreign security. Certain funds have reclaim receivable balances, in which the funds are due a reclaim on the taxes that have been paid to some foreign jurisdictions. The values of all reclaims are not significant for any of the funds and are reflected in Other Assets on the Statement of Assets and Liabilities. On a periodic basis, these receivables are reviewed to ensure the current receivable balance is reflective of the amount deemed to be collectible. 7. SECURITIES LENDING Each fund, except the Target Allocation, Money Market, Small Cap Value, Small Cap Growth Funds, and Target Retirement Funds, 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 December 31, 2008, none of the funds had securities on loan. Amounts earned as interest on investments of cash collateral, net of rebates and fees, are included in the Statement of Operations. The primary risk associated with securities lending is if the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, the funds could experience delays and costs in recovering securities loaned or in gaining access to the collateral. 8. TAX INFORMATION The tax character of distributions paid during the years ended December 31, 2008 and 2007 was as follows:
ORDINARY INCOME LONG-TERM CAPITAL GAIN --------------- ---------------------- FUND 2008 2007 2008 2007 - ---- ---- ---- ---- ---- Conservative Allocation $ 3,634,290 $ 1,348,767 $1,067,962 $ 113,687 Moderate Allocation 5,446,230 3,679,207 4,904,160 749,278 Aggressive Allocation 709,922 867,381 2,663,564 934,096 Money Market 2,036,267 5,113,441 - - Bond 29,315,915 26,026,147 - - High Income 9,037,895 10,814,779 - 66,885 Diversified Income 23,213,706 26,878,629 534,313 17,277,727 Large Cap Value 21,758,147 32,646,965 606,260 102,774,104 Large Cap Growth 3,336,233 2,309,437 1,186,434 19,098,900 Mid Cap Value 3,735,154 15,999,520 287,184 24,960,894 Mid Cap Growth 241,829 11,966,315 3,840,199 25,622,244 Small Cap Value 59,956 113,700 - - Small Cap Growth 1,347 47,600 - - Global Securities 2,360,900 2,704,422 481,988 15,749,330 International Stock 3,262,701 5,895,088 5,318,477 15,739,772 Target Retirement 2020 211,743 45,500 34,889 - Target Retirement 2030 139,545 31,900 25,438 - Target Retirement 2040 80,259 28,400 24,465 -
- -------------------------------------------------------------------------------- 129 ================================================================================ NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- As of December 31, 2008, the components of distributable earnings on a tax basis were as follows:
FUND ORDINARY INCOME LONG-TERM CAPITAL GAIN NET UNREALIZED DEPRECIATION - ---- --------------- ---------------------- --------------------------- Conservative Allocation $240,488 $- $ (24,371,024) Moderate Allocation 391,722 - (76,212,998) Aggressive Allocation 69,076 - (31,021,229) Bond 592,302 - (11,483,449) High Income 190,527 - (18,209,203) Diversified Income 308,614 - (49,866,454) Large Cap Value 362,466 - (80,209,052) Large Cap Growth 29,904 - (65,057,350) Mid Cap Value 12,168 - (51,625,843) Mid Cap Growth 5,837 - (101,921,418) Small Cap Value - - (2,147,835) Small Cap Growth - - (837,725) Global Securities 48,913 - (22,146,005) International Stock 83,748 - (21,439,687) Target Retirement 2020 11,421 - (2,773,739) Target Retirement 2030 33,992 - (2,660,810) Target Retirement 2040 31,910 - (2,118,412)
For federal income tax purposes, the funds listed below have capital loss carryovers as of October 31, 2008, which are available to offet future capital gains, if any:
FUND 2009 2010 2011 2012 2013 2014 2015 2016 - ---- ---- ---- ---- ---- ---- ---- ---- ---- Conservative Allocation $- $ - $ - $ - $ - $ - $ - $ 2,991,644 Moderate Allocation - - - - - - - 17,885,475 Aggressive Allocation - - - - - - - 6,446,542 Bond - 1,857,702 104,606 1,560,242 1,445,891 816,322 228,563 - High Income - - - - - - 640,978 10,602,862 Diversified Income - - - - - - 16,470,805 Large Cap Value - - - - - - - 97,212,808 Large Cap Growth - - - - - - - 78,640,904 Mid Cap Value - - - - - - - 38,971,539 Mid Cap Growth - - - - - - - 21,456,972 Small Cap Value - - - - - - - 306,489 Small Cap Growth - - - - - - - 892,538 Global Securities - - - - - - - 751,246 International Stock - - - - - - - 1,823,628 Target Retirement 2030 - - - - - - - 40,540 Target Retirement 2040 - - - - - - - 28,331
The Bond Fund utilized $926,841 of prior capital loss carryovers during the year ended December 31, 2008. The Bond Fund had $6,650,383 of capital loss carryovers expire as of December 31, 2008. After October 31, 2008, the following funds had capital and currency losses in the following amounts:
FUND POST-OCTOBER CAPITAL LOSS POST-OCTOBER CURRENCY LOSSES - ---- ------------------------- ---------------------------- Moderate Allocation $10,697,947 $- Aggressive Allocation 5,339,651 - High Income 2,665,346 - Mid Cap Growth 22,266,927 - Small Cap Value 95,935 - Small Cap Growth 1,418,579 - Global Securities 65,564 - International Stock 9,645,410 - Target Retirement 2020 877,232 - Target Retirement 2030 981,306 - Target Retirement 2040 1,011,003 -
For federal income tax purposes, these amounts are deferred and deemed to have occurred in the next fiscal year. - -------------------------------------------------------------------------------- 130 ================================================================================ NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- At December 31, 2008, 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 - ---- ------------ ------------ --- Conservative Allocation $ 855,690 $ (25,226,714) $ (24,371,024) Moderate Allocation 1,041,620 (77,254,618) (76,212,998) Aggressive Allocation 180,581 (31,201,810) (31,021,229) Bond 28,105,587 (39,589,036) (11,483,449) High Income 149,698 (18,358,901) (18,209,203) Diversified Income 17,519,472 (67,385,928) (49,866,456) Large Cap Value 78,679,881 (158,888,961) (80,209,080) Large Cap Growth 16,553,029 (81,610,379) (65,057,350) Mid Cap Value 6,452,429 (58,078,272) (51,625,843) Mid Cap Growth 2,481,622 (104,403,040) (101,921,418) Small Cap Value 196,763 (2,344,598) (2,147,835) Small Cap Growth 214,698 (1,052,423) (837,725) Global Securities 271,504 (22,416,155) (22,144,651) International Stock 3,266,262 (24,704,593) (21,438,331) Target Retirement 2020 25,526 (2,799,265) (2,773,739) Target Retirement 2030 13,070 (2,673,880) (2,660,810) Target Retirement 2040 13,686 (2,132,098) (2,118,412)
