As filed with the Securities and Exchange Commission on February 25, 2009
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N - CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act File No. 811-04815
Ultra Series Fund
5910 Mineral Point Road
Madison, WI 53705
(608) 238-5851
(Registrant's Exact Name, Address and Telephone Number)
Pamela M. Krill, Esquire
CUNA Mutual Insurance Society
Managing Associate General Counsel
5910 Mineral Point Road
Madison, WI 53705
(Name and Address of Agent for Service)
--------------------------------------------
Date of fiscal year end: December 31
Date of reporting period: December 31, 2008
ITEM 1. REPORTS TO STOCKHOLDERS
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A N N U A L R E P O R T
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FOR PERIOD ENDED DECEMBER 31, 2008
Conservative Allocation, Moderate Allocation, Aggressive Allocation, Money
Market, Bond, High Income, Diversified Income, Large Cap Value, Large Cap
Growth, Mid Cap Value, Mid Cap Growth, Small Cap Value, Small Cap Growth,
Global Securities, International Stock, Target Retirement 2020, Target
Retirement 2030, and Target Retirement 2040 Funds of the Ultra Series Fund
MEMBERS(R) Variable Annuity
MEMBERS(R) Variable Annuity II
MEMBERS(R) Choice Variable Annuity
MEMBERS(R) Variable Annuity III
MEMBERS(R) Variable Universal Life
MEMBERS(R) Variable Universal Life II
DISTRIBUTED BY:
CUNA Brokerage Services, Inc.
Office of Supervisory Jurisdiction
2000 Heritage Way
Waverly, IA 50677
Member FINRA & SIPC
TELEPHONE:
(319) 352-4090
(800) 798-5500
[LOGO OF MEMBERS](TM)
INSURANCE & INVESTMENTS
This material is for reporting purposes only and shall not be used in
connection with a solicitation, offer or any proposed sale or purchase of
securities unless preceded or accompanied by a prospectus.
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MOVE CONFIDENTLY INTO THE FUTURE(TM)
ANNUAL REPORT
This booklet contains an annual report for the Ultra Series Fund. The Ultra
Series Fund is one of the mutual funds in which the subaccounts of the CUNA
Mutual Variable Life Insurance Account and CUNA Mutual Variable Annuity Account
invest. If you own a MEMBERS(R) Variable Annuity or MEMBERS(R) Variable
Universal Life contracts, you may allocate amounts to the subaccounts that
invest in the Ultra Series Fund.
The Ultra Series Fund includes the Conservative Allocation, Moderate Allocation,
Aggressive Allocation, Money Market, Bond, High Income, Diversified Income,
Large Cap Value, Large Cap Growth, Mid Cap Value, Mid Cap Growth, Small Cap
Value, Small Cap Growth, Global Securities, International Stock, Target
Retirement 2020, Target Retirement 2030, and Target Retirement 2040 Funds.
If you own a MEMBERS(R) Variable Universal Life or Ultra Vers-ALL LIFE(SM)
policy, as you refer to the annual report for the Ultra Series Fund, the
subaccounts available on your policy invest in the Mid Cap Growth Fund, Large
Cap Growth Fund, Large Cap Value Fund, Diversified Income Fund, Bond Fund, and
Money Market Funds.
If you own a MEMBERS(R) Variable Annuity, MEMBERS(R) Variable Annuity II,
MEMBERS(R) Choice Variable Annuity, MEMBERS(R) Variable Annuity III, or
MEMBERS(R) Variable Universal Life II policy, as you refer to the annual report
for the Ultra Series Fund, the subaccounts available on your policy invest in
the Conservative Allocation, Moderate Allocation, Aggressive Allocation, Money
Market, Bond, High Income, Diversified Income, Large Cap Value, Large Cap
Growth, Mid Cap Value, Mid Cap Growth, Small Cap Value, Small Cap Growth, Global
Securities and International Stock Funds.
Nothing in this report represents a recommendation of a security by the
investment adviser. Manager views and portfolio holdings may have changed since
the date of this report.
