SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
Registration Statement Under the Securities Act of 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. [25]
and/or
Registration Statement Under the Investment Company Act of 1940 [X]
Amendment No. [28]
Ultra Series Fund
2000 Heritage Way
Waverly, Iowa 50677
(319) 352-4090, ext. 2157
(Registrant's Exact Name, Address and Telephone Number)
Barbara L. Secor, Esq.
CUNA Mutual Life Insurance Company
2000 Heritage Way
Waverly, Iowa 50677
(Name and Address of Agent for Service)
Copy to:
Stephen E. Roth, Esq.
Sutherland, Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D. C. 20004-2404
Approximate Date of Proposed Public Offering: [ ]
--------------------------------------------
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on May 1, 2000 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[X] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date)pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
ULTRA SERIES FUND
PROSPECTUS , 2000
Money Market Fund
Bond Fund
Balanced Fund
High Income Fund
Growth and Income Stock Fund
Capital Appreciation Stock Fund
Mid-Cap Stock Fund
Emerging Growth Fund
International Stock Fund
Global Securities Fund
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the shares in these funds, nor does the Commission
guarantee the accuracy or adequacy of the prospectus. Any statement to the
contrary is a criminal offense.
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TABLE OF CONTENTS
PAGE
THE FUND
Expenses...........................................................1
Money Market Fund..................................................2
Bond Fund..........................................................4
Balanced Fund......................................................6
High Income Fund...................................................8
Growth and Income Stock Fund......................................10
Capital Appreciation Stock Fund...................................12
Mid-Cap Stock Fund................................................14
Emerging Growth Fund..............................................16
International Stock Fund..........................................18
Global Securities Fund............................................20
Risk vs. Return...................................................22
RISKS ASSOCIATED WITH CERTAIN HIGHER RISK SECURITIES
Foreign Securities................................................23
Small Capitalization Stocks.......................................23
THE SHARES
Offer.............................................................24
Purchase and Redemption...........................................24
Dividends.........................................................25
Pricing of Fund Shares............................................25
Taxes.............................................................26
MORE ABOUT ULTRA SERIES FUND
Portfolio Management..............................................26
Inquiries.........................................................27
Financial Highlights..............................................28
Additional information about each fund's investments is available in the
Statement of Additional Information (SAI), and the annual and semiannual reports
to shareholders. In particular, the annual reports will discuss the relevant
market conditions and investment strategies used by the portfolio manager(s)
that materially affected performance during the prior fiscal year. You may get a
copy of the most recent of these reports at no cost by calling 1-800-798-5500.
Please note that an investment in any of these funds is not a deposit in a
credit union or other financial institution and is neither insured nor endorsed
in any way by any credit union, other financial institution, or government
agency. Such an investment involves certain risks, including loss of principal,
and is not guaranteed to result in positive investment gains. The investment
objectives of the funds are "fundamental" meaning they cannot be changed without
shareholder approval. These funds may not achieve their objectives.
<PAGE>
EXPENSES
This table describes the expenses that you may pay if you buy and hold shares of
the fund.
SHAREHOLDER FEES
None
ANNUAL FUND OPERATING EXPENSES
Fund Management Other Total Annual
Operating Expenses
Money Market .45% .01% .46%
Bond .55% .01% .56%
Balanced .70% .01% .71%
High Income
Growth and Income Stock .60% .01% .61%
Capital Appreciation Stock .80% .01% .81%
Mid-Cap Stock 1.00% .01% 1.01%
Emerging Growth
International Stock
Global Securities
Annual fund operating expenses are paid out of fund assets and are reflected in
the share price.
Management fees are amounts paid to the investment adviser for managing the
funds' investments and administering fund operations.
Other expenses are trustees' fees, auditors' fees, interest on borrowings, any
taxes and extraordinary expenses.
EXAMPLES
The examples shown below are intended to help you compare the cost of investing
in each fund with the cost of investing in other mutual funds. The examples are
based on a $10,000 initial investment in each fund over the various time periods
indicated. The examples assume: (1) 5% annual return and (2) redemption at the
end of each period.
Fund 1 year 3 years 5 years 10 years
Money Market $ 47 $ 148 $ 258 $ 579
Bond 57 179 313 701
Balanced 73 227 395 883
High Income
Growth and Income Stock 62 195 340 762
Capital Appreciation Stock 83 259 450 1,002
Mid-Cap Stock 103 322 558 1,236
Emerging Growth
International Stock
Global Securities
You should not consider the examples above as a representation of past or future
expenses. Actual expenses may be greater or lesser than those shown.
<PAGE>
MONEY MARKET FUND
INVESTMENT OBJECTIVE
What is this fund's goal?
The Money Market Fund seeks high current income from money market instruments
consistent with the preservation of capital and liquidity. The fund intends to
maintain a stable value of $1.00 per share.
INVESTOR PROFILE
Who should consider investing in this fund?
You may want to invest more of your assets in this fund if you:
o require stability of principal
o are seeking a mutual fund for the cash portion of an asset allocation
program
o need to "park" your money temporarily or
o consider yourself a saver rather than an investor.
You may want to invest fewer of your assets in this fund if you:
o want federal deposit insurance
o are seeking an investment that is likely to outpace inflation
o are investing for retirement or other goals that are many years in the
future or
o are investing for growth or maximum current income.
PRINCIPAL RISKS
What are the main risks of investing in this fund?
As with any money market fund, the yield paid by the fund will vary with changes
in interest rates. Generally, if interest rates rise, the market value of income
bearing securities will decline. There is a possibility that the fund's share
value could fall below $1.00, which could reduce the value of your account. An
investment in the Money Market Fund is neither insured nor guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
the Money Market Fund attempts to maintain a stable price of $1.00 per share,
there is no assurance that it will be able to do so and it is possible to lose
money by investing in the fund.
PRINCIPAL INVESTMENT STRATEGIES
How does this fund pursue its objective?
The Money Market Fund invests exclusively in U.S. dollar-denominated money
market securities maturing (or resetting their interest rates to market levels)
in thirteen months or less from the date of purchase. It includes securities
issued by U.S. and foreign financial institutions, corporate issuers, the U.S.
Government and its agencies and instrumentalities, municipalities, foreign
governments, and multi-national 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 rating categories. A more detailed
description of the types of permissible issuers and rating categories is
contained in the SAI. The fund maintains a dollar-weighted average portfolio
maturity of 90 days or less. The fund may also invest in U.S. dollar-denominated
foreign money market securities, although no more than 25% of the fund's assets
may be invested in these securities unless they are backed by a U.S. parent
financial institution.
<PAGE>
MONEY MARKET FUND PERFORMANCE
How has the Money Market Fund performed?
The following chart provides an indication of the risks of investing in the
Money Market Fund by showing the changes in the portfolio performance of the
Fund from year to year over a 10-year period. The chart assumes the reinvestment
of all dividends and distributions. The figures shown do not reflect charges
deducted in connection with variable contracts.
Total Returns
(for years ended 12/31)
GRAPHIC: Bar chart that shows total returns for the past ten calendar years for
the Money Market Fund. Total returns are as follows:
1990 7.53% 1995 5.21%
1991 5.36% 1996 4.72%
1992 3.05% 1997 5.01%
1993 2.86% 1998 5.00%
1994 3.34% 1999 4.69%
Best Calendar Quarter: 2Q90 1.92%
Worst Calendar Quarter: 2Q93 0.60%
Please remember that past performance is no guarantee of the results the Money
Market Fund may achieve in the future. Future returns may be higher or lower
than the returns the fund achieved in the past.
How does the performance of the Money Market Fund compare to general money
market returns?
The following table compares the performance of the Money Market Fund with the
performance of the 90-day U.S. Treasury Bill, which is one measure of the
performance of the relevant market. Returns shown for the Money Market Fund are
after the deduction of fund management and operating expenses. The Treasury Bill
returns bear no such expenses.
Average Annual Total Returns (As of December 31, 1999)
One Year Five Year Ten Year
Money Market Fund 4.69% 4.93% 4.67%
90-day U.S. Treasury Bill 4.73% 5.19% 5.04%
<PAGE>
BOND FUND
INVESTMENT OBJECTIVE
What is this fund's goal?
The Bond Fund seeks to generate a high level of current income, consistent with
the prudent limitation of investment risk, primarily through investment in a
diversified portfolio of income bearing debt securities.
INVESTOR PROFILE
Who should consider investing in this fund?
You may want to invest more of your assets in this fund if you:
o seek an investment based on a regular stream of income
o seek higher potential returns than money market funds and are willing to
accept moderate risk of volatility
o want to diversify your investments
o seek a mutual fund for the income portion of an asset allocation program or
o are retired or nearing retirement.
You may want to invest fewer of your assets in this fund if you:
o invest for maximum return over a long time horizon or
o need absolute stability of your principal.
PRINCIPAL RISKS
What are the main risks of investing in this fund?
As with most income funds, the Bond Fund is subject to interest rate risk, the
risk that the value of your investment will fluctuate with changes in interest
rates. Typically, a rise in interest rates causes a decline in the market value
of income bearing securities. Other factors may affect the market price and
yield of the fund's securities, including investor demand and domestic and
worldwide economic conditions. Loss of money is a risk of investing in this
fund.
In addition, the fund is subject to credit risk, the risk that issuers of debt
securities may be unable to meet their interest or principal payment obligations
when due. The ability of the fund to realize interest under repurchase
agreements and pursuant to loans of the fund's securities is dependent on the
ability of the seller or borrower, as the case may be, to perform its obligation
to the fund. There is also prepayment/extension risk, which is the chance that a
rise or fall in interest rates will reduce/extend the life of a mortgage-backed
security by increasing/decreasing mortgage prepayments, reducing the return in
either case.
To the extent that the fund invests in non-investment grade securities, the fund
is also subject to above-average credit, market and other risks. Issuers of
non-investment grade securities (i.e., "junk" bonds) are typically in weak
financial health and their ability to pay interest and principal is uncertain.
Compared to issuers of investment-grade bonds, they are more likely to encounter
financial difficulties and to be materially affected by these difficulties when
they do encounter them.
PRINCIPAL INVESTMENT STRATEGIES
How does this fund pursue its objective?
To keep current income relatively stable and to limit share price volatility,
the Bond Fund emphasizes investment grade securities and maintains an
intermediate (typically 3-6 year) average portfolio duration. The CIMCO
management team utilizes an approach that involves frequent trading of the
securities in the portfolio. Under normal circumstances, the fund invests at
least 80% of its assets in:
o Corporate debt securities: securities issued by domestic and foreign
corporations;
o U.S. government debt securities: securities issued or guaranteed by the
U.S. government or its agencies or instrumentalities; and
o Foreign government debt securities: securities issued or guaranteed by a
foreign government or its agencies or instrumentalities, payable in U.S.
dollars.
To the extent permitted by law and available in the market, the fund may also
invest in asset-backed and mortgage-backed securities, including those
representing mortgage, commercial or consumer loans originated by credit unions.
<PAGE>
BOND FUND PERFORMANCE
How has the Bond Fund performed?
The following chart provides an indication of the risks of investing in the Bond
Fund by showing the changes in the portfolio performance of the Fund from year
to year over a 10-year period. The chart assumes the reinvestment of all
dividends and distributions. The figures shown do not reflect charges deducted
in connection with variable contracts.
Total Returns
(for years ended 12/31)
GRAPHIC: Bar chart that shows total returns for the past ten calendar years for
the Bond Fund. Total returns are as follows:
1990 7.41% 1995 16.37%
1991 14.70% 1996 2.86%
1992 6.47% 1997 7.45%
1993 8.87% 1998 6.18%
1994 -3.06% 1999 0.73%
Best Calendar Quarter: 2Q95 5.30%
Worst Calendar Quarter: 1Q94 -2.50%
Please remember that past performance is no guarantee of the results the Bond
Fund may achieve in the future. Future returns may be higher or lower than the
returns the fund achieved in the past.
How does the performance of the Bond Fund compare to the bond market?
The following table compares the performance of the Bond Fund with the
performance of the Lehman Brothers Intermediate Government/Corporate Bond Index
which is one measure of the performance of the relevant market. Returns shown
for the Bond Fund are after the deduction of fund management and operating
expenses. The Lehman Index returns bear no such expenses.
Average Annual Total Returns (As of December 31, 1999)
One Year Five Year Ten Year
Bond Fund 0.73% 6.59% 6.66%
Lehman Index 0.39% 7.10% 7.26%
<PAGE>
BALANCED FUND
INVESTMENT OBJECTIVE
What is this fund's goal?
The Balanced Fund seeks a high total return through the combination of income
and capital appreciation.
INVESTOR PROFILE
Who should consider investing in this fund?
You may want to invest more of your assets in this fund if you:
o are looking for a more conservative option to a growth-oriented fund
o want a well-diversified and relatively stable investment allocation
o need a core investment
o seek a reasonable total return over the long term irrespective of its form
(i.e., capital gains or ordinary income) or
o are retired or nearing retirement.
You may want to invest fewer of your assets in this fund if you:
o are investing for maximum return over a long time horizon
o want your return to be either ordinary income or capital gains, but not
both or
o require a high degree of stability of your principal.
PRINCIPAL RISKS
What are the main risks of investing in this fund?
The risks of this fund are similar to the risks described for the Bond, Money
Market, Growth and Income Stock and Capital Appreciation Stock Funds because it
invests in the same types of securities. As with any fund that invests in stocks
and bonds, the fund is subject to market and interest rate risks, the risks that
the value of your investment will fluctuate in response to stock and bond market
movements and changes in interest rates.
Generally, if interest rates rise, the market value of income bearing securities
(including bonds) will decline. There is also the risk that the issuer will not
pay its debts. If payments on an income bearing security are not paid when due,
it may cause the net asset value of the fund to go down.
Because different stocks and bonds move in and out of favor depending on market
conditions, investor sentiment and a myriad of other issues, the fund may
sometimes outperform funds with a different investment objective and sometimes
underperform them. Loss of money is a risk of investing in this fund.
PRINCIPAL INVESTMENT STRATEGIES
How does this fund pursue its objective?
The Balanced Fund invests in a broadly diversified array of securities including
common stocks, bonds and money market instruments. The fund employs regular
rebalancing to maintain a relatively static asset allocation. Stock, bond and
cash components will vary, however, reflecting the relative availability of
attractively priced stocks and bonds. Generally, however, common stocks will
constitute 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. The Balanced Fund will invest primarily in the same types of
equity securities in which the Capital Appreciation Stock and Growth and Income
Stock Funds invest, the same types of bonds in which the Bond Fund invests, and
the same types of money market instruments in which the Money Market Fund
invests.
The fund may invest up to 25% of its assets in foreign securities.
The fund typically sells a stock when the fundamental expectations for buying it
no longer apply, the price exceeds its perceived value or other stocks appear
more attractively priced relative to their values.
<PAGE>
BALANCED FUND PERFORMANCE
How has the Balanced Fund performed?
The following chart provides an indication of the risks of investing in the
Balanced Fund by showing the changes in the portfolio performance of the Fund
from year to year over a 10-year period. The chart assumes the reinvestment of
all dividends and distributions. The figures shown do not reflect charges
deducted in connection with variable contracts.
Total Returns
(for years ended 12/31)
GRAPHIC: Bar chart that shows total returns for the past ten calendar years for
the Balanced Fund. Total returns are as follows:
1990 3.75% 1995 22.27%
1991 18.53% 1996 10.79%
1992 6.85% 1997 16.87%
1993 10.47% 1998 13.40%
1994 -0.46% 1999 14.49%
Best Calendar Quarter: 4Q98 11.43%
Worst Calendar Quarter: 3Q90 -5.69%
Please remember that past performance is no guarantee of the results the
Balanced Fund may achieve in the future. Future returns may be higher or lower
than the returns the fund achieved in the past.
How does the performance of the Balanced Fund compare to the balanced market?
The following table compares the performance of the Balanced Fund with the
performance of the Synthetic Index* and each of the components of the Synthetic
Index, which is one measure of the performance of the relevant market. Returns
shown for the Balanced Fund are after the deduction of fund management and
operating expenses. The Synthetic Index returns bear no such expenses.
Average Annual Total Returns (As of December 31, 1999)
One Year Five Year Ten Year
Balanced Fund 14.49% 15.50% 11.50%
Synthetic Index* 10.14% 16.27% 11.95%
S&P 500 Stock Index 21.04% 28.55% 18.20%
Lehman Index 0.39% 7.10% 7.26%
90-day U.S. Treasury Bills 4.73% 5.19% 5.04%
*The synthetic index is a composition of the S&P 500 (Capitalization weighted)
Stock Index (45%), the Lehman Brothers Intermediate Government/Corporate Bond
Index (40%), and 90-day U.S. Treasury Bills (15%).
<PAGE>
HIGH INCOME FUND
INVESTMENT OBJECTIVE
What is this fund's goal?
The High Income Fund seeks high current income by investing primarily in a
diversified portfolio of lower-rated, higher-yielding income bearing securities.
The fund also seeks capital appreciation, but only when consistent with its
primary goal.
INVESTOR PROFILE
Who should consider investing in this fund?
You may want to invest more of your assets in this fund if you:
o are seeking higher potential returns than most bond funds and are willing
to accept significant risk of volatility
o want to diversify your investments or
o are retired or nearing retirement.
You may want to invest fewer of your assets in this fund if you:
o desire relative stability of your principal or
o are investing for maximum return over a long time horizon.
PRINCIPAL RISKS
What are the main risks of investing in this fund?
This fund is subject to above-average interest rate and credit risks, which are
risks that the value of your investment will fluctuate in response to changes in
interest rates or an issuer will not honor a financial obligation. Investors
should expect greater fluctuations in share price, yield and total return
compared to bond funds holding bonds and other income bearing securities with
higher credit ratings and/or shorter maturities. These fluctuations, whether
positive or negative, may be sharp and unanticipated. Loss of money is a
significant risk of investing in this fund.
Issuers of non-investment grade securities (i.e., "junk" bonds) are typically in
weak financial health and their ability to pay interest and principal is
uncertain. Compared to issuers of investment-grade bonds, they are more likely
to encounter financial difficulties and to be materially affected by these
difficulties when they do encounter them. "Junk" bond markets may react strongly
to adverse news about an issuer or the economy, or to the perception or
expectation of adverse news.
The fund may also invest in mortgage-backed securities that are subject to
prepayment/extension risks described in the Bond Fund Principal Risks.
PRINCIPAL INVESTMENT STRATEGIES
How does this fund pursue its objective?
The High Income Fund invests primarily in lower-rated, higher-yielding income
bearing securities, such as "junk" bonds. Because the performance of these
securities has historically been strongly influenced by economic conditions, the
fund may rotate securities selection by business sector according to the
economic outlook. Under normal market conditions, the fund invests at least 80%
of its assets in bonds rated lower than investment grade (BBB/Baa) and their
unrated equivalents or other high-yielding securities. Types of bonds and other
securities include, but are not limited to, domestic and foreign corporate
bonds, debentures, notes, convertible securities, preferred stocks, municipal
obligations and government obligations. The fund may invest in mortgage-backed
securities.
<PAGE>
HIGH INCOME FUND (CONTINUED)
PRINCIPAL INVESTMENT STRATEGIES (continued)
How does this fund pursue its objective?
Up to 25% of its assets may be invested in the securities of issuers in any one
industry.
The fund may also invest up to 50% of its assets in high-yielding foreign
securities, including emerging market securities.
*Note: The High Income Fund is a new fund that does not have historical
investment performance. When it does, its performance will be shown along with
the performance of the Lehman Brothers High Yield Index, which is a measure of
the performance of the relevant market. The following table shows the historical
performance of this index.
Average Annual Total Returns
(As of December 31, 1999)
One Year Five Year Ten Year
Lehman Brothers High Yield Index
<PAGE>
GROWTH AND INCOME STOCK FUND
INVESTMENT OBJECTIVE
What is this fund's goal?
The Growth and Income Stock Fund seeks long-term capital growth, with income as
a secondary consideration.
INVESTOR PROFILE
Who should consider investing in this fund?
You may want to invest more of your assets in this fund if you:
o are looking for a stock fund that has both growth and income components
o are looking for a more conservative option to a growth-oriented fund
o need a core investment
o seek above-average long-term total return through a combination of capital
gains and ordinary income or
o are retired or nearing retirement.
You may want to invest fewer of your assets in this fund if you:
o are investing for maximum return over a long time horizon
o desire your return to be either ordinary income or capital gains, but not
both or
o require a high degree of stability of your principal.
PRINCIPAL RISKS
What are the main risks of investing in this fund?
Any fund that invests in stocks and seeks income is subject to market and
interest rate risks, meaning the value of your investment will fluctuate when
the stock market and interest rates move. Loss of money is a risk of investing
in this fund.
In addition, a "value" approach to investing includes the risks that: 1. the
securities markets will not recognize the value of a security for an
unexpectedly long period of time; and 2. a stock that is believed to be
undervalued actually is appropriately priced or over-priced due to unanticipated
problems associated with the issuer or industry.
The fund may carry additional risks relating to foreign securities. The
principal risks of foreign securities are described later in this prospectus and
in the SAI.
PRINCIPAL INVESTMENT STRATEGIES
How does this fund pursue its objective?
The Growth and Income Fund will focus on stocks of larger companies with
financial and market strengths and a long-term record of financial performance.
Under normal market conditions, the fund will maintain at least 80% of its
assets in these stocks. Primarily through ownership of a diversified portfolio
of common stocks and securities convertible into common stocks, the fund will
seek a rate of return in excess of returns typically available from less
variable investment alternatives. The fund generally follows what is known as a
"value" approach, which generally means that the managers seek to invest in
stocks at prices below their estimated value based on fundamental analysis of
the issuing company and its prospects. By investing in value stocks, the fund
attempts to limit the downside risk over time but may also produce smaller gains
than other stock funds if their values are not realized by the market.
The fund will typically invest in securities representing every sector of the
S&P 500 in about (+/-50%) the same weightings as such sector has in the S&P 500.
For example, if technology companies represent 10% of the S&P 500, the fund will
typically have between 5% and 15% of its assets invested in securities issued by
technology companies.
The fund may also invest in warrants, preferred stocks and debt securities
(including non-investment grade debt securities). The fund may invest up to 25%
of its assets in foreign securities.
The fund typically sells a stock when the fundamental expectations for buying it
no longer apply, the price exceeds its value or other stocks appear more
attractively priced relative to their values.
<PAGE>
GROWTH AND INCOME STOCK FUND PERFORMANCE
How has the Growth and Income Stock Fund performed?
The following chart provides an indication of the risks of investing in the
Growth and Income Stock Fund by showing the changes in the portfolio performance
of the Fund from year to year over a 10-year period. The chart assumes the
reinvestment of all dividends and distributions. The figures shown do not
reflect charges deducted in connection with variable contracts.
Total Returns
(for years ended 12/31)
GRAPHIC: Bar chart that shows total returns for the past ten calendar years for
the Growth and Income Stock Fund. Total returns are as follows:
1990 -1.98% 1995 31.75%
1991 25.66% 1996 22.02%
1992 7.66% 1997 31.42%
1993 13.77% 1998 17.92%
1994 1.42% 1999 17.95%
Best Calendar Quarter: 4Q98 17.82%
Worst Calendar Quarter: 3Q90 -13.69%
Please remember that past performance is no guarantee of the results the Growth
and Income Stock Fund may achieve in the future. Future returns may be higher or
lower than the returns the fund achieved in the past.
How does the performance of the Growth and Income Stock Fund compare to the
growth and income market?
The following table compares the performance of the Growth & Income Stock Fund
with the performance of the Russell 1000 Index and the S&P 500, which are
measures of the performance of the relevant market. Returns shown for the Growth
and Income Stock Fund are after the deduction of fund management and operating
expenses. The Russell 1000 Index and S&P 500 Index returns bear no such
expenses.
Average Annual Total Returns (As of December 31, 1999)
One Year Five Year Ten Year
Growth & Income Fund 17.95% 24.06% 16.22%
S&P 500 Stock Index 21.04% 28.55% 18.20%
(Capitalization-weighted)
S&P 500 Stock Index 19.53% 21.33% 13.37%
(Equal-weighted)*
Russell 1000 Index 20.91% 28.05% 18.13%
*The source of the S&P 500 Stock Index (Equal-weighted) data is Birinyi
Associates, Inc.
<PAGE>
CAPITAL APPRECIATION STOCK FUND
INVESTMENT OBJECTIVE
What is this fund's goal?
The Capital Appreciation Stock Fund seeks long-term capital appreciation.
INVESTOR PROFILE
Who should consider investing in this fund?
You may want to invest more of your assets in this fund if you:
o have a longer investment time horizon
o are willing to accept higher on-going short-term risk for the potential of
higher long-term returns
o want to diversify your investments
o are seeking a fund for the growth portion of an asset allocation program or
o are investing for retirement or other goals that are many years in the
future.
You may want to invest fewer of your assets in this fund if you:
o are investing with a shorter investment time horizon in mind
o are seeking an investment based on income rather than capital gains or
o are uncomfortable with an investment whose value may vary substantially.
PRINCIPAL RISKS
What are the main risks of investing in this fund?
As with any fund that invests in equity securities, this fund is subject to
market risk, the risk that the value of a security may move up and down due to
factors not directly related to the issuer. Loss of money is a significant risk
of investing in this fund. Due to its focus on stocks that may appreciate in
value and lack of emphasis on those that provide current income, this fund will
typically experience greater volatility over time than the Growth and Income
Stock Fund.
In addition, a "value" approach to investing includes the risks that: 1. the
securities markets will not recognize the value of a security for an
unexpectedly long period of time; and 2. a stock that is believed to be
undervalued actually is appropriately priced or over-priced due to unanticipated
problems associated with the issuer or industry.
To the extent that the fund invests in higher-risk securities, it takes on
additional risks that could adversely affect its performance. For example, to
the extent that the fund invests in foreign securities, it will be subject to
the risks related to such securities, including the risks of adverse changes in
the rate of currency exchange and associated unstable political situations. A
further discussion of the principal risks associated with foreign securities is
contained in the foreign securities section and SAI.
PRINCIPAL INVESTMENT STRATEGIES
How does this fund pursue its objective?
The Capital Appreciation Stock Fund invests primarily in common stocks of
companies of various sizes, and will, under normal market conditions, maintain
at least 80% of its assets in such securities. The fund seeks stocks that have
low market prices relative to their values based on analysis by the fund's
investment adviser of the issuing companies and their prospects. This is
referred to as a "value" approach which is further described on the Growth and
Income Stock Fund page. Relative to the Growth and Income Stock Fund, the
Capital Appreciation Stock Fund will include some smaller, less developed
companies 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 Stock
Fund. The combination of these factors introduces greater investment risk than
the Growth and Income Stock Fund, but can also provide higher long-term returns
than are typically available from less risky investments.
The fund will typically invest in securities representing every sector of the
S&P 400 in about (+/-100%) the same weightings as such sector has in the S&P
400. For example, if technology companies represent 10% of the S&P 400, the fund
will typically have between 0% and 20% of its assets invested in securities
issued by technology companies.
The fund may also invest in warrants, preferred stocks and convertible debt
securities, and may invest up to 25% of its assets in foreign securities.
The fund typically sells a stock when the fundamental expectations for buying it
no longer apply, the price exceeds its value, or other stocks appear more
attractively priced relative to their values.
<PAGE>
CAPITAL APPRECIATION STOCK FUND PERFORMANCE
How has the Capital Appreciation Stock Fund performed?
The following chart provides an indication of the risks of investing in the
Capital Appreciation Stock Fund by showing the changes in the portfolio
performance of the Fund from year to year since inception. The chart assumes the
reinvestment of all dividends and distributions. The figures shown do not
reflect charges deducted in connection with variable contracts.
Total Returns
(for years ended 12/31)
GRAPHIC: Bar chart that shows total returns for the Capital Appreciation
Stock Fund since inception. Total returns are as follows:
1994 5.44%
1995 30.75%
1996 21.44%
1997 31.57%
1998 20.90%
1999 25.19%
Best Calendar Quarter: 4Q98 20.84%
Worst Calendar Quarter: 3Q98 -12.04%
Please remember that past performance is no guarantee of the results the Capital
Appreciation Stock Fund may achieve in the future. Future returns may be higher
or lower than the returns the fund achieved in the past.
How does the performance of the Capital Appreciation Stock Fund compare to the
capital appreciation market?
The following table compares the performance of the Capital Appreciation Stock
Fund with the performance of the Russell 3000 Index and S&P 1500 SuperComposite
Stock Index, which are measures of the performance of the relevant market. The
S&P 1500 SuperComposite is a new benchmark for the Fund. We intend to include
the S&P 1500 SuperComposite, and not the S&P 400, going forward because the
Adviser believes the S&P 1500 SuperComposite more accurately reflects the
securities held in the Fund's portfolio of investments. Returns shown for the
Capital Appreciation Stock Fund are after the deduction of fund management and
operating expenses. The Russell 3000 Index, S&P 1500 SuperComposite, and S&P
Midcap 400 Index returns bear no such expenses.
Average Annual Total Returns (As of December 31, 1999)
One Year Five Year Ten Year
Capital Appreciation Fund 25.19% 25.89% N/A
Russell 3000 Index 20.90% 26.94% 17.68%
S&P 1500 SuperComposite Index 20.25% 25.62% 20.20%*
*Prior to 1995, the S&P Midcap 400 Index was utilized.
<PAGE>
MID-CAP STOCK FUND
INVESTMENT OBJECTIVE
What is this fund's goal?
The Mid-Cap Stock Fund seeks long-term capital appreciation by investing in
midsize and small companies.
INVESTOR PROFILE
Who should consider investing in this fund?
You may want to invest more of your assets in this fund if you:
o have a longer investment time horizon
o are willing to accept higher on-going short-term risk for the potential of
higher long-term returns
o want to diversify your investments
o are seeking a fund for the growth portion of an asset allocation program
o are seeking exposure to smaller companies as part of an asset allocation
program or
o are investing for retirement or other goals that are many years in the
future.
PRINCIPAL RISKS
What are the main risks of investing in this fund?
As with any fund that invests in equity securities, this fund is subject to
market risk, the risk that the value of your investment will fluctuate in
response to stock market movements. Loss of money is a significant risk of
investing in this fund.
Due to its focus on smaller companies' stocks that may appreciate in value and
lack of emphasis on those that provide current income, this fund will typically
experience greater volatility over time than the Growth and Income Stock Fund.
Securities issued by smaller companies may be less liquid than securities issued
by larger, more established companies. In addition, a "value" approach to
investing includes the risks that: 1. the securities markets will not recognize
the value of a security for an unexpectedly long period of time; and 2. a stock
that is believed to be undervalued actually is appropriately priced or
over-priced due to unanticipated problems associated with the issuer or
industry.
To the extent that the fund invests in higher-risk securities, it takes on
additional risks that could adversely affect its performance. For example, to
the extent that the fund invests in foreign securities, it will be subject to
the risks related to such securities, including the risks of changes in the rate
of currency exchange and varying political situations. The principal risks of
foreign securities and small company stocks are described later in this
prospectus and in the SAI.
PRINCIPAL INVESTMENT STRATEGIES
How does this fund pursue its objective?
The Mid-Cap Stock Fund invests primarily in common stocks of midsize and smaller
companies (market capitalization of less than $10 billion at the time of
purchase), and will under normal market conditions, maintain at least 80% of its
assets in such securities. However, the fund will not automatically sell a stock
just because the company's market capitalization has grown beyond the $10
billion upper limit and such position may be increased through additional
purchases.
<PAGE>
MID-CAP STOCK FUND (Continued)
INVESTOR PROFILE (Continued)
Who should consider investing in this fund?
You may want to invest fewer of your assets in this fund if you: o are investing
with a shorter investment time horizon in mind o are seeking an investment based
on income rather than capital gain or o are uncomfortable with an investment
whose value may vary substantially.
PRINCIPAL INVESTMENT STRATEGIES (Continued)
How does this fund pursue its objective?
