Table of Contents
Page
Letter to Shareholders 2
Fund Performance Reviews
Bond Fund 4
Balanced Fund 6
High Income Fund 8
Growth and Income Fund 10
Capital Appreciation Fund 12
International Stock Fund 14
Family of Investments 16
Portfolios of Investments
Cash Reserves Fund 18
Bond Fund 19
Balanced Fund 21
High Income Fund 24
Growth and Income Fund 31
Capital Appreciation Fund 33
International Stock Fund 35
Financial Statements
Statements of Assets & Liabilities 40
Statements of Operations 42
Statements of Changes in Net Assets 44
Financial Highlights 48
Notes to Financial Statements 55
Report of Independent Accountants 60
Other Information 61
<PAGE>
Letter to Shareholders
Dear Fellow Shareholder,
The fiscal year ended October 31, 1999 was a period of rapidly changing and
widely divergent economic environments. As a result, investors suffered through
an even wider than normal range of emotions, and with more frequent than normal
changes. This, in turn, led to some of the most volatile securities markets ever
experienced as these wide swings in investors' attitudes amplified the extreme
vacillations in the world economies. Throughout this extended period of above
normal turbulence in the always challenging investment markets, MEMBERS Mutual
Funds all performed well. This performance is illustrated in the following table
showing each fund's return for the twelve months ended October 31, 1999, along
with that of a representative market index and a peer group index of similar
funds:
<TABLE>
<CAPTION>
Fund, Market Index and Peer Index Return
(All Fund Returns are Class A Shares at NAV)
<S> <C>
MEMBERS Capital Appreciation Fund 24.29%
Representative Market (S&P 1500 Super Composite Index) 24.94%
Peer Group (Lipper Multi-Cap Core Fund Index) 22.54%
MEMBERS Growth and Income Fund 22.33%
Representative Market (S&P 500 Index) 25.68%
Peer Group (Lipper Large-Cap Value Fund Index) 16.91%
MEMBERS International Stock Fund 17.00%
Representative Market (Morgan Stanley EAFE Index) 23.38%
Peer Group (Lipper International Fund Index) 25.53%
MEMBERS Balanced Fund 15.58%
Representative Market (Synthetic 45%/40%/15% Index) 12.30%
Peer Group (Lipper Balanced Fund Index) 12.56%
MEMBERS High Income Fund 9.69%
Representative Market (Lehman High Yield Bond Index) 4.34%
Peer Group (Lipper High Yield Bond Fund Index) 7.38%
MEMBERS Bond Fund 1.60%
Representative Market (Lehman Intermediate Govt./Corp Bond Index) 0.99%
Peer Group (Lipper Intermediate Investment Grade Bond Fund Index) 0.29%
MEMBERS Cash Reserves Fund 4.60%
Representative Market (90-Day U.S. Treasury Bills) 4.64%
Peer Group (Lipper Money Market Fund Index) 4.67%
</TABLE>
As this table shows, the Cash Reserves Fund, our short-term liquidity-providing
fund, essentially matched the average return of similar funds. Every one of the
domestic, long-term MEMBERS Funds provided returns significantly in excess of
the averages of similar funds. This is very important to us, because we know it
is very important to you, our fellow investors. We all want consistent quality
throughout a family of funds so that the specific mix of funds used in our
personal portfolio can evolve over time to meet our changing investment needs
without having to worry about some funds being "out of favor" for extended
periods of time or simply being weak cousins in a family of some good and some
not-so-good funds.
This consistency of quality throughout the fund family is also indicated by the
performance rankings of the long-term investment funds within their respective
categories. These rankings are from Morningstar, Inc., the widely quoted mutual
fund tracking and rating organization, for the twelve-month period ended October
31, 1999:
Fund Percentile Rank
MEMBERS Capital Appreciation Fund 7th
MEMBERS Growth & Income Fund 9th
MEMBERS High Income Fund 16th
MEMBERS Bond Fund 17th
MEMBERS Balanced Fund 22nd
MEMBERS International Stock Fund 86th
This level of performance by every one of the MEMBERS domestic, long-term
investment funds -- top quartile return rankings among similar funds, with two
funds in the top 10% of their categories -- is a significant achievement across
a family of mutual funds. It sets MEMBERS Mutual Funds apart as a more
consistently superior performer than any other complete fund family we have
seen. And, although we don't necessarily expect rankings this high all of the
time, we are very confident in our belief that our investors will rarely if ever
have to experience extended periods of below average performance by funds within
the MEMBERS family.
This broad out-performance in our domestic funds, however, does not yet extend
to our International Stock Fund. The markedly less impressive current ranking of
this fund among its peers reflects its very conservative management style during
a period of explosive recovery by many international stock markets. In most
cases, these market recoveries took place with little if any sign of recovery in
the underlying economies and companies. Our fund's broader exposure than most
international funds to smaller companies and to companies operating in emerging
markets would normally enhance performance in such market rebound periods, but
its strong value discipline more than offset this advantage, restricting returns
to less-than-average (but still double-digit) levels. As described in the Fund
Performance Review for this fund located later in this report, we expect its
investment approach to be much more effective going forward, and we are actively
working with the funds' subadvisors to assure the achievement of performance
rankings more like those of the other MEMBERS funds.
Looking to the years ahead, competitive performance from the International Stock
Fund is expected to become increasingly important to investors. The past decade
of superior performance by the U.S. economy and stock markets relative to
virtually all foreign economies and markets reflected many factors, most of
which are ultimately attributable to the power of economic freedom. As the rest
of the world develops freedoms more like those enjoyed in the United States, and
their regulatory environments and cultures evolve to more fully capitalize on
these freedoms, foreign economies and stock markets have the potential to
perform much more like their U.S. counterparts have in recent years. We firmly
believe that U.S. economic and market gains will continue well into the future,
and that U.S. securities should continue to constitute the bulk of most
investors' portfolios. But, we also believe that U.S. investors will benefit
more than they have in the last few years from some exposure to non-U.S.
investments. MEMBERS International Stock Fund is specifically designed to
provide such exposure.
Before we get to the years ahead, of course, we must weather the next couple of
months and move into the new year. The list of near-term investor concerns is
even longer than usual, due to worries about computer problems upon the arrival
of the year 2000, followed by the typical uncertainty of an election year, all
on top of critical questions about world stability, the state of our economy,
inflation prospects, interest rates and stock market valuation levels in this
new age of technology and communications. It will be a particularly difficult
time for investors to stay on task and in the game with their long-term
investment accumulation programs.
It will also be a particularly important time to do so, in our opinion, because
economies and investment markets almost always respond favorably as particularly
foreboding situations dissipate over time, which is what they almost always do.
And, given the tremendous positive momentum evidenced in our economy through the
last decade and especially in recent quarters, it appears extremely risky for
long-term investors to bet against continued growth and expanding wealth by
stepping away from the U.S. or world investment markets at this time. So, we
strongly encourage all long-term investors to stay the course. We will be right
there with you.
We greatly appreciate the opportunity to serve your investment needs as your
investing partner, and look forward to our continuing mutual success.
Sincerely,
/s/ Lawrence R. Halverson
Lawrence R. Halverson, CFA
President
<PAGE>
MEMBERS Bond Fund
The last twelve months have not been kind to fixed income investors. Interest
rates have soared over 11/2% in some cases, making bond prices decline. For
example, yields on five-year U.S. Treasury bonds rose 160 basis points to end
the period at 6%. Long 30-year Treasuries were particularly hard hit posting a
negative 12.1% total return.
The rise in interest rates can be attributed to several factors. The U.S.
economy continues to grow strongly. Consumer spending has been robust owing to
the hot stock market and record low unemployment rate (4.1%). Overseas, the
financial crisis of 1998 is fading and the rest of the world is recovering. And,
the current account deficit is at record levels, putting downward pressure on
the U.S. dollar. This reduces the incentive for foreign investors to buy U.S.
securities and, by raising import prices, contributes to inflation. Oil prices
have almost doubled over the past year to $23 per barrel, and we are seeing a
rebound in other commodity prices. But, somewhat surprisingly, reported
inflation seems well behaved. In this environment the Federal Reserve Board has
begun to raise short-term interest rates in order to cool the economy and "get
ahead of the inflation curve."
These cyclical forces could continue for a while longer, putting continuing
upward pressure on interest rates. However, it is important to remember that the
long-term downward trend in interest rates could well continue. Global
competition, "new age" technology and rising productivity are widely expected to
keep a lid on prices. Powerful demographic trends suggest more savings and
investment. A vigilant Federal Reserve Board and responsible fiscal policy auger
well for the future. Finally, the triumph of democracy and capitalism have made
the world a more productive and safer place. Fed Chairman Alan Greenspan
recently said:
"It is safe to say that we are witnessing this decade, in the United States,
history's most compelling demonstration of the productive capacity of free
peoples operating in free markets."
Furthermore, bond valuations are attractive according to a key historical
measure. Inflation-adjusted or "real" interest rates currently hover around 4%,
given the current 30-year U.S. Treasury bond yield of 6% and the approximately
2% inflation rate. These after-inflation yields are quite generous compared to
average levels available over the last 40 years.
The Bond Fund provided a 1.60% total return (on Class A shares at net asset
value) for the year ended October 31. This compares to a 0.53% return posted by
the Lehman Aggregate Bond Index, a broad measure of the bond market consisting
of government, corporate, and mortgage backed securities (the "S&P 500" of the
bond market). The fund also performed well relative to the 0.29% return for the
Lipper Index of similar funds.
This can be attributed to a number of factors. First, we have adopted a more
aggressive management style to take fuller advantage of opportunities in the
bond market. Market illiquidity and dealer risk aversion have distorted
traditional trading relationships. Our turnover recently has exceeded 500% as we
actively swap between different bonds we believe to be mispriced. We have also
emphasized "spread product" such as corporates and structured securities, which
have done well relative to Treasuries.
We are always fully invested and make little attempt to "time" changes in
interest rates.
Currently, the portfolio has a 6.0 year effective maturity and an average
quality of AA. As the accompanying charts show, its 33 holdings are well
diversified across the major sectors of the bond market.
We appreciate your patience and confidence in staying with the MEMBERS Bond Fund
during a difficult market environment for bonds. We remain committed to
providing strong relative performance during down markets while expecting to
match the competition in more favorable times.
CIMCO Bond Portfolio Management Team -- Advisor
<PAGE>
Fund Performance Review
[Graphic: pie chart showing Bond Fund Diversification of Investments Among
Market Sectors as follows: Corporate Notes and Bonds 53%, U.S. Government and
Agency Obligations 43%, and Cash & Other Assets 4%.]
[Graphic: line chart showing Bond Fund Cumulative Performance of $10,000 Since
Inception for the following:
<TABLE>
<CAPTION>
12/29/97 04/30/98 10/31/98 04/30/99 10/31/99
<S> <C> <C> <C> <C> <C>
Class A Shares $ 9,570 $ 9,698 $10,151 $10,225 $10,315
Class B Shares 10,000 9,667 10,085 10,195 10,235
Lehman Brothers Intermediate
Government/Corporate Bond Index 10,000 10,226 10,820 10,650 10,927]
</TABLE>
This chart compares a $10,000 investment made in the Fund on its inception date
to a $10,000 investment made in the index on that date. All dividends and
capital gains are reinvested. Further information relating to the Fund's
performance, including expense reimbursements, is contained in the Prospectus
and elsewhere in this report. Past performance is not indicative of future
performance. Indices are unmanaged and investors cannot invest in them.
Additionally, the Lehman index return does not reflect expenses or sales
charges.
<TABLE>
<CAPTION>
MEMBERS Bond Fund Average Annual Total Return
% Return Without Sales Charge % Return After Sales Charge***
12 Months Ended Since Inception 12 Months Ended Since Inception
10/31/99 to 10/31/99+ 10/31/99 to 10/31/99+
<S> <C> <C> <C> <C>
Class A Shares* 1.60% 4.17% -2.80% 1.70%
Class B Shares** 0.94 3.40 -3.56 1.27
Lipper Intermediate Investment Grade Bond Fund Index 0.29 3.89 -- --
Lehman Brothers Intermediate Government/Corporate Bond Index 0.99 4.95 -- --
</TABLE>
* Maximum Sales Charge is 4.3% for A Shares.
** Maximum Contingent Deferred Sales Charge is 4.5% for B Shares.
*** Assuming Maximum Sales Charge
+ Funds commenced operations on December 29, 1997.
<PAGE>
MEMBERS Balanced Fund
During the twelve months ended October 31, 1999, the overall U.S. stock market
rose in value at a rate well above its long-term trend. The Standard and Poor's
500 index, for instance, returned 25.68%, led by its heavy weighting in a small
number of large-company growth stocks. As a broad measure of how the typical
smaller stock fared, the Russell 2000 index rose "only" 14.89%. Most of these
gains occurred during the first six months of the period. The indexes were
mostly flat, though very volatile from day-to-day and week-to-week, during the
last six months of the period.
Bonds fared poorly almost throughout the period as interest rates rose, putting
steady downward pressure on bond prices. The yields on 30-day U.S. Treasury
Bills rose from 3.5% to 4.4% during this one-year period, while 30-year Treasury
Bond rates increased from 5.15% to 6.15%. The Lehman Brothers Intermediate
Government/Corporate Bond index, a broad representation of investment grade
bonds with maturity dates averaging four-to-five years, provided a total return
(consisting of interest income earned, less the average percentage decline in
market value) of 0.99% in this period. Money market instruments,
interest-bearing investments with maturities less than one year, saw their
returns rise during the period along with interest rates. On average, money
market investments provided returns of about 4.67% for the year, very near the
4.64% average earned from 90-day U.S. Treasury Bills.
MEMBERS Balanced Fund provided a return of 15.58% (on Class A Shares at net
asset value) for the twelve months ended October 31, 1999. This substantially
exceeded the 12.56% return of the average balanced fund as represented by the
Lipper Balanced Fund Index over the same time frame. This is despite the fact
that many balanced funds take a more aggressive posture than the MEMBERS
Balanced Fund in their investment allocations and in the specific selections of
stocks, bonds, and money market instruments. The Balanced Fund's return was also
higher than "the market's" 12.30% gain as represented by a hypothetical
portfolio consisting of 45% S&P 500 index, 40% Lehman Brothers Intermediate
Government/Corporate Bond index and 15% 90-day U.S. Treasury bills. Because the
stocks and bonds owned in MEMBERS Balanced Fund are largely the same as the
securities comprising MEMBERS Capital Appreciation, Growth and Income, and Bond
Funds, please see the Fund Performance Reviews of those funds elsewhere in this
report for a more complete description of the Balanced Fund's portfolio
positioning and component results.
Looking ahead, the Fund will continue to be managed as a diversified portfolio
of the most attractive stocks, bonds, and money market investments identified by
the CIMCO management teams. The normal range of asset allocation exposures is
from 40% to 60% stocks, 40% to 60% bonds, and up to 20% money market
instruments. Currently, stocks comprise approximately 54% of net assets and
bonds are 39% of net assets, with the remaining approximately 7% invested in
money market instruments and other assets.
These proportions vary over time in reaction to the pace at which the management
team is finding attractive individual stocks and bonds. For example, as
attractively priced stocks become more plentiful, the stock portion of the
portfolio will grow. The management team uses this "bottom up" asset allocation
approach instead of the more commonly used "top down" tactics because we have
observed that such top-down "market-timing" is rarely successful over the long
term.
The Balanced Fund, through its diversification and flexibility, may be the most
"investment efficient" of all the MEMBERS Mutual Funds. It is specifically
designed to help investors harvest broad U.S. securities market returns within
long-term investment programs, and most importantly, to weather difficult
markets with the help of the risk reduction effects of its broad
diversification.
CIMCO Stock Portfolio Management Team -- Advisor
CIMCO Bond Portfolio Management Team -- Advisor
<PAGE>
Fund Performance Review
[Graphic: pie chart showing Balanced Fund Diversification of Investments Among
Market Sectors as follows: Common Stocks 54%, U.S. Government Obligations 21%,
Corporate Notes & Bonds 18%, and Cash & Other Assets 7%.]
[Graphic: line chart showing Balanced Fund Cumulative Performance of $10,000
Since Inception for the following:
<TABLE>
<CAPTION>
12/29/97 04/30/98 10/31/98 04/30/99 10/31/99
<S> <C> <C> <C> <C> <C>
Class A Shares $ 9,470 $10,330 $10,315 $11,315 $12,017
Class B Shares 10,000 10,432 10,374 11,420 11,922
Blended Synthetic Index 10,000 10,872 11,196 11,707 11,912
(45% S&P 500 Index return, 40% Lehman Brothers Intermediate Government/Corporate
Bond Index return, 15% 90-Day Treasury Bill return)]
</TABLE>
This chart compares a $10,000 investment made in the Fund on its inception date
to a $10,000 investment made in the index on that date. All dividends and
capital gains are reinvested. Further information relating to the Fund's
performance, including expense reimbursements, is contained in the Prospectus
and elsewhere in this report. Past performance is not indicative of future
performance. Indices are unmanaged and investors cannot invest in them.
Additionally, the Blended index return does not reflect expenses or sales
charges.
<TABLE>
<CAPTION>
MEMBERS Balanced Fund Average Annual Total Return
% Return Without Sales Charge % Return After Sales Charge***
12 Months Ended Since Inception 12 Months Ended Since Inception
10/31/99 to 10/31/99+ 10/31/99 to 10/31/99+
<S> <C> <C> <C> <C>
Class A Shares* 15.58% 13.32% 9.46% 10.02%
Class B Shares** 14.72 12.50 10.22 10.51
Lipper Balanced Fund Index 12.56 11.39 -- --
Blended Synthetic Index 12.30 13.26 -- --
</TABLE>
* Maximum Sales Charge is 5.3% for A Shares.
** Maximum Contingent Deferred Sales Charge is 4.5% for B Shares.
*** Assuming Maximum Sales Charge
+ Funds commenced operations on December 29, 1997.
<PAGE>
MEMBERS High Income Fund
Throughout the fiscal year ended October 31, 1999, the high-yield bond market
was buffeted by volatility. It initially benefited from rising bond prices as
concerns related to the Asian financial crisis eased, but then saw erratic and
generally declining market values as market interest rates climbed and credit
problems began to spread among high yield bond issuers. The default rate for the
high-yield market during the first nine months of 1999 was 3.3%. To put this in
perspective, the default rate has not exceeded 2.0% on an annual basis since
1991. The energy sector was most impacted by defaults, followed by the
healthcare sector.
Throughout this period, MEMBERS High Income Fund performed very well. This was
largely attributable to the Fund's limited exposure to the recent worst trouble
spots in the economy. For the year ended October 31, 1999, the Fund provided a
very attractive total return of 9.69% (Class A Shares at net asset value). This
compares to a 4.34% return for the Lehman Brothers High Yield Bond Index, an
unmanaged index of non-investment-grade corporate bonds, and to a 7.38% return
for the Lipper High Yield Bond Fund Index.
The Fund seeks bonds that are inexpensive relative to similar issues from other
companies in the industry having similar prospects. It also looks for potential
catalysts in those industries or specific companies that could cause credit
rating agencies to issue upgrades leading to price appreciation. The "bottom-up"
MFS Original Research(R) employed in the management of the Fund uses a
five-point process that focuses on a company's management, cash flow, asset
value, capital structure, and the fundamentals of its industry. The goal is to
be adequately compensated for the credit risks associated with each particular
company represented in the Fund's portfolio.
The Fund's performance relative to the high yield bond market benefited from
consolidation in the telecommunications industry. The portfolio has been
over-weighted in telecommunications, especially in Europe, and the sector has
performed well. Telecommunications is a $600 billion global industry funded
largely by high-yield bonds. It is benefiting from deregulation in the United
States and Europe, which has allowed the formation of new telecommunications
companies that are building fiber-optic networks to compete for local, long
distance, and Internet traffic, the fastest-growing segment, in direct
competition with "Baby Bell" companies.
Another industry where the Fund is over-weighted is building products companies,
many of which make materials used to renovate existing houses. New housing
starts have been extremely strong, and more importantly, secondary housing
turnover is at its highest point ever. Some of the companies in this market are
GAF Roofing, a subsidiary of Building Materials Holding Corp., which has
approximately 40% of the domestic market, and Synthetic Industries, a producer
of carpet backing.
During most of the year, the Fund was under-weighted in the energy sector and
tended to own the bonds of only the higher-quality companies within that sector.