The differences between cost amounts for book purposes and tax purposes are primarily due to the tax deferral of losses. 9. CONCENTRATION OF RISK Investing in certain financial instruments, including forward foreign currency contracts and futures contracts, involves certain risks, 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, Mid Cap Growth Fund, International Stock Fund, and the Global Securities 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 ratings 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. The Target Allocation Funds and Target Date Funds are fund of funds, meaning that they invest primarily in the shares of other registered investment companies (the "underlying funds"), including ETFs. Thus, each fund's investment performance and its ability to achieve its investment goal are directly related to the performance of the underlying funds in which it invests; and the underlying fund's performance, in turn, depends on the particular securities in which that underlying fund invests and the expenses of that fund. Accordingly, these funds are subject to the risks of the underlying funds in direct proportion to the allocation of their respective assets among the underlying funds. Additionally, the Target Allocation Funds and Target Date Funds are subject to asset allocation risk and manager risk. Manager risk (i.e., fund selection risk) is the risk that the fund(s) selected to fulfill a particular asset class under performs their - -------------------------------------------------------------------------------- 131 ================================================================================ NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- peer. Asset allocation risk is the risk that the allocation of the fund's assets among the various asset classes and market segments will cause the fund to under perform other funds with a similar investment objective. 10. CAPITAL SHARES AND AFFILIATED OWNERSHIP All capital shares outstanding at December 31, 2008, are owned by separate investment accounts and/or pension plans of CUNA Mutual Insurance Society and by CUNA Mutual Insurance Society. The fair value of investments in the Funds by affiliates were as follows:
CUNA MUTUAL INSURANCE FUND SOCIETY - ---- ------- Small Cap Value $3,364,682 Small Cap Growth 2,836,997 Global Securities 8,495,328 Target Retirement 2020 634,270 Target Retirement 2030 600,966 Target Retirement 2040 566,802
The Target Allocation Funds and Target Date Funds invest in underlying funds, of which certain underlying funds (the "affiliated underlying funds"), may be deemed to be under common control because of the same Board of Trustees. The MEMBERS Mutual Funds audited financial statements for the fiscal year ended October 31, 2008 are available at no cost on the Securities and Exchange Commission's website at www.sec.gov, by calling 1-800-877-6089 or by visiting the MEMBERS Mutual Funds' website at www.membersfunds.com. A summary of the transactions with each affiliated underlying fund during the year ended December 31, 2008 follows:
BALANCE OF BALANCE OF SHARES SHARES HELD AT GROSS GROSS HELD AT VALUE AT REALIZED DISTRIBUTIONS FUND/UNDERLYING FUND 12/31/2007 ADDITIONS SALES 12/31/2008 12/31/2008 GAIN (LOSS) RECEIVED(2) - -------------------- ---------- --------- ----- ---------- ---------- ----------- ------------- CONSERVATIVE ALLOCATION FUND MEMBERS Bond Fund Class Y 783,968 2,912,370 161,955 3,534,383 $35,379,173 $ (17,007) $ 817,267 MEMBERS High Income Fund Class Y 442,983 1,897,350 227,464 2,112,869 11,747,551 (210,980) 860,681 MEMBERS International Stock Fund Class Y 232,656 1,156,592 79,826 1,309,422 10,763,450 (438,576) 493,112 MEMBERS Large Cap Growth Fund Class Y 429,426 918,588 381,374 966,640 10,101,384 (642,470) 40,429 MEMBERS Large Cap Value Fund Class Y 356,568 591,521 209,553 738,536 7,230,266 (684,984) 177,641 MEMBERS Mid Cap Growth Fund Class Y(1) 332,237 512,592 844,829 - - (431,040) - - -------------------------------------------------------------------------------------------------------------------------------- TOTALS $75,221,824 $(2,425,057) $2,389,130
- ------------------------------------------- (1) Non-income producing. (2) Distributions received includes distributions from net investment income and from capital gains from the underlying funds. - -------------------------------------------------------------------------------- 132 ================================================================================ NOTES TO FINANCIAL STATEMENTS - --------------------------------------------------------------------------------
BALANCE OF BALANCE OF SHARES SHARES HELD AT GROSS GROSS HELD AT VALUE AT REALIZED DISTRIBUTIONS FUND/UNDERLYING FUND 12/31/2007 ADDITIONS SALES 12/31/2008 12/31/2008 GAIN (LOSS) RECEIVED(2) - -------------------- ---------- --------- ----- ---------- ---------- ----------- ------------- MODERATE ALLOCATION FUND MEMBERS Bond Fund Class Y 2,289,768 2,202,007 288,060 4,203,715 $ 42,079,187 $ 16,491 $1,207,172 MEMBERS High Income Fund Class Y 2,074,418 2,519,641 849,930 3,744,129 20,817,355 (535,764) 1,148,025 MEMBERS International Stock Fund Class Y 980,110 3,619,256 67,306 4,532,060 37,253,534 (435,312) 1,700,982 MEMBERS Large Cap Growth Fund Class Y 1,451,664 1,637,669 473,209 2,616,124 27,338,491 (998,655) 109,016 MEMBERS Large Cap Value Fund Class Y 1,128,103 1,476,462 469,156 2,135,409 20,905,657 (1,057,718) 512,131 MEMBERS Mid Cap Growth Fund Class Y(1) 2,378,051 1,155,727 1,835,713 1,698,065 6,248,878 (1,336,743) - MEMBERS Mid Cap Value Fund Class Y(1) 803,589 41,777 845,366 - - (2,051,836) - MEMBERS Small Cap Growth Fund Class Y(1) 952,968 565,808 455,014 1,063,762 5,999,620 (795,833) - MEMBERS Small Cap Value Fund Class Y 799,549 179,234 20,075 958,708 6,557,561 (56,916) 57,921 - -------------------------------------------------------------------------------------------------------------------------------- TOTALS $167,200,283 $(7,252,286) $4,735,247
BALANCE OF BALANCE OF SHARES SHARES HELD AT GROSS GROSS HELD AT VALUE AT REALIZED DISTRIBUTIONS FUND/UNDERLYING FUND 12/31/2007 ADDITIONS SALES 12/31/2008 12/31/2008 GAIN (LOSS) RECEIVED(2) - -------------------- ---------- --------- ----- ---------- ---------- ----------- ------------- AGGRESSIVE ALLOCATION FUND MEMBERS Bond Fund Class Y - 261,024 - 261,024 $ 2,612,846 $ - $ 9,851 MEMBERS High Income Fund Class Y - 646,053 - 646,053 3,592,055 - 38,904 MEMBERS International Stock Fund Class Y 604,290 1,185,346 39,654 1,749,982 14,384,856 (227,440) 657,917 MEMBERS Large Cap Growth Fund Class Y 579,685 573,333 159,583 993,435 10,381,392 (329,022) 41,469 MEMBERS Large Cap Value Fund Class Y 395,801 457,784 199,626 653,959 6,402,258 (402,289) 157,019 MEMBERS Mid Cap Growth Fund Class Y(1) 1,035,046 710,982 631,111 1,114,917 4,102,894 (480,704) - MEMBERS Mid Cap Value Fund Class Y(1) 467,396 43,567 510,963 - - (1,185,526) - MEMBERS Small Cap Growth Fund Class Y(1) 480,388 346,089 273,705 552,772 3,117,633 (396,500) - MEMBERS Small Cap Value Fund Class Y 510,214 108,647 63,466 555,395 3,798,901 (73,722) 33,646 - -------------------------------------------------------------------------------------------------------------------------------- TOTALS $48,392,835 $(3,095,203) $938,806
- ------------------------------------------- (1) Non-income producing. (2) Distributions received includes distributions from net investment income and from capital gains from the underlying funds. - -------------------------------------------------------------------------------- 133 ================================================================================ NOTES TO FINANCIAL STATEMENTS - --------------------------------------------------------------------------------