The fund seeks stocks in this midsize to smaller range that have a low market
price relative to their value as estimated based on fundamental analysis of the
issuing company and its prospects. This is sometimes referred to as a "value"
approach. Relative to both the Growth and Income Stock and Capital Appreciation
Stock Funds, the Mid-Cap Stock Fund includes more smaller, less developed
issuers. These midsize and smaller companies often have difficulty competing
with larger companies, but the successful ones tend to grow faster than larger
companies. They often use profits to expand rather than to pay dividends.
The fund diversifies its holdings among various industries and among companies
within those industries but is often less diversified than the Growth and Income
Stock Fund. The combination of these factors introduces greater investment risk
than the Growth and Income Stock Fund, but can also provide higher long-term
returns than are typically available from less risky investments.
The fund typically invests in securities representing every sector of the S&P
400 Midcap Index in about (+/-100%) the same weightings as such sector has in
the S&P 400 Midcap Index. For example, if technology companies represent 10% of
the S&P 400 Midcap Index, the fund will typically have between 0% and 20% of its
assets invested in securities issued by technology companies.
The fund may also invest in warrants, preferred stocks and convertible debt
securities, and may invest up to 25% of its assets in foreign securities.
The fund typically sells a stock when the fundamental expectations for buying it
no longer apply, the price exceeds its value or other stocks appear more
attractively priced relative to their values.
Note: The Mid-Cap Stock Fund does not have a calendar year of investment
performance, so there is not a bar chart showing the fund returns from year to
year. Once the Fund has at least one calendar year of performance it will be
shown along with the performance of the S&P 400 Midcap Index and the Russell
Midcap Index, which we use to measure the performance of the relevant market.
The following table shows the historical performance of these indexes.
Average Annual Total Returns
(As of December 31, 1999)
One Year Three Year
S&P 400 Midcap Index 13.58%* 21.78%
Russell Midcap Index 18.23%* 21.86%
*The time period is May 1, 1999 to December 31, 1999.
<PAGE>
EMERGING GROWTH FUND
INVESTMENT OBJECTIVE
What is this fund's goal?
The Emerging Growth Fund seeks long-term capital appreciation.
INVESTOR PROFILE
Who should consider investing in this fund?
You may want to invest more of your assets in this fund if you:
o have a very long investment time horizon
o are willing to accept significantly greater riskhigher on-g oing short-term
risk for the potential of higher long-term returns
o want to diversify your investments
o are seeking a fund for the growth portion of an asset allocation program
o are seeking exposure to smaller companies as part of an asset allocation
program or
o are investing for retirement or other goals that are many years in the
future.
You may want to invest fewer of your assets in this fund if you:
o are investing with a shorter investment time horizon in mind
o are seeking an investment based on income rather than capital gain or
o are uncomfortable with an investment whose value may vary substantially.
PRINCIPAL RISKS
What are the main risks of investing in this fund?
As with any fund that invests in equity securities, this fund is subject to
market risk, the risk that the value of your investment will fluctuate in
response to stock market movements. Loss of money is a significant risk of
investing in this fund. Due to its focus on stocks of fast-growing companies,
including those of smaller capitalization companies, it will typically
experience greater volatility over time than the Capital Appreciation Fund.
Securities of smaller capitalization companies experience greater price
volatility than securities of larger capitalization companies because growth
prospects for smaller companies are less certain and the market for such
securities is smaller. Securities of smaller capitalization companies are often
thinly traded and holders may have to sell such securities at a discount from
current market prices or in small lots over an extended period of time. In
addition, such securities are subject to the risk that during certain periods
their liquidity will shrink or disappear suddenly and without warning as a
result of adverse economic or market conditions, or adverse investor
perceptions, whether or not accurate. The fund could lose money if it has to
sell illiquid securities at a disadvantageous time. The costs of purchasing or
selling securities of smaller capitalization companies are often greater than
those of more widely traded securities and securities of smaller capitalization
companies are often difficult to value.
Many emerging growth companies do not have established financial histories;
often having limited product lines, markets or financial resources; may depend
on a few key personnel for management; and may be susceptible to losses and
risks of bankruptcy.
To the extent that the fund invests in other higher-risk securities, it takes on
additional risks that could adversely affect its performance. For example, to
the extent that the fund invests in foreign securities, it will be subject to
the risks related to such securities, including the risks associated with
changes in the rate of currency exchange and unstable political situations. A
further discussion of the principal risks associated with foreign securities is
contained in the International Stock Fund page.
PRINCIPAL INVESTMENT STRATEGIES
How does this fund pursue its objective?
The Emerging Growth Fund invests generally in common stocks, securities
convertible into common stocks and related equity securities. The funds seeks
securities of emerging growth companies, which are companies that are either:
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; or
o relatively small or early in their life cycle, but have the potential to
become much larger enterprises.
<PAGE>
EMERGING GROWTH FUND (Continued)
PRINCIPAL INVESTMENT STRATEGIES (continued)
How does this fund pursue its objective?
Emerging growth companies that the fund seeks may be of any size if they have
products, proprietary technologies, management, or market opportunities that can
support earnings growth over extended time periods in excess of the growth rate
of the economy and/or the rate of inflation. Nonetheless, most such companies
are small and have securities with smaller market capitalization.
The fund may also invest in warrants, preferred stocks and debt securities
(including non-investment grade debt securities). The fund may invest up to 25 %
of its assets in foreign securities.
*Note: The Emerging Growth Fund is a new fund that does not have historical
investment performance. When it does, its performance will be shown along with
the performance of the S&P 500 Large Cap Index and the Russell 2000 Index, which
are measures of the performance of the relevant market. The following table
shows the historical performance of these indexes.
Average Annual Total Returns
(As of December 31, 1999)
One Year Five Year Ten Year
S&P 500 Index 21.04% 28.55% 18.20%
Russell 2000 Index 21.26% 16.45% 13.28%
<PAGE>
INTERNATIONAL STOCK FUND
INVESTMENT OBJECTIVE
What is this fund's goal?
The International Stock Fund seeks long-term capital appreciation.
INVESTOR PROFILE
Who should consider investing in this fund?
You may want to invest more of your assets in this fund if you:
o are seeking to diversify your domestic investments
o are seeking access to investments in securities markets that can be less
accessible to individual investors in the U.S.
o are willing to accept high risk in pursuit of to achieve higher long-term
growth
o are seeking funds for the growth portion of an asset allocation program or
o are investing for goals that are many years in the future
You may want to invest fewer of your assets in this fund if you:
o are investing with a shorter investment time horizon in mind
o are uncomfortable with an investment whose value may vary substantially
o are seeking an investment based on income rather than capital gains or
o want to limit your exposure to foreign markets or currencies or income from
foreign sources.
PRINCIPAL RISKS
What are the main risks of investing in this fund?
As with any fund investing in stocks, the value of your investment will
fluctuate in response to stock market movements as described in the earlier fund
pages. Loss of money is a significant risk of investing in this fund. There is
also a risk that poor security selection by the adviser will cause the fund to
underperform other funds having a similar objective.
Investing in foreign securities involves certain special considerations and
additional risks which are not typically associated with investing in securities
of domestic issuers or U.S. dollar denominated securities. These risks may make
the fund more volatile than a comparable domestic stock fund. For example,
foreign securities are typically subject to:
o Fluctuations in currency exchange rates.
o Higher trading and custody charges compared to securities of U.S.
companies.
o Different accounting and reporting practices than U.S. companies. As a
result, it is often more difficult to evaluate financial information from
foreign issuers. Also, the laws of some foreign countries limit the
information that is made available to investors.
o Less stringent securities regulation. Securities regulations in many
foreign countries are often more lax than those of the U.S.
o Potential political instability.
o Potential economic instability. The economies of individual foreign
countries may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national products, rate of inflation, and
industry diversification. Such differences may cause the economies of these
countries to be less stable than the U.S. economy and may make them more
sensitive to external influences.
The risks of international investing are higher in emerging markets such as
those of Latin America, Africa, Asia and Eastern Europe. Additionally, investing
in smaller companies involves a higher level of risk compared to larger, more
established companies. Some small capitalization companies often do not have the
financial strength needed to do well in difficult economic times. Also, they
often sell limited numbers of products, which can make it harder for them to
compete with larger companies. As a result, their stock prices may fluctuate
more over the short-term, but may also have more potential to grow. To the
extent that the fund invests in smaller capitalization companies or utilizes
higher-risk securities and practices, it takes on further risks that could
adversely affect its performance.
PRINCIPAL INVESTMENT STRATEGIES
How does this fund pursue its objective?
Under normal market conditions, the International Stock Fund invests at least
80% of its assets in foreign equity securities. Foreign equity securities are
securities that are issued by companies organized or whose principal operations
are outside the U.S., are issued by a foreign government, are principally traded
outside of the U.S., or are quoted or denominated in a foreign currency.
<PAGE>
INTERNATIONAL STOCK FUND (CONTINUED)
PRINCIPAL INVESTMENT STRATEGIES (continued)
How does this fund pursue its objective?
Equity securities include common stocks, securities convertible into common
stocks, preferred stocks, and other securities representing equity interests
such as American depository receipts ("ADRs"- receipts typically issued by a
U.S. financial institution which evidence ownership of underlying securities of
foreign corporate issuers), European depository receipts ("EDRs") and Global
depository receipts ("GDRs"). EDRs and GDRs are receipts evidencing an
arrangement with a non-U.S. financial institution similar to that for ADRs and
are designed for use in non-U.S. securities markets. The fund may also invest in
debt securities, foreign money market instruments, and other income bearing
securities as well as forward foreign currency exchange contracts and other
derivative securities and contracts. The fund always holds securities of issuers
located in at least three countries other than the U.S.
Approximately two-thirds (66.67%) of the fund's assets are invested in
relatively large capitalization stocks of issuers located or operating in
developed countries. Such securities are those generally representative of the
securities comprising the Morgan Stanley Capital International, Europe,
Australia, and Far East ("EAFE") Index.
Currently, the fund's remaining assets are invested in small capitalization
stocks and stocks principally traded in emerging markets or of issuers located
in or having substantial business operations in emerging economies. The emerging
economies in which the fund invests are located primarily in the Asia-Pacific
region, Eastern Europe, Central and South America, and Africa. In selecting both
small capitalization stocks and emerging market stocks, the subadviser seeks
securities that are undervalued in the markets in which the securities
principally trade based on its analysis of the issuer's future prospects. Such
an analysis includes both quantitative (screening for specific financial
characteristics) and qualitative (evaluation of the management capabilities and
business prospects of the issuer) elements.
*Note: The International Stock Fund is a new fund that does not have historical
investment performance. When it does, its performance will be shown along with
the performance of the MSCI EAFE Index, which is a measure of the performance of
the relevant market. The following table shows the historical performance of
this index.
Average Annual Total Returns
(As of December 31, 1999)
One Year Five Year Ten Year
MSCI EAFE
<PAGE>
GLOBAL SECURITIES FUND
INVESTMENT OBJECTIVE
What is this fund's goal?
The Global Securities Fund seeks capital appreciation.
INVESTOR PROFILE
Who should consider investing in this fund?
You may want to invest more of your assets in this fund if you:
o are seeking to diversify your domestic investments
o are seeking access to markets that can be less accessible to individual
investors in the U.S.
o are willing to accept high risk in pursuit ofto achieve higher long-term
growth
o are seeking funds for the growth portion of an asset allocation program or
o are investing for goals that are many years in the future
You may want to invest fewer of your assets in this fund if you:
o are investing with a shorter investment time horizon in mind
o are uncomfortable with an investment whose value may vary substantially
o are seeking investments based on income rather than capital gains or
o want to limit your exposure to foreign markets or currencies or income from
foreign sources.
PRINCIPAL RISKS
What are the main risks of investing in this fund?
As with any fund investing in stocks, the value of your investment will
fluctuate in response to stock market movements as described in the earlier fund
pages. Loss of money is a significant risk of investing in this fund. There is
also a risk that poor security selection by the advisor will cause the fund to
underperform other funds having a similar objective.
Investing in foreign securities involves certain special considerations and
additional risks which are not typically associated with investing in securities
of domestic issuers or U.S. dollar denominated securities. These risks may make
the fund more volatile than a comparable domestic stock fund. For example,
foreign securities are typically subject to:
o Fluctuations in currency exchange rates.
o Higher trading and custody charges compared to securities of U.S.
companies.
o Different accounting and reporting practices than U.S. companies. As a
result, it is often more difficult to evaluate financial information from
foreign issuers. Also, the laws of some foreign countries limit the
information that is made available to investors.
o Less stringent securities regulation. Securities regulations in many
foreign countries are often more lax than those of the U.S.
o Potential political instability.
o Potential economic instability. The economies of individual foreign
countries may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national products, rate of inflation, and
industry diversification. Such differences may cause the economies of these
countries to be less stable than the U.S. economy and may make them more
sensitive to economic fluctuationsexternal influences.
The risks of international investing are higher in emerging markets such as
those of Latin America, Africa, Asia and Eastern Europe. Additionally, investing
in smaller companies involves a higher level of risk compared to larger, more
established companies. Some small capitalization companies often do not have the
financial strength needed to do well in difficult economic times. Also, they
often sell limited numbers of products, which can make it harder for them to
compete with larger companies. As a result, their stock prices may fluctuate
more over the short-term, but may also have more potential to grow. To the
extent that the fund invests in smaller capitalization companies or utilizes
higher-risk securities and practices, it takes on further risks that could
adversely affect its performance.
To the extent the fund invests in U.S. common stocks, it is subject to the risks
described in fund pages for the Growth and Income, Capital Appreciation and
Emerging Growth Funds.
<PAGE>
GLOBAL SECURITIES FUND (CONTINUED)
PRINCIPAL INVESTMENT STRATEGIES (CONTINUED)
How does this fund pursue its objective?
The Fund invests mainly in foreign equity securities and equity securities of
companies in the U.S. The Fund can invest without limit in foreign securities
and can invest in any country, including countries with developed or emerging
markets. However, the Fund currently emphasizes investments in developed markets
such as the United States, Western European countries and Japan. The Fund
normally will invest in at least three countries (one of which may be the United
States). The Fund does not limit its investments to companies in a particular
capitalization range, but currently focuses its investments in mid-cap and
large-cap companies.
In selecting securities for the Fund, the adviser looks primarily for foreign
and U.S. companies with high growth potential. The adviser uses fundamental
analysis of a company's financial statements, management structure, operations
and product development, and considers factors affecting the industry of which
the issuer is part.
The adviser considers overall and relative economic conditions in U.S. and
foreign markets, and seeks broad portfolio diversification in different
countries to help moderate the special risks of foreign investing.
*Note: The Global Securities Fund is a new fund that does not have historical
investment performance. When it does, its performance will be shown along with
the performance of the MSCI World Index, which is a measure of the performance
of the relevant market. The following table shows the historical performance of
this index.
Average Annual Total Returns
(As of December 31, 1999)
One Year Five Year Ten Year
MSCI World Index
<PAGE>
RISK VS. RETURN
The risk/return curve below demonstrates that, in general for diversified
portfolios of securities of the various types, as short-term risk increases the
potential for long-term gain also increases. "Short-term risk" refers to the
likely volatility of a fund's total return and its potential for gain or loss
over a relatively short time period. "Long-term potential gain" means the
expected average annual total return over a relatively long time period, such as
20 years.
GRAPHIC: This graphic shows where each of the funds in the Ultra Series Fund, in
addition to other types of investments, fall on a curve that depicts the risk
taken for the gain potential. The x-axis is labelled "Long Term Potential for
Gains"; the y-axis is labelled "Short Term Risk (Volatility of Returns)."
This curve is not intended to indicate future volatility or performance. It is
merely intended to demonstrate the relationship between the ongoing short-term
risk and the long-term potential for gain of each portfolio of the Ultra Series
Fund relative to other funds and types of investments.
Although each fund expects to pursue its investment objective using its
principal investment strategies regardless of market conditions, each fund may
invest up to 100% of its assets in money market securities as a defensive tactic
in abnormal market conditions.
The preceding fund pages provide descriptions of the general investment
strategies and what we believe to be the principal risks of each of the funds.
The fund pages do not contain an exhaustive description of all the risks and
investment strategies of the funds. Please read each of the fund pages to gain a
basic understanding of the funds. For a more detailed description, including
non-principal risks, investment strategies, and investment restrictions, please
consult the Statement of Additional Information. Also, if there are terms or
concepts you do not fully understand, please consult the SAI, other reference
material or your registered representative before investing.
<PAGE>
RISKS ASSOCIATED WITH CERTAIN HIGHER RISK SECURITIES
FOREIGN SECURITIES
As indicated in the earlier pages, several of the funds may invest in foreign
equity and debt securities. Foreign securities are securities that are issued by
companies organized outside the U.S. or whose principal operations are outside
the U.S., are issued by a foreign government, are principally traded outside of
the U.S., or are quoted or denominated in a foreign currency. Equity securities
include common stocks, securities convertible into common stocks, preferred
stocks, and other securities representing equity interests such as American
depository receipts ("ADRs"), European depository receipts ("EDRs") and global
depository receipts ("GDRs"). The fund may also invest in debt securities,
foreign money market instruments, and other income bearing securities as well as
forward foreign currency exchange contracts and other derivative securities and
contracts.
Investing in foreign securities involves certain special considerations and
additional risks which are not typically associated with investing in securities
of domestic issuers or U.S. dollar denominated securities. For example, foreign
securities are typically subject to:
o Fluctuations in currency exchange rates.
o Higher trading and custody charges compared to securities of U.S.
companies.
o Different accounting and reporting practices than U.S. companies. As a
result, it is often more difficult to evaluate financial information from
foreign issuers. Also, the laws of some foreign countries limit the
information that is made available to investors.
o Less stringent securities regulations than those of the U.S.
o Potential political instability.
o Potential economic instability. The economies of individual foreign
countries may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross domestic product, rate of inflation, and
industry diversification. Such differences may cause the economies of these
countries to be less stable than the U.S. economy and may make them more
sensitive to economic fluctuations.
Some of the investments will be stocks or bonds of relatively large issuers
located or operating in developed countries. Such securities are those generally
representative of the companies comprising the Morgan Stanley Capital
International, Europe, Australia, and Far East ("EAFE") Stock Index.
SMALL CAPITALIZATION STOCKS
Certain funds may also invest in small capitalization stocks and stocks or bonds
principally traded in emerging securities markets or of issuers located in or
having substantial business operations in emerging economies. The downside of
investing in smaller companies is that such investments entail a higher level of
risk compared to larger, more established companies. Small capitalization
companies often do not have the financial strength needed to do well in
difficult economic times. Also, they often sell limited numbers of products,
which can make it harder for them to compete with larger companies. As a result,
their securities prices may fluctuate more over the short-term, but they have
more potential to grow. The emerging economies in which the fund invests are
located primarily in the Asia-Pacific region, Eastern Europe, Central and South
America, and Africa. The small size, inexperience and limited trading volume of
the securities markets in certain of these countries may also make investments
in such countries more volatile and less liquid than investments in securities
traded in markets in Japan and Western European countries.
<PAGE>
THE SHARES
OFFER
Currently, each series of shares is divided into two classes - Class C and Class
Z. Class C and Class Z are identical except that Class C shares bear a
distribution fee pursuant to a distribution plan, adopted in accordance with
Rule 12b-1 under the Act. Both Classes are sold in a continuous offering. This
prospectus offers the Class Z shares.
The Ultra Series Fund generally offers Class Z shares to separate accounts of
CUNA Mutual Group and to qualified pension and retirement plans of CUNA Mutual
Group.
The Ultra Series Fund offers Class C shares to separate accounts of insurance
companies and to qualified pension and retirement plans that are not affiliated
with CUNA Mutual Group. The fund does not offer its shares directly to the
general public.
Investments in the Ultra Series Fund by separate accounts of insurance companies
are made through either variable annuity or variable life insurance contracts,
together commonly known as variable contracts. Each separate account contains a
subaccount that corresponds to a portfolio in the Ultra Series Fund.
Ultra Series Fund Separate Account
Money Market Fund Money Market Subaccount
Bond Fund Bond Subaccount
Balanced Fund Balanced Subaccount
High Income Fund High Income Subaccount
Growth and Income Stock Fund Growth and Income Stock Subaccount
Capital Appreciation Stock Fund Capital Appreciation Stock Subaccount
Mid-Cap Stock Fund Mid-Cap Stock Subaccount
Emerging Growth Fund Emerging Growth Subaccount
International Stock Fund International Stock Subaccount
Global Securities Fund Global Securities Subaccount
PURCHASE AND REDEMPTION
On each day that a Fund's net asset value is calculated, the Ultra Series Fund
processes any orders to purchase or redeem shares. Purchase and redemption
orders are processed at each fund's net asset value calculated on the day the
order is received, although orders may be executed the next morning. Shares are
purchased and redeemed at net asset value without the deduction of sales or
redemption charges.
For a more detailed description of the procedures for allocating interest in a
separate account to a portfolio of the Ultra Series Fund, owners of individual
variable contracts should refer to the separate prospectus for their contracts;
and participants in qualified pension or retirement plans should refer to their
plan documents.
<PAGE>
DIVIDENDS
Dividends of the various funds in the Ultra Series Fund are distributed to
separate accounts for variable contracts and qualified pension or retirement
plans and automatically reinvested in Ultra Series Fund shares.
Dividends from the Money Market Fund are declared daily and reinvested monthly
in full and fractional shares of the Money Market Fund.
Dividends of ordinary income from the Bond, Balanced, Growth and Income Stock,
Capital Appreciation Stock, Mid-Cap Stock, Emerging Growth, High Income,
International Stock and Global Securities Funds will be declared and reinvested
quarterly in full and fractional shares. Dividends of capital gains from these
funds will be declared and reinvested at least annually in full and fractional
shares. In no event will capital gain dividends be declared and paid more
frequently than allowed under SEC rules.
The funds' distributions may be subject to federal income tax. An exchange of
fund shares may also be treated as a sale of fund shares and any gain on the
transaction may be subject to federal income tax.
PRICING OF FUND SHARES
The funds' shares are sold and redeemed at the shares' net asset value without
sales or redemption charges. Net asset value is computed by adding the total
current values of each fund's assets, subtracting all liabilities and dividing
by the number of outstanding shares. On each day that net asset value is
calculated, the calculation occurs at the earlier of 3:00 p.m. Central Standard
Time or the close of regular trading on the New York Stock Exchange.
Net asset values are calculated on any day the New York Stock Exchange is open
for business.
Federal securities regulations will be followed in case of an emergency that
interferes with valuation of shares.
The funds' shares will be purchased and redeemed at their net asset value.
Generally, the assets of each fund are valued using market quotations and
independent pricing services. If these are not available, the value of the
assets of the funds will be based on their "fair value" as determined in
accordance with procedures adopted by the Board of Trustees. The assets of the
Money Market Fund and other short-term investments having maturities of 60 days
or less will be valued at amortized cost. More information about the calculation
of net asset value is in the SAI.
<PAGE>
TAXES
For federal income tax purposes, each Fund will be treated as a separate entity.
Each Fund intends to qualify each year as a "regulated investment company" under
the Internal Revenue Code, as amended (the "Code"). By so qualifying, a Fund is
not subject to federal income tax to the extent that its net investment income
and net realized capital gains are distributed to the separate accounts of
insurance companies or to qualified plans. Further, each Fund intends to meet
certain diversification requirements applicable to mutual funds underlying
variable life insurance and variable annuity contracts.
The Shareholders of the Funds are qualified pension and profit sharing plans and
the separate accounts of life insurance companies. Under current law, plan
participants and owners of variable life insurance and annuity contracts which
have invested in a Fund are not subject to federal income tax on Fund
distributions or on gains realized upon the sale or redemption of Fund shares
until they are withdrawn from the plan or contracts. For information concerning
the federal tax consequences to the purchasers of the variable annuity or
variable life insurance contracts, see the prospectus for such contract.
For more information about the tax status of the Funds, see "Taxes" in the SAI.
MORE ABOUT ULTRA SERIES FUND
PORTFOLIO MANAGEMENT
The investment adviser for the Ultra Series Fund is:
CIMCO Inc.
5910 Mineral Point Road
Madison, WI 53701-0391
CIMCO was established on July 6, 1982. It provides investment management of the
investment portfolios of CUNA Mutual Group, its "permanent affiliate" CUNA
Mutual Life Insurance Company, their subsidiaries and affiliates, and MEMBERS
Mutual Funds. CIMCO has over $8 billion of assets under management.
CIMCO employs a team approach in the management of investments of all the funds.
The Money Market, Bond, Balanced, Growth and Income Stock, Capital Appreciation
Stock Mid-Cap Stock are each managed by teams of portfolio managers employed by
CIMCO.
CIMCO manages the assets of the High Income, Mid-Cap Stock, Emerging Growth,
International Stock and Global Securities Funds (and may in the future manage
other funds) using a "manager of managers" approach under which CIMCO may manage
some or all of the fund's assets and may allocate some or all of the fund's
assets among one or more "specialist" subadvisers. CIMCO monitors the
performance of each subadviser to the extent that it deems appropriate to
achieve a fund's investment objective, reallocates fund assets among its own
portfolio management team and individual subadvisers, or recommends to the Ultra
Series Fund board that a fund employ or terminate particular subadvisers.
CIMCO selects subadvisers based on a continuing quantitative and qualitative
evaluation of their skills and proven abilities in managing assets pursuant to a
particular investment style. While superior performance is the ultimate goal,
short-term performance by itself will not be a significant factor in selecting
or terminating subadvisers, and CIMCO does not expect frequent changes in
subadvisers.
CIMCO received an order of the Commission that permits the Ultra Series Fund
board to employ particular subadvisers without shareholder approval. If there is
a change in subadvisers, you will receive an "information statement" within 90
days of the change. The statement will provide you with relevant information
about the reason for the change and information about any new subadvisers.
<PAGE>
CIMCO has engaged Wellington Management Company, llp ("Wellington Management"),
75 State Street, Boston, Massachusetts, 02109 as sub-adviser for the small-cap
portion of the assets within Mid-Cap Stock Fund. Wellington Management became
the sub-adviser on May 1, 2000. Wellington Management is a limited liability
partnership which traces its origins to 1928. Wellington Management provides
investment services to investment companies, employee benefit plans, endowments,
foundations, and other institutions and had over $235 billion in assets under
management as of December 31, 1999.
Stephen T. O'Brien, CFA is the Portfolio Manager from Wellington Management
primarily responsible for the Mid-Cap Stock Fund. Mr. O'Brien joined Wellington
Management in 1983 and has over 28 year of investment experience.
CIMCO has engaged Massachusetts Financial Services (MFS), 500 Boylston Street,
Boston, Massachusetts 02116-3741 as sub-adviser for the Emerging Growth and High
Income Funds. MFS became the sub-adviser on _____, 2000. MFS is a _____ company
which traces its origins to ____. MFS provides investment services to investment
companies, employee benefit plans, endowments, foundations, and other
institutions and had over $___ billion in assets under management as of
_______________.
CIMCO has engaged Lazard Asset Management, 30 Rockefeller Plaza, New York, New
York 10020 as sub-adviser for the International Stock Fund. Lazard became the
sub-adviser on _____, 2000. Lazard is a _____ company which traces its origins
to ____. Lazard provides investment services to investment companies, employee
benefit plans, endowments, foundations, and other institutions and had over $___
billion in assets under management as of
_______________.
CIMCO has engaged Oppenheimer Funds, Inc., Two World Trade Center, 34th Floor,
New York, New York 10048-0203 as sub-adviser for the Global Securities Fund.
Oppenheimer became the sub-adviser on _____, 2000. Oppenheimer is a _____
company which traces its origins to ____. Oppenheimer provides investment
services to investment companies, employee benefit plans, endowments,
foundations, and other institutions and had over $___ billion in assets under
management as of _______________.
In addition to providing portfolio management services, CIMCO also provides or
arranges for the provision of substantially all other services required by the
funds. Such services include all administrative, accounting, and legal services,
as well as the services of custodians, transfer agents, and dividend disbursing
agents.
As payment for its services as the investment adviser, CIMCO receives a
management fee based upon the assets of each fund. The management fee paid to
CIMCO is computed and accrued daily and paid monthly, as indicated in the
Expenses section.
INQUIRIES
If you have any questions regarding the Ultra Series Fund, please contact:
CUNA Brokerage Services, Inc.
2000 Heritage Way
Waverly, IA 50677
(800) 798-5500
(319) 352-4090
<PAGE>
FINANCIAL HIGHLIGHTS
The Financial Highlights tables will be filed by post-effective amendment.
<PAGE>
The following documents contain more information about the funds and are
available free upon request:
Statement of Additional Information (SAI). The SAI contains additional
information about all aspects of the funds. A current SAI has been filed with
the Securities and Exchange Commission and is incorporated herein by reference.
Annual and Semiannual Reports. The funds' annual and semiannual reports provide
additional information about the funds' investments. The annual report contains
a discussion of the market conditions and investment strategies that
significantly affected each fund's performance during the last fiscal year.
Requesting Documents. You may request copies of these documents, ask questions
about your account, or request further information about the funds either by
contacting your broker or by contacting the funds at:
Ultra Series Fund
CUNA Mutual Life Insurance Company
2000 Heritage Way
Waverly, IA 50677
(800) 798-5500
Public Information. You can review and copy information about the funds,
including the SAI, at the Securities and Exchange Commission's Public Reference
Room in Washington D.C. You may obtain information on the operation of the
public reference room by calling the Commission at 1-800-SEC-0330. Reports and
other information about the funds also are available on the Commission's
Internet site at http://www.sec.gov. You may obtain copies of this information,
upon payment of a duplicating fee, by writing the Public Reference Section of
the Securities and Exchange Commission, Washington, D.C. 20549-6009.
The Funds are available to the public only through the purchase of:
(1) Class Z Shares by certain individual variable life insurance contracts or
variable annuity contracts;
(2) Class Z Shares by certain group variable annuity contracts for qualified
pension and retirement plans; or
(3) Class C Shares directly by qualified pension and retirement plans.
When used in connection with individual variable annuity contracts or variable
life insurance contracts, this Prospectus must be accompanied by prospectuses
for those contracts. When distributed to qualified pension and retirement plans
or to participants of such plans, this Prospectus may be accompanied by
disclosure materials relating to such plans which should be read in conjunction
with this Prospectus.
Investment Company File No. 811-4815
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
ULTRA SERIES FUND
2000 HERITAGE WAY
WAVERLY, IOWA 50677
(319) 352-4090
This is not a prospectus. This statement of additional information should be
read in conjunction with the Ultra Series Fund prospectus dated September ___,
2000 which is incorporated by reference.
The prospectus contains information that an investor should know before
investing. For a copy of the most recent prospectus, call or write CUNA
Brokerage Services, Inc., 2000 Heritage Way, Waverly, Iowa 50677, (319)
352-4090, (800) 798-5500.
SEPTEMBER ___, 2000
<PAGE>
TABLE OF CONTENTS PAGE
General Information...........................................................1
Investment Practices..........................................................1
Lending Portfolio Securities.........................................1
Restricted Securities................................................2
Foreign Transactions.................................................2
Put and Call Options.................................................9
Financial Futures and Related Options...............................10
Stock Index Futures and Related Options.............................11
Bond Fund Practices.................................................12
Lower-Rated Corporate Debt Securities...............................13
Other Debt Securities...............................................14
Foreign Government Securities.......................................15
Convertible Securities..............................................16
Repurchase Agreements...............................................16
Reverse Repurchase Agreements.......................................17
U.S. Government Securities..........................................17
Mortgage-Backed and Asset-Backed Securities.........................18
Forward Commitment and When-Issued Securities.......................22
Investment Limitations.......................................................22
Portfolio Turnover...........................................................24
Management of the Fund.......................................................25
Officers and Trustees...............................................25
Trustees Compensation...............................................27
Substantial Shareholders............................................27
Beneficial Owners...................................................27
Code of Ethics......................................................27
The Investment Adviser.......................................................28
Management Agreements with Subadvisers.......................................29
The Subadviser for the High Income Fund.............................30
The Subadviser for the Mid-Cap Stock Fund...........................30
The Subadviser for the Emerging Growth Fund.........................30
The Subadviser for the International Stock Fund.....................30
The Subadviser for the Global Securities Fund.......................30
Expenses of the Fund.........................................................31
Distribution Plan and Agreement..............................................31
Transfer Agent...............................................................32
Custodian....................................................................32
Independent Accountants......................................................32
Brokerage....................................................................33
How Securities Are Offered...................................................34
Shares Of Beneficial Interest.......................................34
Limitation of Trustee and Officer Liability.........................35
Limitation of Interseries Liability.................................35
Net Asset Value of Shares....................................................36
Money Market Fund...................................................36
Bond, Balanced, High Income, Growth and Income Stock,
Capital Appreciation Stock, Mid-Cap Stock, Emerging Growth,
International Stock, and Global Securities Funds...................37
Dividends, Distributions and Taxes...........................................38
Options and Futures Transactions....................................39
Straddles...........................................................40
Distributor.........................................................41
Calculation of Yields and Total Returns......................................41
Money Market Fund Yields............................................43
Other Fund Yields...................................................43
Average Annual Total Returns........................................44
Other Total Returns.................................................45
Financial Statements.........................................................45
<PAGE>
GENERAL INFORMATION
The Ultra Series Fund is an investment company consisting of ten separate
investment portfolios or funds (each, a "Fund") each of which has a different
investment objective. Each Fund is a diversified, open-end management investment
company, commonly known as a mutual fund. The ten Funds are Money Market, Bond,
Balanced, High Income, Growth and Income Stock, Capital Appreciation Stock,
Mid-Cap Stock, Emerging Growth, International Stock, and Global Securities. The
Ultra Series Fund was organized under the laws of the Commonwealth of
Massachusetts on September 16, 1983, and is a Massachusetts Business Trust.