As oil prices recovered to over $20 a barrel, the Fund missed a rally in the
bonds of medium-quality energy companies, but it also avoided the numerous
bankruptcies that occurred among lower-rated companies.
The Fund's relative performance was hurt somewhat by an under-weighted position
in cyclical industries. It had taken a rather defensive stance towards the end
of last year due to general concerns about the economy, concerns that did not
prove to be warranted. The paper and steel sectors in particular outperformed
the market as prices for these commodities increased throughout the year.
Looking ahead, the Fund will continue to make extensive use of fundamental
research as it attempts to avoid the areas of the economy that develop credit
problems while capitalizing on the growing and as yet under-appreciated sectors
of our economy.
CIMCO Bond Portfolio Management Team -- Advisor
Massachusetts Financial Services Company -- Subadvisor
<PAGE>
Fund Performance Review
[Graphic: pie chart showing High Income Fund Diversification of Investments
Among Market Sectors as follows: Communications 18%, Telecommunications 17%,
Finance 6%, Technology 5%, Other Sectors 46%, and Cash & Other Assets 8%.]
[Graphic: line chart showing High Income Fund Cumulative Performance of $10,000
Since Inception for the following:
<TABLE>
<CAPTION>
12/29/97 04/30/98 10/31/98 04/30/99 10/31/99
<S> <C> <C> <C> <C> <C>
Class A Shares $ 9,570 $ 9,844 $9,016 $10,116 $ 9,890
Class B Shares 10,000 9,799 8,962 10,091 9,805
Lehman Brothers High Yield
Bond Index 10,000 10,398 9,790 10,444 10,215]
</TABLE>
This chart compares a $10,000 investment made in the Fund on its inception date
to a $10,000 investment made in the index on that date. All dividends and
capital gains are reinvested. Further information relating to the Fund's
performance, including expense reimbursements, is contained in the Prospectus
and elsewhere in this report. Past performance is not indicative of future
performance. Indices are unmanaged and investors cannot invest in them.
Additionally, the Lehman index return does not reflect expenses or sales
charges.
<TABLE>
<CAPTION>
MEMBERS High Income Fund Average Annual Total Return
% Return Without Sales Charge % Return After Sales Charge***
12 Months Ended Since Inception 12 Months Ended Since Inception
10/31/99 to 10/31/99+ 10/31/99 to 10/31/99+
<S> <C> <C> <C> <C>
Class A Shares* 9.69% 1.81% 4.95% (0.60)%
Class B Shares** 9.02 1.11 4.52 (1.06)
Lipper High Yield Bond Index 7.38 1.01 -- --
Lehman Brothers High Yield Bond Index 4.34 1.16 -- --
</TABLE>
* Maximum Sales Charge is 4.3% for A Shares.
** Maximum Contingent Deferred Sales Charge is 4.5% for B Shares.
*** Assuming Maximum Sales Charge
+ Funds commenced operations on December 29, 1997.
<PAGE>
MEMBERS Growth and Income Fund
U.S. stocks delivered solid returns for the year ended October 31, 1999 as
reflected by the 25.68% gain in the S&P 500. The majority of this gain was
generated during the first half of this twelve month period as stocks were
rebounding from weakness brought about by last fall's Asian financial crisis. In
the last six months, stocks in general have fluctuated within a trading range as
nervousness over Fed tightening, a slowdown in profit growth and Y2K jitters
produced a volatile, range-bound market.
The MEMBERS Growth and Income Fund returned 22.33% (on Class A Shares at net
asset value) during the twelve months ended October 31, 1999, slightly trailing
the S&P 500 return over this period. The S&P 500 return has outpaced most
prudently managed portfolios in recent years as the leadership in this
capitalization-weighted index has been heavily skewed toward a very narrow group
of large-capitalization growth stocks. As a result, the Index has not been
particularly representative of the broad universe of stock returns. The Growth
and Income Fund results exceeded those of the peer group index by a significant
margin as the new Lipper Large-Cap Value Index returned 16.91% for the year
ended October 31, 1999.
Fund results during the fiscal year benefited from strong relative performance
in the technology and communications services sectors, the two best performing
sectors of the market. Other outperforming sectors included the basic materials
and consumer staples sectors. Nortel Networks, Texas Instruments, and EMC Corp
each more than doubled during the period, leading the technology sector to its
out-performance. Sprint and Vodafone Airtouch were the leading contributors to
the communications services sector results, though Vodafone Airtouch was
eliminated from the portfolio during recent months for valuation reasons. The
consumer staples sector most notably benefited from strong performance in Media
One Group, which agreed to be acquired by AT&T. Holdings in consumer products
manufacturer Kimberly-Clark also generated strong returns.
Fund results were negatively impacted by a number of stocks experiencing
company-specific problems, particularly in the capital goods, consumer cyclical
and finance sectors. In the capital goods sector, Waste Management
under-performed significantly as the company announced a series of
disappointments. Consumer cyclical sector results lagged due to lackluster
performance at Sears and Dana Corp, while finance sector results were negatively
impacted by weak performance from Allstate and Bank One.
At present, we are marginally over-weighted in the consumer staples, energy and
transportation sectors as we are seeing stocks in these areas that appear to
offer particularly attractive investment opportunities. Conversely, we are
under-weighted in the consumer cyclical, communication services and capital
goods sectors as we believe that many of the component stocks within those
sectors are fairly valued at this time. All other sector weights approximate
those of the market. Our sector weights reflect the types of stocks we are
finding that appear most attractive; we do not attempt to make general judgments
about the relative investment prospects of various broad economic sectors. We
do, however, ensure that our portfolios remain diversified across economic
sectors.
We believe that the long-term outlook for U.S. stocks remains favorable.
However, we do not expect that future gains in the market will be generated by
continued strength in the narrow group of growth stocks which has been leading
the popular averages higher. Rather, we expect broader participation by the rest
of the market. The valuation gap between large-capitalization growth stocks and
the rest of the market has widened to what we believe is an unsustainable level.
Higher interest rates may cause valuations to moderate and some of this
valuation divergence to narrow. Should this occur, we believe that the Growth
and Income Fund would be well-positioned to benefit even further than in recent
periods.
CIMCO Stock Portfolio Management Team -- Advisor
<PAGE>
Fund Performance Review
[Graphic: pie chart showing Growth and Income Fund Diversification of
Investments Among Market Sectors as follows: Technology 22%, Consumer Staples
16%, Financial Services 13%, Healthcare 10%, Communication Services 8%, Energy
7%, Capital Goods 6%, Other Sectors 15%, and Cash & Other Assets 3%.]
[Graphic: line chart showing Growth and Income Fund Cumulative Performance of
$10,000 Since Inception for the following:
<TABLE>
<CAPTION>
12/29/97 04/30/98 10/31/98 04/30/99 10/31/99
<S> <C> <C> <C> <C> <C>
Class A Shares $ 9,470 $10,979 $10,376 $12,153 $12,694
Class B Shares 10,000 11,113 10,447 12,287 12,821
S&P 500 Index 10,000 11,717 11,670 13,057 14,667]
</TABLE>
This chart compares a $10,000 investment made in the Fund on its inception date
to a $10,000 investment made in the index on that date. All dividends and
capital gains are reinvested. Further information relating to the Fund's
performance, including expense reimbursements, is contained in the Prospectus
and elsewhere in this report. Past performance is not indicative of future
performance. Indices are unmanaged and investors cannot invest in them.
Additionally, the S&P index return does not reflect expenses or sales charges.
<TABLE>
<CAPTION>
Members Growth and Income Fund Average Annual Total Return
% Return Without Sales Charge % Return After Sales Charge***
12 Months Ended Since Inception 12 Months Ended Since Inception
10/31/99 to 10/31/99+ 10/31/99 to 10/31/99+
<S> <C> <C> <C> <C>
Class A Shares* 22.33% 17.28% 15.84% 13.85%
Class B Shares** 21.32 16.40 16.82 14.47
Lipper Growth & Income Index 16.03 12.28 -- --
S&P 500 Index 25.68 23.17 -- --
</TABLE>
* Maximum Sales Charge is 5.3% for A Shares.
** Maximum Contingent Deferred Sales Charge is 4.5% for B Shares.
*** Assuming Maximum Sales Charge
+ Funds commenced operations on December 29, 1997.
<PAGE>
MEMBERS Capital Appreciation Fund
During the past twelve months, investors have faced unusually strong and
divergent pressures, beginning with the generally favorable Federal Reserve
Board-induced interest rate cuts, a strong dollar, falling oil prices, and low
inflation. This triggered one of the strongest three-month rallies on record.
Then, by mid-1999 investors were dealing with Fed-induced rate increases, oil
prices that more than doubled from their lows, a weaker dollar, and growing
concerns about inflation. These factors held overall stock prices within a
trading range for the last several months of this period. However, the
persistence of low inflation and favorable corporate earnings have been the key
as U.S. stocks posted impressive twelve month results.
The broad Standard and Poor's 1500 Super Composite index returned 24.94% during
this period. The large capitalization growth stock-dominated S&P 500 returned an
even higher 25.68%, while the S&P 400 Midcap Index returned 21.01% and the
Russell 2000 Small Cap Index posted a 14.89% gain for the period.
The Capital Appreciation Fund, with its mid- to large-capitalization
orientation, returned a very attractive 24.29% (on Class A Shares at net asset
value) for the twelve months ended October 31, 1999. This compares very well
with the representative market indexes cited above, and also significantly
exceeds representative peer group averages like Lipper's new Multi-Cap Core
Stock Fund Index which returned 22.54% for this period.
Performance during this fiscal year was driven by out-performance relative to
the market in the communications services, technology and consumer cyclical
sectors. Strong performers in the Fund during the period included Tiffany & Co,
Texas Instruments, Gateway, EMC, Micron Technology, Citigroup and US West Media
Group. The Fund's performance was dampened by under-performance in the
healthcare and capital goods sectors. The Fund's sector representations reflect
our "bottom-up" analysis of the merits of each individual stock. This approach
can lead to the over or under-weighting of certain sectors before our
perceptions of their relative attractiveness are validated by the market. For
instance, during this period our under-weighted position in the healthcare and
capital goods sectors offset some of the effects of the sectors' return
under-performance.
The Fund enters its new fiscal year modestly over-weighted in the basic
material, consumer cyclical, and technology sectors. The Fund is under-weighted
in the capital goods, communications, and healthcare sectors. Although sector
weightings may deviate from the index weightings, the Fund remains well
diversified at all times.
The market remains at a critical juncture as inflationary pressures appear
likely to build, yet actual signs of inflation have yet to appear. The Fed has
become more involved, actively "managing" interest rate levels and investor
expectations in an attempt to keep the economy on a growth track while
preempting inflation. Proponents of the "New Era Economy" continue to espouse
the power of technology-driven productivity enhancements in countering
inflationary pressures. The U.S. economic underpinnings remain sound and world
economies are showing signs of recovery. Valuation is still a key issue, as
current levels of many stocks remain at the upper end of their historical
ranges, in the face of interest rates that are significantly above last year's
levels.
The sensitivity of the market to economic news will likely remain high as we
approach the end of the millennium. Daily moves of more than one percent up or
down now seem more the rule than the exception. This high volatility can unnerve
investors and tempt them to postpone their long term investment accumulation
programs. We stress the need to maintain investment discipline through these
volatile times, continuing to believe that long-term investors will be rewarded
by accumulating a diversified portfolio of good quality, reasonably priced
securities like those we seek to provide in MEMBERS Capital Appreciation Fund.
CIMCO Stock Portfolio Management Team -- Advisor
<PAGE>
Fund Performance Review
[Graphic: pie chart showing Capital Appreciation Fund Diversification of
Investments Among Market Sectors as follows: Technology 23%, Financial Services
14%, Consumer Cyclicals 12%, Consumer Staples 10%, Communication Services 8%,
Capital Goods 6%, Healthcare 6%, Energy 6%, Other Sectors 12%, and Cash & Other
Assets 3%.]
[Graphic: line chart showing Capital Appreciation Fund Cumulative Performance of
$10,000 Since Inception for the following:
<TABLE>
<CAPTION>
12/29/97 04/30/98 10/31/98 04/30/99 10/31/99
<S> <C> <C> <C> <C> <C>
Class A Shares $ 9,470 $11,109 $10,465 $11,904 $13,007
Class B Shares 10,000 11,261 10,541 12,034 13,153
S&P 400 Midcap Index 10,000 11,717 10,381 11,705 12,562]
</TABLE>
This chart compares a $10,000 investment made in the Fund on its inception date
to a $10,000 investment made in the index on that date. All dividends and
capital gains are reinvested. Further information relating to the Fund's
performance, including expense reimbursements, is contained in the Prospectus
and elsewhere in this report. Past performance is not indicative of future
performance. Indices are unmanaged and investors cannot invest in them.
Additionally, the S&P index return does not reflect expenses or sales charges.
<TABLE>
<CAPTION>
MEMBERS Capital Appreciation Fund Average Annual Total Return
% Return Without Sales Charge % Return After Sales Charge***
12 Months Ended Since Inception 12 Months Ended Since Inception
10/31/99 to 10/31/99+ 10/31/99 to 10/31/99+
<S> <C> <C> <C> <C>
Class A Shares* 24.29% 18.84% 17.68% 15.37%
Class B Shares** 23.32 17.98 18.82 16.08
Lipper Capital Appreciation Index 34.47 21.67 -- --
S&P1500 Super Composit Index 24.94 21.38 -- --
S&P400 Midcap Index 21.01 13.25 -- --
</TABLE>
* Maximum Sales Charge is 5.3% for A Shares.
** Maximum Contingent Deferred Sales Charge is 4.5% for B Shares.
*** Assuming Maximum Sales Charge
+ Funds commenced operations on December 29, 1997.
<PAGE>
MEMBERS International Stock Fund
Most stock markets worldwide rebounded sharply during the past twelve months
from the steep declines of the summer of 1998. Asian markets and many small
company and emerging country markets enjoyed spectacular rebounds reflecting
heightened expectations for economic recovery in much of the world.
In Europe, most economies are experiencing slow but steady cyclical recovery.
Corporate restructurings and consolidations are accelerating, improving
shareholder returns. While much of this has already been discounted by Europe's
equity markets, valuations of many companies remain quite reasonable.
In the Pacific Basin, the key occurrence was the strong recovery of the Japanese
stock market in anticipation of recovering economic performance. The strength of
the yen also boosted returns to U.S. investors. Other Asian nations began
showing measurable export and domestic economic recovery, as well as stock
market rebounds.
Relative weakness continues in the Middle East, Africa and especially Latin
America which was initially hurt by the late-1998 international financial crisis
and plummeting commodities prices, and more recently has been slowed by rising
interest rates in North America.
In this overall very positive environment, MEMBERS International Stock Fund
returned 17.00% (on Class A Shares at net asset value) for the fiscal year ended
October 31. Although an impressive return, it significantly lags most market and
peer group indexes, reflecting the Fund's value-based and highly diversified
investment strategies. These strategies tend to moderate year-to-year return
variations such that performance generally lags in periods of strong recovery
like the past twelve months. Likewise, in weak markets, performance should
exceed market and peer group averages.
MEMBERS International Stock Fund is somewhat unique in its diversification
beyond the stocks of large companies operating in economically developed parts
of the world. Such stocks currently comprise approximately 70% of Fund assets,
but the remaining 30% are stocks of smaller companies and companies operating in
emerging markets worldwide. Each of these three "portfolios" within the Fund
employs similar value-oriented stock selection criteria, but the activities and
performance of each reflect its particular market environment:
o Large companies in developed markets (subadvised by IAI International Limited)
- -- This portfolio benefited from strong stock selection in Australia, Germany
and Switzerland. Conversely, underweight exposure to the Japanese market, as
well as its particular holdings in Japan, the UK and several continental
European countries, detracted from overall results. This portfolio continues to
overweight the Pacific Basin, particularly Australasia and Singapore. Exposure
to Japan was cautiously increased over the year, but remains modestly under the
market index. A near-market weighting is being maintained in continental Europe,
but with less-than-index exposure to the UK.
o Small companies in developed markets (subadvised by Lazard Asset Management)
- -- This portfolio's focus remains on Europe, with selected exposures in Asia and
Japan. European small companies are seeing record takeover activity, including
bids for the portfolio's Tag Heuer (Switzerland) and Mundial Confianca
(Portugal). Its strongest performing stock was Hong Kong's Esprit Asia. The
portfolio also benefited from strong stock selection in Japan and Australia, but
was negatively impacted by an under-weighting in Japan and by adverse stock
selection in Sweden.
o Companies of all sizes in emerging markets (subadvised by Lazard Asset
Management) -- The two top performing stocks in this portfolio were Samsung
Electronics (South Korea) and Larsen and Toubro (India). Over-weightings in
Brazil and India, and strong stock selection in Chile and Korea aided results.
Over-weightings in Mexico and South Africa, and holdings in Bangkok Expressway
(Thailand) and Grupo Industrial Maseca (Mexico), negatively impacted returns.
Going forward, we believe international stock returns should compare more
favorably to U.S. returns than in recent years. We expect the diverse exposure
provided by MEMBERS International Stock Fund to serve investors particularly
well, and believe the Fund warrants at least a small part in most long term
investment programs.
CIMCO Stock Portfolio Management Team -- Advisor
IAI International Limited -- Subadvisor
Lazard Asset Management -- Subadvisor
<PAGE>
Fund Performance Review
[Graphic: pie chart showing International Stock Fund Diversification of
Investments Among Market Sectors as follows: Japan 16%, United Kingdom 13%,
France 10%, Germany 6%, Finland 5%, Australia 4%, Portugal 4%, Other Countries
36%, and Cash & Other Assets 6%.]
[Graphic: line chart showing International Stock Fund Cumulative Performance of
$10,000 Since Inception for the following:
<TABLE>
<CAPTION>
12/29/97 04/30/98 10/31/98 04/30/99 10/31/99
<S> <C> <C> <C> <C> <C>
Class A Shares $ 9,470 $11,157 $ 9,811 $10,840 $11,479
Class B Shares 10,000 11,301 9,840 10,916 11,545
Morgan Stanley Capital
International Europe, Asia
& Far East Index 10,000 11,592 11,090 12,035 13,683]
</TABLE>
This chart compares a $10,000 investment made in the Fund on its inception date
to a $10,000 investment made in the index on that date. All dividends and
capital gains are reinvested. Further information relating to the Fund's
performance, including expense reimbursements, is contained in the Prospectus
and elsewhere in this report. Past performance is not indicative of future
performance. Indices are unmanaged and investors cannot invest in them.
Additionally, the EAFE Index return does not reflect expenses or sales charges.
<TABLE>
<CAPTION>
MEMBERS International Stock Fund Average Annual Total Return
% Return Without Sales Charge % Return After Sales Charge***
12 Months Ended Since Inception 12 Months Ended Since Inception
10/31/99 to 10/31/99+ 10/31/99 to 10/31/99+
<S> <C> <C> <C> <C>
Class A Shares* 17.00% 11.01% 10.80% 7.78%
Class B Shares** 16.09 10.15 11.59 8.13
Lipper International Stock Fund Index 23.05 15.11 -- --
Morgan Stanley Capital International Europe, Asia &
Far East Index 23.38 18.60 -- --
</TABLE>
* Maximum Sales Charge is 5.3% for A Shares.
** Maximum Contingent Deferred Sales Charge is 4.5% for B Shares.
*** Assuming Maximum Sales Charge
+ Funds commenced operations on December 29, 1997.
<PAGE>
Family of Investments
MEMBERS Mutual Funds are a family of open-end investment companies, typically
called mutual funds. Each Fund is a separate investment portfolio with its own
investment objective, policies, restrictions and attendant risks. The
information in this table provides an overview, summarizing the Funds'
investment objectives, management, and primary strategies. For more specific and
complete information on the Funds, please refer to your prospectus and the
statement of additional information.
CASH RESERVES FUND
Investment Objective
The Cash Reserves Fund seeks high current income from money market instruments
consistent with the preservation of capital and liquidity. The Fund intends to
maintain a stable net asset value of $1.00 per share.
Portfolio Management
The Fund is managed by a team of CIMCO's portfolio managers.
Primary Investment Strategies
The Cash Reserves Fund invests exclusively in U.S. dollar-denominated money
market securities maturing in thirteen months or less from the date of purchase,
including those issued by U.S. and foreign financial institutions, corporate
issuers, the U.S. Government and its agencies and instrumentalities,
municipalities, foreign governments, and multinational organizations such as the
World Bank. At least 95% of the Fund's assets must be rated in the highest
short-term category (or its unrated equivalent), and 100% of the Fund's assets
must be invested in securities rated in the two highest categories.