BALANCE OF BALANCE OF SHARES SHARES HELD AT GROSS GROSS HELD AT VALUE AT REALIZED DISTRIBUTIONS FUND/UNDERLYING FUND 12/31/2007 ADDITIONS SALES 12/31/2008 12/31/2008 GAIN (LOSS) RECEIVED(2) - -------------------- ---------- --------- ----- ---------- ---------- ----------- ------------- TARGET RETIREMENT 2020 FUND MEMBERS Bond Fund Class Y - 59,602 1,383 58,219 $ 582,771 $ 5 $ 3,199 MEMBERS High Income Fund Class Y 32,366 166,474 55,369 143,471 797,702 (63,895) 52,969 MEMBERS International Stock Fund Class Y - 100,393 2,233 98,160 806,872 (1,592) 37,062 MEMBERS Large Cap Growth Fund Class Y 15,046 102,181 19,052 98,175 1,025,925 (78,276) 4,117 MEMBERS Large Cap Value Fund Class Y 15,694 72,594 18,460 69,828 683,613 (76,385) 16,848 MEMBERS Mid Cap Growth Fund Class Y(1) 14,090 72,263 86,353 - - (178,734) - MEMBERS Small Cap Value Fund Class Y - 45,226 1,084 44,142 301,934 (765) 2,685 - -------------------------------------------------------------------------------------------------------------------------------- TOTALS $4,198,817 $(399,642) $116,880
BALANCE OF BALANCE OF SHARES SHARES HELD AT GROSS GROSS HELD AT VALUE AT REALIZED DISTRIBUTIONS FUND/UNDERLYING FUND 12/31/2007 ADDITIONS SALES 12/31/2008 12/31/2008 GAIN (LOSS) RECEIVED(2) - -------------------- ---------- --------- ----- ---------- ---------- ----------- ------------- TARGET RETIREMENT 2030 FUND MEMBERS Bond Fund Class Y - 26,007 221 25,786 $ 258,120 $ 2 $ 1,460 MEMBERS High Income Fund Class Y 15,275 117,454 29,862 102,867 571,942 (36,612) 38,868 MEMBERS International Stock Fund Class Y - 106,337 957 105,380 866,221 (968) 39,405 MEMBERS Large Cap Growth Fund Class Y 9,106 90,159 8,413 90,852 949,399 (36,182) 3,771 MEMBERS Large Cap Value Fund Class Y 9,430 65,298 9,938 64,790 634,292 (45,453) 15,474 MEMBERS Mid Cap Growth Fund Class Y(1) 10,604 79,938 90,542 - - (201,444) - MEMBERS Small Cap Growth Fund Class Y(1) 4,281 32,309 36,590 - - (120,717) - MEMBERS Small Cap Value Fund Class Y - 47,902 461 47,441 324,496 (491) 2,857 - -------------------------------------------------------------------------------------------------------------------------------- TOTALS $3,604,470 $(441,865) $101,835
- ------------------------------------------- (1) Non-income producing. (2) Distributions received includes distributions from net investment income and from capital gains from the underlying funds. - -------------------------------------------------------------------------------- 134 ================================================================================ NOTES TO FINANCIAL STATEMENTS - --------------------------------------------------------------------------------
BALANCE OF BALANCE OF SHARES SHARES HELD AT GROSS GROSS HELD AT VALUE AT REALIZED DISTRIBUTIONS FUND/UNDERLYING FUND 12/31/2007 ADDITIONS SALES 12/31/2008 12/31/2008 GAIN (LOSS) RECEIVED(2) - -------------------- ---------- --------- ----- ---------- ---------- ----------- ------------- TARGET RETIREMENT 2040 FUND MEMBERS Bond Fund Class Y - 27,589 307 27,282 $ 273,089 $ 5 $ 1,459 MEMBERS High Income Fund Class Y 6,898 47,717 54,615 - - (61,478) 13,958 MEMBERS International Stock Fund Class Y - 93,027 1,047 91,980 756,076 (692) 34,224 MEMBERS Large Cap Growth Fund Class Y 7,192 75,720 10,314 72,598 758,646 (53,313) 2,998 MEMBERS Large Cap Value Fund Class Y 7,364 54,911 10,590 51,685 505,993 (53,056) 12,280 MEMBERS Mid Cap Growth Fund Class Y(1) 11,590 88,999 100,589 - - (236,537) - MEMBERS Small Cap Growth Fund Class Y(1) 4,454 34,286 38,740 - - (126,204) - MEMBERS Small Cap Value Fund Class Y - 43,068 520 42,548 291,029 (433) 2,549 - -------------------------------------------------------------------------------------------------------------------------------- TOTALS $2,584,833 $(531,708) $67,468
- ------------------------------------------- (1) Non-income producing. (2) Distributions received includes distributions from net investment income and from capital gains from the underlying funds. - -------------------------------------------------------------------------------- 135 ================================================================================ REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - -------------------------------------------------------------------------------- To the Shareholders and Board of Trustees of Ultra Series Fund: We have audited the accompanying statements of assets and liabilities, including the portfolio of Ultra Series Fund comprising the Conservative Allocation Fund, Moderate Allocation Fund, Aggressive Allocation Fund, Money Market Fund, Bond Fund, High Income Fund, Diversified Income Fund, Large Cap Value Fund, Large Cap Growth Fund, Mid Cap Value Fund, Mid Cap Growth Fund, Small Cap Value Fund, Small Cap Growth Fund, Global Securities Fund, International Stock Fund, Target Retirement 2020 Fund, Target Retirement 2030 Fund, and Target Retirement 2040 Fund (collectively, the "Funds") as of December 31, 2008, and the related statements of operations for the year then ended, and the statements of changes in net assets and the financial highlights for the periods presented. 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. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds' internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2008, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audit provides 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 positions of each of the Funds as of December 31, 2008, the results of their operations for the year then ended, and the changes in their net assets and financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. /s/ DELOITTE & TOUCHE LLP Chicago, Illinois February 19, 2009 - -------------------------------------------------------------------------------- 136 ================================================================================ OTHER INFORMATION (UNAUDITED) - -------------------------------------------------------------------------------- FUND EXPENSES PAID BY SHAREHOLDERS As a shareholder of the Funds, you pay no transaction costs, but do incur ongoing costs which include management fees; disinterested trustee fees; brokerage commissions and other expenses incurred in connection with the acquisition or disposition of investments; costs of borrowing money; expenses for independent audits, taxes, and extraordinary expenses as approved by a majority of the disinterested trustees. The examples in the table that follows 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 December 31, 2008. Expenses paid during the period in the table 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 "Actual" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table also 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.