For more complete information including charges and expenses, obtain a
prospectus from your representative or call the Home Office at 1-800-798-5500,
Monday through Friday, 7 a.m. to 8 p.m. Central time. Consider the investment
objectives, risks and charges and expenses of the investment carefully before
investing.
As with all securities, the Securities and Exchange Commission ("SEC") has not
approved or disapproved of these securities, nor does the SEC guarantee the
accuracy or adequacy of the prospectus. Any statement to the contrary is a
criminal offense.
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LETTER TO INVESTORS
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[PHOTO OF DAVID P. MARKS]
David P. Marks
Dear Investor:
I am pleased to present the annual report for the Ultra Series Fund.
The past 12 months have been marked by unforeseen volatility and failures across
the global financial landscape. The credit markets remain in a frozen state
impacting both Wall Street and Main Street in a number of critical ways. What
began as a crisis in the sub-prime mortgage market in the U.S. rapidly cascaded
far and wide throughout the economy and across the globe; in some cases
resulting in calamity for businesses and individuals alike. The resultant
impacts, regardless of degree, were that nearly every major asset class within
the stock and bond universe lost real value. For anyone invested in stocks or
bonds, it has been a remarkable test of investor patience. The last time
intermediate-term government bonds AND the S&P 500 stock index delivered
negative returns over a 12 month period was in 1969 and before that 1931(1).
Modern day investors have been used to expecting more from our investments and
the past 12 months have disappointed nearly everyone. While we are not
predicting when the markets bottom; they will at some point and the recovery
could be very significant as it has in the past. History does show that in times
like these opportunities abound and those with the ability to stay focused can
make attractive returns if their time horizon is longer than the next 12 months.
Patience in these markets is truly a major virtue.
As a manager of portfolios of bonds and stocks, this environment demands a
disciplined approach including vigilant and in depth research, astute decisions
and well established relationships with market makers in order to execute
strategies. The investment professionals at MEMBERS Capital Advisors who manage
the investment portfolios of the Ultra Series Fund have done stellar work in
this very difficult environment. Performance through December 2008 for the
investment portfolios of the Ultra Series Funds was generally above average and
in some cases exceptional. In particular, six of our portfolios have performed
in the top 25% of their respective peers according to Morningstar. That is
exceptional when even some of the world's best managers over the last 5 and 10
years have fallen off the performance track in a serious manner.
During all market environments the investment professionals of MEMBERS Capital
Advisors that manage your investments are working diligently to identify
prevailing risks and prudently choose stocks and bonds that present sound
investment opportunities. The reports that follow this letter provide insight on
each fund's performance and portfolio position.
As always, your long-term success as a investor in the Ultra Series Fund is our
top priority. We appreciate the confidence you have placed in us as managers of
your assets and we are determined to be good stewards in this role. Please call
me directly with any questions you may have.
Sincerely,
/s/ David P. Marks
David P. Marks, CFA
President, Ultra Series Fund
(1) SBBI/Morningstar Data
Not part of the Annual Report.