For a listing of the securities held in the portfolio on October 31, 1999,
please turn to page 18.
BOND FUND
Investment Objective
The Bond Fund seeks to generate a high level of current income, consistent with
the prudent limitation of risk, primarily through investment in a diversified
portfolio of income bearing debt securities.
Portfolio Management
The Fund is managed by a team of CIMCO's portfolio managers.
Primary Investment Strategies
To keep current income relatively stable and to limit share price volatility,
the Bond Fund emphasizes investment grade securities and maintains an
intermediate (typically 3 to 6 years) average portfolio duration. Under normal
circumstances, the Fund invests at least 80% of its assets in such securities.
The Fund may employ active trading and typically invests in the following
instruments:
o Corporate Debt Securities
o U.S. Government Debt Securities
o Foreign Government Debt Securities
o Other issuer Debt Securities.
The Fund may also invest in asset-backed and mortgage-backed securities,
including securities backed by credit union originated loans, to the extent
permitted by law and available in the market.
For a listing of the securities held in the portfolio at October 31, 1999,
please turn to page 19.
BALANCED FUND
Investment Objective
The Balanced Fund seeks a high total return through the combination of income
and capital appreciation.
Portfolio Management
The Fund is managed by a team of CIMCO's portfolio managers.
Primary Investment Strategies
The Balanced Fund invests in a broadly diversified array of securities including
common stocks, bonds and money market instruments. The percentage of the Fund's
assets invested in equity securities, income bearing securities and money market
instruments may vary somewhat depending upon the availability of attractively
priced stocks and bonds and anticipated cash needs of the Fund. Generally,
however, common stocks will constitute 60% to 40% of the Fund's assets, bonds
will constitute 40% to 60% of the Fund's assets and money market instruments may
constitute up to 20% of the Fund's assets.
For a listing of the securities held in the portfolio at October 31, 1999,
please turn to page 21.
HIGH INCOME FUND
Investment Objective
The High Income Fund seeks high current income by investing primarily in a
diversified portfolio of lower-rated, higher-yielding income securities. The
Fund also seeks capital appreciation, but only when consistent with its primary
goal.
Portfolio Management
CIMCO uses one or more subadvisers under a "manager of managers" approach to
make investment decisions for this Fund. Massachusetts Financial Services
Company (MFS) is the only subadviser currently used by CIMCO to manage the
assets of the Fund.
Primary Investment Strategies
The High Income Fund invests primarily in lower-rated, higher-yielding income
bearing securities, such as "junk" bonds. Because the performance of these
securities has historically been strongly influenced by economic conditions, the
Fund may rotate securities selection by business sector according to the
economic outlook. Under normal market conditions, the Fund invests at least 80%
of its assets in bonds rated lower than investment grade (BBB/Baa) and their
unrated equivalents or other high-yielding securities.
For a listing of the securities held in the portfolio at October 31, 1999,
please turn to page 24.
GROWTH AND INCOME FUND
Investment Objective
The Growth and Income Fund seeks long-term capital growth with income as a
secondary consideration.
Portfolio Management
The Fund is managed by a team of CIMCO's portfolio managers.
Primary Investment Strategies
The Growth and Income Fund focuses on stocks of companies with financial and
market strengths and a long-term record of financial performance, and will,
under normal market conditions, maintain at least 80% of its assets in such
stocks. Primarily through ownership of a diversified portfolio of common stocks
and securities convertible into common stocks, the Fund will seek a rate of
return in excess of returns typically available from less variable investment
alternatives. The Fund will typically invest in securities representing every
sector of the S&P 500 in approximately the same weightings such sector has in
the S&P 500.
For a listing of the securities held in the portfolio at October 31, 1999,
please turn to page 31.
CAPITAL APPRECIATION FUND
Investment Objective
The Capital Appreciation Fund seeks long-term capital appreciation.
Portfolio Management
The Fund is managed by a team of CIMCO's portfolio managers.
Primary Investment Strategies
The Capital Appreciation Fund invests primarily in common stocks, and will,
under normal market conditions, maintain at least 80% of its assets in such
securities. The Fund seeks stocks that have a low market price relative to the
portfolio managers' expected level and certainty of the issuing company's future
earnings. Relative to the Growth and Income Fund, the Capital Appreciation Fund
will include some smaller, less developed issuers and some companies undergoing
more significant changes in their operations or experiencing significant changes
in their markets. The Fund will diversify its holdings among various industries
and among companies within those industries but will often be less diversified
than the Growth and Income Fund.
For a listing of the securities held in the portfolio at October 31, 1999,
please turn to page 33.
INTERNATIONAL STOCK FUND
Investment Objective
The International Stock Fund seeks long-term growth of capital by investing
primarily in foreign equity securities.
Portfolio Management
CIMCO uses one or more subadvisers under a "manager of managers" approach to
make investment decisions for this fund. IAIInternational Limited and Lazard
Asset Management are the subadvisers currently used by CIMCO to manage the
assets of the Fund.
Primary Investment Strategies
Under normal market conditions, the International Stock Fund invests at least
80% of its assets in foreign equity securities. Foreign securities are issued by
companies organized or whose principal operations are outside the U.S., issued
by a foreign government, principally traded outside of the U.S., or quoted or
denominated in a foreign currency. Equity securities include common stocks,
securities convertible into common stocks, preferred stocks, and other
securities representing equity interests such as American depository receipts,
European depository re-ceipts and Global depository receipts.
For a listing of the securities held in the portfolio at October 31, 1999,
please turn to page 35.
<PAGE>
CASH RESERVES FUND -- Portfolio of Investments
Value
Par Value (Note 2)
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (A) - 48.95%
Federal Home Loan Mortgage Corp. - 20.04%
$ 350,000 5.335%, due 11/15/99 $ 349,292
200,000 5.391%, due 11/24/99 199,329
360,000 5.381%, due 12/15/99 357,696
300,000 5.168%, due 01/03/00 297,359
400,000 5.700%, due 01/10/00 395,707
1,599,383
Federal Home Loan Bank - 17.14%
300,000 5.073%, due 12/08/99 298,495
180,000 5.303%, due 12/10/99 179,002
100,000 5.413%, due 12/17/99 99,329
400,000 5.716%, due 02/15/00 393,481
300,000 5.040%, due 03/29/00 299,939
100,000 4.997%, due 03/31/00 98,025
1,368,271
Federal Farm Credit Bank - 8.64%
400,000 5.283%, due 11/08/99 399,600
291,000 5.384%, due 11/29/99 289,814
689,414
Federal National Mortgage Association - 3.13%
250,000 5.167%, due 11/04/99 249,896
Total U.S. Government and Agency Obligations 3,906,964
( Cost $3,906,964 )
COMMERCIAL PAPER (A) - 47.54%
Finance - 13.19%
300,000 American General Finance Co.
6.132%, due 02/07/00 295,157
200,000 General Electric Capital Corp.
5.161%, due 01/21/00 . 197,790
367,000 Goldman Sachs Group LP
6.028%, due 02/22/00 360,307
200,000 Merrill Lynch & Co., Inc.
5.418%, due 11/02/99 199,970
1,053,224
Communication - 8.04%
350,000 AT&T Corp.
5.802%, due 02/02/00 344,937
300,000 Bellsouth Telecommunications, Inc.
5.548%, due 01/18/00 296,535
641,472
Media - 7.46%
300,000 Disney (Walt) Co
6.055%, due 02/09/00 295,108
300,000 McGraw Hill Companies
5.304%, due 11/02/99 299,957
595,065
Technology - 5.94%
300,000 Emerson Electric Co.
6.131%, due 01/31/00 295,488
180,000 General Electric Co.
5.480%, due 12/20/99 178,692
474,180
Consumer Staples - 3.74%
300,000 Procter & Gamble Co.
5.443%, due 12/03/99 298,587
Energy - 3.71%
300,000 Consolidated Natural Gas Corp.
5.680%, due 01/25/00 296,140
Chemicals - 3.71%
300,000 du Pont (E.I.) de Nemours & Co.
5.996%, due 01/27/00 295,781
Utilities - 1.75%
140,000 MDU Resources Group
5.406%, due 11/10/99 139,814
Total Commercial Paper 3,794,263
( Cost $3,794,263 )
CERTIFICATE OF DEPOSIT - 2.71%
216,740 State Street Eurodollar
4.500%, due 11/01/99 216,740
Total Certificate of Deposit 216,740
( Cost $216,740 )
TOTAL INVESTMENTS - 99.20%. 7,917,967
( Cost $7,917,967** )
NET OTHER ASSETS AND LIABILITIES - 0.80% 63,984
TOTAL NET ASSETS - 100.00%. $ 7,981,951
** Aggregate cost for Federal tax purposes.
(A) Rate noted represents annualized yield at time of purchase.
See accompanying Notes to Financial Statements.
<PAGE>
BOND FUND -- Portfolio of Investments
Value
Par Value (Note 2)
CORPORATE NOTES AND BONDS - 52.97%
Finance - 9.64%
$ 500,000 Capital One Bank
6.760%, due 07/23/02 $ 492,657
500,000 Ford Motor Credit Co.
7.375%, due 10/28/09 504,520
500,000 Pemex Finance, Ltd., 144A (C)
9.690%, due 08/15/09 497,385
1,494,562
Energy - 8.92%
525,000 Occidental Petroleum Co., Senior Note
10.125%, due 11/15/01 557,004
500,000 Tosco Corp.
8.250%, due 05/15/03 515,932
300,000 YPF Sociedad Anonima, Yankee
9.125%, due 02/24/09 309,495
1,382,431
Basic Materials - 6.46%
500,000 du Pont (E.I.) de Nemours &Co.
6.750%, due 10/15/04 502,311
500,000 Rohm & Haas Co., 144A (C)
6.950%, due 07/15/04 499,032
1,001,343
Capital Goods - 6.25%
500,000 Crown Cork & Seal Co., Inc.
7.125%, due 09/01/02 498,564
500,000 Owens-Illinois, Inc., Senior Note
7.150%, due 05/15/05 470,053
968,617
Retail - 6.08%
500,000 Autozone, Inc.
6.000%, due 11/01/03 473,049
500,000 Great Atlantic & Pacific Tea Co.
7.750%, due 04/15/07 469,581
942,630
Industrials - 4.64%
290,000 Foster Wheeler Corp.
6.750%, due 11/15/05 247,500
500,000 Temple-Inland, Inc., MTN
6.750%, due 03/01/09 471,290
718,790
Communication - 3.04%
500,000 Teleglobe, Inc., Yankee
7.200%, due 07/20/09 470,641
Business Services - 2.60%
415,000 Comdisco, Inc., Senior Note
6.000%, due 01/30/02 403,356
Durable Goods - 1.61%
250,000 Borg-Warner Automotive, Senior Note
8.000%, due 10/01/19 249,522
Waste Management - 1.51%
250,000 Waste Management, Inc., Step Coupon (F)
7.700%, due 10/01/02 234,325
Asset-Backed Securities - 1.28%
200,000 Residential Funding Mortgage Securities II,
Series 1998-HI2, Step Coupon, Class A2, ABS (F)
6.290%, due 07/25/13 198,314
Health Services - 0.94%
150,000 Columbia/HCA Healthcare Corp.
6.125%, due 12/15/00 146,342
Total Corporate Notes and Bonds 8,210,873
( Cost $8,256,478 )
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 42.99%
U.S. Treasury Notes - 21.68%
500,000 10.750%, due 02/15/03 569,375
500,000 7.875%, due 11/15/04 538,438
500,000 6.500%, due 08/15/05 508,906
500,000 7.000%, due 07/15/06 522,188
500,000 8.875%, due 02/15/19 628,594
500,000 8.125%, due 08/15/21 593,125
3,360,626
Government National Mortgage Association - 11.06%
390,426 6.250%, due 07/20/21 380,673
858,463 6.500%, due 04/15/26 823,673
499,359 8.000%, due 09/20/29 508,835
1,713,181
Federal Home Loan Mortgage Corp. - 6.36%
500,000 6.250%, due 10/15/02 499,410
500,000 6.010%, due 04/26/04 486,548
985,958
Federal National Mortgage Association - 3.89%
375,000 6.520%, due 03/05/08 359,147
250,000 7.000%, due 08/27/12 243,381
602,528
Total U.S. Government and Agency Obligations 6,662,293
( Cost $6,643,995 )
Value
Shares (Note 2)
INVESTMENT COMPANY - 4.96%
768,477 State Street Prime Money Market
4.830% 768,477
Total Investment Company 768,477
( Cost $768,477 )
Value
Par Value (Note 2)
CERTIFICATE OF DEPOSIT - 0.12%
18,693 State Street Eurodollar
4.50%, due 11/01/99 18,693
Total Certificate of Deposit 18,693
( Cost $18,693 )
TOTAL INVESTMENTS - 101.04% 15,660,336
( Cost $15,687,643** )
NET OTHER ASSETS AND LIABILITIES - (1.04)% (161,411)
TOTAL NET ASSETS - 100.00%. $ 15,498,925
** Aggregate cost for Federal tax purposes.
(C) Security sold within the terms of a private placement memorandum
exempt from registration under section 144A of the Securities Act of
1933, as amended, and may be sold only to dealers in that program or
other "qualified institutional investors." These securities have been
determined to be liquid under guidelines established by the Board of
Trustees.
(F) Represents a security whose interest rate increases at predetermined
dates. The rate disclosed is the rate currently in effect.
MTN Medium Term Note
ABS Asset Backed Security
See accompanying Notes to Financial Statements.
<PAGE>
BALANCED FUND -- Portfolio of Investments
Value
Shares (Note 2)
COMMON STOCKS - 53.78%
Technology - 13.79%
11,000 3Com Corp.* $ 319,000
6,700 ADC Telecommunications, Inc.* 319,506
4,700 Conexant Systems, Inc.* 438,863
13,800 EMC Corp.* 1,007,400
833 Gartner Group, Inc., Class B* 7,809
10,700 Gateway 2000, Inc.* 706,869
5,000 Hewlett-Packard Co. 370,312
11,500 Interim Services, Inc.* 189,031
6,000 International Business Machines Corp. 590,250
14,200 Keane, Inc.* 333,700
3,292 Koninklijke (Royal) Philips Electronics N.V. 342,162
4,000 Micron Technology, Inc.* 285,250
4,800 Motorola, Inc. 467,700
11,600 Seagate Technology, Inc.* 341,475
7,800 Texas Instruments, Inc. 700,050
6,419,377
Financial Services - 7.64%
12,000 Allstate Corp. 345,000
8,196 Bank of America Corp. 527,617
8,090 Bank One Corp. 303,881
10,500 Citigroup, Inc. 568,312
8,200 Countrywide Credit Industries, Inc. 278,288
9,400 Household International, Inc. 419,475
5,900 MBIA, Inc. 336,669
2,800 Morgan Stanley Dean Witter & Co. 308,875
9,800 Wells Fargo Co. 469,175
3,557,292
Consumer Staples - 6.94%
8,800 Cox Communications, Inc., Class A* 399,850
10,300 CVS Corp. 447,406
3,000 General Mills, Inc. 261,563
7,900 Kimberly-Clark Corp. 498,687
7,800 MediaOne Group, Inc.* 554,288
9,100 Nabisco Holdings Corp., Class A 340,113
7,500 Safeway, Inc.* 264,844
10,900 Sara Lee Corp. 294,981
11,100 Tyson Foods, Inc., Class A 169,275
3,231,007
Healthcare - 5.49%
6,400 Aetna, Inc. 321,600
6,700 ALZA Corp.* 286,844
11,700 American Home Products Corp. 611,325
7,300 Bristol-Myers Squibb Co. 560,731
3,900 Glaxo Wellcome PLC, ADR 233,513
2,492 Johnson & Johnson 261,037
5,200 Pharmacia & Upjohn, Inc. 280,475
2,555,525
Consumer Cyclical - 4.52%
10,800 Dayton Hudson Corp. 697,950
7,100 IMS Health, Inc. 205,900
16,800 PRIMEDIA, Inc.* 187,950
7,500 Sears, Roebuck & Co. 211,406
9,000 Tiffany & Co. 535,500
4,700 Wal-Mart Stores, Inc. 266,431
2,105,137
Energy - 3.72%
5,164 BP Amoco PLC, ADR 298,221
3,700 Exxon Corp. 274,031
4,500 Kerr-McGee Corp. 241,875
6,300 Schlumberger, Ltd. 381,544
8,000 Unocal Corp. 276,000
8,900 USX-Marathon Group 259,213
1,730,884
Communication Services - 3.43%
4,500 AT&T Corp. 210,375
4,600 GTE Corp. 345,000
5,922 SBC Communications, Inc. 301,652
3,200 Telefonos de Mexico SA, Class L, ADR 273,600
9,750 Vodafone AirTouch, PLC, ADR 467,391
1,598,018
Capital Goods - 3.40%
2,600 Honeywell, Inc. 274,138
3,300 Illinois Tool Works, Inc. 241,725
10,700 Owens-Illinois, Inc.* 256,131
10,700 Pall Corp. 234,731
4,300 Rockwell International Corp. 208,281
3,800 United Technologies Corp. 229,900
7,642 Waste Management, Inc. 140,422
1,585,328
Basic Materials - 2.35%
2,900 Dow Chemical Co. 342,925
5,300 Praxair, Inc. 247,775
7,300 Rohm and Haas Co. 279,225
5,400 Willamette Industries, Inc. 224,437
1,094,362
Transportation - 1.26%
3,500 Delta Air Lines, Inc. 190,531
6,300 FDX Corp.* 271,294
5,100 Norfolk Southern Corp. 124,631
586,456
Utilities - 1.24%
10,000 PG & E Corp. 229,375
9,300 Williams Cos., Inc. 348,750
578,125
Total Common Stocks 25,041,511
( Cost $21,058,472 )
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 20.75%
U.S. Treasury Notes - 11.42%
1,500,000 5.500%, due 08/31/01 1,491,563
500,000 5.625%, due 09/30/01 498,281
500,000 6.375%, due 08/15/02 506,094
500,000 10.750%, due 02/15/03 569,375
500,000 6.500%, due 08/15/05 508,906
500,000 7.000%, due 07/15/06 522,188
500,000 8.875%, due 02/15/19 628,594
500,000 8.125%, due 08/15/21 593,125
5,318,126
Federal National Mortgage Association - 5.37%
1,000,000 6.520%, due 03/05/08 957,726
410,000 6.320%, due 03/16/09 390,530
500,000 7.000%, due 08/27/12 486,762
655,543 8.000%, due 09/01/29 667,107
2,502,125
Government National Mortgage Association - 2.91%
390,426 6.250%, due 07/20/21 380,673
463,852 7.500%, due 07/15/26 465,428
500,000 8.000%, due 09/20/29 509,488
1,355,589
Federal Home Loan Mortgage Corp. - 1.05%
500,000 6.010%, due 04/26/04 486,548
Total U.S. Government and Agency Obligations 9,662,388
( Cost $9,670,755 )
CORPORATE NOTES AND BONDS - 18.34%
Finance - 3.21%
500,000 Capital One Bank
6.760%, due 07/23/02 492,656
500,000 Ford Motor Credit Co.
7.375%, due 10/28/09 504,520
500,000 Pemex Finance, Ltd., 144A (C)
9.690%, due 08/15/09 497,385
1,494,561
Industrials - 2.97%
250,000 Foster Wheeler Corp.
6.750%, due 11/15/05 213,362
715,000 Temple-Inland, Inc., MTN
6.750%, due 03/01/09 673,945
500,000 Tyco International Group SA, 144A (C)
6.875%, due 09/05/02 497,239
1,384,546
Retail - 2.85%
500,000 Autozone, Inc.
6.000%, due 11/01/03 473,049
500,000 Great Atlantic & Pacific Tea Co.
7.750%, due 04/15/07 469,581
575,000 Rite Aid Corp.
7.125%, due 01/15/07 385,250
1,327,880
Energy - 2.25%
500,000 Occidental Petroleum Co., Senior Note
10.125%, due 11/15/01 530,480
500,000 Tosco Corp.
8.250%, due 05/15/03 515,932
1,046,412
Capital Goods - 1.88%
500,000 Crown Cork & Seal Co., Inc.