Under Massachusetts's law, shareholders of a business trust may, under certain
circumstances, be held personally liable as partners for the obligations of the
Ultra Series Fund. The Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Ultra Series Fund and
requires that notice of such disclaimer be given in each instrument entered into
or executed by the Ultra Series Fund. The Declaration of Trust provides for
indemnification out of the Ultra Series Fund property for any shareholder held
personally liable for the obligations of the Ultra Series Fund. Thus, the risk
of a shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Ultra Series Fund itself would be unable
to meet its obligations.
INVESTMENT PRACTICES
The Ultra Series Fund is a diversified open-end management investment company
consisting of ten investment portfolios or funds, each with its own investment
objective and policies. The Ultra Series Fund Prospectus describes the
investment objective and policies of each of the ten Funds. The following
information is provided for those investors wishing to have more comprehensive
information than that contained in the Prospectus. Within the past year, no Fund
has employed any of the following practices: lending of portfolio securities,
investing in restricted securities, investing in options, financial futures,
stock index futures and related options. Except for the High Income, Mid-Cap
Stock, Emerging Growth, International Stock, and Global Securities Funds (as
described below), no Fund has a current intention of employing these practices
in the foreseeable future.
If the Ultra Series Fund enters into futures contracts or call options thereon,
reverse repurchase agreements, firm commitment agreements or standby commitment
agreements, the Ultra Series Fund will obtain approval from the Board of
Trustees to establish a segregated account with the custodian of the Ultra
Series Fund. The segregated account will hold liquid assets such as cash, U.S.
government assets and high-grade debt obligations. The cash value of the
segregated account will be not less than the market value of the futures
contracts and call options thereon, reverse repurchase agreements, firm
commitment agreements and standby commitment agreements.
Lending Portfolio Securities
All Funds, except the Money Market Fund, may lend portfolio securities. Such
loans will be made only in accordance with guidelines established by the
Trustees and on the request of broker-dealers or institutional investors deemed
qualified, and only when the borrower agrees to maintain cash or securities as
collateral with the Fund equal at all times to at least 100% of the value of the
securities. The Fund will continue to receive interest or dividends on the
securities loaned and will, at the same time, earn an agreed-upon amount of
interest on the collateral which will be invested in readily marketable
short-term obligations of high quality. The Fund will retain the right to call
the loaned securities and intends to call loaned voting securities if important
shareholder meetings are imminent. Such security loans will not be made if, as a
result, the aggregate of such loans exceeds 30% of the value of the Fund's
assets. The Fund may terminate such loans at any time. While there may be delays
in recovery of loaned securities or even a loss of rights in collateral supplied
should the borrower fail financially, loans will be made only to firms deemed by
the Investment Adviser or SubAdviser to be in good standing and will not be made
unless, in the judgment of the Investment Adviser or SubAdviser, the
consideration to be earned from such loans would justify the risk.
Restricted Securities
Each Fund, except the Money Market, High Income, Mid-Cap Stock, Emerging Growth,
International Stock, and Global Securities Funds, may invest up to 10% of its
net assets in restricted securities. The High Income, Mid-Cap Stock, Emerging
Growth, International Stock, and Global Securities Funds may invest up to 15% of
the Fund's net assets in restricted securities. Securities regulations limit the
resale of restricted securities which have been acquired through private
placement transactions, directly from the issuer or from security holders,
generally at higher yields or on terms more favorable to investors than
comparable publicly traded securities. Privately placed securities are often not
readily marketable and ordinarily can be sold only in privately negotiated
transactions to a limited number of purchasers or in public offerings made
pursuant to an effective registration statement under the Securities Act of
1933. Private or public sales of such securities by the Fund may involve
significant delays and expense. Private sales require negotiations with one or
more purchasers and generally produce less favorable prices than the sale of
comparable unrestricted securities. Public sales generally involve the time and
expense of preparing and processing a registration statement under the
Securities Act of 1933 and may involve the payment of underwriting commissions;
accordingly, the proceeds may be less than the proceeds from the sale of
securities of the same class which are freely marketable. Restricted securities
in each Fund will be valued at fair value as determined in good faith by or at
the direction of the Trustees for purposes of determining the Fund's Net Asset
Value. Such securities, when possible, will be valued on a comparative basis to
securities with similar characteristics for which market prices are available.
Foreign Transactions
Foreign Securities. All Funds may invest in foreign securities. Except for the
High Income, Mid-Cap Stock, Emerging Growth, International Stock, and Global
Securities Funds, no Fund will invest more than 10% of its total assets in
foreign securities. ADRs are not considered foreign securities for this purpose.
However, the Growth and Income Stock, and Capital Appreciation Stock Funds may
invest up to 25% of assets, and the Balanced Fund may invest up to 15% of assets
in American Depository Receipts and foreign securities. The High Income, Mid-Cap
Stock, and Emerging Growth, may invest up to 25% of the Fund's total assets in
foreign securities and has no limitations on ADRs.
The International Stock and Global Securities Funds may invest up to 100% of the
Fund's total assets in foreign securities.
Foreign securities means securities that are: (1) issued by companies organized
outside the U.S. or whose principal operations are outside the U.S. ("foreign
issuers"), (2) issued by foreign governments or their agencies or
instrumentalities (also "foreign issuers"), (3) principally traded outside of
the U.S., or (4) quoted or denominated in a foreign current ("non-dollar
securities").
Foreign securities may offer potential benefits that are not available from
investments exclusively in securities of domestic issuers or dollar denominated
securities. Such benefits may include the opportunity to invest in foreign
issuers that appear to offer better opportunity for long-term capital
appreciation or current earnings than investments in domestic issuers, the
opportunity to invest in foreign countries with economic policies or business
cycles different from those of the U.S. and the opportunity to invest in foreign
securities markets that do not necessarily move in a manner parallel to U.S.
markets.
Investing in foreign securities involves significant risks that are not
typically associated with investing in U.S. dollar denominated securities or in
securities of domestic issuers. Such investments may be affected by changes in
currency exchange rates, changes in foreign or U.S. laws or restrictions
applicable to such investments and in exchange control regulations (e.g.,
currency blockage). Some foreign stock markets may have substantially less
volume than, for example, the New York Stock Exchange and securities of some
foreign issuers may be less liquid than securities of comparable domestic
issuers. Commissions and dealer mark-ups on transactions in foreign investments
may be higher than for similar transactions in the U.S. In addition, clearance
and settlement procedures may be different in foreign countries and, in certain
markets, on certain occasions, such procedures have been unable to keep pace
with the volume of securities transactions, thus making it difficult to conduct
such transactions.
Foreign issuers are not generally subject to uniform accounting, auditing and
financial reporting standards comparable to those applicable to domestic
companies. There may be less publicly available information about a foreign
issuer than about a domestic one. In addition, there is generally less
government regulation of stock exchanges, brokers, and listed and unlisted
issuers in foreign countries than in the U.S. Furthermore, with respect to
certain foreign countries, there is a possibility of expropriation or
confiscatory taxation, imposition of withholding taxes on dividend or interest
payments, limitations on the removal of funds or other assets of the fund making
the investment, or political or social instability or diplomatic developments
which could affect investments in those countries.
Investments in short-term debt obligations issued either by foreign issuers or
foreign financial institutions or by foreign branches of U.S. financial
institutions (collectively, "foreign money market securities") present many of
the same risks as other foreign investments. In addition, foreign money market
securities present interest rate risks similar to those attendant to an
investment in domestic money market securities.
Investments in ADRs, EDRs and GDRs. Many securities of foreign issuers are
represented by American depository receipts ("ADRs"), European depository
receipts ("EDRs") and global depository receipts ("GDRs"). Each of the funds may
invest in ADRs, and each of the funds other than the Money Market Fund may
invest in GDRs and EDRs.
ADRs are receipts typically issued by a U.S. financial institution or trust
company which represent the right to receive securities of foreign issuers
deposited in a domestic bank or a foreign correspondent bank. Prices of ADRs are
quoted in U.S. dollars, and ADRs are traded in the U.S. on exchanges or
over-the-counter and are sponsored and issued by domestic banks. In general,
there is a large, liquid market in the U.S. for ADRs quoted on a national
securities exchange or the NASD's national market system. The information
available for ADRs is subject to the accounting, auditing and financial
reporting standards of the domestic market or exchange on which they are traded,
which standards are more uniform and more exacting than those to which many
foreign issuers may be subject.
EDRs and GDRs are receipts evidencing an arrangement with a non-U.S. bank
similar to that for ADRs and are designed for use in non-U.S. securities
markets. EDRs are typically issued in bearer form and are designed for trading
in the European markets. GDRs, issued either in bearer or registered form, are
designed for trading on a global basis. EDRs and GDRs are not necessarily quoted
in the same currency as the underlying security.
Depository receipts do not eliminate all the risk inherent in investing in the
securities of foreign issuers. To the extent that a fund acquires depository
receipts through banks which do not have a contractual relationship with the
foreign issuer of the security underlying the receipt to issue and service such
depository receipts, there may be an increased possibility that the fund would
not become aware of and be able to respond to corporate actions such as stock
splits or rights offerings involving the foreign issuer in a timely manner. The
market value of depository receipts is dependent upon the market value of the
underlying securities and fluctuations in the relative value of the currencies
in which the receipts and the underlying are quoted. In addition, the lack of
information may result in inefficiencies in the valuation of such instruments.
However, by investing in depository receipts rather than directly in the stock
of foreign issuers, a fund will avoid currency risks during the settlement
period for either purchases or sales.
Investments in Emerging Markets. The High Income, International Stock and Global
Securities Funds may invest in securities of issuers located in countries with
emerging economies and/or securities markets. These countries are located in the
Asia Pacific region, Eastern Europe, Central and South America and Africa.
Political and economic structures in many of these countries may be undergoing
significant evolution and rapid development, and such countries may lack the
social, political and economic stability characteristic of more developed
countries. Certain of these countries may have in the past failed to recognize
private property rights and have at times nationalized or expropriated the
assets of private companies. As a result, the risks of foreign investment
generally, including the risks of nationalization or expropriation of assets,
may be heightened. In addition, unanticipated political or social developments
may affect the values of a fund's investments in those countries and the
available to the fund of additional investments in those countries.
The small size and inexperience of the securities markets in certain of these
countries and the limited volume of trading in securities in those countries may
also make the High Income, International Stock and Global Securities Funds'
investments in such countries illiquid and more volatile than investments in
Japan or most Western European countries, and these funds may be required to
establish special custody or other arrangements before making certain
investments in those countries. There may be little financial or accounting
information available with respect to issuers located in certain of such
countries, and it may be difficult as a result to assess the value or prospects
of an investment in such issuers.
A fund's purchase or sale of portfolio securities in certain emerging markets
may be constrained by limitations as to daily changes in the prices of listed
securities, periodic trading or settlement volume and/or limitations on
aggregate holdings of foreign investors. Such limitations may be computed based
on aggregate trading volume by or holdings of a fund, CIMCO or its affiliates, a
subadviser and its affiliates, and each person's respective clients and other
service providers. A fund may not be able to sell securities in circumstances
where price, trading or settlement volume limitations have been reached.
Foreign investment in certain emerging securities markets is restricted or
controlled to varying degrees that may limit investment in such countries or
increase the administrative cost of such investments. For example, certain Asian
countries require government approval prior to investments by foreign persons or
limit investment by foreign persons to a specified percentage of an issuer's
outstanding securities or a specific class of securities which may have less
advantageous terms (including price) than securities of such company available
for purchase by nationals. In addition, certain countries may restrict or
prohibit investment opportunities in issuers or industries important to national
interests. Such restrictions may affect the market price, liquidity and rights
of securities that may be purchased by a fund.
Settlement procedures in emerging markets are frequently less developed and
reliable than those in the U.S. and may involve a fund's delivery of securities
before receipt of payment for their sale. In addition, significant delays are
common in certain markets in registering the transfer of securities. Settlement
or registration problems may make it more difficult for a fund to value its
portfolio assets and could cause a fund to miss attractive investment
opportunities, to have its assets uninvested or to incur losses due to the
failure of a counterparty to pay for securities that the fund has delivered or
due to the fund's inability to complete its contractual obligations.
Currently, there is no market or only a limited market for many management
techniques and instruments with respect to the currencies and securities markets
of emerging market countries. Consequently, there can be no assurance that
suitable instruments for hedging currency and market related risks will be
available at the times when the Investment Adviser of the fund wishes to use
them.
Foreign Currency Transactions Generally. Because investment in foreign issuers
will usually involve currencies of foreign countries, and because the High
Income, Emerging Growth, International Stock and Global Securities Funds may
have currency exposure independent of their securities positions, the value of
the assets of these funds, as measured in U.S. dollars, will be affected by
changes in foreign currency exchange rates.
An issuer of securities purchased by a fund may be domiciled in a country other
than the country in whose currency the instrument is denominated or quoted. The
High Income, Emerging Growth, International Stock and Global Securities Funds
may also invest in securities quoted or denominated in the European Currency
Unit ("ECU"), which is a "basket" consisting of specified amounts of the
currencies of certain of the twelve member states of the European Economic
Community. The specific amounts of currencies comprising the ECU may be adjusted
by the Council of Ministers of the European Economic Community from time to time
to reflect changes in relative values of the underlying currencies. In addition,
these two funds may invest in securities quoted or denominated in other currency
"baskets."
Currency exchange rates may fluctuate significantly over short periods of time
causing, along with other factors, a fund's NAV to fluctuate as well. They
generally are determined by the forces of supply and demand in the foreign
exchange markets and the relative merits of investments in different countries,
actual or anticipated changes in interest rates and other complex factors, as
seen from an international perspective. Currency exchange rates also can be
affected unpredictably by intervention by U.S. or foreign governments or central
banks, or the failure to intervene, or by currency controls or political
developments in the U.S. or abroad. The market in forward foreign currency
exchange contracts, currency swaps and other privately negotiated currency
instruments offers less protection against defaults by the other party to such
instruments than is available for currency instruments traded on an exchange. To
the extent that a substantial portion of a fund's total assets, adjusted to
reflect the fund's net position after giving effect to currency transactions, is
denominated or quoted in the currencies of foreign countries, the fund will be
more susceptible to the risk of adverse economic and political developments
within those countries.
In addition to investing in securities denominated or quoted in a foreign
currency, certain of the funds may engage in a variety of foreign currency
management techniques. These funds may hold foreign currency received in
connection with investments in foreign securities when, in the judgment of the
fund's Investment Adviser, it would be beneficial to convert such currency into
U.S. dollars at a later date, based on anticipated changes in the relevant
exchange rate. The funds will incur costs in connection with conversions between
various currencies.
Forward Foreign Currency Exchange Contracts. The High Income, International
Stock and Global Securities Funds may each purchase or sell forward foreign
currency exchange contracts for defensive or hedging purposes when the fund's
Investment Adviser anticipates that the foreign currency will appreciate or
depreciate in value, but securities denominated or quoted in that currency do
not present attractive investment opportunities and are not held in the fund's
portfolio. In addition, these two funds may enter into forward foreign currency
exchange contracts in order to protect against anticipated changes in future
foreign currency exchange rates and may engage in cross-hedging by using forward
contracts in a currency different from that in which the hedged security is
denominated or quoted if the fund's Investment Adviser determines that there is
a pattern of correlation between the two currencies.
These three funds may enter into contracts to purchase foreign currencies to
protect against an anticipated rise in the U.S. dollar price of securities it
intends to purchase. They may enter into contracts to sell foreign currencies to
protect against the decline in value of its foreign currency denominated or
quoted portfolio securities, or a decline in the value of anticipated dividends
from such securities, due to a decline in the value of foreign currencies
against the U.S. dollar. Contracts to sell foreign currency could limit any
potential gain which might be realized by a fund if the value of the hedged
currency increased.
If a fund enters into a forward foreign currency exchange contract to buy
foreign currency for any purpose, the fund will be required to place cash or
liquid high grade debt securities in a segregated account with the fund's
custodian in an amount equal to the value of the fund's total assets committed
to the consummation of the forward contract. If the value of the securities
placed in the segregated account declines, additional cash or securities will be
placed in the segregated account so that the value of the account will equal the
amount of the fund's commitment with respect to the contract.
Forward contracts are subject to the risk that the counterparty to such contract
will default on its obligations. Since a forward foreign currency exchange
contract is not guaranteed by an exchange or clearinghouse, a default on the
contract would deprive a fund of unrealized profits, transaction costs or the
benefits of a currency hedge or force the fund to cover its purchase or sale
commitments, if any, at the current market price. A fund will not enter into
such transactions unless the credit quality of the unsecured senior debt or the
claims-paying ability of the counterparty is considered to be investment grade
by the fund's Investment Adviser.
Options on Foreign Currencies. The High Income, International Stock and Global
Securities Funds may also purchase and sell (write) put and call options on
foreign currencies for the purpose of protecting against declines in the U.S.
dollar value of foreign portfolio securities and anticipated dividends on such
securities and against increases in the U.S. dollar cost of foreign securities
to be acquired. These funds may use options on currency to cross-hedge, which
involves writing or purchasing options on one currency to hedge against changes
in exchange rates for a different currency, if there is a pattern of correlation
between the two currencies. As with other kinds of option transactions, however,
the writing of an option on foreign currency will constitute only a partial
hedge, up to the amount of the premium received. A fund could be required to
purchase or sell foreign currencies at disadvantageous exchange rates, thereby
incurring losses. The purchase of an option on foreign currency may constitute
an effective hedge against exchange rate fluctuations; however, in the event of
exchange rate movements adverse to a fund's position, the fund may forfeit the
entire amount of the premium plus related transaction costs. In addition, these
funds may purchase call or put options on currency to seek to increase total
return when the fund's Investment Adviser anticipates that the currency will
appreciate or depreciate in value, but the securities quoted or denominated in
that currency do not present attractive investment opportunities and are not
held in the fund's portfolio. When purchased or sold to increase total return,
options on currencies are considered speculative. Options on foreign currencies
to be written or purchased by these funds will be traded on U.S. and foreign
exchanges or over-the-counter. See "Stock Index Futures and Related Options"
above for a discussion of the liquidity risks associated with options
transactions.
Special Risks Associated With Options on Currency. An exchange traded options
position may be closed out only on an options exchange which provides a
secondary market for an option of the same series. Although a fund will
generally purchase or write only those options for which there appears to be an
active secondary market, there is no assurance that a liquid secondary market on
an exchange will exist for any particular option, or at any particular time. For
some options no secondary market on an exchange may exist. In such event, it
might not be possible to effect closing transactions in particular options, with
the result that a fund would have to exercise its options in order to realize
any profit and would incur transaction costs upon the sale of underlying
securities pursuant to the exercise of put options. If a fund as a covered call
option writer is unable to effect a closing purchase transaction in a secondary
market, it will not be able to see the underlying currency (or security quoted
or denominated in that currency) until the option expires or it delivers the
underlying currency upon exercise.
There is no assurance that higher than anticipated trading activity or other
unforeseen events might not, at times, render certain of the facilities of the
Options Clearing Corporation inadequate, and thereby result in the institution
by an exchange of special procedures which may interfere with the timely
execution of customers' orders.
The High Income Fund, International Stock and Global Securities Fund may each
purchase and write over-the-counter options to the extent consistent with its
limitation on investments in restricted securities. Trading in over-the-counter
options is subject to the risk that the other party will be unable or unwilling
to close-out options purchased or written by the fund.
The amount of the premiums which a fund may pay or receive may be adversely
affected as new or existing institutions, including other investment companies,
engage in or increase their option purchasing and writing activities.
Interest Rate Swaps, Currency Swaps and Interest Rate Caps, Floors and Collars.
The High Income, International Stock and Global Securities Fund may each enter
into interest rate and currency swaps for hedging purposes and to seek to
increase total return. The High Income Fund may also enter into special interest
rate swap arrangements such as caps, floors and collars for both hedging
purposes and to seek to increase total return. The High Income Fund typically
uses interest rate swaps to shorten the effective duration of its portfolio.
Interest rate swaps involve the exchange by the High Income Fund with another
party of their respective commitments to pay or receive interest, such as an
exchange of fixed rate payments for floating rate payments. Currency swaps
involve the exchange by the funds with another party of their respective rights
to make or receive payments in specified currencies. The purchase of an interest
rate cap entitles the purchaser to receive from the seller of the cap payments
of interest on a notional amount equal to the amount by which a specified index
exceeds a stated interest rate. The purchase of an interest rate floor entitles
the purchaser to receive from the seller of the floor payments of interest on a
notional amount equal to the amount by which a specified index falls below a
stated interest rate. An interest rate collar is the combination of a cap and a
floor that preserves a certain return within a stated range of interest rates.
Since interest rate swaps, currency swaps and interest rate caps, floors and
collars are individually negotiated, these three funds expect to achieve an
acceptable degree of correlation between their portfolio investments and their
interest rate or currency swap positions entered into for hedging purposes.
The High Income Fund only enters into interest rate swaps on a net basis, which
means the two payment streams are netted out, with the fund receiving or paying,
as the case may be, only the net amount of the two payments. Interest rate swaps
do not involve the delivery of securities, or underlying assets or principal.
Accordingly, the risk of loss with respect to interest rate swaps is limited to
the net amount of interest payments that the fund is contractually obligated to
make. If the other party to an interest rate swap defaults, the fund's risk of
loss consists of the net amount of interest payments that the fund is
contractually entitled to receive. In contrast, currency swaps usually involve
the delivery of the entire principal value of one designated currency in
exchange for the other designated currency. Therefore, the entire principal
value of a currency swap is subject to the risk that the other party to the swap
will default on its contractual delivery obligations. The Trust maintains in a
segregated account with its custodian, cash or liquid securities equal to the
net amount, if any, of the excess of each fund's obligations over its
entitlements with respect to swap transactions. Neither fund enters into swap
transactions unless the unsecured commercial paper, senior debt or claims paying
ability of the other party is considered investment grade by such fund's
Investment Adviser.
The use of interest rate and currency swaps (including caps, floors and collars)
is a highly specialized activity which involves investment techniques and risks
different from those associated with traditional portfolio securities
activities. If the fund's Investment Adviser is incorrect in its forecasts of
market values, interest rates and currency exchange rates, the investment
performance of the High Income Fund, International Stock or Global Securities
Fund would be less favorable than it would have been if this investment
technique were not used.
Inasmuch as swaps are entered into for good faith hedging purposes or are offset
by a segregated account as described below, neither fund's Investment Adviser
believe that swaps constitute senior securities as defined in the Act and,
accordingly, will not treat swaps as being subject to such fund's borrowing
restrictions. An amount of cash or liquid, high grade debt securities having an
aggregate net asset value at least equal to the entire amount of the payment
stream payable by the fund will be maintained in a sewed account by the fund's
custodian. A fund will not enter into any interest rate swap (including caps,
floors and collars) or currency swap unless the credit quality of the unsecured
senior debt or the claim paying ability of the other party thereto is considered
to be investment grade by the fund's Investment Adviser. If there is a default
by the other party to such a transaction, the fund will have contractual
remedies pursuant to the agreement, related to the transaction. The swap market
has grown substantially in recent years with a large number of banks and
investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid comparison with the markets for other similar instruments
which are traded in the interbank market. Nevertheless, the staff of the
Commission takes the position that currency swaps are illiquid investments
subject to these funds' 15% limitation on such investments.
Put and Call Options
All Funds, except the Money Market Fund, may engage in the purchase, sale and
covered writing of put and call options that are traded on U.S. exchanges and
boards of trade. A call option is a contract (generally having a duration of
nine months or less) pursuant to which the purchaser of the call option in
return for a premium paid, has the right to buy the security or instrument
underlying the option at a specified exercise price at any time during the term
of the option. The writer of the call option, who receives the premium, has the
obligation, upon exercise of the option, to deliver the underlying security or
instrument against payment of the exercise price during the option period. A put
option is a similar contract which gives the purchaser of the put option, in
return for a premium, the right to sell the underlying security or instrument at
a specified price during the term of the option. The writer of the put, who
receives the premium, has the obligation to buy the underlying security or
instrument, upon exercise, at the exercise price during the option period.
The writing of a call option is "covered" if the Fund owns the underlying
security or instrument covered by the call or has an absolute and immediate
right to acquire that security or instrument without additional cash
consideration (or for additional cash consideration held in a segregated account
by its custodian) upon conversion or exchange of other securities or instruments
held in its portfolio. The writing of a call option is also covered if the Fund
holds a call on an equivalent amount of the same security or instrument as the
call written where the exercise price of the call held is equal to or less than
the exercise price of the call written or greater than the exercise price of the
call written if the difference is maintained by the Fund in cash, U.S. Treasury
bills or other high grade short-term obligations in a segregated account with
its custodian. The writing of a put option is "covered" if the Fund maintains
cash, U.S. Treasury bills or other high grade short-term obligations with a
value equal to the exercise price in a segregated account with its custodian, or
else holds a put on an equivalent amount of the same security or instrument as
the put written where the exercise price of the put held is equal to or greater
than the exercise price of the put written. The premium paid by the purchaser of
an option will reflect, among other things, the relationship of the exercise
price to the market price and volatility of the underlying security or
instrument, the remaining term of the option, supply and demand, and interest
rates.
If the writer of an option wishes to terminate his obligation, he may effect a
"closing purchase transaction." This is accomplished by buying an option of the
same kind as the option previously written. The effect of the purchase is that
the clearing corporation will cancel the writer's position. However, a writer
may not effect a closing purchase transaction after it has been notified of the
exercise of an option. Likewise, an investor who is the holder of an option may
liquidate his position by effecting a "closing sale transaction." This is
accomplished by selling an option of the same kind as the option previously
purchased. There is no guarantee that either a closing purchase or a closing
sale transaction can be effected.
Effecting a closing transaction in the case of a written call option will permit
the Fund to write another call option on the underlying security or instrument
with either a different exercise price or expiration date or both, or in the
case of a written put option will permit the Fund to write another put option to
the extent that the exercise price thereof is secured by deposited cash or
short-term securities. Also, effecting a closing transaction will permit the
cash or proceeds from the concurrent sale of any securities or instruments
subject to the option to be used for other Fund investments. If the Fund desires
to sell a particular security or instrument from its portfolio on which it has
written a call option, it will effect a closing transaction prior to or
concurrent with the sale of the security or instrument.
The Fund may write put and call options only if they are covered, and the
options must remain covered so long as a Fund is obligated as a writer.
An option position may be closed out only on an exchange or board of trade which
provides a secondary market for an option of the same kind. Although the Fund
will generally purchase or write only those options for which there appears to
be an active secondary market, there is no assurance that a liquid secondary
market on an exchange or board of trade will exist for any particular option, or
at any particular time, and for some options no secondary market on an exchange
or board of trade may exist. In such event it might not be possible to effect
closing transactions in particular options, with the result that the Fund would
have to exercise its options in order to realize any profit and would incur
brokerage commissions upon the exercise of call options and upon the subsequent
disposition of underlying securities or instruments acquired through the
exercise of call options or upon the purchase of underlying securities or
instruments for the exercise of put options. If the Fund, as a covered call
option writer, is unable to effect a closing purchase transaction in a secondary
market, it will not be able to sell the underlying security or instrument until
the option expires or it delivers the underlying security or instrument upon
exercise.
The use of put and call options is restricted to no more than twenty percent
(20%) of the net assets in the Fund using such option.
Financial Futures and Related Options
The Balanced and Bond Funds may engage in transactions in financial futures
contracts or related options, but only as a hedge against changes in the values
of securities held in the Fund's portfolio resulting from market conditions or
which it intends to purchase and where the transactions are economically
appropriate to the reduction of risks inherent in the ongoing management of the
Fund. A Fund may not purchase or sell financial futures or purchase related
options if, immediately thereafter, more than one-third of its net assets would
be hedged. In addition, a Fund may not purchase or sell financial futures or
purchase related options if, immediately thereafter, the sum of the amount of
margin deposits on the Fund's existing futures positions and premiums paid for
related options would exceed five percent (5%) of the market value of the Fund's
total assets.
Unlike when a Fund purchases or sells a security, no price is paid or received
by the Fund upon the purchase or sale of a futures contract. Initially, the Fund
will be required to deposit with the custodian under the name of the futures
commission merchant an amount of cash or U.S. Treasury bills, known as initial
margin. The nature of initial margin in futures transactions is different from
that of margin in securities transactions in that a futures contract margin does
not involve the borrowing of funds by a customer to finance the transaction.
Rather, the initial margin is in the nature of a performance bond or a good
faith deposit on a contract which is returned to the Fund upon termination of
the Fund's contract assuming all contractual obligations have been satisfied.
Subsequent payments, called "variation margin," to or from the custodian will be
made on a daily basis as the price of the underlying securities or instruments
fluctuates making the long and short positions in the futures contract more or
less valuable, a process known as "mark to the market." At any time prior to
expiration of the futures contract, the Fund may elect to close the position by
taking an opposite position which will operate to terminate the Fund's position
in the futures contract. A final determination of variation margin is then made,
additional cash is required to be paid by or released to the Fund, and the Fund
realizes a loss or a gain.
There are several risks in connection with the use of financial futures as a
hedging device. One risk arises because of the imperfect correlation between
movements in the price of the futures contracts and movements in the price of
the securities or instruments which are the subject of the hedge. The price of
the futures contract may move more than or less than the price of the securities
or instruments being hedged. If the price of the futures contract moves less
than the price of the securities or instruments which are the subject of the
hedge, the hedge will not be fully effective but, if the price of the securities
or instruments being hedged has moved in an unfavorable direction, the Fund
would be in a better position than if it had not hedged at all. If the price of
the securities being hedged has moved in a favorable direction, this advantage
will be partially offset by the futures. If the price of the futures contract
moves more than the price of the securities or instruments being hedged, the
Fund will experience either a loss or a gain on the futures contract which will
not be completely offset by movements in the price of the securities or
instruments. To compensate for the imperfect correlation of movements in the
price of securities or instruments being hedged and movements in the price of
the futures contracts, the Fund may buy or sell financial futures contracts in a
greater dollar amount than the dollar amount of securities being hedged if the
historical volatility of the prices of such securities has been greater than the
historical volatility of the futures. Conversely, the Fund may buy or sell fewer
financial futures contracts if the historical volatility of the price of the
securities being hedged is less than the historical volatility of the futures.
The financial impact of any use of financial futures is subject to movements in
interest rates. For example, if the Fund is hedged against the possibility of a
rise in interest rates, adversely affecting the value of bonds held in its
portfolio, and bond prices increase instead, the Fund will lose part or all of
the benefit of the increased value of its bonds which it has hedged because it
will have offsetting losses in its futures positions. In addition, in such
situations, if the Fund has insufficient cash, it may have to sell securities to
meet daily variation margin requirements. Such sales of securities may be, but
will not necessarily be, at increased prices which reflect the rising market.