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================================================================================
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FUND RETURNS AND PEER GROUP RANK AS OF 12/31/2008
-------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
---------------------- --------------------- --------------------- ---------------------
% RANK/# % RANK/# % RANK/# % RANK/#
OF FUNDS IN OF FUNDS IN OF FUNDS IN OF FUNDS IN
FUND AND PEER GROUP RETURN PEER GROUP RETURN PEER GROUP RETURN PEER GROUP RETURN PEER GROUP
- ------------------- ------- ---------- ------ ---------- ------ ---------- ------ ----------
CONSERVATIVE ALLOCATION -17.89% 41/85 N/A N/A N/A N/A N/A N/A
COnservative ALlocation* -15.56% N/A N/A N/A
MODERATE ALLOCATION -30.23% 67/230 N/A N/A N/A N/A N/A N/A
Moderate Allocation* -28.03% N/A N/A N/A
AGGRESSIVE ALLOCATION -41.09% 79/369 N/A N/A N/A N/A N/A N/A
Large Blend* -37.64% N/A N/A N/A
BOND 2.86% 21/140 3.97% 24/137 3.55% 23/135 4.62% 32/112
Intermediate-Term Bond* -5.18% 1.41% 2.24% 3.99%
HIGH INCOME -14.74% 3/91 -1.67% 3/91 1.20% 4/87 N/A N/A
High Yield Bond* -27.25% -6.82% -1.92% N/A
DIVERSIFIED INCOME -13.25% 2/230 -0.74% 6/193 1.94% 9/166 2.79% 19/131
Moderate Allocation* -28.03% -5.04% -0.30% 1.14%
LARGE CAP VALUE -35.99% 42/225 -8.09% 41/203 -1.62% 48/187 -0.34% 72/119
Large Value* -37.19% -8.93% -2.05% 0.62%
LARGE CAP GROWTH -37.20% 22/354 -8.69% 29/333 -3.22% 45/316 -1.13% 31/186
Large Growth* -41.67% -10.87% -3.56% -2.51%
MID CAP VALUE -36.45% 47/76 -9.34% 45/70 -0.97% 51/56 N/A N/A
Mid-Cap Value* -37.24% -10.11% -1.62% N/A
MID CAP GROWTH -46.89% 70/157 -13.76% 78/153 -4.58% 76/146 N/A N/A
Mid-Cap Growth* -45.02% -11.53% -2.72% N/A
SMALL CAP VALUE -25.55% 7/42 N/A N/A N/A N/A N/A N/A
Small Value* -32.33% N/A N/A N/A
SMALL CAP GROWTH -43.41% 67/96 N/A N/A N/A N/A N/A N/A
Small Growth* -40.97% N/A N/A N/A
GLOBAL SECURITIES -38.14% 23/81 -8.42% 46/67 0.72 33/64 N/A N/A
World Stock* -41.76 -7.85 0.42 N/A
INTERNATIONAL STOCK -38.62% 6/103 -5.30% 16/92 3.58% 15/88 N/A N/A
Foreign Large Blend* -43.33% -7.36% 1.47% N/A
TARGET RETIREMENT 2020 -35.31% 79/30 N/A N/A N/A N/A N/A N/A
Target-Date 2015-2029* -30.24% N/A N/A N/A
TARGET RETIREMENT 2030 -38.35% 56/23 N/A N/A N/A N/A N/A N/A
Target-Date 2030+* -36.26% N/A N/A N/A
TARGET RETIREMENT 2040 -41.65% 97/23 N/A N/A N/A N/A N/A N/A
Target-Date 2030+* -36.26% N/A N/A N/A
* Source of Peer Group category returns and ranks: Morningstar Direct; The
Morningstar Average Peer Returns represents the average annual composite
performance of all U.S. insurance mutual funds listed in each fund category by
Morningstar. The highest (or most favorable) percentile rank is 1 and the
lowest (or least favorable) percentile rank is 100. The funds' ranking data
shown is for returns calculated after fund level expenses have been subtracted,
but do not include any separate account fees, charges or expenses imposed by the
variable annuity and variable life insurance contracts that invest in the fund.
For more current performance information, please call 1-800-798-5500. Current
performance may be lower or higher than the performance data quoted above. Past
performance does not guarantee future results.
(C) 2009 Morningstar, Inc. All Rights Reserved. The information contained
herein: (1) is proprietary to Morningstar and/or its content providers; (2) may
not be copied or distributed; and (3) is not warranted to be accurate, complete
or timely. Neither Morningstar nor its content providers are responsible for any
damages or losses arising from any use of this information.