7.125%, due 09/01/02 498,564
400,000 Owens-Illinois, Inc., Senior Note
7.150%, due 05/15/05 376,043
874,607
Business Services - 1.42%
680,000 Comdisco, Inc., Senior Note
6.000%, due 01/30/02 660,920
Basic Materials - 1.18%
550,000 Rohm & Haas Co., 144A (C)
6.950%, due 07/15/04 548,936
Communication - 1.01%
500,000 Teleglobe, Inc., Yankee
7.200%, due 07/20/09 470,641
Durable Goods - 0.54%
250,000 Borg-Warner Automotive, Senior Note
8.000%, due 10/01/19 249,522
Waste Management - 0.50%
250,000 Waste Management, Inc., Step Coupon (F)
7.700%, due 10/01/02 234,325
Asset-Backed Securities - 0.43%
200,000 Residential Funding Mortgage Securities II,
Series 1998-HI2, Step Coupon, Class A2, ABS (F)
6.290%, due 07/25/13 198,314
Health Services - 0.10%
50,000 Columbia/HCA Healthcare Corp.
6.125%, due 12/15/00 48,781
Total Corporate Notes and Bonds 8,539,445
( Cost $8,594,284 )
Value
Shares (Note 2)
INVESTMENT COMPANY - 4.94%
2,297,570 State Street Prime Money Market
4.830% $ 2,297,570
Total Investment Company 2,297,570
( Cost $2,297,570 )
Value
Par Value (Note 2)
CERTIFICATE OF DEPOSIT - 1.50%
$ 696,709 State Street Eurodollar
4.830%, due 11/01/99 696,709
Total Certificate of Deposit 696,709
( Cost $696,709 )
TOTAL INVESTMENTS - 99.31%. $ 46,237,623
(Cost $42,317,790**)
NET OTHER ASSETS AND LIABILITIES - 0.69% 322,495
TOTAL NET ASSETS - 100.00% $ 46,560,118
* Non-income producing security.
** Aggregate cost for Federal tax purposes was $42,533,160.
(C) Security sold within the terms of a private placement memorandum
exempt from registration under section 144A of the Securities Act of
1933, as amended, and may be sold only to dealers in that program or
other "qualified institutional investors." These securities have been
determined to be liquid under guidelines established by the Board of
Trustees.
(F) Represents a security whose interest rate increases at predetermined
dates. The rate disclosed is the rate currently in effect.
ADR American Depository Receipt
MTN Medium Term Note
ABS Asset Backed Security
See accompanying Notes to Financial Statements.
<PAGE>
HIGH INCOME FUND -- Portfolio of Investments
Value
Par Value (Note 2)
CORPORATE NOTES AND BONDS - 91.50%
Communications - 18.28%
$ 185,000 Allegiance Telecom, Inc., Step Coupon (B)
11.750%, due 02/15/08 $ 125,800
75,000 Allegiance Telecom, Inc.
Senior Note
12.875%, due 05/15/08 81,937
25,000 American Cellular Corp.
Senior Note
10.500%, due 05/15/08 26,938
130,000 Centennial Cellular Corp.
Senior Subordinate Note
10.750%, due 12/15/08 135,525
100,000 Charter Commercial Holdings LLC
Senior Note
8.250%, due 04/01/07 . 94,500
260,000 Charter Commercial Holdings LLC, Step Coupon
Senior Discount Note (B)
9.920%, due 04/01/11 154,700
50,000 Crown Castle International Corp.
Senior Note
9.000%, due 05/15/11 47,500
130,000 Dolphin Telecom PLC, Step Coupon, Yankee
Senior Discount Note (B)(D)
11.500%, due 06/01/08 55,900
25,000 Dolphin Telecom PLC, 144A, Step Coupon
Senior Discount Note (B)(C)(D)
14.000%, due 05/15/09 9,875
60,000 Esprit Telecom Group PLC, Yankee
Senior Note (D)
10.875%, due 06/15/08 58,800
90,000 Exodus Communications, Inc.
Senior Note
11.250%, due 07/01/08 92,025
100,000 Hermes Europe Railtel B.V., Yankee
Senior Note (D)
10.375%, due 01/15/09 94,500
160,000 ICG Holdings, Inc.
Step Coupon (B)
12.500%, due 05/01/06 120,800
90,000 Intermedia Communication, Series B
Senior Note
8.875%, due 11/01/07 81,000
25,000 ITC Deltacom, Inc.
Senior Note
11.000%, due 06/01/07 26,250
40,000 ITC Deltacom, Inc.
Senior Note
9.750%, due 11/15/08 40,500
10,000 Lenfest Communications
Senior Note
8.375%, due 11/01/05 10,250
35,000 Lenfest Communications
Senior Subordinate Note
10.500%, due 06/15/06 39,725
50,000 Lenfest Communications
Senior Subordinate Note
8.250%, due 02/15/08 50,250
80,000 MCI Worldcom, Inc.
Senior Note
13.500%, due 12/15/02 90,600
175,000 Metronet Communications, Yankee, Step Coupon
Senior Discount Note (B)(D)
9.950%, due 06/15/08 136,063
105,000 Millicom International Cellular, Yankee, Step Coupon
Senior Discount Note (B)(D)
13.500%, due 06/01/06 75,863
55,000 MJD Communications, Inc., Series B
Senior Subordinate Note
9.500%, due 05/01/08 49,500
100,000 Nextel Communications, Step Coupon
Senior Discount Note (B)
9.750%, due 10/31/07 72,000
215,000 Nextel Communications, Step Coupon
Senior Discount Note (B)
9.950%, due 02/15/08 152,650
45,000 Nextel International, Inc., Step Coupon
Senior Discount Note (B)
12.125%, due 04/15/08 22,950
25,000 Nextlink Communications
Senior Note
9.625%, due 10/01/07 24,000
190,000 Nextlink Communications
Senior Note
10.750%, due 06/01/09 193,800
30,000 Pagemart Wireless, Inc., Step Coupon
Senior Discount Note (B)
11.250%, due 02/01/08 9,000
140,000 PSINET, Inc., 144A
Senior Note (C)
11.000%, due 08/01/09 143,850
65,000 Rural Cellular Corp., Series B
Senior Subordinate Note
9.625%, due 05/15/08 66,625
31,984 Rural Cellular Corp., Series B, PIK
11.375%, due 05/15/10 31,984
30,000 Telesystem International Wireless, Yankee, Step Coupon
Senior Discount Note (B)(D)
13.250%, due 06/30/07 14,400
110,000 Telewest Communications PLC, Yankee
Debenture (D)
9.625%, due 10/01/06 111,650
115,000 Triton PCS, Inc., Step Coupon (B)
11.000%, due 05/01/08 78,775
220,000 United International Holdings, Series B, Step Coupon
Senior Discount Note (B)
10.750%, due 02/15/08 124,850
35,000 U.S. Unwired, Inc., 144A, Step Coupon
Senior Discount Note (B)(C)
13.375%, due 11/01/09 18,725
175,000 Versatel Telecom BV
Senior Note (D)
13.250%, due 05/15/08 175,875
15,000 Viatel, Inc., Senior Note
11.250%, due 04/15/08 14,100
160,000 Viatel, Inc., Step Coupon
Senior Discount Note (B)
12.500%, due 04/15/08 88,800
110,000 Western Wireless
Senior Subordinate Note
10.500%, due 02/01/07 115,500
3,158,335
Telecommunications - 17.38%
125,000 Adelphia Business Solutions
Senior Subordinate Note
12.000%, due 11/01/07 129,375
75,000 Adelphia Communications, Series B
Senior Note
8.375%, due 02/01/08 70,500
45,000 AT&T Canada, Inc., Step Coupon
Senior Discount Note (B)
10.750%, due 11/01/07 36,900
25,000 Avalon Cable Holdings LLC, Step Coupon
Senior Discount Note (B)
11.875%, due 12/01/08 15,875
75,000 Avalon Cable of Michigan
Senior Subordinate Note
9.375%, due 12/01/08 75,281
25,000 Bresnan Communications, Series B, Step Coupon
Senior Discount Note (B)
9.250%, due 02/01/09 16,969
65,000 Bresnan Communications, Series B
Senior Note
8.000%, due 02/01/09 64,756
110,000 Chancellor Media Corp., Series B
8.750%, due 06/15/07 109,450
90,000 Classic Cable, Inc., 144A
Senior Subordinate Note (C)
9.875%, due 08/01/08 90,000
125,000 Colt Telecom Group PLC, Yankee, Step Coupon
Senior Discount Note (B)(D)
12.000%, due 12/15/06 103,750
100,000 CSC Holdings, Inc.
Senior Subordinate Note
9.250%, due 11/01/05 101,250
85,000 Cumulus Media, Inc.
10.375%, due 07/01/08 87,656
175,000 Echostar DBS Corp.
Senior Note
9.375%, due 02/01/09 173,469
150,000 Energis PLC, 144A (C)
9.750%, due 06/15/09 153,000
165,000 Esat Telecom Group PLC, Series B, Yankee
Senior Note (D)
11.875%, due 12/01/08 169,125
100,000 Fox Sports Networks LLC
Senior Note
8.875%, due 08/15/07 101,500
75,000 Frontiervision LP/Capital
Senior Subordinate Note
11.000%, due 10/15/06 79,125
40,000 Frontiervision Holdings LP, Step Coupon
Senior Discount Note (B)
11.875%, due 09/15/07 34,600
60,000 Globenet Communication Group, Ltd. 144A
Senior Note (C)
13.000%, due 07/15/07 60,000
90,000 Granite Broadcasting Corp.
Senior Subordinate Note
10.375%, due 05/15/05 91,800
100,000 Insight Midwest/Insight Capital, Inc., 144A
Senior Note (C)
9.750%, due 10/01/09 102,750
125,000 Jazztel PLC, 144A
Senior Note (C)
14.000%, due 04/01/09 125,000
60,000 LIN Holdings Corp., Step Coupon
Senior Discount Note (B)
10.000%, due 03/01/08 39,000
40,000 Northeast Optic Network
Senior Note
12.750%, due 08/15/08 40,900
150,000 NTL Communications Corp., Series B, Step Coupon
Senior Note (B)
12.375%, due 10/01/08 99,750
80,000 NTL, Inc., Series B, Step Coupon
Senior Note (B)
9.750%, due 04/01/08 53,000
50,000 NTL, Inc., Series B, Step Coupon
Senior Note (B)
9.750%, due 04/15/09 46,168
65,000 Spectrasite Holdings, Inc.
Senior Discount Note
12.000%, due 07/15/08 36,563
175,000 Spectrasite Holdings, Inc., Step Coupon
Senior Discount Note (B)
11.250%, due 04/15/09 91,000
150,000 Telemundo Holdings, Inc., Series B, Step Coupon
Senior Discount Note (B)
11.500%, due 08/15/08 85,500
60,000 Telewest Communication PLC, 144A, Step Coupon
Senior Discount Note (B)(C)
9.250%, due 04/15/09 36,900
110,000 Time Warner Telecom LLC
Senior Note
9.750%, due 07/15/08 112,750
190,000 United Pan-Europ Communications N.V., 144A
Senior Note (C)(D)
10.875%, due 08/01/09 185,725
25,000 Verio, Inc.
Senior Note
10.375%, due 04/01/05 25,125
100,000 Worldwide Fiber, Inc., 144A
Senior Note (C)
12.000%, due 08/01/09 100,000
60,000 Young Broadcasting, Inc., Series B
8.750%, due 06/15/07 58,800
3,003,312
Finance - 5.76%
25,000 AMSC Acquisition Co., Inc., Series B
12.250%, due 04/01/08 14,000
82,406 Crown Castle International Corp., PIK
12.750%, due 12/15/10 83,230
65,000 DTI Holdings, Inc., Series B, Step Coupon
Senior Discount Note (B)
12.500%, due 03/01/08 22,750
150,000 Global Crossing Holding LTD
9.625%, due 05/15/08 152,250
150,000 Ono Finance PLC, Series A, 144A (C)(D)
13.000%, due 05/01/09 147,000
150 Ono Finance PLC, Series A, 144A,
Zero Coupon (B)(C)(D)
0.000%, due 05/31/09 7,500
200,000 P & L Coal Holdings Corp., Series B
9.625%, due 05/15/08 192,500
90,000 Silgan Holdings, Inc.
Senior Subordinate Note
9.000%, due 06/01/09 85,500
80,000 Thermadyne Manufacturing Corp.
9.875%, due 06/01/08 65,600
160,000 Thermadyne Holdings Corp., Step Coupon
Debenture (B)
12.500%, due 06/01/08 70,400
175,000 Willis Corroon Corp.
9.000%, due 02/01/09 154,875
995,605
Technology - 5.13%
110,000 Argo-Tech Corp.
8.625%, due 10/01/07 93,087
50,000 Argo-Tech Corp., Series D
8.625%, due 10/01/07 42,313
95,000 Be Aerospace, Inc., Series B
Senior Subordinate Note
8.000%, due 03/01/08 82,175
25,000 Be Aerospace, Inc.
Senior Subordinate Note
9.500%, due 11/01/08 23,625
75,000 Completel Europe N.V., 144A, Step Coupon
Senior Discount Note (B)(C)(D)
14.000%, due 02/15/09 37,687
175,000 K & F Industries, Series B
Senior Subordinate Note
9.250%, due 10/15/07 166,688
225,000 Level 3 Communications, Inc.
Senior Note
9.125%, due 05/01/08 209,813
115,000 Metromedia Fiber Network, Series B
Senior Note
10.000%, due 11/15/08 112,988
80,000 Unisys Corp., Series B
Senior Note
12.000%, due 04/15/03 85,400
35,000 Unisys Corp.
Senior Note
7.875%, due 04/01/08 33,250
887,026
Energy - 3.94%
110,000 Anacomp, Inc., Series B
Senior Subordinate Note
10.875%, due 04/01/04 107,800
130,000 Chesapeake Energy Corp., Series B
9.625%, due 05/01/05 122,850
75,000 Clark R&M, Inc.
Senior Note
8.625%, due 08/15/08 63,750
45,000 Continental Resources
10.250%, due 08/01/08 37,575
100,000 Forest Oil Corp.
10.500%, due 01/15/06 102,000
100,000 HS Resources, Inc.
9.250%, due 11/15/06 97,750
125,000 Ocean Energy, Inc., Series B
8.875%, due 07/15/07 124,062
10,000 Pool Energy Services Co., Series B
8.625%, due 04/01/08 9,900
15,000 Pride International, Inc.
Senior Note
10.000%, due 06/01/09 15,000
680,687
Retail - 3.74%
45,000 Cole National Group, Inc.
Senior Subordinate Note
8.625%, due 08/15/07 33,300
75,000 Duane Reade, Inc.
9.250%, due 02/15/08 73,125
15,000 J Crew Group, Series B, Step Coupon
Debenture (B)
13.125%, due 10/15/08 7,050
85,000 J Crew Operating Corp.
Senior Subordinate Note
10.375%, due 10/15/07 73,950
40,000 Jitney-Jungle Stores (E)
12.000%, due 03/01/06 11,200
10,000 Jitney-Jungle Stores (E)
10.375%, due 09/15/07 100
100,000 Musicland Group, Inc., Series B
9.875%, due 03/15/08 83,500
50,000 Pathmark Stores
Subordinate Note
11.625%, due 06/15/02 48,500
35,000 Pathmark Stores
Senior Subordinate Note
9.625%, due 05/01/03 33,950
100,000 Red Roof Inns, Senior Note
9.625%, due 12/15/03 102,250
75,000 Southland Corp.
Senior Subordinate Debenture
5.000%, due 12/15/03 63,562
125,000 Williams Scotsman, Inc.
9.875%, due 06/01/07 116,250
646,737
Metals and Mining - 3.72%
70,000 AK Steel Corp., Senior Note
9.125%, due 12/15/06 69,475
65,000 Algoma Steel, Inc., Yankee (D)
12.375%, due 07/15/05 55,900
100,000 Commonwealth Industries
Senior Subordinate Note
10.750%, due 10/01/06 99,500
60,000 Doe Run Resources Corp., Series B
11.250%, due 03/15/05 55,200
75,000 Fairfield Manufacturing Co., Inc.
Senior Subordinate Note
9.625%, due 10/15/08 72,094
60,000 Kaiser Aluminum & Chemical Co.
Senior Note
9.875%, due 02/15/02 60,000
50,000 Metal Management, Inc.
10.000%, due 05/15/08 32,500
50,000 Russel Metals, Inc., Yankee (D)
10.000%, due 06/01/09 50,938
150,000 WCI Steel, Inc., Series B
Senior Note
10.000%, due 12/01/04 146,625
642,232
Building and Construction - 3.64%
100,000 American Standard, Inc.
7.375%, due 02/01/08 89,250
25,000 American Standard, Inc.
7.625%, due 02/15/10 22,250
50,000 Building Materials Corp., Series B
Senior Note
7.750%, due 07/15/05 45,375
150,000 Building Materials Corp., Series B
Senior Note
8.625%, due 12/15/06 141,375
50,000 Building Materials Corp., Series B
Senior Note
8.000%, due 10/15/07 45,375
125,000 Formica Corp., Series B
Senior Subordinate Note
10.875%, due 03/01/09 112,500
65,000 MMI Products, Inc., Series B
Senior Subordinate Note
11.250%, due 04/15/07 65,975
110,000 Nortek, Inc., Series B
Senior Note
9.250%, due 03/15/07 106,425
628,525
Containers / Packaging - 3.60%
65,000 Ball Corp.
8.250%, due 08/01/08 62,725
105,000 Gaylord Container Corp.
Senior Note
9.750%, due 06/15/07 97,912
135,000 Gaylord Container Corp., Series B
Senior Subordinate Note
9.875%, due 02/15/08 116,775
50,000 Graham Packaging/GPC Capital, Series B
8.750%, due 01/15/08 46,000
220,000 Packaging Corp. of America
9.625%, due 04/01/09 220,000
80,000 Riverwood International
10.250%, due 04/01/06 79,200
622,612
Consumer Staples - 3.46%
90,000 Finlay Enterprises, Inc.
9.000%, due 05/01/08 79,200
50,000 International Utility Structures, Yankee
Senior Subordinate Note (D)
10.750%, due 02/01/08 44,500
115,000 Pierce Leahy Corp.
Senior Subordinate Note
11.125%, due 07/15/06 121,900
30,000 Remington Products Co. LLC, Series B
Senior Subordinate Note
11.000%, due 05/15/06 22,500
115,000 Revlon Consumer Products
Senior Note
8.125%, due 02/01/06 89,987
115,000 Samsonite Corp.
Senior Subordinate Note
10.750%, due 06/15/08 95,450
100,000 Simmons Co., Series B
Senior Subordinate Note
10.250%, due 03/15/09 98,250
50,000 Vlasic Foods International, Inc., Series B
Senior Subordinate Note
10.250%, due 07/01/09 47,000
598,787
Recreation - 3.26%
150,000 Boyd Gaming Corp.
Senior Subordinate Note
9.500%, due 07/15/07 145,312
160,000 Coast Hotels & Casino
9.500%, due 04/01/09 149,000
50,000 Hollywood Park, Inc., Series B
9.250%, due 02/15/07 48,375
75,000 Isle of Capri Casinos
8.750%, due 04/15/09 67,687
80,000 Lady Luck Gaming, Series QTR
11.875%, due 03/01/01 80,000
75,000 Station Casinos
Senior Subordinate Note
8.875%, due 12/01/08 72,375
562,749
Basic Materials - 3.05%
100,000 Applied Extrusion Technology, Series B
Senior Note
11.500%, due 04/01/02 102,500
90,000 Buckeye Technologies, Inc.
Senior Subordinate Note
9.250%, due 09/15/08 88,425
20,000 Keystone Consolidated Industries
Senior Note
9.625%, due 08/01/07 18,500
50,000 Fibermark, Inc.
Senior Note
9.375%, due 10/15/06 50,125
5,000 Galey & Lord, Inc.
9.125%, due 03/01/08 1,225
100,000 Polymer Group, Inc., Series B
9.000%, due 07/01/07 96,000
35,000 Repap New Brunswick, Yankee
Senior Note (D)
9.000%, due 06/01/04 33,250
50,000 Synthetic Industries, Inc., Series B
Senior Subordinate Note
9.250%, due 02/15/07 49,500
95,000 US Timberlands Klam/Fin
Senior Note
9.625%, due 11/15/07 87,400
526,925
Durable Goods - 2.44%
50,000 Dura Operating Corp., Series B
9.000%, due 05/01/09 46,125
110,000 Hayes Lemmerz International, Inc.
11.000%, due 07/15/06 113,850
50,000 International Knife & Saw, Inc.
