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
Emerging Growth Fund 14
International Stock Fund 16
Family of Investments 18
Portfolios of Investments
Cash Reserves Fund 20
Bond Fund 21
Balanced Fund 23
High Income Fund 26
Growth and Income Fund 33
Capital Appreciation Fund 34
Emerging Growth Fund 35
International Stock Fund 37
Financial Statements
Statements of Assets & Liabilities 42
Statements of Operations 44
Statements of Changes in Net Assets 46
Financial Highlights 50
Notes to Financial Statements 54
Report of Independent Accountants 59
Other Information 60
<PAGE>
Letter to Shareholders
Dear Fellow Shareholder,
Welcome to the real world of investing.
After many years of outsized and nearly continuous market value gains in both
stocks and bonds, capped by five consecutive calendar years of 20%-plus stock
market returns, U.S. investors may now have entered a much more normal period by
historical standards. What exactly is "historically normal?" According to the
statisticians at Ibbotson Associates:
o Since the mid-1920's, the U.S. stock market has been in a downtrend of some
length approximately one-third of the time.
o Over most of our nation's nearly 225-year history, interest rates have been
in a rising trend (making bond prices decline) approximately one-half of
the time.
Ominous as this sounds, keep in mind that over these same historical periods,
U.S. stocks and bonds provided patient investors with long-term returns
significantly in excess of inflation rates, and did so while providing greater
safety and liquidity than any other practical investment alternative.
As MEMBERS Mutual Funds' fiscal year began last November 1, market action was
much like that of the year just ended. Bonds were gradually declining in price
as the Federal Reserve continued to ratchet up interest rates in its inflation
pre-emptive quest to slow the rate of economic growth. Stocks, however, were in
a world of their own as technology stocks led the markets ever higher. Dot-com
mania was spreading rapidly. And, Jeff Bezos, CEO of Amazon.com, was named Time
magazine's Person of the Year in December. But, as often happens, this crowning
moment proved to mark the beginning of the end of not only Amazon.com's
ascension, but also of the broad investing public's inflated expectations for
the Dot-com phenomenon. And between December, 1999, and March of 2000, nearly
every Internet-related company's stock peaked and entered a free-fall that would
ultimately mirror if not exceed their initial upside moves.
Although the sudden occurrence of these price declines caught many by surprise,
it was not entirely unexpected. MEMBERS Capital Advisors (f/k/a CIMCO Inc.) had
largely avoided the Dot-com "story stocks" due to their almost universal lack of
a comprehendible business model that included an eventual path to profitability.
Our 2000 Economic and Market Outlook called for the deflation of the Internet
stock bubble sometime in 2000, and our portfolios were positioned accordingly.
As a result, the period from the early-2000 market peaks to the subsequent lows
provided a vivid example of the risk-moderating capability of the MEMBERS stock
and diversified funds.
The following chart shows this "peak to trough" performance. It shows the
percentage returns for the period from each fund's individual early-2000 peak to
the nearly universal May 23 market low, along with the percentage price change
in several popular market indexes from their individual peaks to their May 23
lows.
<PAGE>
GRAPHIC: At this place there is a bar chart showing the following percent
returns or price changes on the dates listed.
Fund Date of Peak Percent Return or Price Change*
Balanced 03/23/00 -5.13
Growth & Income 04/07/00 -5.16
Capital Appreciation 03/24/00 -9.08
S&P 500* 01/14/00 -10.05
DJIA* 03/24/00 -11.10
Russell 2000* 03/09/00 -23.94
NASDAQ* 03/10/00 -37.32
*Index numbers are price change only. Fund numbers are total returns, which
include dividends.
After these May lows, stocks generally recovered through August, but then headed
down again and were making new lows as the Funds' fiscal year came to a close on
October 31. High quality bonds were mostly stable to up in price, but high-yield
bond markets have been selling off in reaction to escalating credit problems in
areas previously thought to be sound. For the year as a whole, it was very much
a case of a strong start, followed by increasing volatility and market weakness.
However, as you will see on the following Fund Performance Review pages, the
"core" MEMBERS Mutual Funds cited above continued to perform extremely well in
this very difficult market, and the other domestic funds performed generally in
line with their representative markets.
Our stock and bond markets will face continuing challenges in the months ahead.
Although the U.S. economy will almost certainly continue to grow, and the
profits of U.S. corporations overall will most likely rise further, the rate of
economic growth is moderating, along with corporate profit margins. Our
developing political stalemate could further dampen the mood of consumers,
business management and investors, and could also begin to impact negatively the
international standing of the U.S. Foreign investment into U.S. bond and stock
markets has been sizable and growing the last several years, and has been huge
in recent months as more and more people worldwide recognized the strength and
momentum of our economy and currency. If this factor wanes in the months ahead,
our investment markets will be further tested.
In this challenging environment, it is always difficult for investors to
continue their long-term, periodic investment accumulation programs. It is just
such an environment, of course, that offers the best prospects of "buying low."
But, many investors find they are more influenced by negative commentary from
the financial media than by the reduced prices of potential new investments. For
this reason, it is especially important in such times of market weakness and
increased volatility to maintain at least the core of your portfolio in
investments with a record of successfully weathering such financial storms, and
to focus even more on such investments for new purchases.
We appreciate your confidence in MEMBERS Funds, and remain committed to your
ultimate investment success.
Sincerely,
/s/ Lawrence R. Halverson
Lawrence R. Halverson, CFA
President
<PAGE>
Fund Performance Review
MEMBERS Bond Fund
To use an old cliche, "when all the smoke cleared," there was not much change in
interest rates from the November 1, 1999 beginning to the October 31, 2000 end
of the Bond Fund's just-completed fiscal year. In fact, if you were fortunate
enough to have slept through the entire year and just awoke, you would probably
not believe that the Federal Reserve Board (the Fed) had actually raised rates
on six occasions since mid-1999. Nor would you believe that the two-year U.S.
Treasury Note, "still" at 5.85%, had hit 6.90% during the year, or that the
bellwether thirty year U.S. Treasury, currently at 5.75%, had reached a yield
level of 6.75%. Needless to say, rates didn't travel too far, but the ride was
extremely bumpy.
How can the Fed raise interest rates and yields on treasury securities change so
very little? That can be answered in two words: "budget surplus." In January of
2000, the Treasury Department announced its intention to use the surplus to
periodically purchase outstanding treasury bonds in the open market, focusing
their initial efforts on the longer maturities. This announcement came as the
market was pricing in an expected series of rate hikes by the Fed. This caused
the many bond dealers who had "shorted" treasury notes (sold notes they had
borrowed in hopes of buying them back cheaper after the fed hiked rates) to
scramble to cover their short positions. This move, coupled with the Fed "buy
backs," created an inversion in the slope of the yield curve (meaning
longer-term interest rates became lower than short rates). This event resulted
in a large difference in total return performance between short-term bonds and
long-term bonds. Longer maturity treasury bonds (10- to 30-year) returned over
2.5% more than short-term (1-3 year) maturities.
The corporate bond market on the other hand did not benefit from the efforts of
the Treasury Department. Rising corporate issuance and a perceived slowdown in
economic activity actually caused corporate bonds to decline in price (increase
in yield) from their levels at the beginning of the fiscal year. As a result,
the return realized by any one bond fund was highly dependent on the fund's
specific sector and maturity concentrations.
This also was the year of the "fallen angels" - companies that had been among
the darlings of the investment community, but experienced an unexpected event
that caused their bonds to fall suddenly in market price. Examples include
companies like Rite Aid and Service Corp. International which reported
accounting irregularities, and Owens Corning which filed for reorganization due
to asbestos claims arising from products they made and sold during the 1970's.
The list of companies in this category is large and growing, causing the yield
spread on corporate bonds versus U.S. Treasuries to expand to historically wide
levels to compensate investors for the ever growing risks.
MEMBERS Bond Fund has always been structured to minimize credit risk by
maintaining an average credit rating of "AA." We also keep a very low percentage
of lower quality, high yield bonds in the fund, knowing that if exposure to high
yield is desired, our shareholders can always invest in MEMBERS High Income
Fund. Even with our high average credit rating, however, we were unable to walk
through this year's credit quality minefields without suffering a few injuries.
We had a position in Owens Corning that we acquired earlier in 2000. This was a
company that finished 1999 with strong earnings momentum and generated large
levels of cash flow. The two major credit rating services had the bonds rated
investment grade with a stable outlook. Not one Wall Street analyst saw the
rising asbestos claims issue until the company's earnings warning in June, 2000.
After the news, in the resulting selling frenzy, the bonds fell quickly from a
price of $88 per $100 par to $27. As of September 30, 2000, we had liquidated
our entire holding, costing the fund approximately 1% in performance for the
year. We also had a small position in Saks Fifth Avenue, which like all
department store retailers has been under pressure. It too has been sold.
The good news, however, is that the basic structure of the fund and our
management strategy allowed MEMBERS Bond Fund to end the year with a positive
return of 4.89% (on Class A Shares at net asset value). With the Fund's strong
finish in 1999, it still remains in Morningstar's top quartile among similar
funds for the two years ended October 31, 2000.
For the rest of 2000 and 2001, there are new dark clouds of uncertainty forming.
Is the economy heading for a soft or a hard landing? With the developing
gridlock, what is Washington going to accomplish? Is the volatility in stocks
and corporate bonds trying to tell us something? Will the Fed begin to ease
interest rates? The list continues, with many possible scenarios emerging.
Our stance is to not bet on any one possible outcome. The Fund is positioned for
an environment of uncertainty. More than 60% of the current holdings are backed
by the full faith and credit of the U.S. Government. Approximately 40% of the
portfolio is in mortgage-backed securities, the majority of which are U.S.
Government-backed GNMA's. Corporate bonds have been reduced to about a 30%
weighting, and a majority of them are rated "A" or higher. We expect to maintain
this structure until some of these clouds of uncertainty dissipate. This should
allow the fund to continue to meet its priority objective of adding stability,
along with a moderate yield, to a diversified portfolio of funds.
MEMBERS Capital Advisors Fixed Income Portfolio
Management Team -- Advisor
<PAGE>
Fund Performance Review
Bond Fund Diversification
of Investments Among Market Sectors
GRAPHIC: Pie chart showing Bond Fund Diversification of Investments Among Market
Sectors as follows: U.S. Government and Agency Obligations 63%, Corporate Notes
and Bonds 33%, Cash & Other Assets 4%.
Bond Fund Cumulative Performance
Of $10,000 Since Inception
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 04/30/00 10/31/00
<S> <C> <C> <C> <C> <C> <C> <C>
Class A Shares $ 9,570 $ 9,698 $10,151 $10,225 $10,315 $10,422 $10,818
Class B Shares 10,000 9,667 10,085 10,195 10,235 10,372 10,721
Lehman Brothers Intermediate
Government/Corporate Bond Index 10,000 10,226 10,820 10,650 10,927 11,042 11,631
</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.
MEMBERS Bond Fund Average Annual Total Return
<TABLE>
<CAPTION>
% Return Without Sales Charge % Return After Sales Charge***
12 Months Ended Since Inception 12 Months Ended Since Inception
10/31/00 to 10/31/00+ 10/31/00 to 10/31/00+
<S> <C> <C> <C> <C>
Class A Shares* 4.89% 4.41% 0.38% 2.80%
Class B Shares** 4.10 3.65 -0.40 2.48
Lipper Intermediate Investment Grade Bond Fund Index 6.33 4.74 -- --
Lehman Brothers Intermediate Government/Corporate Bond Index 6.44 5.47 -- --
</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>
Fund Performance Review
MEMBERS Balanced Fund
The U.S. stock market swung wildly during the year ended October 31, 2000, up
strongly through January then falling sharply during most of the
March-through-May time-span. Since May, the market has remained in a volatile
trading range, but most indexes managed to post at least modest overall advances
for the year. The large-capitalization, growth stock-dominated Standard & Poor's
500 returned 6.09% for this twelve-month period, but for the first time in a
long while was overshadowed by the performance of smaller stocks. S&P's MidCap
400 index was up 31.65% while the SmallCap 600 advanced 25.26% as market
leadership shifted from large company stocks and technology to long-neglected
mid- and small-cap areas like utilities, financial services and energy stocks.
The U.S. bond market was relatively well behaved during this period, but did see
significant divergence of performance among its various issuer and maturity
segments. The short end of the market as represented by three-month U.S.
Treasury bills began the fiscal year yielding 5.10%. Due to continuing increases
in short-term interest rates as the Federal Reserve attempted to moderate the
rate of economic growth, these Treasury bill yields had risen 130 basis points
to nearly 6.40% by October 31, 2000. At the same time, bond investors saw the
Treasury applying some of the burgeoning fiscal surplus to the retirement of
longer-term U.S. Treasury debt. As a result, the thirty-year U.S. Treasury bond,
after starting the fiscal year at 6.20% and hitting its high for the period of
6.75% in mid-January, declined in yield to 5.75% at October 31, producing an
"inverted" yield curve where short-term interest rates are higher than long-term
rates. Corporate bonds did not follow these Treasury bond trends, however,
resulting in little change in yields from the beginning of the period to the
end. As a result, most bond market indexes provided positive returns for the
twelve months ended October 31. Accumulating concerns about our slowing economy
and its effect on certain economic sectors, however, led to an increase in
yields on lower-rated bonds, producing negative total returns for high yield
bond indexes.
In this very mixed environment, MEMBERS Balanced Fund benefited from its broad
diversification, concentration in high quality securities and favorable security
selection. This allowed it to provide a total return for the year ended October
31, 2000 of 8.67% (on Class A shares at net asset value). This return exceeded
the 6.45% return of a representative market index (a blending of 45% S&P 500
Index, 40% Lehman Brothers Intermediate Government/Credit Bond Index and 15%
90-Day U.S. Treasury Bills), as well as the 7.88% return of the Lipper Balanced
Fund Index.
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, with the current mix being approximately 55% common stocks, 40% bonds and
5% money market instruments. 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 results.
Although the slowing rate of growth of the U. S economy is welcomed by the
Federal Reserve Board whose chairman expects growth to level off at a positive
and sustainable level, the slowing economy and increasing earnings shortfalls at
many companies are causing concerns for investors. We believe, however, that the
longer-term prospects for the U.S. economy and corporate profits remain bright.
Furthermore, there remain many individual stocks and bonds of worthy issuers
that are selling at attractive valuation levels. We believe that a
well-diversified portfolio of these securities like MEMBERS Balanced Fund can
provide patient, prudent investors with very good prospects for attractive
long-term returns with modest levels of risk.
MEMBERS Capital Advisors' Stock and Bond Portfolio
Management Teams -- Advisor
<PAGE>
Fund Performance Review
Balanced Fund Diversification
of Investments Among Market Sectors
GRAPHIC: Pie chart showing Balanced Fund Diversification of Investments Among
Market Sectors as follows: Common Stocks 55%, U.S. Government Obligations 28%,
Corporate Notes & Bonds 12%, Cash and other Assets 5%.
Balanced Fund Cumulative Performance
Of $10,000 Since Inception
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 04/30/00 10/31/00
<S> <C> <C> <C> <C> <C> <C> <C>
Class A Shares $ 9,470 $10,330 $10,315 $11,315 $12,017 $12,712 $12,955
Class B Shares 10,000 10,432 10,374 11,420 11,922 12,852 13,053
Blended Synthetic Index 10,000 10,872 11,196 11,707 11,912 12,724 13,383
(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.
MEMBERS Balanced Fund Average Annual Total Return
<TABLE>
<CAPTION>
% Return Without Sales Charge % Return After Sales Charge***
12 Months Ended Since Inception 12 Months Ended Since Inception
10/31/00 to 10/31/00+ 10/31/00 to 10/31/00+
<S> <C> <C> <C> <C>
Class A Shares* 8.67% 11.66% 2.91% 9.54%
Class B Shares** 7.93 10.86 3.43 9.83
Lipper Balanced Fund Index 7.88 10.14 -- --
Blended Synthetic Index 6.45 10.81 -- --
</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>
Fund Performance Review
MEMBERS High Income Fund
High yield markets fell under significant pressure during the one-year period
ended October 31, 2000 in response to evidence of a slowing U.S. economy and
increasing credit concerns. The percentage of the overall high-yield market
trading at distressed levels reached very high levels relative to historical
averages during the summer months. Liquidity was particularly troublesome during
much of the year, leading to some mutual funds struggling to raise cash to meet
redemptions. Given the significant volatility in the equity market and
uncertainty about inflation and the economy, investors have been reluctant to
move money into riskier segments of the bond market.
Recently, however, signs began to appear that this trend may be changing as
money started to flow back into the high-yield market. High-yield bonds posted
modest recoveries as the interest rate environment improved and investors were
drawn to extremely attractive yields relative to other sectors of the bond
market. The MEMBERS High Income Fund posted a return for the period of -0.81%
(on Class A Shares at net asset value). Although negative returns are never
welcome, this slight loss for the period compares very well to the -1.61% return
of the Lehman Brothers High Yield Index, and the -3.20% return recorded by the
Lipper High Yield Bond Index.
The Fund benefited from favorable security selection across a wide range of
industries, including energy refiners, telecommunications service providers and
equipment manufacturers, cable television companies, radio operators and
industrial manufacturers. In addition to favorable security selection, the
Fund's performance continued to benefit from successful avoidance of credit
problems and bankruptcies that hurt a variety of industries. In recent months,
many telecommunications and media securities experienced a dramatic sell-off in
tandem with the equity market. However, the Fund's holdings in these sectors, as
well as holdings in industries such as gaming, lodging and industrial
manufacturing, held up quite well. We maintained our significant exposure to
telecommunications and media bonds because we continued to see exceptional
growth outlooks, strong cash flows and above-average potential for credit-rating
upgrades.
We believe the outlook for the high-yield sector continues to improve after an
extended period of weakness relative to other fixed income sectors. Also, yield
spreads - the yield differences between non-investment-grade debt and U.S.
Treasuries with the same maturities - have widened significantly during the past
year, making yields on high-yield bonds very attractive relative to Treasury
securities. In addition, we believe the economy will remain healthy and
corporate earnings will remain strong, which should bode well for high-yield
bond prices because, historically, the high-yield market has closely tracked
corporate earnings growth.
With this outlook, investors seeking high current income and able to take the
attendant investment risk should be well served in the years ahead by exposure
to the high-yield bond market. MEMBERS High Income Fund will continue to be
managed to provide that exposure in an effective and productive manner.
MEMBERS Capital Advisors' Fixed Income Portfolio
Management Team -- Advisor
Massachusetts Financial Services -- Subadvisor
<PAGE>
Fund Performance Review
High Income Fund Diversification
Of Investments Among Market Sectors
Graphic: Pie chart showing High Income Fund Diversification of Investments Among
Market Sectors as follows: Telecommunications 22%, Communications 13%, Cash and
Other Assets 11%, Recreation 9%, Technology 6%, Energy 5%, Finance 4%, and Other
Sectors 30%.
High Income Fund Cumulative Performance
Of $10,000 Since Inception
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 04/30/00 10/31/00
<S> <C> <C> <C> <C> <C> <C> <C>
Class A Shares $ 9,570 $ 9,844 $9,016 $10,116 $ 9,890 $10,133 $ 9,809
Class B Shares 10,000 9,799 8,962 10,091 9,805 10,114 9,698
Lehman Brothers High Yield
Bond Index 10,000 10,398 9,790 10,444 10,215 10,223 10,050
</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.
MEMBERS High Income Fund Average Annual Total Return
<TABLE>
<CAPTION>
% Return Without Sales Charge % Return After Sales Charge***
12 Months Ended Since Inception 12 Months Ended Since Inception
10/31/00 to 10/31/00+ 10/31/00 to 10/31/00+
<S> <C> <C> <C> <C>
Class A Shares* -0.81% 0.87% -5.09% -0.68%
Class B Shares** -1.54 0.17 -5.97 -1.07
Lipper High Yield Bond Index -3.20 -0.49 -- --
Lehman Brothers High Yield Bond Index -1.61 0.18 -- --
</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>
Fund Performance Review
MEMBERS Growth and Income Fund
The U.S. stock market advanced during the year ended October 31, 2000, though
the ride was far from smooth. Many market indexes rose dramatically early in the
fiscal year, only to have those gains erased during the March-through-May
time-span. Since May, the market has remained in a volatile trading range. This
has resulted in an overall gain of 6.09% for the Standard & Poor's 500 during
this twelve-month period.
The combination of higher energy prices, a strong dollar, and the lagged effects
of Fed tightening have all hastened a slowdown in economic activity. Many "new
economy" stocks in the technology, media, and telecommunications sectors also
saw a moderation in their growth. At one time, many investors believed that the
secular prospects for these companies would make them immune from the effects of
an economic slowdown; this has not been the case. As a result, many of the
stocks within these sectors have been particularly volatile as their lofty P/E
multiples have contracted well in excess of the downward adjustment in profit
expectations. This revaluation has resulted in significant share price declines
for many so-called "new era" stocks, particularly those in the Internet space,
and has caused the technology-heavy NASDAQ Composite Index to lose one-third of
its value from its March 10th peak through the end of October.
The MEMBERS Growth and Income Fund returned 6.90% (on Class A Shares at net
asset value) during the twelve months ended October 31, 2000, exceeding the S&P
500 return over this period. Fund results also exceeded the return of the Lipper
Large-Cap Value Index, which returned 5.92%. As we have noted in the past, the
S&P 500 return in recent years has been heavily influenced by a very small group
of large-capitalization growth stocks. Since mid-March, we have begun to see a
broadening of this performance to include many more stocks. In addition, the
valuation levels of the small group of stocks that had been leading the averages
higher have begun to converge with the rest of the market. These factors have
brought about a more favorable investment environment for value-oriented funds,
which have begun to outperform the S&P 500. While the Lipper Large-Cap Value
Index lagged the S&P 500 during the twelve-month period, it has outperformed
during the most recent one-, three-, and six-month periods.
Fund results during the fiscal year benefited from strong relative performance
in the technology and consumer staples sectors. Technology sector results
continued to benefit from strong performance by EMC Corporation stock, the
Fund's largest holding. Shares of EMC, a leader in the enterprise storage
market, led the sector by advancing 144% during the past twelve months. Shares
of Harris, Hewlett-Packard and Compaq Computer also contributed to the sector's
positive relative performance. The consumer staples sector benefited most
notably from strong performance in Nabisco Holdings, which agreed to be acquired
by Philip Morris in an all-cash transaction. Other strong contributors included
PepsiCo and CVS Corporation.