The Fund may have to sell securities at a time when it may be disadvantageous to
do so.
Stock Index Futures and Related Options
The Balanced, High Income, Growth and Income Stock, Capital Appreciation Stock,
Mid-Cap Stock, Emerging Growth, International Stock, and Global Securities Funds
may engage in transactions in stock index futures contracts or related options,
but only as a hedge against changes resulting from market conditions in the
values of securities held in the Fund's portfolio or which the Fund intends to
purchase and where the transactions are economically appropriate to the
reduction of risks inherent in the ongoing management of the Fund. A Fund may
not purchase or sell stock index futures or purchase related options if,
immediately thereafter, more than one-third of its net assets would be hedged.
In addition, a Fund may not purchase or sell stock index futures or purchase
related options if, immediately thereafter, the sum of the amount of margin
deposits on the Fund's existing futures positions and premiums paid for related
options would exceed twenty percent (20%) of net assets.
Unlike when a Fund purchases or sells a security, no price is paid or received
by the Fund upon the purchase or sale of a futures contract. Initially, the Fund
will be required to deposit with the custodian under the name of the futures
commission merchant an amount of cash or U.S. Treasury bills known as initial
margin. The nature of initial margin in futures transactions is different from
that of margin in security transactions in that futures contract margin does not
involve the borrowing of funds by a customer to finance the transactions.
Rather, the initial margin is in the nature of a performance bond or good faith
deposit on the contract which is returned to the Fund upon termination of the
futures contract assuming all contractual obligations have been satisfied.
Subsequent payments, called "variation margin," to or from the custodian, will
be made on a daily basis as the price of the underlying stock index fluctuates
making the long and short positions in the futures contract more or less
valuable, a process known as "mark to the market." At any time prior to
expiration of the futures contract, the Fund may elect to close the position by
taking an opposite position which will operate to terminate the Fund's position
in the futures contract. A final determination of variation margin is then made,
additional cash is required to be paid by or released to the Fund, and the Fund
realizes a loss or a gain.
There are several risks in connection with the use of stock index futures as a
hedging device. One risk arises because of the imperfect correlation between
movements in the price of the stock index futures contract and movements in the
price of the securities which are the subject of the hedge. The price of the
stock index futures may move more than or less than the price of the securities
being hedged. If the price of the stock index futures contract moves less than
the price of the securities which are the subject of the hedge, the hedge will
not be fully effective but, if the price of the securities being hedged has
moved in an unfavorable direction, the Fund would be in a better position than
if it had not hedged at all. If the price of the securities being hedged has
moved in a favorable direction, this advantage will be partially offset by the
futures contract. If the price of the futures contract moves more than the price
of the stock, the Fund will experience either a loss or a gain on the futures
contract which will not be completely offset by movements in the price of the
securities which are the subject of the hedge. To compensate for the imperfect
correlation of movements in the price of securities being hedged and movements
in the price of the stock index futures, the Fund may buy or sell stock index
futures contracts in a greater dollar amount than the dollar amount of
securities being hedged if the historical volatility of the prices of such
securities has been greater than the historical volatility of the index.
Conversely, the Fund may buy or sell fewer stock index futures contracts if the
historical volatility of the price of the securities being hedged is less than
the historical volatility of the stock index.
The financial impact of any use of stock index futures is subject to movements
in the direction of the market. For example, if the Fund has hedged against the
possibility of a decline in the market adversely affecting stocks held in its
portfolio and stock prices increase instead, the Fund will lose part or all of
the benefit of the increased value of its stocks which it has hedged because it
will have offsetting losses in its futures positions. In addition, in such
situations, if the Fund has insufficient cash, it may have to sell securities to
meet daily variation margin requirements. Such sales of securities may be, but
will not necessarily be, at increased prices which reflect the rising market.
The Fund may have to sell securities at a time when it may be disadvantageous to
do so.
Compared to the use of stock index futures, the purchase of options on stock
index futures involves less potential risk because the maximum amount at risk is
the premium paid for the options (plus transaction costs). However, there may be
circumstances when the use of an option on a stock index future would result in
a loss when the use of a stock index future would not, such as when there is no
movement in the level of the index.
Bond Fund Practices
The Bond, High Income and Balanced Funds (collectively, the "Bond Funds") invest
a significant portion of their assets in debt securities. As stated in the
prospectus, the Bond Fund and Balanced Fund will emphasize investment grade,
primarily intermediate term securities. If an investment grade security is
downgraded by the rating agencies or otherwise falls below the investment
quality standards stated in the prospectus, management will retain that
instrument only if management believes it is in the best interest of the fund.
Management does not currently intend to invest more than ten percent (10%) of
the total assets of either the Bond Fund or Balanced Fund in corporate debt
securities which are not in the four highest ratings by Standard & Poor's Rating
Group ("Standard & Poor's") or by Moody's Investors Service, Inc. ("Moody's")
("non-investment grade" or "junk" securities), but, on occasion, each fund may
do so. The High Income Fund may invest all of its assets in non-investment grade
securities.
All three Bond Funds may also invest in debt options, interest rate future
contracts, and options on interest rate futures contracts, and may utilize
interest rate futures and options to manage the risk of fluctuating interest
rates. These instruments will be used to control risk and obtain additional
income and not with a view toward speculation. The Bond Fund and Balanced Fund
will invest only in futures and options which are traded on U.S. exchanges or
boards of trade. The High Income Fund may invest in any non-U.S. futures and
options.
In the debt securities market, purchases of some issues are occasionally made
under firm (forward) commitment agreements. Purchase of securities under such
agreements can involve risk of loss due to changes in the market rate of
interest between the commitment date and the settlement date. As a matter of
operating policy, no Bond Fund will commit itself to forward commitment
agreements in an amount in excess of 25% of total assets and will not engage in
such agreements for leveraging purposes. For purposes of this limitation,
forward commitment agreements are defined as those agreements involving more
than five business days between the commitment date and the settlement date.
Lower-Rated Corporate Debt Securities
As described in the prospectus, each fund, other than the Money Market Fund, may
make certain investments including corporate debt obligations that are unrated
or rated in the lower rating categories (i.e., ratings of BB or lower by
Standard & Poor's or Ba or lower by Moody's). Bonds rated BB or Ba or below by
Standard & Poor's or Moody's (or comparable unrated securities) are commonly
referred to as "lower-rated" securities or as "junk bonds" and are considered
speculative and may be questionable as to principal and interest payments. In
some cases, such bonds may be highly speculative, have poor prospects for
reaching investment standing and be in default. As a result, investment in such
bonds will entail greater speculative risks than those associated with
investment in investment-grade bonds (i.e., bonds rated AAA, AA, A or BBB by
Standard & Poor's or Aaa, Aa, A or Baa by Moody's).
An economic downturn could severely affect the ability of highly leveraged
issuers of junk bonds to service their debt obligations or to repay their
obligations upon maturity. Factors having an adverse impact on the market value
of lower rated securities will have an adverse effect on a fund's net asset
value to the extent it invests in such securities. In addition, a fund may incur
additional expenses to the extent it is required to seek recovery upon a default
in payment of principal or interest on its portfolio holdings.
The secondary market for junk bond securities, which is concentrated in
relatively few market makers, may not be as liquid as the secondary market for
more highly rated securities, a factor which may have an adverse effect on a
fund's ability to dispose of a particular security when necessary to meet its
liquidity needs. Under adverse market or economic conditions, the secondary
market for junk bond securities could contract further, independent of any
specific adverse changes in the condition of a particular issuer. As a result,
the Investment Adviser could find it more difficult to sell these securities or
may be able to sell the securities only at prices lower than if such securities
were widely traded. Prices realized upon the sale of such lower rated or unrated
securities, under these circumstances, may be less than the prices used in
calculating a fund's net asset value.
Since investors generally perceive that there are greater risks associated with
lower-rated debt securities, the yields and prices of such securities may tend
to fluctuate more than those for higher rated securities do. In the lower
quality segments of the fixed-income securities market, changes in perceptions
of issuers' creditworthiness tend to occur more frequently and in a more
pronounced manner than do changes in higher quality segments of the fixed-income
securities market resulting in greater yield and price volatility.
Another factor which causes fluctuations in the prices of fixed-income
securities is the supply and demand for similarly rated securities. In addition,
the prices of fixed-income securities fluctuate in response to the general level
of interest rates. Fluctuations in the prices of portfolio securities subsequent
to their acquisition will not affect cash income from such securities but will
be reflected in a fund's net asset value.
Lower-rated (and comparable non-rated) securities tend to offer higher yields
than higher-rated securities with the same maturities because the historical
financial condition of the issuers of such securities may not have been as
strong as that of other issuers, increasing the risks of loss of income and
principal versus higher-rated securities. In addition to the risk of default,
there are the related costs of recovery on defaulted issues. The Investment
Adviser will attempt to reduce these risks through diversification of these
funds' portfolios and by analysis of each issuer and its ability to make timely
payments of income and principal, as well as broad economic trends in corporate
developments.
Other Debt Securities
Custody Receipts. All of the funds may also acquire securities issued or
guaranteed as to principal and interest by the U.S. Government, its agencies,
authorities or instrumentalities in the form of custody receipts. Such receipts
evidence ownership of future interest payments, principal payments or both on
certain notes or bonds issued by the U.S. Government, its agencies, authorities
or instrumentalities. For certain securities law purposes, custody receipts are
not considered obligations of the U.S. Government.
Zero Coupon, Deferred Interest, Pay-in-Kind and Capital Appreciation Bonds. The
High Income Fund may invest in zero coupon bonds as well as in deferred
interest, pay-in-kind and capital appreciation bonds. Zero coupon, deferred
interest, pay-in-kind and capital appreciation bonds are debt obligations which
are issued at a significant discount from face value. The original discount
approximates the total amount of interest the bonds will accrue and compound
over the period until maturity or the first interest accrual date at a rate of
interest reflecting the market rate of the security at the time of issuance.
Zero coupon bonds are debt obligations that do not entitle the holder to any
periodic payments of interest prior to maturity or provide for a specified cash
payment date when the bonds begin paying current interest. As a result, zero
coupon bonds are generally issued and traded at a significant discount from
their face value. The discount approximates the present value amount of interest
the bonds would have accrued and compounded over the period until matured.
Zero coupon bonds benefit the issuer by mitigating its initial need for cash to
meet debt service, but generally provide a higher rate of return to compensate
investors for the deferment of cash interest or principal payments. Such
securities are often issued by companies that may not have the capacity to pay
current interest and so may be considered to have more risk than current
interest-bearing securities. In addition, the market price of zero coupon bonds
generally is more volatile than the market prices of securities that provide for
the periodic payment of interest. The market prices of zero coupon bonds are
likely to fluctuate more in response to changes in interest rates than those of
interest-bearing securities having similar maturities and credit quality.
Zero coupon bonds carry the additional risk that, unlike securities that provide
for the periodic payment of interest to maturity, the High Income Fund will
realize no cash until a specified future payment date unless a portion of such
securities is sold. If the issuer of such securities defaults, the fund may
obtain no return at all on their investment. In addition, the fund's investment
in zero coupon bonds may require it to sell certain of its portfolio securities
to generate sufficient cash to satisfy certain income distribution requirements.
While zero coupon bonds do not require the periodic payment of interest,
deferred interest bonds generally provide for a period of delay before the
regular payment of interest begins. Although this period of delay is different
for each deferred interest bond, a typical period is approximately one-third of
the bond's terms to maturity. Pay-in-kind securities are securities that have
interest payable by the delivery of additional securities. Such investments
benefit the issuer by mitigating its initial need for cash to meet debt service,
but some also provide a higher rate of return to attract investors who are
willing to defer receipt of such cash. Such investments experience greater
volatility in market value due to changes in interest rates than debt
obligations which provide for regular payments of interest. The fund will accrue
income on such investments for tax and accounting purposes, as required, which
is distributable to shareholders and which, because no cash is received at the
time of accrual, may require the liquidation of other portfolio securities to
satisfy the fund's distribution obligations.
Structured Securities. The High Income Fund may invest in structured securities.
The value of the principal of and/or interest on such securities is determined
by reference to changes in the value of specific currencies, interest rates,
commodities, indices or other financial indicators (the "Reference") or the
relative change in two or more References. The interest rate or the principal
amount payable upon maturity or redemption may be increased or decreased
depending upon changes in the applicable Reference. The terms of the structured
securities may provide that in certain circumstances no principal is due at
maturity and, therefore, may result in the loss of the fund's investment.
Structured securities may be positively or negatively indexed, so that
appreciation of the Reference may produce an increase or decrease in the
interest rate or value of the security at maturity. In addition, changes in
interest rates or the value of the security at maturity may be a multiple of
changes in the value of the Reference. Consequently, structured securities may
entail a greater degree of market risk than other types of fixed-income
securities. Structured securities may also be more volatile, less liquid and
more difficult to accurately price than less complex fixed-income investments.
Foreign Government Securities
All of the funds may invest in debt obligations of foreign governments and
governmental agencies, including those of emerging countries. Investment in
sovereign debt obligations involves special risks not present in debt
obligations of corporate issuers. The issuer of the debt or the governmental
authorities that control the repayment of the debt may be unable or unwilling to
repay principal or interest when due in accordance with the terms of such debt,
and the funds may have limited recourse in the event of a default. Periods of
economic uncertainty may result in the volatility of market prices of sovereign
debt and in turn the fund's net asset value, to a greater extent than the
volatility inherent in debt obligations of U.S. issuers. A sovereign debtor's
willingness or ability to repay principal and pay interest in a timely manner
may be affected by, among other factors, its cash flow situation, the extent of
its foreign currency reserves, the availability of sufficient foreign exchange
on the date a payment is due, the relative size of the debt service burden to
the economy as a whole, the sovereign debtor's policy toward principal
international lenders and the political constraints to which a sovereign debtor
may be subject.
Convertible Securities
The Balanced, High Income, Growth and Income Stock, Capital Appreciation Stock,
Mid-Cap Stock, Emerging Growth, International Stock, and Global Securities Funds
may each invest in convertible securities. Convertible securities may include
corporate notes or preferred stock but are ordinarily a long-term debt
obligation of the issuer convertible at a stated conversion rate into common
stock of the issuer. As with all debt and income-bearing securities, the market
value of convertible securities tends to decline as interest rates increase and,
conversely, to increase as interest rates decline. Convertible securities
generally offer lower interest or dividend yields than non-convertible
securities of similar quality. However, when the market price of the common
stock underlying a convertible security exceeds the conversion price, the price
of the convertible security tends to reflect the value of the underlying common
stock. As the market price of the underlying common stock declines, the
convertible security tends to trade increasingly on a yield basis, and thus may
not decline in price to the same extent as the underlying common stock.
Convertible securities rank senior to common stocks in an issuer's capital
structure and are consequently of higher quality and entail less risk than the
issuer's common stock. In evaluating a convertible security, the fund's
Investment Adviser gives primary emphasis to the attractiveness of the
underlying common stock. The convertible debt securities in which the funds may
invest are subject to the same rating criteria as that fund's investments in
non-convertible debt securities. Convertible debt securities, the market yields
of which are substantially below prevailing yields on non-convertible debt
securities of comparable quality and maturity, are treated as equity securities
for the purposes of a fund's investment policies or restrictions.
Repurchase Agreements
Each fund may enter into 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, U.S. Central Credit Union,
and with "primary dealers" in U.S. Government securities. The Investment Adviser
will continuously monitor the creditworthiness of the parties with whom the
funds enter into repurchase agreements.
The Trust has established a procedure providing that the securities serving as
collateral for each repurchase agreement must be delivered to the Trust's
custodian either physically or in book-entry form and that the collateral must
be marked to market daily to ensure that each repurchase agreement is fully
collateralized at all times. In the event of bankruptcy or other default by a
seller of a repurchase agreement, a fund could experience delays in liquidating
the underlying securities during the period in which the fund seeks to enforce
its rights thereto, possible subnormal levels of income, declines in value of
the underlying securities or lack of access to income during this period and the
expense of enforcing its rights.
Reverse Repurchase Agreements
Each fund may also enter into reverse repurchase agreements which involve the
sale of U.S. Government securities held in its portfolio to a bank with an
agreement that the fund will buy back the securities at a fixed future date at a
fixed price plus an agreed amount of "interest" which may be reflected in the
repurchase price. Reverse repurchase agreements are considered to be borrowings
by the fund entering into them. Reverse repurchase agreements involve the risk
that the market value of securities purchased by the fund with proceeds of the
transaction may decline below the repurchase price of the securities sold by the
fund which it is obligated to repurchase. A fund that has entered into a reverse
repurchase agreement will also continue to be subject to the risk of a decline
in the market value of the securities sold under the agreements because it will
reacquire those securities upon effecting their repurchase. To minimize various
risks associated with reverse repurchase agreements, each fund will establish
and maintain with the Trust's custodian a separate account consisting of liquid
securities, of any type or maturity, in an amount at least equal to the
repurchase prices of the securities (plus any accrued interest thereon) under
such agreements. No fund will enter into reverse repurchase agreements and other
borrowings (except from banks as a temporary measure for extraordinary emergency
purposes) in amounts in excess of 30% of the fund's total assets (including the
amount borrowed) taken at market value. No fund will use leverage to attempt to
increase income. No fund will purchase securities while outstanding borrowings
exceed 5% of the fund's total assets. Each fund will enter into reverse
repurchase agreements only with federally insured banks or credit unions which
are approved in advance as being creditworthy by the Trustees. Under procedures
established by the Trustees, the Investment Adviser will monitor the
creditworthiness of the institutions involved.
U.S. Government Securities
All of the funds may purchase U.S. Government Securities. U.S. Government
Securities are obligations issued or guaranteed by the U.S. Government, its
agencies, authorities or instrumentalities.
Certain U.S. Government securities, including U.S. Treasury bills, notes and
bonds, and Government National Mortgage Association certificates ("Ginnie
Maes"), are supported by the full faith and credit of the U.S. Certain other
U.S. Government securities, issued or guaranteed by Federal agencies or
government sponsored enterprises, are not supported by the full faith and credit
of the U.S. Government, but may be supported by the right of the issuer to
borrow from the U.S. Treasury. These securities include obligations of the
Federal Home Loan Mortgage Corporation ("Freddie Macs"), and obligations
supported by the credit of the instrumentality, such as Federal National
Mortgage Association Bonds ("Fannie Maes"). No assurance can be given that the
U.S. Government will provide financial support to such Federal agencies,
authorities, instrumentalities and government sponsored enterprises in the
future. U.S. Government Securities may also include zero coupon bonds.
Ginnie Maes, Freddie Macs and Fannie Maes are mortgage-backed securities which
provide monthly payments which are, in effect, a "pass-through" of the monthly
interest and principal payments (including any prepayments) made by individual
borrowers on the pooled mortgage loans. Collateralized mortgage obligations
("CMOs") in which the fund may invest are securities issued by a corporation or
a U.S. Government instrumentality that are collateralized by a portfolio of
mortgages or mortgage-backed securities. Mortgage-backed securities may be less
effective than traditional debt obligations of similar maturity at maintaining
yields during periods of declining interest rates. (See "Mortgage-Backed and
Asset-Backed Securities.")
Each fund may invest in separately traded principal and interest components of
securities guaranteed or issued by the U.S. Treasury if such components are
traded independently under the Separate Trading of Registered Interest and
Principal of Securities program ("STRIPS").
All of the funds may acquire securities issued or guaranteed as to principal and
interest by the U.S. Government, its agencies, authorities or instrumentalities
in the form of custody receipts. Such receipts evidence ownership of future
interest payments, principal payments or both on certain notes or bonds issued
by the U.S. Government, its agencies, authorities or instrumentalities. For
certain securities law purposes, custody receipts are not considered obligations
of the U.S. Government.
Mortgage-Backed and Asset-Backed Securities
The Money Market, Bond, Balanced and High Income Funds may invest in
mortgage-backed securities, which represent direct or indirect participation in,
or are collateralized by and payable from, fixed rate or variable rate mortgage
loans secured by real property. These funds may also invest in fixed or variable
rate asset-backed securities, which represent participation in, or are secured
by and payable from, assets such as motor vehicle installment sales, installment
loan contracts, leases of various types of real and personal property,
receivables from revolving credit (i.e., credit card) agreements and other
categories of receivables. Such assets are securitized though the use of trusts
and special purpose corporations. Payments or distributions of principal and
interest may be guaranteed up to certain amounts and for a certain time period
by a letter of credit or a pool insurance policy issued by a credit union or
other financial institution unaffiliated with the Trust, or other credit
enhancements may be present.
Mortgage-backed and asset-backed securities are often subject to more rapid
repayment than their stated maturity date would indicate as a result of the
pass-through of prepayments of principal on the underlying loans. A fund's
ability to maintain positions in such securities will be affected by reductions
in the principal amount of such securities resulting from prepayments, and its
ability to reinvest the returns of principal at comparable yields is subject to
generally prevailing interest rates at that time. To the extent that a fund
invests in mortgage-backed and asset-backed securities, the values of its
portfolio securities will vary with changes in market interest rates generally
and the differentials in yields among various kinds of U.S. Government
securities and other mortgage-backed and asset-backed securities.
Asset-backed securities present certain additional risks that are not presented
by mortgage backed securities because asset-backed securities generally do not
have the benefit of a security interest in collateral that is comparable to
mortgage assets. Credit card receivables are generally unsecured and the debtors
on such receivables are entitled to the protection of a number of state and
federal consumer credit laws, many of which give such debtors the right to
set-off certain amounts owed on the credit cards, thereby reducing the balance
due. Automobile receivables generally are secured, but by automobiles rather
than residential real property. Most issuers of automobile receivables permit
the loan servicers to retain possession of the underlying obligations. If the
servicer were to sell these obligations to another party, there is a risk that
the purchaser would secure an interest superior to that of the holders of the
asset-backed securities. In addition, because of the large number of vehicles
involved in a typical issuance and technical requirements under state laws, the
trustee for the holders of the automobile receivables may not have a proper
security interest in the underlying automobiles. Therefore, there is the
possibility that, in some cases, recoveries on repossessed collateral may not be
available to support payments on these securities.
Other Securities Related to Mortgages
Mortgage Pass-Through Securities. The Bond, Balanced and High Income Funds may
invest in mortgage pass-through securities. Mortgage pass-through securities are
securities representing interests in "pools" of mortgage loans. Monthly payments
of interest and principal by the individual borrowers on mortgages are passed
through to the holders of the securities (net of fees paid to the issue or
guarantor of the securities) as the mortgages in the underlying mortgage pools
are paid off. The average lives of mortgage pass-through securities are variable
when issued because their average lives depend on prepayment rates. The average
life of these securities is likely to be substantially shorter than their stated
final maturity as a result of unscheduled principal prepayment. Prepayments on
underlying mortgages result in a loss of anticipated interest, and all or part
of a premium if any has been paid, and the actual yield (or total return) to the
holder of a pass-through security may be different than the quoted yield on such
security. Mortgage prepayments generally increase with falling interest rates
and decrease with rising interest rates. Like other fixed income securities,
when interest rates rise the value of a mortgage pass-though security generally
will decline; however, when interest rates are declining, the value of mortgage
pass-through securities with prepayment features may not increase as much as
that of other fixed income securities.
Interests in pools or mortgage-related securities differ from other forms of
debt securities, which normally provide for periodic payment of interest in
fixed amounts with principal payments at maturity or specified call dates.
Instead, these securities provide a monthly payment which consists of both
interest and principal payments. In effect, these payments are a "pass-through"
of the monthly payments made by the individual borrowers on their mortgage
loans, net of any fees paid to the issuer or guarantor of such securities.
Additional payments are caused by prepayments of principal resulting from the
sale, refinancing or foreclosure of the underlying property, net of fees or
costs which may be incurred. Some mortgage pass-through securities (such as
securities issued by the Government National Mortgage Association ("GNMA"), are
described as "modified pass-through." These securities entitle the holder to
receive all interests and principal payments owned on the mortgages in the
mortgage pool, net of certain fees, at the scheduled payment dates regardless of
whether the mortgagor actually makes the payment.
The principal governmental guarantor of mortgage pass-through securities is
GNMA. GNMA is a wholly owned U.S. Government corporation within the Department
of Housing and Urban Development. GNMA is authorized to guarantee, with the full
faith and credit of the U.S. Government, the timely payment of principal and
interest on securities issued by institutions approved by GNMA (such as savings
and loan institutions, commercial banks and mortgage bankers) and backed by
pools of Federal Housing Administration-insured or Veteran's Administration
("VA")-guaranteed mortgages. These guarantees, however, do not apply to the
market value or yield of mortgage pass-through securities. GNMA securities are
often purchased at a premium over the maturity value of the underlying
mortgages. This premium is not guaranteed and will be lost if prepayment occurs.
Government-related guarantors (i.e., whose guarantees are not backed by the full
faith and credit of the U.S. Government) include the Federal National Mortgage
Association ("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC").
FNMA is a government-sponsored corporation owned entirely by private
stockholders. It is subject to general regulation by the Secretary of Housing
and Urban Development. FNMA purchases conventional residential mortgages (i.e.,
mortgages not insured or guaranteed by any governmental agency) from a list of
approved seller/services which include state and federally-chartered savings and
loan associations, mutual savings banks, commercial banks, credit unions and
mortgage bankers. Pass-through securities issued by FNMA are guaranteed as to
timely payment by FNMA of principal and interest.
FHLMC was created by Congress in 1970 as a corporate instrumentality of the U.S.
Government for the purpose of increasing the availability of mortgage credit for
residential housing. FHLMC issues Participation Certificates ("PCS") which
represent interest in conventional mortgages (i.e., not federally insured or
guaranteed) from FHLMC's national portfolio. FHLMC guarantees timely payment of
interest and ultimate collection of principal regardless of the status of the
underlying mortgage loans.
Credit unions, commercial banks, savings and loan institutions, private mortgage
insurance companies, mortgage bankers and other secondary market issuers also
create pass-through pools of mortgage loans. Such issuers may also be the
originators and/or servicers of the underlying mortgage-related securities.
Pools created by such non-governmental issuers generally offer a higher rate of
interest than government and government-related pools because there are no
direct or indirect government or agency guarantees of payments in the former
pools. However, timely payment of interest and principal of mortgage loans in
these pools may be supported by various forms of insurance or guarantees,
including individual loan, title, pool and hazard insurance and letters of
credit. The insurance and guarantees are issued by governmental entities,
private insurers and the mortgage poolers. There can be no assurance that the
private insurers or guarantors can meet their obligations under the insurance
policies or guarantee arrangements. The High Income Fund may also buy
mortgage-related securities without insurance or guarantees.
Collateralized Mortgage Obligations and Multiclass Pass-Through Securities. The
Bond, Balanced and High Income Funds may invest a portion of their assets in
collateralized mortgage obligations or "CMOs", which are debt obligations
collateralized by mortgage loans or mortgage pass-through securities. Typically,
CMOs are collateralized by certificates issued by GNMA, FNMA or FHLMC, but also
may be collateralized by whole loans or private mortgage pass-through securities
(such collateral collectively hereinafter referred to as "Mortgage Assets"). The
Bond, Balanced and High Income Funds may also invest a portion of their assets
in multiclass pass-through securities which are equity interests in a trust
composed of Mortgage Assets. Unless the context indicates otherwise, all
references herein to CMOs include multiclass pass-through securities. Payments
of principal of and interest on the Mortgage Assets, and any reinvestment income
thereon, provide the funds to pay debt service on the CMOs or make scheduled
distributions on the multiclass pass-through securities. CMOs may be issued by
agencies or instrumentalities of the United States government or by private
originators of, or investors in, mortgage loans, including credit unions,
savings and loan associations, mortgage banks, commercial banks, investment
banks and special purpose subsidiaries of the foregoing. The issuer of a series
of CMOs may elect to be treated as a Real Estate Mortgage Investment Conduit (a
"REMIC").
In a CMO, a series of bonds or certificates are usually issued in multiple
classes with different maturities. Each class of CMOs, often referred to as a
"tranch", is issued at a specific fixed or floating coupon rate and has a stated
maturity or final distribution date. Principal prepayments on the Mortgage
Assets may cause the CMOs to be retired substantially earlier than their stated
maturities or final distribution dates, resulting in a loss of all or a part of
the premium if any has been paid. Interest is paid or accrues on all classes of
the CMOs on a monthly, quarterly or semiannual basis. The principal of and
interest on the Mortgage Assets may be allocated among the several classes of a
series of a CMO in innumerable ways. In a common structure, payments of
principal, including any principal pre-payments, on the Mortgage Assets are
applied to the classes of the series of a CMO in the order of their respective
stated maturities or final distribution dates, so that no payment of principal
will be made on any class of CMOs until all other classes having an earlier
stated maturity or final distribution date have been paid in full. Certain CMOs
may be stripped (securities which provide only the principal or interest factor
of the underlying security). See "Stripped Mortgage-Backed Securities" below for
a discussion of the risks of investing in these stripped securities and of
investing in classes consisting primarily of interest payments or principal
payments.
The Bond, Balanced and High Income Funds may also invest in parallel pay CMOs
and Planned Amortization Class CMOs ("PAC Bonds"). Parallel pay CMOs are
structured to provide payments of principal on each payment date to more than
one class. These simultaneous payments are taken into account in calculating the
stated maturity date or final distribution date of each class, which, as with
other CMO structures, must be retired by its stated maturity date or final
distribution date, but may be retired earlier. PAC Bonds generally require
payments of a specified amount of principal on each payment date. PAC Bonds are
always parallel pay CMOs with the required principal payment on such securities
having the highest priority after interest has been paid to all classes.
Stripped Mortgage-Backed Securities. The High Income Fund may invest a portion
of its assets in stripped mortgage-backed securities ("SMBS") which are
derivative multiclass mortgage securities issued by agencies or
instrumentalities of the United States government or by private originators of,
or investors in, mortgage loans, including savings and loan associations,
mortgage banks, commercial banks and investment banks.
SMBS are usually structured with two classes that receive different proportions
of the interest and principal distributions from a pool of Mortgage Assets. A
common type of SMBS will have one class receiving some of the interest and most
of the principal from the Mortgage Assets, while another class receives most of
the interest and the remainder of the principal. In the most extreme case, one
class will receive an "IO" (the right to receive all of the interest) while the
other class will receive a "PO" (the right to receive all of the principal). The
yield to maturity on an IO is extremely sensitive to the rate of principal
payments (including prepayments) on the related underlying Mortgage Assets, and
a rapid rate of principal payments may have a material adverse effect on such
security's yield to maturity. If the underlying Mortgage Assets experience
greater than anticipated prepayments of principal, the High Income Fund may fail
to fully recoup its initial investment in these securities. The market value of
the class consisting primarily or entirely of principal payments generally is
unusually volatile in response to changes in interest rates. Because SMBS were
only recently introduced, established trading markets for these securities have
not yet developed, although the securities are traded among institutional
investors and investment banking firms.
Mortgage Dollar Rolls. The High Income Fund may enter into mortgage "dollar
rolls" in which the fund sells securities for delivery in the current month and
simultaneously contracts with the same counterparty to repurchase substantially
similar (same type, coupon and maturity) but not identical securities on a
specified future date. During the roll period, the fund loses the right to
receive principal and interest paid on the securities sold. However, the fund
would benefit to the extent of any difference between the price received for the
securities sold and the lower forward price for the future purchase or fee
income plus the interest earned on the cash proceeds of the securities sold
until the settlement date for the forward purchase. Unless such benefits exceed
the income, capital appreciation and gain or loss due to mortgage prepayments
that would have been realized on the securities sold as part of the mortgage
dollar roll, the use of this technique will diminish the investment performance
of the fund. Successful use of mortgage dollar rolls depends upon the Investment
Adviser's ability to predict correctly interest rates and mortgage prepayments.
There is no assurance that mortgage dollar rolls can be successfully employed.
The fund will hold and maintain in a segregated account until the settlement
date cash or liquid assets in an amount equal to the forward purchase price. For
financial reporting and tax purposes, each fund treats mortgage dollar rolls as
two separate transactions; one involving the purchase of a security and a
separate transaction involving a sale. The fund does not currently intend to
enter into mortgage dollar rolls that are accounted for as a financing.