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TABLE OF CONTENTS
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PAGE
----
FUND PERFORMANCE REVIEWS
Conservative Allocation Fund ................................ 2
Moderate Allocation Fund .................................... 4
Aggressive Allocation Fund .................................. 6
Bond Fund ................................................... 8
High Income Fund ............................................ 10
Diversified Income Fund ..................................... 13
Large Cap Value Fund ........................................ 16
Large Cap Growth Fund ....................................... 18
Mid Cap Value Fund .......................................... 21
Mid Cap Growth Fund ......................................... 24
Small Cap Value Fund ........................................ 26
Small Cap Growth Fund ....................................... 28
Global Securities Fund ...................................... 30
International Stock Fund .................................... 32
Target Retirement 2020 Fund ................................. 36
Target Retirement 2030 Fund ................................. 38
Target Retirement 2040 Fund ................................. 40
PORTFOLIOS OF INVESTMENTS
Conservative Allocation Fund ................................ 42
Moderate Allocation Fund .................................... 43
Aggressive Allocation Fund .................................. 45
Money Market Fund ........................................... 46
Bond Fund ................................................... 48
High Income Fund ............................................ 54
Diversified Income Fund ..................................... 59
Large Cap Value Fund ........................................ 66
Large Cap Growth Fund ....................................... 69
Mid Cap Value Fund .......................................... 72
Mid Cap Growth Fund ......................................... 76
Small Cap Value Fund ........................................ 78
Small Cap Growth Fund ....................................... 80
Global Securities Fund ...................................... 83
International Stock Fund .................................... 86
Target Retirement 2020 Fund ................................. 92
Target Retirement 2030 Fund ................................. 94
Target Retirement 2040 Fund 96
FINANCIAL STATEMENTS
Statements of Assets and Liabilities ........................ 98
Statements of Operations .................................... 102
Statements of Changes in Net Assets ......................... 106
Financial Highlights ........................................ 114
NOTES TO FINANCIAL STATEMENTS .......................................... 123
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ................ 136
OTHER INFORMATION ...................................................... 137
TRUSTEES AND OFFICERS .................................................. 141
Non-deposit investment products are not federally insured, involve investment
risk, may lose value and are not obligations of or guaranteed by the financial
institution. For more complete information about the Ultra Series Fund,
including charges and expenses, request a prospectus from your registered
representative or from CUNA Mutual Insurance Society, 2000 Heritage Way,
Waverly, IA 50677. Consider the investment objectives, risks, charges and
expenses of the investment carefully before investing. The prospectus contains
this and other information about the investment company. For current performance
information, please call 1-800-798-5500. Current performance may be lower or
higher than the performance data quoted within. Past performance does not
guarantee future results.
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CONSERVATIVE ALLOCATION FUND PERFORMANCE REVIEW
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PERFORMANCE AND ECONOMIC & MARKET REVIEW
For the twelve month period ended December 31, 2008, the Ultra Series
Conservative Allocation Fund returned -17.89%, underperforming the Conservative
Allocation Custom Index return of - 9.36%, the Merrill Lynch U.S. Corporate,
Government & Mortgage Index return of 6.20%, and the Morningstar Insurance Fund
Conservative Allocation category average return of -15.56%. With every major
equity and fixed income asset class (except for government-backed paper and
cash) dropping in unison as a result of the ongoing financial crisis, the
long-term benefits of asset allocation went unrealized this year. There was
truly no where to turn for protection in these declining markets.
PORTFOLIO REVIEW
One asset class that held up nicely during the financial crisis was high-quality
government bonds. Investors sought out the safety of the full faith and credit
of the U.S. Government, rallying the U.S. Treasury market and benefiting the
portfolio accordingly. On the corporate bond side, both investment-grade and
non-investment grade (high yield) bonds performed poorly due to the frozen
credit markets. Normally staid investment-grade corporate bonds funds were hit
with substantial price declines, as interest rate spreads between U.S.
Treasuries widened to some of the highest levels ever recorded. High yield
bonds, as measured by the Merrill Lynch U.S. High Yield Master II Index returned
- -26.39% over the past year. Intermediate-term investment grade bonds are also
down -- with the Barclays Capital U.S. Intermediate-Term Credit Index down
- -2.76%.
The portfolio's diversified equity funds had the largest negative impact on the
fund's return. As mentioned above, major equity markets the world over all
experienced significant price declines. No equity asset class was spared. The
deleveraging process accelerated in the capital markets, with institutional and
hedge fund investors being forced to unwind their leveraged positions to raise
liquidity. The resulting heavy selling placed tremendous downward pressure on
equity prices. The Russell 3000(R) Index returned -37.31% for the year.