Fund results were negatively impacted by poor relative performance in the
communication services sector, which went from being one of the best performing
sectors last year to the worst-performing sector this fiscal year. Holdings such
as Sprint, WorldCom, and AT&T all lagged during the period. Other sectors within
the Fund that did not keep pace with their corresponding S&P sector returns
include the basic materials and healthcare sectors. Georgia-Pacific
under-performed as paper and other commodity-related stocks were under pressure.
In the healthcare sector, Bristol-Myers Squibb declined after announcing an
unanticipated delay for a significant new drug.
At present, we are over-weighted in the consumer staples and energy sectors as
we are seeing stocks in these areas that continue to offer attractive return
potential. Conversely, we are under-weighted in the consumer cyclical and
finance sectors, believing 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.
Despite near-term cyclical concerns, the secular prospects for the U.S. economy
and corporate profits remain bright. Furthermore, while the
capitalization-weighted P/E for the S&P 500 appears high, there remain many
individual stocks that are selling at attractive valuation levels. We believe
that a well-diversified portfolio of these stocks offers attractive return
potential and the likelihood of greater stability. While our objective is to
lessen the impact of volatility, it can never be completely eliminated. These
fluctuations, no matter how severe, must be endured in order to reap the
long-term rewards of investing.
MEMBERS Capital Advisors' Stock Portfolio Management
Team -- Advisor
<PAGE>
Fund Performance Review
Growth and Income Fund Diversification
of Investments Among Market Sectors
Graphic: Pie chart showing Growth and Income Fund Diversification of Investments
Among Market Sectors as follows: Technology 27%, Consumer Staples 16%, Finance
12%, Healthcare 11%, Capital Goods 8%, Energy 7%, Communication Services 6%,
Cash and Other Assets 4%, Other Sectors 9%.
Growth and Income Fund Cumulative Performance
of $10,000 Since Inception
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 04/30/00 10/31/00
<S> <C> <C> <C> <C> <C> <C> <C>
Class A Shares $ 9,470 $10,979 $10,376 $12,153 $12,694 $13,719 $13,570
Class B Shares 10,000 11,113 10,447 12,287 12,821 13,893 13,682
S&P 500 Index 10,000 11,717 11,670 13,057 14,667 15,725 15,560
</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.
Members Growth and Income Fund Average Annual Total Return
<TABLE>
<CAPTION>
% Return Without Sales Charge % Return After Sales Charge***
12 Months Ended Since Inception 12 Months Ended Since Inception
10/31/00 to 10/31/00+ 10/31/00 to 10/31/00+
<S> <C> <C> <C> <C>
Class A Shares* 6.90% 13.50% 1.23% 11.34%
Class B Shares** 6.13 12.66 1.63 11.66
Lipper Large-Cap Value Index 5.92 11.58 -- --
S&P 500 Index 6.09 16.86 -- --
</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>
Fund Performance Review
MEMBERS Capital Appreciation Fund
During the past twelve months, the moderate overall stock market returns masked
great turmoil occurring beneath the surface. This turmoil reflected investors'
confusion about the continued low inflation and surprising profit growth in the
face of historically high oil prices, Fed-induced interest rate increases and
the strong dollar. The Internet bubble burst in March as the sector peaked and
has been in a devastating free fall ever since as cash strapped companies with
questionable business plans found that the cash well had run dry. High oil
prices and weak foreign currencies have raised concerns of a global economic
slowdown, resulting in decreases in capital spending. Investors began to turn
away from the large capitalization stocks that had driven the market's advance
over the past several years in favor of more reasonably valued
mid-capitalization stocks. While the Fed's attempt to engineer a "soft landing"
continues, investors are struggling to reset expectations for a slower growth
environment. This process prevented the market from establishing any firm
leadership and led to its modest returns for this twelve-month period.
The broad Standard and Poor's 1500 Super Composite Index returned 8.16% during
this period. The large capitalization S&P 500 returned 6.09%, lagging the
stellar 31.65% return for the S&P 400 Midcap Index and the impressive 16.11%
return posted by the Russell 2000 Small Cap Index.
The Capital Appreciation Fund, with its mid- to large-capitalization
orientation, returned a very strong 20.12% (on Class A Shares at net asset
value) for the twelve months ended October 31, 2000. This compares very well
with the representative market indexes cited above, and significantly exceeds
representative peer group averages like Lipper's Multi-Cap Core Index which
returned 14.64% during the period.
Performance during this fiscal year was driven by out-performance relative to
the market in the technology, communication services and healthcare sectors.
Strong performers in the Fund during the period included Peoplesoft, EMC,
Seagate Technology, Ace Limited, Elan ADS, and Alza. The Fund's performance was
dampened by under-performance in the capital goods and utilities sectors. The
Fund's sector representations reflect our "bottom up" analysis of the
fundamental strengths of each individual stock. This approach can lead to the
over or under-weighting of certain sectors as we await the market's validation
of our perceptions of their relative attractiveness. For instance, our
under-weighted position in the capital goods sector during this reporting period
offset some of the effects of the sector's return under-performance.
The Fund enters its new fiscal year modestly over-weighted in the consumer
cyclical, energy and basic material sectors. The Fund is under-weighted in the
consumer staples, healthcare and capital goods sectors. Although sector
weightings may deviate from the representative index's weightings, the Fund
remains well diversified at all times.
As the slowdown in the rate of economic growth continues to unfold, uncertainty
and volatility will likely continue to stalk the markets. This is the first
period of broad reductions in investors' expectations for economic growth in the
past several years, and investors continue to rotate out of growth stocks and
into more reasonably valued names. Concerns related to slowing profit growth in
technology and communications have begun to turn into reality and the market is
now resetting growth and profitability assumptions for a slower but probably
more sustainable economic growth environment. World economies remain a question
mark, but the U.S. remains well positioned with modest inflation, low
unemployment and a sustainable growth rate.
Valuation remains an area of concern, reflecting the uncertainty of future
earnings growth rates throughout our economy. These concerns are causing
volatility to remain at high levels. This high volatility has the potential to
cause investors to deviate from their long-term investment accumulation
disciplines. We continue 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.
MEMBERS Capital Advisors' Stock Portfolio Management
Team -- Advisor
<PAGE>
Fund Performance Review
Capital Appreciation Fund Diversification
of Investments Among Market Sectors
Graphic: Pie chart showing Capital Appreciation Fund Diversification of
Investments Among Market Sectors as follows: Technology 28%, Finance 14%,
Consumer Cyclicals 9%, Healthcare 9%, Capital Goods 8%, Consumer Staples 8%,
Communication Services 7%, Energy 7%, Cash and Other Assets 4%, Other Sectors
6%.
Capital Appreciation Fund Cumulative Performance
of $10,000 Since Inception
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 04/30/00 10/31/00
<S> <C> <C> <C> <C> <C> <C> <C>
Class A Shares $ 9,470 $11,109 $10,465 $11,904 $13,007 $14,654 $15,623
Class B Shares 10,000 11,261 10,541 12,034 13,153 14,870 15,812
S&P 400 Midcap Index 10,000 11,717 10,381 11,705 12,562 15,481 15,446
</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.
MEMBERS Capital Appreciation Fund Average Annual Total Return
<TABLE>
<CAPTION>
% Return Without Sales Charge % Return After Sales Charge***
12 Months Ended Since Inception 12 Months Ended Since Inception
10/31/00 to 10/31/00+ 10/31/00 to 10/31/00+
<S> <C> <C> <C> <C>
Class A Shares* 20.12% 19.27% 13.73% 17.00%
Class B Shares** 19.25 18.41 14.75 17.50
Lipper Multi-Cap Core Index 14.64 15.74 -- --
S&P1500 Super Composite Index 8.16 16.55 -- --
</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>
Fund Performance Review
MEMBERS Emerging Growth Fund
Stock market activity during the fiscal year ended October 31, 2000 was
radically different from recent years. Beginning mid-1999, low unemployment
rates and rising wages caused concerns among investors that the economy may be
growing too rapidly. The Federal Reserve Board began what became over the
ensuing year a series of six hikes in short-term interest rates in an effort to
slow economic growth to what it believes is a more sustainable level. Higher
energy prices generated by a supply/demand imbalance contributed to inflationary
concerns. As a result, stocks provided less-than-exciting returns with
more-than-exciting levels of volatility.
Technology stocks were particularly impacted by a sudden market reassessment of
future growth prospects for most newcomers and many leaders in the sector. The
"Internet bubble" deflated with great public rancor as many of the same Dot-coms
that were last year's darlings on Wall Street became this year's dogs on Main
Street. Many viable technology companies saw their stocks prices fall in
sympathy with the declines in Dot-com land, even though their prospects for
long-term success were still quite bright relative to their upstart
counterparts. Previously high valuations among many of the technology elites
contributed to a significant decline in the NASDAQ Composite index. At one point
during the period, this technology-heavy index declined more than 37% from its
peak achieved on March 10, 2000.
The MEMBERS Emerging Growth Fund's heavy emphasis on technology stocks made it
vulnerable to the aforementioned sell-off. During the period from its February
29, 2000 inception through October 31, 2000, the Fund (on Class A Shares at net
asset value) posted a return of -21.30% versus -28.18% for the NASDAQ Composite
index. The more diversified S&P 500 returned 5.31%, owing its out-performance
relative to the NASDAQ Composite to its significantly lower concentration in
technology stocks.
We continue to find great companies among technology stocks, though leadership
in that sector has narrowed significantly. Corporate America appears to be under
tremendous pressure to quickly become more efficient by using the Internet and
business-to-business (B2B) applications. Rather than trusting smaller B2B
technology companies, Fortune 500 corporations are turning to those service
providers with proven products, large market shares and well-established
customer bases for their B2B solutions.
We also find some intriguing opportunities in the financial services sector,
particularly among the investment banks that have benefited from a wave of
global merger and acquisition activity. In addition, more favorable pricing
among the property and casualty insurance companies brings the prospect for
better-than-expected (by Wall Street) earnings and stronger performance.
We are still investing in the best long-term growth stories that we've been able
to identify, but in much more diverse markets. We believe that many companies
enabling B2B commerce will be long-term winners, given estimates that B2B
commerce could go from $400 billion today to approximately $7 trillion over the
next four years. We have significantly increased our weightings in financial
services reflecting a potentially favorable future interest rate environment.
And, we believe continued consolidation in the sector will also present
opportunities for investors. Finally, although we have scaled back our
communication services holdings following major earnings disappointments, we
still believe in the long-term potential for telecommunications equipment
companies. Overall, we have positioned the portfolio rather aggressively,
focusing more on growth stocks as opposed to some of the more defensive stocks
we owned at mid-year. We maintain our long-term belief that stock prices will
follow earnings growth and cash flow. Although we want to own the current
leaders that are showing strong and accelerating growth, the real focus of
MEMBERS Emerging Growth Fund is on owning the next-generation leaders.
MEMBERS Capital Advisors' Stock Portfolio Management
Team -- Advisor
Massachusetts Financial Services Company-- Subadvisor
<PAGE>
Fund Performance Review
Emerging Growth Fund Diversification
of Investments Among Market Sectors
Graphic: Pie chart showing Emerging Growth Fund Diversification of Investments
Among Market Sectors as follows: Technology 36%, Healthcare 16%, Financial
Services 15%, Cash and Other Assets 9%, Utilities 6%, Telecommunications 5%,
Capital Goods 5%, Other Sectors 8%.
Emerging Growth Fund Cumulative Performance
of $10,000 Since Inception
Graphic: Line chart showing Emerging Growth Fund Cumulative Performance of
$10,000 Since Inception for the following:
<TABLE>
<CAPTION>
02/29/00 04/30/00 10/31/00
<S> <C> <C> <C>
Class A Shares $ 9,470 $ 8,125 $ 7,453
Class B Shares 10,000 8,194 7,478
S&P 500 Index 10,000 10,648 10,531
Russell 2000 Index 10,000 8,779 8,682
</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 and Russell index returns do not reflect expenses or sales
charges.
MEMBERS Emerging Growth Fund Average Annual Total Return
<TABLE>
<CAPTION>
% Return Without Sales Charge % Return After Sales Charge***
Since Inception Since Inception
to 10/31/00+ to 10/31/00+
<S> <C> <C>
Class A Shares* -21.30% -25.47%
Class B Shares** -21.70 -25.22
Lipper Large-Cap Growth Index -7.61 --
S&P500 Index 5.31 --
Russell 2000 Index -13.18 --
</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 February 29, 2000. Returns are not
annualized.
<PAGE>
Fund Performance Review
MEMBERS International Stock Fund
International stocks struggled through most of the year ended October 31, 2000
under the weight of multiple pressures. Global capital flows have been heavily
skewed toward U.S. capital markets reflecting the extended period of preeminence
by the domestic economy. That created a significant demand for the U.S. dollar,
and an opposing sell-off in many foreign currencies. This, and the U.S.
economy's ability to maintain historically high levels of growth while keeping
inflation in check, have been the main drivers for the dollar's continued
strength.
Contributing to the relative strength in the U.S. dollar was a significant rise
in the price of oil which trades in international markets via the U.S. dollar.
In contrast, European economies continued to vacillate between fostering growth
and fighting inflation as price increases doggedly accompanied any pick up in
growth. This currency imbalance magnified the spread between international stock
returns in local currency terms versus U.S. dollar terms. For example, the
Morgan Stanley Europe, Australasia and Far East (EAFE) stock index posted a
12-month return of 11.98% in local currency terms, but a -2.64% return - a loss
- in U.S. dollar terms.
The MEMBERS International Stock Fund is composed primarily of EAFE-type
large-capitalization stocks domiciled in developed countries. To gain
diversification and to seek the higher historical returns provided by smaller
companies and emerging market companies, a smaller portion of its portfolio is
invested in these typically more volatile categories. This exposure hurt returns
during the Fund's year ended October 31 as the Morgan Stanley EAFE Small Cap
Index returned -7.86% and the Emerging Markets Free Index -8.74% (both in U.S.
dollars). As a result, MEMBERS International Stock Fund posted a return of
-9.29% (on Class A Shares at net asset value) versus 3.45% for the Lipper
International Stock Fund Index for the one year period ended October 31, 2000.
As the Fund's fiscal year ended, evidence that the world economy is slowing was
apparent, and European economies showed increasingly disappointing performance.
The seriousness of the slowdown remains to be seen, and will be influenced
significantly by whether or not the U.S. achieves the soft landing the Federal
Reserve is seeking. Either way, it seems prudent to monitor cyclical exposure so
the Fund has given a greater weight to the more defensive stocks. Nevertheless,
earnings expectations for most industrial stocks are still more realistic than
for many highly priced technology companies. A return to falling interest rates
would especially benefit utilities and financial stocks.
Within these areas, the Fund holds those companies expected to be less
susceptible to a potential slowdown in capital market activity. In the event of
such a slowdown, it is expected that developing-Asia (ex-Japan) would fare
particularly poorly. As such, the Fund is maintaining a negligible position in
this region. In Japan, it is expected that the ongoing restructuring of some of
the major companies would offset some of the negative impact of an economic
slowdown. As a result, the Fund is maintaining a market weight in Japan. The UK
continues to represent good value in a seemingly expensive world and its
weighting remains unchanged.
High volatility and divergent performances characterized the emerging markets
during the period. Asian emerging markets remain particularly weak, even after
falling nearly 30% for the year ended October 31, while Latin American markets
turned in a very respectable 8.17% return. The Fund's emerging market stocks
performed essentially in line with the broad emerging markets indexes.
Small cap international companies outperformed the emerging market asset class
as the appealing relative valuations of small caps continued to attract
investors. During the period, the small cap segment of the Fund also
outperformed its benchmark, the Morgan Stanley EAFE Small Cap Index. Stock
selection was generally strong during the period, and country selection
significantly aided performance due to an underweight position in Japan. Given
the weak outlook for the Japanese economy, we remain comfortable with an
underweight position in small caps. Consumer sentiment and retail sales continue
to decline, and valuations remain high relative to the other regions. Technology
stocks within the portfolio performed strongly after a weak second quarter as
financially productive companies in the sector were able to shake the overall
negative sentiment.
After an extended period of under-performance relative to U.S. markets, it is
tempting to abandon the diversification afforded by exposure to international
stocks. This is typically the worst time to do so, however, so we encourage
investors to stay the course and maintain their targeted component of their
long-term investment assets in international securities.
MEMBERS Capital Advisors' Stock Portfolio Management
Team -- Advisor
IAI International Limited -- Subadvisor
Lazard Asset Management -- Subadvisor
<PAGE>
Fund Performance Review
International Stock Fund
Geographical Diversification of Investments
Graphic: Pie chart showing International Stock Fund Diversification of
Investments Among Market Sectors as follows: United Kingdom 18%, Japan 18%, Cash
and Other Assets 9%, Germany 7%, France 6%, Switzerland 5%, Netherlands 5%,
Spain 4%, Other Countries 28%.
International Stock Fund Cumulative Performance
of $10,000 Since Inception
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 04/30/00 10/31/00
<S> <C> <C> <C> <C> <C> <C> <C>
Class A Shares $ 9,470 $11,157 $ 9,811 $10,840 $11,479 $11,033 $10,402
Class B Shares 10,000 11,301 9,840 10,916 11,545 11,103 10,413
Morgan Stanley Capital
International Europe, Asia
& Far East Index 10,000 11,592 11,090 12,035 13,683 14,619 10,410
</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.
MEMBERS International Stock Fund Average Annual Total Return
<TABLE>
<CAPTION>
% Return Without Sales Charge % Return After Sales Charge***
12 Months Ended Since Inception 12 Months Ended Since Inception
10/31/00 to 10/31/00+ 10/31/00 to 10/31/00+
<S> <C> <C> <C> <C>
Class A Shares* -9.29% 3.40% -14.09% 1.44%
Class B Shares** -9.92 2.61 -13.97 1.43
Lipper International Stock Fund Index 3.45 10.86 -- --
Morgan Stanley Capital International Europe, Asia & Far East Index -2.64 10.63 -- --
</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
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 MEMBERS Capital Advisors' 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, 2000,
please turn to page 20.
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 MEMBERS Capital Advisors' 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, 2000,
please turn to page 21.
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 MEMBERS Capital Advisors' 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, 2000,
please turn to page 23.
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
MEMBERS Capital Advisors uses one or more subadvisors under a "manager of
managers" approach to make investment decisions for this Fund. Massachusetts
Financial Services Company (MFS) is the only subadvisor currently used by
MEMBERS Capital Advisors 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, 2000,
please turn to page 26.
<PAGE>
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 MEMBERS Capital Advisors' 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, 2000,
please turn to page 33.
CAPITAL APPRECIATION FUND
Investment Objective
The Capital Appreciation Fund seeks long-term capital appreciation.
Portfolio Management
The Fund is managed by a team of MEMBERS Capital Advisors' portfolio managers.
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, 2000,
please turn to page 34.
EMERGING GROWTH FUND
Investment Objective
The Emerging Growth Fund seeks long-term capital appreciation.
Portfolio Management
MEMBERS Capital Advisors uses one or more subadvisors under a "manager of
managers" approach to make investment decisions for this Fund. Massachusetts
Financial Services Company (MFS) is the only subadvisor currently used by
MEMBERS Capital Advisors to manage the assets of the Fund.
Primary Investment Strategies
The Emerging Growth Fund invests generally in common stocks, securities
convertible into common stocks and related equity securities. The Fund seeks
securities of emerging growth companies, which are companies that are either:
o relatively small or early in their life cycle, but have the potential to
become much larger enterprises, or
o major enterprises whose rates of earnings growth are anticipated to
accelerate because of changes such as new management, new products, changes
in demand for the company's products, or changes in the economy or segments
of the economy affecting the company.
For a listing of the securities held in the portfolio at October 31, 2000,
please turn to page 35.
INTERNATIONAL STOCK FUND
Investment Objective
The International Stock Fund seeks long-term growth of capital by investing
primarily in foreign equity securities.
Portfolio Management
MEMBERS Capital Advisors uses one or more subadvisors under a "manager of
managers" approach to make investment decisions for this fund. Lazard Asset
Management is the only subadvisor currently used by MEMBERS Capital Advisors 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 receipts and Global depository receipts.
For a listing of the securities held in the portfolio at October 31, 2000,
please turn to page 37.
<PAGE>
CASH RESERVES FUND-- Portfolio of Investments
Value
Par Value (Note 2)
COMMERCIAL PAPER (A) - 62.40%
Chemicals - 5.01%
$ 400,000 E. I. du Pont de Nemours & Co.
6.430%, due 11/13/00 $ 399,143
Communication Services - 16.22% 300,000 AT&T Corp.
6.490%, due 11/06/00 299,730
300,000 BellSouth Telecommunications, Inc.
6.450%, due 12/04/00 298,226
300,000 Motorola, Inc.
6.480%, due 11/02/00 299,946
400,000 SBC Communications, Inc.
6.520%, due 01/10/01 394,929
1,292,831
Consumer Staples - 18.71%
300,000 Campbell Soup Co.
6.470%, due 12/06/00 298,113
400,000 Kimberly-Clark Corp.
6.460%, due 11/29/00 397,990
400,000 Target Corp.
6.470%, due 12/18/00 396,621
400,000 Wal-Mart Stores, Inc.
6.460%, due 11/21/00 398,565
1,491,289
Finance - 13.70%
400,000 General Electric Capital Corp.
6.480%, due 11/01/00 400,000
400,000 Goldman Sachs Group, Inc.
6.510%, due 01/02/01 395,515
300,000 Merrill Lynch & Co., Inc.
6.530%, due 01/08/01 296,300
1,091,815
Media - 5.01%
400,000 McGraw-Hill Cos., Inc.
6.470%, due 11/15/00 398,993
Utilities - 3.75%
300,000 Madison Gas and Electric Co.