ACTUAL HYPOTHETICAL -------------------------- ------------------------- EXPENSES EXPENSES BEGINNING ANNUAL ENDING PAID ENDING PAID ACCOUNT EXPENSE ACCOUNT DURING ACCOUNT DURING FUND VALUE RATIO VALUE PERIOD VALUE PERIOD - ---- ----- ----- ----- ------ ----- ------ Conservative Allocation $1,000 0.31% $ 843.00 $1.44 $1,023.58 $1.58 Moderate Allocation 1,000 0.31% 736.50 1.35 1,023.58 1.58 Aggressive Allocation 1,000 0.32% 640.00 1.32 1,023.53 1.63 Money Market 1,000 0.46% 1,006.50 2.32 1,022.82 2.34 Bond 1,000 0.56% 1,018.80 2.84 1,022.32 2.85 High Income 1,000 0.77% 859.40 3.60 1,021.27 3.91 Diversified Income 1,000 0.72% 928.50 3.49 1,021.52 3.66 Large Cap Value 1,000 0.62% 737.30 2.71 1,022.02 3.15 Large Cap Growth 1,000 0.82% 682.50 3.47 1,021.01 4.17 Mid Cap Value 1,000 1.02% 691.60 4.34 1,020.01 5.18 Mid Cap Growth 1,000 0.87% 572.40 3.44 1,020.76 4.42 Small Cap Value 1,000 1.12% 780.80 5.01 1,019.51 5.69 Small Cap Growth 1,000 1.12% 621.10 4.56 1,019.51 5.69 Global Securities 1,000 0.97% 725.80 4.21 1,020.26 4.93 International Stock 1,000 1.23% 696.50 5.25 1,018.95 6.24 Target Retirement 2020 1,000 0.40% 688.30 1.70 1,023.13 2.03 Target Retirement 2020 1,000 0.40% 663.90 1.67 1,023.13 2.03 Target Retirement 2020 1,000 0.40% 633.30 1.64 1,023.13 2.03
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any separate account fees, charges, or expenses imposed by the variable annuity or variable life insurance contracts, or retirement and pension plans that use the funds. The information provided in the hypothetical example table is useful in comparing ongoing fund costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these fees, charges or expenses were included, your costs would have been higher. - -------------------------------------------------------------------------------- 137 ================================================================================ OTHER INFORMATION (UNAUDITED) - -------------------------------------------------------------------------------- AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULES The Trust files 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 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 Trust to vote proxies related to portfolio securities is available to shareholders at no cost on the SEC's website at www.sec.gov or by calling CUNA Mutual Insurance Society at 1-800-798-5500. The proxy voting records for the Trust for the most recent twelve-month period ended June 30 are available to shareholders at no cost on the SEC's website at www.sec.gov. BOARD APPROVAL OF INVESTMENT ADVISORY AND SUBADVISORY AGREEMENTS Under the Investment Company Act of 1940, as amended (the "Act"), each mutual fund's investment advisory agreement, and any subadvisory agreement, must be approved at least annually by the fund's board of trustees, including a majority of the trustees who are not "interested persons" under the Act (the "independent trustees"). The board of trustees (the "Board") of Ultra Series Fund (the "Trust") reviews the performance of each series of the Trust (each, a "Fund" and collectively, the "Funds") and the investment adviser and subadviser of each Fund at each regular board meeting, including appropriate comparative information. At these meetings, the Board also receives updates concerning the investment strategies being pursued by the Funds, changes in the Funds' investment processes and portfolio management personnel, the expenses incurred by the Funds, and various other matters which may impact the Funds' performance and that of the Funds' investment adviser and subadvisers. In addition, the Board considers whether to approve the continuation of the Funds' investment advisory and subadvisory agreements at an in-person meeting held near the end of each year. The most recent such meeting was held December 4-5, 2008. Before the December 2008 meeting, the Board asked the Funds' investment adviser and subadvisers to provide written information addressing factors to be considered by the Board in deciding whether or not to approve the agreements. In addition, counsel to the independent trustees provided the Board with a memorandum reviewing its duties under the Act with respect to approval of the agreements. Before the December 2008 meeting, the Board and counsel also asked the investment adviser and subadvisers to expand upon certain of the written information they had provided, and they held a conference call with representatives of the investment adviser to discuss the information provided. At the December 2008 meeting, representatives of the investment adviser reviewed the written information it had provided and responded to further questions from the Board concerning this information and related matters. In addition, at this meeting, representatives of each subadviser made presentations and responded to follow-up questions from the Board. After these presentations and discussions, the Board (including a majority of independent trustees) unanimously approved the investment advisory agreement and each subadvisory agreement. In determining to approve these agreements, the Board considered the following factors and reached the following conclusions: NATURE, EXTENT AND QUALITY OF SERVICES PROVIDED BY THE INVESTMENT ADVISER AND SUBADVISERS: The Board received and considered a variety of information pertaining to the nature, extent and quality of the services provided by the investment adviser and subadvisers. This information generally included the professional qualifications and experience of the portfolio management teams for each Fund; the portfolio management processes utilized by these teams; the organization, resources and research capabilities of the investment management companies of which these teams are a part; and the investment adviser's and subadvisers' compliance, regulatory and litigation experience, their portfolio transaction execution and soft dollar policies and practices, and their policies and procedures for allocating transactions among accounts. In particular, the Board discussed with the investment adviser and each subadviser the status of the firm's financial condition and future expectations for any expense and/or staff reductions in consideration of recent market events. After reviewing this information and discussing it with representatives of the investment adviser and subadvisers, the Board concluded that it was generally satisfied with the nature, extent and quality of the services provided by the investment adviser and subadvisers. - -------------------------------------------------------------------------------- 138 ================================================================================ OTHER INFORMATION (UNAUDITED) - -------------------------------------------------------------------------------- INVESTMENT PERFORMANCE OF THE FUNDS AND THEIR INVESTMENT ADVISER AND SUBADVISERS: As noted above, the Board reviews the performance of the Funds and their investment adviser and subadvisers at each regular Board meeting held throughout the year. In addition, at the December 2008 meeting, the Board reviewed recent performance of the Funds compared to (i) the performance of their respective unmanaged market benchmark indices and (ii) the performance of their respective Morningstar peer groups adjusted for fund structure and size. The Board also considered written discussions the investment adviser and, in the case of the subadvised Funds, the subadviser provided to it regarding the major elements of each Fund's investment strategy that contributed positively or negatively to the Fund's performance during the preceding year as well as expectations for the next year. Among other things, the Board noted that seven Funds outperformed and an additional five Funds ranked at or just below the median of their respective Morningstar peer group for the 12 months ended September 30, 2008. In addition, the Board noted that of the remaining six Funds, (i) three had only been in existence for one year, (ii) two had shown recent improvement and (iii) the remaining Fund outperformed its benchmark index for the 12 months ended September 30, 2008. Based on the foregoing reviews, the Board concluded that it was comfortable with the Funds' performance or with the steps which the investment adviser or subadviser is taking to improve performance. The Board also determined that it will monitor the progress of the lower performing Funds during the coming year. COST OF SERVICES PROVIDED AND PROFITABILITY: At the December 2008 meeting, the Board reviewed written information prepared by the Funds' investment adviser setting forth, on a fund-by-fund basis, the investment adviser's pre-tax profitability under its investment advisory agreement with the Funds for the year ended September 30, 2008. In the course of its review, the Board noted that some of the Funds were operated at a loss to the investment adviser. With respect to the other Funds, the Board noted that the pre-tax margins reported by the investment adviser appeared reasonable and were substantially lower than the margins which have been upheld in reported judicial decisions concerning investment advisory fees. The Board also considered how each Fund's total expense ratio compares to those of the other funds in its Morningstar peer group. Because the Funds are so-called "unitary fee" funds, which pay a single fee covering both investment advisory and most other administrative services, the Board did not consider comparative Morningstar data pertaining to investment advisory fees standing alone. The Board noted that ten Funds' total expense ratio ranked in the third quintile or better compared to their respective Morningstar peer groups, with the remaining eight Funds ranked below the third quintile. Six of those lower ranking Funds were Funds that invested in other mutual funds. To that extent, it was unclear