Forward Commitment and When-Issued Securities
Each fund may purchase securities on a when-issued or forward commitment basis.
"When-issued" refers to securities whose terms are specified and for which a
market exists, but which have not been issued. Each fund will engage in
when-issued transactions with respect to securities purchased for its portfolio
in order to obtain what is considered to be an advantageous price and yield at
the time of the transaction. For when-issued transactions, no payment is made
until delivery is due, often a month or more after the purchase. In a forward
commitment transaction, a fund contracts to purchase securities for a fixed
price at a future date beyond customary settlement time.
When a fund engages in forward commitment and when-issued transactions, it
relies on the seller to consummate the transaction. The failure of the issuer or
seller to consummate the transaction may result in the fund's losing the
opportunity to obtain a price and yield considered to be advantageous. The
purchase of securities on a when-issued or forward commitment basis also
involves a risk of loss if the value of the security to be purchased declines
prior to the settlement date.
On the date a fund enters into an agreement to purchase securities on a
when-issued or forward commitment basis, the fund will segregate in a separate
account cash or liquid securities, of any type or maturity, equal in value to
the fund's commitment. These assets will be valued daily at market, and
additional cash or securities will be segregated in a separate account to the
extent that the total value of the assets in the account declines below the
amount of the when-issued commitments. Alternatively, a fund may enter into
offsetting contracts for the forward sale of other securities that it owns.
INVESTMENT LIMITATIONS
The Ultra Series Fund has adopted the following restrictions and policies
relating to the investment of assets and the activities of each Fund. The
policies in this INVESTMENT LIMITATION section are fundamental and may not be
changed for a Fund without the approval of the holders of a majority of the
outstanding votes of that Fund (which for this purpose and under the Investment
Company Act of 1940 (the "Act") means the lesser of (i) sixty-seven percent
(67%) of the outstanding votes attributable to shares represented at a meeting
at which more than fifty percent (50%) of the outstanding votes attributable to
shares are represented or (ii) more than fifty percent (50%) of the outstanding
votes attributable to shares). Except as noted below, none of the Funds within
the Ultra Series Fund may:
1. Borrow money in excess of one-third of the value of its total assets
taken at market value (including the amount borrowed) and then only
from banks as a temporary measure for extraordinary or emergency
purposes. This borrowing provision is not for investment leverage, but
solely to facilitate management of a Fund by enabling the Fund to meet
redemption requests where the liquidation of an investment is deemed
to be inconvenient or disadvantageous. Except for the High Income,
Mid-Cap Stock, Emerging Growth, International Stock, and Global
Securities Funds, a Fund will not make additional investments while it
has borrowings outstanding.
2. Underwrite securities of other issuers, except that a Fund may acquire
portfolio securities under circumstances where, if the securities are
later publicly offered or sold by the Fund, it may be deemed to be an
underwriter for purposes of the Securities Act of 1933.
3. Invest over twenty-five percent (25%) of assets taken at its market
value in any one industry. Securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, or instruments secured
by these money market instruments, such as repurchase agreements,
shall not be considered investments in any one industry for purposes
of these rules. Telephone, gas, and electric utility industries shall
be considered separate industries.
4. Purchase or sell commodities, commodity contracts (except financial
futures contracts), foreign exchange or real estate, including
interests in real estate investment trusts whose securities are not
readily marketable or invest in oil, gas or other mineral development
or exploration programs. (This does not prohibit investment in the
securities of corporations which own interests in commodities, foreign
exchange, real estate or oil, gas or other mineral development or
exploration programs.) The High Income, Mid-Cap Stock, Emerging
Growth, International Stock, and Global Securities Funds may invest in
securities related to oil, gas, or other mineral development or
exploration programs.
5. Invest more than five percent (5%) of the value of the assets of a
Fund in securities of any one issuer, except in the case of the
securities issued or guaranteed by the U.S. Government, its agencies
or instrumentalities.
6. Invest in securities of a company for the purpose of exercising
control or management. The High Income, Mid-Cap Stock, Emerging
Growth, International Stock, and Global Securities Funds may engage in
such activities.
7. Invest in securities issued by any other registered investment
companies in excess of five percent (5%) of total assets, nor in
excess of three percent (3%) of the assets of the acquired investment
company. Not more than ten percent (10%) of total assets taken at
market value will be invested in such securities.
8. Purchase or sell real estate, except a Fund may purchase securities
which are issued by companies which invest in real estate or interests
therein.
9. Issue senior securities as defined in the Act, except insofar as a
Fund may be deemed to have issued a senior security by reason of (a)
entering into any repurchase agreement; (b) borrowing money in
accordance with restrictions described above; (c) lending portfolio
securities; (d) purchasing securities on a when-issued or delayed
delivery basis; or (e) accommodating short sales. If the asset
coverage falls below three hundred percent (300%), when taking into
account items (a) through (e), a Fund may be required to liquidate
investments to be in compliance with the Act.
10. Lend portfolio securities in excess of thirty percent (30%) of the
value of its total assets. Any loans of portfolio securities will be
made according to guidelines established by the Trustees, including
maintenance of collateral of the borrower at least equal at all times
to the current market value of the securities loaned.
11. Invest in illiquid assets (which include repurchase agreements that do
not mature within seven (7) days, non-negotiable time deposits
maturing in over seven (7) days, restricted securities, and other
securities for which there is no ready market) in an amount in excess
of ten percent (10%) of the value of its total assets. The High
Income, Mid-Cap Stock, Emerging Growth, International Stock, and
Global Securities Funds may invest up to fifteen percent (15%) of the
value of the Fund's net assets in illiquid assets.
12. Make loans (the acquisition of bonds, debentures, notes and other
securities as permitted by the investment objectives of a Fund shall
not be deemed to be the making of loans) except that a Fund may
purchase securities subject to repurchase agreements under policies
established by the Trustees.
13. Invest in foreign securities (ADRs are not considered foreign
securities) in excess of ten percent (10%) of the value of its total
assets. The High Income, Mid-Cap Stock, Emerging Growth, International
Stock, and Global Securities Funds may invest up to twenty-five
percent (25%) of the value of the Fund's total assets in foreign
securities.
Except for the limitations on borrowing from banks, if the above percentage
restrictions are adhered to at the time of investment, a later increase or
decrease in such percentage resulting from a change in values of securities or
amount of net assets will not be considered a violation of any of the foregoing
restrictions.
The Money Market Fund may not write put or call options, purchase common stock
or other equity securities or purchase securities on margin or sell short. The
Bond, Balanced, High Income, Growth and Income Stock, Capital Appreciation
Stock, Mid-Cap Stock, Emerging Growth, International Stock, and Global
Securities Funds may not purchase securities on margin or sell short. However,
each Fund may obtain such short-term credits as may be necessary for the
clearance of transactions and may make margin payments in connection with
transactions in futures and related options as permitted by its investment
policies.
PORTFOLIO TURNOVER
While the Money Market Fund is not subject to specific restrictions on portfolio
turnover, it generally does not seek profits by short-term trading. However, it
may dispose of a portfolio security prior to its maturity where disposition
seems advisable because of a revised credit evaluation of the issuer or other
considerations. Because money market instruments have short maturities, the Fund
expects to have a high portfolio turnover, but since brokerage commissions are
not customarily charged on money market instruments, a high turnover should not
adversely affect Net Asset Value or net investment income.
The Bond, Balanced, High Income, Growth and Income Stock, Capital Appreciation
Stock, Mid-Cap Stock, Emerging Growth, International Stock, and Global
Securities Funds will trade whenever, in management's view, changes are
appropriate to achieve the stated investment objectives. Management does not
anticipate that high portfolio turnover will be required in the stock funds and
stock portion of the Balanced Fund and intends to keep such turnover to moderate
levels consistent with the objectives of each Fund. Although management makes no
assurances, it is expected that the annual portfolio turnover rate in the stock
funds will be generally less than 100%. This would mean that normally less than
100% of the securities held by the Fund would be replaced in any one year
(excluding turnover of securities having a maturity of one year or less). In the
Bond Fund and the bond portion of the Balanced Fund, management employs active
trading techniques which may result in portfolio turnover rates of 500% or
higher. Such active trading increased the funds' transaction costs but is
intended to more than compensate for such increased costs by capitalizing on
temporary mispricing of securities in the bond market due to imbalances in
supply and demand or changing perceptions of an issuer's credit quality or
prospects.
MANAGEMENT OF THE FUND
Ultra Series Fund is governed by a Board of Trustees. The Trustees have the
duties and responsibilities set forth under the applicable laws of the State of
Massachusetts, including but not limited to the management and supervision of
the funds.
The board, from time to time, may include individuals who may be deemed to be
affiliated persons of CIMCO, the funds' adviser. At all times, however, the
majority of board members will not be affiliated with CIMCO or the funds.
The funds do not hold annual shareholder meetings, but may hold special meetings
for such purposes as electing or removing board members, changing fundamental
policies, approving certain management contracts, approving or amending a 12b-1
plan, or as otherwise required by the 1940 Act.
<TABLE>
<CAPTION>
Officers and Trustees
Name and Address Fund Position(s) Principal Occupation(s)
For the Past 5 Years
<S> <C> <C>
Michael S. Daubs* President, CIMCO Inc.
5910 Mineral Point Road 1983 - Present President, 1982 - Present
Madison, WI 53705 Trustee, CUNA Mutual Life Insurance Company
Age - 55 1997 - Present Chief Investment Officer, 1973 - Present
CUNA Mutual Insurance Society
Chief Investment Officer, 1990 - Present
Lawrence R. Halverson* Vice President, CIMCO Inc.
5910 Mineral Point Road 1987 - Present Senior Vice President, 1996 - Present
Madison, WI 53705 Secretary, Vice President, 1987 - 1996
Age - 53 1992 - Present CUNA Brokerage Services, Inc.
Trustee, President, 1996 - 1998
1997 - Present
<PAGE>
Mary E. Hoffmann* Treasurer CIMCO Inc.
5910 Mineral Point Road 1999-Present Product Operations and Finance Manager
Madison, WI 53705 1998 - Present
Age - 30
CUNA Mutual Insurance Society
Investment Accounting Supervisor
1996 - 1998
McGladrey and Pullen, LLP
(Madison, Wisconsin)
Financial Auditor
1993 - 1996
Thomas J. Merfeld* Secretary CIMCO Inc.
5910 Mineral Point Road 1999 - Present Senior Vice President
Madison, WI 53705 1994 - Present
Age - 43
Robert M. Buckingham* Assistant Secretary CUNA Mutual Life Insurance Company
2000 Heritage Way 1993-Present Vice President and Valuation Actuary
Waverly, IA 50677 1991-Present
Age - 44
Michael G. Joneson* Assistant Secretary CUNA Mutual Life Insurance Company
2000 Heritage Way 1992-Present Vice President - Controller, Treasurer
Waverly, IA 50677 1986-Present
Age - 52
Gwendolyn M. Boeke Trustee Evangelical Lutheran Church in America
2000 Heritage Way 1988 - Present Area Representative - Iowa
Waverly, IA 50677 1990 - Present
Age - 64
Alfred L. Disrud Trustee Planned Giving Services
2000 Heritage Way 1987 - Present Owner
Waverly, IA 50677 1986 - Present
Age - 78
Thomas C. Watt Trustee MidAmerican Energy Company
2000 Heritage Way 1986 - Present Manager - Business Initiatives
Waverly, IA 50677 1997 - Present
Age - 62
MidAmerican Energy Company
District Manager
1995 - 1997
</TABLE>
*An interested person within the meaning of the Act.
Trustee Compensation
Aggregate Compensation Total Compensation from
Name, Position from Fund(1) Fund and Fund Complex(1)(2)
Michael S. Daubs(3) None None
Lawrence R. Halverson(3) None None
Gwendolyn M. Boeke $4,000 $8,000
Alfred L. Disrud $4,000 $8,000
Thomas C. Watt $4,000 $8,000
(1)Amounts for the fiscal year ending December 31, 1999.
(2)"Fund Complex" includes the Ultra Series Fund and MEMBERS Mutual Funds.
(3)Non-compensated interested trustee.
Trustees and officers of the Ultra Series Fund do not receive any benefits from
the Ultra Series Fund upon retirement nor does the Ultra Series Fund accrue any
expense for pension or retirement benefits. All Trustees and officers of the
Ultra Series Fund also serve as trustees or officers of the MEMBERS Mutual
Funds, an open-end management investment company that is managed by the
Investment Adviser.
Substantial Shareholders
CUNA Mutual Life Insurance Company (the "Company") established the Ultra Series
Fund as an investment vehicle underlying the separate accounts of the Company
which issue variable contracts. As of May 1, 2000, the separate accounts of the
Company and certain qualified plans were the only shareholders of the Ultra
Series Fund. Voting rights are described in the Ultra Series Fund Prospectus in
the GENERAL INFORMATION, Shareholder Rights section.
Beneficial Owners
As of August 31, 2000, the directors and officers as a group own less than one
percent (1%). In addition to its own beneficial interest in each Fund, the
Company holds legal title on behalf of the beneficiaries of employee benefit
plans held within the Company separate accounts not registered pursuant to an
exemption from the registration provisions of the securities acts. As of March
31, 2000, no one person had a beneficial interest exceeding five percent (5%).
Code of Ethics
The Ultra Series Fund, its adviser CIMCO, Inc., and its principal underwriter,
CUNA Brokerage Services, Inc., have adopted codes of ethics pursuant to Rule
17j-1. The codes permit access people to invest in securities, including
securities that may be purchased or held by the Fund, for their own accounts.
The codes, however, establish certain procedures and prohibitions on investments
in securities for personal accounts. The codes are on public file with, and are
available from, the SEC.
THE INVESTMENT ADVISER
The Management Agreement ("Agreement") requires that the Investment Adviser
provide continuous professional investment management of the investments of the
Ultra Series Fund, including establishing an investment program complying with
the investment objectives, policies and restrictions of each Series. In
addition, the Adviser has agreed to provide, or arrange to have provided, all
services to each Series of the Ultra Series Fund, including but not limited to
legal and accounting services, mailing and printing services, custody and
transfer agent services, etc. The Investment Adviser is CIMCO Inc. The Company,
and CUNA Mutual Investment Corporation each own a one-half interest in the
Investment Adviser. CUNA Mutual Insurance Society is the sole owner of CUNA
Mutual Investment Corporation. CUNA Mutual Investment Corporation is the sole
owner of CUNA Brokerage Services, Inc., the principal underwriter. The
Investment Adviser and the Ultra Series Fund have servicing agreements with the
Company and with CUNA Mutual Insurance Society. The Company and CUNA Mutual
Insurance Society entered into a permanent affiliation July 1, 1990. At the
current time, all of the directors of the Company are also directors of CUNA
Mutual Insurance Society and many of the senior executive officers of the
Company hold similar positions with CUNA Mutual Insurance Society.
The Investment Adviser, pursuant to a Management Agreement effective May 1,
1997, provides investment advice for each Fund and provides or arranges for the
provision of substantially all other services required by the Ultra Series Fund
through services agreements with affiliated and unaffiliated service providers.
Such services include all administrative, accounting and legal services as well
as the services of custodians, transfer agents and dividend disbursing agents.
There are, however, certain expenses that The Ultra Series Fund pays for itself
under the Management Agreement. These are: fees of the independent Trustees,
fees of the independent auditors, interest on borrowings by a Fund, any taxes
that a Fund must pay, and any extraordinary expenses incurred by a Fund or Funds
not in the ordinary course of business. As full compensation for its services,
the Ultra Series Fund pays the Investment Adviser a unitary fee computed at an
annualized percentage rate of the average value of the daily net assets of each
series as set forth in the table below:
Management Fee Table
Series Management Fee
Money Market 0.45 %
Bond 0.55 %
Balanced 0.70 %
High Income %
Growth & Income Stock 0.60 %
Capital Appreciation Stock 0.80 %
Mid-Cap Stock 1.00 %
Emerging Growth %
International Stock %
Global Securities %
The total fee paid to the Investment Adviser during the years ended December 31
was as follows:
1997 $5,320,543
1998 $12,547,473
1999 $17,105,630
The Investment Adviser or subadviser (as applicable) makes the investment
decisions and is responsible for the investment and reinvestment of assets;
performs research, statistical analysis, and continuous supervision of the
Fund's investment portfolio; furnishes office space for the Ultra Series Fund;
provides the Ultra Series Fund with such accounting data concerning the
investment activities of the Ultra Series Fund as is required to be prepared and
files all periodic financial reports and returns required to be filed with the
Securities and Exchange Commission ("SEC") and any other regulatory agency;
continuously monitors compliance by the Ultra Series Fund in its investment
activities with the requirements of the Act and the rules promulgated pursuant
thereto; and renders to the Ultra Series Fund such periodic and special reports
as may be reasonably requested with respect to matters relating to the duties of
the Investment Adviser.
The Adviser contracts with the Company to perform some of these services on
behalf of the Ultra Series Fund in return for a portion of the investment
advisory fee. The Adviser paid $1,268,229, $2,800,753 and $3,827,693 for those
services in 1997, 1998 and 1999, respectively.
The Adviser contracts with CUNA Mutual Insurance Society to perform cash
management and investment accounting services on behalf of the Ultra Series Fund
in return for a portion of the investment advisory fee. The Adviser paid
$16,404, $0, and $0 for those services in 1997, 1998 and 1999, respectively.
The Management Agreement provides that the Investment Adviser shall not be
liable to the Ultra Series Fund or any shareholder for anything done or omitted
by it, or for any losses that may be sustained in the purchase, holding or sale
of any security, except for an act or omission involving willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties imposed upon it
by the Management Agreement.
The directors and principal officers of the Investment Adviser are as follows:
Janice C. Doyle Assistant Secretary
Michael S. Daubs Director and President
Lawrence R. Halverson Senior Vice President
Joyce A. Harris Director and Chair
James C. Hickman Director
Michael B. Kitchen Director
Daniel J. Larson Vice President
Thomas J. Merfeld Vice President and Secretary
George A. Nelson Director and Vice Chair
Jeffrey B. Pantages Senior Vice President
CUNA Brokerage Services, Inc., 5910 Mineral Point Road, Madison, WI 53705-4456
is the Trust's principal underwriter.
MANAGEMENT AGREEMENTS WITH SUBADVISERS
As described in the prospectus, CIMCO manages the assets of the High Income,
Mid-Cap Stock, Emerging Growth, International Stock, and Global Securities Funds
using a "manager of managers" approach under which CIMCO may allocate some of
the fund's assets among one or more "specialist" subadvisers (each, a
"Subadviser").
Even though Subadvisers have day-to-day responsibility over the management of a
portion of the High Income, Mid-Cap Stock, Emerging Growth, International Stock,
and Global Securities Funds, CIMCO retains the ultimate responsibility for the
performance of these funds and will oversee the Subadvisers and recommend their
hiring, termination, and replacement.
CIMCO may, at some future time, employ a subadvisory or "manager of managers"
approach to other new or existing funds in addition to the High Income, Mid-Cap
Stock, Emerging Growth, International Stock, and Global Securities Funds.
The Subadviser for the High Income Fund
As of the date of the prospectus, Massachusetts Financial Services Company (MFS)
is the only subadviser managing the assets of the High Income Fund. For its
services to the fund, MFS receives a management fee from CIMCO, computed and
accrued daily and paid monthly, at the following annual rates:
The Subadviser for the Mid-Cap Stock Fund
As of the date of the prospectus, Wellington Management Company llp (Wellington)
is the only subadviser managing some of the assets of the Mid-Cap Stock Fund.
For its services to the fund, Wellington receives a management fee from CIMCO,
computed and accrued daily and paid monthly, at the following annual rates:
The Subadvisers for the Emerging Growth Fund
As of the date of the prospectus, Massachusetts Financial Services Company (MFS)
is the only subadviser managing the assets of the Emerging Growth Fund. For its
services to the fund, MFS receives a management fee from CIMCO, computed and
accrued daily and paid monthly, at the following annual rates:
The Subadvisers for the International Stock Fund
As of the date of the prospectus, the assets of the International Stock Fund are
managed by Lazard Asset Management ("Lazard").
For its services to the fund, Lazard receives a management fee from CIMCO,
computed and accrued daily and paid monthly, equal on an annual basis to ____%
of net assets managed by Lazard.
The Subadvisers for the Global Securities Fund
As of the date of the prospectus, Oppenheimer Funds, Inc. (Oppenheimer) is the
only subadviser managing the assets of the Global Securities Fund. For its
services to the fund, Oppenheimer receives a management fee from CIMCO, computed
and accrued daily and paid monthly, at the following annual rates:
EXPENSES OF THE FUND
The Money Market, Bond, Balanced, High Income, Growth and Income Stock, Capital
Appreciation Stock, Mid-Cap Stock, Emerging Growth, International Stock, and
Global Securities Funds are currently obligated to pay to the Investment Adviser
the Management Fee set forth in the Management Fee Table above. As part of its
services, the Investment Adviser has agreed to provide or arrange to have
provided, administrative services to each Fund. Currently, the Company provides
the Funds with administrative, fund accounting, transfer agency and shareholder
services. The Adviser pays the Company .15% of the average value of the daily
net assets for these services.
Prior to May 1, 1997, expenses which exceeded .65% of the average value of daily
net assets of such Fund were being absorbed by the Company pursuant to an
Expense Reimbursement Agreement between the Company and the Ultra Series Fund.
The Company absorbed $48,308, $0 and $0 for the years ended December 31, 1997,
December 31, 1998, and December 31, 1999, respectively.
DISTRIBUTION PLAN AND AGREEMENT
The Ultra Series fund has adopted a Distribution Plan pursuant to Rule 12b-1 of
the Act under which the Ultra Series Fund bears certain expenses relating to the
distribution of Class C shares. The Distribution Plan provides for the Ultra
Series Fund to pay CUNA Brokerage Services, Inc. a distribution fee equal, on an
annual basis, to 0.25% of the average daily net assets of each Fund attributable
to Class C shares. The distribution fee is calculated and accrued daily and paid
quarterly or at such other intervals as the Ultra Series Fund and CUNA Brokerage
Services, Inc. agree. The distribution fee is paid solely out of each Fund's
assets supporting Class C shares. This means that the net asset value of Class C
shares reflects the daily accrual of the fee but that the net asset value of
Class Z shares is not affected by the distribution fee and no distribution fee
is supported by assets of any Fund representing Class Z shares.
Under the Distribution Plan, CUNA Brokerage Services, Inc. receives the entire
amount of the distribution fee and may spend any amount of the fee that it
considers appropriate to finance any activity that is primarily intended to
result in the sale of Class C shares or to service Class C shareholders. CUNA
Brokerage Services, Inc. does not have to spend all of the distribution fee and
can spend more than the amount of the fee to finance activities intended to
result in the sale of Class C shares or to service Class C shareholders. If CUNA
Brokerage Services, Inc. spends less than the entire amount of the fee in any
period, it may keep the amounts not spent. If CUNA Brokerage Services, Inc.
spends more than the amount of the fee in any period, the Ultra Series Fund will
not reimburse CUNA Brokerage Services, Inc. for the difference.
Activities primarily intended to result in the sale of Class C shares or service
Class C shareholders include, among other: (a) compensation to employees of CUNA
Brokerage Services, Inc.; (b) compensation to and expenses, including overhead
and telephone expenses, of CUNA Brokerage Services, Inc., other selected
broker-dealers, and insurance companies who engage in or support activities
primarily intended to result in the sale of Class C shares; (c) the costs of
printing and distributing prospectuses, statements of additional information and
annual and interim reports of the Ultra Series Fund for prospective Class C
shareholders; (d) the costs of preparing, printing and distributing sales
literature and advertising materials attributable to Class C shares; (e)
expenses relating to the formulation and implementation of marketing strategies
and promotional activities relating to Class C shares such as direct mail
promotions and television, radio, newspaper, magazine and other mass media
advertising; and (f) the costs of obtaining such information, analyses and
reports with respect to marketing and promotional activities and investor
accounts as the Ultra Series Fund may, from time to time, deem advisable. CUNA
Brokerage Services, Inc. did not incur any expenses in 1999 relating to the sale
of Class C shares.
The Distribution Plan was initially approved on October 29, 1996, by the Board
of Trustees of the Ultra Series Fund, including all disinterested Trustees. The
Plan became effective May 1, 1997, and continues in effect from year to year
only so long as such continuance is approved at least annually by the Trustees,
including a majority of the Trustees who are not interested, as defined by the
Act, and who have no direct or indirect financial interest in the operation of
the Plan or agreements related to it.
Any amendment which would materially increase the amount which the Ultra Series
Fund may expend under the Plan requires approval by holders of a majority of the
outstanding shares of the Ultra Series Fund. Any agreement related to the Plan
may be terminated at any time, upon sixty (60) days written notice to the other
party, by a vote of a majority of the disinterested Trustees, or by vote of a
majority of the Trust's outstanding voting securities. In the event of an
assignment, the Plan terminates automatically. As long as the Plan is in effect,
the selection and nomination of the disinterested Trustees of the Ultra Series
Fund are committed to the discretion of the disinterested Trustees.
TRANSFER AGENT
CUNA Mutual Life Insurance Company, 2000 Heritage Way, Waverly, IA 50677, is the
transfer agent and dividend disbursing agent for the Fund. As transfer agent,
CUNA Mutual maintains the shareholder records and reports. CIMCO pays CUNA
Mutual Life Insurance Company .15% of the average daily net assets for its
transfer agency services and other services described in the Fund Expenses
section above.
CUSTODIAN
State Street Bank and Trust Company, 225 Franklin Street, Boston, MA 02110, is
the current custodian for the securities and cash of the Ultra Series Fund. The
custodian holds for the Ultra Series Fund all securities and cash owned by the
Ultra Series Fund, and receives for the Ultra Series Fund all payments of
income, payments of principal or capital distributions with respect to
securities owned by the Ultra Series Fund. Also, the custodian receives payment
for the shares issued by the Ultra Series Fund. The custodian releases and
delivers securities and cash upon proper instructions from the Ultra Series
Fund. Pursuant to and in furtherance of a Custody Agreement with the custodian,
the Ultra Series Fund uses automated instructions and a cash data entry system
to transfer monies to and from the Ultra Series Fund's account at the custodian.
INDEPENDENT ACCOUNTANTS
The financial statements for the fiscal year ended December 31, 1999 have been
included herein and elsewhere in the Registration Statement in reliance upon the
report of PricewaterhouseCoopers LLP, 100 East Wisconsin Avenue, Milwaukee, WI
53202, independent accountants, and upon the authority of said firm as experts
in accounting and auditing. The financial statements for fiscal years ended
December 31, 1998 and prior have been audited by KPMG LLP.
BROKERAGE
It is the policy of the Ultra Series Fund, in effecting transactions in
portfolio securities, to seek best execution of orders at the most favorable
prices. The determination of what may constitute best execution and price in the
execution of a securities transaction by a broker involves a number of
considerations, including without limitation, the overall direct net economic
result (involving both price paid or received and any commissions and other
costs paid), the efficiency with which the transaction is effected, the ability
to effect the transaction at all where a large block is involved, the
availability of the broker to stand ready to execute potentially difficult
transactions in the future and the financial strength and stability of the
broker. Such considerations are judgmental and are weighed by management in
determining the overall reasonableness of brokerage commissions paid.
Subject to the foregoing, a factor in the selection of brokers is the receipt of
research services, analyses and reports concerning issuers, industries,
securities, economic factors and trends and other statistical and factual
information. Any such research and other statistical and factual information
provided by brokers to the Ultra Series Fund, or the Investment Adviser or
Sub-Adviser ("Advisers" for purposes of this section), is considered to be in
addition to and not in lieu of services required to be performed by the Advisers
under its contract with the Ultra Series Fund. Research obtained on behalf of
the Ultra Series Fund may be used by the Advisers in connection with other
clients of the Advisers. Conversely, research received from placement of
brokerage for other accounts may be used by the Advisers in managing investments
of the Ultra Series Fund. Therefore, the correlation of the cost of research to
individual clients of the Advisers, including the Ultra Series Fund, is
indeterminable and cannot practically be allocated among the Ultra Series Fund
and the Advisers' other clients. Consistent with the above, the Ultra Series
Fund may effect principal transactions with a broker-dealer that furnishes
brokerage and/or research services, or designate any such broker-dealer to
receive selling commissions, discounts or other allowances, or otherwise deal
with any broker-dealer, in connection with the acquisition of securities in
underwritings. Accordingly, the net prices or commission rates charged by any
such broker-dealer may be greater than the amount another firm might charge if
the management of the Ultra Series Fund determines in good faith that the amount
of such net prices and commissions is reasonable in relation to the value of the
services and research information provided by such broker-dealer to the Ultra
Series Fund. For the year ended December 31, 1997, Capital Appreciation Stock
Fund paid $186,338, Growth and Income Stock Fund paid $352,096 and Balanced Fund
paid $92,415 in brokerage fees. There were no brokerage fees paid by Bond or
Money Market Funds in 1997. For the year ended December 31, 1998, Capital
Appreciation Stock Fund paid $358,785, Growth and Income Stock Fund paid
$372,675, and Balanced Fund paid $117,875 in brokerage fees. There were no
brokerage fees paid by Bond or Money Market Funds in 1998. For the year ended
December 31, 1999, Capital Appreciation Stock Fund paid $563,777, Growth and
Income Stock Fund paid $497,353, Balanced Fund paid $131,328, and the Mid-Cap
Stock Fund paid $67,763 in brokerage fees. There were no brokerage fees paid by
the Bond or Money Market Funds in 1999.
The Ultra Series Fund expects that purchases and sales of money market
instruments usually will be principal transactions. Money market instruments are
normally purchased directly from the issuer or from an underwriter or market
maker for the securities. There usually will be no brokerage commissions paid
for such purchases. Purchases from underwriters will include the underwriting
commission or concession and purchases from dealers serving as market makers
will include the spread between the bid and asked price. Where transactions are
made in the over-the-counter market, the Ultra Series Fund will deal with the
primary market makers unless equal or more favorable prices are otherwise
obtainable.
Where advantageous, the Ultra Series Fund may participate with other clients of
the Advisers in "bunching of trades" wherein one purchase or sale transaction
representing several different client accounts is placed with a broker. The
Advisers have established various policies and procedures that assure equitable
treatment of all accounts.
The policy with respect to brokerage is and will be reviewed by the Trustees
from time to time. Because of the possibility of further regulatory developments
affecting the securities exchanges and brokerage practices generally, the
foregoing practices may be changed, modified or eliminated.
HOW SECURITIES ARE OFFERED
Shares of Beneficial Interest
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest of the Trust without par
value. Under the Declaration of Trust, the Trustees have the authority to create
and classify shares of beneficial interest in separate series, without further
action by shareholders. As of the date of this SAI, the Trustees have authorized
shares of the seven funds described in the prospectus. Additional series and/or
classes may be added in the future. The Declaration of Trust also authorizes the
Trustees to classify and reclassify the shares of the Trust, or new series of
the Trust, into one or more classes. As of the date of this SAI, the Trustees
have authorized the issuance of two classes of shares of the fund, designated as
Class C and Class Z. Additional classes of shares may be offered in the future.
The shares of each class of each fund represent an equal proportionate interest
in the aggregate net assets attributable to that class of that fund. The
different classes of a fund may bear different expenses relating to the cost of
holding shareholder meetings necessitated by the exclusive voting rights of any
class of shares.
Dividends paid by each fund, if any, with respect to each class of shares will
be calculated in the same manner, at the same time and on the same day and will
be in the same amount, except for differences resulting from the fact that: (i)
the distribution and service fees relating to Class C or Class Z shares will be
borne exclusively by that class; (ii) each of Class C shares and Class Z shares
will bear any other class expenses properly allocable to such class of shares,
subject to the requirements imposed by the Internal Revenue Service on funds
having a multiple-class structure. Similarly, the NAV per share may vary
depending on whether Class C shares or Class Z shares are purchased.
In the event of liquidation, shareholders of each class of each fund are
entitled to share pro rata in the net assets of the class of the fund available
for distribution to these shareholders. Shares entitle their holders to one vote
per dollar value of shares, are freely transferable and have no preemptive,
subscription or conversion rights. When issued, shares are fully paid and
non-assessable, except as set forth below.