6.470%, due 11/27/00 298,598
Total Commercial Paper 4,972,669
( Cost $4,972,669 )
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (A) - 32.41%
Federal National Mortgage Association - 13.64%
300,000 6.370%, due 12/11/00 297,876
400,000 6.420%, due 01/04/01 395,435
400,000 6.420%, due 01/25/01 393,937
1,087,248
Federal Home Loan Bank - 18.77%
500,000 6.540%, due 11/08/00 499,364
500,000 6.430%, due 12/15/00 496,071
500,000 6.900%, due 08/28/01 500,000
1,495,435
Total U.S. Government and Agency Obligations 2,582,683
( Cost $2,582,683 )
CERTIFICATE OF DEPOSIT - 3.66%
292,094 State Street Eurodollar
6.000%, due 11/01/00 292,094
Total Certificate of Deposit 292,094
( Cost $292,094 )
TOTAL INVESTMENTS - 98.47% 7,847,446
( Cost $7,847,446** )
NET OTHER ASSETS AND LIABILITIES - 1.53% 121,533
TOTAL NET ASSETS - 100.00% $ 7,968,979
** Aggregate cost for Federal tax purposes.
(A) Rate noted represents annualized yield at time of purchase.
<PAGE>
BOND FUND-- Portfolio of Investments
Value
Par Value (Note 2)
CORPORATE NOTES AND BONDS - 32.73%
Capital Goods - 0.85%
$ 200,000 TRW, Inc., Senior Note
8.750%, due 05/15/06 $ 205,076
Consumer Services - 1.43%
350,000 Electronic Data Systems Corp.
7.125%, due 10/15/09 347,407
Energy - 6.11%
250,000 Coastal Corp., Senior Note
7.500%, due 08/15/06 251,771
200,000 DPL, Inc., Senior Note
8.250%, due 03/01/07 201,663
200,000 El Paso Energy Corp., Senior Note
6.750%, due 05/15/09 190,082
250,000 ENSERCH Corp.
6.375%, due 02/01/04 243,772
400,000 Wisconsin Electric Power Co., Debenture
6.625%, due 11/15/06 389,890
200,000 YPF Sociedad Anonima, Yankee (D)
9.125%, due 02/24/09 203,964
1,481,142
Finance - 13.31%
350,000 American General Corp.
7.500%, due 08/11/10 349,688
500,000 Barclays Bank PLC,
Step Coupon 144A (C)(D)
8.550%, due 09/29/49 503,040
300,000 Boeing Capital Corp.
7.100%, due 09/27/05 300,957
400,000 Ford Motor Credit Co.
7.500%, due 03/15/05 401,045
250,000 General Electric Capital Corp., Debenture
8.750%, due 05/21/07 272,736
350,000 Heller Financial, Inc., Senior Note
8.000%, due 06/15/05 353,401
300,000 Norwest Financial, Inc.
7.000%, due 11/01/05 297,578
200,000 Royal & Sun Alliance Insurance Group PLC,
Subordinated Note, 144A (C)(D)
8.950%, due 10/15/29 194,722
300,000 UBS Preferred Funding Trust
8.622%, due 01/02/01 303,159
250,000 Wells Fargo & Co., Senior Note
7.250%, due 08/24/05 251,580
3,227,906
Industrials - 3.96%
350,000 Avnet, Inc.
8.200%, due 10/17/03 348,925
180,000 Georgia-Pacific Group, Debenture
8.625%, due 04/30/25 167,821
150,000 Host Marriott Corp., Series B, Senior Note
7.875%, due 08/01/08 138,000
300,000 International Paper Co., Senior Note, 144A (C)
8.125%, due 07/08/05 307,048
961,794
Retail - 2.24%
200,000 Great Atlantic & Pacific Tea Co., Senior Note
7.700%, due 01/15/04 160,672
395,000 Safeway, Inc., Senior Note
7.000%, due 09/15/07 383,043
543,715
Telecommunications - 3.65%
250,000 CenturyTel, Inc., Series B, Senior Note
8.250%, due 05/01/24 229,061
300,000 Koninklijke (Royal) KPN NV,
Senior Note, 144A (C)(D)
7.500%, due 10/01/05 298,071
350,000 TCI Communciations, Inc., Senior Note
8.650%, due 09/15/04 359,400
886,532
Transportation - 1.18%
300,000 AMERCO, Senior Note
8.800%, due 02/04/05 286,625
Total Corporate Notes and Bonds 7,940,197
( Cost $7,941,192 )
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 63.45%
Government National Mortgage Association - 31.22%
500,000 8.000%, due 10/20/15 507,835
500,000 7.500%, due 01/20/26 496,960
743,821 6.500%, due 04/15/26 721,863
581,887 7.000%, due 02/20/30 571,203
777,515 8.000%, due 04/20/30 786,325
496,346 7.500%, due 05/20/30 495,815
490,366 8.000%, due 05/20/30 495,922
248,435 7.500%, due 06/20/30 248,169
395,938 8.000%, due 06/20/30 400,424
523,224 8.500%, due 07/20/30 534,342
997,102 7.500%, due 08/20/30 996,035
498,089 8.000%, due 08/20/30 503,733
315,664 7.000%, due 10/20/30 309,769
500,000 8.000%, due 10/20/30 505,510
7,573,905
Federal National Mortgage Association - 5.82%
300,000 5.830%, due 02/20/03 295,391
295,000 6.290%, due 01/22/08 283,459
250,000 7.000%, due 08/27/12 244,484
289,226 8.000%, due 05/01/30 292,829
296,842 7.500%, due 06/01/30 296,521
1,412,684
U.S. Treasury Bills - 2.00%
500,000 6.260%, due 04/19/01 485,940
U.S. Treasury Notes - 7.71%
300,000 5.875%, due 11/15/04 300,110
500,000 6.750%, due 05/15/05 518,359
1,068,970 3.625%, due 01/15/08 TIP 1,051,934
1,870,403
<PAGE>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (continuted)
U.S. Treasury Bonds - 9.33%
Value
Par Value (Note 2)
$ 500,000 10.750%, due 02/15/03 $ 550,000
500,000 11.125%, due 08/15/03 565,274
500,000 10.750%, due 08/15/05 599,941
500,000 9.125%, due 05/15/09 548,369
2,263,584
Small Business Administration - 3.39%
525,949 7.000%, due 04/25/24 521,441
299,639 7.250%, due 07/25/25 299,919
821,360
Federal Home Loan Bank - 3.98%
500,000 7.668%, due 02/20/01 468,460
491,138 8.000%, due 06/01/30 498,023
966,483
Total U.S. Government and Agency Obligations
(Cost $15,250,924) 15,394,359
INVESTMENT COMPANY - 5.10%
1,238,191 SSGA Prime Money Market Fund 1,238,191
Total Investment Company 1,238,191
( Cost $1,238,191 )
TOTAL INVESTMENTS - 101.28% 24,572,747
( Cost $24,430,307** )
NET OTHER ASSETS AND LIABILITIES - (1.28)% (311,653)
TOTAL NET ASSETS - 100.00% $ 24,261,094
** Aggregate cost for Federal tax purposes.
(B) Represents securities that remain zero coupon until a predetermined date,
at which time the stated coupon rate becomes effective rate.
(C) Security sold within the terms of private placement memorandum exempt from
registration under section 144A of the Securities Act of 1933, as amended,
and may be sold only to dealers in that program or other "qualified
institutional investors." The securities have been determined to be liquid
under guidelines established by the Board of Trustees.
(D) Notes and bonds issued by foreign entities are denominated in U.S. dollars.
The aggregate value of these securities is 4.95% of total net assets.
TIP Treasury Inflation Protection security.
<PAGE>
BALANCED FUND-- Portfolio of Investments
Value
Shares (Note 2)
COMMON STOCKS - 54.80%
Basic Materials - 1.30%
14,000 Dow Chemical Co. $ 428,750
11,000 Rohm and Haas Co. 330,687
11,500 Willamette Industries, Inc. 417,594
1,177,031
Capital Goods - 5.58%
15,000 Dover Corp. 636,563
9,000 Emerson Electric Co. 660,937
13,000 Honeywell International, Inc. 699,562
8,000 Illinois Tool Works, Inc. 444,500
5,500 Minnesota Mining and Manufacturing Co. 531,438
31,200 Pall Corp. 672,750
14,000 Tyco International, Ltd. 793,625
9,000 United Technologies Corp. 628,313
5,067,688
Communication Services - 3.34%
8,000 ALLTEL Corp. 515,500
22,484 AT&T Corp. 521,348
12,500 Sprint Corp. 318,750
9,020 Verizon Communications 521,469
17,000 Vodafone Group, PLC, ADR 723,562
18,000 WorldCom, Inc. * 427,500
3,028,129
Consumer Cyclical - 3.74%
27,000 IMS Health, Inc. 637,875
7,800 Lowe's Cos., Inc. 356,363
28,400 PRIMEDIA, Inc. * 321,275
45,100 Target Corp. 1,245,887
11,900 Tiffany & Co. 507,981
7,200 Wal-Mart Stores, Inc. 326,700
3,396,081
Consumer Staples - 7.19%
20,500 Cox Communications, Inc., Class A * 903,281
19,800 CVS Corp. 1,048,163
15,800 General Mills, Inc. 659,650
14,200 Kimberly-Clark Corp. 937,200
26,100 McDonald's Corp. 809,100
8,100 Nabisco Holdings Corp., Class A 437,906
11,600 Safeway, Inc. * 634,375
21,300 Sara Lee Corp. 459,281
17,900 Walt Disney Co. 641,044
6,530,000
Energy - 3.74%
9,364 BP Amoco PLC, ADR 476,979
5,700 Exxon Mobil Corp. 508,369
7,400 Kerr-McGee Corp. 483,312
11,100 Schlumberger, Ltd. 844,987
2,016 Transocean Sedco Forex, Inc. 106,848
14,400 Unocal Corp. 491,400
17,700 USX-Marathon Group 481,219
3,393,114
Finance - 7.19%
27,500 Allstate Corp. 1,106,875
10,896 Bank of America Corp. 523,689
15,190 Bank One Corp. 554,435
22,000 Citigroup, Inc. 1,157,750
13,500 Countrywide Credit Industries, Inc. 505,406
11,000 Household International, Inc. 553,438
9,000 MBIA, Inc. 654,188
9,000 Morgan Stanley Dean Witter & Co. 722,812
16,100 Wells Fargo & Co. 745,631
6,524,224
Healthcare - 6.53%
6,700 Aetna, Inc. 387,344
7,300 ALZA Corp. * 590,844
15,200 American Home Products Corp. 965,200
12,200 Baxter International, Inc. 1,002,687
22,800 Bristol-Myers Squibb Co. 1,389,375
2,700 Genzyme Corp. * 191,700
6,300 Glaxo Wellcome PLC, ADR 366,581
7,092 Johnson & Johnson 653,351
6,902 Pharmacia Corp. 379,610
5,926,692
Technology - 14.20%
15,800 3Com Corp. 280,450
42,600 ADC Telecommunications, Inc. * 910,575
4,040 Agilent Technologies, Inc. * 187,104
7,700 Computer Sciences Corp. * 485,100
12,300 Compuware Corp. * 96,863
15,200 Conexant Systems, Inc. 399,950
19,100 EMC Corp. * 1,701,094
21,300 Gateway, Inc. * 1,099,293
18,100 Hewlett-Packard Co. 840,519
10,900 International Business Machines Corp. 1,073,650
36,500 Keane, Inc. * 474,500
24,338 Koninklijke (Royal) Philips
Electronics N.V., ADR * 971,999
9,400 Micron Technology, Inc. * 326,650
26,700 Motorola, Inc. 665,831
24,623 Palm, Inc. * 1,318,869
14,100 Seagate Technology, Inc. * 985,237
21,900 Texas Instruments, Inc. 1,074,469
12,892,153
Transportation - 0.79%
4,600 Delta Air Lines, Inc. 217,350
10,600 FedEx Corp. * 496,716
714,066
Utilities - 1.20%
14,000 PG&E Corp. 377,125
17,000 Williams Cos., Inc. 710,813
1,087,938
Total Common Stocks 49,737,116
( Cost $42,653,529 )
<PAGE>
Value
Par Value (Note 2)
CORPORATE NOTES AND BONDS - 12.01%
Capital Goods - 0.34%
$ 300,000 TRW, Inc., Senior Note
8.750%, due 05/15/06 $ 307,614
Consumer Services - 1.10%
500,000 Compaq Computer Corp.
7.450%, due 08/01/02 501,695
500,000 Electronic Data Systems Corp.
7.125%, due 10/15/09 496,295
997,990
Energy - 3.16%
500,000 Coastal Corp., Senior Note
7.500%, due 08/15/06 503,542
500,000 DPL, Inc., Senior Note
8.250%, due 03/01/07 504,158
500,000 El Paso Energy Corp., Senior Note
6.750%, due 05/15/09 475,206
600,000 Wisconsin Electric Power Co., Debenture
6.625%, due 11/15/06 584,834
500,000 YPF Sociedad Anonima, Yankee (D)
8.000%, due 02/15/04 491,400
300,000 YPF Sociedad Anonima, Yankee (D)
9.125%, due 02/24/09 305,946
2,865,086
Finance - 5.05%
500,000 American General Capital
8.500%, due 07/01/30 497,437
500,000 Barclays Bank PLC, Step
Coupon 144A (C)(D)
8.550%, due 09/29/49 503,040
500,000 EOP Operating LP
8.100%, due 08/01/10 502,434
400,000 Ford Motor Credit Co.
7.500%, due 03/15/05 401,045
350,000 General Electric Capital Corp., Debenture
8.750%, due 05/21/07 381,831
500,000 Heller Financial, Inc.
8.000%, due 06/15/05 504,858
500,000 Norwest Financial, Inc.
7.000%, due 11/01/05 495,963
300,000 Royal & Sun Alliance Insurance Group PLC,
Subordinated Note, 144A (C)(D)
8.950%, due 10/15/29 292,083
500,000 UBS Preferred Funding Trust
8.622%, due 01/02/01 505,264
500,000 Wells Fargo & Co., Senior Note
7.250%, due 08/24/05 503,160
4,587,115
Industrials - 1.27%
393,000 Amerco, Senior Note
7.200%, due 04/01/02 377,824
500,000 Avnet, Inc.
8.200%, due 10/17/03 498,464
300,000 Georgia-Pacific Group, Debenture
8.625%, due 04/30/25 279,703
1,155,991
Retail - 0.29%
400,000 Saks, Inc.
7.250%, due 12/01/04 260,000
Telecommunications - 0.80%
250,000 CenturyTel, Inc., Series B, Senior Note
8.250%, due 05/01/24 229,061
500,000 Koninklijke (Royal) KPN NV,
Senior Note, 144A (C)(D)
7.500%, due 10/01/05 496,785
725,846
Total Corporate Notes and Bonds 10,899,642
( Cost $10,974,108 )
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 28.52%
Government National Mortgage Association - 10.26%
327,045 8.000%, due 10/20/15 332,170
687,981 7.000%, due 02/20/30 675,350
1,166,926 8.000%, due 04/20/30 1,180,148
992,693 7.500%, due 05/20/30 991,631
490,366 8.000%, due 05/20/30 495,922
248,435 7.500%, due 06/20/30 248,169
395,938 8.000%, due 06/20/30 400,424
495,143 8.000%, due 07/20/30 500,753
986,966 8.500%, due 07/20/30 1,007,939
997,102 7.500%, due 08/20/30 996,034
498,088 8.000%, due 08/20/30 503,732
998,327 7.500%, due 09/20/30 997,259
1,000,000 7.000%, due 10/20/30 981,325
9,310,856
Federal National Mortgage Association - 3.96%
500,000 5.830%, due 02/20/03 492,318
300,000 6.290%, due 01/22/08 288,264
500,000 7.000%, due 08/27/12 488,967
609,820 8.000%, due 09/01/29 619,571
489,357 8.000%, due 03/01/30 495,453
692,631 7.500%, due 06/01/30 691,883
499,372 8.500%, due 06/01/30 512,415
3,588,871
<PAGE>
Value
Par Value (Note 2)
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (continued)
U.S. Treasury Notes - 6.53%
$ 500,000 5.500%, due 08/31/01 $ 496,562
500,000 5.875%, due 11/15/04 500,182
1,500,000 6.000%, due 08/15/09 1,515,576
2,500,000 6.500%, due 02/15/10 2,616,995
800,000 5.750%, due 08/15/10 799,250
5,928,565
U.S. Treasury Bonds - 4.31%
500,000 10.750%, due 02/15/03 550,000
1,500,000 11.125%, due 08/15/03 1,695,820
500,000 10.750%, due 08/15/05 599,942
500,000 9.125%, due 05/15/09 548,369
500,000 6.125%, due 08/15/29 517,813
3,911,944
Small Business Administration - 1.26%
699,157 7.250%, due 11/01/00 699,812
450,242 7.000%, due 04/25/24 446,383
1,146,195
Federal Home Loan Mortgage Corp. - 0.93%
860,000 6.000%, due 11/18/03 843,720
Federal Home Loan Bank - 1.27%
250,000 7.668%, due 02/20/01 234,230
908,604 8.000%, due 06/01/30 921,343
1,155,573
Total U.S. Government and Agency Obligations
(Cost $25,696,867) 25,885,724
INVESTMENT COMPANY - 4.75%
4,309,723 SSGA Prime Money Market Fund 4,309,723
Total Investment Company 4,309,723
( Cost $4,309,723 )
TOTAL INVESTMENTS - 100.08% 90,832,205
(Cost $83,634,227**)
NET OTHER ASSETS AND LIABILITIES - (0.08)% (75,530)
TOTAL NET ASSETS - 100.00% $ 90,756,675
* Non-income producing.
** Aggregate cost for Federal tax purposes was $83,765,461.
(B) Represents securities that remain zero coupon until a predetermined date,
at which time the stated coupon rate becomes effective rate.
(C) Security sold within the terms of private placement memorandum exempt from
registration under section 144A of the Securities Act of 1933, as amended,
and may be sold only to dealers in that program or other "qualified
institutional investors." The securities have been determined to be liquid
under guidelines established by the Board of Trustees.
(D) Notes and bonds issued by foreign entities are denominated in U.S. dollars.
The aggregate value of these securities is 2.30% of total net assets.
ADR American Depository Receipt.