International and emerging market equities provided no relief, experiencing even
steeper declines, with the MSCI EAFE Index down -43.06% and the MSCI Emerging
Markets Index down -53.18%.
ECONOMIC & MARKET OUTLOOK
As painful as 2008 was, the year did manage to end on a high note. After
bottoming out in late November, equities rallied significantly throughout
December. Bonds also posted nice gains in the final five weeks of the year.
Unfortunately, we expect the heightened market volatility of the past several
months to persist into 2009. Until the credit markets unfreeze, and the overall
deleveraging process is substantially complete, the markets will remain
unsettled. However, with volatility comes opportunity, and we plan to take
advantage of historically low prices in certain asset classes, with corporate
bonds being at the top of the list. With yield spreads at record highs, we
believe investors are being more than adequately compensated for holding both
investment and non-investment grade corporate bonds. Pending any further
deterioration in the credit markets, we intend to opportunistically increase our
positions in these asset classes over the coming year. We expect equities to be
attractively priced on both a historical absolute basis and relative basis vs.
U.S. Treasuries. Once the market completes a bottoming process, we plan to
selectively purchase equities in an effort to rebalance the portfolio back to
its targeted stock/bond allocation.
Moving forward, we will continue to employ caution in our overall asset
allocation strategies within the fund while awaiting more positive economic
news. At the same time we stand ready to capitalize on the aforementioned
opportunities in 2009.
MEMBERS Capital Advisors, Inc. - Adviser
David M. Schlimgen, CIMA(R), CIMC(R) and Patrick F. Ryan, CIMA(R) Portfolio
Managers
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2
================================================================================
CONSERVATIVE ALLOCATION FUND PERFORMANCE REVIEW
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CUMULATIVE PERFORMANCE OF $10,000 INVESTMENT SINCE INCEPTION(1,4,6)
[CHART OF CUMULATIVE PERFORMANCE]
Conservative Conservative Allocation Fund Merrill Lynch U.S. Corporate,
Allocation Fund Custom Index(2) Government & Mortgage Index(3)
6/30/2006 $10,000 $10,000 $10,000
12/31/2006 10,734 10,701 10,550
12/31/2007 11,155 11,398 11,306
12/31/2008 9,159 10,331 12,008
[END CHART]
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AVERAGE ANNUAL TOTAL RETURN THROUGH DECEMBER 31, 2008(4,6)
Annual
Expense
1 Year Since Inception(5) Ratio
------------------------------ -------
CONSERVATIVE ALLOCATION FUND -17.89% -3.44% 0.96%
Conservative Allocation Fund Custom Index(2) -9.36 1.31 NA
Merrill Lynch U.S. Corporate, Government & Mortgage Index(3) 6.20 7.56 NA
- ---------------------------------------------------------------------------------------------------------
NA Not Applicable. Index returns do not reflect fees or expenses.
(1) This chart compares a $10,000 investment made in the fund to a $10,000
investment made in the securities that make up the index.
(2) The Conservative Allocation Fund Custom Index consists of 55% Merrill Lynch
U.S. Corporate, Government & Mortgage Index, 30% Russell 1000(R) Index, and
15% 90-Day U.S. Treasury Bills. A description of the Merrill Lynch U.S.
Corporate, Government & Mortgage Index is set forth below. The Russell
1000(R) Index is a large-cap market index which measures the performance of
the 1,000 largest companies in the Russell 3000(R) Index (the Russell
3000(R) Index measures the performance of the 3,000 largest U.S. companies
based on total market capitalization).
(3) The Merrill Lynch U.S. Corporate, Government & Mortgage Index, formerly the
Merrill Lynch U.S. Domestic Master Index, is broad-based measure of the
total rate of return performance of the U.S. investment-grade bond markets.
The index is a capitalization-weighted aggregation of outstanding U.S.
treasury, agency and supranational mortgage pass-through, and
investment-grade corporate bonds meeting specified selection criteria.