Share certificates will not be issued.
Limitation of Trustee and Officer Liability
The Declaration further provides that the Trust shall indemnify each of its
Trustees and officers against liabilities and expenses reasonably incurred by
them, in connection with, or arising out of, any action, suit or proceeding,
threatened against or otherwise involving such Trustee or officer, directly or
indirectly, by reason of being or having been a Trustee or officer of the Trust.
The Declaration does not authorize the Trust to indemnify any Trustee or officer
against any liability to which he or she would otherwise be subject by reason of
or for willful misfeasance, bad faith, gross negligence or reckless disregard of
such person's duties.
Limitation of Interseries Liability
All persons dealing with a fund must look solely to the property of that
particular fund for the enforcement of any claims against that fund, as neither
the Trustees, officers, agents or shareholders assume any personal liability for
obligations entered into on behalf of a fund or the Trust. No fund is liable for
the obligations of any other fund. Since the funds use a combined prospectus,
however, it is possible that one fund might become liable for a misstatement or
omission in the prospectus regarding another fund with which its disclosure is
combined. The Trustees have considered this factor in approving the use of the
combined prospectus.
Pursuant to current interpretations of the Act, the Company will solicit voting
instructions from owners of variable annuity or variable life insurance
contracts issued by it with respect to any matters that are presented to a vote
of shareholders. Insurance companies not affiliated with the CUNA Mutual Group
will generally follow similar procedures. On any matter submitted to a vote of
shareholders, all shares of the Ultra Series Fund then issued and outstanding
and entitled to vote shall be voted in the aggregate and not by series or Class,
except for matters concerning only a series or Class. Certain matters approved
by a vote of the shareholders of the Ultra Series Fund may not be binding on a
series or Class whose shareholders have not approved such matter. This is the
case if the matter affects interests of that series or Class which are not
identical with the interests of all other series and Classes such as a change in
investment policy, approval of the Investment Adviser or a material change in
the distribution Plan and failure by the holders of a majority of the
outstanding voting securities of the series or Class to approve the matter. The
holder of each share of each series or Class of stock of the Ultra Series Fund
shall be entitled to one vote for each full dollar of net asset value and a
fractional vote for each fractional dollar of net asset value attributed to the
shareholder.
The Ultra Series Fund is not required to hold annual meetings of shareholders
and does not plan to do so. The Trustees may call special meetings of
shareholders for action by shareholder vote as may be required by the Act or the
Declaration of Trust. The Trustees have the power to alter the number and the
terms of office of the Trustees, and may lengthen their own terms or make their
terms of unlimited duration and appoint their successors, provided always at
least a majority of the Trustees have been elected by the shareholders of the
Ultra Series Fund. The Declaration of Trust provides that shareholders can
remove Trustees by a vote of two-thirds of the outstanding shares and the
Declaration of Trust sets out procedures to be followed.
Because shares of the Ultra Series Fund are sold to the CUNA Mutual Group
separate accounts, qualified retirement plans sponsored by CUNA Mutual Group,
unaffiliated insurance company separate accounts and qualified retirement plans,
it is possible that material conflicts could arise among and between the
interests of: (1) variable annuity contract owners (or participants under group
variable annuity contracts) and variable life insurance contract owners, or (2)
owners of variable annuity and variable life insurance contracts of affiliated
and unaffiliated insurance companies and (3) participants in affiliated and
unaffiliated qualified retirement plans. Such material conflicts could include,
for example, differences in federal tax treatment of variable annuity contracts
versus variable life insurance contracts. The Ultra Series Fund does not
currently foresee any disadvantage to one category of investors vis-a-vis
another arising from the fact that the Ultra Series Fund's shares support
different types of variable insurance contracts. However, the Ultra Series
Fund's Board of Trustees will continuously monitor events to identify any
potential material conflicts that may arise between the interests of different
categories or classes of investors and to determine what action, if any, should
be taken to resolve such conflicts. Such action may include redeeming shares of
the Ultra Series Fund held by one or more of the separate accounts or qualified
retirement plans involved in any material irreconcilable conflict.
NET ASSET VALUE OF SHARES
Net Asset Value per share is calculated each Valuation Day. Net Asset Value is
determined by dividing each Fund's total net assets by the number of shares
outstanding at the time of calculation. Total net assets are determined by
adding the total current value of portfolio securities, cash, receivables, and
other assets and subtracting liabilities. Shares will be sold and redeemed at
the Net Asset Value next determined after receipt of the purchase order or
request for redemption.
The Net Asset Value of a share issued by the Bond, Balanced, High Income, Growth
and Income Stock, Capital Appreciation Stock, Mid-Cap Stock, Emerging Growth,
International Stock, and Global Securities Funds was initially set at $10.00 per
share. The Net Asset Value of a share issued by the Money Market Fund was
initially set at $1.00 per share. (See Money Market Fund below.)
Money Market Fund
The Trustees have determined that the best method currently available for
determining the Net Asset Value is the amortized cost method. The Trustees will
utilize this method pursuant to Rule 2a-7 of the Act. The use of this valuation
method will be continuously reviewed and the Trustees will make such changes as
may be necessary to assure that assets are valued fairly as determined by the
Trustees in good faith. Rule 2a-7 obligates the Trustees, as part of their
responsibility within the overall duty of care owed to the shareholders, to
establish procedures reasonably designed, taking into account current market
conditions and the investment objectives, to stabilize the Net Asset Value per
share as computed for the purpose of distribution and redemption at $1.00 per
share. The Trustees' procedures include periodically monitoring, as they deem
appropriate and at such intervals as are reasonable in light of current market
conditions, the relationship between the amortized cost value per share and the
Net Asset Value per share based upon available market quotations. The Trustees
will consider what steps should be taken, if any, in the event of a difference
of more than 1/2 of one percent (1%) between the two. The Trustees will take
such steps as they consider appropriate, (e.g., redemption in kind or shortening
the average portfolio maturity) to minimize any material dilution or other
unfair results which might arise from differences between the two. The Rule
requires that the Fund limit its investments to instruments which the Trustees
determine will present minimal credit risks and which are of high quality as
determined by a major rating agency, or, in the case of any instrument that is
not so rated, of comparable quality as determined by the Trustees. It also calls
for the Fund to maintain a dollar weighted average portfolio maturity (not more
than 90 days) appropriate to its objective of maintaining a stable Net Asset
Value of $1.00 per share and precludes the purchase of any instrument with a
remaining maturity of more than 397 days. Should the disposition of a portfolio
security result in a dollar weighted average portfolio maturity of more than 90
days, the Fund will invest its available cash in such manner as to reduce such
maturity to 90 days or less as soon as reasonably practicable.
It is the normal practice of the Fund to hold portfolio securities to maturity.
Therefore, unless a sale or other disposition of a security is mandated by
redemption requirements or other extraordinary circumstances, the Fund will
realize the par value of the security. Under the amortized cost method of
valuation traditionally employed by institutions for valuation of money market
instruments, neither the amount of daily income nor the Net Asset Value is
affected by any unrealized appreciation or depreciation. In periods of declining
interest rates, the indicated daily yield on shares the Fund has computed by
dividing the annualized daily income by the Net Asset Value will tend to be
higher than if the valuation were based upon market prices and estimates. In
periods of rising interest rates, the indicated daily yield on shares the Fund
has computed by dividing the annualized daily income by the Net Asset Value will
tend to be lower than if the valuation were based upon market prices and
estimates.
Bond, Balanced, High Income, Growth and Income Stock, Capital Appreciation
Stock, Mid-Cap Stock, Emerging Growth, International Stock, and Global
Securities Funds
Common stocks that are traded on an established exchange or over-the-counter are
valued on the basis of market price as of the end of the Valuation Period,
provided that a market quotation is readily available. Otherwise, they are
valued at fair value as determined in good faith by or at the direction of the
Trustees.
Stripped Treasury Securities, long-term straight debt obligations, and
non-convertible preferred stocks are valued using readily available market
quotations, if available. When exchange quotations are used, the latest quoted
sale price is used. If an over-the-counter quotation is used, the last bid price
will normally be used. If readily available market quotations are not available,
these securities are valued at market value as determined in good faith by or at
the direction of the Trustees. Readily available market quotations will not be
deemed available if an exchange quotation exists for a debt security, preferred
stock, or security convertible into common stock, but it does not reflect the
true value of the Fund's holdings because sales have occurred infrequently, the
market for the security is thin, or the size of the reported trade is considered
not comparable to the Fund's institutional size holdings. When readily available
market quotations are not available, the Fund will use an independent pricing
service which provides valuations for normal institutional size trading units of
such securities. Such a service may utilize a matrix system which takes into
account appropriate factors such as institutional size trading in similar groups
of securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data in determining valuations. These
valuations are reviewed by the Investment Adviser. If the Investment Adviser
believes that evaluation still does not represent a fair value, it will present
for approval of the Trustees such other valuation as the Investment Adviser
considers to represent a fair value. The specific pricing service or services to
be used will be presented for approval of the Trustees.
Short-term instruments having maturities of sixty (60) days or less will be
valued at amortized cost. Short-term instruments having maturities of more than
sixty (60) days will be valued at market values or values based on current
interest rates.
Options, stock index futures, interest rate futures, and related options which
are traded on U.S. exchanges or boards of trade are valued at the closing price
as of the close of the New York Stock Exchange.
The Investment Adviser, at the direction of the Trustees, values the following
at prices it deems in good faith to be fair:
1. Securities (including restricted securities) for which complete
quotations are not readily available, and
2. Listed securities if, in the opinion of the Investment Adviser, the
last sale price does not reflect the current market value or if no
sale occurred, and
3. Other assets.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund intends that each of the Funds will qualify each year as a regulated
investment company under Subchapter M of Chapter 1 of the Code. If, as intended,
each Fund continues to qualify as a regulated investment company and distributes
substantially all of its net investment income and net capital gains to its
shareholders, then, under the provisions of Subchapter M, there should be little
or no income or gains taxable to it. In addition, each Fund intends to comply
with other distribution rules specified in Code so that it will not incur a 4%
nondeductible federal excise tax that otherwise would apply.
Each Fund of the Trust must meet several requirements to maintain its status as
a regulated investment company. These requirements include the following: (1) at
least 90% of the Fund's gross income must be derived from dividends, interest,
payments with respect to securities loaned, and gains from the sale or
disposition of securities; and (2) at the close of each quarter of the Fund's
taxable year, (a) at least 50% of the value of the Fund's total assets must
consist of cash, U.S. Government securities and other securities (no more than
5% of the value of the Fund may consist of such other securities of any one
issuer, and the Fund must not hold more than 10% of the outstanding voting stock
of any issuer), and (b) the Fund must not invest more than 25% of the value of
its total assets in the securities of any one issuer (other than U.S. Government
securities).
Each of the Funds also intends to comply with section 817(h) of the Code and the
regulations issued thereunder, which impose certain investment diversification
requirements on separate accounts of life insurance companies that are used to
support variable annuity contracts ("VA contracts") and variable life insurance
policies ("VLI policies"). In general, these requirements are that no more than
55% of the value of the assets of a Fund may be represented by any one
investment; no more than 70% by any two investments; no more than 80% by any
three investments; and no more than 90% by any four investments. For these
purposes, all securities of the same issuer are treated as a single investment
and each United States government agency or instrumentality is treated as a
separate issuer. These diversification requirements are in addition to the
requirements of subchapter M and of the Investment Company Act, and may affect
the securities in which a Fund may invest. In order to comply with the current
or future requirements of section 817(h) (or related provisions of the Code),
the Trust may be required, for example, to alter the investment objectives of
one or more of the Funds. (To the extent required by law, approval of owners of
VA contracts or VLI policies or of the Commission will be obtained before
changing investment objectives.)
If a Fund fails to qualify as a regulated investment company, it will be subject
to federal, and possibly state, corporate taxes on its taxable income and gains
(without any deduction for its distributions to its shareholders) and
distributions to its shareholders will constitute ordinary income to the extent
of such Fund's available earnings and profits. Owners of VA contracts and VLI
policies indirectly invested in such a Fund might be taxed currently on the
investment earnings under their contracts or policies and thereby lose the
benefit of tax deferral. In addition, if a Fund fails to comply with the
diversification requirements of section 817(h) of the Code and the regulations
thereunder, owners of VA contracts and VLI policies indirectly invested in the
Fund would be taxed on the investment earnings under their contracts or policies
and thereby lose the benefit of tax deferral. Accordingly, compliance with the
above rules is carefully monitored by the investment adviser and the Trust
intends that each Fund comply with these rules as they exist or as they may be
modified from time to time. Compliance with the tax requirements described above
may result in a reduction in the return under a Fund, since, to comply with the
above rules, the investments utilized (and the time at which such investments
are entered into and closed out) may be different from what the investment
adviser might otherwise believe desirable.
The foregoing discussion of federal income tax consequences is a general and
abbreviated summary based on tax laws and regulations in effect on the date of
this SAI. Tax law is subject to change by legislative, administrative or
judicial action. Each prospective investor should consult his or her own tax
adviser as to the tax consequences of investments in the Funds. For information
concerning the federal income tax consequences to the owners of VA contracts and
VLI policies, see the prospectuses for such contracts or policies. [For
information concerning the federal income tax consequences to plan participants,
see the summary plan description.]
It is the intention of the Ultra Series Fund to distribute substantially all of
the net investment income, if any, of each Fund thereby avoiding the imposition
of any Fund-level income or excise tax as follows:
(i) Dividends on the Money Market Fund will be declared daily and
reinvested monthly in additional full and fractional shares of the
Money Market Fund.
(ii) Dividends of ordinary income from the Bond, Balanced, High Income,
Growth and Income Stock, and Capital Appreciation Stock, Mid-Cap
Stock, Emerging Growth, International Stock, and Global Securities
Funds will be declared and reinvested quarterly in additional full and
fractional shares of the respective Fund.
(iii)All net realized short-term and long-term capital gains of the Ultra
Series Fund, if any, will be declared and distributed at least
annually, but in any event, no more frequently than allowed under SEC
rules, to the shareholders of each Fund to which such gains are
attributable.
Options and Futures Transactions
The tax consequences of options transactions entered into by a Fund will vary
depending on the nature of the underlying security, whether the option is
written or purchased and finally, whether the "straddle" rules, discussed
separately below, apply to the transaction. When a Fund writes a call or a put
option on an equity or convertible debt security, the treatment for federal
income tax purposes of the premium that it receives will, subject to the
straddle rules, depend on whether the option is exercised. If the option expires
unexercised, or if the Fund enters into a closing purchase transaction, the Fund
will realize a gain (or loss if the cost of the closing purchase transaction
exceeds the amount of the premium) without regard to any unrealized gain or loss
on the underlying security. Any such gain or loss will be short-term capital
gain or loss, except that any loss on a "qualified" covered call stock option
that is not treated as part of a straddle may be treated as long-term capital
loss. If a call option written by a Fund is exercised, the Fund will recognize a
capital gain or loss from the sale of the underlying security, and will treat
the premium as additional sales proceeds. Whether the gain or loss will be
long-term or short-term will depend on the holding period of the underlying
security. If a put option written by a Fund is exercised, the amount of the
premium will reduce the tax basis of the security that the Fund then purchases.
If a put or call option that a Fund has purchased on an equity or convertible
debt security expires unexercised, the Fund will realize a capital loss equal to
the cost of the option. If the Fund enters into a closing sale transaction with
respect to the option, it will realize a capital gain or loss (depending on
whether the proceeds from the closing transaction are greater or less than the
cost of the option). The gain or loss will be short-term or long-term depending
on the Fund's holding period in the option. If the Fund exercises such a put
option, it will realize a short-term gain or loss (long-term if the Fund holds
the underlying security for more than one year before it purchases the put) from
the sale of the underlying security measured by the sales proceeds decreased by
the premium paid. If the Fund exercises such a call option, the premium paid for
the option will be added to the tax basis of the security purchased.
One or more Funds may invest in Section 1256 contracts. Section 1256 contracts
generally include options on nonconvertible debt securities (including
securities of U.S. Government agencies or instrumentalities), options on stock
indexes, futures contracts, options on futures contracts and certain foreign
currency contracts. Options on foreign currency, futures contracts on foreign
currency, and options on foreign currency futures will qualify as Section 1256
contracts if the options or futures are traded on or subject to the rules of a
qualified board or exchange. In general, gain or loss on Section 1256 contracts
will be treated as 60% long-term and 40% short-term capital gain or loss
("60/40"), regardless of the period of time particular positions are actually
held by a Fund. In addition, any Section 1256 contracts held at the end of each
taxable year (and on October 31 of each year for purposes of determining the
amount of capital gain net income that a Fund must distribute to avoid liability
for the 4% excise tax) are "marked to market" with the result that unrealized
gains or losses are treated as though they were realized and the resulting gain
or loss is treated as 60/40 gain or loss.
Straddles
Hedging transactions undertaken by a Fund may result in "straddles" for federal
income tax purposes. Straddles are defined to include "offsetting positions" in
actively-traded personal property. Under current law, it is not clear under what
circumstances one investment made by a Fund, such as an option or futures
contract, would be treated as "offsetting" another investment also held by the
Fund, such as the underlying security (or vice versa) and, therefore, whether
the Fund would be treated as having entered into a straddle. In general,
investment positions may be "offsetting" if there is a substantial diminution in
the risk of loss from holding one position by reason of holding one or more
other positions (although certain "qualified" covered call stock options written
by a Fund may be treated as not creating a straddle).
To the extent that the straddle rules apply to positions established by a Fund,
losses realized by the Fund may be either deferred or recharacterized as
long-term losses, and long-term gains realized by the Fund may be converted to
short-term gains.
Each Fund may make one or more of the elections available under the Code which
are applicable to straddles. If a Fund makes any of the elections, the amount,
character, and timing of the recognition of gains or losses from the affected
straddle positions will be determined under rules that vary according to the
election(s) made. The rules applicable under certain of the elections operate to
accelerate the recognition of gains or losses from the affected straddle
positions.
Because application of the straddle rules may affect the character of gains or
losses, defer losses and/or accelerate the recognition of gains or losses from
the affected straddle positions, the amount which must be distributed to
shareholders, and which will be taxed to shareholders as ordinary income or
long-term capital gain, may be increased or decreased substantially as compared
to a Fund that did not engage in such hedging transactions.
Distributor
As described in the Prospectus, the Ultra Series Fund does not deal directly
with the public. Shares of the Ultra Series Fund are currently issued and
redeemed through the distributor, pursuant to a Distribution Agreement between
the Ultra Series Fund and the distributor. The principal place of business of
CUNA Brokerage Services, Inc. is 5910 Mineral Point Road, Madison, Wisconsin
53705. The distributor is owned by CUNA Mutual Investment Corporation which in
turn is owned by CUNA Mutual Insurance Society. The Company and CUNA Mutual
Insurance Society entered into an agreement of permanent affiliation on July 1,
1990. Shares of the Ultra Series Fund are purchased and redeemed at Net Asset
Value. The Distribution Agreement provides that the distributor will use its
best efforts to render services to the Ultra Series Fund, but in the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of its
obligations, it will not be liable to the Ultra Series Fund or any shareholder
for any error of judgment or mistake of law or any act or omission or for any
losses sustained by the Ultra Series Fund or its shareholders. CUNA Brokerage
has not received underwriting commissions from the Ultra Series Fund for any of
the last three fiscal years.
CALCULATION OF YIELDS AND TOTAL RETURNS
From time to time, the Ultra Series Fund may disclose yields, total returns, and
other performance data. Such performance data will be computed, or accompanied
by performance data computed, in accordance with the standards defined by the
SEC. The Ultra Series Fund will not disclose performance of the Ultra Series
Fund in separate account sales literature or advertising without also showing
performance at the separate account level.
The Ultra Series Fund may distribute sales literature showing total return
performance. Total return calculations are based on historical results and are
not intended to indicate future performance. Total return will vary over time
depending on market conditions, assets owned and operating expenses. Information
about the performance of the Ultra Series Fund is contained in the annual report
to shareholders which may be obtained without charge from the address shown on
the first page of this SAI.
Total return figures distributed by the Ultra Series Fund will show the change
in value of an investment in the Ultra Series Fund from the beginning of the
measuring period to the end of the measuring period. All dividends and capital
gains are assumed to be immediately reinvested. Average annual total return is
calculated by determining the growth or decline in value of a $1,000
hypothetical investment over a stated period and then calculating the annually
compounded percentage rate that would have produced the same ending value if the
rate of growth or decline in value had been constant during the entire period.
The actual rate of growth or decline varies over time, rather than being
constant, so actual year-to-year performance will be different from "average"
annual return. The Ultra Series Fund will show average annual total returns for
1, 3, 5, and 10 year periods (or, if shorter, the period since inception) and
may show actual and average total returns for other periods. The Ultra Series
Fund may also show cumulative return, computed by dividing the value at the end
of the period by the value at the beginning of the period. Cumulative total
return may be shown either as a percentage change or as a dollar value.
Performance data may be shown in the form of graphs, charts, tables and
numerical examples.
The Ultra Series Fund may also distribute sales literature showing yield figures
for its Money Market and Bond Funds. Yield figures are based on historical
earnings and are not intended to indicate future performance. The yield of the
fund refers to the income generated by an investment in the fund over the stated
period. This income is then annualized, that is, the amount of income generated
by the investment during that period is assumed to be generated over a 365-day
period and is shown as a percentage of the investment. The effective yield is
calculated similarly but, when annualized, the income earned is assumed to be
reinvested or "compounded." The effective yield will be slightly higher than the
yield because of the effect of assumed reinvestment.
The Ultra Series Fund may distribute sales literature comparing its total
returns to standard industry measures, for example, the Dow Jones Industrial
Average, one or more of the Standard & Poor's or Frank Russell Company stock
indexes, one or more of the Lehman Brothers bond indexes, the consumer price
index, and data published by Lipper Analytical Services, Morningstar, Inc., and
Ibbotson Associates. The Dow Jones Industrial Average (DJIA) is a market
value-weighted, unmanaged index of 30 large industrial stocks traded on the New
York Stock Exchange. The Standard and Poor's and Frank Russell Company stock
indexes are unmanaged, market value weighted indexes of various industrial,
transportation, utility and financial companies, grouped by size of market
capitalization, valuation characteristics (i.e. growth or value) or other
attributes. The Lehman Brothers bond indexes represent unmanaged groups of fixed
income securities of various issuers and terms to maturity which are
representative of bond market performance. The consumer price index is a
statistical measure of changes in the prices of goods and services over time
published by the U.S. Bureau of Labor Statistics. Lipper Analytical Services and
Morningstar, Inc. are independent services that monitor performance of mutual
funds and insurance company separate accounts. Lipper Performance Summary
Averages represent the average annual total return of all the funds (within a
specified investment category) that are covered by the Lipper Analytical
Services Variable Insurance Products Performance Analysis Service.
The volatility of each fund may be compared to the volatility of the relevant
market as a whole. "Beta" is a measure of the sensitivity of a particular asset
or a particular fund relative to the marketplace in which it is traded. The beta
of the market is 1.0 which serves as a benchmark to assess other assets
including the six funds within the Ultra Series Fund. Beta is a measure of the
degree to which the return on the asset or the fund moved relative to how the
return of the relevant market moved. A number that is both positive and less
than 1.0 means that the asset or fund moved in the same direction as the market
but to a smaller degree. In other words, a beta of less than 1.0 indicates less
volatility (less investment risk) than the market.
Standard deviation measures the volatility of actual periodic returns around a
statistically fitted (average) trendline of the actual returns. For example, a
portfolio that grew over a five-year period at an average annual total return of
10% with a standard deviation of 15% would be much more volatile (would involve
more investment risk) than a portfolio that grew at an average annual total
return of 8% with a standard deviation of 5%. The latter portfolio might meet
the investment needs of a risk averse investor better than the former portfolio.
Money Market Fund Yields
From time to time, sales literature may quote the current annualized yield of
the Money Market Fund for a seven-day period in a manner which does not take
into consideration any realized or unrealized gains or losses on portfolio
securities.
This current annualized yield is computed by determining the net change
(exclusive of realized gains and losses on the sale of securities and unrealized
appreciation and depreciation) at the end of the period in the value of a
hypothetical account having a balance of 1 share at the beginning of the period,
dividing such net change in account value by the value of the hypothetical
account at the beginning of the period to determine the base period return, and
annualizing this quotient on a 365-day basis. The net change in value reflects
net income from the Fund attributable to the hypothetical account. Current yield
is calculated according to the following formula:
Current Yield = [(NCS - ES)/UV) X (365/7)] x 100
Where:
NCS= the net change in the value of the Money Market Fund (exclusive of
realized gains or losses on the sale of securities and unrealized
appreciation and depreciation) for the seven-day period attributable
to a hypothetical account having a balance of 1 share.
ES= per share expenses attributable to the hypothetical account for the
seven-day period.
UV= the share value at the close of business on the day prior to the first
day of the seven-day period.
Effective yield = [(1 + ((NCS-ES)/UV)) 365/7 - 1] x 100
Where:
NCS= the net change in the value of the Money Market Fund (exclusive of
realized gains or losses on the sale of securities and unrealized
appreciation and depreciation) for the seven-day period attributable
to a hypothetical account having a balance of 1 share.
ES= per share expenses attributable to the hypothetical account for the
seven-day period.
UV= the share value at the close of business on the day prior to the first
day of the seven-day period.
The current and effective yields on amounts held in the Money Market Fund
normally fluctuate on a daily basis. Therefore, the disclosed yield for any
given past period is not an indication or representation of future yields or
rates of return. The Money Market Fund's actual yield is affected by changes in
interest rates on money market securities, average portfolio maturity, the types
and quality of portfolio securities held and operating expenses. Yields on
amounts held in the Money Market Fund may also be presented for periods other
than a seven-day period.
Other Fund Yields
From time to time, sales literature may quote the current annualized yield of
one or more of the Funds (except the Money Market Fund) for 30-day or one-month
periods. The annualized yield of a Fund refers to income generated by the Fund
during a 30-day or one-month period and is assumed to be generated each period
over a 12-month period.
The yield is computed by: 1) dividing the net investment income of the Fund for
the period; by 2) the maximum offering price per share on the last day of the
period times the daily average number of shares outstanding for the period; by
3) compounding that yield for a six-month period; and by 4) multiplying that
result by 2. The 30-day or one-month yield is calculated according to the
following formula:
Yield = [2 X (((NI - ES)/(U X UV)) + 1)6 - 1)] x 100
Where:
NI= net income of the Fund for the 30-day or one-month period attributable
to the Fund's shares.
ES= expenses of the Fund for the 30-day or one-month period.
U= the average number of shares outstanding.
UV= the share value at the close of the last day in the 30-day or
one-month period.
The yield normally fluctuates over time. Therefore, the disclosed yield for any
given past period is not an indication or representation of future yields or
rates of return. A Fund's actual yield is affected by the types and quality of
portfolio securities held and operating expenses.
Average Annual Total Returns
From time to time, sales literature may also quote average annual total returns
for one or more of the Funds for various periods of time.
When a Fund has been in operation for 1, 3, 5, and 10 years, respectively, the
average annual total return for these periods will be provided. Average annual
total returns for other periods of time may, from time to time, also be
disclosed.
Standard average annual total returns represent the average annual compounded
rates of return that would equate an initial investment of $1,000 to the
redemption value of that investment as of the last day of each of the periods.
The ending date for each period for which total return quotations are provided
will be for the most recent month or calendar quarter-end practicable,
considering the type of the communication and the media through which it is
communicated.
The total return is calculated according to the following formula:
TR= [((ERV/P)1/N) - 1] x 100
Where:
TR= the average annual total return net of any Fund recurring charges.
ERV= the ending redeemable value of the hypothetical account at the end of
the period.
P= a hypothetical initial payment of $1,000.
N= the number of years in the period.
Other Total Returns
From time to time, sales literature may also disclose cumulative total returns
in conjunction with the standard formats described above. The cumulative total
returns will be calculated using the following formula:
CTR = [(ERV/P) - 1] x 100
Where:
CTR= The cumulative total return net of any Fund recurring charges for the
period.
ERV= The ending redeemable value of the hypothetical investment at the end
of the period.
P= A hypothetical single payment of $1,000.
FINANCIAL STATEMENTS
Financial Statements will be filed by post-effective amendment.
<PAGE>
PART C
OTHER INFORMATION
Item 23. Exhibits:
(a) Amended and Restated Declaration of Trust. Incorporated herein by
reference to post-effective amendment number 19 to this Form N-1A
registration statement (File No. 2-87775) filed with the Commission on
February 28, 1997.
(b) Amended and Restated Bylaws. Incorporated herein by reference to
post-effective amendment number 19 to this Form N-1A registration
statement (File No. 2-87775) filed with the Commission on February 28,
1997.
(c) Not Applicable.
(d) 1. Management Agreement effective May 1, 1997. Incorporated herein
by reference to post-effective amendment number 19 to this Form
N-1A registration statement (File No. 2-87775) filed with the
Commission on February 28, 1997.
2. Amendment No. 1 to Management Agreement effective May 1, 1999.
Incorporated herein by reference to post-effective amendment
number 23 to this Form N-1A registration statement (File No.
2-87775) filed with the Commission on April 23, 1999.
3. Amendment No. 2 to Management Agreement effective ____________.
To be filed by post-effective amendment.
4. Investment Sub-Advisory Agreement Between CIMCO Inc. and
Wellington Management Company LLP effective February 17, 2000.
Incorporated herein by reference to post-effective amendment
number 24 to this Form N-1A registration statement (File No.
2-87775) filed with the Commission on April 20, 2000.
5. Investment Sub-Advisory Agreement Between CIMCO Inc. and Lazard
Asset Management effective ____________. To be filed by
post-effective amendment.
6. Investment Sub-Advisory Agreement Between CIMCO Inc. and
Massachusetts Financial Services effective ____________. To be
filed by post-effective amendment.
7. Investment Sub-Advisory Agreement Between CIMCO Inc. and
Oppenheimer Funds, Inc. effective ____________. To be filed by
post-effective amendment.
8. Servicing Agreement between CIMCO Inc. and CUNA Mutual Insurance
Society effective May 1, 1997. Incorporated herein by reference
to post-effective amendment number 22 to this Form N-1A
registration statement (File No. 2-87775) filed with the
Commission on February 12, 1999.
9. Servicing Agreement between CUNA Mutual Life Insurance Company
and CIMCO Inc. effective May 1, 1997. Incorporated herein by
reference to post-effective amendment number 22 to this Form N-1A
registration statement (File No. 2-87775) filed with the
Commission on February 12, 1999.
(e) Distribution Agreement between Ultra Series Fund and CUNA Brokerage
Services, Inc. effective December 29, 1993. Incorporated herein by
reference to post-effective amendment number 19 to this Form N-1A
registration statement (File No. 2-87775) filed with the Commission on
February 28, 1997.
(f) N/A
(g) 1. Mutual Fund Custody Agreement between Ultra Series Fund and State
Street Bank and Trust Company effective April 30, 1997.
Incorporated herein by reference to post-effective amendment
number 22 to this Form N-1A registration statement (File No.
2-87775) filed with the Commission on February 12, 1999.
2. Amendment No. 1 to Mutual Fund Custody Agreement effective May 1,
1999. Incorporated herein by reference to post-effective
amendment number 23 to this Form N-1A registration statement
(File No. 2-87775) filed with the Commission on April 23, 1999.
3. Amendment to Mutual Fund Custody Agreement effective December 2,
1999.
(h) 1. Participation Agreement between Ultra Series Fund and CUNA Mutual
Life Insurance Company Pension Plan for Home Office Employees.
Incorporated herein by reference to post-effective amendment
number 22 to this Form N-1A registration statement (File No.
2-87775) filed with the Commission on February 12, 1999.
2. Participation Agreement between Ultra Series Fund and CUNA Mutual
Life Insurance Company Pension Plan for Agents. Incorporated
herein by reference to post-effective amendment number 22 to this
Form N-1A registration statement (File No. 2-87775) filed with
the Commission on February 12, 1999.