<PAGE>
HIGH INCOME FUND-- Portfolio of Investments
Value
Par Value (Note 2)
CORPORATE NOTES AND BONDS - 86.58%
Basic Materials - 2.99%
$ 100,000 Applied Extrusion Technologies, Inc.,
Series B, Senior Note
11.500%, due 04/01/02 $ 92,000
90,000 Buckeye Technologies, Inc.,
Senior Subordinated Note
9.250%, due 09/15/08 90,000
50,000 FiberMark, Inc., Series B, Senior Note
9.375%, due 10/15/06 47,000
165,000 Huntsman ICI Chemicals LLC,
Senior Subordinated Note
10.125%, due 07/01/09 156,750
80,000 Sovereign Specialty Chemicals, Inc.,
Senior Subordinated Note
11.875%, due 03/15/10 78,800
70,000 Synthetic Securities, Inc., 144A (C) (G)
13.000%, due 12/13/00 68,950
95,000 U.S. Timberlands Klam/Fin, Senior Note
9.625%, due 11/15/07 85,317
618,817
Building and Construction - 2.98%
130,000 American Standard, Inc., Senior Note
7.375%, due 02/01/08 120,900
25,000 American Standard, Inc., Senior Note
7.625%, due 02/15/10 23,750
105,000 Atrium Cos., Inc., Series B,
Senior Subordinated Note
10.500%, due 05/01/09 89,250
50,000 Building Materials Corp.,
Series B, Senior Note
7.750%, due 07/15/05 15,000
130,000 Building Materials Corp.,
Series B, Senior Note
8.625%, due 12/15/06 39,000
50,000 Building Materials Corp.,
Series B, Senior Note
8.000%, due 10/15/07 15,000
125,000 Formica Corp., Series B,
Senior Subordinated Note
10.875%, due 03/01/09 53,750
130,000 MMI Products, Inc., Series B,
Senior Subordinated Note
11.250%, due 04/15/07 126,750
110,000 Nortek, Inc., Series B, Senior Note
9.250%, due 03/15/07 97,900
40,000 Nortek, Inc., Series B, Senior Note
8.875%, due 08/01/08 34,800
616,100
Chemicals and Drugs - 1.48%
95,000 Lyondell Chemical Co., Series A, Senior Note
9.625%, due 05/01/07 92,150
90,000 Lyondell Chemical Co., Series B, Senior Note
9.875%, due 05/01/07 87,750
75,000 NL Industries, Inc., Senior Note
11.750%, due 10/15/03 75,375
5,000 PCI Chemicals Canada, Inc., Yankee (D)
9.250%, due 10/15/07 1,900
90,000 Sterling Chemicals, Inc.,
Series A, Senior Subordinated Note
11.250%, due 04/01/07 49,500
306,675
Communication - 13.17%
115,000 Allegiance Telecom, Inc., Series B,
Step Coupon Senior Discount Note (B)
11.750%, due 02/15/08 79,350
75,000 Allegiance Telecom, Inc., Senior Note
12.875%, due 05/15/08 74,250
130,000 Centennial Cellular Operating Co.,
Senior Subordinated Note
10.750%, due 12/15/08 122,200
260,000 Charter Commercial Holdings LLC,
Step Coupon Senior Discount Note (B)
9.92%, due 04/01/11 151,125
140,000 Charter Commercial Holdings LLC, Senior Note
8.250%, due 04/01/07 126,350
135,000 Dolphin Telecom PLC,
Step Coupon Senior Discount Note (B)(D)
11.500%, due 06/01/08 25,650
25,000 Dolphin Telecom PLC, Series B,
Step Coupon Senior Discount Note (B)(D)
14.000%, due 05/15/09 4,500
60,000 Esprit Telecom Group PLC, Yankee Senior Note
10.875%, due 06/15/08 12,000
75,000 Exodus Communications, Inc., Senior Note
11.250%, due 07/01/08 69,750
45,000 Exodus Communications, Inc., Senior Note
10.750%, due 12/15/09 40,725
90,000 Exodus Communications, Inc., 144A Senior Note (C)
11.625%, due 07/15/10 83,250
55,000 FairPoint Communications, Inc.,
Series B, Senior Subordinated Note
9.500%, due 05/01/08 44,550
100,000 Hermes Europe Railtel B.V., Yankee Senior Note (D)
10.375%, due 01/15/09 45,000
120,000 ICG Holdings, Inc.,
Step Coupon Senior Discount Note (B)
12.500%, due 05/01/06 19,800
<PAGE>
Value
Par Value (Note 2)
CORPORATE NOTES AND BONDS (continued)
$ 90,000 Intermedia Communications, Inc.,
Series B, Senior Note
8.875%, due 11/01/07 $ 85,725
25,000 ITC DeltaCom, Inc., Senior Note
11.000%, due 06/01/07 21,750
80,000 ITC DeltaCom, Inc., Senior Note
9.750%, due 11/15/08 65,200
10,000 Lenfest Communications, Inc., Senior Note
8.375%, due 11/01/05 10,402
35,000 Lenfest Communications, Inc.,
Senior Subordinated Note
10.500%, due 06/15/06 39,452
50,000 Lenfest Communications, Inc.,
Senior Subordinated Note
8.250%, due 02/15/08 50,091
75,000 Millicom International Cellular S.A.,
Step Coupon Senior Discount Note (B)(D)
13.5000%, due 06/01/06 60,750
110,000 Motient Corp., Series B, Senior Note
12.250%, due 04/01/08 78,650
15,000 NEON Communications, Inc., Senior Note
12.750%, due 08/15/08 10,950
100,000 Nextel Communications, Inc.,
Step Coupon Senior Discount Note (B)
9.750%, due 10/31/07 76,500
265,000 Nextel Communications, Inc.,
Step Coupon Senior Discount Note (B)
9.950%, due 02/15/08 197,425
45,000 Nextel International, Inc.,
Step Coupon Senior Discount Note (B)
12.125%, due 04/15/08 27,450
95,000 Nextel International, Inc., 144A Senior Note (C)
12.750%, due 08/01/10 88,350
25,000 NEXTLINK Communications, Inc., Senior Note
9.625%, due 10/01/07 21,000
230,000 NEXTLINK Communications, Inc., Senior Note
10.750%, due 06/01/09 201,825
65,000 Rural Cellular Corp., Series B, Senior Subordinated Note
9.625%, due 05/15/08 59,150
25,000 Telesystem International Wireless, Inc.,
Series B, Step Coupon, Senior Discount Note (B)(D)
13.250%, due 06/30/07 14,750
60,000 Telewest Communications PLC,
Step Coupon Senior Discount Note (B)(D)
9.250%, due 04/15/09 27,000
75,000 Telewest Communications PLC,
144A Step Coupon Senior Discount Note (B)(C)(D)
11.375%, due 02/01/10 32,625
55,000 Telewest Communications PLC,
Yankee Senior Note (D)
9.625%, due 10/01/06 45,375
40,000 Telewest Communications PLC,
Senior Discount Note (D)
11.000%, due 10/01/07 34,800
30,000 Telewest Communications PLC,
144A Senior Note (C)(D)
9.875%, due 02/01/10 23,850
115,000 Triton PCS Holdings, Inc.,
Step Coupon Senior Subordinated Discount Note (B)
11.000%, due 05/01/08 87,113
220,000 UnitedGlobalCom, Inc., Series B,
Step Coupon Senior Discount Note (B)
10.750%, due 02/15/08 134,200
200,000 Versatel Telecom International N.V.,
Yankee Senior Note (D)
13.250%, due 05/15/08 152,000
160,000 Viatel, Inc., Step Coupon Senior Discount Note (B)
12.500%, due 04/15/08 47,200
15,000 Viatel, Inc., Senior Note
11.250%, due 04/15/08 7,500
110,000 Western Wireless Corp., Senior Subordinated Note
10.500%, due 02/01/07 113,300
10,000 Williams Communications Group, Inc.,
144A Senior Note (C)
11.700%, due 08/01/08 8,925
2,721,808
Consumer Cyclical - 0.70%
140,000 WestPoint Stevens, Inc., Senior Note
7.875%, due 06/15/05 103,600
60,000 WestPoint Stevens, Inc., Senior Note
7.875%, due 06/15/08 40,500
144,100
Consumer Services - 1.07%
40,000 Eldorado Resorts LLC, Senior Subordinated Note
10.500%, due 08/15/06 39,600
20,000 Iron Mountain, Inc., Senior Subordinated Note
10.125%, due 10/01/06 20,250
65,000 Iron Mountain, Inc., Senior Subordinated Note
8.750%, due 09/30/09 61,913
100,000 Prime Hospitality Corp.,
Series B, Senior Subordinated Note
9.750%, due 04/01/07 100,000
221,763
Consumer Staples - 2.48%
75,000 7-Eleven, Inc., Senior Subordinated Debenture
5.000%, due 12/15/03 65,250
30,000 Fage Dairy Industries S.A., Senior Note (D)
9.000%, due 02/01/07 22,500
90,000 Finlay Enterprises, Inc., Senior Note
9.000%, due 05/01/08 81,000
50,000 International Utility Structures, Inc.,
Yankee Senior Subordinated Note (D)
10.750%, due 02/01/08 36,000
40,000 Pierce Leahy Corp., Senior Subordinated Note
11.125%, due 07/15/06 41,550
30,000 Remington Products Co. LLC,
Series B, Senior Subordinated Note
11.000%, due 05/15/06 24,000
115,000 Samsonite Corp., Senior Subordinated Note
10.750%, due 06/15/08 87,975
165,000 Simmons Co., Series B, Senior Subordinated Note
10.250%, due 03/15/09 153,450
511,725
<PAGE>
Value
Par Value (Note 2)
CORPORATE NOTES AND BONDS (continued)
Containers/Packaging - 2.93%
105,000 Ball Corp., Senior Subordinated Note
8.250%, due 08/01/08 $ 98,175
100,000 Consolidated Container Co. LLC, Senior Note
10.125%, due 07/15/09 90,000
35,000 Gaylord Container Corp., Series B, Senior Note
9.375%, due 06/15/07 22,050
70,000 Gaylord Container Corp., Series B, Senior Note
9.750%, due 06/15/07 44,100
110,000 Gaylord Container Corp., Series B,
Senior Subordinated Note
9.875%, due 02/15/08 33,000
255,000 Riverwood International Corp., Senior Note
10.250%, due 04/01/06 248,625
70,000 U.S. Can Corp., Series B, Senior Subordinated Note
12.375%, due 10/01/10 68,775
604,725
Defense Electronics - 0.62%
125,000 L-3 Communications Corp., Series B,
Senior Subordinated Note (F)
10.375%, due 05/01/07 127,813
Durable Goods - 1.06%
110,000 Hayes Wheels International, Inc., Senior Note
11.000%, due 07/15/06 97,900
50,000 International Knife & Saw, Inc., Senior Subordinated Note
11.375%, due 11/15/06 24,875
35,000 Motors and Gears, Inc., Series D, Senior Note
10.750%, due 11/15/06 33,950
20,000 Oxford Automotive, Inc., Series D, Senior Subordinated Note
10.125%, due 06/15/07 15,800
65,000 Simonds Industries, Inc., Senior Subordinated Note
10.250%, due 07/01/08 45,500
218,025
Energy - 4.71%
110,000 Anacomp, Inc., Series B, Senior Subordinated Note (E)
10.875%, due 04/01/04 15,950
155,000 Chesapeake Energy Corp., Series B, Senior Note
9.625%, due 05/01/05 155,581
75,000 Clark R&M, Inc., Senior Note
8.625%, due 08/15/08 61,875
45,000 Continental Resources, Inc., Senior Subordinated Note
10.250%, due 08/01/08 40,275
100,000 Forest Oil Corp., Senior Subordinated Note
10.500%, due 01/15/06 101,500
125,000 HS Resources, Inc., Senior Subordinated Note
9.250%, due 11/15/06 124,688
60,000 Ocean Energy, Inc., Series B, Senior Subordinated Note
8.875%, due 07/15/07 60,825
85,000 P&L Coal Holdings Corp., Series B, Senior Note
8.875%, due 05/15/08 84,150
200,000 P&L Coal Holdings Corp., Series B, Senior Subordinated Note
9.625%, due 05/15/08 194,500
80,000 Pioneer Natural Resources Co., Senior Note
9.625%, due 04/01/10 84,063
15,000 Pride International, Inc., Senior Note
10.000%, due 06/01/09 15,525
35,000 Triton Energy, Ltd., 144A Senior Note (C)
8.875%, due 10/01/07 35,044
973,976
Finance - 3.84%
30,000 DTI Holdings, Inc., Series B,
Step Coupon Senior Discount Note (B)
12.250%, due 03/01/08 9,600
230,000 Global Crossings Holdings, Ltd., Senior Note (D)
9.625%, due 05/15/08 219,650
30,000 Madison River Capital/Madison River Financial,
Series B, Senior Note
13.250%, due 03/01/10 21,600
195,000 Ono Finance PLC, Senior Note (D)
13.000%, due 05/01/09 150,150
150 Ono Finance PLC, Series A, 144A
Zero Coupon (C)(D) 0.000%, due 05/31/09 10,800
170,000 Silgan Holdings, Inc., Senior Subordinated Debenture
9.000%, due 06/01/09 145,350
160,000 Thermadyne Holdings Corp.,
Step Coupon Senior Discount Note (B)
12.500%, due 06/01/08 48,000
80,000 Thermadyne Manufacturing LLC / Capital Corp.,
Senior Subordinated Note
9.875%, due 06/01/08 57,600
145,000 Willis Corroon Corp., Senior Subordinated Note
9.000%, due 02/01/09 131,587
794,337
Health Care Services - 1.08%
90,000 Alaris Medical Systems, Inc., Senior Subordinated Note
9.750%, due 12/01/06 45,000
35,000 Alaris Medical, Inc., Step Coupon Senior Discount Note (B)
11.125%, due 08/01/08 4,200
30,000 Prime Medical Services, Inc., Senior Subordinated Note
8.750%, due 04/01/08 26,100
150,000 Tenet Healthcare Corp., Senior Note
8.000%, due 01/15/05 147,563
222,863
Industrials - 2.34%
35,000 Actuant Corp., 144A Senior Subordinated Note (C)
13.000%, due 05/01/09 34,300
65,000 Blount, Inc., Senior Subordinated Note
13.000%, due 08/01/09 54,925
105,000 Flextronics International, Ltd.,
144A Senior Subordinated Note (C)(D)
9.875%, due 07/01/10 106,050
50,000 General Binding Corp., Senior Note
9.375%, due 06/01/08 38,500
100,000 Moog, Inc., Series B, Senior Subordinated Note
10.000%, due 05/01/06 100,000
80,000 Numatics, Inc., Series B, Senior Subordinated Note
9.625%, due 04/01/08 61,200
100,000 Ocean Rig ASA, Senior Note (D)
10.250%, due 06/01/08 88,250
483,225
<PAGE>
Value
Par Value (Note 2)
CORPORATE NOTES AND BONDS (continued)
Machinery - 0.92%
100,000 Columbus McKinnon Corp., Senior Subordinated Note
8.500%, due 04/01/08 $ 84,000
100,000 R&B Falcon Corp., Senior Note
9.500%, due 12/15/08 106,750
190,750
Media - 1.66%
50,000 Allbritton Communications Co., Series B,
Senior Subordinated Note
9.750%, due 11/30/07 47,875
125,000 AMFM, Inc.
8.000%, due 11/01/08 125,312
140,000 Ekabel Hessen GMBH, 144A Senior Note (C)(D)
14.500%, due 09/01/10 132,300
60,000 Satelites Mexicanos S.A., Series B, Senior Note (D)
10.125%, due 11/01/04 37,800
343,287
Metals and Mining - 1.79%
50,000 AK Steel Corp., Senior Note
9.125%, due 12/15/06 49,000
85,000 Commonwealth Industries, Inc. Senior Subordinated Note
10.750%, due 10/01/06 79,050
160,000 Kaiser Aluminum & Chemical Corp., Senior Note
9.875%, due 02/15/02 134,400
95,000 Metal Management, Inc., Senior Subordinated Note (E)
10.000%, due 05/15/08 5,700
50,000 Russel Metals, Inc., Yankee Senior Note (D)
10.000%, due 06/01/09 46,000
60,000 The Doe Run Resources Corp., Series B, Senior Note
11.250%, due 03/15/05 30,600
30,000 WCI Steel, Inc., Series B, Senior Note
10.000%, due 12/01/04 24,450
369,200
Printing - 0.92%
110,000 Hollinger International Publishing, Inc.
Senior Subordinated Note
9.250%, due 03/15/07 108,900
50,000 World Color Press, Inc., Senior Subordinated Note
8.375%, due 11/15/08 48,479
35,000 World Color Press, Inc., Senior Subordinated Note
7.750%, due 02/15/09 32,558
189,937
Recreation - 8.65%
140,000 Agrosy Gaming Co., Senior Note
10.750%, due 06/01/09 146,300
55,000 Autotote Corp., 144A Senior Subordinated Note (C)
12.500%, due 08/15/10 54,175
150,000 Aztar Corp., Senior Subordinated Note
8.875%, due 05/15/07 145,875
110,000 Boyd Gaming Corp., Senior Subordinated Note
9.500%, due 07/15/07 100,100
190,000 Coast Hotels and Casinos, Inc., Senior Subordinated Note
9.500%, due 04/01/09 187,150
165,000 HMH Properties, Inc., Series C, Senior Note
8.450%, due 12/01/08 156,750
125,000 Horseshoe Gaming Holding Corp.,
Series B, Senior Subordinated Note
8.625%, due 05/15/09 120,625
35,000 Isle of Capri Casinos, Inc., Senior Subordinated Note
8.750%, due 04/15/09 31,763
60,000 Mandalay Resort Group, Series B, Senior Subordinated Note
10.250%, due 08/01/07 61,350
40,000 Mandalay Resort Group, Senior Note
9.500%, due 08/01/08 41,050
160,000 MGM Mirage, Inc., Senior Subordinated Note
9.750%, due 06/01/07 166,000
40,000 MGM Mirage, Inc., Senior Note
8.500%, due 09/15/10 39,264
75,000 Park Place Entertainment Corp., Senior Subordinated Note
7.875%, due 12/15/05 72,187
125,000 Park Place Entertainment Corp., Senior Subordinated Note
8.875%, due 09/15/08 122,500
75,000 Pinnacle Entertainment, Inc., Series B, Senior Subordinated Note
9.250%, due 02/15/07 80,625
100,000 Station Casinos, Inc., Senior Subordinated Note
8.875%, due 12/01/08 96,000
165,000 Station Casinos, Inc., 144A, Senior Subordinated Note (C)
9.875%, due 07/01/10 165,412
1,787,126
Retail - 2.34%
75,000 Duane Reade, Inc., Senior Subordinated Note
9.250%, due 02/15/08 63,750
15,000 J Crew Group, Inc., Series B,
Step Coupon Senior Discount (B)
13.125%, due 10/15/08 8,700
125,000 J Crew Operating Corp., Senior Subordinated Note
10.375%, due 10/15/07 108,750
40,000 Jitney-Jungle Stores of America, Inc. (E)
12.000%, due 03/01/06 600
10,000 Jitney-Jungle Stores of America, Inc. (E)
10.375%, due 09/15/07 100
70,000 Musicland Group, Inc., Senior Subordinated Note
9.000%, due 06/15/03 63,700
55,000 Musicland Group, Inc., Series B, Senior Subordinated Note
9.875%, due 03/15/08 44,000
230,000 Williams Scotsman, Inc., Senior Note
9.875%, due 06/01/07 193,200
482,800
Schools - 0.53% 120,000 KinderCare Learning Centers, Inc.,
Series B, Senior Subordinated Note
9.500%, due 02/15/09 109,200
<PAGE>
Value
Par Value (Note 2)
CORPORATE NOTES AND BONDS (continued)
Technology - 5.56%
$ 110,000 Argo-Tech Corp., Senior Subordinated Note
8.625%, due 10/01/07 $ 89,100
50,000 Argo-Tech Corp., Series D,
Senior Subordinated Note
8.625%, due 10/01/07 40,500
95,000 BE Aerospace, Inc., Series B,
Senior Subordinated Note
8.000%, due 03/01/08 87,875
85,000 BE Aerospace, Inc., Senior Subordinated Note
9.500%, due 11/01/08 83,300
90,000 Buckeye Technologies, Inc.,
Senior Subordinated Note
8.000%, due 10/15/10 84,600
75,000 Completel Europe N.V., Series B,
Step Coupon Senior Discount Note (B)(D)
14.000%, due 02/15/09 35,250
60,000 Globix Corp., Senior Note
12.500%, due 02/01/10 33,000
175,000 K & F Industries, Inc., Series B,
Senior Subordinated Note
9.250%, due 10/15/07 167,125
225,000 Level 3 Communications, Inc., Senior Note
9.125%, due 05/01/08 181,687
115,000 Metromedia Fiber Network, Inc.,
Series B, Senior Note
10.000%, due 11/15/08 101,775
40,000 Metromedia Fiber Network, Inc.,
Series B, Senior Note
10.000%, due 12/15/09 35,500
235,000 PSINet, Inc., Senior Note
11.000%, due 08/01/09 113,388
105,000 Unisys Corp., Senior Note
7.875%, due 04/01/08 96,075
1,149,175
Telecommunications - 21.63%
225,000 360networks, Inc., Yankee Senior Note (D)
12.000%, due 08/01/09 177,750
90,000 Adelphia Business Solutions, Inc.,
Senior Subordinated Note
12.000%, due 11/01/07 53,100
125,000 Adelphia Communications Corp.,
Series B, Senior Note
8.375%, due 02/01/08 102,500
60,000 Adelphia Communications Corp., Senior Note
9.375%, due 11/15/09 51,300
175,000 AT&T Canada, Inc.,
Step Coupon Senior Discount Note (B)(D)
9.950%, due 06/15/08 141,829
25,000 Avalon Cable Holdings LLC,
Step Coupon Senior Discount Note (B)
11.875%, due 12/01/08 16,375
125,000 Benedek Communications Corp., Step Coupon
Senior Subordinated Discount Note (B)
13.250%, due 05/15/06 106,250
100,000 Cablevision Systems Corp.,
Senior Subordinated Note
9.250%, due 11/01/05 100,500
110,000 Chancellor Corp., Series B,
Senior Subordinated Note
8.750%, due 06/15/07 111,925
120,000 Citadel Broadcasting Co.,
Senior Subordinated Note
9.250%, due 11/15/08 110,700
15,000 Classic Cable, Inc.,
144A Senior Subordinated Note (C)
10.500%, due 03/01/10 12,375
125,000 COLT Telecom Group PLC,
Step Coupon Senior Discount Note (B)(D)
12.000%, due 12/15/06 113,125
90,000 Crown Castle International Corp., Senior Note
10.750%, due 08/01/11 92,250
50,000 Cumulus Media, Inc., Senior Subordinated Note
10.375%, due 07/01/08 40,000
60,000 Dobson Communications Corp., Senior Note
10.875%, due 07/01/10 57,600
150,000 Echostar Broadband Corp.,
144A Senior Note (C)
10.375%, due 10/01/07 150,375
190,000 Echostar DBS Corp., Senior Note
9.375%, due 02/01/09 186,675
150,000 Energis PLC, Senior Note (D)
9.750%, due 06/15/09 143,250
165,000 Esat Telecom Group PLC,
Series B, Yankee Senior Note (D)
11.875%, due 12/01/08 194,700
55,000 Focal Communications Corp.,
Series B, Step Coupon Senior Discount Note
12.125%, due 02/15/08 27,500
75,000 Focal Communications Corp.,
144A Series B, Senior Note (C)
11.875%, due 01/15/10 57,750
100,000 Fox Sports Networks, LLC, Senior Note
8.875%, due 08/15/07 100,500
40,000 FrontierVision Holdings LP,
Step Coupon Subordinated Note (B)
11.875%, due 09/15/07 33,400
75,000 FrontierVision Operating Partners LP,
Senior Subordinated Note
11.000%, due 10/15/06 72,000
36,000 Granite Broadcasting Corp.,
Senior Subordinated Note
10.375%, due 05/15/05 26,640
175,000 GT Group Telecom, Inc.,
144A Step Coupon Senior Discount Note (B)(D)
13.250%, due 02/01/10 63,875
135,000 Insight Midwest/Insight Capital, Inc., Senior Note
9.750%, due 10/01/09 131,288
125,000 Jazztel PLC, Yankee Senior Note (D)
14.000%, due 04/01/09 91,250
25,000 Level 3 Communications, Inc.