Senior Subordinate Note
11.375%, due 11/15/06 37,500
85,000 Motors and Gears, Inc., Series D
Senior Note
10.750%, due 11/15/06 79,900
100,000 Oxford Automotive, Inc., Series D
10.125%, due 06/15/07 . 90,000
65,000 Simonds Industries
10.250%, due 07/01/08 50,700
5,000 Talon Automotive Group, Series B
Senior Subordinate Note
9.625%, due 05/01/08 4,050
422,125
Chemicals and Drugs - 2.43%
75,000 Huntsman ICI Chemicals, 144A
Senior Subordinate Note (C)
10.125%, due 07/01/09 74,625
55,000 Lyondell Chemical Co., Series A
9.625%, due 05/01/07 54,450
90,000 Lyondell Chemical Co., Series B
9.875%, due 05/01/07 89,550
75,000 NL Industries
Senior Note
11.750%, due 10/15/03 77,250
25,000 PCI Chemicals Canada, Inc., Yankee (D)
9.250%, due 10/15/07 19,000
90,000 Sterling Chemicals, Inc., Series A
Senior Subordinate Note
11.250%, due 04/01/07 55,800
50,000 Sterling Chemicals, Inc., 144A (C)
12.375%, due 07/15/06 50,000
420,675
Printing - 2.37%
110,000 Big Flower Press, Inc.
Senior Subordinate Note
8.875%, due 07/01/07 110,275
150,000 Hollinger International Publishing
9.250%, due 03/15/07 147,000
75,000 Mail-Well I Corp., Series B
8.750%, due 12/15/08 70,313
35,000 Quebecor World (USA), Inc.
Senior Subordinate Note
7.750%, due 02/15/09 33,206
50,000 World Color Press, Inc.
Senior Subordinate Note
8.375%, due 11/15/08 48,750
409,544
Industrial - 2.02%
100,000 Blount, Inc., 144A
Senior Subordinate Note (C)
13.000%, due 08/01/09 102,250
65,000 GCI, Inc., Senior Note
9.750%, due 08/01/07 62,075
50,000 General Binding Corp.
9.375%, due 06/01/08 40,000
100,000 Moog, Inc., Series B
Senior Subordinate Note
10.000%, due 05/01/06 101,694
55,000 Numatics, Inc., Series B
Senior Subordinate Note
9.625%, due 04/01/08 42,350
348,369
Media - 1.69%
50,000 Albritton Communications, Series B
Senior Subordinate Debenture
9.750%, due 11/30/07 50,000
50,000 AMC Entertainment, Inc.
Senior Subordinate Note
9.500%, due 03/15/09 44,000
50,000 AMFM, Inc.
8.000%, due 11/01/08 49,375
75,000 Cinemark USA, Inc., Series B
Senior Subordinate Note
9.625%, due 08/01/08 66,750
50,000 Regal Cinemas, Inc.
Senior Subordinate Note
9.500%, due 06/01/08 37,500
60,000 Satelites Mexicanos SA, Series B (D)
10.125%, due 11/01/04 43,875
291,500
Consumer Services - 1.54%
75,000 Eldorado Resorts LLC, 144A
Senior Subordinate Note (C)
10.500%, due 08/15/06 76,500
40,000 Iron Mountain, Inc.
10.125%, due 10/01/06 41,000
85,000 Iron Mountain, Inc.
8.750%, due 09/30/09 80,113
75,000 Prime Hospitality Corp., Series B
Senior Subordinate Note
9.750%, due 04/01/07 68,250
265,863
Capital Goods - 0.79%
65,000 Transportation Tech Industries, Series C
11.750%, due 08/15/05 66,137
20,000 Transportation Tech Industries
Senior Subordinate Note
11.750%, due 08/15/05 20,350
90,000 Newcor, Inc., Series B
Senior Subordinate Note
9.875%, due 03/01/08 49,500
135,987
Defense Electronics - 0.75%
125,000 L-3 Communications Corp., Series B
Senior Subordinate Note
10.375%, due 05/01/07 129,063
Waste Disposal - 0.61%
125,000 Allied Waste North America, 144A
Senior Subordinate Note (C)
10.000%, due 08/01/09 105,781
Schools - 0.59%
110,000 Kindercare Learning Centers, Series B
Senior Subordinate Note
9.500%, due 02/15/09 102,850
Transportation - 0.57%
110,000 Mark IV Industries, Inc.
Senior Subordinate Note
7.500%, due 09/01/07 98,406
Machinery - 0.49%
100,000 Columbus McKinnon Corp.
8.500%, due 04/01/08 84,000
Health Care Services - 0.25%
35,000 Alaris Medical, Inc., Step Coupon
Senior Discount Note (B)
11.125%, due 08/01/08 14,875
30,000 Prime Medical Services, Inc.
8.750%, due 04/01/08 28,200
43,075
Total Corporate Notes and Bonds 15,810,770
( Cost $16,904,821 )
COMMON STOCK - 0.14%
Technology - 0.00%
750 Completel Holdings LLC, 144A (C)* $ 0
Communication - 0.14%
719 Viatel, Inc.* 23,997
Total Common Stock 23,997
( Cost $0 )
WARRANTS AND RIGHTS - 0.13%
Communication - 0.13%
185 Allegiance Telecom, Inc. 42
25 American Mobile SAT 450
25 Convergent Communications, Inc., 144A (C) 225
375 Jazztel PLC, 144A (C) 15,000
50 Versatel Telecom BV 7,481
23,198
Finance - 0.00%#
325 DTI Holdings, Inc., 144A (C) 3
Total Warrants and Rights 23,201
( Cost $0 )
PREFERRED STOCK - 0.13%
Media - 0.13%
250 Primedia, Inc., Series H 21,875
Total Preferred Stock 21,875
( Cost $24,850 )
CERTIFICATE OF DEPOSIT - 6.23%
$ 1,076,025 State Street Eurodollar
4.500%, due 11/01/99 $ 1,076,025
Total Certificate of Deposit 1,076,025
( Cost $1,076,025 )
TOTAL INVESTMENTS - 98.13%. 16,955,868
( Cost $18,005,696** )
NET OTHER ASSETS AND LIABILITIES - 1.87% 322,441
TOTAL NET ASSETS 100.00% $ 17,278,309
* Non income producing.
** Aggregate cost for Federal tax purposes was $18,006,581.
# Amount represents less than 0.01%
PIK Payment-In-Kind
(B) Represents securities that remain zero coupon until predetermined
date, at which time the stated coupon rate becomes the effective rate.
(C) Security sold within the terms of a private placement memorandum
exempt from registration under section 144A of the Securities Act of
1933, as amended, and may be sold only to dealers in that program or
other "qualified institutional investors." These securities have been
determined to be liquid under guidelines established by the Board of
Directors.
(D) Notes and bonds, issued by foreign entities, denominated in U.S.
dollars. The aggregate of these securities are 9.44% of total net
assets.
(E) In default.
See accompanying Notes to Financial Statements.
<PAGE>
GROWTH AND INCOME FUND -- Portfolio of Investments
Value
Shares (Note 2)
COMMON STOCKS - 96.54%
Technology - 22.03%
34,300 Computer Associates International, Inc. $ 1,937,950
14,800 Computer Sciences Corp.* 1,016,575
30,600 EMC Corp.* 2,233,800
26,600 Harris Corp. 596,837
18,400 Hewlett-Packard Co. 1,362,750
20,200 International Business Machines Corp. 1,987,175
13,844 Koninklijke (Royal) Philips Electronics N.V. 1,438,911
19,100 Motorola, Inc. 1,861,056
34,900 Nortel Networks Corp. 2,161,619
29,600 Texas Instruments, Inc. 2,656,600
25,200 Xerox Corp. 705,600
17,958,873
Consumer Staples - 15.75%
30,700 ConAgra, Inc. 800,119
30,100 CVS Corp. 1,307,469
57,800 Disney (Walt) Co. 1,524,475
9,400 General Mills, Inc. 819,563
32,500 Kimberly-Clark Corp. 2,051,562
75,300 Kroger Co.* 1,567,181
23,500 MediaOne Group, Inc.* 1,669,969
27,100 Nabisco Holdings Corp., Class A 1,012,862
30,800 PepsiCo, Inc. 1,068,375
37,600 Sara Lee Corp. 1,017,550
12,839,125
Financial Services - 13.42%
56,000 Allstate Corp. 1,610,000
26,092 Bank of America Corp. 1,679,672
31,870 Bank One Corp. 1,197,117
34,500 Citigroup, Inc. 1,867,313
18,400 First Union Corp. 785,450
41,000 Household International, Inc. 1,829,625
9,000 Morgan Stanley Dean Witter & Co. 992,813
11,300 Wachovia Corp. 974,625
10,936,615
Healthcare - 10.42%
19,100 Aetna, Inc. 959,775
22,900 ALZA Corp.* 980,406
41,900 American Home Products Corp. 2,189,275
26,800 Bristol-Myers Squibb Co. 2,058,575
16,200 Glaxo Wellcome PLC, ADR 969,975
12,700 Johnson & Johnson 1,330,325
8,488,331
Communication Services - 7.65%
13,978 AT&T Corp. 653,471
19,300 GTE Corp. 1,447,500
33,042 SBC Communications, Inc. 1,683,077
33,000 Sprint Corp. (FON Group) 2,452,312
6,236,360
Energy - 7.01%
19,206 BP Amoco PLC, ADR 1,109,146
11,800 Exxon Corp. 873,938
19,800 Schlumberger, Ltd. 1,199,138
14,300 Texaco, Inc. 877,663
21,100 Unocal Corp. 727,950
31,900 USX-Marathon Group 929,088
5,716,923
Capital Goods - 5.72%
14,000 Emerson Electric Co. 840,875
10,000 Honeywell, Inc. 1,054,375
15,000 Rockwell International Corp. 726,563
22,000 United Technologies Corp. 1,331,000
38,662 Waste Management, Inc. 710,414
4,663,227
Basic Materials - 3.49%
8,700 Dow Chemical Co. 1,028,775
18,000 Georgia-Pacific Group 714,375
18,100 PPG Industries, Inc. 1,097,312
2,840,462
Consumer Cyclical - 3.43%
22,338 Dana Corp. 660,367
23,500 Sears, Roebuck & Co. 662,406
26,000 Wal-Mart Stores, Inc. 1,473,875
2,796,648
Utilities - 3.38%.
14,500 Duke Energy Corp. 819,250
28,500 PG & E Corp. 653,719
34,100 Williams Cos., Inc. 1,278,750
2,751,719
Miscellaneous - 2.34%
16,500 AlliedSignal, Inc. 939,469
10,200 Minnesota Mining and Manufacturing Co. 969,637
1,909,106
Transportation - 1.90%
16,200 Burlington Northern Santa Fe Corp. 516,375
11,900 Delta Air Lines, Inc. 647,806
15,600 Norfolk Southern Corp. 381,225
1,545,406
Total Common Stocks 78,682,795
( Cost $72,774,850 )
INVESTMENT COMPANY - 4.08%
3,325,870 State Street Prime Money Market
4.830% $ 3,325,870
Total Investment Company 3,325,870
(Cost $3,325,870)
TOTAL INVESTMENTS - 100.62% $ 82,008,665
( Cost $76,100,720** )
NET OTHER ASSETS AND LIABILITIES - (0.62)% (506,668)
TOTAL NET ASSETS - 100.00% $ 81,501,997
* Non-income producing security.
** Aggregate cost for Federal tax purposes was $76,413,632.
ADR American Depository Receipt
See accompanying Notes to Financial Statements.
<PAGE>
CAPITAL APPRECIATION FUND -- Portfolio of Investments
Value
Shares (Note 2)
COMMON STOCKS - 96.81%
Technology - 23.19%
18,000 3Com Corp.* $ 522,000
18,700 Autodesk, Inc. 350,625
29,000 Cadence Design Systems, Inc.* 440,437
6,700 Conexant Systems, Inc.* 625,612
12,300 Dallas Semiconductor Corp. 724,163
19,500 EMC Corp.* 1,423,500
1,406 Gartner Group, Inc., Class B* 13,181
20,600 Gateway, Inc.* 1,360,888
28,000 Keane, Inc.* 658,000
5,700 Micron Technology, Inc.* 406,481
33,700 PeopleSoft, Inc.* 505,500
20,800 Seagate Technology, Inc.* 612,300
10,000 Texas Instruments, Inc. 897,500
8,540,187
Financial Services - 14.40%
29,000 Ace, Ltd. 563,687
17,600 Associates First Capital Corp., Class A 642,400
23,850 Citigroup, Inc. 1,290,881
12,000 Countrywide Credit Industries, Inc. 407,250
17,300 First Security Corp. 443,313
8,500 MBIA, Inc. 485,031
9,600 SunTrust Banks, Inc. 702,600
16,000 Wells Fargo Co.* 766,000
5,301,162
Consumer Cyclical - 11.77%
19,300 Dayton Hudson Corp. 1,247,263
14,800 IMS Health, Inc. 429,200
10,600 Lowe's Cos., Inc. 583,000
40,400 PRIMEDIA, Inc.* 451,975
22,000 Sherwin-Williams Co. 492,250
9,600 Tiffany & Co. 571,200
20,600 TJX Cos., Inc. 558,775
4,333,663
Consumer Staples - 10.03%
18,100 Cox Communications, Inc., Class A* 822,419
13,900 MediaOne Group, Inc.* 987,769
12,700 Nabisco Holdings Corp., Class A 474,662
18,900 Safeway, Inc.* 667,406
12,800 Sara Lee Corp. 346,400
25,900 Tyson Foods, Inc., Class A 394,975
3,693,631
Communication Services - 8.40%
12,100 ADC Telecommunications, Inc.* 577,019
10,200 CenturyTel, Inc. 412,462
3,500 Sprint Corp. (PCS Group) 290,281
10,000 Telefonos de Mexico SA, Class L, ADR 855,000
20,000 Vodafone AirTouch, PLC, ADR 958,750
3,093,512
Capital Goods - 6.46%
8,700 Grainger (W.W.), Inc. 368,663
11,500 Illinois Tool Works, Inc. 842,375
30,000 Owens-Illinois, Inc.* 718,125
20,500 Pall Corp. 449,719
2,378,882
Energy - 6.26%
5,600 El Paso Energy Corp. 229,600
7,500 Kerr-McGee Corp. 403,125
14,800 Unocal Corp. 510,600
18,900 USX-Marathon Group 550,462
18,000 Weatherford International, Inc.* 609,750
2,303,537
Healthcare - 5.70%
10,300 Aetna, Inc. 517,575
20,800 Boston Scientific Corp.* 418,600
22,800 Elan Corp., PLC, ADR* 587,100
10,700 Pharmacia & Upjohn, Inc. 577,131
2,100,406
Basic Materials - 4.35%
3,300 Dexter Corp. 115,706
11,300 Praxair, Inc. 528,275
14,300 Rohm and Haas Co. 546,975
9,900 Willamette Industries, Inc. 411,469
1,602,425
Utilities - 2.73%
13,600 MidAmerican Energy Holdings Co.* 457,300
14,600 Williams Cos., Inc. 547,500
1,004,800
Transportation - 2.23%
12,900 FDX Corp.* 555,506
9,000 Midwest Express Holdings, Inc.* 263,813
819,319
Miscellaneous - 1.29%
29,000 Interim Services, Inc.* 476,688
Total Common Stocks 35,648,212
( Cost $30,364,823 )
INVESTMENT COMPANY - 3.24%
1,192,798 State Street Prime Money Market
4.830% $ 1,192,798
Total Investment Company 1,192,798
( Cost $1,192,798 )
TOTAL INVESTMENTS - 100.05% $ 36,841,010
( Cost $31,557,621** )
NET OTHER ASSETS AND LIABILITIES - (0.05)% (16,516)
TOTAL NET ASSETS - 100.00% $ 36,824,494
* Non-income producing security.
** Aggregate cost for Federal tax purposes was $32,143,993.
ADR American Depository Receipt
See accompanying Notes to Financial Statements.