whether the Morningstar peer groups reported fees at both the fund and underlying fund level, as the Funds did. The Board considered that the investment adviser manages certain other mutual funds with similar investment objectives or principal investment strategies as the Funds for a lower management fee. However, as noted above, the Funds' management fee includes most of the Funds' administrative expenses while the management fee charged to the other mutual funds includes only investment advisory services. The Board also noted that the investment adviser, not the Funds, pays the subadvisers' fees. The Board noted that to the extent a Fund invests in other mutual funds also managed by the investment adviser, the investment adviser receives investment advisory fees from both the Fund and the underlying mutual fund. The Board was satisfied in this regard that the investment adviser provides separate services to each of the Fund and the underlying mutual fund in exchange for the fees received from it. Based on all this information, the Board concluded that the management fees and total expenses borne by the Funds are reasonable in relation to the services provided, and that the investment adviser's level of profitability from its investment advisory agreement with the Funds is well within reason. ECONOMIES OF SCALE: The investment adviser provided the Board with information concerning how large a Fund must be before the investment adviser begins to realize economies of scale under its management agreement. The investment adviser also noted that under its unitary fee agreement, economies of scale can change from year to year as the amounts charged by third-party service providers and borne by the investment adviser change. In addition, the investment adviser noted that the larger Funds' total expense ratios generally rank well in their Morningstar peer groups. Accordingly, the investment adviser did not recommend the institution of breakpoints in the Funds' management fee schedules at this time. The Board, taking these factors into account, determined not to pursue breakpoints for the Funds at this time. OTHER BENEFITS TO THE INVESTMENT ADVISER AND SUBADVISERS FROM THEIR RELATIONSHIPS WITH THE FUNDS: The Board also considered the nature and extent of other benefits that may flow to the investment adviser and subadvisers from their - -------------------------------------------------------------------------------- 139 ================================================================================ OTHER INFORMATION (UNAUDITED) - -------------------------------------------------------------------------------- relationships with the Funds. As discussed above, the Board noted that with respect to a Fund that invests in other mutual funds managed by the investment adviser, the investment adviser receives fees from both the Fund and the underlying mutual fund. However, the Board was satisfied that the investment adviser provides separate services for the two layers of fees paid in such instances. The Board also noted that the investment adviser and some subadvisers execute a portion of the Funds' portfolio transactions on a "soft dollar" basis, pursuant to which the investment adviser and subadvisers receive research services from or through the executing brokers. In connection with each regular Board meeting, the Board reviews a third-party evaluation of the quality of execution of the portfolio transactions executed by the investment adviser on behalf of the Funds. The Board noted that these evaluations generally have indicated that the quality of the Funds' executions compares favorably with that of other mutual funds. The Board also noted that the reported execution and soft dollar benefits received by the subadvisers were reasonable in light of the transactions each subadviser executes on behalf of the Funds. Finally, the Board noted the investment adviser's and the subadvisers' representations that they seek to achieve "best execution" in executing all of the Funds' portfolio transactions, and that their soft dollar practices comply with applicable law. Based on these reviews, the Board was satisfied with the quality of execution of the Funds' portfolio transactions, and it did not believe the soft dollar benefits received by the investment adviser and subadvisers were excessive. Based on the foregoing information, the Board concluded that while additional benefits flow to the investment adviser and subadvisers from their relationships with the Funds, the nature and extent of these additional benefits are not unreasonable when considered in the context of the overall services provided to, and fees received from, the Funds by these entities. Board Conclusion: After taking the foregoing information and the other information provided by the investment adviser and subadvisers into account, the Board (including a majority of independent trustees), acting in the exercise of its business judgment, unanimously approved the continuation of the investment advisory agreement and the subadvisory agreements. In doing so, the Board did not assign specific weights to the various factors considered, nor did it deem any one factor or set of factors to be decisive. Instead, it considered the total mix of information provided to it in reaching its decisions. - -------------------------------------------------------------------------------- 140 ================================================================================ TRUSTEES AND OFFICERS - -------------------------------------------------------------------------------- Each trustee and officer oversees 32 portfolios in the fund complex, which consists of the Ultra Series Fund with 18 portfolios and the MEMBERS Mutual Funds with 14 portfolios. The address of each trustee and officer is 5910 Mineral Point Road, Madison WI 53705. The Statement of Additional Information, which includes additional information about the trustees and officers, is available at no cost on the SEC's website at www.sec.gov or by calling CUNA Mutual Insurance Society at 1-800-798-5500.
NAME; POSITION(S) HELD WITH THE FUND & PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS; YEAR ELECTED(1); YEAR OF BIRTH OTHER OUTSIDE DIRECTORSHIPS - --------------------------------------------------------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - --------------------------------------------------------------------------------------------------------------------------------- Rolf F. Bjelland, CLU MEMBERS Mutual Funds: Chairman (since 2006) and Trustee Chairman (2006) (since 2003); Lutheran Brotherhood Mutual Funds: Chairman and Trustee (2003) President (1983-2002); Lutheran Brotherhood (now Thrivent Financial): 1938 Chief Investment Officer (1983-2002). Other Directorships: Regis Corp. (since 1982). - --------------------------------------------------------------------------------------------------------------------------------- Linda S. Foltz, CPA MEMBERS Mutual Funds: Trustee (since 2006); Dougherty Consulting, Trustee (2006) LLC: President/Owner (since 2005); Direct Supply, Inc.: Executive Vice 1950 President of Corporate Development and Chief Financial Officer (1988-2005). Other Directorships: Direct Supply, Inc. (since 2003). - --------------------------------------------------------------------------------------------------------------------------------- Steven P. Riege MEMBERS Mutual Funds: Trustee (since 2005); The Rgroup: Trustee (2005) Owner/President (since 2001); Robert W. Baird & Company: Senior 1954 Vice President Marketing and Vice President Human Resources (1986-2001). Other Directorships: None - --------------------------------------------------------------------------------------------------------------------------------- Richard E. Struthers MEMBERS Mutual Funds: Trustee (since 2004); Clearwater Capital Trustee (2004) Management: Chairman and Chief Executive Officer (since 1998); Park 1952 Nicollet Health Services: Director (since 2001) and Chairman, Finance and Investment Committee (since 2006); IAI Mutual Funds: President and Director (1992-1997). Other Directorships: Park Nicollet Health Services (since 2001) and Micro Component Technology, Inc. (since 2008). - --------------------------------------------------------------------------------------------------------------------------------- INTERESTED TRUSTEES AND OFFICERS - --------------------------------------------------------------------------------------------------------------------------------- David P. Marks, CFA CUNA Mutual Insurance Society: Chief Investment Officer (since 2005); MEMBERS Trustee, President & Capital Advisors, Inc.: President (since 2005); CUNA Mutual Life Insurance Principal Executive Officer (2006) Company: Chief Investment Officer (2005-2007); MEMBERS Mutual Funds: Trustee, 1947 President, and Principal Executive Officer (since 2006); Citigroup Insurance Investors: Chief Investment Officer (2004-2005); CIGNA Investments: Chief Investment Officer, (2002-2004); Green Mountain Partners: Partner (2001-2002); Allianz Investments: Chief Investment Officer (1991-2001). Other Directorships: CBRE Realty Finance (since 2005). - --------------------------------------------------------------------------------------------------------------------------------- Scott R. Powell, CFA MEMBERS Capital Advisors, Inc: Managing Director-Common Stock and Vice President (2008) MAP (since 2008); Managing Director-Managed Accounts and Mutual 1962 Funds (2006-2008); MEMBERS Mutual Funds: Vice President (since 2008); Virchow Krause Wealth Management, LLC: Partner, Managing Director, (2003-2006); Jacobus Wealth Management, Inc.: (2001-2003). - --------------------------------------------------------------------------------------------------------------------------------- Timothy S. Halevan MEMBERS Capital Advisors, Inc.: Vice President and Chief Compliance Officer Chief Compliance Officer (2009) (since 2009); CUNA Brokerage Services, Inc.: Vice President, Chief Compliance 1961 Officer (since 2001); MEMBERS Mutual Funds: Chief Compliance Officer (since 2009). - ---------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 141 ================================================================================ TRUSTEES AND OFFICERS - --------------------------------------------------------------------------------