10.750%, due 03/15/08 18,139
<PAGE>
Value
Par Value (Note 2)
CORPORATE NOTES AND BONDS (continued)
$ 325,000 LIN Holdings Corp., 144A Step Coupon
Senior Discount Note (B)(C)
10.000%, due 03/01/08 $ 229,125
155,000 MGC Communications, Inc.,
144A Senior Note (C)
13.000%, due 04/01/10 86,800
175,000 NTL Communications Corp.,
Step Coupon Senior Note
12.375%, due 10/01/03 102,375
50,000 NTL Communications Corp.,
Step Coupon Senior Note (B)(F)
9.750%, due 04/15/09 36,259
180,000 NTL, Inc., Senior Note
9.750%, due 04/01/08 100,800
230,000 Paxson Communications Corp.,
Senior Subordinated Note
11.625%, due 10/01/02 235,175
125,000 Pecunia 1 Vermogensverwaltung,
144A Senior Note (C)(D)
14.000%, due 07/15/10 119,375
59,000 PTC International Finance II S.A.,
144A Senior Subordinated Note (C)(D)
11.250%, due 12/01/09 53,100
65,000 Spectrasite Holdings, Inc.,
Step Coupon Senior Discount Note
12.000%, due 07/15/08 42,412
175,000 Spectrasite Holdings, Inc.,
Step Coupon Senior Discount Note
11.250%, due 04/15/09 90,344
45,000 Spectrasite Holdings, Inc.,
Series B, Senior Discount Note
10.750%, due 03/15/10 41,400
170,000 Tele1 Europe B.V., Yankee Senior Note (D)
13.000%, due 05/15/09 142,800
70,000 TeleCorp PCS, Inc., Senior Subordinated Note
10.625%, due 07/15/10 69,825
150,000 Telemundo Holdings, Inc.,
Series B, Step Coupon Senior Discount Note
11.500%, due 08/15/08 108,750
120,000 Time Warner Telecom, Inc., Senior Note
9.750%, due 07/15/08 106,200
190,000 United Pan-Europe,
Series B, Yankee Senior Note (D)
10.875%, due 08/01/09 140,600
45,000 VSTR Wire Co./VSTR Wire Holdings,
Senior Note
10.375%, due 11/15/09 48,150
55,000 XM Satellite Radio Holdings, Inc.,
144A Senior Note (C)
14.000%, due 03/15/10 37,950
105,000 Young Broadcasting, Inc.,
Series B, Senior Subordinated
8.750%, due 06/15/07 94,500
4,470,861
Transportation - 0.62%
115,000 GulfMark Offshore, Inc., Senior Note
8.750%, due 06/01/08 108,675
20,000 Kansas City Southern Railway Co.,
144A Senior Note (C)
9.500%, due 10/01/08 20,300
128,975
Waste Disposal - 0.51%
65,000 Allied Waste North America, Inc.,
Series B Senior Note
7.625%, due 01/01/06 57,850
55,000 Allied Waste North America, Inc.,
Series B Senior Suordinate Note
10.000%, due 08/01/09 47,025
104,875
Total Corporate Notes and Bonds 17,892,138
( Cost $20,744,465 )
<PAGE>
Value
Shares (Note 2)
COMMON STOCKS - 0.30%
Communication - 0.11%
405 Allegiance Telecom, Inc. * $ 12,728
491 Versatel Telecom International N.V., ADR * 9,820
22,548
Retail - 0.07%
950 Pathmark Stores, Inc. * 14,903
Technology - 0.12%
3,390 Completel Europe N.V. * 25,425
Total Common Stocks 62,876
( Cost $42,369 )
PREFERRED STOCKS - 1.86%
Communication - 0.17%
43,660 Rural Cellular Corp., Series B, 11.375% PIK 34,655
Finance - 0.54%
120,000 Fresenius Med Care Capital Trust II, 7.75% 111,600
Media - 0.70%
29,316 Cablevision Systems Corp., Series M 31,222
1,350 PRIMEDIA, Inc., Series H, 8.625% 113,400
144,622
Telecommunications - 0.45%
92,420 Crown Castle International Corp., 12.75% PIK 91,958
Total Preferred Stocks 382,835
( Cost $398,724 )
WARRANTS AND RIGHTS - 0.13%
Communication - 0.09%
175 GT Group Telecom, Inc. * 8,750
90 Jazztel PLC, 144A (C)* 5,433
110 Motient Corp., 144A (C)* 3,850
18,033
Finance - 0.00%
275 DTI Holdings, Inc., 144A (C)* 3
Retail - 0.01%
672 Pathmark Stores, Inc. * 3,024
Telecommunications - 0.03%
55 XM Satellite Radio Holdings, Inc. * 6,600
Total Warrants and Rights 27,660
( Cost $12,940 )
Par Value
CERTIFICATE OF DEPOSIT - 11.72%
2,422,667 State Street Eurodollar
6.000%, due 11/01/00 2,422,667
Total Certificate of Deposit 2,422,667
( Cost $2,422,667 )
TOTAL INVESTMENTS - 100.59% 20,788,176
( Cost $23,621,165** )
NET OTHER ASSETS AND LIABILITIES - (0.59)% (122,807)
TOTAL NET ASSETS - 100.00% $ 20,665,369
* Non income producing.
** Aggregate cost for Federal tax purposes was $23,640,175.
(B) Represents securities that remain zero coupon until a predetermined date,
at which time the stated coupon rate becomes the effective rate.
(C) Security sold within the terms of 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.
(D) Notes and bonds issued by foreign entities are denominated in U.S. dollars.
The aggregate value of these securities is 13.23% of total net assets.
(E) In default.
(F) Notes and bonds issued by foreign entities are denominated in their local
currency. Shown here is USD, converted at period end exchange rates. The
aggregate value of these securities is 0.79% of total net assets.
(G) Fair valued security.
ADR American Depository Receipt.
PIK Payment-In-Kind.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS TO SELL
Net
Unrealized
Contracts to Deliver Value in In Exchange For Settlement Date Depreciation
Euro U.S. Dollars U.S. Dollars 12/15/00 $(664)
$(21,923) $(21,259)
<PAGE>
GROWTH AND INCOME FUND-- Portfolio of Investments
Value
Shares (Note 2)
COMMON STOCKS - 96.33%
Basic Materials - 2.32%
44,000 Dow Chemical Co. $ 1,347,500
31,100 Georgia-Pacific Group 835,813
31,000 PPG Industries, Inc. 1,383,375
3,566,688
Capital Goods - 8.47%
54,000 Emerson Electric Co. 3,965,625
67,900 Honeywell International, Inc. 3,653,869
25,600 Minnesota Mining and Manufacturing Co. 2,473,600
42,000 United Technologies Corp. 2,932,125
13,025,219
Communication Services - 6.10%
35,500 ALLTEL Corp. 2,287,531
78,968 AT&T Corp. 1,831,071
60,000 Sprint Corp. 1,530,000
38,520 Verizon Communications 2,226,937
63,500 WorldCom, Inc. * 1,508,125
9,383,664
Consumer Cyclical - 2.24%
31,638 Dana Corp. 701,968
36,300 Sears, Roebuck & Co. 1,079,199
36,700 Wal-Mart Stores, Inc. 1,665,263
3,446,430
Consumer Staples - 15.96%
78,100 CVS Corp. 4,134,419
54,500 General Mills, Inc. 2,275,375
57,800 Kimberly-Clark Corp. 3,814,800
131,500 Kroger Co. * 2,966,969
82,900 McDonald's Corp. 2,569,900
33,400 Nabisco Holdings Corp., Class A 1,805,687
35,700 PepsiCo, Inc. 1,729,219
87,400 Sara Lee Corp. 1,884,562
94,000 Walt Disney Co. 3,366,375
24,547,306
Energy - 6.75%
30,406 BP Amoco PLC, ADR 1,548,806
17,600 Exxon Mobil Corp. 1,569,700
35,500 Schlumberger, Ltd. 2,702,437
26,200 Texaco, Inc. 1,547,437
7,252 Transocean Sedco Forex, Inc. 384,356
33,300 Unocal Corp. 1,136,363
55,100 USX-Marathon Group 1,498,031
10,387,130
Finance - 12.15%
123,000 Allstate Corp. 4,950,750
33,192 Bank of America Corp. 1,595,291
55,570 Bank One Corp. 2,028,305
62,466 Citigroup, Inc. 3,287,273
27,300 First Union Corp. 827,531
52,000 Household International, Inc. 2,616,250
26,100 Morgan Stanley Dean Witter & Co. 2,096,156
23,700 Wachovia Corp. 1,279,800
18,681,356
Healthcare - 10.93%
61,400 American Home Products Corp. 3,898,900
53,600 Baxter International, Inc. 4,405,250
77,300 Bristol-Myers Squibb Co. 4,710,469
25,300 Glaxo Wellcome PLC, ADR 1,472,144
25,200 Johnson & Johnson 2,321,550
16,808,313
Technology - 26.68%
19,516 Agilent Technologies, Inc. * 903,835
52,400 Automatic Data Processing, Inc. 3,422,375
58,700 Compaq Computer Corp. 1,785,067
63,100 Computer Associates International, Inc. 2,011,312
50,700 Computer Sciences Corp. * 3,194,100
56,300 EMC Corp. * 5,014,219
64,300 Harris Corp. 2,037,506
68,600 Hewlett-Packard Co. 3,185,612
37,900 Intel Corp. 1,705,500
38,500 International Business Machines Corp. 3,792,250
102,691 Koninklijke (Royal) Philips
Electronics N.V., ADR * 4,101,222
26,600 Lanier Worldwide, Inc. * 18,288
122,000 Motorola, Inc. 3,042,375
72,400 Nortel Networks Corp. 3,294,200
67,400 Texas Instruments, Inc. 3,306,812
24,900 Xerox Corp. 210,094
41,024,767
Transportation - 0.96%
21,500 Burlington Northern Santa Fe Corp. 571,094
19,000 Delta Air Lines, Inc. 897,750
1,468,844
Utilities - 3.77%
27,200 Duke Energy Corp. 2,351,100
32,000 PG&E Corp. 862,000
62,000 Williams Cos., Inc. 2,592,375
5,805,475
Total Common Stocks 148,145,192
( Cost $134,851,341 )
INVESTMENT COMPANY - 3.43%
5,274,061 SSGA Prime Money Market Fund 5,274,061
Total Investment Company 5,274,061
( Cost $5,274,061 )
TOTAL INVESTMENTS - 99.76% 153,419,253
( Cost $140,125,402** )
NET OTHER ASSETS AND LIABILITIES - 0.24% 366,891
TOTAL NET ASSETS - 100.00% $153,786,144
* Non-income producing.
** Aggregate cost for Federal tax purposes was $140,419,156.
ADR American Depository Receipt.
<PAGE>
CAPITAL APPRECIATION FUND-- Portfolio of Investments
Value
Shares (Note 2)
COMMON STOCKS - 96.10%
Basic Materials - 2.65%
24,000 Praxair, Inc. $ 894,000
28,000 Rohm and Haas Co. 841,750
20,000 Willamette Industries, Inc. 726,250
2,462,000
Capital Goods - 8.01%
40,000 Dover Corp. 1,697,500
30,000 Illinois Tool Works, Inc. 1,666,875
60,000 Pall Corp. 1,293,750
17,400 SCI Systems, Inc. * 748,200
36,000 Tyco International, Ltd. 2,040,750
7,447,075
Communication Services - 6.58%
42,000 AT&T Wireless Group * 1,047,375
38,000 CenturyTel, Inc. 1,463,000
8,800 Sprint Corp. (PCS Group) * 335,500
29,000 Telefonos de Mexico SA, ADR, Class L 1,564,188
40,000 Vodafone Group, PLC, ADR 1,702,500
6,112,563
Consumer Cyclical - 9.27%
76,800 IMS Health, Inc. 1,814,400
25,300 Lowe's Cos., Inc. 1,155,894
83,500 PRIMEDIA, Inc. * 944,594
90,200 Target Corp. 2,491,775
26,200 Tiffany & Co. 1,118,412
40,200 TJX Cos., Inc. 1,095,450
8,620,525
Consumer Staples - 7.67%
33,500 Brinker International, Inc. * 1,314,875
63,700 Cox Communications, Inc., Class A * 2,806,782
18,100 Nabisco Holdings Corp., Class A 978,531
37,100 Safeway, Inc. * 2,028,906
7,129,094
Energy - 6.63%
44,500 Grant Prideco, Inc. * 826,031
18,500 Kerr-McGee Corp. 1,208,281
40,200 Unocal Corp. 1,371,825
43,200 USX-Marathon Group 1,174,500
43,400 Weatherford International, Inc. 1,584,100
6,164,737
Finance - 14.44%
55,000 ACE, Ltd. 2,158,750
51,000 Associates First Capital Corp., Class A 1,893,375
31,966 Citigroup, Inc. 1,682,210
23,300 Countrywide Credit Industries, Inc. 872,294
45,700 Freddie Mac 2,742,000
16,700 MBIA, Inc. 1,213,881
28,000 SunTrust Banks, Inc. 1,366,750
32,300 Wells Fargo & Co. 1,495,894
13,425,154
Healthcare - 8.89%
13,800 Aetna, Inc. 797,813
18,800 ALZA Corp. * 1,521,625
87,400 Boston Scientific Corp. * 1,392,937
38,700 Elan Corp. PLC, ADR * 2,009,981
12,400 Genzyme Corp. * 880,400
21,113 Pharmacia Corp. 1,161,215
10,000 QLT, Inc. * 497,344
8,261,315
Technology - 27.69%
37,700 3Com Corp. 669,175
84,800 ADC Telecommunications, Inc. * 1,812,600
72,200 Autodesk, Inc. 1,592,912
79,200 Cadence Design Systems, Inc. * 2,034,450
30,500 Compuware Corp. * 240,188
32,100 Conexant Systems, Inc. 844,631
25,400 Dallas Semiconductor Corp. 1,006,475
35,100 EMC Corp. * 3,126,094
46,700 Gateway, Inc. * 2,410,187
84,500 Keane, Inc. * 1,098,500
18,200 Micron Technology, Inc. * 632,450
50,873 Palm, Inc. * 2,724,885
85,500 PeopleSoft, Inc. * 3,731,273
27,200 Seagate Technology, Inc. * 1,900,600
39,200 Texas Instruments, Inc. 1,923,250
25,747,670
Transportation - 1.55%
25,700 FedEx Corp. * 1,204,302
12,600 Midwest Express Holdings, Inc. * 239,400
1,443,702
Utilities - 2.72%
17,700 El Paso Energy Corp. 1,109,569
34,000 Williams Cos., Inc. 1,421,625
2,531,194
Total Common Stocks 89,345,029
( Cost $74,099,632 )
INVESTMENT COMPANY - 4.76%
4,425,734 SSGA Prime Money Market Fund 4,425,734
Total Investment Company 4,425,734
( Cost $4,425,734 )
Par Value
CERTIFICATE OF DEPOSIT - 0.11%
100,000 State Street Eurodollar
6.000%, due 11/01/00 100,000
Total Certificate of Deposit 100,000
( Cost $100,000 )
TOTAL INVESTMENTS - 100.97% 93,870,763
( Cost $78,625,366** )
NET OTHER ASSETS AND LIABILITIES - (0.97)% (900,024)
TOTAL NET ASSETS - 100.00% $92,970,739
* Non-income producing.
** Aggregate cost for Federal tax purposes was $79,032,707.
ADR American Depository Receipt.
<PAGE>
EMERGING GROWTH FUND-- Portfolio of Investments
Value
Shares (Note 2)
COMMON STOCKS - 91.06%
Capital Goods - 5.35%
30 Capstone Turbine Corp. * $ 1,665
450 Embraer - Empresa Brasileira
de Aeronautica, S.A., ADR 13,022
600 General Dynamics Corp. 42,938
3,270 General Electric Co. 179,237
20 Leica Geosystems AG * 5,674
18,540 Tyco International, Ltd. 1,050,986
4,000 United Technologies Corp. 279,250
1,572,772
Communication Services - 0.05%
400 Comcast Corp. * 16,300
Consumer Services - 0.46%
1,350 Research in Motion, Ltd. * 135,000
Consumer Staples - 1.83%
2,600 Philip Morris Cos., Inc. 95,225
1,550 Procter & Gamble Co. 110,728
2,600 RadioShack Corp. 155,025
2,110 Safeway, Inc. * 115,391
300 SYSCO Corp. 15,470
1,000 Walgreen Co. 45,625
537,464
Energy - 2.48%
200 Anadarko Petroleum Corp. 12,810
2,910 Baker Hughes, Inc. 100,031
1,560 Coastal Corp. 117,682
1,240 Enron Corp. 101,758
3,680 EOG Resources, Inc. 144,900
1,880 Global Marine, Inc. * 49,820
3,020 Noble Drilling Corp. * 125,519
1,450 Transocean Sedco Forex, Inc. 76,850
729,370
Finance - 2.80%
1,150 ACE, Ltd. 45,138
7,680 Citigroup, Inc. 404,160
1,500 Freddie Mac 90,000
1,560 Household International, Inc. 78,487
2,560 Morgan Stanley Dean Witter & Co. 205,600
823,385
Financial Services - 15.22%
3,400 AFLAC, Inc. 248,412
5,600 American International Group, Inc. 548,800
510 Arthur J. Gallagher & Co. 32,194
2,420 AXA Financial, Inc. 130,831
Financial Services (continued)
1,790 Bear Stearns Cos, Inc. 108,519
1,020 Biotech Holders Trust, ADR 180,922
1,210 Capital One Financial Corp. 76,381
535 Charter One Financial, Inc. 12,272
1,470 Chubb Corp. 124,123
800 CIGNA Corp. 97,560
2,500 Comerica, Inc. 150,781
1,550 Fannie Mae 119,350
3,250 Golden West Financial Corp. 182,203
1,890 Goldman Sachs Group, Inc. 188,646
550 Hartford Financial Services Group, Inc. 40,941
1,780 Lehman Brothers Holdings, Inc. 114,810
2,080 Marsh & McLennan Cos., Inc. 271,960
1,680 MBNA Corp. 63,105
3,060 Mellon Financial Corp. 147,645
5,900 Merrill Lynch & Co., Inc. 413,000
1,620 Northern Trust Corp. 138,308
400 PMI Group, Inc. 29,550
2,830 PNC Financial Services Group 189,256
2,980 Providian Financial Corp. 309,920
1,400 St. Paul Cos., Inc. 71,750
400 State Street Corp. 49,896
2,900 UnumProvident Corp. 81,925
300 USA Education, Inc. 16,763
4,090 Washington Mutual, Inc. 179,960
2,000 XL Capital, Ltd. 153,750
4,473,533
Healthcare - 16.14%
20 3 Dimensional Pharmaceuticals, Inc. * 478
2,720 Abbott Laboratories 143,650
1,550 Abgenix, Inc. * 122,256
300 Albany Molecular Research, Inc. * 17,438
1,100 Allergan, Inc. 92,469
4,185 ALZA Corp. * 338,723
3,480 Andrx Group * 250,560
320 ArthroCare Corp. * 7,260
1,320 BioSource International, Inc. * 28,133
400 Biovail Corp. * 16,825
3,270 Cardinal Health, Inc. 309,832
400 Celgene Corp. * 25,750
40 Ciphergen Biosystems, Inc. * 1,240
1,100 Community Health Care * 31,006
4,010 Genentech, Inc. * 330,825
6,320 HCA-The Healthcare Co. 252,405
2,060 Human Genome Sciences, Inc. * 182,085
400 IDEC Pharmaceuticals Corp. * 78,450
430 Illumina, Inc. * 13,975
1,200 ImClone Systems, Inc. * 65,625
3,130 Immunex Corp. * 133,221
3,040 IVAX Corp. * 132,240
1,180 McKesson HBOC, Inc. 33,114
660 Medarex, Inc. * 40,342
2,160 Millennium Pharmaceuticals, Inc. * 156,735
840 Mylan Laboratories, Inc. 23,520
<PAGE>
Value
Shares (Note 2)
COMMON STOCKS (continued)
Healthcare (continued)
4,175 PE Corp.-PE Biosystems Group $ 488,475
380 Pfizer, Inc. 16,411
400 Protein Design Labs, Inc. * 54,031
1,440 Quest Diagnostics, Inc. * 138,600
2,580 Sepracor, Inc. * 175,762
8,470 Serono, S.A., ADR * 191,634
900 Shire Pharmaceuticals Group PLC * 56,587
2,250 Tenet Healthcare Corp. 88,453
4,430 Teva Pharmaceutical Industries, Ltd., ADR 261,924
2,570 Waters Corp. * 186,486
3,190 Watson Pharmaceuticals, Inc. * 199,574
500 Wellpoint Health Networks, Inc. * 58,469
4,744,563
Technology - 36.11%
2,455 Ariba, Inc. * 310,251
1,380 ARM Holdings PLC * 13,616
7,600 ARM Holdings PLC, ADR * 228,000
1,680 Automatic Data Processing, Inc. 109,725
5,735 BEA Systems, Inc. * 411,486
2,240 Brocade Communications Systems, Inc. * 509,320
5,750 Check Point Software Technologies, Ltd. * 910,656
23,015 Cisco Systems, Inc. * 1,239,933
500 Computer Network Technology Corp. * 15,195
930 Conductus, Inc. * 8,661
459 Cybear Group * 315
8,120 EMC Corp. * 723,187
1,100 Emulex Corp. * 161,563
3,530 Extreme Networks, Inc. * 292,769
3,520 Flextronics International, Ltd. * 133,760
700 Handspring, Inc. * 50,619
2,265 i2 Technologies, Inc. * 385,050
2,700 Intel Corp. 121,500
1,900 Interwoven, Inc. * 191,425
260 JNI Corp. * 23,156
2,060 Juniper Networks, Inc. * 401,700
2,805 Mercury Interactive Corp. * 311,355
600 Micron Technology, Inc. * 21,111
2,110 Microsoft Corp. * 145,326
1,060 Network Appliance, Inc. * 126,140
13,557 Nortel Networks Corp. 616,844
36,400 Oracle Corp. * 1,201,200
925 Palm, Inc. * 49,545
1,280 Rational Software Corp. * 76,400
10 Resonate, Inc. * 424
5,090 Siebel Systems, Inc. * 534,132
5,545 Sun Microsystems, Inc. * 614,802
40 Vastera, Inc. * 710
2,085 VeriSign, Inc. * 275,220
2,830 VERITAS Software Corp. * 399,074
10,614,170
Telecommunications - 4.72%
5,670 CIENA Corp. * 596,059
500 Comverse Technology, Inc. * 55,875
6,435 Corning, Inc. 492,277
40 Cosine Communications, Inc. * 1,322
640 EchoStar Communications Corp., Class A * 28,960
3,400 Nokia Oyj, ADR 145,350
1,040 QUALCOMM, Inc. * 67,714
1,387,557
Utilities - 5.88%
5,920 AES Corp. * 334,480
950 American Electric Power Co., Inc. 39,425
6,230 Calpine Corp. * 491,781
2,200 Constellation Energy Group 91,712
400 DTE Energy Co. 14,450
2,400 Duke Energy Corp. 207,450
1,930 Dynegy, Inc., Class A 89,383
1,000 El Paso Energy Corp. 62,688
2,500 Exelon Corp. * 150,312
500 FPL Group, Inc. 33,000
1,400 Public Service Enterprise Group, Inc. 58,100
2,600 Reliant Energy, Inc. 107,412
1,000 Southern Co. 29,375
650 Southern Energy, Inc. * 17,713
150 TNPC, Inc. * 2,494
1,729,775
Miscellaneous - 0.02%
400 Grupo Aeroportuario
del Sureste, S.A. de C.V. * 5,950
Total Common Stocks 26,769,839
( Cost $25,676,641 )
Par Value
CERTIFICATE OF DEPOSIT - 11.26%
3,309,116 State Street Eurodollar
6.000%, due 11/01/00 3,309,116
Total Certificate of Deposit 3,309,116
( Cost $3,309,116 )
TOTAL INVESTMENTS - 102.32% 30,078,955
( Cost $28,985,757** )
NET OTHER ASSETS AND LIABILITIES - (2.32)% (681,704)
TOTAL NET ASSETS - 100.00% $ $29,397,251
* Non-income producing.