<PAGE>
INTERNATIONAL STOCK FUND -- Portfolio of Investments
Value
Shares (Note 2)
COMMON STOCKS - 92.35%
Argentina - 0.45%
11,100 Quilmes Industrial, S.A., ADR $ 115,856
1,900 Telefonica de Argentina, S.A., ADR 48,687
164,543
Australia - 4.07%
36,590 Australia & New Zealand Banking Group, Ltd. 241,516
280,110 Boral, Ltd. 421,624
62,851 Broken Hill Proprietary Co., Ltd. 649,680
16,100 Cochlear, Ltd. 175,593
1,488,413
Austria - 2.10%
405 Best Water Tech AG 73,180
748,980 Goodman Fielder, Ltd. 692,664
765,844
Belgium - 1.69%
25,730 Agfa Gevaert N.V.* 515,252
2,020 Compagnie Maritime Belge, S.A. 104,102
619,354
Brazil - 1.72%
5,200 Companhia Brasileira de Distribuicao
Grupo Pao de Acucar, GDR 113,750
9,100 Companhia Cervejaria Brahma, ADR 113,750
3,358 Companhia Energetica de Minas Gerais,
S.A., ADR 47,995
10,000 Companhia Paranaense de Energia-Copel,
ADR* 66,250
3,300 Embratel Participacoes, S.A. 42,487
13,300 Souza Cruz, S.A.* 75,971
3,800 Tele Norte Leste Participacoes, S.A., ADR 64,125
3,900 Telesp Participacoes, S.A., ADR* 63,131
2,100 Tele Sudeste Celular Participacoes, S.A.,
ADR* 42,000
629,459
Chile - 0.58%
6,400 Administradora de Fondos de Pensiones
Provida, ADR 110,400
7,500 Quinenco, S.A., ADR 69,844
3,900 Santa Isabel, S.A., ADR* 31,200
211,444
China - 0.22%
1,343 China Steel Corp., GDR 22,865
156,000 Jiangsu Expressway Co., Ltd., Class H 23,896
220,000 Shenzhen Expressway Co., Ltd., Class H 32,850
79,611
Denmark - 0.38%
4,100 Carli Gry International A/S 74,841
700 Falck A/S 64,384
139,225
Finland - 4.57%
7,700 Amer Group, Ltd. 146,582
101,150 Fortum Corp., IVO - Neste Group* 489,369
17,020 Orion-Yhtyma Oyj, Class B 404,558
2,400 Sampo Insurance Co., Class A* 83,299
15,860 UPM-Kymmene Oyj 500,423
600 Vaisala Oyj 44,174
1,668,405
France - 9.70%
1,600 Carbone-Lorraine, S.A. 68,843
21,897 CNP Assurances 644,845
2,750 Credit Lyonnais, S.A.* 83,154
4,567 Dexia France 643,648
4,569 Eridania Beghin-Say, S.A. 518,988
2,552 Groupe Danone 650,886
470 Havas Advertising, S.A. 131,737
3,800 Neopost, S.A.* 131,490
900 Scor, ADR 44,325
3,873 Suez Lyonnaise des Eaux, S.A. 625,271
3,543,187
Germany - 4.59%
8,130 BASF AG 365,544
11,387 Bayer AG 465,877
6,152 Deutsche Bank AG 441,279
600 Hawesko Holding AG 18,932
1,900 Marseille-Kliniken AG 24,679
6,645 Veba AG 359,228
1,675,539
Greece - 0.24%
3,811 Hellenic Telecommunications Organization,
S.A. 80,734
500 Hellenic Telecommunications Organization,
S.A., ADR 5,313
86,047
Hong Kong - 3.12%
6,000 77 Bank, Ltd. 71,238
358,000 Axa China Region, Ltd. 308,752
132,000 CDL Hotels International, Ltd. 44,602
1,500 China Telecom (Hong Kong), Ltd., ADR* 101,250
345,081 Dairy Farm International Holdings, Ltd. 270,888
154,000 Esprit Holdings, Ltd.* 145,700
5,300 Guangshen Railway Co., Ltd., ADR 30,475
2,000 Hachijuni Bank, Ltd. 14,597
30,000 Shaw Brothers (Hong Kong), Ltd. 27,032
49,000 Yue Yuen Industrial Holdings 124,255
1,138,789
Hungary - 0.40%
2,500 Magyar Tavkozlesi Rt., ADR, Class B 72,031
3,700 MOL Magyar Olaj-es Gazipari Rt. 74,545
146,576
India - 1.47%
4,609 Bharat Heavy Electricals, Ltd. 28,455
4,400 Hindalco Industries, Ltd., GDR 92,950
3,250 Hindalco Industries, Ltd. 54,129
4,300 Larsen & Toubro, Ltd., GDR, 144A (C) 78,904
11,200 Mahanagar Telephone Nigam, Ltd., GDR,
144A* (C) 92,400
27,500 PT Hanjaya Mandala Sampoerna Tbk* 63,786
9,400 State Bank of India, GDR, 144A (C) 125,114
535,738
Indonesia - 0.18%
150,000 PT Indah Kiat Pulp & Paper Corp. Tbk* 64,551
Ireland - 0.50%
19,100 Anglo Irish Bank Corp. PLC 44,797
130,900 Waterford Wedgwood PLC 139,052
183,849
Israel - 0.88%
25,500 Bank Hapoalim, Ltd. 60,641
3,700 ECI Telecom, Ltd.* 107,763
4,100 Partner Communications Co., Ltd, ADR* 64,575
6,200 Supersol, Ltd., ADR* 87,575
320,554
Italy - 3.24%
3,000 Bipop SpA* 126,999
43,000 ENI SpA*. 251,452
5,300 Industrie Natuzzi SpA, ADR 96,725
14,700 Interpump Group SpA 71,738
14,100 Manuli Rubber Industries SpA 33,812
123,011 Telecom Italia SpA 604,190
1,184,916
Japan - 16.34%
1,200 ADERANS Co., Ltd. 60,075
34,000 Eisai Co., Ltd. 934,209
2,990 H.I.S. Co., Ltd. 119,004
48,000 Hitachi, Ltd. 518,807
6,000 Hitachi Medical Corp. 73,770
700 Hokuto Corp. 41,287
3,400 IMPACT 21 Co., Ltd. 71,574
201,000 Japan Airlines Co., Ltd. 674,691
1,000 Kawasumi Laboratories, Inc. 15,153
4,000 Maruichi Steel Tube, Ltd. 55,126
1,500 Meitec Corp. 56,248
93,000 Minolta Co., Ltd. 380,848
162,000 Mitsubishi Heavy Industries, Ltd. 635,446
113,000 Nippon Mitsubishi Oil Corp. 498,513
187,000 Nippon Yusen Kabushiki Kaisha 807,039
191,360 Sekisui Chemical Co., Ltd. 941,476
2,900 Torii Pharmaceutical Co., Ltd. 88,722
5,971,988
Korea - 2.50%
7,200 Hanvit Bank, GDR* 54,000
6,200 Kookmin Bank 96,657
4,300 Korea Electric Power Corp. 125,827
1,800 Korea Telecom Corp., ADR* 63,450
600 Pohang Iron & Steel Co., Ltd. 72,030
900 Pohang Iron & Steel Co., Ltd., ADR 30,038
3,162 Samsung Electronics, GDR, 144A (C) 268,770
15,639 SK Telecom Co., Ltd., ADR* 204,284
915,056
Malaysia - 0.15%
31,000 Jaya Tiasa Holdings Berhad 56,697
Mexico - 2.75%
17,000 Carso Global Telecom* 113,192
5,776 Cemex S.A. de C.V., ADR* 129,960
3,020 Fomento Economico Mexicano,
S.A. de C.V., ADR 99,094
56,000 Grupo Financiero Banamex Accival,
S.A. de C.V., Class O* 140,117
33,000 Grupo Financiero Banorte, S.A. de
C.V., Class O* 41,199
10,600 Grupo Industrial Maseca, S.A., de C.V., ADR 72,875
3,300 Grupo Televisa, S.A., GDR* 140,250
12,800 Kimberly-Clark de Mexico, S.A. de C.V.,
Class A 41,015
5,900 Nuevo Grupo Iusacell, S.A. de C.V.,
Series L* 61,950
3,200 Panamerican Beverages, Inc., Class A 51,400
8,500 Pepsi-Gemex, S.A., GDR* 39,312
6,700 Tubos de Acero de Mexico, S.A., ADR 73,281
1,003,645
Netherlands - 2.28%
2,000 Avalix Groep N.V.* 10,517
2,800 Beter Bed Holding N.V. 80,101
2,600 Fugro N.V. 87,506
2,000 Hunter Douglas N.V. 54,165
18,975 Koninklijke Luchtvaart Maatschappij N.V. 516,885
3,000 N.V. Holdingmaatschappij De Telegraaf 55,217
1,100 PinkRoccade N.V.* 27,766
832,157
New Zealand - 1.37%
394,167 Carter Holt Harvey, Ltd. 499,508
Norway - 0.56%
6,300 Ekornes ASA 46,545
7,800 Merkantildata ASA 66,072
19,000 P4 Radio Hele Norge ASA 91,364
203,981
Peru - 0.24%
3,000 Credicorp, Ltd. 31,875
4,700 Telefonica del Peru S.A.A., ADR 54,344
86,219
Philippines - 0.62%
596,000 Benpres Holdings Corp.* 104,040
16,600 Manila Electric Co., Class B 45,536
3,800 Philippine Long Distance Telephone Co.,
ADR 78,138
227,714
Poland - 0.26%
6,600 Bank Handlowy W. Warszawie, GDR,
144A (C) 93,390
Portugal - 4.33%
33,132 Banco Pinto & Sotto Mayor, S.A. 689,963
4 Banco Totta & Acores, S.A., Registered 91
1,278 Brisa-Auto Estradas de Portugal, S.A.,
Registered 48,819
18,060 Brisa-Auto Estradas de Portugal,
S.A., Private Placement 711,348
2,900 Companhia de Seguros Mundial Confianca,
S.A.* 130,848
1,581,069
Singapore - 1.26%
280,000 Neptune Orient Lines, Ltd. 405,846
41,000 Want Want Holdings, Ltd. 54,940
460,786
South Africa - 1.96%
17,600 ABSA Group, Ltd. 71,775
7,971 Barlow, Ltd. 38,866
3,100 Impala Platinum Holdings, Ltd 107,396
9,834 JD Group, Ltd. 63,078
3,800 Liberty Life Association of Africa, Ltd. 35,263
12,300 Naspers, Ltd., Class N 76,593
12,200 Rembrandt Group, Ltd. 91,264
57,100 Sanlam, Ltd.* 65,536
4,000 Sasol, Ltd. 27,350
3,100 South African Breweries PLC 27,432
11,200 South African Breweries PLC* 98,097
4,457 Standard Bank Investment Corp. Ltd.* 15,236
717,886
Spain - 2.19%
1,400 Banco Pastor, S.A. 60,267
19,316 Endesa, S.A.* 386,615
24,278 Iberdrola, S.A. 353,907
800,789
Sweden - 0.83%
5,400 Celsius AB, Class B 84,693
3,100 Elanders AB, Class B 55,593
3,600 Getinge Industrier AB, Class B 39,392
6,200 Industrial & Financial Systems, IFS AB,
Class B* 72,742
3,700 Nobel Biocare AB 51,283
303,703
Switzerland - 1.05%
65 Bank Sarasin & Cie, Registered, Class B 120,710
340 Edipresse, S.A. 139,891
980 Gretag Imaging Group, Registered* 124,116
384,717
Thailand - 0.05%
43,000 Bangkok Expressway Public Co., Ltd.,
Foreign Registered* 20,049
United Kingdom - 13.32%
28,200 AMEC PLC. 99,170
38,100 Ashtead Group PLC 108,628
14,540 Britannic PLC 259,245
78,200 Corporate Services Group PLC 134,931
1,947 Euromoney Institutional Investor PLC 52,392
3,700 Games Workshop Group PLC 28,273
57,674 Greenalls Group PLC 291,434
20,600 Hogg Robinson PLC 94,278
48,430 Hyder PLC 434,534
24,100 Man (E D & F) Group PLC 140,196
12,500 Northgate PLC 106,609
31,400 Old Mutual PLC* 66,370
155,205 Rank Group PLC 483,316
175,322 Rolls-Royce PLC* 623,030
66,020 Royal & Sun Alliance Insurance Group PLC 449,694
145,180 Safeway PLC 456,869
5,700 Signet Group PLC, ADR 144,637
13,088 SSL International PLC 139,261
142,682 Tomkins PLC 480,076
66,795 United Biscuits (Holdings) PLC 234,895
15,900 Victrex PLC 40,107
4,867,945
Venezuela - 0.19%
1,600 Compania Anonima Nacional Telefonos
de Venezuela, ADR 41,300
9,200 Mavesa, S.A., ADR 29,325
70,625
Total Common Stocks 33,743,968
(Cost $32,587,913)
PREFERRED STOCKS - 2.05%
Brazil - 0.28%
1,800,000 Banco Itau, S.A. 103,279
Columbia - 0.11%
5,900 Banco Ganadero, S.A., ADR 38,567
Germany - 1.66%
1,700 Fielmann AG 64,367
13,235 ProSieben Media AG 542,877
607,244
Total Preferred Stocks 749,090
(Cost $833,091)
WARRANTS AND RIGHTS - 0.00%#
Korea - 0.00%#
370 Kookmin Bank 2,252
Singapore - 0.00%#
41,000 Want Want Holdings, Ltd. 0
Total Warrants and Rights 2,252
(Cost $0)
CERTIFICATE OF DEPOSIT - 6.10%
$ 2,227,081 State Street Eurodollar
4.500%, due 11/01/99 $ 2,227,081
Total Certificate of Deposit 2,227,081
(Cost $2,227,081)
TOTAL INVESTMENTS - 100.50% $ 36,722,391
(Cost $35,648,085**)
NET OTHER ASSETS AND LIABILITIES - (0.50)% (182,299)
TOTAL NET ASSETS - 100.00% $ 36,540,092
* Non-income producing security.
** Aggregate cost for Federal tax purposes was $35,838,633.
# Amount represents less than 0.01%.
(C) Security sold within the terms of a private placement memorandum
exempt from registration under section 144A of the Securities Act of
1933, as amended, and may be sold only to dealers in that program or
other "qualified institutional investors." These securities have been
determined to be liquid under guidelines established by the Board of
Trustees.
ADR American Depository Receipt
GDR Global Depository Receipt
OTHER INFORMATION (UNAUDITED):
Industry Concentration as a Percentage of Net Assets: % of Net Assets
Finance 15.74%
Transportation 10.43%
Chemicals & Drugs 8.87%
Industrial 7.69%
Energy 7.46%
Communication 7.36%
Consumer Staples 6.26%
Technology 6.19%
Certificate of Deposit 6.10%
Retail 4.42%
Business Services 3.20%
Metals & Mining 3.17%
Basic Materials 3.12%
Consumer Cyclical 3.02%
Building & Construction 2.22%
Agriculture 1.73%
Health 1.42%
Media 1.36%
Consumer Services 0.74%
Net Other Assets and Liabilities -0.50%
100.00%
See accompanying Notes to Financial Statements.
<PAGE>
This page intentionally left blank.
<PAGE>
<TABLE>
<CAPTION>
Statements of Assets and Liabilities
Cash Reserves Bond
Fund Fund
<S> <C> <C>
ASSETS:
Investments (Note 2):
Investments at cost $ 7,917,967 $ 15,687,643
Net unrealized appreciation (depreciation) -- (27,307)
----------- ------------
Total investments at value 7,917,967 15,660,336
Cash 29,929 32,258
Foreign currency (Cost $2)(Note 2) -- --
Receivables:
Investments sold -- 406,087
Fund shares sold 39,793 30,125
Dividends and interest 1,371 244,451
Due from Adviser, net 31,826 16,000
Deferred organization and offering costs 26,567 26,567
Prepaid insurance 381 551
Other assets 237 1,635
----------- ------------
Total Assets 8,048,071 16,418,010
----------- ------------
LIABILITIES:
Payable to custodian -- --
Payables:
Investments purchased -- 819,332
Due to Adviser, net -- --
Fund shares repurchased 768 39,296
Administration and transfer agent fees 7,730 8,455
Trustees' fees 143 286
Distribution fees - Class B 2,055 4,603
Shareholder servicing fees -- 3,203
Accrued expenses and other payables 55,424 43,910
----------- ------------
Total Liabilities 66,120 919,085
----------- ------------
NET ASSETS $ 7,981,951 $ 15,498,925
=========== ============
NET ASSETS consist of:
Paid-in capital $ 7,952,187 $ 15,863,363
Accumulated undistributed net investment income 29,722 12,355
Accumulated net realized gain (loss) on investments sold
and foreign currency related transactions 42 (349,486)
Net unrealized appreciation (depreciation) of investments
(including depreciation of foreign currency related
transactions of $2,133 in the International Stock Fund) -- (27,307)
----------- ------------
TOTAL NET ASSETS $ 7,981,951 $ 15,498,925
=========== ============
Class A Shares:
Net Assets $ 4,481,207 $ 7,990,871
Shares of beneficial interest outstanding 4,481,245 820,259
NET ASSET VALUE and redemption price per share $ 1.00 $ 9.74
Sales charge of offering price* 0.06 0.44
----------- ------------
Maximum offering price per share $ 1.06 $ 10.18
=========== ============
Class B Shares:
Net Assets $ 3,500,744 $ 7,508,054
Shares of beneficial interest outstanding 3,500,744 770,447
NET ASSET VALUE and offering price per share** $ 1.00 $ 9.75
=========== ============
</TABLE>
* Sales charge of offering price is 5.3% for the Cash Reserves Fund,
4.3% for the Bond Fund, 5.3% for the Balanced Fund, 4.3% for the High
Income Fund and 5.3% for the Growth and Income Fund, Capital
Appreciation Fund and International Stock Fund.
** Redemption price per share is equal to the Net Asset Value per share
less any applicable deferred sales charge.
See accompanying Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
Balanced High Income Growth and Income Capital Appreciation International Stock
Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C>
$ 42,317,790 $ 18,005,696 $ 76,100,720 $ 31,557,621 $ 35,648,085
3,919,833 (1,049,828) 5,907,945 5,283,389 1,074,306
------------ ------------ ------------ ------------ ------------
46,237,623 16,955,868 82,008,665 36,841,010 36,722,391
62,339 -- 115,242 75,312 15,319
-- -- -- -- 2
1,116,739 1,450 -- -- 423,952
198,808 53,588 395,383 143,202 47,269
295,278 410,456 47,040 24,378 118,667
-- 20,938 -- -- --
26,567 26,567 26,567 26,567 26,567
2,391 762 2,035 1,616 2,225
-- 7,967 25,387 18,233 2,005
------------ ------------ ------------ ------------ ------------
47,939,745 17,477,596 82,620,319 37,130,318 37,358,397
------------ ------------ ------------ ------------ ------------
-- 8,385 -- -- --
1,243,468 101,624 944,537 218,270 702,365
41,410 -- 63,400 19,491 37,633
45,410 14,590 41,293 7,984 180
10,914 9,458 13,915 10,341 10,578
841 326 1,428 652 701
18,801 5,937 33,080 14,049 2,045
9,548 3,641 16,185 7,351 7,772
9,235 55,326 4,484 27,686 57,031
------------ ------------ ------------ ------------ ------------
1,379,627 199,287 1,118,322 305,824 818,305
------------ ------------ ------------ ------------ ------------
$ 46,560,118 $ 17,278,309 $ 81,501,997 $ 36,824,494 $ 36,540,092
============ ============ ============ ============ ============
$ 42,509,207 $ 18,684,149 $ 75,778,037 $ 32,086,676 $ 32,566,323
1,966 39,187 1 35 267,089
129,112 (395,199) (183,986) (545,606) 2,634,507
3,919,833 (1,049,828) 5,907,945 5,283,389 1,072,173
------------ ------------ ------------ ------------ ------------
$ 46,560,118 $ 17,278,309 $ 81,501,997 $ 36,824,494 $ 36,540,092
============ ============ ============ ============ ============
$ 15,297,134 $ 7,879,164 $ 25,645,501 $ 13,261,505 $ 33,214,095
1,269,936 887,219 1,941,134 967,933 2,900,940
$ 12.05 $ 8.88 $ 13.21 $ 13.70 $ 11.45
0.67 0.40 0.74 0.77 0.64
------------ ------------ ------------ ------------ ------------
$ 12.72 $ 9.28 $ 13.95 $ 14.47 $ 12.09
============ ============ ============ ============ ============
$ 31,262,984 $ 9,399,145 $ 55,856,496 $ 23,562,989 $ 3,325,997
2,593,958 1,055,517 4,236,737 1,739,637 292,287
$ 12.05 $ 8.90 $ 13.18 $ 13.54 $ 11.38
============ ============ ============ ============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Cash Reserves Bond
Fund Fund
INVESTMENT INCOME:
<S> <C> <C>
Dividends $ -- $ --
Interest 310,554 721,978
Less: Foreign taxes withheld -- --
----------- ------------
Total investment income 310,554 721,978
----------- ------------
EXPENSES:
Management fees (Note 3) 24,668 58,724
Administration and transfer agent fees (Note 3) 89,911 94,948
Registration expenses 10,945 13,205
Custodian fees 12,224 9,594
Professional fees 9,630 10,661
Reports to shareholder expense 982 2,200
Trustees' fees (Note 3) 753 1,481
Distribution fees - Class B (Note 3) 13,919 38,119
Shareholder servicing fees - Class A (Note 3) -- 16,655
Shareholder servicing fees - Class B (Note 3) -- 12,706
Amortization of organization and offering costs (Note 2) 12,493 12,493
Other expenses 325 4,442
----------- ------------
Total expenses before reimbursement 175,850 275,228
Less reimbursement (Note 3) (128,007) (131,403)
----------- ------------
Total expenses net of reimbursement 47,843 143,825
----------- ------------
Net Investment Income (Loss) 262,711 578,153
----------- ------------
Net Realized and Unrealized Gain (Loss) on Investments (Note 2):
Net realized gain (loss) on investments (including a net
realized loss on foreign currency transactions of $15,076 in
the International Stock Fund) 42 (341,357)
Net change in unrealized appreciation (depreciation) on
investments (including a net unrealized depreciation on
foreign currency related transactions of $33,634 in the
International Stock Fund) -- (89,553)
----------- ------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 42 (430,910)
----------- ------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 262,753 $ 147,243
=========== ============
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Balanced High Income Growth and Income Capital Appreciation International Stock
Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C>
$ 239,701 $ 2,248 $ 678,893 $ 202,879 $ 993,102
1,017,001 1,389,325 117,043 54,341 66,910
-- -- -- -- (92,387)
------------ ------------ ------------ ------------ ------------
1,256,702 1,391,573 795,936 257,220 967,625
------------ ------------ ------------ ------------ ------------
235,956 78,156 273,436 189,945 350,091
117,206 97,634 128,260 106,012 114,161
22,124 12,550 35,687 20,851 16,072
17,031 14,402 13,126 13,762 97,394
17,426 11,291 17,668 13,648 16,112
8,037 2,496 9,676 4,380 5,572
4,086 1,647 5,558 3,109 3,830
135,123 51,591 242,696 112,363 17,191
45,712 18,328 43,391 25,861 77,626
45,041 17,196 80,898 37,454 5,730
12,493 12,493 12,493 12,493 12,493
7,209 13,764 1,660 5,761 28,495
------------ ------------ ------------ ------------ ------------
667,444 331,548 864,549 545,639 744,767
(133,221) (138,215) (124,700) (129,364) (193,962)
------------ ------------ ------------ ------------ ------------
534,223 193,333 739,849 416,275 550,805
------------ ------------ ------------ ------------ ------------
722,479 1,198,240 56,087 (159,055) 416,820
------------ ------------ ------------ ------------ ------------
129,310 (327,673) (118,122) (390,468) 2,602,484
3,512,277 38,689 5,867,753 4,901,372 1,996,743
------------ ------------ ------------ ------------ ------------
3,641,587 (288,984) 5,749,631 4,510,904 4,599,227
------------ ------------ ------------ ------------ ------------
$ 4,364,066 $ 909,256 $ 5,805,718 $ 4,351,849 $ 5,016,047
============ ============ ============ ============ ============
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets For the Year Ended October 31, 1999
Cash Reserves Bond
Fund Fund
<S> <C> <C>
NET ASSETS at beginning period $ 5,233,081 $ 7,022,297
----------- ------------
Increase in net assets from operations:
Net investment income (loss) 262,711 578,153
Net realized gain (loss) 42 (341,357)
Net change in unrealized appreciation (depreciation) -- (89,553)
----------- ------------