(4) Fund returns are calculated after fund level expenses have been subtracted,
but do not include any separate account fees, charges or expenses imposed by
the variable annuity and variable life insurance contracts that invest in
the fund, as described in the Prospectus. If these fees, charges, or
expenses were included, fund returns would have been lower. Fund returns
also assume that dividends and capital gains are reinvested in additional
shares of the fund. Investment return and principal value will fluctuate,
so an investor's shares, when redeemed, may be worth more or less than when
purchased. Further information relating to the fund's performance is
contained in the Prospectus and elsewhere in this report. The fund's past
performance is not indicative of future performance. Current performance may
be lower or higher than the performance data cited. For fund performance
data current to the most recent month-end, please call 1-800-798-5500.
Indices are unmanaged and investors cannot invest in them directly. Index
returns do not reflect fees or expenses.
(5) The fund commenced investment operations on June 30, 2006. The since
inception index returns are also from June 30, 2006.
(6) MEMBERS Capital Advisors reduced its management fee for the Conservative
Allocation Fund from June 30, 2006 through April 30, 2008. If the management
fee had not been reduced, returns would have been lower.
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3
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MODERATE ALLOCATION FUND PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
PERFORMANCE AND ECONOMIC & MARKET REVIEW
For the twelve month period ended December 31, 2008, the Ultra Series Moderate
Allocation Fund returned -30.23%, underperforming the Moderate Allocation Custom
Index return of -22.92%, outperforming the Russell 1000(R) Index return of
- -37.60% and underperforming the Morningstar Insurance Fund Moderate Allocation
category average return of -28.03%. With every major equity and fixed income
asset class (except government-backed paper and cash) dropping in unison as a
result of the ongoing financial crisis, the long-term benefits of asset
allocation went unrealized this year. There was truly no where to turn for
protection in these declining markets.
PORTFOLIO REVIEW
One asset class that held up nicely during the financial crisis was high-quality
government bonds. Investors sought out the safety of the full faith and credit
of the U.S. Government, rallying the U.S. Treasury market and benefiting the
portfolio accordingly. On the corporate bond side, both investment-grade and
non-investment grade (high yield) bonds performed poorly due to the frozen
credit markets. Normally staid investment-grade corporate bonds funds were hit
with substantial price declines, as interest rate spreads between U.S.
Treasuries widened to some of the highest levels ever recorded. High Yield
Bonds, as measured by the Merrill Lynch U.S. High Yield Master II Index returned
- -26.39% over the past year. Intermediate-term investment grade bonds are also
down -- with the Barclays Capital U.S. Intermediate-Term Credit Index off
- -2.76%.
The portfolio's diversified equity funds had the largest negative impact on the
fund's return. As mentioned above, major equity markets the world over all
experienced significant price declines. No equity asset class was spared. The
deleveraging process accelerated in the capital markets, with institutional and
hedge fund investors being forced to unwind their leveraged positions to raise
liquidity. The resulting heavy selling placed tremendous downward pressure on
equity prices. The Russell 3000(R) Index returned -37.31% for the year.
International and emerging market equities provided no relief, experiencing even
steeper declines, with the MSCI EAFE Index down -43.06% and the MSCI Emerging
Markets Index down -53.18%. Additionally, the fund's exposure to energy and
natural resources followed the dramatic rise and fall of oil and other
industrial metals prices. Returns for the sector were enhanced during oil's
dramatic rise to $147 a barrel. Subsequently, returns suffered when oil dropped
back down just as rapidly to under $40 per barrel.
ECONOMIC & MARKET OUTLOOK
As painful as 2008 was, the year did manage to end on a high note. After
bottoming out in late November, equities rallied significantly throughout
December. Bonds also posted nice gains in the final five weeks of the year.
Unfortunately, we expect the heightened market volatility of the past several
months to persist into 2009. Until the credit markets unfreeze, and the overall
deleveraging process is substantially complete, the markets will remain
unsettled. However, with volatility comes opportunity, and we plan to take
advantage of historically low prices in certain asset classes, with corporate
bonds being at the top of the list. With yield spreads at record highs, we
believe investors are being more than adequately compensated for holding both
investment and non-investment grade corporate bonds. Pending any further
deterioration in the credit markets, we intend to opportunistically increase our
positions in these asset classes over the coming year. We expect equities to be
attractively priced on both a historical absolute basis and relative basis vs.