** Aggregate cost for Federal tax purposes was $29,348,550.
ADR American Depository Receipt.
<PAGE>
INTERNATIONAL STOCK FUND-- Portfolio of Investments
Value
Shares (Note 2)
COMMON STOCKS - 89.97%
Australia - 1.09%
8,400 Cochlear, Ltd. $ 117,997
88,931 Telstra Corp., Ltd. 290,229
408,226
Belgium - 2.10%
2,400 Ackermans & van Haaren N.V. 72,280
8,113 Creyf's N.V. 209,650
13 Creyf's N.V. 0
3,281 Dexia 493,118
100 Dexia 15,233
790,281
Brazil - 1.92%
2,700 Companhia Brasileira de Distribuicao
Grupo Pao de Acucar, ADR 96,187
7,200 Companhia de Bebidas das Americas, ADR 162,450
11,800 Companhia Paranaense
de Energia-Copel, ADR 106,937
3,900 Embratel Participacoes, S.A., ADR 63,131
3,000 Petroleo Brasileiro, S.A., ADR * 87,188
6,814 Tele Norte Leste Participacoes, S.A., ADR 150,766
1,700 Telesp Celular Participacoes, S.A., ADR 53,763
720,422
Chile - 0.33%
5,900 Administradora de Fondas
de Pensiones Provida, S.A., ADR 125,375
Finland - 1.93%
7,700 Amer Group, Ltd. 171,197
14,660 UPM-Kymmene Oyj 414,890
7,500 Vaisala Oyj * 140,019
726,106
France - 5.61%
3,850 BNP Paribas, S.A. * 331,939
3,800 Carbone-Lorraine, S.A. 162,201
30,300 European Aeronautic
Defence and Space Co. * 617,102
2,504 Groupe Danone * 350,183
2,700 Neopost, S.A. * 51,805
3,893 Suez Lyonnaise des Eaux, S.A. 593,987
2,107,217
Germany - 7.29%
9,180 BASF AG 359,905
5,587 Bayer AG 242,509
5,800 Bayerische Hypo- und Vereinsbank AG 318,692
16,100 DaimlerChrysler AG 741,872
12,100 Deutsche Telekom AG 454,362
5,600 Hawesko Holding AG 77,460
3,011 Techem AG * 73,588
33,000 ThyssenKrupp AG 470,464
2,738,852
Greece - 0.26%
2,300 Cosmote, S.A. * 17,243
1,400 Hellenic Telecommunications
Organization, S.A., ADR 12,250
3,811 Hellenic Telecommunications
Organization, S.A. 66,571
96,064
Hong Kong - 1.47%
7,320 China Mobile (Hong Kong), Ltd., ADR * 224,175
154,000 Esprit Holdings, Ltd. 132,299
30,000 Shaw Brothers (Hong Kong), Ltd. 20,195
186,000 Tingyi (Cayman Islands) Holdings Corp. 22,418
36,000 VTech Holdings, Ltd. 67,624
47,000 Yue Yuen Industrial Holdings, Ltd. 87,383
554,094
Hungary - 0.30%
1,030 Gedeon Richter Rt. 50,096
2,650 Magyar Tavkozlesi Rt., ADR 62,275
112,371
India - 1.39%
1,300 Hindalco Industries, Ltd., GDR 19,842
3,250 Hindalco Industries, Ltd. 49,591
430 Infosys Technologies, Ltd. 65,809
4,500 ITC, Ltd. 73,175
4,300 Larsen & Toubro, Ltd., GDR, 144A (C) 27,205
20,000 Mahanagar Telephone Nigam, Ltd. 60,198
16,400 Reliance Industries, Ltd. 106,130
3,600 Satyam Computer Services, Ltd. 23,612
27,600 State Bank of India 96,625
522,187
Indonesia - 0.13%
27,500 PT Hanjaya Mandala Sampoerna 32,319
150,000 PT Indah Kiat Pulp & Paper Corp. Tbk * 16,426
48,745
Ireland - 0.60%
184,500 Waterford Wedgwood PLC 225,456
Israel - 0.44%
25,500 Bank Hapoalim, Ltd. 64,505
460 Check Point Software Technologies, Ltd. * 72,852
4,500 Partner Communications Co., Ltd., ADR * 27,000
164,357
Italy - 2.61%
77,400 ENI SpA 419,049
8,600 Industrie Natuzzi SpA, ADR 102,125
14,700 Interpump Group SpA 61,374
73,011 Telecom Italia SpA 397,146
979,694
<PAGE>
Value
Shares (Note 2)
COMMON STOCKS (continued)
Japan - 17.99%
1,200 ADERANS Co., Ltd. $ 43,880
33,000 Dai Nippon Printing Co., Ltd. 517,161
5,000 Diamond Lease Co., Ltd. 59,433
12,000 Fuji Photo Film Co., Ltd. 445,402
6,000 Hitachi Medical Corp. 61,531
47,000 Hitachi, Ltd. 503,964
1,500 Hokuto Corp. 47,565
8,000 Honda Motor Co., Ltd. 276,406
2,000 I S B Corp. 20,529
3,900 IMPACT 21 Co., Ltd. 45,500
12,000 Ito-Yokado Co., Ltd. 542,180
7,000 Japan Digital Laboratory Co., Ltd. 92,700
1,000 Kawasumi Laboratories, Inc. 9,211
2,000 KOSE Corp. 69,468
4,000 Maruichi Steel Tube, Ltd. 56,784
33,000 Matsushita Electric Industrial Co., Ltd. 958,713
1,500 Meitec Corp. 62,961
3,000 Ministop Co., Ltd. 61,311
4,000 Nippon Ceramic Co., Ltd. 66,022
12,000 Nippon Shinyaku Co., Ltd. 117,674
55 Nippon Telegraph and Telephone Corp. 500,527
20,000 Nomura Securities Co., Ltd. 424,323
32,000 Sankyo Co., Ltd. 705,311
3,000 Secom Techno Service Co., Ltd. 65,985
41,000 Sumitomo Bank, Ltd. 497,869
49,000 Sumitomo Corp. 431,105
40 Yoshinoya D&C Co., Ltd. 75,150
6,758,665
Mexico - 2.91%
52,700 Carso Global Telecom * 117,662
3,776 Cemex S.A. de C.V., ADR 79,768
3,190 Fomento Economico Mexicano,
S.A. de C.V., ADR 121,818
34,500 Grupo Aeroportuario del Sureste,
S.A. de C.V., Series B * 51,231
84,300 Grupo Financiero Banamex Accival,
S.A. de C.V., Class O * 131,001
33,000 Grupo Financiero Banorte,
S.A. de C.V., Class O * 49,280
9,400 Grupo Iusacell S.A. de C.V., ADR * 122,200
2,200 Grupo Televisa, S.A., GDR * 119,075
14,100 Kimberly-Clark de Mexico,
S.A. de C.V., Class A 36,052
1,400 Telefonos de Mexico SA, ADR, Class L 75,513
7,200 Tubos de Acero de Mexico, S.A., ADR 109,512
35,000 Wal-Mart de Mexico
S.A. de C.V., Series C * 79,791
1,092,903
Netherlands - 4.58%
2,800 Beter Bed Holding N.V. 29,226
21,700 Fortis N.V. 662,926
2,600 Fugro N.V. 153,232
6,731 Hunter Douglas N.V. 193,057
5,900 Internatio-Muller N.V. 115,155
300 Kempen & Co N.V. 18,457
7,663 Koninklijke (Royal) Philips
Electronics N.V. * 301,146
6,300 N.V. Holdingmaatschappij De Telegraaf 125,101
2,200 PinkRoccade N.V. 122,283
1,720,583
Norway - 1.35%
6,300 Ekornes ASA 47,527
1,710 Hands ASA * 5,381
27,300 Merkantildata ASA 128,865
19,000 P4 Radio Hele Norge ASA 92,144
22,900 Tandberg Television ASA 231,986
505,903
Peru - 0.10%
5,100 Credicorp, Ltd. 37,294
Philippines - 0.34%
631,000 Benpres Holdings Corp. * 31,457
19,920 Manila Electric Co., Class B 16,357
5,200 Philippine Long Distance
Telephone Co., ADR 80,600
128,414
Russia - 0.92%
6,180 Mobile Telesystems, ADR * 170,722
3,300 OAO Lukoil Holding, ADR 176,220
346,942
Singapore - 0.08%
41,000 Want Want Holdings, Ltd. 28,495
South Africa - 0.94%
19,500 ABSA Group, Ltd. 66,275
900 Anglo American Platinum Corp., Ltd. 35,111
1,700 Impala Platinum Holdings, Ltd. 72,841
70,700 Sanlam, Ltd. 73,395
13,600 Sasol, Ltd. 104,135
351,757
South Korea - 2.29%
4,700 Hyundai Electronics Industries Co., Ltd. * 28,882
9,171 Kookmin Bank 104,811
4,600 Korea Electric Power Corp. 102,716
2,590 Korea Telecom Corp., ADR 95,506
400 Korea Telecom Corp. 23,561
600 Pohang Iron & Steel Co., Ltd. 34,866
2,400 Pohang Iron & Steel Co., Ltd., ADR 37,950
2,199 Samsung Electronics, GDR, 144A (C) 161,627
1,484 Samsung Fire & Marine Insurance 34,442
9,439 SK Telecom Co., Ltd, ADR 236,565
860,926
<PAGE>
Value
Shares (Note 2)
COMMON STOCKS (continued)
Spain - 3.58%
1,200 Abengoa, S.A. $ 34,368
6,000 Aldeasa, S.A. 113,543
2,200 Banco Pastor, S.A. 85,692
34,166 Empresa Nacional de Electricidad, S.A. 556,671
35,678 Iberdrola, S.A. 436,282
12,000 Prosegur, CIA de Seguridad S.A. 118,125
1,344,681
Sweden - 1.63%
3,100 Elanders AB, Series B 46,226
26,300 Electrolux AB, Series B 331,635
5,950 Industrial & Financial Systems AB, Series B 46,743
8,300 Nobel Biocare AB 186,894
611,498
Switzerland - 4.92%
65 Bank Sarasin & Cie, Registered, Class B 209,724
340 Edipresse, S.A. 137,127
980 Gretag Imaging Group, Registered 176,091
83 Roche Holding AG 758,155
1,170 Zurich Financial Services AG 566,255
1,847,352
Taiwan - 1.25%
3,400 ASE Test, Ltd. * 52,488
7,344 Asustek Computer, Inc., GDR, 144A (C) 39,658
5,610 China Steel Corp., GDR 63,393
4,917 Compal Electronics, Inc. 38,351
23,520 Far Eastern Textile, Ltd. 19,369
6,200 Siliconware Precision Industries Co., ADR 24,800
37,000 Taiwan Semiconductor
Manufacturing Co., Ltd 112,260
8,700 United Microelectronics Corp., ADR * 98,962
3,000 Via Technologies, Inc. 21,548
470,829
Turkey - 0.88%
1,432,627 Anadolu Efes Biracilik ve
Malt Sanayii A.S. * 83,965
7,800 Turkcell Iletisim Hizmetleri A.S., ADR * 85,312
6,800 Turkiye Garanti Bankasi A.S.,
ADR, 144A (C) * 69,360
10,703,517 Yapi ve Kredi Bankasi A.S. 92,531
331,168
United Kingdom - 18.41%
22,300 AEA Technology PLC 107,261
6,900 AMEC PLC 29,183
83,700 Ashtead Group PLC 143,304
31,000 BAA PLC 257,732
21,100 Barclays PLC 603,728
31,760 Bass PLC 310,824
60,500 Boots Co. PLC 482,803
36,100 British Telecommunications PLC 423,225
36,700 CGNU PLC 490,964
100,500 Corporate Services Group PLC * 94,783
7,788 Euromoney Institutional Investor PLC 61,020
8,400 Glaxo Wellcome PLC 241,809
258,000 Invensys PLC 615,797
4,700 Luminar PLC 45,418
24,100 Man Group PLC 173,091
19,600 Northgate PLC 115,745
37,800 Old Mutual PLC 82,954
50,700 ScottishPower PLC 380,689
5,700 Signet Group PLC, ADR 139,650
3,100 South African Breweries PLC 18,667
11,200 South African Breweries PLC 67,096
12,588 SSL International PLC 145,660
146,800 Tesco PLC 559,656
126,700 Unilever PLC 857,132
113,000 Vodafone Group PLC 470,147
6,918,338
United States - 0.25%
840 Comverse Technology, Inc. * 93,870
Venezuela - 0.08%
1,600 Compania Anonima Nacional
Telefonos de Venezuela, ADR 30,400
Total Common Stocks 33,799,465
( Cost $34,819,225 )
PREFERRED STOCKS - 0.80%
Brazil - 0.43%
7,100,000 Banco Bradesco, S.A. 43,887
1,535,000 Banco Itau, S.A. 119,407
163,294
Colombia - 0.01%
2,000 Banco Ganadero, S.A., ADR 4,500
Germany - 0.36%
3,800 Fielmann AG 133,824
Total Preferred Stocks 301,618
( Cost $270,981 )
<PAGE>
Value
Shares (Note 2)
WARRANTS AND RIGHTS - 0.00%
Singapore - 0.00%
4,100 Want Want Holdings, Ltd. * 779
Total Warrants and Rights 779
( Cost $205 )
Par Value
CERTIFICATE OF DEPOSIT - 9.14%
3,433,947 State Street Eurodollar
6.000%, due 11/01/00 3,433,947
Total Certificate of Deposit 3,433,947
( Cost $3,433,947 )
TOTAL INVESTMENTS - 99.91% 37,535,809
( Cost $38,524,358** )
NET OTHER ASSETS AND LIABILITIES - 0.09% 31,578
TOTAL NET ASSETS - 100.00% $37,567,387
* Non-income producing.
** Aggregate cost for Federal tax purposes was $38,710,698.
(C) Security sold within the terms of private placement memorandum exempt from
registration under section 144A of the Securities Act of 1933, as amended,
and may be sold only to dealers in that program or other "qualified
institutional investors." The securities have been determined to be liquid
under guidelines established by the Board of Trustees.
ADR American Depository Receipt.
GDR Global Depository Receipt.
OTHER INFORMATION:
Industry Concentration as a Percentage of Net Assets: % of Net Assets
Communication Services 12.53%
Certificate of Deposit 9.14%
Banks 7.79%
Drugs & Healthcare 6.35%
Household Appliances & Home Furnishings 5.75%
Financial Services 5.39%
Food & Beverages 4.46%
Electric Utilities 4.26%
Retail Trade 3.61%
Insurance 3.32%
Retail Grocery 3.03%
Business Services 3.02%
Electronics 2.90%
Automobiles 2.71%
Industrial Machinery 2.40%
Mining 2.24%
Computers & Business Equipment 2.23%
Miscellaneous 2.14%
Chemicals 2.07%
Oil-Domestic 1.86%
Aerospace 1.64%
Leisure Time 1.64%
Gas & Pipeline Utilities 1.58%
Paper 1.24%
Software 1.23%
Conglomerates 1.23%
Construction & Mining Equipment 1.11%
Hotels & Restaurants 1.00%
Electrical Equipment 0.43%
Apparel & Textiles 0.41%
Railroads & Equipment 0.31%
Tobacco 0.28%
Construction Materials 0.21%
Telephone 0.20%
Cosmetics & Toiletries 0.12%
Net Other Assets and Liabilities 0.09%
Household Products 0.08%
100.00%
<PAGE>
This page intentionally left blank.
<PAGE>
<TABLE>
<CAPTION>
Statements of Assets and Liabilities
Cash Reserves Bond Balanced
Fund Fund Fund
ASSETS:
Investments (Note 2):
<S> <C> <C> <C>
Investments at cost $ 7,847,446 $ 24,430,307 $ 83,634,227
Net unrealized appreciation (depreciation) -- 142,440 7,197,978
------------------ ------------------ -------------------
Total investments at value 7,847,446 24,572,747 90,832,205
Cash -- --
Foreign currency (Cost $2,239 and $42,060) (Note 2) -- -- --
Receivables:
Investments sold -- 971,364 685,787
Fund shares sold 120,902 194,791 1,157,047
Dividends and interest 6,188 311,981 548,116
Due from Advisor, net 5,533 1,001 --
Deferred organization and offering costs 18,142 18,142 18,142
Prepaid registration fees -- -- --
------------------ ------------------ -------------------
Total Assets 7,998,211 26,070,026 93,241,297
------------------ ------------------ -------------------
LIABILITIES:
Payable to custodian -- -- --
Net unrealized depreciation on forward currency contracts -- -- --
Payables:
Investments purchased -- 1,757,638 2,286,030
Due to Advisor, net -- -- 41,166
Fund shares repurchased -- 7,079 39,275
Administration and transfer agent fees 7,812 11,259 19,113
Distribution fees - Class B 1,682 6,743 38,123
Shareholder servicing fees -- 4,632 18,159
Accrued expenses and other payables 19,738 21,581 42,756
------------------ ------------------ -------------------
Total Liabilities 29,232 1,808,932 2,484,622
------------------ ------------------ -------------------
NET ASSETS $ 7,968,979 $ 24,261,094 $ 90,756,675
================== ================== ===================
NET ASSETS consist of:
Paid-in capital $ 7,937,458 $ 24,907,494 $ 84,009,170
Accumulated undistributed (distributions in excess of)
net investment income 31,584 20,068 11,140
Accumulated net realized gain (loss) on investments sold
and foreign currency related transactions (63) (808,908) (461,613)
Net unrealized appreciation (depreciation) of investments
(including appreciation (depreciation) of foreign currency
related transactions) -- 142,440 7,197,978
------------------ ------------------ -------------------
TOTAL NET ASSETS $ 7,968,979 $ 24,261,094 $ 90,756,675
================== ================== ===================
Class A Shares:
Net Assets $ 5,104,274 $ 13,278,980 $ 27,088,260
Shares of beneficial interest outstanding 5,105,217 1,387,473 2,140,633
NET ASSET VALUE and redemption price per share $ 1.00 $ 9.57 $ 12.65
Sales charge of offering price* 0.056 0.43 0.71
------------------ ------------------ -------------------
Maximum offering price per share $ 1.056 $ 10.00 $ 13.36
================== ================== ===================
Class B Shares:
Net Assets $ 2,864,705 $ 10,982,114 $ 63,668,415
Shares of beneficial interest outstanding 2,863,898 1,146,943 5,027,653
NET ASSET VALUE and redemption price per share** $ 1.00 $ 9.58 $ 12.66
================== ================== ===================
</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, Emerging Growth
Fund and International Stock Fund.
** Redemption price per share is equal to the Net Asset Value per share less any
applicable deferred sales charge.
<PAGE>
<TABLE>
<CAPTION>
High Income Growth and Income Capital Appreciation Emerging Growth International Stock
Fund Fund Fund Fund Fund
<S><C> <C> <C> <C> <C>
$ 23,621,165 $ 140,125,402 $ 78,625,366 $ 28,985,757 $ 38,524,358
(2,832,989) 13,293,851 15,245,397 1,093,198 (988,549)
------------------ ------------------- ------------------- ------------------- -------------------
20,788,176 153,419,253 93,870,763 30,078,955 37,535,809
439 -- -- -- --
2,279 -- -- -- 41,014
20,573 -- -- 463,087 4,544
112,408 1,040,983 775,014 173,398 61,418
539,609 101,322 48,293 5,384 69,075
535 -- -- -- --
18,142 18,142 18,142 -- 18,142
-- -- -- 7,557 --
------------------ ------------------- ------------------- ------------------- -------------------
21,482,161 154,579,700 94,712,212 30,728,381 37,730,002
------------------ ------------------- ------------------- ------------------- -------------------
-- -- -- 60 6,198
664 -- -- -- --
743,717 457,251 1,559,977 1,270,582 45,816
-- 61,039 49,491 11,631 17,078
3,341 106,758 38,013 1,571 2,557
8,748 30,616 19,101 13,813 20,193
7,858 64,274 33,639 5,400 3,408
4,391 30,418 17,728 6,256 7,862
48,073 43,200 23,524 21,817 59,503
------------------ ------------------- ------------------- ------------------- -------------------
816,792 793,556 1,741,473 1,331,130 162,615
------------------ ------------------- ------------------- ------------------- -------------------
$ 20,665,369 $ 153,786,144 $ 92,970,739 $ 29,397,251 $ 37,567,387
================== =================== =================== =================== ===================
$ 24,080,146 $ 142,000,991 $ 78,197,402 $ 35,110,044 $ 40,505,059
76,204 -- -- -- 24,450
(657,368) (1,508,698) (472,060) (6,805,960) (1,969,291)
(2,833,613) 13,293,851 15,245,397 1,093,167 (992,831)
------------------ ------------------- ------------------- ------------------- -------------------
$ 20,665,369 $ 153,786,144 $ 92,970,739 $ 29,397,251 $ 37,567,387
================== =================== =================== =================== ===================
$ 8,395,369 $ 46,993,735 $ 35,888,986 $ 20,731,888 $ 32,069,981
1,046,297 3,341,598 2,183,661 2,635,594 3,357,209
$ 8.02 $ 14.06 $ 16.44 $ 7.87 $ 9.55
0.36 0.79 0.92 0.44 0.53
------------------ ------------------- ------------------- ------------------- -------------------
$ 8.38 $ 14.85 $ 17.36 $ 8.31 $ 10.08
================== =================== =================== =================== ===================
$ 12,270,000 $ 106,792,409 $ 57,081,753 $ 8,665,363 $ 5,497,406
1,526,217 7,649,218 3,538,774 1,106,686 579,979
$ 8.04 $ 13.96 $ 16.13 $ 7.83 $ 9.48
================== =================== =================== =================== ===================
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of Operations For the Year Ended October 31, 2000
Cash Reserves Bond Balanced
Fund Fund Fund
INVESTMENT INCOME:
<S> <C> <C> <C>
Dividends $ -- $ -- $ 380,300
Interest 480,607 1,251,158 2,193,416
Less: Foreign taxes withheld -- -- --
------------------ ------------------ -------------------
Total investment income 480,607 1,251,158 2,573,716
------------------ ------------------ -------------------
EXPENSES:
Management fees (Note 3) 31,220 84,362 425,620
Administration and transfer agent fees (Note 3) 88,367 99,351 140,664
Registration expenses 14,954 14,189 34,395
Custodian and accounting fees 8,285 15,668 23,752
Professional fees 8,369 8,886 13,880
Reports to shareholder expense 603 3,085 12,038
Trustees' fees 463 1,135 4,813
Distribution fees - Class B (Note 3) 22,385 66,112 342,141
Shareholder servicing fees - Class A (Note 3) -- 20,130 49,643
Shareholder servicing fees - Class B (Note 3) -- 22,051 114,057
Amortization of organization and offering costs (Note 2) 8,425 8,425 8,425
Other expenses 1,114 2,082 8,379
------------------ ------------------ -------------------
Total expenses before reimbursement 184,185 345,476 1,177,807
Less reimbursement (Note 3) (118,873) (127,512) (114,370)
------------------ ------------------ -------------------
Total expenses net of reimbursement/waiver 65,312 217,964 1,063,437
------------------ ------------------ -------------------
NET INVESTMENT INCOME (LOSS) 415,295 1,033,194 1,510,279
------------------ ------------------ -------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2)
Net realized gain (loss) on investments (including net
realized gain on foreign currency related transactions) (63) (452,538) (244,076)
Net change in unrealized appreciation (depreciation) on
investments (including net unrealized appreciation
(depreciation) on foreign currency related transactions) -- 169,747 3,278,145
------------------ ------------------ -------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (63) (282,791) 3,034,069
------------------ ------------------ -------------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ 415,232 $ 750,403 $ 4,544,348
================== ================== ===================
</TABLE>
(1) Fund commenced investment operations on February 29, 2000.