Net increase in net assets from operations 262,753 147,243
----------- ------------
Distributions to shareholders from:
Net investment income
Class A (193,602) (345,079)
Class B (69,068) (233,074)
Net realized gains
Class A -- (28,262)
Class B -- (9,835)
----------- ------------
Total distributions (262,670) (616,250)
----------- ------------
Capital Stock Transactions:
Class A Shares
Shares sold 1,463,270 3,599,208
Issued to shareholders in reinvestment of distributions 192,249 372,980
Shares redeemed (1,513,071) (514,328)
----------- ------------
Net increase (decrease) from capital stock transactions 142,448 3,457,860
----------- ------------
Class B Shares
Shares sold 4,494,991 6,343,163
Issued to shareholders in reinvestment of distributions 68,769 228,798
Shares redeemed (1,957,421) (1,084,186)
----------- ------------
Net increase from capital stock transactions 2,606,339 5,487,775
----------- ------------
Total increase in net assets 2,748,870 8,476,628
----------- ------------
NET ASSETS at end of period (including line A) $ 7,981,951 $ 15,498,925
=========== ============
(A) Undistributed net investment income $ 29,722 $ 12,355
=========== ============
OTHER INFORMATION:
Capital Share Transactions:
Class A Shares
Shares sold 1,467,709 361,356
Issued to shareholders in reinvestment of distributions 193,165 37,674
Shares redeemed (1,517,727) (51,766)
----------- ------------
Net increase (decrease) in shares outstanding 143,147 347,264
----------- ------------
Class B Shares
Shares sold 4,542,489 637,845
Issued to shareholders in reinvestment of distributions 68,511 23,198
Shares redeemed (2,004,599) (109,947)
----------- ------------
Net increase in shares outstanding 2,606,401 551,096
----------- ------------
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Balanced High Income Growth and Income Capital Appreciation International Stock
Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C>
$ 23,109,847 $ 9,677,254 $ 25,577,029 $ 20,435,388 $ 29,005,768
------------ ------------ ------------ ------------ ------------
722,479 1,198,240 56,087 (159,055) 416,820
129,310 (327,673) (118,122) (390,468) 2,602,484
3,512,277 38,689 5,867,753 4,901,372 1,996,743
------------ ------------ ------------ ------------ ------------
4,364,066 909,256 5,805,718 4,351,849 5,016,047
------------ ------------ ------------ ------------ ------------
(431,006) (639,267) (104,915) -- (402,357)
(291,473) (558,973) -- -- (10,711)
(11,733) (18,678) (10,773) (10,034) (1,172,577)
(20,814) (6,615) (29,659) -- (66,391)
------------ ------------ ------------ ------------ ------------
(755,026) (1,223,533) (145,347) (10,034) (1,652,036)
------------ ------------ ------------ ------------ ------------
22,621,347 2,118,956 17,647,334 8,326,212 1,024,723
439,832 645,554 114,550 10,009 1,575,095
(25,576,825) (871,164) (5,460,361) (10,439,625) (192,494)
------------ ------------ ------------ ------------ ------------
(2,515,646) 1,893,346 12,301,523 (2,103,404) 2,407,324
------------ ------------ ------------ ------------ ------------
23,989,683 7,053,287 40,923,793 15,597,190 1,965,892
304,240 462,448 29,580 -- 76,883
(1,937,046) (1,493,749) (2,990,299) (1,446,495) (279,786)
------------ ------------ ------------ ------------ ------------
22,356,877 6,021,986 37,963,074 14,150,695 1,762,989
------------ ------------ ------------ ------------ ------------
23,450,271 7,601,055 55,924,968 16,389,106 7,534,324
------------ ------------ ------------ ------------ ------------
$ 46,560,118 $ 17,278,309 $ 81,501,997 $ 36,824,494 $ 36,540,092
============ ============ ============ ============ ============
$ 1,966 $ 39,187 $ 1 $ 35 $ 267,089
============ ============ ============ ============ ============
2,004,630 227,759 1,367,430 645,448 93,829
38,008 69,992 9,102 815 151,888
(2,240,465) (93,192) (461,584) (893,051) (18,840)
------------ ------------ ------------ ------------ ------------
(197,827) 204,559 914,948 (246,788) 226,877
------------ ------------ ------------ ------------ ------------
2,031,097 753,638 3,142,758 1,219,845 180,336
25,453 50,649 2,458 -- 7,421
(159,197) (159,042) (233,327) (120,110) (26,738)
------------ ------------ ------------ ------------ ------------
1,897,353 645,245 2,911,889 1,099,735 161,019
------------ ------------ ------------ ------------ ------------
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets For the Period Ended October 31, 1998
Cash Reserves Bond
Fund (1) Fund (1)
<S> <C> <C>
NET ASSETS at beginning period(1) $ 50,000 $ 50,000
----------- ------------
Increase in net assets from operations:
Net investment income (loss) 167,773 194,052
Net realized gain (loss) 420 10,498
Net change in unrealized appreciation (depreciation) -- 62,246
----------- ------------
Net increase (decrease) in net assets from operations 168,193 266,796
----------- ------------
Distributions to shareholders from:
Net investment income
Class A (157,807) (163,646)
Class B (9,966) (30,406)
Distribution in excess of net investment income
Class A -- --
Class B -- --
----------- ------------
Total distributions (167,773) (194,052)
----------- ------------
Capital Stock Transactions:
Class A Shares
Shares sold 5,496,824 4,702,204
Issued to shareholders in reinvestment of distributions 157,329 163,461
Shares redeemed (1,364,778) (174,114)
----------- ------------
Net increase from capital stock transactions 4,289,375 4,691,551
----------- ------------
Class B Shares
Shares sold 1,315,996 2,223,002
Issued to shareholders in reinvestment of distributions 9,489 28,634
Shares redeemed (432,199) (43,634)
----------- ------------
Net increase from capital stock transactions 893,286 2,208,002
----------- ------------
Total increase in net assets 5,183,081 6,972,297
----------- ------------
NET ASSETS at end of period (including line A) $ 5,233,081 $ 7,022,297
=========== ============
(A) Undistributed net investment income $ 23,338 $ 23,446
=========== ============
OTHER INFORMATION:
Capital Share Transactions:
Class A Shares
Shares sold 5,496,384 469,093
Issued to shareholders in reinvestment of distributions 157,376 16,269
Shares redeemed (1,364,662) (17,267)
----------- ------------
Net increase in shares outstanding 4,289,098 468,095
----------- ------------
Class B Shares
Shares sold 1,314,093 220,718
Issued to shareholders in reinvestment of distributions 9,643 2,834
Shares redeemed (430,393) (4,301)
----------- ------------
Net increase in shares outstanding 893,343 219,251
----------- ------------
(1) Fund commenced investment operations on December 29, 1997.
(2) Represents less than 1/2 of a share.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Balanced High Income Growth and Income Capital Appreciation International Stock
Fund(1) Fund(1) Fund(1) Fund(1) Fund(1)
<S> <C> <C> <C> <C> <C>
$ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000
------------ ------------ ------------ ------------ ------------
151,971 457,306 51,697 (10,945) 218,074
2,595 (67,321) (1,828) (2,007) 1,306,953
407,556 (1,088,517) 40,191 382,017 (924,570)
------------ ------------ ------------ ------------ ------------
562,122 (698,532) 90,060 369,065 600,457
------------ ------------ ------------ ------------ ------------
(114,070) (352,444) (48,609) -- (19,999)
(37,901) (104,862) (3,088) -- (1)
(590) -- (3,054) (2,999) --
(306) -- (2,653) (1) --
------------ ------------ ------------ ------------ ------------
(152,867) (457,306) (57,404) (3,000) (20,000)
------------ ------------ ------------ ------------ ------------
15,586,877 6,528,079 11,287,655 13,061,416 26,957,663
114,515 350,011 51,706 2,999 19,999
(458,280) (149,760) (439,612) (198,712) (66,752)
------------ ------------ ------------ ------------ ------------
15,243,112 6,728,330 10,899,749 12,865,703 26,910,910
------------ ------------ ------------ ------------ ------------
7,559,659 4,060,617 15,004,465 7,326,656 1,487,111
37,560 92,006 5,698 1 1
(189,739) (97,861) (415,539) (173,037) (22,711)
------------ ------------ ------------ ------------ ------------
7,407,480 4,054,762 14,594,624 7,153,620 1,464,401
------------ ------------ ------------ ------------ ------------
23,059,847 9,627,254 25,527,029 20,385,388 28,955,768
------------ ------------ ------------ ------------ ------------
$ 23,109,847 $ 9,677,254 $ 25,577,029 $ 20,435,388 $ 29,005,768
============ ============ ============ ============ ============
$ 22,711 $ 23,986 $ 19,303 $ 10,070 $ 321,481
============ ============ ============ ============ ============
1,494,109 657,540 1,057,206 1,227,548 2,672,922
10,884 36,216 4,825 293 1,949
(42,130) (15,996) (40,745) (18,020) (5,708)
------------ ------------ ------------ ------------ ------------
1,462,863 677,760 1,021,286 1,209,821 2,669,163
------------ ------------ ------------ ------------ ------------
710,854 410,828 1,363,973 656,474 133,396
3,588 9,755 557 --(2) --(2)
(17,937) (10,411) (39,782) (16,672) (2,228)
------------ ------------ ------------ ------------ ------------
696,505 410,172 1,324,728 639,802 131,168
------------ ------------ ------------ ------------ ------------
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights for a Share of Beneficial Interest Outstanding Throughout each Period
Cash Reserves Fund
Class A Class B Class A Class B
Year Ended Year Ended Inception (a) to Inception (a) to
10/31/1999 10/31/1999 10/31/1998 10/31/1998
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------- ------------ ------------ ------------
Income from Investment Operations:
Net investment income 0.05 0.04 0.04 0.03
------------- ------------ ------------ ------------
Total from investment operations 0.05 0.04 0.04 0.03
------------- ------------ ------------ ------------
Less Distributions:
Distributions from net investment income (0.05) (0.04) (0.04) (0.03)
------------- ------------ ------------ ------------
Total distributions (0.05) (0.04) (0.04) (0.03)
------------- ------------ ------------ ------------
Net increase in net asset value -- -- -- --
------------- ------------ ------------ ------------
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00
============= ============ ============ ============
Total Return+ 4.60% 3.81% 4.21%(2) 3.50%(2)
Ratios/Supplemental Data:
Net Assets, End of Period (in 000's) $ 4,481 $ 3,501 $ 4,339 $ 894
Ratios of expenses to average net assets:
Before reimbursement of expenses by Adviser 2.63% 3.38% 4.76%(1) 5.51% (1)
After reimbursement of expenses by Adviser 0.55% 1.30% 0.55%(1) 1.30% (1)
Ratios of net investment income (loss) to average net assets:
Before reimbursement of expenses by Adviser 2.33% 1.84% 0.67%(1) (0.08)%(1)
After reimbursement of expenses by Adviser 4.41% 3.92% 4.88%(1) 4.13% (1)
</TABLE>
(1) Annualized
(2) Not annualized.
+ Total return without applicable sales charge.
(a) Cash Reserves Fund Class A and Cash Reserves Fund Class B commenced
investment operations on December 29, 1997.
See accompanying Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights for a Share of Beneficial Interest Outstanding Throughout each Period
Bond Fund
Class A Class B Class A Class B
Year Ended Year Ended Inception (a) to Inception (a) to
10/31/1999 10/31/1999 10/31/1998 10/31/1998
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.14 $ 10.14 $ 10.00 $ 10.00
------------- ------------ ------------ ------------
Income from Investment Operations:
Net investment income 0.51 0.44 0.45 0.39
------------- ------------ ------------ ------------
Net realized and unrealized gain(loss)on investments (0.35) (0.35) 0.14 0.14
------------- ------------ ------------ ------------
Total from investment operations 0.16 0.09 0.59 0.53
------------- ------------ ------------ ------------
Less Distributions:
Distributions from net investment income (0.51) (0.44) (0.45) (0.39)
------------- ------------ ------------ ------------
Distributions from capital gains (0.05) (0.04) -- --
------------- ------------ ------------ ------------
Total distributions (0.56) (0.48) (0.45) (0.39)
------------- ------------ ------------ ------------
Net increase (decrease) in net asset value (0.40) (0.39) 0.14 0.14
------------- ------------ ------------ ------------
Net Asset Value, End of Period $ 9.74 $ 9.75 $ 10.14 $ 10.14
============= ============ ============ ============
Total Return+ 1.60% 0.94% 6.08%(2) 5.36%(2)
Ratios/Supplemental Data:
Net Assets, End of Period (in 000's) $ 7,991 $ 7,508 $ 4,797 $ 2,225
Ratios of expenses to average net assets:
Before reimbursement of expenses by Adviser 2.02% 2.77% 4.83%(1) 5.58%(1)
After reimbursement of expenses by Adviser 0.90% 1.65% 0.60%(1) 1.35%(1)
Ratios of net investment income to average net assets:
Before reimbursement of expenses by Adviser 4.06% 3.46% 1.14%(1) 0.39%(1)
After reimbursement of expenses by Adviser 5.18% 4.58% 5.37%(1) 4.62%(1)
Portfolio Turnover . 725% 725% 95% 95%
</TABLE>
(1) Annualized.
(2) Not annualized.
+ Total return without applicable sales charge.
(a) Bond Fund Class A and Bond Fund Class B commenced investment operations on
December 29, 1997.
See accompanying Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights for a Share of Beneficial Interest Outstanding Throughout each Period
Balanced Fund
Class A Class B Class A Class B
Year Ended Year Ended Inception (a) to Inception (a) to
10/31/1999 10/31/1999 10/31/1998 10/31/1998
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.68 $ 10.68 $ 10.00 $ 10.00
------------- ------------ ------------ ------------
Income from Investment Operations:
Net investment income 0.27 0.18 0.21 0.14
------------- ------------ ------------ ------------
Net realized and unrealized gain on investments 1.38 1.38 0.68 0.68
------------- ------------ ------------ ------------
Total from investment operations 1.65 1.56 0.89 0.82
------------- ------------ ------------ ------------
Less Distributions:
Distributions from net investment income (0.27) (0.18) (0.21) (0.14)
------------- ------------ ------------ ------------
Distributions from capital gains (0.01) (0.01) -- --
------------- ------------ ------------ ------------
Total distributions (0.28) (0.19) (0.21) (0.14)
------------- ------------ ------------ ------------
Net increase in net asset value 1.37 1.37 0.68 0.68
------------- ------------ ------------ ------------
Net Asset Value, End of Period $ 12.05 $ 12.05 $ 10.68 $ 10.68
============= ============ ============ ============
Total Return+ 15.58% 14.72% 8.92%(2) 8.24% (2)
Ratios/Supplemental Data:
Net Assets, End of Period (in 000's) $ 15,297 $ 31,263 $ 15,670 $ 7,440
Ratios of expenses to average net assets:
Before reimbursement of expense by Adviser 1.47% 2.22% 3.40%(1) 4.15% (1)
After reimbursement of expenses by Adviser 1.10% 1.85% 1.10%(1) 1.85% (1)
Ratios of net investment income (loss) to average net assets:
Before reimbursement of expenses by Adviser 1.99% 1.25% 0.23%(1) (0.52)%(1)
After reimbursement of expenses by Adviser 2.36% 1.62% 2.53%(1) 1.78% (1)
Portfolio Turnover . 349% 349% 60% 60%
</TABLE>
(1) Annualized.
(2) Not annualized.
+ Total return without applicable sales charge.
(a) Balanced Fund Class A and Balanced Fund Class B commenced investment
operations on December 29, 1997.
See accompanying Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights for a Share of Beneficial Interest Outstanding Throughout each Period
High Income Fund
Class A Class B Class A Class B
Year Ended Year Ended Inception (a) to Inception (a) to
10/31/1999 10/31/1999 10/31/1998 10/31/1998
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 8.85 $ 8.85 $ 10.00 $ 10.00
------------- ------------ ------------ ------------
Income from Investment Operations:
Net investment income 0.80 0.74 0.61 0.55
------------- ------------ ------------ ------------
Net realized and unrealized gain (loss) on investments 0.06 0.06 (1.15) (1.15)
------------- ------------ ------------ ------------
Total from investment operations 0.86 0.80 (0.54) (0.60)
------------- ------------ ------------ ------------
Less Distributions:
Distributions from net investment income (0.80) (0.74) (0.61) (0.55)
------------- ------------ ------------ ------------
Distributions from capital gains (0.03) (0.01) -- --
------------- ------------ ------------ ------------
Total distributions (0.83) (0.75) (0.61) (0.55)
------------- ------------ ------------ ------------
Net increase (decrease) in net asset value 0.03 0.05 (1.15) (1.15)
------------- ------------ ------------ ------------
Net Asset Value, End of Period $ 8.88 $ 8.90 $ 8.85 $ 8.85
============= ============ ============ ============
Total Return+ 9.69% 9.02% (5.78)%(2) (6.39)%(2)
Ratios/Supplemental Data:
Net Assets, End of Period (in 000's) $ 7,879 $ 9,399 $ 6,045 $ 3,632
Ratios of expenses to average net assets:
Before reimbursement of expenses by Adviser 1.97% 2.72% 3.52% (1) 4.27% (1)
After reimbursement of expenses by Adviser 1.00% 1.75% 1.00% (1) 1.75% (1)
Ratios of net investment income to average net assets:
Before reimbursement of expenses by Adviser 7.75% 7.16% 4.95% (1) 4.20% (1)
After reimbursement of expenses by Adviser 8.72% 8.13% 7.47% (1) 6.72% (1)
Portfolio Turnover 48% 48% 56% 56%
</TABLE>
(1) Annualized.
(2) Not annualized.
+ Total return without applicable sales charge.
(a) High Income Fund Class A and High Income Fund Class B commenced investment
operations on December 29, 1997.
See accompanying Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights for a Share of Beneficial Interest Outstanding Throughout each Period
Growth and Income Fund
Class A Class B Class A Class B
Year Ended Year Ended Inception (a) to Inception (a) to
10/31/1999 10/31/1999 10/31/1998 10/31/1998
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.88 $ 10.88 $ 10.00 $ 10.00
------------- ------------ ------------ ------------
Income from Investment Operations:
Net investment income (loss) 0.09 (0.01) 0.07 0.01
------------- ------------ ------------ ------------
Net realized and unrealized gain on investments 2.33 2.33 0.89 0.89
------------- ------------ ------------ ------------
Total from investment operations 2.42 2.32 0.96 0.90
------------- ------------ ------------ ------------
Less Distributions:
Distributions from net investment income (0.09) -- (0.07) (0.01)
------------- ------------ ------------ ------------
Distributions from capital gains -- (0.02) -- --
------------- ------------ ------------ ------------
Distributions in excess of net investment income -- -- (0.01) (0.01)
------------- ------------ ------------ ------------
Total distributions (0.09) (0.02) (0.08) (0.02)
------------- ------------ ------------ ------------
Net increase in net asset value 2.33 2.30 0.88 0.88
------------- ------------ ------------ ------------
Net Asset Value, End of Period $ 13.21 $ 13.18 $ 10.88 $ 10.88
============= ============ ============ ============
Total Return+ 22.33% 21.32% 9.57% (2) 8.97% (2)
Ratios/Supplemental Data:
Net Assets, End of Period (in 000's) $ 25,646 $ 55,856 $ 11,169 $ 14,408
Ratios of expenses to average net assets:
Before reimbursement of expenses by Adviser 1.25% 2.00% 2.41% (1) 3.16% (1)
After reimbursement of expenses by Adviser 1.00% 1.75% 1.00% (1) 1.75% (1)
Ratios of net investment income (loss) to average net assets:
Before reimbursement of expenses by Adviser 0.35% (0.40)% (0.60)%(1) (1.35)%(1)
After reimbursement of expenses by Adviser 0.60% (0.15)% 0.81% (1) 0.06% (1)
Portfolio Turnover 19% 19% 5% 5%
</TABLE>
(1) Annualized.
(2) Not annualized.
+ Total return without applicable sales charge.
(a) Growth and Income Fund Class A and Growth and Income Fund Class B commenced
investment operations on December 29, 1997.