NAME; POSITION(S) HELD WITH THE FUND & PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS; YEAR ELECTED(1); YEAR OF BIRTH OTHER OUTSIDE DIRECTORSHIPS ================================================================================================================================= INTERESTED TRUSTEES AND OFFICERS (CONTINUED) ================================================================================================================================= Holly S. Baggot MEMBERS Capital Advisors, Inc.: Director, Mutual Funds (since July 2008); Secretary (1999) Treasurer Director, Mutual Fund Operations, (2006-2008), Operations Officer-Mutual Funds and Principal Financial Officer(2008) (2005-2006), Senior Manager-Product and Fund Operations (2001-2005); Assistant Treasurer (1999-2007) MEMBERS Mutual Funds: Treasurer and Principal Financial Officer (since 2008); 1960 Secretary (since 1999), and Assistant Treasurer (1997-2007). - --------------------------------------------------------------------------------------------------------------------------------- Dan P. Owens MEMBERS Capital Advisors, Inc.: Director, Investment Operations, (since Assistant Treasurer (2000) June 2006), Investment Operations Officer (2005-2006), and Senior Manager- 1966 Portfolio Operations (2001-2005); MEMBERS Mutual Funds: Assistant Treasurer (since 2000). - --------------------------------------------------------------------------------------------------------------------------------- Cheryl R. Gilge MEMBERS Capital Advisors, Inc.: Operations Associate, Mutual Fund Assistant Treasurer (2009) Administration (since 2007), Fund Administration Analyst (2005-2007), 1975 Investment Support Manager (1999-2005); MEMBERS Mutual Funds: Assistant Treasurer (since 2009). - ---------------------------------------------------------------------------------------------------------------------------------
(1) The board of trustees adopted term limits authorizing each independent trustee to serve in such capacity until reaching the age of 75. - -------------------------------------------------------------------------------- 142 [LOGO OF CUNA MUTUAL GROUP](R) CUNA MUTUAL GROUP - ------------------------------------------------- CUNA Mutual Insurance Society 2000 Heritage Way Waverly, IA 50677 Form 1965-0209 [LOGO OF CUNA MUTUAL GROUP](R) CUNA MUTUAL GROUP ---------------------- - ------------------------------------------------- Presorted Standard U.S. Postage CUNA Mutual Insurance Society PAID 2000 Heritage Way Carol Stream, IL Waverly, IA 50677 Permit No. 1 ---------------------- Form 1965-0209 ITEM 2. CODE OF ETHICS. As of the period ended December 31, 2008, Ultra Series Fund (also referred to herein as the "Registrant" or the "Trust") has adopted a code of ethics ("Code") that applies to the Trust's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. The Code was amended effective August 21, 2008 which included administrative changes as well as a change in the Principal Financial Officer. The new Principal Financial Officer is Holly S. Baggot. A copy of the Code is filed as an exhibit to this Form N-CSR. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The Registrant's board of trustees has determined that the Registrant has four audit committee financial experts serving on its Audit Committee. The names of the audit committee financial experts are Richard E. Struthers, Linda S. Foltz, Rolf F. Bjelland and Steven P. Riege, each of whom is an "independent" trustee for purposes of this Item. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. (a) Audit Fees ---------- For the fiscal years ended December 31, 2008 and December 31, 2007, 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 $238,350 and $221,120, respectively. (b) Audit Related Fees ------------------ For the fiscal years ended December 31, 2008 and December 31, 2007, 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 totaled $0 and $0, respectively. (c) Tax Fees -------- For the fiscal years ended December 31, 2008 and December 31, 2007, the aggregate fees for professional services rendered by Deloitte & Touche for tax compliance, tax advice and tax planning for such fiscal years, totaled $51,795 and $8,700, respectively. Included in the scope of services comprising the fees disclosed under this Item 4(c) were the following services for the fiscal year ended December 31, 2008: Review and sign as signature preparer for U.S. Income Tax Return for Regulated Investment Companies, Form 1120-RIC and the Return of Excise Tax on Undistributed Income of Regulated Investment Companies, Form 8613;and for the fiscal year ended December 31, 2007: review and sign as signature preparer the Return of Excise Tax on Undistributed Income of Regulated Investment Companies, Form 8613 for the International Stock, High Income, Global Securities and Mid Cap Growth Funds. (d) All Other Fees -------------- For the fiscal years ended December 31, 2008 and December 31, 2007, 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 and $0, respectively. (e)(1) Pursuant to Rule 2-01(c)(7) of Regulation S-X, the Registrant's Audit Committee has established pre-approval policies and procedures with respect to audit, audit-related, tax, and other non-audit services. In accordance with these policies, certain services have received the Audit Committee's general pre-approval, while other services must be specifically pre-approved. (e)(2) The Audit Committee has pre-approved, as required by Rule 2-01(c)(7)(i)(C) of Regulation S-X, 100% of the services described in this Item 4(b) through (d), which such services are described above. (f) Not applicable. (g) During the Trust's fiscal years ended December 31, 2008 and December 31, 2007, the aggregate non-audit fees billed by Deloitte & Touche for services rendered to the Trust (other than as already disclosed above) 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 and $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 pre-approved pursuant to paragraph Rule 2-01(c)(7)(ii) of Regulation S-X and has determined that the provision of such services is compatible with maintaining Deloitte & Touche's independence. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS Schedule I - Investments in Securities of Unaffiliated Issuers as of December 31, 2008 is included as part of the report to shareholders filed under Item 1 hereto. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASES. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. ITEM 11. CONTROLS AND PROCEDURES. (a) The President and Treasurer of the Registrant have concluded that the Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) are effective based on their evaluation of the disclosure controls and procedures as of a date within 90 days of the filing date of this report. (b) There have been no changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting. ITEM 12. EXHIBITS. (a)(1) Sarbanes-Oxley Code of Ethics dated August 21, 2008 for period ended December 31, 2008, is filed herewith. (a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, are filed herewith. (a)(3) Not applicable. (b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, are furnished herewith. 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. ULTRA SERIES FUND BY: /s/ David P. Marks ------------------ David P. Marks President DATE: 2/25/09 ------- 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/ David P. Marks ------------------ David P. Marks President, Ultra Series Fund DATE: 2/25/09 ------- BY: /s/ Holly S. Baggot ------------------- Holly S. Baggot Treasurer, Ultra Series Fund DATE: 2/25/09 ------- EXHIBIT INDEX 12(a)(1) Sarbanes-Oxley Code of Ethics dated August 21, 2008 for period ended December 31, 2008, is filed herewith. 12(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, are filed herewith. (a)(3) Not applicable. 12(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, are furnished herewith. EX-99.CODE ETH 2 e68654_ex99code.txt CODE OF ETHICS MEMBERS MUTUAL FUNDS ULTRA SERIES FUND FORM OF CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS AMENDED AND RESTATED AUGUST 21, 2008 I. COVERED OFFICERS/PURPOSE OF THE CODE This code of ethics (this "Code") for each of MEMBERS Mutual Funds and the Ultra Series Fund (each, a "Trust," and collectively, the "Trusts") has been adopted by the board of trustees ("Board") for each Trust and applies to each Trust's Principal Executive (i.e., each Trust's president) and Senior Financial (i.e., each Trust's treasurer) Officers (such persons are hereinafter referred to collectively as the "Covered Officers," and each such person is set forth in Exhibit A hereto) for the purpose of promoting: o Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; o Full, fair, accurate, timely and understandable disclosure in reports and documents that a registrant files with, or submits to, the SEC and in other public communications made by the Trusts; o Compliance with applicable laws and governmental rules and regulations; o The prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and o Accountability for adherence to the Code. The Board has adopted this Code for the purpose of furthering compliance with Item 2 of Form N-CSR,(1) which implements Section 406 of the Sarbanes-Oxley Act of 2002 (the - ------------------------------- (1) Item 2 of Form N-CSR requires a registered management investment company to disclose annually whether, as of the end of the period covered by the report, that company has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer, or controller, or persons performing similar functions. If the registrant has not adopted such a code of ethics, the registrant must explain why it has not done so. Under Item 2, the registrant also must: (1) file with the SEC a copy of such code as an exhibit to its annual report; (2) post the text of the code on it's internet website and disclose, in its annual report, its internet address, and the fact that it as posted the code on its website; or (3) undertake in its most recently filed semi-annual report on Form N-CSR to provide to any person without charge, upon request, a copy of the code and explain the manner in which this request may be made. Disclosure also is required of amendments to, or waivers (including implicit waivers) from, a provision of the code in the registrant's annual report on Form N-CSR or on the registrant's website. If the registrant intends to satisfy the disclosure requirement by posting this information on its website, the registrant will be required to disclose its internet address and such intention. Investment companies must 1 "2002 Act").