<PAGE>
<TABLE>
<CAPTION>
High Income Growth and Income Capital Appreciation Emerging Growth International Stock
Fund Fund Fund Fund (1) Fund
<S><C> <C> <C> <C> <C>
$ 20,372 $ 1,530,174 $ 400,695 $ 33,202 $ 756,907
1,953,361 239,631 139,028 100,029 100,366
(162) -- -- (408) (76,893)
------------------ -------------------- ------------------- ------------------- -------------------
1,973,571 1,769,805 539,723 132,823 780,380
------------------ -------------------- ------------------- ------------------- -------------------
104,432 631,743 438,194 127,737 403,418
95,075 183,020 131,740 69,827 125,395
11,279 39,463 28,396 13,490 12,054
25,993 17,453 13,329 11,360 122,318
8,502 18,683 11,727 9,084 9,801
3,753 23,887 10,350 3,187 7,506
740 6,396 3,309 698 1,512
80,906 609,029 283,158 26,739 34,098
20,485 84,101 51,649 33,666 84,684
26,983 203,055 94,416 8,913 11,368
8,425 8,425 8,425 17,287 8,425
2,432 9,967 6,128 2,029 6,319
------------------ -------------------- ------------------- ------------------- -------------------
389,005 1,835,222 1,080,821 324,017 826,898
(118,223) (77,523) (96,580) (92,898) (178,647)
------------------ -------------------- ------------------- ------------------- -------------------
270,782 1,757,699 984,241 231,119 648,251
------------------ -------------------- ------------------- ------------------- -------------------
1,702,789 12,106 (444,518) (98,296) 132,129
------------------ -------------------- ------------------- ------------------- -------------------
(258,795) (1,195,785) 114,311 (6,811,319) (1,881,318)
(1,783,785) 7,385,906 9,962,008 1,093,167 (2,065,004)
------------------ -------------------- ------------------- ------------------- -------------------
(2,042,580) 6,190,121 10,076,319 (5,718,152) (3,946,322)
------------------ -------------------- ------------------- ------------------- -------------------
$ (339,791) $ 6,202,227 $ 9,631,801 $ (5,816,448) $ (3,814,193)
================== ==================== =================== =================== ====================
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
Cash Reserves Bond
Fund Fund
Year Ended Year Ended Year Ended Year Ended
October 31, 2000 October 31, 1999 October 31, 2000 October 31, 1999
<S> <C> <C> <C> <C>
NET ASSETSat beginning of period $ 7,981,951 $ 5,233,081 $ 15,498,925 $ 7,022,297
--------------- --------------- --------------- ---------------
Increase in net assets from operations:
Net investment income 415,295 262,711 1,033,194 578,153
Net realized gain (loss) (63) 42 (452,538) (341,357)
Net change in unrealized appreciation (depreciation) -- -- 169,747 (89,553)
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets from operations 415,232 262,753 750,403 147,243
--------------- --------------- --------------- ---------------
Distributions to shareholders from:
Net investment income
Class A (272,200) (193,602) (525,490) (345,079)
Class B (143,125) (69,068) (508,730) (233,074)
Net realized gains
Class A -- -- -- (28,262)
Class B -- -- -- (9,835)
--------------- --------------- --------------- ---------------
Total distributions (415,325) (262,670) (1,034,220) (616,250)
--------------- --------------- --------------- ---------------
Capital Share transactions:
Class A Shares
Shares sold 5,234,906 1,463,270 6,976,002 3,599,208
Issued to shareholders in reinvestment of distributions 271,074 192,249 514,391 372,980
Shares redeemed (4,882,011) (1,513,071) (2,060,463) (514,328)
--------------- --------------- --------------- ---------------
Net increase (decrease) from capital share transactions 623,969 142,448 5,429,930 3,457,860
--------------- --------------- --------------- ---------------
Class B Shares
Shares sold 3,541,946 4,494,991 5,238,219 6,343,163
Issued to shareholders in reinvestment of distributions 140,677 68,769 473,758 228,798
Shares redeemed (4,319,471) (1,957,421) (2,095,921) (1,084,186)
--------------- --------------- --------------- ---------------
Net increase (decease) from capital share transactions (636,848) 2,606,339 3,616,056 5,487,775
--------------- --------------- --------------- ---------------
Total increase (decrease) in net assets (12,972) 2,748,870 8,762,169 8,476,628
--------------- --------------- --------------- ---------------
NETASSETS at end of period (including line A) $ 7,968,979 $ 7,981,951 $ 24,261,094 $ 15,498,925
=============== =============== =============== ===============
(A) Undistributed net investment income $ 31,584 $ 29,722 $ 20,068 $ 12,355
=============== =============== =============== ===============
OTHERINFORMATION:
Capital Share transactions:
Class A Shares
Shares sold 5,234,891 1,467,709 728,394 361,356
Issued to shareholders in reinvestment of distributions 271,062 193,165 53,722 37,674
Shares redeemed (4,881,981) (1,517,727) (214,902) (51,766)
--------------- --------------- --------------- ---------------
Net increase (decrease) in shares outstanding 623,972 143,147 567,214 347,264
--------------- --------------- --------------- ---------------
Class B Shares
Shares sold 3,541,848 4,542,489 545,816 637,845
Issued to shareholders in reinvestment of distributions 140,622 68,511 49,469 23,198
Shares redeemed (4,319,316) (2,004,599) (218,789) (109,947)
--------------- --------------- --------------- ---------------
Net increase (decrease) in shares outstanding (636,846) 2,606,401 376,496 551,096
--------------- --------------- --------------- ---------------
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Balanced High Income Growth and Income
Fund Fund Fund
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
October 31, 2000 October 31, 1999 October 31, 2000 October 31, 1999 October 31, 2000 October 31, 1999
<S> <C> <C> <C> <C> <C>
$ 46,560,118 $ 23,109,847 $ 17,278,309 $ 9,677,254 $ 81,501,997 $ 25,577,029
------------------- ------------------ ------------------ ------------------ ------------------- -------------------
1,510,279 722,479 1,702,789 1,198,240 12,106 56,087
(244,076) 129,310 (258,795) (327,673) (1,195,785) (118,122)
3,278,145 3,512,277 (1,783,785) 38,689 7,385,906 5,867,753
------------------- ------------------ ------------------ ------------------ ------------------- -------------------
4,544,348 4,364,066 (339,791) 909,256 6,202,227 5,805,718
------------------- ------------------ ------------------ ------------------ ------------------- -------------------
(559,926) (431,006) (765,887) (639,267) (87,911) (104,915)
(946,179) (291,473) (928,501) (558,973) (35,566) --
(105,600) (11,733) -- (18,678) (39,692) (10,773)
(237,904) (20,814) -- (6,615) (89,517) (29,659)
------------------- ------------------ ------------------ ------------------ ------------------- -------------------
(1,849,609) (755,026) (1,694,388) (1,223,533) (252,686) (145,347)
------------------- ------------------ ------------------ ------------------ ------------------- -------------------
15,089,626 22,621,347 1,545,554 2,118,956 25,493,468 17,647,334
658,892 439,832 735,562 645,554 127,180 114,550
(4,812,012) (25,576,825) (924,681) (871,164) (6,358,513) (5,460,361)
------------------- ------------------ ------------------ ------------------ ------------------- -------------------
10,936,506 (2,515,646) 1,356,435 1,893,346 19,262,135 12,301,523
------------------- ------------------ ------------------ ------------------ ------------------- -------------------
36,064,441 23,989,683 5,816,822 7,053,287 57,537,601 40,923,793
1,163,242 304,240 702,434 462,448 123,944 29,580
(6,662,371) (1,937,046) (2,454,452) (1,493,749) (10,589,074) (2,990,299)
------------------- ------------------ ------------------ ------------------ ------------------- -------------------
30,565,312 22,356,877 4,064,804 6,021,986 47,072,471 37,963,074
------------------- ------------------ ------------------ ------------------ ------------------- -------------------
44,196,557 23,450,271 3,387,060 7,601,055 72,284,147 55,924,968
------------------- ------------------ ------------------ ------------------ ------------------- -------------------
$ 90,756,675 $ 46,560,118 $ 20,665,369 $ 17,278,309 $ 153,786,144 $ 81,501,997
=================== ================== ================== ================== =================== ===================
$ 11,140 $ 1,966 $ 76,204 $ 39,187 $ -- $ 1
=================== ================== ================== ================== =================== ===================
1,208,487 2,004,630 178,683 227,759 1,846,869 1,367,430
48,399 38,008 86,177 69,992 9,353 9,102
(386,189) (2,240,465) (105,782) (93,192) (455,758) (461,584)
------------------- ------------------ ------------------ ------------------ ------------------- -------------------
870,697 (197,827) 159,078 204,559 1,400,464 914,948
------------------- ------------------ ------------------ ------------------ ------------------- -------------------
2,871,367 2,031,097 668,629 753,638 4,170,579 3,142,758
93,064 25,453 81,293 50,649 9,343 2,458
(530,736) (159,197) (279,222) (159,042) (767,441) (233,327)
------------------- ------------------ ------------------ ------------------ ------------------- -------------------
2,433,695 1,897,353 470,700 645,245 3,412,481 2,911,889
------------------- ------------------ ------------------ ------------------ ------------------- -------------------
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
Capital Appreciation Emerging Growth
Fund Fund (1)
Year Ended Year Ended Period Ended
October 31, 2000 October 31, 1999 October 31, 2000
<S> <C> <C> <C>
NET ASSETS at beginning of period $ 36,824,494 $ 20,435,388 $ --
--------------- ---------------- ----------------
Increase in net assets from operations:
Net investment income (loss) (444,518) (159,055) (98,296)
Net realized gain (loss) 114,311 (390,468) (6,811,319)
Net change in unrealized appreciation (depreciation) 9,962,008 4,901,372 1,093,167
--------------- ---------------- ----------------
Net increase (decrease) in net assets from operations 9,631,801 4,351,849 (5,816,448)
--------------- ---------------- ----------------
Distributions to shareholders from:
Net investment income
Class A -- -- --
Class B -- -- --
Net realized gains
Class A (14,447) (10,034) --
Class B (26,348) -- --
--------------- ---------------- ----------------
Total distributions (40,795) (10,034) --
--------------- ---------------- ----------------
Capital Share transactions:
Class A Shares
Shares sold 23,430,373 8,326,212 25,755,958
Issued to shareholders in reinvestment of distributions 14,391 10,009 --
Shares redeemed (4,619,423) (10,439,625) (186,109)
--------------- ---------------- ----------------
Net increase (decrease) from capital share transactions 18,825,341 (2,103,404) 25,569,849
--------------- ---------------- ----------------
Class B Shares
Shares sold 32,183,438 15,597,190 9,908,820
Issued to shareholders in reinvestment of distributions 26,124 -- --
Shares redeemed (4,479,664) (1,446,495) (264,970)
--------------- ---------------- ----------------
Net increase from capital share transactions 27,729,898 14,150,695 9,643,850
--------------- ---------------- ----------------
Total increase in net assets 56,146,245 16,389,106 29,397,251
--------------- ---------------- ----------------
NETASSETS at end of period (including line A) $ 92,970,739 $ 36,824,494 $ 29,397,251
=============== ================ ================
(A) Undistributed net investment income $ -- $ 35 $ --
=============== ================ ================
OTHER INFORMATION:
Capital Share transactions:
Class A Shares
Shares sold 1,508,464 645,448 2,656,627
Issued to shareholders in reinvestment of distributions 997 815 --
Shares redeemed (293,733) (893,051) (21,033)
--------------- ---------------- ----------------
Net increase (decrease) in shares outstanding 1,215,728 (246,788) 2,635,594
--------------- ---------------- ----------------
Class B Shares
Shares sold 2,091,342 1,219,845 1,137,730
Issued to shareholders in reinvestment of distributions 1,827 -- --
Shares redeemed (294,032) (120,110) (31,044)
--------------- ---------------- ----------------
Net increase in shares outstanding 1,799,137 1,099,735 1,106,686
--------------- ---------------- ----------------
</TABLE>
(1) Fund commenced investment operations on February 29, 2000.
See accompanying Notes to Financial Statements.
<PAGE>
International Stock
Fund
Year Ended Year Ended
October 31, 2000 October 31, 1999
$ 36,540,092 $ 29,005,768
------------------- ------------------
132,129 416,820
(1,881,318) 2,602,484
(2,065,004) 1,996,743
------------------- ------------------
(3,814,193) 5,016,047
------------------- ------------------
(440,689) (402,357)
(23,618) (10,711)
(2,379,485) (1,172,577)
(255,311) (66,391)
------------------- ------------------
(3,099,103) (1,652,036)
------------------- ------------------
2,588,770 1,024,723
2,819,698 1,575,095
(482,865) (192,494)
------------------- ------------------
4,925,603 2,407,324
------------------- ------------------
3,486,182 1,965,892
276,979 76,883
(748,173) (279,786)
------------------- ------------------
3,014,988 1,762,989
------------------- ------------------
1,027,295 7,534,324
------------------- ------------------
$ 37,567,387 $ 36,540,092
=================== ==================
$ 24,450 $ 267,089
=================== ==================
247,409 93,829
255,360 151,888
(46,500) (18,840)
------------------- ------------------
456,269 226,877
------------------- ------------------
334,355 180,336
25,337 7,421
(72,000) (26,738)
------------------- ------------------
287,692 161,019
------------------- ------------------
See accompanying Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights for a Share of Beneficial Interest Outstanding Throughout each Period
Class A Class B
Year Ended Year Ended Inception(a) to Year Ended Year Ended Inception(a) to
10/31/2000 10/31/1999 10/31/1998 10/31/2000 10/31/1999 10/31/1998
CASH RESERVES FUND ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ---------- ----------
Income from Investment Operations:
Net investment income 0.06 0.05 0.04 0.05 0.04 0.03
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 0.06 0.05 0.04 0.05 0.04 0.03
---------- ---------- ---------- ---------- ---------- ----------
Less Distributions:
Distributions from net investment income (0.06) (0.05) (0.04) (0.05) (0.04) (0.03)
---------- ---------- ---------- ---------- ---------- ----------
Total distributions (0.06) (0.05) (0.04) (0.05) (0.04) (0.03)
---------- ---------- ---------- ---------- ---------- ----------
Net increase in net asset value -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ========== ==========
Total Return+ 5.77% 4.60% 4.21%(1) 4.97% 3.81% 3.50%(1)
Ratios/Supplemental Data:
Net Assets, End of Period (in 000's) $ 5,104 $ 4,481 $ 4,339 $ 2,865 $ 3,501 $ 894
Ratios of expenses to average net assets:
Before reimbursement of expenses by Advisor 2.07% 2.63% 4.76%(2) 2.82% 3.38% 5.51%(2)
After reimbursement of expenses by Advisor 0.55% 0.55% 0.55%(2) 1.30% 1.30% 1.30%(2)
Ratios of net investment income (loss) to
average net assets:
Before reimbursement of expenses by Advisor 4.09% 2.33% 0.67%(2) 3.34% 1.84% (0.08)%(2)
After reimbursement of expenses by Advisor 5.61% 4.41% 4.88%(2) 4.86% 3.92% 4.13%(2)
BOND FUND
Net Asset Value, Beginning of Period $ 9.74 $ 10.14 $ 10.00 $ 9.75 $ 10.14 $ 10.00
---------- ---------- ---------- ---------- ---------- ----------
Income from Investment Operations:
Net investment income 0.63 0.51 0.45 0.55 0.44 0.39
Net realized and unrealized gain (loss)
on investments (0.17) (0.35) 0.14 (0.17) (0.35) 0.14
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 0.46 0.16 0.59 0.38 0.09 0.53
---------- ---------- ---------- ---------- ---------- ----------
Less Distributions:
Distributions from net investment income (0.63) (0.51) (0.45) (0.55) (0.44) (0.39)
Distributions from capital gains -- (0.05) -- -- (0.04) --
---------- ---------- ---------- ---------- ---------- ----------
Total distributions (0.63) (0.56) (0.45) (0.55) (0.48) (0.39)
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net asset value (0.17) (0.40) 0.14 (0.17) (0.39) 0.14
---------- ---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period $ 9.57 $ 9.74 $ 10.14 $ 9.58 $ 9.75 $ 10.14
========== ========== ========== ========== ========== ==========
Total Return+ 4.89% 1.60% 6.08%(1) 4.10% 0.94% 5.36%(1)
Ratios/Supplemental Data:
Net Assets, End of Period (in 000's) $ 13,279 $ 7,991 $ 4,797 $ 10,982 $ 7,508 $ 2,225
Ratios of expenses to average net assets:
Before reimbursement of expenses by Advisor 1.66% 2.02% 4.83%(2) 2.41% 2.77% 5.58%(2)
After reimbursement of expenses by Advisor 0.90% 0.90% 0.60%(2) 1.65% 1.65% 1.35%(2)
Ratios of net investment income to average
net assets:
Before reimbursement of expenses by Advisor 5.76% 4.06% 1.14%(2) 5.01% 3.46% 0.39%(2)
After reimbursement of expenses by Advisor 6.52% 5.18% 5.37%(2) 5.77% 4.58% 4.62%(2)
Portfolio Turnover 366% 725% 95% 366% 725% 95%
</TABLE>
(1) Not annualized.
(2) Annualized.
+ Total return without applicable sales charge. (a) Fund commenced investment
operations on December 29, 1997.
See accompanying Notes to Financial Statements.
<PAGE>
Financial Highlights for a Share of Beneficial Interest
Outstanding Throughout each Period
<TABLE>
<CAPTION>
Class A Class B
Year Ended Year Ended Inception(a) to Year Ended Year Ended Inception(a) to
BALANCED FUND 10/31/2000 10/31/1999 10/31/1998 10/31/2000 10/31/1999 10/31/1998
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 12.05 $ 10.68 $ 10.00 $ 12.05 $ 10.68 $ 10.00
---------- ---------- ---------- ---------- ---------- ----------
Income from Investment Operations:
Net investment income 0.34 0.27 0.21 0.25 0.18 0.14
Net realized and unrealized gain (loss)
on investments 0.69 1.38 0.68 0.69 1.38 0.68
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 1.03 1.65 0.89 0.94 1.56 0.82
Less Distributions:
Distributions from net investment income (0.35) (0.27) (0.21) (0.25) (0.18) (0.14)
Distributions from capital gains (0.08) (0.01) -- (0.08) (0.01) --
---------- ---------- ---------- ---------- ---------- ----------
Total distributions (0.43) (0.28) (0.21) (0.33) (0.19) (0.14)
---------- ---------- ---------- ---------- ---------- ----------
Net increase in net asset value 0.60 1.37 0.68 0.61 1.37 0.68
---------- ---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period $ 12.65 $ 12.05 $ 10.68 $ 12.66 $ 12.05 $ 10.68
========== ========== ========== ========== ========== ==========
Total Return+ 8.67% 15.58% 8.92%(1) 7.93% 14.72% 8.24%(1)
Ratios/Supplemental Data:
Net Assets, End of Period (in 000's) $ 27,088 $ 15,297 $ 15,670 $ 63,669 $ 31,263 $ 7,440
Ratios of expenses to average net assets:
Before reimbursement of expense by Advisor 1.28% 1.47% 3.40%(2) 2.03% 2.22% 4.15%(2)
After reimbursement of expenses by Advisor 1.10% 1.10% 1.10%(2) 1.85% 1.85% 1.85%(2)
Ratios of net investment income (loss) to average
net assets:
Before reimbursement of expenses by Advisor 2.65% 1.99% 0.23%(2) 1.90% 1.25% (0.52)%(2)
After reimbursement of expenses by Advisor 2.83% 2.36% 2.53%(2) 2.08% 1.62% 1.78%(2)
Portfolio Turnover 187% 349% 60% 187% 349% 60%
</TABLE>
<TABLE>
<CAPTION>
HIGH INCOME FUND
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 8.88 $ 8.85 $ 10.00 $ 8.90 $ 8.85 $ 10.00
---------- ---------- ---------- ---------- ---------- ----------
Income from Investment Operations:
Net investment income 0.81 0.80 0.61 0.75 0.74 0.55
Net realized and unrealized gain (loss)
on investments (0.86) 0.06 (1.15) (0.86) 0.06 (1.15)
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations (0.05) 0.86 (0.54) (0.11) 0.80 (0.60)
---------- ---------- ---------- ---------- ---------- ----------
Less Distributions:
Distributions from net investment income (0.81) (0.80) (0.61) (0.75) (0.74) (0.55)
Distributions from capital gains -- (0.03) -- -- (0.01) --
---------- ---------- ---------- ---------- ---------- ----------
Total distributions (0.81) (0.83) (0.61) (0.75) (0.75) (0.55)
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net asset value (0.86) 0.03 (1.15) (0.86) 0.05 (1.15)
---------- ---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period $ 8.02 $ 8.88 $ 8.85 $ 8.04 $ 8.90 $ 8.85
========== ========== ========== ========== ========== ==========
Total Return+ (0.81)% 9.69% (5.78)%(1) (1.54)% 9.02% (6.39)%(1)
Ratios/Supplemental Data:
Net Assets, End of Period (in 000's) $ 8,394 $ 7,879 $ 6,045 $ 12,271 $ 9,399 $ 3,632
Ratios of expenses to average net assets:
Before reimbursement of expenses by Advisor 1.62% 1.97% 3.52%(2) 2.37% 2.72% 4.27%(2)
After reimbursement of expenses by Advisor 1.00% 1.00% 1.00%(2) 1.75% 1.75% 1.75%(2)
Ratios of net investment income to average
net assets:
Before reimbursement of expenses by Advisor 8.78% 7.75% 4.95%(2) 8.03% 7.16% 4.20%(2)
After reimbursement of expenses by Advisor 9.40% 8.72% 7.47%(2) 8.65% 8.13% 6.72%(2)
Portfolio Turnover 41% 48% 56% 41% 48% 56%
</TABLE>
(1) Not annualized.