3. Participation Agreement between Ultra Series Fund and CUNA Mutual
Life Insurance Company 401(k)/Thrift Plan for Home Office
Employees. Incorporated herein by reference to post-effective
amendment number 22 to this Form N-1A registration statement
(File No. 2-87775) filed with the Commission on February 12,
1999.
4. Participation Agreement between Ultra Series Fund and CUNA Mutual
Life Insurance Company 401(k)/Thrift Plan for Agents.
Incorporated herein by reference to post-effective amendment
number 22 to this Form N-1A registration statement (File No.
2-87775) filed with the Commission on February 12, 1999.
5. Participation Agreement between Ultra Series Fund and CUNA Mutual
Pension Plan. Incorporated herein by reference to post-effective
amendment number 22 to this Form N-1A registration statement
(File No. 2-87775) filed with the Commission on February 12,
1999.
6. Participation Agreement between Ultra Series Fund and CUNA Mutual
Savings Plan. Incorporated herein by reference to post-effective
amendment number 22 to this Form N-1A registration statement
(File No. 2-87775) filed with the Commission on February 12,
1999.
7. Participation Agreement between Ultra Series Fund and CUNA Mutual
Thrift Plan. Incorporated herein by reference to post-effective
amendment number 22 to this Form N-1A registration statement
(File No. 2-87775) filed with the Commission on February 12,
1999.
(i) Opinion of Counsel. Incorporated herein by reference to post-effective
amendment number 19 to this Form N-1A registration statement (File No.
2-87775) filed with the Commission on February 28, 1997.
(j) 1. Consent of PricewaterhouseCoopers LLP. To be filed by
post-effective amendment.
2. Consent of KPMG LLP. To be filed by post-effective amendment.
(k) Not Applicable.
(l) Subscription Agreement between Ultra Series Fund and CUNA Mutual
Insurance Society effective __________. To be filed by post-effective
amendment.
(m) 1. Plan of Distribution dated May 1, 1997. Incorporated herein by
reference to post-effective amendment number 19 to this Form N-1A
registration statement (File No. 2-87775) filed with the
Commission on February 28, 1997.
2. Supplement No. 1 to Distrubution Plan effective May 1, 1999.
Incorporated herein by reference to post-effective amendment
number 23 to this Form N-1A registration statement (File No.
2-87775) filed with the Commission on April 23, 1999.
3. Supplement No. 2 to Distribution Plan effective ___________. To
be filed by post-effective amendment.
(n) Multi-Class Plans. Incorporated herein by reference to post-effective
amendment number 19 to this Form N-1A registration statement (File No.
2-87775) filed with the Commission on February 28, 1997.
(o) Reserved.
(p) 1. Ultra Series Fund's Code of Ethics effective June 1, 2000.
Incorporated herein by reference to post-effective amendment
number 24 to this Form N-1A registration statement (File No.
2-87775) filed with the Commission on April 20, 2000.
2. CIMCO Inc.'s (Investment Adviser) Code of Ethics effective April
1, 2000. Incorporated herein by reference to post-effective
amendment number 24 to this Form N-1A registration statement
(File No. 2-87775) filed with the Commission on April 20, 2000.
3. CUNA Brokerage Services, Inc.'s (Principal Underwriter) Code of
Ethics effective September 1, 1997. Incorporated herein by
reference to post-effective amendment number 24 to this Form N-1A
registration statement (File No. 2-87775) filed with the
Commission on April 20, 2000.
Other Exhibits
Powers of Attorney
<PAGE>
Item 24. Persons Controlled by or Under Common Control with the Fund
Class Z shares of the Ultra Series Fund are currently sold to separate accounts
of CUNA Mutual Life Insurance Company, CUNA Mutual Insurance Society, or their
affiliates, and to their qualified retirement plans.
Class C shares of the Ultra Series Fund are offered to separate accounts of
insurance companies other than CUNA Mutual Life Insurance Company, CUNA Mutual
Insurance Society, or their affiliates, and to qualified retirement plans of
companies not affiliated with the Fund, CUNA Mutual Life Insurance Company, CUNA
Mutual Insurance Society, or their affiliates. Currently, there are no Class C
shares outstanding.
CUNA Mutual Life Insurance Company is a mutual life insurance company and
therefore is controlled by its contractowners. Various companies and other
entities are controlled by CUNA Mutual Life Insurance Company and various
companies may be considered to be under common control with CUNA Mutual Life
Insurance Company. Such other companies and entities, together with the identity
of their controlling persons (where applicable), are set forth in the following
organization charts. In addition, by virtue of an Agreement of Permanent
Affiliation with CUNA Mutual Insurance Society ("CUNA Mutual"), the Ultra Series
Fund could be considered to be an affiliated person or an affiliated person of
an affiliated person of CUNA Mutual. Likewise, CUNA Mutual and its affiliates,
together with the identity of their controlling persons (where applicable), are
set forth on the following organization charts.
See organization charts on the following pages.
<PAGE>
CUNA Mutual Insurance Society
ORGANIZATIONAL CHART AS OF MARCH 6, 2000
CUNA Mutual Insurance Society
Business: Life, Health & Disability Insurance
May 20, 1935*
State of domicile: Wisconsin
CUNA Mutual Insurance Society, either directly or indirectly is the controlling
company of the following wholly-owned subsidiaries:
1. CUNA Mutual Investment Corporation
Business: Holding Company
September 15, 1972*
State of domicile: Wisconsin
CUNA Mutual Investment Corporation is the owner of the following subsidiaries:
a. CUMIS Insurance Society, Inc.
Business: Corporate Property/Casualty Insurance
May 23, 1960*
State of domicile: Wisconsin
CUMIS Insurance Society, Inc. is the 100% owner of the following
subsidiary:
(1) Credit Union Mutual Insurance Society New Zealand Ltd.
Business: Fidelity Bond Coverage
November l, 1990*
State of domicile: Wisconsin
b. CUNA Brokerage Services, Inc.
Business: Brokerage
July 19, 1985*
State of domicile: Wisconsin
c. CUNA Mutual General Agency of Texas, Inc.
Business: Managing General Agent
August 14, 1991*
State of domicile: Texas
d. MEMBERS Life Insurance Company
Business: Credit Disability/Life/Health
February 27, 1976*
State of domicile: Wisconsin
Formerly CUMIS Life & CUDIS
<PAGE>
e. International Commons, Inc.
Business: Special Events
January 13, 1981*
State of domicile: Wisconsin
f. CUNA Mutual Mortgage Corporation
Business: Mortgage Servicing
November 20, 1978*
State of domicile: Wisconsin
g. CUNA Mutual Insurance Agency, Inc.
Business: Leasing/Brokerage
March 1, 1974*
State of domicile: Wisconsin
Formerly CMCI Corporation
h. Stewart Associates Incorporated
Business: Credit Insurance
March 6, 1998
State of domicile: Wisconsin
i. CMG Mortgage Assurance Company
Business: Private Mortgage Insurance
April 14, 1994*
State of domicile: California
j. CUNA Mutual Business Services, Inc.
Business: Operate Financial Programs
Incorporated April 22, 1974
Wholly owned March 6, 2000
State of domicile: Wisconsin
2. CUNA Mutual Australia Holding Co. Pty. Ltd.
Business: Holding Company
September 17, 1999
Sydney, N.S.W. Australia
a. CUNA Mutual Life Australia Ltd.
Business: Life Insurance
October 15, 1999
Sydney, N.S.W. Australia
CUNA Mutual Insurance Agency, Inc. is the 100% owner of the following
subsidiaries:
(1) CM Field Services, Inc.
Business: Serves Agency Field Staff
January 26,1994*
State of domicile: Wisconsin
(2) CUNA Mutual Insurance Agency of Alabama, Inc.
Business: Property & Casualty Agency
May 27, 1993*
State of domicile: Alabama
(3) CUNA Mutual Insurance Agency of New Mexico, Inc.
Business: Brokerage of Corporate & Personal Lines
June 10, 1993*
State of domicile: New Mexico
(4) CUNA Mutual Insurance Agency of Hawaii, Inc.
Business: Property & Casualty Agency
June 10, 1993*
State of domicile: Hawaii
(5) CUNA Mutual Casualty Insurance Agency of Mississippi, Inc.
Business: Property & Casualty Agency
June 24, 1993 *
State of domicile: Mississippi
(6) CUNA Mutual Insurance Agency of Kentucky, Inc.
Business: Brokerage of Corporate & Personal Lines
October 5, 1994*
State of domicile: Kentucky
(7) CUNA Mutual Insurance Agency of Massachusetts, Inc.
Business: Brokerage of Corporate & Personal Lines
January 27, 1995*
State of domicile: Massachusetts
2. C.U.I.B.S. Pty. Ltd.
Business: Brokerage
February 18,1981*
Country of domicile: Australia
3. CUNA Caribbean Insurance Society Limited
Business: Life and Health
July 4, 1985*
Country of domicile: Trinidad and Tobago
4. CUNA Mutual Group, Limited
Business: Brokerage
May 27, 1998
Country of domicile: United Kingdom
* Dates shown are dates of acquisition, control or organization.
CUNA Mutual Insurance Society, either directly or through a wholly-owned
subsidiary, has a partial ownership interest in the following:
1. C. U. Family Insurance Services, Inc./Colorado
50% ownership by CUNA Mutual Insurance Agency, Inc.
50% ownership by Colleague Services Corporation
September 1, 1981
2. C. U. Insurance Services, Inc./Oregon
50% ownership by CUNA Mutual Insurance Agency, Inc.
50% ownership by Oregon Credit Union League
December 27, 1989
3. The CUMIS Group Limited
63.3% ownership by CUNA Mutual Insurance Society (as of 12-31 -96)
4. CIMCO Inc. (CIMCO)
50% ownership by CUNA Mutual Investment Corporation
50% ownership by CUNA Mutual Life Insurance Company
January 1, 1992
5. CUNA Mutual Insurance Agency of Ohio, Inc.
1% of value owned by Michael Corcoran (CUNA Mutual Employee) subject to a
voting trust agreement, Michael B. Kitchen as Voting Trustee.
99% of value-owned by CUNA Mutual Insurance Agency, Inc. Due to Ohio
regulations, CUNA Mutual Insurance Agency, Inc. holds no voting stock in
this corporation. June 14, 1993
6. SECURITY Management Company, Ltd. (Hungary)
90% ownership by CUNA Mutual Insurance Society
10% ownership by: Federation of Savings Cooperatives
Savings Cooperative of Szoreg
Savings Cooperative of Szekkutas
(collectively called Hungarian Associates)
September 5, 1992
7. CMG Mortgage Insurance Company
50% ownership by CUNA Mutual Investment Corporation 50% ownership by
PMI Mortgage Insurance Co.
April 14, 1994
8. Cooperators Life Assurance Society Limited (Jamaica)
CUNA Mutual Insurance Society owns 122,500 shares
Jamaica Co-op Credit Union League owns 127,500 shares
(NOTE: Awaiting authority to write business)
May 10, 1990
<PAGE>
9. CU Interchange Group, Inc.
Owned by CUNA Mutual Investment Corporation, CUNA Service Group and
various state league organizations December 15, 1993 - CUNA Mutual
Investment Corporation purchased 100 shares stock
10. CMG Mortgage Reinsurance Company
50% ownership by CUNA Mutual Investment Corporation
50% ownership by PMI Insurance Company
July 26, 1999
11. Credit Union Service Corporation
Owned by CUNA Mutual Investment Corporation, Credit Union National
Association, Inc. and 18 state league organizations March 29, 1996 -
CUNA Mutual Investment Corporation purchased 1,300,000 shares of stock
12. finsure.australia limited
50% ownership by CUNA Mutual Australia Holding Company Pty. Limited
50% ownership by CUSCAL
October 15, 1999
13. CUNA Strategic Services, Inc.
200.71 shares
December 31, 1999
Partnerships
1. CM CUSO Limited Partnership, a Washington Partnership
CUMIS Insurance Society, Inc. - General Partner
Credit Unions in Washington - Limited Partners
June 14, 1993
Limited Liability Companies
1. "Sofia LTD." (Ukraine)
99.96% CUNA Mutual Insurance Society
.04% CUMIS Insurance Society, Inc.
March 6, 1996
2. 'FORTRESS' (Ukraine)
80% "Sofia LTD."
19% The Ukrainian National Association of Savings and Credit Unions
1% Service Center by UNASCU
September 25, 1996
3. MEMBERS Development Company LLC
49% CUNA Mutual Investment Corporation
51% Credit Unions and CUSOs
September 24, 1999
4. The Center for Credit Union Innovation LLC
33.3% ownership by CUNA Mutual Insurance Society 33.3% ownership by
CUNA & Affiliates 33.3% ownership by American Association of Credit
Union Leagues
January 5, 2000
Affiliated (Nonstock)
1. MEMBERS Prime Club, Inc.
August 8, 1978
2. CUNA Mutual Group Foundation, Inc.
July 5, 1967
3. CUNA Mutual Life Insurance Company
July 1, 1990
CUNA Mutual Life Insurance Company
ORGANIZATIONAL CHART AS OF JANUARY 1, 2000
CUNA Mutual Life Insurance Company
An Iowa mutual life insurance company
Fiscal Year End: December 31
CUNA Mutual Life Insurance Company is the controlling company for the following
subsidiaries:
1. CIMCO Inc.
An Iowa Business Act Corporation
50% ownership by CUNA Mutual Life Insurance Company
50% ownership by CUNA Mutual Investment Corporation
CIMCO Inc. is the investment adviser of:
Ultra Series Fund
MEMBERS Mutual Funds
2. Plan America Program, Inc.
A Maine Business Act Corporation
100% ownership by CUNA Mutual Life Insurance Company
3. CMIA Wisconsin Inc.
A Wisconsin Business Act Corporation
100% ownership by CUNA Mutual Life Insurance Company
<PAGE>
Item 25. Indemnification
Each officer, Trustee or agent of the Ultra Series Fund shall be indemnified by
the Ultra Series Fund to the full extent permitted under the General Laws of the
State of Massachusetts and the Investment Company Act of 1940, as amended,
except that such indemnity shall not protect any such person against any
liability to the Ultra Series Fund or any shareholder thereof to which such
person would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office ("disabling conduct"). Indemnification shall be made when (1) a final
decision on the merits is made by a court or other body before whom the
proceeding was brought, that the person to be indemnified was not liable by
reason of disabling conduct or, (2) in the absence of such a decision, a
reasonable determination, based upon a review of the facts, that the person to
be indemnified was not liable by reason of disabling conduct, by (a) the vote of
a majority of the quorum of Trustees who are not "interested persons" of the
Ultra Series Fund as defined in Section 2(a)(19) of the Investment Company Act
of 1940, or (b) an independent legal counsel in a written opinion. The Ultra
Series Fund may, by vote of a majority of a quorum of Trustees who are not
interested persons, advance attorneys' fees or other expenses incurred by
officers, Trustees, Investment Advisers or principal underwriters, in defending
a proceeding upon the undertaking by or on behalf of the person to be
indemnified to repay the advance unless it is ultimately determined that he is
entitled to indemnification. Such advance shall be subject to at least one of
the following: (1) the person to be indemnified shall provide a security for his
undertaking, (2) the Ultra Series Fund shall be insured against losses arising
by reason of any lawful advances, or (3) a majority of a quorum of the
disinterested non-party Trustees of the Ultra Series Fund, or an independent
legal counsel in a written opinion, shall determine, based on a review of
readily available facts, that there is reason to believe that the person to be
indemnified ultimately will be found entitled to indemnification.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
<PAGE>
Item 26. Business and Other Connections of Investment Adviser
The Investment Adviser for the Ultra Series Fund is CIMCO Inc. See Part A
MANAGEMENT OF THE ULTRA SERIES FUND, The Investment Adviser for a more complete
description. The officers and directors of the Investment Adviser are as
follows:
NAME/ADDRESS POSITION HELD
Michael S. Daubs CIMCO Inc.
5910 Mineral Point Rd. President
Madison, WI 53705 1982-Present
Director
1995-Present
CUNA Mutual Insurance Society
Chief Officer - Investment
1990-Present
CUNA Mutual Life Insurance Company
Chief Officer - Investment
1989-Present
Kimberly M. Gant CIMCO Inc.
5910 Mineral Point Rd. Assistant Treasurer
Madison, WI 53705 1999-Present
Tracy K. Gunderson CIMCO Inc.
5910 Mineral Point Rd. Assistant Secretary
Madison, WI 53705 1999-Present
Lawrence R. Halverson CIMCO Inc.
5910 Mineral Point Rd. Senior Vice President
Madison, WI 53705 1996-Present
Vice President
1988-Present
Secretary
1992-1999
CUNA Brokerage Services, Inc.
President
1996-1998
Director
1996-Present
Joyce A. Harris CIMCO Inc.
PO Box 7130 Director and Chair
Madison, WI 53707 1992 - Present
Telco Community Credit Union
President, Chief Executive Officer
1978- Present
James C. Hickman CIMCO Inc.
975 University Avenue Director
Madison, WI 53706 1992 - Present
University of Wisconsin
Professor
1972 - Present
Mary E. Hoffmann CIMCO Inc.
5910 Mineral Point Rd. Treasurer
Madison, WI 53705 2000 - Present
Michael B. Kitchen CIMCO Inc.
5910 Mineral Point Rd. Director
Madison, WI 53705 1995 - Present
CUNA Mutual Insurance Society
President and Chief Executive Officer
1995- Present
CUNA Mutual Life Insurance Company
President and Chief Executive Officer
1995 - Present
Daniel J. Larson CIMCO Inc.
5910 Mineral Point Rd. Vice President
Madison, WI 53705 1995 - Present
Thomas J. Merfeld CIMCO Inc.
5910 Mineral Point Rd. Senior Vice President & Secretary
Madison, WI 53705 2000 - Present
Vice President
1994 - 2000
George A. Nelson CIMCO Inc.
PO Box 44965 Director and Vice Chair
Madison, WI 53744 1992 - Present
Evening Telegram Co. - WISC-TV
Vice President
1982 - Present
Jeffrey B. Pantages CIMCO Inc.
5910 Mineral Point Rd. Senior Vice President
Madison, WI 53705 1998-Present
<PAGE>
Item 27. Distributor
a. CUNA Brokerage Services, Inc., a registered broker-dealer, is the principal
Distributor of the shares of the Ultra Series Fund. CUNA Brokerage
Services, Inc. does not act as principal underwriter, depositor or
investment adviser for any investment company other than the Registrant,
MEMBERS Mutual Funds, CUNA Mutual Life Variable Account, and CUNA Mutual
Life Variable Annuity Account.
b. The officers and directors of CUNA Brokerage Services, Inc. are as follows:
<TABLE>
<CAPTION>
Name and Principal Position with Positions and Offices
Business Address Distributor with Registrant
<S> <C> <C>
Joseph L. Bauer* Assistant Treasurer Finance Reporting Operations
Manager
Wayne A. Benson* Director & President Chief Officer - Sales
Donna C. Blankenheim* Assistant Secretary Vice President
Assistant Secretary
Timothy L. Carlson** Assistant Treasurer None
Janice C. Doyle* Assistant Secretary Assistant Secretary
David S. Emery Vice President Division Vice President
9500 Cleveland Ave #210
Rancho Cucamonga, CA 91730
John C. Fritsche Assistant Vice President None
4455 LBJ Freeway
Suite 1108
Dallas, TX 75244
James E. Gowan* Director Vice President
Tracy K. Gunderson* Assistant Secretary Recording Secretary/Technical
Writer
Lawrence R. Halverson* Director None
John W. Henry* Director & Vice President Vice President
Michael G. Joneson* Secretary & Treasurer Vice President
Marcia L. Martin** Director & Assistant Assistant Vice President
Vice President
Campbell D. McHugh* Compliance Officer None
Daniel E. Meylink, Sr.* Director Chief Officer - Member Services
Andrew C. Osen* Associate Compliance Assistant Counsel
Officer
Faye A. Patzner* Vice President - General Senior Vice President and General
Counsel Counsel
Judd T. Schemmel* Associate Compliance Assistant Counsel
Officer
Brian L. Schroeder* Associate Compliance Assistant Director, Insurance &
Officer Securities Market
Barbara L. Secor** Assistant Secretary Assistant Vice President
Assistant Secretary
Helen W. Wagabaza* Assistant Secretary Recording Secretary/Technical
Writer
John W. Wiley* Associate Compliance Officer None
</TABLE>
*The principal business address of these persons is: 5910 Mineral Point Road,
Madison, Wisconsin 53705.
**The principal business address of these persons is: 2000 Heritage Way,
Waverly, Iowa 50677
c. There have been no commissions or other compensation paid by Registrant to
unaffiliated principal underwriters.
<PAGE>
Item 28. Location of Accounts and Records
The accounts, books and other documents required to be maintained by Registrant
pursuant to Section 31(a) of the Investment Company Act of 1940 and the rules
promulgated thereunder are maintained by:
a. CUNA Mutual Life Insurance Company
2000 Heritage Way
Waverly, Iowa 50677
b. CIMCO Inc.
5910 Mineral Point Road
Madison, Wisconsin 53705
c CUNA Mutual Insurance Society
5910 Mineral Point Road
Madison, Wisconsin 53705
d. State Street Bank & Trust Company
225 Franklin Street
Boston, Massachusetts 02110
<PAGE>
Item 29. Management Services
Not applicable.
Item 30. Undertakings
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Fund certifies that it meets all of the requirements
for effectiveness of this registration statement under rule 485(b) under the
Securities Act of 1933 and has duly caused this registration statement to be
signed on its behalf by the undersigned, duly authorized, in the City of
Madison, State of Wisconsin, on the 13th day of July, 2000.
Ultra Series Fund
By: /s/ Michael S. Daubs
Michael S. Daubs
President
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons in the capacities and
on the dates indicated.
SIGNATURE AND TITLE DATE
/s/ Gwendolyn M. Boeke*
Gwendolyn M. Boeke
Trustee
/s/ Robert M. Buckingham July 13, 2000
Robert M. Buckingham
Assistant Secretary
/s/ Michael S. Daubs July 13, 2000
Michael S. Daubs
President and Trustee
/s/ Alfred L. Disrud*
Alfred L. Disrud
Trustee
/s/ Lawrence R. Halverson July 13, 2000
Lawrence R. Halverson
Vice President, Secretary and Trustee
/s/ Michael G. Joneson July 13, 2000
Michael G. Joneson
Treasurer and Assistant Secretary
/s/ Thomas C. Watt*
Thomas C. Watt
Trustee
/s/ Kevin S. Thompson July 13, 2000
Kevin S. Thompson
Attorney-In-Fact
*Pursuant to Powers of Attorney.
<PAGE>
INDEX TO EXHIBITS TO
FORM N-1A FOR
ULTRA SERIES FUND
Item 23. Exhibits:
(d) 3. Amendment No. 2 to Management Agreement effective ____________. To be
filed by post-effective amendment.
5. Investment Sub-Advisory Agreement Between CIMCO Inc. and Lazard Asset
Management effective ____________. To be filed by post-effective
amendment.
6. Investment Sub-Advisory Agreement Between CIMCO Inc. and Massachusetts
Financial Services effective ____________. To be filed by
post-effective amendment.
7. Investment Sub-Advisory Agreement Between CIMCO Inc. and Oppenheimer
Funds, Inc. effective ____________. To be filed by post-effective
amendment.
g) 3. Amendment to Mutual Fund Custody Agreement effective December 2, 1999.
(j) 1. Consent of PricewaterhouseCoopers LLP. To be filed by post-effective
amendment.
2. Consent of KPMG LLP. To be filed by post-effective amendment.
(l) Subscription Agreement between Ultra Series Fund and CUNA Mutual Insurance
Society effective __________. To be filed by post-effective amendment.
(m) 3. Supplement No. 2 to Distribution Plan effective ___________. To be
filed by post-effective amendment.
Other Exhibits
Powers of Attorney
<PAGE>
Other Exhibits
Powers of Attorney
LIMITED POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that I, the undersigned, a Trustee of the
ULTRA SERIES FUND (the "Fund"), a business trust duly organized under the laws
of the State of Massachusetts, do hereby appoint, authorize, and empower Kevin
S. Thompson and Michael A. Murphy, severally, as my attorney and agent, for me
and in my name as a Trustee of the Fund on behalf of the Fund or otherwise with
full power to review, execute, deliver and file with the Securities and Exchange
Commission all necessary post-effective amendments to Form N-1A filed by the
Fund, Registration No. 2-87775, as may be required under the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as amended, and to do
and perform each and every act that said attorney may deem necessary or
advisable to comply with the intent of the aforesaid Acts.
WITNESS my hand and seal this 7th day of April, 2000.
/s/ Gwendolyn M. Boeke
Gwendolyn M. Boeke
Trustee for Ultra Series Fund
<PAGE>
LIMITED POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that I, the undersigned, a Trustee of the
ULTRA SERIES FUND (the "Fund"), a business trust duly organized under the laws
of the State of Massachusetts, do hereby appoint, authorize, and empower Kevin
S. Thompson and Michael A. Murphy, severally, as my attorney and agent, for me
and in my name as a Trustee of the Fund on behalf of the Fund or otherwise with
full power to review, execute, deliver and file with the Securities and Exchange
Commission all necessary post-effective amendments to Form N-1A filed by the
Fund, Registration No. 2-87775, as may be required under the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as amended, and to do
and perform each and every act that said attorney may deem necessary or
advisable to comply with the intent of the aforesaid Acts.
WITNESS my hand and seal this 7th day of April, 2000.
/s/ Michael S. Daubs
Michael S. Daubs
Trustee for Ultra Series Fund
<PAGE>
LIMITED POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that I, the undersigned, a Trustee of the
ULTRA SERIES FUND (the "Fund"), a business trust duly organized under the laws
of the State of Massachusetts, do hereby appoint, authorize, and empower Kevin
S. Thompson and Michael A. Murphy, severally, as my attorney and agent, for me
and in my name as a Trustee of the Fund on behalf of the Fund or otherwise with
full power to review, execute, deliver and file with the Securities and Exchange
Commission all necessary post-effective amendments to Form N-1A filed by the
Fund, Registration No. 2-87775, as may be required under the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as amended, and to do
and perform each and every act that said attorney may deem necessary or
advisable to comply with the intent of the aforesaid Acts.
WITNESS my hand and seal this 7th day of April, 2000.
/s/ Alfred L. Disrud
Alfred L. Disrud
Trustee for Ultra Series Fund
<PAGE>
LIMITED POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that I, the undersigned, a Trustee of the
ULTRA SERIES FUND (the "Fund"), a business trust duly organized under the laws
of the State of Massachusetts, do hereby appoint, authorize, and empower Kevin
S. Thompson and Michael A. Murphy, severally, as my attorney and agent, for me
and in my name as a Trustee of the Fund on behalf of the Fund or otherwise with
full power to review, execute, deliver and file with the Securities and Exchange
Commission all necessary post-effective amendments to Form N-1A filed by the
Fund, Registration No. 2-87775, as may be required under the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as amended, and to do
and perform each and every act that said attorney may deem necessary or
advisable to comply with the intent of the aforesaid Acts.
WITNESS my hand and seal this 7th day of April, 2000.
/s/ Lawrence R. Halverson
Lawrence R. Halverson
Trustee for Ultra Series Fund
<PAGE>
LIMITED POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that I, the undersigned, a Trustee of the
ULTRA SERIES FUND (the "Fund"), a business trust duly organized under the laws
of the State of Massachusetts, do hereby appoint, authorize, and empower Kevin
S. Thompson and Michael A. Murphy, severally, as my attorney and agent, for me
and in my name as a Trustee of the Fund on behalf of the Fund or otherwise with
full power to review, execute, deliver and file with the Securities and Exchange
Commission all necessary post-effective amendments to Form N-1A filed by the
Fund, Registration No. 2-87775, as may be required under the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as amended, and to do
and perform each and every act that said attorney may deem necessary or
advisable to comply with the intent of the aforesaid Acts.
WITNESS my hand and seal this 7th day of April, 2000.
/s/ T.C. Watt
T.C. Watt
Trustee for Ultra Series Fund
<PAGE>
Exhibit (g)3
AMENDMENT TO MUTUAL FUND CUSTODY AGREEMENT
This Amendment to the Mutual Fund Custody Agreement is made as of
December 2, 1999, by and between Ultra Series Fund (the "Fund") and State Street
Bank and Trust Company (the "Custodian"). Capitalized terms used in this
Amendment without definition shall have the respective meanings given to such
terms in the Custody Agreement referred to below.
WHEREAS, the Fund and the Custodian entered into a Mutual Fund Custody
Agreement dated as of April, 1997, as amended April 26, 1999 (as further amended
and in effect from time to time, the "Contract"); and
WHEREAS, the Fund is authorized to issue shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets, and the Fund has made each such series subject to
the Contract (each such series, together with all other series subsequently
established by the Fund and made subject to the Contract in accordance with the
terms thereof, shall be referred to as a "Portfolio", and, collectively, the
"Portfolios"); and
WHEREAS, the Fund and the Custodian desire to amend certain provisions
of the Contract to reflect revisions to Rule 17f-5 ("Rule 17f-5") promulgated
under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Fund and the Custodian desire to amend and restate certain
other provisions of the Contract relating to the custody of assets of each of
the Portfolios held outside of the United States.
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements hereinafter contained, the parties hereby agree to
amend the Contract, pursuant to the terms thereof, as follows:
I. Paragraph 14 of the Contract is hereby deleted, and Paragraphs 15 through
34 of the Contract are hereby renumbered, as of the effective date of this
Amendment, as Paragraphs 16 through 35, respectively.
II. New Paragraphs 14 and 15 of the Contract are hereby added, as of the
effective date of this Amendment, as set forth below.
14. The Custodian as Foreign Custody Manager.
14.1.Definitions. Capitalized terms in this Paragraph 14 shall have the
following meanings:
"Country Risk" means all factors reasonably related to the systemic risk of
holding Foreign Assets in a particular country including, but not limited to,
such country's political environment; economic and financial infrastructure
(including any Mandatory Securities Depositories operating in the country);
prevailing or developing custody and settlement practices; and laws and
regulations applicable to the safekeeping and recovery of Foreign Assets held in
custody in that country.
"Eligible Foreign Custodian" has the meaning set forth in section (a)(1) of Rule
17f-5, including a majority-owned or indirect subsidiary of a U.S. Bank (as
defined in Rule 17f-5), a bank holding company meeting the requirements of an
Eligible Foreign Custodian (as set forth in Rule 17f-5 or by other appropriate
action of the U.S. Securities and Exchange Commission (the "SEC")), or a foreign
branch of a Bank (as defined in Section 2(a)(5) of the 1940 Act) meeting the
requirements of a custodian under Section 17(f) of the 1940 Act, except that the
term does not include Mandatory Securities Depositories.
"Foreign Assets" means any of the Portfolios' investments (including foreign
currencies) for which the primary market is outside the United States and such
cash and cash equivalents as are reasonably necessary to effect the Portfolios'
transactions in such investments.
"Foreign Custody Manager" has the meaning set forth in section (a)(2) of Rule
17f-5.
"Mandatory Securities Depository" means a foreign securities depository or
clearing agency that, either as a legal or practical matter, must be used if the
Fund, on the Portfolio's behalf, determines to place Foreign Assets in a country
outside the United States (i) because required by law or regulation; (ii)
because securities cannot be withdrawn from such foreign securities depository
or clearing agency; or (iii) because maintaining or effecting trades in
securities outside the foreign securities depository or clearing agency is not
consistent with prevailing or developing custodial or market practices.
14.2. Delegation to the Custodian as Foreign Custody Manager. The Fund, by
resolution adopted by its Board of Trustees (the "Board"), hereby delegates to
the Custodian, with respect to the Portfolios, subject to Section (b) of Rule
17f-5, the responsibilities set forth in this Paragraph 14 with respect to
Foreign Assets of the Portfolios held outside the United States, and the
Custodian hereby accepts such delegation, as Foreign Custody Manager with
respect to the Portfolios.