(2) Section 406 of the 2002 Act requires disclosure by management investment companies that are registered with the Securities and Exchange Commission (the "SEC") under the Investment Company Act of 1940 (the "1940 Act"), concerning a code of ethics for senior financial officers of these investment companies. ROLE OF THE DESIGNATED PERSONS. As set forth in greater detail below, the Covered Officers shall report to the Senior Vice President of Corporate Compliance for CUNA Mutual Group(3) , another designated senior legal or compliance officer of the Trusts or of a company ("Control Company") in a control relationship to the Trusts (as such term is defined under Section 2(a)(19) of the 1940 Act), a designated senior legal or compliance officer of a Control Company of the Trusts, or another appropriate designated person (each hereinafter referred to as a "Designated Person").(4) As discussed in footnote 3, given the seniority of the Covered Officers, investigations, interpretations and waivers(5) regarding any existing, actual or potential violation of this Code shall be the responsibility of the Designated Person(s); except that interpretations or waivers sought by the President of the affected Trusts shall be considered by the Audit Committee or the Board of Trustees of such Trust. NOT A 1940 ACT RULE 17j-1 CODE OF ETHICS. This Code is not adopted under, nor intended to serve as a basis for complying with the requirements of, Rule 17j-1 under the 1940 Act. II. COVERED OFFICERS SHOULD ACT HONESTLY AND CANDIDLY This Code is applicable to all Covered Officers of the Trusts. Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest. - -------------------------------------------------------------------------------- make the disclosure discussed in this footnote irrespective of whether these officers are employed by the registrant or a third party. (2) The SEC rules require disclosure only about whether the registrant has adopted a code of ethics in accordance with the 2002 Act, but, in view of the seniority of the officers covered by the Code, it has been deemed appropriate that the Trusts' respective Boards of Trustees also adopt this Code for the Trusts. (3) CUNA Mutual Group is the unifying name for CUNA Mutual Insurance Society, Inc. and its affiliates. (4) The SEC has indicated that any Designated Person "should have sufficient status within the company to engender respect for the [C]ode and the authority to adequately deal with the persons subject to the [C]ode regardless of their stature in the company." In addition a Designated Person also may be a Trustee of a Trust who is not deemed to be an "interested person" of the Trust, as that term is defined under Section 2(a)(19) of the 1940 Act (hereinafter, an "Independent Trustee"), the chairperson of the Audit Committee of the Board of Trustees ("Audit Committee") of a Trust, or even the counsel to the Independent Trustees, as appropriate. (5) Item 2 of Form N-CSR defines "waiver" as "the approval by the registrant of a material departure from a provision of the code of ethics" and "implicit waiver," which also must be disclosed in the Form N-CSR, as "the registrant's failure to take action within a reasonable period of time regarding a material departure from a provision of the code of ethics that has been made known to an executive officer of the registrant." 2 Each Covered Officer must: o Act with integrity, including being honest and candid while still maintaining the confidentiality of information where required by law of the Trust's policies; o Observe applicable laws and governmental rules and regulations, accounting standards and Trust policies; o Adhere to a high standard of business ethics; and o Place the interests of the Trust and its shareholders before the Covered Officer's own personal interests. All activities of Covered Officers should be guided by and adhere to these standards. III. COVERED OFFICERS SHOULD HANDLE ETHICALLY ACTUAL AND APPARENT CONFLICTS OF INTEREST OVERVIEW. The 1940 Act is designed, in part, to address inherent conflicts of interest that exist in the management of an investment company's assets by a third party (i.e., the investment company's investment adviser). Similarly, the Investment Advisers Act of 1940, as amended, (the "Advisers Act"), addresses conflicts of interest faced by an investment adviser in the management of client assets. The principles set forth in this section relating to conflicts of interest reflect the fact that investment companies and investment advisers thereof already are subject to prohibitions on certain activities, including self-dealing, and substantial limitations regarding conflicts of interest by the 1940 Act and the Advisers Act and the SEC rules promulgated thereunder. In light of the existing structural, statutory and regulatory environment for registered investment companies, a code of ethics broader than necessary to meet the new 2002 Act code of ethics requirement may be unnecessary. This Code, however, is intended to reflect the general principal recognizing the need to hold persons responsible for managing other people's money to the highest standards of integrity. GUIDING PRINCIPLES. A "conflict of interest" occurs when a Covered Officer's private interest interferes with the interests of, or his or her service to, a Trust. A conflict of interest can arise when a Covered Officer has interests that may make it difficult to perform that Covered Person's work related to the Trust objectively. For example, a conflict of interest would arise if a Covered Officer, or a member of his or her family, receives improper personal benefits as a result of such Covered Officer's position in the Trust. Service to the Trust should not be subordinated to personal gain and advantage. Certain conflicts of interest arise out of the relationships between Covered Officers and the Trust that already are subject to conflict of interest provisions in the 1940 Act and the Advisers Act. For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Trust because of their status as "affiliated persons" of the Trust, as that term is defined under 3 Section 2(a)(3) of the 1940 Act. The Trust's and the investment adviser's compliance programs and procedures are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code. Although typically not presenting an opportunity for improper personal benefit, conflicts may arise from, or as a result of, the contractual relationship between the Trust and the investment adviser of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for the Trust or for the adviser, or for both), be involved in establishing policies and implementing decisions which will have different effects on the adviser and the Trust. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Trust and the adviser and is consistent with the performance by the Covered Officers of their duties as officers of the Trust and, if addressed in conformity with the provisions of the 1940 Act and the Advisers Act will be deemed to have been handled ethically. In addition, it is recognized by the Board of Trust that the Covered Officers may also be officers or employees of one or more other investment companies covered by this or other Codes. Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Acts. In reading the following examples of conflicts of interest under the Code, Covered Officers should keep in mind that such a list cannot ever be exhaustive by covering every possible scenario. It follows that the overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Trust. Each Covered Officer must: o Not use personal influence or personal relationships improperly to influence investment decisions or financial reporting by a Trust whereby the Covered Officer would benefit personally to the detriment of the Trust; o Not cause a Trust to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit the Trust; o Not use material non-public knowledge of portfolio transactions made or contemplated for a Trust to profit or cause others to profit in contemplation of the market effect of such transactions; o Report at least annually on the Trust's "Trustees and Officers Questionnaire" any and all material transactions, affiliations or relationships that could reasonably expected to give rise to, or be related to, a conflict of interest; and o Handle any actual or apparent conflict of interest ethically. 