U.S. Treasuries. Once the market completes a bottoming process, we plan to
selectively purchase equities in an effort to rebalance the portfolio back to
its targeted stock/bond allocation.
Moving forward, we will continue to employ caution in our overall asset
allocation strategies within the fund while awaiting more positive economic
news. At the same time we stand ready to capitalize on the aforementioned
opportunities in 2009.
MEMBERS Capital Advisors, Inc. - Adviser
David M. Schlimgen, CIMA(R), CIMC(R), And Patrick F. Ryan, CIMA(R), Portfolio
Managers
- --------------------------------------------------------------------------------
4
================================================================================
MODERATE ALLOCATION FUND PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
CUMULATIVE PERFORMANCE OF $10,000 INVESTMENT SINCE INCEPTION(1,4,6)
[CHART OF CUMULATIVE PERFORMANCE]
Moderate Moderate Allocation
Allocation Fund Fund Custom Index(2) Russell 1000(R) Index(3)
6/30/2006 $10,000 $10,000 $10,000
12/31/2006 10,987 10,976 11,216
12/31/2007 11,598 11,688 11,864
12/31/2008 8,092 9,010 7,403
[END CHART]
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AVERAGE ANNUAL TOTAL RETURN THROUGH DECEMBER 31, 2008(4,6)
Annual
Expense
1 Year Since Inception(5) Ratio
------------------------------ -------
MODERATE ALLOCATION FUND -30.23% -8.10% 1.18%
Moderate Allocation Fund Custom Index(2) -22.92 -4.07 NA
Russell 1000(R) Index(3) -37.60 -11.29 NA
- ---------------------------------------------------------------------------------------------------------
NA Not Applicable. Index returns do not reflect fees or expenses.
(1) This chart compares a $10,000 investment made in the fund to a $10,000
investment made in the securities that make up the index.
(2) The Moderate Allocation Fund Custom Index consists of 50% Russell 3000(R)
Index, 30% Merrill Lynch U.S. Corporate, Government & Mortgage Index, 10%
MSCI EAFE Index and 10% 90-Day U.S. Treasury Bills. A description of the
Russell 3000(R) Index is set forth below. The Merrill Lynch U.S. Corporate,
Government & Mortgage Index, formerly the Merrill Lynch U.S. Domestic Master
Index, is a broad-based measure of the total rate of return performance of
the U.S. investment-grade bond markets. The index is a
capitalization-weighted aggregation of outstanding U.S. treasury, agency and
supranational mortgage pass-through, and investment-grade corporate bonds
meeting specified selection criteria. The MSCI EAFE (Europe, Australasia &
Far East) Index is a free float-adjusted market capitalization index that is
designed to measure developed market equity performance, excluding the U.S.
and Canada.
(3) The Russell 1000(R) Index is a large-cap market index which measures the
performance of the 1,000 largest companies in the Russell 3000(R) Index (the
Russell 3000(R) Index measures the performance of the 3,000 largest U.S.
companies based on total market capitalization).
(4) Fund returns are calculated after fund level expenses have been subtracted,
but do not include any separate account fees, charges or expenses imposed by
the variable annuity and variable life insurance contracts that invest in
the fund, as described in the Prospectus. If these fees, charges, or
expenses were included, fund returns would have been lower. Fund returns
also assume that dividends and capital gains are reinvested in additional
shares of the fund. Investment return and principal value will fluctuate,
so an investor's shares, when redeemed, may be worth more or less than when
purchased. Further information relating to the fund's performance is
contained in the Prospectus and elsewhere in this report. The fund's past
performance is not indicative of future performance. Current performance may
be lower or higher than the performance data cited. For fund performance
data current to the most recent month-end, please call 1-800-798-5500.
Indices are unmanaged and investors cannot invest in them directly. Index
returns do not reflect fees or expenses.
(5) The fund commenced investment operations on June 30, 2006. The since
inception index returns are also from June 30, 2006.