14.3. Countries Covered. The Foreign Custody Manager shall be responsible for.
Performing the delegated responsibilities defined below only with respect to the
countries and custody arrangements for each such country listed on Schedule A to
this Contract, which list of countries may be amended from time to time by the
Fund with the agreement of the Foreign Custody Manager. The Foreign Custody
Manager shall list on Schedule A the Eligible Foreign Custodians selected by the
Foreign Custody Manager to maintain the assets of the Portfolios which list of
Eligible Foreign Custodians may be amended from time to time in the sole
discretion of the Foreign Custody Manager. Mandatory Securities Depositories are
listed on Schedule B to this Contract, which Schedule B may be amended from time
to time by the Foreign Custody Manager. The Foreign Custody Manager will provide
amended versions of Schedules A and Bin accordance with Section 14.7 of this
Paragraph 14.
Upon the receipt by the Foreign Custody Manager of Proper Instructions to open
an account or to place or maintain Foreign Assets in a country listed on
Schedule A, and the fulfillment by the Fund on behalf of the Portfolios of the
applicable account opening requirements for such country, the Foreign Custody
Manager shall be deemed to have been delegated by the Board on behalf of the
Portfolios responsibility as Foreign Custody Manager with respect to that
country and to have accepted such delegation. Execution of this Amendment by the
Fund shall be deemed to be a Proper Instruction to open an account, or to place
or maintain Foreign Assets, in each country listed on Schedule A in which the
Custodian has previously placed or currently maintains Foreign Assets pursuant
to the terms of the Contract. Following the receipt of Proper Instructions
directing the Foreign Custody Manager to close the account of a Portfolio with
the Eligible Foreign Custodian selected by the Foreign Custody Manager in a
designated country, the delegation by the Board on behalf of the Portfolios to
the Custodian as Foreign Custody Manager for that country shall be deemed to
have been withdrawn and the Custodian shall immediately cease to be the Foreign
Custody Manager of the Portfolios with respect to that country.
The Foreign Custody Manager may withdraw its acceptance of delegated
responsibilities with respect to a designated country upon written notice to the
Fund. Thirty days (or such longer period as to which the parties agree in
writing) after receipt of any such notice by the Fund, the Custodian shall have
no further responsibility as Foreign Custody Manager to the Fund with respect to
the country as to which the Custodian's acceptance of delegation is withdrawn.
14.4. Scope of Delegated Responsibilities.
14.4.1. Selection of Eligible Foreign Custodians. Subject to the provisions of
this Paragraph 14, the Portfolio's Foreign Custody Manager may place and
maintain the Foreign Assets in the care of the Eligible Foreign Custodian
selected by the Foreign Custody Manager in each country listed on Schedule A, as
amended from time to time.
In performing its delegated responsibilities as Foreign Custody Manager to place
or maintain Foreign Assets with an Eligible Foreign Custodian, the Foreign
Custody Manager shall determine that the Foreign Assets will be subject to
reasonable care, based on the standards applicable to custodians in the country
in which the Foreign Assets will be held by that Eligible Foreign Custodian,
after considering all factors relevant to the safekeeping of such assets,
including, without limitation the factors specified in Rule 17f-5(c)(1).
14.4.2. Contracts With Eligible Foreign Custodians. The Foreign Custody Manager
shall determine that the contract (or the rules or established practices or
procedures in the case of an Eligible Foreign Custodian that is a foreign
securities depository or clearing agency) governing the foreign custody
arrangements with each Eligible Foreign Custodian selected by the Foreign
Custody Manager will satisfy the requirements of Rule 17f-5(c)(2).
14.4.3. Monitoring. In each case in which the Foreign Custody Manager maintains
Foreign Assets with an Eligible Foreign Custodian selected by the Foreign
Custody Manager, the Foreign Custody Manager shall establish a system to monitor
(i) the appropriateness of maintaining the Foreign Assets with such Eligible
Foreign Custodian and (ii) the contract governing the custody arrangements
established by the Foreign Custody Manager with the Eligible Foreign Custodian
(or the rules or established practices and procedures in the case of an Eligible
Foreign Custodian selected by the Foreign Custody Manager which is a foreign
securities depository or clearing agency that is not a Mandatory Securities
Depository). In the event the Foreign Custody Manager determines that the
custody arrangements with an Eligible Foreign Custodian it has selected are no
longer appropriate, the Foreign Custody Manager shall notify the Board in
accordance with Section 14.7 hereunder.
<PAGE>
14.5. Guidelines for the Exercise of Delegated Authority. For purposes of this
Paragraph 14, the Board shall be deemed to have considered and determined to
accept such Country Risk as is incurred by placing and maintaining the Foreign
Assets in each country for which the Custodian is serving as Foreign Custody
Manager of the Portfolios. The Fund, on behalf of the Portfolios, and the Board
shall be deemed to be monitoring on a continuing basis such Country Risk to the
extent that the Board considers necessary or appropriate. The Fund and the
Custodian each expressly acknowledge that the Foreign Custody Manager shall not
be delegated any responsibilities under this Paragraph 14 with respect to
Mandatory Securities Depositories.
14.6. Standard of Care as Foreign Custody Manager of a Portfolio. In performing
the responsibilities delegated to it, the Foreign Custody Manager agrees to
exercise reasonable care, prudence and diligence such as a person having
responsibility for the safekeeping of assets of management investment companies
registered under the 1940 Act would exercise.
14.7. Reporting Requirements. The Foreign Custody Manager shall report the
withdrawal of the Foreign Assets from an Eligible Foreign Custodian and the
placement of such Foreign Assets with another Eligible Foreign Custodian by
providing to the Board amended Schedules A or B at the end of the calendar
quarter in which an amendment to either Schedule has occurred. The Foreign
Custody Manager shall make written reports notifying the Board of any other
material change in the foreign custody arrangements of the Portfolios described
in this Paragraph 14 after the occurrence of the material change.
14:8.Representations with Respect to Rule 17f-5. The Foreign Custody Manager
represents to the Fund that it is a U.S. Bank as
defined in section (a)(7) of Rule 17f-5.
The Fund represents to the Custodian that the Board has determined that it is
reasonable for the Board to rely on the Custodian to perform the
responsibilities delegated pursuant to this Contract to the Custodian as the
Foreign Custody Manager of the Portfolios.
14.9. Effective Date and Termination of the Custodian as Foreign Custody
Manager. The Board's delegation to the Custodian as Foreign Custody Manager of
the Portfolios shall be effective as of the date hereof and shall remain in
effect until terminated at any time, without penalty, by written notice from the
terminating party to the non-terminating party. Termination will become
effective thirty (30) days after receipt by the non-terminating party of such
notice. The provisions of Section 14.3 hereof shall govern the delegation to and
termination of the Custodian as Foreign Custody Manager of the Portfolios with
respect to designated countries.
15. Duties of the Custodian with Respect to Property of the Portfolios Held
Outside the United States.
15.1 Definitions. Capitalized terms in this Paragraph 15 shall have the
following meanings:
"Foreign Securities System" means either a clearing agency or a securities
depository listed on Schedule A hereto or a Mandatory Securities Depository
listed on Schedule B hereto.
<PAGE>
"Foreign Sub-Custodian" means a foreign banking institution serving as an
Eligible Foreign Custodian.
15.2. Holding Securities. The Custodian shall identify on its books as belonging
to the Portfolios the foreign securities held by each Foreign Sub-Custodian or
Foreign Securities System. The Custodian may hold foreign securities for all of
its customers, including the Portfolios, with any Foreign Sub-Custodian in an
account that is identified as belonging to the Custodian for the benefit of its
customers, provided however, that (i) the records of the Custodian with respect
to foreign securities of the Portfolios which are maintained in such account
shall identify those securities as belonging to the Portfolios and (ii), to the
extent permitted and customary in the market in which the account is maintained,
the Custodian shall require that securities so held by the Foreign Sub-Custodian
be held separately from any assets of such Foreign Sub-Custodian or of other
customers of such Foreign Sub-Custodian.
15.3. Foreign Securities Systems. Foreign securities shall be maintained in a
Foreign Securities System in a designated country only through arrangements
implemented by the Foreign Sub-Custodian in such country pursuant to the terms
of this Contract.
15.4. Transactions in Foreign Custody Account.
15.4.1. Delivery of Foreign Assets. The Custodian or a Foreign Sub-Custodian
shall release and deliver foreign securities of the Portfolios held by such
Foreign Sub-Custodian, or in a Foreign Securities System account, only upon
receipt of Proper Instructions, which may be continuing instructions when deemed
appropriate by the parties, and only in the following cases:
(i) upon the sale of such foreign securities for the Portfolio in
accordance with commercially reasonable market practice in the country
where such foreign securities are held or traded, including, without
limitation: (A) delivery against expectation of receiving later
payment; or (B) in the case of a sale effected through a Foreign
Securities System, in accordance with the rules governing the
operation of the Foreign Securities System;
(ii) in connection with any repurchase agreement related to foreign
securities;
(iii)to the depository agent in connection with tender or other similar
offers for foreign securities of the Portfolios;
(iv) to the issuer thereof or its agent when such foreign securities are
called, redeemed, retired or otherwise become payable;
(v) to the issuer thereof, or its agent, for transfer into the name of the
Custodian (or the name of the respective Foreign Sub-Custodian or of
any nominee of the Custodian or such Foreign Sub-Custodian) or for
exchange for a different number of bonds, certificates or other
evidence representing the same aggregate face amount or number of
units;
<PAGE>
(vi) to brokers, clearing banks or other clearing agents for examination or
trade execution in accordance with market custom; provided that in any
such case the Foreign Sub-Custodian shall have no responsibility or
liability for any loss arising from the delivery of such securities
prior to receiving payment for such securities except as may arise
from the Foreign Sub-Custodian's own negligence or willful misconduct;
(vii)for exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the
securities of the issuer of such securities, or pursuant to provisions
for conversion contained in such securities, or pursuant to any
deposit agreement;
(viii) in the case of warrants, rights or similar foreign securities, the
surrender thereof in the exercise of such warrants, rights or similar
securities or the surrender of interim receipts or temporary
securities for definitive securities;
(ix) for delivery as security in connection with any borrowing by the
Portfolios requiring a pledge of assets by the Portfolios;
(x) in connection with trading in options and futures contracts, including
delivery as original margin and variation margin;
(xi) in connection with the lending of foreign securities; and
(xii)for any other proper purpose, but only upon receipt of Proper
Instructions specifying the foreign securities to be delivered,
setting forth the purpose for which such delivery is to be made,
declaring such purpose to be a proper corporate purpose, and naming
the person or persons to whom delivery of such securities shall be
made.
15.4.2. Payment of Portfolio Monies. Upon receipt of Proper Instructions, which
may be continuing instructions when deemed appropriate by the parties, the
Custodian shall pay out, or direct the respective Foreign Sub-Custodian or the
respective Foreign Securities System to pay out, monies of a Portfolio in the
following cases only:
(i) upon the purchase of foreign securities for the Portfolio, unless
otherwise directed by Proper Instructions, by (A) delivering money to
the seller thereof or to a dealer therefore (or an agent for such
seller or dealer) against expectation of receiving later delivery of
such foreign securities; or (B) in the case of a purchase effected
through a Foreign Securities System, in accordance with the rules
governing the operation of such Foreign Securities System;
(ii) in connection with the conversion, exchange or surrender of foreign
securities of the Portfolio;
(iii)for the payment of any expense or liability of the Portfolio,
including but not limited to the following payments: interest, taxes,
investment advisory fees,
<PAGE>
transfer agency fees, fees under this Contract, legal fees, accounting
fees, and other operating expenses;
(iv) for the purchase or sale of foreign exchange or foreign exchange
contracts for the Portfolio, including transactions executed with or
through the Custodian or its Foreign Sub-Custodians;
(v) in connection with trading in options and futures contracts, including
delivery as original margin and variation margin;
(vi) for payment of part or all of the dividends received in respect of
securities sold short;
(vii)in connection with the borrowing or lending of foreign securities;
and
(viii) for any other proper purpose, _but only upon receipt of Proper
Instructions specifying the amount of such payment, setting forth the
purpose for which such payment is to be made, declaring such purpose
to be a proper trust purpose, and naming the person or persons to whom
such payment is to be made.
15.4.3. Market Conditions; Market Information. Notwithstanding any provision of
this Contract to the contrary, settlement and payment for Foreign Assets
received for the account of the Portfolios and delivery of Foreign Assets
maintained for the account of the Portfolios may be effected in accordance with
the customary established securities trading or processing practices and
procedures in the country or market in which the transaction occurs, including,
without limitation, delivering Foreign Assets to the purchaser thereof or to a
dealer therefor (or an agent for such purchaser or dealer) with the expectation
of receiving later payment for such Foreign Assets from such purchaser or
dealer.
The Custodian shall provide to the Board the information with respect to custody
and settlement practices in countries in which the Custodian employs a Foreign
Sub-Custodian, including without limitation information relating to Foreign
Securities Systems, described on Schedule C hereto at the time or times set
forth on such Schedule. The Custodian may revise Schedule C from time to time,
provided that no such revision shall result in the Board being provided with
substantively less information than had been previously provided hereunder.
15.5. Registration of Foreign Securities. The foreign securities maintained in
the custody of a Foreign Sub-Custodian (other than bearer securities) shall be
registered in the name of the applicable Portfolio or in the name of the
Custodian or in the name of any Foreign SubCustodian or in the name of any
nominee of the foregoing, and the Fund on behalf of such Portfolio agrees to
hold any such nominee harmless from any liability as a holder of record of such
foreign securities. The Custodian or a Foreign Sub-Custodian shall not be
obligated to accept securities on behalf of a Portfolio under the terms of this
Contract unless the form of such securities and the manner in which they are
delivered are in accordance with reasonable market practice.
<PAGE>
15.6. Bank Accounts. The Custodian shall identify on its books as belonging to
the Fund cash (including cash denominated in foreign currencies) deposited with
the Custodian. Where the Custodian is unable to maintain, or market practice
does not facilitate the maintenance of, cash on the books of the Custodian, a
bank account or bank accounts opened and maintained outside the United States on
behalf of a Portfolio with a Foreign Sub-Custodian shall be subject only to
draft or order by the Custodian or such Foreign Sub-Custodian, acting pursuant
to the terms of this Contract to hold cash received by or from or for the
account of the Portfolio.
15.7. Collection of Income. The Custodian shall use reasonable commercial
efforts to collect all income and other payments with respect to the Foreign
Assets held hereunder to which the Portfolios shall be entitled and shall credit
such income, as collected, to the applicable Portfolio In the event that
extraordinary measures are required to collect such income, the Fund and the
Custodian shall consult as to such measures and as to the compensation and
expenses of the Custodian relating to such measures.
15.8. Shareholder Rights. With respect to the foreign securities held pursuant
to this Paragraph 15, the Custodian will use reasonable commercial efforts to
facilitate the exercise of voting and other shareholder rights, subject always
to the laws, regulations and practical constraints that may exist in the country
where such securities are issued. The Fund acknowledges that local conditions,
including lack of regulation, onerous procedural obligations, lack of notice and
other factors may have the effect of severely limiting the ability of the Fund
to exercise shareholder rights.
15.9. Communications Relating to Foreign Securities. The Custodian shall
transmit promptly to the Fund written information (including, without
limitation, pendency of calls and maturities of foreign securities and
expirations of rights in connection therewith) received by the Custodian via the
Foreign Sub-Custodians from issuers of the foreign securities being held for the
account of the Portfolios. With respect to tender or exchange offers, the
Custodian shall transmit promptly to the Fund written information so received by
the Custodian from issuers of the foreign securities whose tender or exchange is
sought or from the party (or its agents) making the tender or exchange offer.
The Custodian shall not be liable for any untimely exercise of any tender,
exchange or other right or power in connection with foreign securities or other
property of the Portfolios at any time held by it unless (i) the Custodian or
the respective Foreign SubCustodian is in actual possession of such foreign
securities or property and (ii) the Custodian receives Proper Instructions with
regard to the exercise of any such right or power, and both (i) and (ii) occur
at least three business days prior to the date on which the Custodian is to take
action to exercise such right or power.
15.10. Liability of Foreign Sub-Custodians and Foreign Securities Systems. Each
agreement pursuant to which the Custodian employs a Foreign Sub-Custodian shall,
to the extent possible, require the Foreign Sub-Custodian to exercise reasonable
care in the performance of its duties and, to the extent possible, to indemnify,
and hold harmless, the Custodian from and against any loss, damage, cost,
expense, liability or claim arising out of or in connection with the Foreign
Sub-Custodian's performance of such obligations. At the Fund's election, the
Portfolios shall be entitled to be subrogated to the rights of the Custodian
with respect to any claims against a Foreign Sub-Custodian as a consequence of
any such loss, damage, cost, expense, liability or
<PAGE>
claim if and to the extent that the Portfolios have not been made whole for any
such loss, damage, cost, expense, liability or claim.
15.11. Tax Law. The Custodian shall have no responsibility or liability for any
obligations now or hereafter imposed on the Fund, the Portfolios or the
Custodian as custodian of the Portfolios by the tax law of the United States or
of any state or political subdivision thereof. It shall be the responsibility of
the Fund to notify the Custodian of the obligations imposed on the Fund with
respect to the Portfolios or the Custodian as custodian of the Portfolios by the
tax law of countries other than those mentioned in the above sentence, including
responsibility for withholding and other taxes, assessments or other
governmental charges, certifications and governmental reporting. The sole
responsibility of the Custodian with regard to such tax law shall be to use
reasonable efforts to assist the Fund with respect to any claim for exemption or
refund under the tax law of countries for which the Fund has provided such
information.
15.12. Liability of Custodian. Except as may arise from the Custodian's own
negligence or willful misconduct or the negligence or willful misconduct of a
Sub-Custodian, the Custodian shall be without liability to the Fund for any
loss, liability, claim or expense resulting from or caused by anything which is
(A) part of Country Risk or (B) part of the "prevailing country risk" of the
Fund and the Portfolios, as such term is used in SEC Release Nos. IC-22658;
IS-1080 (May 12, 1997) or as such term or other similar terms are now or in the
future interpreted by the SEC or by the staff of the Division of Investment
Management of the SEC.
The Custodian shall be liable for the acts or omissions of a Foreign
Sub-Custodian to the same extent as set forth with respect to sub-custodians
generally in the Contract and, regardless of whether assets are maintained in
the custody of a Foreign Sub-Custodian or a Foreign Securities Depository, the
Custodian shall not be liable for any loss, damage, cost, expense, liability or
claim resulting from nationalization, expropriation, currency restrictions, or
acts of war or terrorism, or any other loss where the Sub-Custodian has
otherwise acted with reasonable care.
III. Except as specifically superseded or modified herein, the terms and
provisions of the Contract shall continue to apply with full force and
effect. In the event of any conflict between the terms of the Contract
prior to this Amendment and this Amendment, the terms of this Amendment
shall prevail. If the Custodian is delegated the responsibilities of
Foreign Custody Manager pursuant to the terms of Paragraph 14 hereof,
in the event of any conflict between the provisions of Paragraphs 14
and 15 hereof, the provisions of Paragraph 14 shall prevail.
IN WITNESS WHEREOF, each of the parties has caused this Amendment to be executed
in its name and behalf by its duly authorized representative as of the date
first above written.
STATE STREET BANK AND TRUST COMPANY ULTRA SERIES FUND
By: /s/ Stephen R. Hilliard By: /s/ L. R. Halverson
Name: Stephen R. Hilliard Name: Lawrence R. Halverson
Title: Vice President Title: Vice President
<PAGE>
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
Country Subcustodian Non-Mandatory Depositories
Argentina Citibank, N.A. --
Australia Westpac Banking Corporation --
Austria Erste Bank der Oesterreichischen --
Sparkassen AG
Bahrain HSBC Bank Middle East --
(as delegate of The Hong Kong and
Shanghai Banking Corporation Limited)
Bangladesh Standard Chartered Bank --
Belgium Fortis Bank NV/as. --
Bermuda The Bank of Bermuda Limited --
Bolivia Citibank, N. A. --
Botswana Barclays Bank of Botswana Limited --
Brazil Citibank, N.A. --
Bulgaria ING Bank N.V. --
Canada State Street Trust Company Canada --
Chile Citibank, N.A. --
People's Republic The Hong Kong and Shanghai --
of China Banking Corporation Limited,
Shanghai and Shenzhen branches
Colombia Cititrust Colombia S.A. --
Sociedad Fiduciaria
10/5/99 1
<PAGE>
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
Country Subcustodian Non-Mandatory Depositories
Costa Rica Banco BCT S.A. --
Croatia Privredna Banka Zagreb dal --
Cyprus The Cyprus Popular Bank Ltd. --
Czech Republic Eskoslovenska Obchodni --
Banka, A.S.
Denmark Den Danske Bank --
Ecuador Citibank, N.A. --
Egypt Egyptian British Bank --
(as delegate of The Hong Kong
and Shanghai Banking Corporation
Limited)
Estonia Hansabank --
Finland Merita Bank Plc. --
France Paribas, S.A. --
Germany Dresdner Bank AG --
Ghana Barclays Bank of Ghana Limited --
Greece National Bank of Greece S.A. Bank of Greece,
System for
Monitoring
Transactions in
Securities in
Book-Entry Form
Hong Kong Standard Chartered Bank --
Hungary Citibank Rt. --
10/5/99 2
<PAGE>
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
Country Subcustodian Non-Mandatory Depositories
Iceland Icebank Ltd. --
India Deutsche Bank AG --
The Hong Kong and Shanghai
Banking Corporation Limited
Indonesia Standard Chartered Bank --
Ireland Bank of Ireland --
Israel Bank Hapoalim B.M. --
Italy Paribas, S.A. --
Ivory Coast Societe Generale de Banques --
en Cote d'Ivoire
Jamaica Scotiabank Jamaica Trust and --
Merchant -Bank Limited
Japan The Fuji Bank, Limited Japan Securities
Depository Center
(JASDEC)
The Sumitomo Bank, Limited
Jordan HSBC Bank Middle East --
(as delegate of The Hong Kong and
Shanghai Banking Corporation Limited)
Kenya Barclays Bank of Kenya Limited --
Republic of Korea The Hong Kong and Shanghai --
Banking Corporation Limited
Latvia A/s Hansabank --
10/5/99 3
<PAGE>
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
Country Subcustodian Non-Mandatory Depositories
Lebanon HSBC Bank Middle East --
(as delegate of The Hong Kong and
Shanghai Banking Corporation Limited)
Lithuania Vilniaus Bankas AB --
Malaysia Standard Chartered Bank --
Malaysia Berhad
Mauritius The Hong Kong and Shanghai --
Banking Corporation Limited
Mexico Citibank Mexico, S.A. --
Morocco Banque Commerciale du Maroc --
Namibia (via) Standard Bank of South Africa --
The Netherlands MeesPierson N.V. --
New Zealand ANZ Banking Group --
(New Zealand) Limited
Norway Christiania Bank og --
Kreditkasse ASA
Oman HSBC Bank Middle East --
(as delegate of The Hong Kong and
Shanghai Banking Corporation Limited)
Pakistan Deutsche Bank AG --
Palestine HSBC Bank Middle East --
(as delegate of The Hong Kong and
Shanghai Banking Corporation Limited)
Peru Citibank, N.A. --
10/5/99 4
<PAGE>
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
Country Subcustodian Non-Mandatory Depositories
Philippines Standard Chartered Bank --
Poland Citibank (Poland) S.A. --
Portugal Banco Comercial Portugues --
Qatar HSBC Bank Middle East --
Romania ING Bank N.V. --
Russia Credit Suisse First Boston AO, Moscow --
(as delegate of Credit Suisse
First Boston, Zurich)
Singapore The Development Bank --
of Singapore Limited
Slovak Republic Ceskoslovenska Obchodni Banka, A.S. --
Slovenia Bank Austria Creditanstalt d.d. --
Ljubljana
South Africa Standard Bank of South Africa Limited --
Spain Banco Santander Central Hispano, S.A. --
Sri Lanka The Hong Kong and Shanghai --
Banking Corporation Limited
Swaziland Standard Bank Swaziland Limited --
Sweden Skandinaviska Enskilda Banken --
Switzerland UBS AG --
10/5/99 5
<PAGE>
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
Country Subcustodian Non-Mandatory Depositories
Taiwan - RO.C. Central Trust of China --
Thailand Standard Chartered Bank --
Trinidad & Tobago Republic Bank Limited --
Tunisia Banque Internationale Arabe de Tunisie --
Turkey Citibank, N.A. --
Ukraine ING Bank Ukraine --
United Kingdom State Street Bank and Trust Company, --
London Branch
Uruguay BankBoston N.A. --
Venezuela Citibank, N.A. --
Vietnam The Hong Kong and Shanghai --
Banking Corporation Limited
Zambia Barclays Bank of Zambia Limited --
Zimbabwe Barclays Bank of Zimbabwe Limited --
Euroclear (The Euroclear System)/State Street London Limited
Cedelbank S.A. (Cedel Bank, societe anonyme)/State Street London Limited
INTERSETTLE (for EASDAQ Securities)
10/5/99 6
<PAGE>
STATE STREET SCHEDULE B
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
Country Mandatory Depositories
Argentina Caja de Valores S.A.
Australia Austraclear Limited
Reserve Bank Information and Transfer System
Austria Oesterreichische Kontrollbank AG
(Wertpapiersammelbank Division)
Belgium Caisse Interprofessionnelle de Depots et
de Virements de Titres S.A.
Banque Nationale de Belgique
Brazil Companhia Brasileira de Liquidacao e
Custodia
Bulgaria Central Depository AD
Bulgarian National Bank
Canada Canadian Depository
for Securities Limited
Chile Deposito Central de Valores S.A
People's Republic Shanghai Securities Central Clearing &
of China Registration Corporation
Shenzhen Securities Clearing Co., Ltd.
Colombia Deposito Centralizado de Valores
Costa Rica Central de Valores S.A.
* Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.
10/5/99 1
<PAGE>
STATE STREET SCHEDULE B
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
Country Mandatory Depositories
Croatia Ministry of Finance
National Bank of Croatia
Sredisnja Depozitarna Agencija
Czech Republic Stredisko cennych papiru
Czech National Bank
Denmark Vaerdipapircentralen (Danish Securities Center)
Egypt Misr Company for Clearing, Settlement,
and Depository
Estonia Eesti Vaartpaberite Keskdepositoorium
Finland Finnish Central Securities Depository
France Societe Interprofessionnelle pour la
Compensation des Valeurs Mobilieres
Germany Deutsche Borse Clearing AG
Greece Central Securities Depository
(Apothetirion Titlon AE)
Hong Kong Central Clearing and Settlement System
Central Moneymarkets Unit
Hungary Kozponti Elszamolohaz es Ertektar
(Budapest) Rt. (KELER)
[Mandatory for Govt Bonds and dematerialized
equities only; SSB does not use for other securities]
* Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.
10/5/99
<PAGE>
STATE STREET SCHEDULE B
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
Country Mandatory Depositories
India The National Securities Depository Limited
Reserve Bank of India
Indonesia Bank Indonesia
PT Kustodian Sentral Efek Indonesia
Ireland Central Bank of Ireland
Securities Settlement Office
Israel Tel Aviv Stock Exchange Clearing
House Ltd. (TASE Clearinghouse)
Bank of Israel
(As part of the TASE Clearinghouse system)
Italy Monte Titoli S.p.A.
Banca d'Italia
Ivory Coast Depositaire Central - Banque de Reglement
Jamaica Jamaica Central Securities Depository
Japan Bank of Japan Net System
Kenya Central Bank of Kenya
Republic of Korea Korea Securities Depository Corporation
Latvia Latvian Central Depository
* Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.
10/5/99 3
<PAGE>
STATE STREET SCHEDULE B
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
Country Mandatory Depositories
Lebanon Custodian and Clearing Center of
Financial Instruments for Lebanon
and the Middle East (MIDCLEAR) S.A.L.
The Central Bank of Lebanon
Lithuania Central Securities Depository of Lithuania
Malaysia Malaysian Central Depository Sdn. Bhd.
Bank Negara Malaysia,
Scripless Securities Trading and Safekeeping
System
Mauritius Central Depository & Settlement
Co. Ltd.
Mexico S.D. INDEVAL
(Instituto para el Deposito de
Valores)
Morocco Maroclear
The Netherlands Nederlands Centraal Instituut voor Giraal
Effectenverkeer B.V. (NECIGEF)
New Zealand New Zealand Central Securities
Depository Limited
Norway Verdipapirsentralen (the Norwegian Central
Registry of Securities)
Oman Muscat Securities Market Depository & Securities
Registration Company
* Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.
10/5/99 4
<PAGE>
STATE STREET SCHEDULE B
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
Country Mandatory Depositories
Pakistan Central Depository Company of Pakistan Limited
State Bank of Pakistan
Palestine The Palestine Stock Exchange
Peru Caja de Valores y Liquidaciones
CAVALI ICLV S.A.
Philippines Philippines Central Depository, Inc.
Registry of Scripless Securities
(ROSS) of the Bureau of Treasury
Poland National Depository of Securities
(Krajowy Depozyt Papierow Wartosciowych SA)
Central Treasury Bills Registrar
Portugal Central de Valores Mobiliarios
Qatar Doha Securities Market
Romania National Securities Clearing, Settlement and
Depository Company
Bucharest Stock Exchange Registry Division
National Bank of Romania
Singapore Central Depository (Pte) Limited
Monetary Authority of Singapore
* Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.
10/5/99 5
<PAGE>
STATE STREET SCHEDULE B
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
Country Mandatory Depositories
Slovak Republic Stredisko
cennych papierov SR
Bratislava, a.s.
National Bank of Slovakia
Slovenia Klirinsko Depotna Druzba dal.
South Africa The Central Depository Limited
Strate Ltd.
Spain Servicio de Compensacion y
Liquidacion de Valores, S.A.
Banco de Espana,
Central de Anotaciones en Cuenta
Sri Lanka Central Depository System
(Pvt) Limited
Sweden Vardepapperscentralen VPC AB
(the Swedish Central Securities Depository)
Switzerland SIS - SegaIntersettle
Taiwan - R.O.C. Taiwan Securities Central
Depository Co., Ltd.
Thailand Thailand Securities Depository
Company Limited
Tunisia Societe Tunisienne Interprofessionelle pour la
Compensation et de Depots de
Valeurs Mobilieres
* Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.
10/5/99 6
<PAGE>
STATE STREET SCHEDULE B
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
Country Mandatory Depositories
Turkey Takas ve Saklama Bankasi A.S.
(TAKASBANK)
Central Bank of Turkey
Ukraine National Bank of Ukraine
United Kingdom The Bank of England,
The Central Gilts Office and
The Central Moneymarkets Office
Venezuela Central Bank of Venezuela
Zambia LuSE Central Shares Depository Limited
Bank of Zambia
* Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.
10/5/99 7
<PAGE>
SCHEDULE C
MARKET INFORMATION
Publication/Type
of Information Brief Description
(Frequency)
The Guide to An overview of safekeeping and settlement practices and
Custody in World procedures in each market in which State Street Bank and
Markets Trust Company offers custodial services.
(annually)
Global Custody Information relating to the operating history and structure
Network Review of depositories and subcustodians located in the markets in
(annually) which State Street Bank and Trust Company offers custodial
services, including transnational depositories.
Global Legal Survey With respect to each market in which State Street Bank and
(annually) Trust Company offers custodial services, opinions relating
to whether local law restricts (i) access of a fund's
independent public accountants to books and records of a
Foreign Sub Custodian or Foreign Securities System, (ii) the
Fund's ability to recover in the event of bankruptcy or
insolvency of a Foreign Sub-Custodian or Foreign Securities
System, (iii) the Fund's ability to recover in the event of
a loss by a Foreign Sub-Custodian or Foreign Securities
System, and (iv) the ability of a foreign investor to
convert cash and cash equivalents to U.S. dollars.
Subcustodian Copies of the subcustodian contracts State Street Bank and
Agreements Trust Company has entered into with each subcustodian in the
(annually) markets in which State Street Bank and Trust Company offers
subcustody services to its US mutual fund clients.
Network Bulletins Developments of interest to investors in the markets in
(weekly): which State Street Bank and Trust Company offers custodial
services.
Foreign Custody With respect to markets in which State Street Bank and Trust
Advisories: Company offers custodial services which exhibit special
(as necessary): custody risks, developments which may impact State Street's
ability to deliver expected levels of Service.