4 Certain conflict of interest situations should always, if material, be discussed with the Designated Persons. Examples of these include: o Service as a director or trustee on the board of any non-charitable or commercial company; o The receipt of any gifts of more than de minimis value (i.e., gifts in excess of $100) from any person or entity that does business with or on behalf of a Trust; o The receipt of any entertainment from any company with which a Trust has current or prospective business dealings unless such entertainment is business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety; o Any ownership interest in, or any consulting or employment relationship with, any of the Trust's service providers, other than its investment adviser, principal underwriter, administrator or any affiliated person thereof; o A direct or indirect financial interest in commissions, transaction charges or spreads paid by the Trust for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment, such as compensation or equity ownership. In addition, any activity or relationship that would present a conflict of interest for a Covered Officer also would likely present a conflict for the Covered Officer if a member of the Covered Officer's family engages in such an activity or has such a relationship. IV. DISCLOSURE AND COMPLIANCE o Each Covered Officer should be familiar with the disclosure requirements generally applicable to the Trusts; o Each Covered Officer should not knowingly misrepresent, or cause others to misrepresent, facts about the Trusts to others, whether within or outside the Trusts, including to the Trusts' trustees and auditors, and to governmental regulators and self-regulatory organizations; o Each Covered Officer should, to the extent appropriate within his or her area of responsibility, consult with other officers and employees of the Trusts and the adviser with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Trusts file with, or submit to, the SEC and in other public communications made by the Trusts; and 5 o It is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. In addition, each Covered Officer is required to be familiar, and to comply, with the relevant Trust's Disclosure Controls and Procedures in connection with the 2002 Act so that the Trust's subject reports and documents filed with the SEC comply in all material respects with the applicable federal securities laws and SEC rules. Moreover, each Covered Officer having direct or supervisory authority regarding these SEC filings or the relevant Trust's other public communications, also should consult, to the extent appropriate within the Covered Person's area of responsibility, with Control Company officers and employees and take appropriate steps regarding such disclosures with the goal of rendering such disclosures full, fair, accurate, timely and understandable. V. REPORTING AND ACCOUNTABILITY Each Covered Officer must: o Upon adoption of the Code, sign and submit to the Funds' Chief Compliance Officer a written acknowledgement that he or she has received, read, and understands the Code; o Annually thereafter affirm to the Funds' Chief Compliance Officer in writing that he or she has complied with the requirements of the Code; o Not retaliate against any employee or Covered Officer for reports of potential violations that are made in good faith; and o Notify the Designated Person(s) promptly if he or she knows of any violation of this Code. Failure to do so is itself a violation of this Code. Except as otherwise described below, the Designated Person(s) will be responsible for applying this Code to specific situations in which questions are presented under it and shall have the authority to interpret this Code in any particular situation. The Designated Person(s) shall take all actions that such Designated Person(s) may deem necessary and appropriate to investigate any reported existing, actual or potential violations. Such actions will include reporting any existing or actual violations of this Code to the Funds' Chief Compliance Officer, as well as reporting, when such Designated Person deems necessary or appropriate, potential violations of this Code to the Funds' Chief Compliance Officer. In addition, any conflicts of interest that pertain to a Trust's president shall be submitted for consideration to the Chief Compliance Officer for CUNA Mutual Group (the "CCO"). The CCO shall be responsible for making a recommendation as to any approvals or waivers sought by the president of a Trust and shall refer such recommendation to the Funds' Chief Compliance Officer, which shall then follow such recommendation. The Funds' Chief Compliance Officer shall report, or cause to be reported, to each Trust's Board, on an annual basis, any issues arising under this Code. 6 The Trusts will follow these procedures in investigating and enforcing this Code: o Designated Person(s) will take all appropriate action to investigate any potential violations reported thereto; o If, after such investigation, a Designated Person determines that no violation has occurred, he or she is not required to take any further action; o Any matter that a Designated Person determines is a violation will be reported to the Funds' Chief Compliance Officer; o If the Funds' Chief Compliance Officer concurs that a violation has occurred, he or she will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures, as well as notification to appropriate personnel of the investment adviser or its board, or of the affected Trust's Control Company. In addition, the Funds' Chief Compliance Officer shall determine whether to refer the matter to the affected Trust's Board for a determination of whether to dismiss the Covered Officer is appropriate, if, in its judgment, such corrective action may be warranted; o The Designated Person(s) will be responsible for granting waivers, as appropriate, and will make a report concerning such waivers to the Funds' Chief Compliance Officer; and o Any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules. VI. OTHER POLICIES AND PROCEDURES This Code shall be the sole code of ethics adopted by the Trusts for purposes of Section 406 of the 2002 Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Trusts, the Trusts' adviser, principal underwriter, or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are super-ceded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Trusts' and their investment adviser's and principal underwriter's codes of ethics under Rule 17j-1 under the 1940 Act and the Advisers Act are separate requirements applying to the Covered Officers and others, and are not part of this Code. VII. AMENDMENTS Except as to Exhibit A, this Code may not be amended except in written form, which is specifically approved or ratified by a majority vote of each Trust's respective Board, including a majority of its independent Trustees. 7 VIII. CONFIDENTIALITY All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the appropriate Board and their counsel, the appropriate Trust and its adviser, the Funds' Chief Compliance Officer, Designated Person(s), appropriate personnel within the Office of the General Counsel and other appropriate compliance personnel. IX. INTERNAL USE The Code is intended solely for the internal use by the Trusts and does not constitute an admission, by or on behalf of any Trust, as to any fact, circumstance, or legal conclusion. 8 EXHIBIT A COVERED PRINCIPAL EXECUTIVE AND FINANCIAL OFFICERS MEMBERS MUTUAL FUNDS David P. Marks, President Holly S. Baggot, Treasurer ULTRA SERIES FUND David P. Marks, President Holly S. Baggot, Treasurer 9 MEMBERS MUTUAL FUNDS ULTRA SERIES FUND CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS INITIAL CERTIFICATION OF RECEIPT (This certification must be returned to the Chief Compliance Officer within 10 days of receipt of a copy of the Code) I hereby acknowledge that I have received, read and understood the MEMBERS Mutual Funds and Ultra Series Fund Code of Ethics for Principal Executive and Senior Financial Officers ("Code"). I understand and agree that as a Covered Officer, I am subject to and will abide by the Code's provisions and all amendments to the Code. I further undertake to obey the rules of any regulatory body with which the MEMBERS Mutual Funds or Ultra Series Fund may be required to comply and any addition, amendment or replacement that is set out in any written notice that is subsequently given to me. I understand that failure to follow such policies and procedures can result in disciplinary action by the Board of Trustees of the MEMBERS Mutual Funds and/or Ultra Series Fund, as well as possible civil and criminal penalties. - ---------------------------- ---------------------------- Signature Date - ---------------------------- Print Name 10 EX-12 3 e68654_ex12a2i.txt CERTIFICATION EXHIBIT 12(a)(2)(i) I, David P. Marks, certify that: 1. I have reviewed this report on Form N-CSR of Ultra Series Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: 2/25/09 /s/ David P. Marks ------- ------------------ David P. Marks President, Ultra Series Fund EX-12 4 e68654_ex12a2ii.txt CERTIFICATION EXHIBIT 12(a)(2)(ii) I, Holly S. Baggot, certify that: 1. I have reviewed this report on Form N-CSR of Ultra Series Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940 for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: 2/25/09 /s/ Holly S. Baggot ------- ------------------- Holly S. Baggot Treasurer, Ultra Series Fund EX-12 5 e68654_ex12b.txt CERTIFICATION EXHIBIT 12(b) FORM OF SECTION 906 CERTIFICATION David P. Marks, President, and Holly S. Baggot, Treasurer, of Ultra Series Fund (the "Registrant"), to the best of their knowledge, each certify that: 1. The Registrant's periodic report on Form N-CSR for the period ended December 31, 2008 (the "Form N-CSR") fully complies with the requirements of Section 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. PRESIDENT TREASURER /s/ David P. Marks /s/ Holly S. Baggot - -------------------------------- -------------------------------- David P. Marks Holly S. Baggot Date: 2/25/09 Date: 2/25/09 ---------------------------- ---------------------------- -----END PRIVACY-ENHANCED MESSAGE-----