See accompanying Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights for a Share of Beneficial Interest Outstanding Throughout each Period
Capital Appreciation Fund
Class A Class B Class A Class B
Year Ended Year Ended Inception (a) to Inception (a) to
10/31/1999 10/31/1999 10/31/1998 10/31/1998
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 11.04 $ 10.98 $ 10.00 $ 10.00
------------- ------------ ------------ ------------
Income from Investment Operations:
Net investment income (loss) (0.00)* (0.12) 0.01 (0.02)
------------- ------------ ------------ ------------
Net realized and unrealized gain on investments 2.68 2.68 1.04 1.01
------------- ------------ ------------ ------------
Total from investment operations 2.68 2.56 1.05 0.99
------------- ------------ ------------ ------------
Less Distributions:
Distributions from net investment income -- -- -- --
------------- ------------ ------------ ------------
Distributions from capital gains (0.02) -- -- --
------------- ------------ ------------ ------------
Distributions in excess of net investment income -- -- (0.01) (0.01)
------------- ------------ ------------ ------------
Total distributions (0.02) -- (0.01) (0.01)
------------- ------------ ------------ ------------
Net increase in net asset value 2.66 2.56 1.04 0.98
------------- ------------ ------------ ------------
Net Asset Value, End of Period $ 13.70 $ 13.54 $ 11.04 $ 10.98
============= ============ ============ ============
Total Return+ 24.29% 23.32% 10.51% (2) 9.91% (2)
Ratios/Supplemental Data:
Net Assets, End of Period (in 000's) $ 13,262 $ 23,563 $ 13,410 $ 7,025
Ratios of expenses to average net assets:
Before reimbursement of expenses by Adviser 1.71% 2.46% 3.28% (1) 4.03% (1)
After reimbursement of expenses by Adviser 1.20% 1.95% 1.20% (1) 1.95% (1)
Ratios of net investment income (loss) to average net assets:
Before reimbursement of expenses by Adviser (0.68)% (1.46)% (1.97)%(1) (2.72)%(1)
After reimbursement of expenses by Adviser (0.05)% (1.03)% 0.11% (1) (0.64)%(1)
Portfolio Turnover . 68% 68% 10% 10%
</TABLE>
(1) Annualized.
(2) Not annualized.
+ Total return without applicable sales charge.
(a) Capital Appreciation Fund Class A and Capital Appreciation Fund Class B
commenced investment operations on December 29, 1997. * Amount represents
less than $(0.01).
See accompanying Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights for a Share of Beneficial Interest Outstanding Throughout each Period
International Stock Fund
Class A Class B Class A Class B
Year Ended Year Ended Inception (a) to Inception (a) to
10/31/1999 10/31/1999 10/31/1998 10/31/1998
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.34 $ 10.28 $ 10.00 $ 10.00
------------- ------------ ------------ ------------
Income from Investment Operations:
Net investment income 0.14 0.05 0.08 0.03
------------- ------------ ------------ ------------
Net realized and unrealized gain on investments 1.56 1.56 0.27 0.26
------------- ------------ ------------ ------------
Total from investment operations 1.70 1.61 0.35 0.29
------------- ------------ ------------ ------------
Less Distributions:
Distributions from net investment income (0.14) (0.05) (0.01) (0.01)
------------- ------------ ------------ ------------
Distributions from capital gains (0.45) (0.46) -- --
------------- ------------ ------------ ------------
Total distributions (0.59) (0.51) (0.01) (0.01)
------------- ------------ ------------ ------------
Net increase in net asset value 1.11 1.10 0.34 0.28
------------- ------------ ------------ ------------
Net Asset Value, End of Period $ 11.45 $ 11.38 $ 10.34 $ 10.28
============= ============ ============ ============
Total Return+ 17.00% 16.09% 3.60% (2) 2.90% (2)
Ratios/Supplemental Data:
Net Assets, End of Period (in 000's) $ 33,214 $ 3,326 $ 27,656 $ 1,350
Ratios of expenses to average net assets:
Before reimbursement of expenses by Adviser 2.18% 2.93% 2.76% (1) 3.51% (1)
After reimbursement of expenses by Adviser 1.60% 2.35% 1.60% (1) 2.35% (1)
Ratios of net investment income (loss) to average net assets:
Before reimbursement of expenses by Adviser 0.72% 0.05% (0.01)%(1) (0.76)%(1)
After reimbursement of expenses by Adviser 1.30% 0.63% 1.15% (1) 0.40% (1)
Portfolio Turnover 57% 57% 60% 60%
</TABLE>
(1) Annualized.
(2) Not annualized.
+ Total return without applicable sales charge.
(a) International Stock Fund Class A and International Stock Fund Class B
commenced investment operations on December 29, 1997.
See accompanying Notes to Financial Statements.
<PAGE>
Notes to Financial Statements
1. Organization
MEMBERS Mutual Funds, a Delaware Business Trust (the "Trust"), is registered
under the Investment Company Act of 1940, as amended (the "1940 Act") as an
open-end, management investment company. As of the date of this report, the
Trust offers seven Funds (individually, a "Fund," collectively, the "Funds")
each with two classes of shares: Class A and Class B. Each class of shares
represents an interest in the assets of the respective Fund and has identical
voting, dividend, liquidation and other rights, except that each class of shares
bears its own distribution fees and its proportional share of fund level
expenses, is subject to its own sales charges, if any, and has exclusive voting
rights on matters pertaining to the Rule 12b-1 plan as it relates to that class.
The accompanying financial statements include the Cash Reserves Fund, Bond Fund,
Balanced Fund, High Income Fund, Growth and Income Fund, Capital Appreciation
Fund and International Stock Fund, each commencing operations on December 29,
1997.
The only transactions of the Funds prior to commencement of operations were the
sale of 49,000 Class A shares and 1,000 Class B shares of Cash Reserves Fund at
$1 per share and the sale of 4,900 Class A shares and 100 Class B shares of Bond
Fund, Balanced Fund, High Income Fund, Growth and Income Fund, Capital
Appreciation Fund and International Stock Fund at $10 per share on November 10,
1997.
2. Significant Accounting Policies
The preparation of financial statements in conformity with generally accepted
accounting principles 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 reporting 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: Investments in securities which are traded on a recognized
stock exchange or for which price quotations are available will normally be
valued on the basis of market quotations furnished by a pricing service which
has been approved by the Board of Trustees. Short-term obligations that mature
in sixty days or less are valued at amortized cost, which constitutes fair
value. All other securities and other assets are appraised at their fair values
as determined in good faith by and under the general supervision of the Board of
Trustees.
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 the accrual basis.
Dividend income is recorded on ex-dividend date.
Federal Income Taxes: It is each Fund's intention to qualify as a regulated
investment company for federal income tax purposes by complying with the
appropriate provisions of the Internal Revenue Code of 1986, as amended.
Accordingly, no provisions for federal income taxes are required in the
accompanying financial statements.
Classes: Class-specific expenses are borne by that class. Income, non-class
specific expenses, and realized and unrealized gains/losses are allocated to the
respective classes on the basis of relative net assets or settled shares, as
appropriate.
Expenses: Expenses that are directly related to one of the Funds are charged
directly to that Fund. Other operating expenses of the Fund are prorated to the
Funds on the basis of relative net assets.
Organization and Offering Costs: Each Fund bears all costs in connection with
its organization, including registration and notification fees and expenses with
respect to the sale of their shares under federal and state securities
regulation. These organization and offering costs are being amortized on a
straight-line basis over five years and one year, respectively. In the event any
of the initial shares of a Fund are redeemed by any holder thereof during the
amortization period, the proceeds of such redemptions will be reduced by an
amount equal to the pro-rata portion of unamortized deferred organizational
expenses in the same proportion as the number of shares being redeemed bears to
the number of initial shares of such Fund outstanding at the time of such
redemption. To the extent that proceeds of the redemptions are less than such
pro-rata portion of any unamortized organizational expenses, CIMCO has agreed to
reimburse the Fund promptly.
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.
Foreign Currency Transactions: The books and records are maintained in U.S.
dollars. Foreign currency amounts are translated into U.S. dollars on the
following basis:
(1) market value of investment securities, assets and liabilities at the
current rate of exchange; and
(2) purchases and sales of investment securities, income, and expenses at the
relevant rates of exchange prevailing on the respective dates of such
transactions.
The High Income and International Stock Funds report certain foreign
currency-related transactions as components of realized gains or losses for
financial reporting purposes, whereas such components are treated as ordinary
income for federal income tax purposes.
The Funds do not isolate the portion of gains and losses on investments in
securities that is due to changes in the foreign exchange rates from that which
is due to change in market prices of securities. Such amounts are categorized as
gain or loss on investments for financial reporting purposes.
Forward Foreign Currency Exchange Contracts: The High Income and International
Stock Funds may each purchase or sell forward foreign currency contracts for
defensive or hedging purposes when the Fund's Investment Adviser anticipates
that the foreign currency will appreciate or depreciate in value. The Funds
realize a gain or a loss at the time the forward contracts are closed out or
offset by a matching contract.
Futures Contracts: The Funds (other than the Cash Reserves Fund) may purchase
and sell futures contracts and purchase and write options on futures contracts.
Cash or securities are deposited with brokers in order to establish and maintain
a position. Subsequent payments made or received by the Fund based on the daily
change in the market value of the position are recorded as unrealized gains or
losses until the contract is closed out, at which time the gains or losses are
realized.
Reclassification Adjustments: Paid in Capital, undistributed net investment
income, and accumulated net realized gain (loss) have been adjusted in the
Statement of Assets and Liabilities for permanent book-tax differences for all
Funds.
3. ADVISORY, ADMINISTRATION AND DISTRIBUTION AGREEMENTS
The Trust has entered into an Investment Advisory Agreement with CIMCO Inc. (the
"Investment Adviser"). For its investment advisory services to the Portfolios,
CIMCO is entitled to receive a fee, which is calculated daily and paid monthly,
at an annual rate based upon the following percentages of average daily net
assets: 0.40% for the Cash Reserves Fund; 0.50% for the Bond Fund; 0.65% for the
Balanced Fund; 0.55% for the High Income Fund and Growth and Income Fund; 0.75%
for the Capital Appreciation Fund and 1.05% for the International Stock Fund.
The Investment Adviser, has entered into Subadviser Agreements for the
management of the investments of the High Income Fund and the International
Stock Fund. The Investment Adviser is solely responsible for the payment of all
fees to the Subadvisers. The Subadvisers for these funds are Massachusetts
Financial Services Company for the High Income Fund and IAI International
Limited and Lazard Asset Management for the International Stock Fund. The
Investment Adviser voluntarily agrees to waive a portion of its fees and to
reimburse the Funds for certain expenses so that total expenses will not exceed
certain expense limitations. The Investment Adviser, at its discretion, may
revise or discontinue the voluntary fee waivers and expense reimbursements at
any time. The Investment Adviser has agreed to waive fees and/or reimburse
expenses with respect to the Funds in order that total expenses will not exceed
the following amounts:
Fund Class A Class B
Cash Reserves Fund 0.55% 1.30%
Bond Fund 0.90% 1.65%
Balanced Fund 1.10% 1.85%
High Income Fund 1.00% 1.75%
Growth and Income Fund 1.00% 1.75%
Capital Appreciation Fund 1.20% 1.95%
International Stock Fund 1.60% 2.35%
For the year ended October 31, 1999, the Investment Adviser reimbursed expenses
of $128,007 for the Cash Reserves Fund, $131,403 for the Bond Fund, $133,221 for
the Balanced Fund, $138,215 for the High Income Fund, $124,700 for the Growth
and Income Fund, $129,364 for the Capital Appreciation Fund, and $193,962 for
the International Stock Fund.
Any reimbursements or fee reductions made by the Investment Adviser to a Fund
are subject to repayment by the Fund within the subsequent eighteen months, to
the extent that the Fund is able to make the repayment within its expense cap.
Since December 29, 1997 through October 31,1999, the Investment Adviser
reimbursed expenses of $274,295 for the Cash Reserves Fund, $288,176 for the
Bond Fund, $287,184 for the Balanced Fund, $296,526 for the High Income Fund,
$281,186 for the Growth and Income Fund, $280,691 for the Capital Appreciation
Fund, and $417,687 for the International Stock Fund.
The Trust and First Data Investor Services Group, Inc., which is a wholly-owned
subsidiary of First Data Corporation, now known as PFPC Global Fund Services
("PFPC"), are parties to an agreement under which PFPC provides administration
services for a fee calculated daily and paid monthly, at the annual rate of
0.15% of the first $500 million of the combined average daily net assets and
0.12% of the next $500 million of the combined average daily net assets and
0.09% of the combined average daily net assets over $1 billion. Currently, at
October 31, 1999, the Funds are at the minimum of $3,500 per Fund, per Class,
per month until aggregate net assets reach $392 million.
In addition, PFPC also provides certain fund accounting, custody administration
and transfer agency services pursuant to certain fee arrangements. Pursuant to
such fee arrangements, PFPC compensates the Trust's custodian bank, State Street
Bank and Trust, for its services in addition to the fees First Data receives.
CUNA Brokerage Services, Inc. (CUNA Brokerage) serves as distributor of the
Funds. The Trust adopted Distribution Plans (the "Plans") with respect to the
Trust's Class A and Class B shares pursuant to Rule 12b-1 under the 1940 Act.
Under the Plans, the Trust will pay service fees for Class A and Class B shares
at an aggregate annual rate of 0.25% of each Fund's daily net assets
attributable to the respective class of shares for all Funds except the Cash
Reserves Fund. The Trust will also pay distribution fees for Class B shares at
an aggregate annual rate of 0.75% of each Fund's daily net assets attributable
to Class B. The distribution fees are used to reimburse CUNA Brokerage for its
distribution expenses with respect to Class B shares only, including but not
limited to: (1) initial and ongoing sales compensation to selling brokers and
others engaged in the sale of Fund shares, (2) marketing, promotional and
overhead expenses incurred in connection with the distribution of Fund shares,
and (3) interest expenses on unreimbursed distribution expenses. The service
fees will be used to compensate selling brokers and others for providing
personal and account maintenance services to shareholders.
In addition to distribution fees, CUNA Brokerage received sales charges paid by
the purchasers or redeemers of the Funds' shares. For the year ended October 31,
1999, sales charges received by CUNA Brokerage were as follows:
Cash Reserves $ 187,750
Bond 357,271
Balanced 1,375,103
High Income 352,685
Growth and Income 2,346,872
Capital Appreciation 939,589
International Stock 119,846
Certain officers and trustees of the Funds are also officers of the Trust. The
Funds do not compensate its officers or affiliated trustees. Effective September
4, 1997, the Trust pays each unaffiliated trustee $1,000 per Board of Trustees
meeting attended.
4. Dividends from Net Investment Income and Distributions of Capital Gains
With respect to the Cash Reserves Fund, Bond Fund, and High Income Fund,
dividends from net investment income are declared daily. The Balanced Fund
declares dividends from net investment income monthly. The Growth and Income
Fund declares dividends from net investment income quarterly. The Capital
Appreciation Fund and the International Stock Fund declare dividends from net
investment income annually. Each fund distributes net realized gains from
investment transactions, if any, to shareholders annually.
5. Securities Transactions
For the year ended October 31, 1999, aggregate cost of purchases and proceeds
from sales of securities, other than short-term investments, were as follows:
U.S. GOVERNMENT OTHER INVESTMENT
SECURITIES SECURITIES
Fund Purchases Sales Purchases Sales
Bond $ 57,092,486 $ 52,174,182 $ 32,302,833 $ 28,384,111
Balanced 74,502,120 69,110,789 62,308,404 49,604,889
High Income -- -- 13,498,216 6,366,046
Growth and Income -- -- 57,896,368 9,050,087
Capital Appreciation -- -- 28,056,052 16,583,066
International Stock -- -- 21,113,848 17,551,889
At October 31, 1999, the aggregate gross unrealized appreciation (depreciation)
and net unrealized appreciation (depreciation) for all securities as computed on
a federal income tax basis for each Fund were as follows:
Fund Appreciation (Depreciation) Net
Bond $ 63,532 $ (90,839) $ (27,307)
Balanced 4,892,041 (1,187,578) 3,704,463
High Income 108,803 (1,159,516) (1,050,713)
Growth and Income 10,864,467 (5,269,434) 5,595,033
Capital Appreciation 6,238,980 (1,541,963) 4,697,017
International Stock 3,769,381 (2,885,623) 883,758
For federal income tax purposes, the Bond Fund and the High Income Fund have
capital loss carryovers as of October 31, 1999, which are available to offset
future capital gains, if any:
Losses Deferred Losses Deferred
Fund Expiring in 2006 Expiring in 2007
Bond Fund -- $ 349,486
High Income Fund $ 66,186 328,128
6. Foreign Securities
Each Fund may invest in foreign securities, although only the High Income Fund
and International Stock Fund anticipate having significant investments in such
securities. The International Stock Fund may invest all of its assets in foreign
securities and the High Income Fund may invest up to half of its assets in
foreign securities. No Fund will concentrate its investments in any particular
foreign country.
Foreign securities means securities that are: (1) issued by companies organized
outside the U.S. or whose principal operations are outside the U.S. ("foreign
issuers"), (2) issued by foreign governments or their agencies or
instrumentalities (also "foreign issuers"), (3) principally traded outside the
U.S., or (4) quoted or denominated in a foreign currency ("non-dollar
securities"). Foreign securities include ADR's, EDR's, GDR's, and foreign money
market securities.
7. Financial Instruments
Investing in certain financial instruments including forward foreign currency
contracts and futures contracts involves risks other than that reflected in the
Statement of Assets and Liabilities. Risks associated with these instruments
include potential for an imperfect correlation between the movements in the
prices of instruments and the prices of the underlying securities and interest
rates, an illiquid secondary market for the instruments or inability of
counterparties to perform under the terms of the contracts, and changes in the
value of foreign currency relative to the U.S. dollar. The High Income Fund and
International Stock Fund enter into these contracts primarily to protect these
Funds from adverse currency movements.
8. Concentration of Risk
The High Income Fund invests in securities offering high current income which
generally will be in the lower rating 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.
9. Capital shares and affiliated Ownership
Each fund is authorized to issue an unlimited number of shares of beneficial
interest with no par value. Each Fund currently offers two classes of shares,
Class A and Class B. At October 31, 1999, investments in the Funds by affiliates
were as follows:
CUNA MUTUAL CUNA MUTUAL CUMIS
LIFE INSURANCE INSURANCE INSURANCE
FUND CLASS COMPANY SOCIETY SOCIETY, INC.
CASH RESERVES A $1,635,342 $1,634,252 $ --
BOND A 1,617,059 1,615,982 --
HIGH INCOME A 5,169,216 -- --
INTERNATIONAL STOCK A 3,632,779 6,053,420 21,626,406
<PAGE>
Report of Independent Accountants
To the Board of Trustees and Shareholders
of MEMBERS Mutual Funds
In our opinion, the accompanying statements of assets and liabilities, including
the portfolios of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of MEMBERSCash Reserves Fund,
MEMBERSBond Fund, MEMBERSBalanced Fund, MEMBERSHigh Income Fund, MEMBERSGrowth
and Income Fund, MEMBERSCapital Appreciation Fund and MEMBERSInternational Stock
Fund (constituting MEMBERSMutual Funds, hereafter referred to as the "Funds") at
October 31, 1999, the results of each of their operations for the year then
ended, the changes in each of their net assets and the financial highlights for
the year then ended, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Funds'
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
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, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1999 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above. The financial statements of the Funds as of October 31, 1998 and for the
period then ended were audited by other independent accountants whose report
dated December 11, 1998 expressed an unqualified opinion on those statements.
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
December 10, 1999
<PAGE>
Other Information
Tax Information (unaudited)
Of the Dividends paid by Balanced Fund, High Income Fund, Growth and Income
Fund, Capital Appreciation Fund, and the International Stock Fund, 28.24%,
0.18%, 100%, 100%, and 2.89%, respectively, qualify for the corporate dividends
received deduction.
The International Stock Fund has made an election under Section 853 of the
Internal Revenue Code to pass through the benefit of foreign tax credits to its
shareholders. The amount per share of income from each country is $0.3176 and
foreign taxes paid to each country is $0.0289. This information is pertinent to
taxpayers who file a U.S. federal income tax return on the basis of fiscal year
ended October 31, 1999.
Change of Independent Accountants
On June 14, 1999 KPMG LLP resigned as independent accountants for the
MEMBERSMutual Funds and Ultra Series Fund (the "Funds"). KPMG's reports for the
Funds' financial statements for the past two years have not contained any
adverse opinion or disclaimer of opinion and have not been qualified as to
uncertainty, audit scope or accounting principles. In addition there have not
been any disagreements with KPMG during the Funds' two most recent fiscal years
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure which, if not resolved to the
satisfaction of KPMG, would have caused it to make a reference to the subject
matter of the disagreement in connection with its reports. The Funds' board of
directors, upon the recommendation of the audit committee, appointed
PricewaterhouseCoopers LLP as independent accountants for the Funds on June 15,
1999 for the 1999 fiscal year.