(2) Annualized.
+ Total return without applicable sales charge. (a) Fund 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
Class A Class B
Year Ended Year Ended Inception(a) to Year Ended Year Ended Inception(a) to
GROWTH AND INCOME FUND 10/31/2000 10/31/1999 10/31/1998 10/31/2000 10/31/1999 10/31/1998
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 13.21 $ 10.88 $ 10.00 $ 13.18 $ 10.88 $ 10.00
---------- ---------- ---------- ---------- ---------- ----------
Income from Investment Operations:
Net investment income (loss) 0.07(b) 0.09 0.07 (0.03)(b) (0.01) 0.01
Net realized and unrealized gain
on investments 0.84 2.33 0.89 0.84 2.33 0.89
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 0.91 2.42 0.96 0.81 2.32 0.90
---------- ---------- ---------- ---------- ---------- ----------
Less Distributions:
Distributions from net investment income (0.04) (0.09) (0.07) (0.01) -- (0.01)
Distributions from capital gains (0.02) -- -- (0.02) (0.02) --
Distributions in excess of net
investment income -- -- (0.01) -- -- (0.01)
---------- ---------- ---------- ---------- ---------- ----------
Total distributions (0.06) (0.09) (0.08) (0.03) (0.02) (0.02)
---------- ---------- ---------- ---------- ---------- ----------
Net increase in net asset value 0.85 2.33 0.88 0.78 2.30 0.88
---------- ---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period $ 14.06 $ 13.21 $ 10.88 $ 13.96 $ 13.18 $ 10.88
========== ========== ========== ========== ========== ==========
Total Return+ 6.90% 22.33% 9.57%(1) 6.13% 21.32% 8.97%(1)
Ratios/Supplemental Data:
Net Assets, End of Period (in 000's) $ 46,994 $ 25,646 $ 11,169 $ 106,792 $ 55,856 $ 14,408
Ratios of expenses to average net assets:
Before reimbursement of expenses by Advisor 1.07% 1.25% 2.41%(2) 1.82% 2.00% 3.16%(2)
After reimbursement of expenses by Advisor 1.00% 1.00% 1.00%(2) 1.75% 1.75% 1.75%(2)
Ratios of net investment income (loss) to
average net assets:
Before reimbursement of expenses by Advisor 0.47% 0.35% (0.60)%(2) (0.28)% (0.40)% (1.35)%(2)
After reimbursement of expenses by Advisor 0.54% 0.60% 0.81%(2) (0.21)% (0.15)% 0.06%(2)
Portfolio Turnover 14% 19% 5% 14% 19% 5%
CAPITAL APPRECIATION FUND
Net Asset Value, Beginning of Period $ 13.70 $ 11.04 $ 10.00 $ 13.54 $ 10.98 $ 10.00
---------- ---------- ---------- ---------- ---------- ----------
Income from Investment Operations:
Net investment income (loss) (0.03)(b) (0.00)* 0.01 (0.15)(b) (0.12) (0.02)
Net realized and unrealized gain
on investments 2.78 2.68 1.04 2.75 2.68 1.01
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 2.75 2.68 1.05 2.60 2.56 0.99
---------- ---------- ---------- ---------- ---------- ----------
Less Distributions:
Distributions from net investment income -- -- -- -- -- --
Distributions from capital gains (0.01) (0.02) -- (0.01) -- --
Distributions in excess of net investment
income -- -- (0.01) -- -- (0.01)
---------- ---------- ---------- ---------- ---------- ----------
Total distributions (0.01) (0.02) (0.01) (0.01) -- (0.01)
---------- ---------- ---------- ---------- ---------- ----------
Net increase in net asset value 2.74 2.66 1.04 2.59 2.56 0.98
---------- ---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period $ 16.44 $ 13.70 $ 11.04 $ 16.13 $ 13.54 $ 10.98
========== ========== ========== ========== ========== ==========
Total Return+ 20.12% 24.29% 10.51%(1) 19.25% 23.32% 9.91%(1)
Ratios/Supplemental Data:
Net Assets, End of Period (in 000's) $ 35,889 $ 13,262 $ 13,410 $ 57,082 $ 23,563 $ 7,025
Ratios of expenses to average net assets:
Before reimbursement of expenses by Advisor 1.37% 1.71% 3.28%(2) 2.12% 2.46% 4.03%(2)
After reimbursement of expenses by Advisor 1.20% 1.20% 1.20%(2) 1.95% 1.95% 1.95%(2)
Ratios of net investment income (loss) to
average net assets:
Before reimbursement of expenses by Advisor (0.44)% (0.68)% (1.97)%(2) (1.19)% (1.46)% (2.72)%(2)
After reimbursement of expenses by Advisor (0.27)% (0.05)% 0.11%(2) (1.02)% (1.03)% (0.64)%(2)
Portfolio Turnover 18% 68% 10% 18% 68% 10%
</TABLE>
(1) Not annualized.
(2) Annualized.
+ Total return without applicable sales charge.
(a) Fund commenced investment operations on December 29, 1997.
(b) Calculated based on average shares outstanding.
* 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
Class A Class B
Inception(a) to Inception(a) to
EMERGING GROWTH FUND 10/31/2000 10/31/2000
--------------- ---------------
<S> <C> <C>
Net Asset Value, Beginning of Period $ 10.00 $ 10.00
------------ ------------
Income from Investment Operations:
Net investment income (0.02)(c) (0.06)(c)
Net realized and unrealized loss on investments (2.11) (2.11)
------------ ------------
Total from investment operations (2.13) (2.17)
------------ ------------
Net decrease in net asset value (2.13) (2.17)
------------ ------------
Net Asset Value, End of Period $ 7.87 $ 7.83
============ ============
Total Return+ (21.30)%(1) (21.70)%(1)
Ratios/Supplemental Data:
Net Assets, End of Period (in 000's) $ 20,731 $ 8,666
Ratios of expenses to average net assets:
Before reimbursement of expenses by Advisor 1.75%(2) 2.50%(2)
After reimbursement of expenses by Advisor 1.20%(2) 1.95%(2)
Ratios of net investment income (loss) to average net assets:
Before reimbursement of expenses by Advisor (0.97)%(2) (1.72)%(2)
After reimbursement of expenses by Advisor (0.42)%(2) (1.17)%(2)
Portfolio Turnover 151% 151%
</TABLE>
<TABLE>
<CAPTION>
Year Ended Year Ended Inception(b) to Year Ended Year Ended Inception(b)to
10/31/2000 10/31/1999 10/31/1998 10/31/2000 10/31/1999 10/31/1998
INTERNATIONAL STOCK FUND ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 11.45 $ 10.34 $ 10.00 $ 11.38 $ 10.28 $ 10.00
---------- ---------- ---------- ---------- ---------- ----------
Income from Investment Operations:
Net investment income (loss) 0.04(c) 0.14 0.08 (0.03)(c) 0.05 0.03
Net realized and unrealized gain (loss)
on investments (0.98) 1.56 0.27 (0.98) 1.56 0.26
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations (0.94) 1.70 0.35 (1.01) 1.61 0.29
---------- ---------- ---------- ---------- ---------- ----------
Less Distributions:
Distributions from net investment income (0.14) (0.14) (0.01) (0.07) (0.05) (0.01)
Distributions from capital gains (0.82) (0.45) -- (0.82) (0.46) --
---------- ---------- ---------- ---------- ---------- ----------
Total distributions (0.96) (0.59) (0.01) (0.89) (0.51) (0.01)
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net asset value (1.90) 1.11 0.34 (1.90) 1.10 0.28
---------- ---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period $ 9.55 $ 11.45 $ 10.34 $ 9.48 $ 11.38 $ 10.28
========== ========== ========== ========== ========== ==========
Total Return+ (9.29)% 17.00% 3.60%(1) (9.92)% 16.09% 2.90%(1)
Ratios/Supplemental Data:
Net Assets, End of Period (in 000's) $ 32,071 $ 33,214 $ 27,656 $ 5,497 $ 3,326 $ 1,350
Ratios of expenses to average net assets:
Before reimbursement of expenses by Advisor 2.06% 2.18% 2.76%(2) 2.81% 2.93% 3.51%(2)
After reimbursement of expenses by Advisor 1.60% 1.60% 1.60%(2) 2.35% 2.35% 2.35%(2)
Ratios of net investment income (loss) to
average net assets:
Before reimbursement of expenses by Advisor (0.03)% 0.72% (0.01)%(2) (0.78)% 0.05% (0.76)%(2)
After reimbursement of expenses by Advisor 0.43% 1.30% 1.15%(2) (0.32)% 0.63% 0.40%(2)
Portfolio Turnover 117% 57% 60% 117% 57% 60%
</TABLE>
(1) Not annualized.
(2) Annualized.
+ Total return without applicable sales charge.
(a) Fund commenced investment operations on February 29, 2000.
(b) Fund commenced investment operations on December 29, 1997.
(c) Calculated based on average shares outstanding.
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 eight 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 Rule 12b-1 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, Emerging Growth Fund and the International Stock Fund.
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
$1.00 per share and the sale of 4,900 Class A shares and 100 Class B shares of
the Bond Fund, Balanced Fund, High Income Fund, Growth and Income Fund, Capital
Appreciation Fund and International Stock Fund at $10.00 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: Securities and other investments are valued as follows: 1)
equity securities listed on any U.S. or foreign stock exchange or the ("NASDAQ")
are valued at the last sale price on the valuation day; if no sale occurs,
equities traded on a U.S. exchange or NASDAQ are valued at the mean between the
closing bid and closing asked prices and equities traded on a foreign exchange
will be valued at the bid price; 2) over-the-counter securities not quoted on
NASDAQ are valued at the last sale price on the valuation day or, if no sale
occurs, at the mean between the last bid and asked prices; 3) debt securities
purchased with a remaining maturity of 61 days or more are valued by a pricing
service selected by the Trust or on the basis of dealer-supplied quotations; 4)
options and futures contract are valued at the last sale price on the market
where any such option or futures contracts is principally traded; 5)
over-the-counter options are valued based upon prices provided by market makers
in such securities or dealers in such currencies; 6) forward foreign currency
exchange contracts are valued based upon quotations supplied by dealers in such
contracts. The value of all assets and liabilities expressed in foreign
currencies will be converted into U.S. dollar values at the noon (Eastern
Standard Time) Reuters spot rate. All other securities and other investments 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.
Expenses: Expenses that are directly related to one of the Funds are charged
directly to that Fund. Other operating expenses of the Funds are prorated to the
Fund 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 its shares under federal and state regulation. Such
organization and offering costs incurred prior to July 1998 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, MEMBERS
Capital Advisors, Inc. has agreed to reimburse the Fund promptly.
<PAGE>
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, Emerging Growth and International Stock Funds report certain
foreign currency-related transactions as components or 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, Emerging Growth
and International Stock Funds may each purchase or sell forward foreign currency
contracts for defensive or hedging purposes when the Fund's Investment Advisor
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 are 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 MEMBERS Capital
Advisors, Inc. (the "Investment Advisor'). For its investment advisory services
to the Funds, MEMBERS Capital Advisors, Inc. 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 the
Emerging Growth Fund and 1.05% for the International Stock Fund. The Investment
Advisor has entered into Subadvisor agreements for the management of the
investments of the High Income Fund, the Emerging Growth Fund, and the
International Stock Fund. The Investment Advisor is solely responsible for the
payment of all fees to the Subadvisors. The Subadvisors for these Funds are
Massachusetts Financial Services Company for the High Income Fund and Emerging
Growth Fund and Lazard Asset Management for the International Stock Fund. Prior
to November 1, 2000 IAI International Limited served as co-subadvisor for the
International Stock Fund.
The Investment Advisor contractually 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 Advisor 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%
Emerging Growth Fund 1.20% 1.95%
International Stock Fund 1.60% 2.35%
<PAGE>
For the periods ended October 31, 2000, the Investment Advisor reimbursed
expenses of $118,873 for the Cash Reserves Fund, $127,512 for the Bond Fund,
$114,370 for the Balanced Fund, $118,223 for the High Income Fund, $77,523 for
the Growth and Income Fund, $96,580 for the Capital Appreciation Fund, $92,898
for the Emerging Growth Fund and $178,647 for the International Stock Fund.
Any reimbursements or fee reductions made by the Investment Advisor to a Fund
are subject to repayment by the Fund, to the extent that the Fund is able to
make the repayment within its expense cap. Prior to March 1, 2000, such payments
must be made within the subsequent eighteen months from when the reimbursement
or fee reduction occurred. At October 31, 2000, the Cash Reserves Fund, Bond
Fund, Balanced Fund, High Income Fund, Growth and Income Fund, Capital
Appreciation Fund and International Stock Fund had $102,949, $112,013, $91,121,
$112,493, $63,686, $87,056 and $140,980, respectively, subject to recovery under
this agreement. These amounts recoverable expire at various dates through August
31, 2001. Beginning March 1, 2000, such payments must be made within three
years, measured on a fiscal year basis, from when the reimbursement or fee
reduction occurred. At October 31, 2000, the Cash Reserves Fund, Bond Fund,
Balanced Fund, High Income Fund, Growth and Income Fund, Capital Appreciation
Fund, Emerging Growth Fund and International Stock Fund had $73,959, $79,335,
$84,684, $72,153, $70,368, $64,827, $92,898 and $122,233, respectively, subject
to recovery under this agreement. These amounts recoverable expire on October
31, 2003. Through October 31, 2000, none of the Funds have made repayments to
the Investment Advisor under either of these agreements.
Through October 27, 2000, the Trust and PFPC Inc. ("PFPC") were parties to an
agreement under which PFPC provided 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. For the period from November 1, 1999 through October 27,
2000, the Funds paid to PFPC the following amounts:
Fund Amount Paid
Cash Reserves Fund $83,133
Bond Fund 83,133
Balanced Fund 83,133
High Income Fund Fund 83,133
Growth and Income Fund 83,133
Capital Appreciation Fund 83,133
Emerging Growth Fund 54,857
International Stock Fund 83,133
Effective October 28, 2000, the Trust entered into an agreement with State
Street Bank ("State Street") to provide administration services for a fee
calculated daily and paid monthly, at an annual rate of 0.07% of the first $500
million of the combined average daily net assets, 0.04% on the second $500
million of the combined average daily net assets, 0.03% on the third $500
million, 0.02% on the fourth $500 million up to $2.5 billion, and 0.01%,
thereafter, of the combined average daily net assets. Each Fund is also charged
$7,500 per year for each additional class of shares. A minimum fee of $55,000
per year applies. For the period from October 28, 2000 through the year ended
October 31, 2000 each Fund accrued $0 for administration services performed by
State Street.
Through October 27, 2000, PFPC provided certain fund accounting, custody
administration and transfer agency services pursuant to certain fee
arrangements. Effective October 28, 2000, the Trust entered into an agreement
with State Street to provide accounting and custody services. PFPC continued to
provide transfer agency services for the Trust through November 17, 2000.
Effective November 20, 2000, the Trust, entered into an agreement with Boston
Financial Data Services to perform transfer agency services pursuant to certain
fee arrangements.
CUNA Brokerage Services, Inc. (CUNA Brokerage) serves as distributor of the
Funds. The Trust adopted Distribution Plans (the "Plans") with respect to
Trust's Class A and B shares pursuant to Rule 12b-1 under the 1940 Act. Under
the Plans, the Trust will pay service fees for Class A and Class B share at an
aggregate annual rate of 0.25% of each Fund's daily net assets attributable to
the respective class of shares for all Funds except the Cash Reserves Fund. The
Trust will also pay distribution fees for Class B shares at an aggregate annual
rate of 0.75% of each Fund's daily net assets attributable to Class B. The
distribution fees are used to reimburse CUNA Brokerage for its distribution
expenses with respect to Class B only, including but not limited to: (1) initial
and ongoing sales compensation to selling brokers and others engaged in the sale
of Fund shares, (2) marketing, promotional and overhead expenses incurred in
connection with the distribution of Fund shares, and (3) interest expenses on
unreimbursed distribution expenses. The service fees will be used to compensate
selling brokers and others for providing personal and account maintenance
services to shareholders.
<PAGE>
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,
2000, sales charges received by CUNA Brokerage were as follows:
Fund Amount Paid
Cash Reserves Fund $159,383
Bond Fund 303,399
Balanced Fund 1,996,941
High Income Fund Fund 277,756
Growth and Income Fund 3,084,706
Capital Appreciation Fund 1,760,311
Emerging Growth Fund 198,653
International Stock Fund 538,452
Certain officers and trustees of the Funds are also officers of the Investment
Advisor. The Funds do not compensate their 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 and net realized gains from
investment transactions, if any, are distributed to shareholders annually. The
Balanced Fund declares dividends from net investment income monthly and net
realized gains from investment transactions, if any, are distributed to
shareholders annually. The Growth and Income Fund declares dividends from net
investment income quarterly and net realized gains from investment transactions,
if any, are distributed to shareholders annually. The Capital Appreciation Fund,
Emerging Growth Fund and the International Stock Fund declare dividends from net
investment income annually and net realized gains from investment transactions,
if any, are distributed to shareholders annually.
5. SECURITIES TRANSACTIONS
For the periods ended October 31, 2000, aggregate cost of purchases and proceeds
from sales of securities, other than short-term investments, were as follows:
<TABLE>
<CAPTION>
U.S. Government Other Investment
Securities Securities
Fund Purchases Sales Purchases Sales
<S> <C> <C> <C> <C>
Bond Fund $39,988,898 $30,817,015 $ 28,581,882 $ 28,510,320
Balanced Fund 80,110,676 63,960,460 74,860,700 50,554,594
High Income Fund -- -- 11,299,959 4,526,813
Growth and Income Fund -- -- 78,359,994 14,982,623
Capital Appreciation Fund -- -- 52,889,841 9,269,344
Emerging Growth Fund -- -- 66,706,406 34,223,477
International Stock Fund -- -- 44,667,068 41,212,677
</TABLE>
At October 31, 2000, 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:
<TABLE>
<CAPTION>
Fund Appreciation Depreciation Net
<S> <C> <C> <C>
Bond Fund $ 210,240 $ (67,800) $ 142,440
Balanced Fund 9,723,749 (2,657,005) 7,066,744
High Income Fund 181,131 (3,033,130) (2,851,999)
Growth and Income Fund 22,926,694 (9,926,597) 13,000,097
Capital Appreciation Fund 18,598,827 (3,760,771) 14,838,056
Emerging Growth Fund 1,988,485 (1,258,080) 730,405
International Stock Fund 3,074,296 (4,249,185) (1,174,889)
</TABLE>
<PAGE>
For federal income tax purposes, the below listed Funds have capital loss
carryovers as of October 31, 2000, which are available to offset future capital
gains, if any:
<TABLE>
<CAPTION>
Losses Deferred Losses Deferred Losses Deferred
Fund Expiring in 2006 Expiring in 2007 Expiring in 2008
<S> <C> <C> <C>
Bond Fund $ -- $ 349,486 $ 459,422
Balanced Fund -- -- 330,272
High Income Fund 66,186 328,128 244,044
Growth and Income Fund -- -- 1,214,946
Capital Appreciation Fund -- -- 64,720
Emerging Growth Fund -- -- 6,443,167
International Stock Fund -- -- 1,887,109
</TABLE>
6. FOREIGN SECURITIES
Each Fund may invest in foreign securities, although only the High Income Fund,
Emerging Growth Fund and International Stock Fund anticipate having significant
investments in such securities. The International Stock Fund, High Income Fund
and Emerging Growth Fund may invest 100%, 50% and 25%, respectively of their
assets in foreign securities. No Fund will concentrate its investments in a
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 ADRs, EDRs, GDRs and foreign money
market securities.
7. FINANCIAL INSTRUMENTS
Investing in certain financial instruments including forward foreign currency
contracts and futures contracts involves risk other than that reflected in the
Statements of Assets and Liabilities. Risk 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, 2000, investments in the Funds by affiliates
were as follows:
<TABLE>
<CAPTION>
CUNA Mutual CUNA Mutual CUMIS
Fund Class Life Insurance Company Insurance Society Insurance Society, Inc.
<S> <C> <C> <C> <C>
Cash Reserves Fund A $ 1,729,644 $ 1,728,491 $ --
Bond Fund A 1,696,063 1,694,932 --
High Income Fund A 5,127,139 -- --
Emerging Growth Fund A 3,935,000 -- 11,804,213
Emerging Growth Fund B -- -- 783
International Stock Fund A 3,295,234 5,490,959 19,616,960
</TABLE>
<PAGE>
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 MEMBERS Mutual Funds (hereafter
referred to as the "Funds") at October 31, 2000, the results of each of their
operations, the changes in each of their net assets and the financial highlights
for each of the periods indicated, in conformity with accounting principles
generally accepted in the United States of America. 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 auditing standards
generally accepted in the United States of America, 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, 2000 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
December 19, 2000
Other Information
Tax Information (Unaudited)
Of the dividends paid by the Bond Fund, Balanced Fund, High Income Fund, Growth
and Income Fund, Capital Appreciation Fund and the International Stock Fund,
3.30%, 17.75%, 1.20%, 100.00%, 100.00% and 8.12%, respectively, qualify, for the
corporate dividends received deduction.