(6) MEMBERS Capital Advisors reduced its management fee for the Moderate
Allocation Fund from June 30, 2006 through April 30, 2008. If the management
fee had not been reduced, returns would have been lower.
- --------------------------------------------------------------------------------
5
================================================================================
AGGRESSIVE ALLOCATION FUND PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
PERFORMANCE AND ECONOMIC & MARKET REVIEW
For the twelve month period ended December 31, 2008, the Ultra Series Aggressive
Allocation Fund returned -41.09%, underperforming the Aggressive Allocation
Custom Index return of -39.49%, the Russell 3000(R) Index return of -37.31, and
the Morningstar Insurance Fund Large Blend category average return of -37.64.
With every major equity and fixed income asset class (except government-backed
paper and cash) dropping in unison as a result of the ongoing financial crisis,
the long-term benefits of asset allocation have gone unrealized this year. There
was truly no where to turn for protection in these declining markets -
especially in an aggressive allocation fund, with equity-based asset classes
making up nearly all of the portfolio.
PORTFOLIO REVIEW
As mentioned above, major equity markets the world over all experienced
significant price declines. No equity asset class was spared. The deleveraging
process accelerated in the capital markets, with institutional and hedge fund
investors being forced to unwind their leveraged positions to raise liquidity.
The resulting heavy selling placed tremendous downward pressure on equity
prices. The Russell 3000(R) Index returned -37.31% for the year. International
and emerging market equities provided no relief, experiencing even steeper
declines, with the MSCI EAFE Index down -43.06% and the MSCI Emerging Markets
Index down -53.18%. Additionally, the fund's exposure to energy and natural
resources followed the dramatic rise and fall of oil and other industrial metals
prices. Returns for the sector were enhanced during oil's dramatic rise to $147
a barrel. Subsequently, returns suffered when oil dropped back down just as
rapidly to under $40 per barrel.
The lone bright spot was our small cap value position. Contrary to the consensus
opinion that large caps would lead the way in 2008, small cap value stocks
outperformed large caps on a relative basis, with the Russell 2000(R) Value
Index down -28.92% for the year.
ECONOMIC & MARKET OUTLOOK
As painful as 2008 was, the year did manage to end on a high note. After
bottoming out in late November, equities rallied significantly throughout
December. Bonds also posted nice gains in the final five weeks of the year.
Unfortunately, we expect the heightened market volatility of the past several
months to persist into 2009. Until the credit markets unfreeze, and the overall
deleveraging process is substantially complete, the markets will remain
unsettled. However, with volatility comes opportunity, and we plan to take
advantage of historically low prices in certain asset classes, with corporate
bonds being at the top of the list. With yield spreads at record highs, we
believe investors are being more than adequately compensated for holding both
investment and non-investment grade corporate bonds. Pending any further
deterioration in the credit markets, we intend to opportunistically increase our
positions in these asset classes over the coming year. We expect equities to be
attractively priced on both a historical absolute basis and relative basis vs.
U.S. Treasuries. Once the market completes a bottoming process, we plan to
selectively purchase equities to slowly increase the risk profile of the
portfolio.
Moving forward, we will continue to employ caution in our overall asset
allocation strategies within the fund while awaiting more positive economic
news. At the same time we stand ready to capitalize on the aforementioned
opportunities in 2009.
MEMBERS Capital Advisors, Inc. - Adviser
David M. Schlimgen, CIMA(R), CIMC(R) and Patrick F. Ryan, CIMA(R), Portfolio
Managers
- --------------------------------------------------------------------------------
6
================================================================================
AGGRESSIVE ALLOCATION FUND PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
CUMULATIVE PERFORMANCE OF $10,000 INVESTMENT SINCE INCEPTION(1,4,6)
[CHART OF CUMULATIVE PERFORMANCE]
Aggressive Aggressive Allocation Fund Russell 3000(R)
Allocation Fund Custom Index(2) Index(3)
6/30/2006 $10,000 $10,000 $10,000
12/31/2006 11,249 11,467 11,206
12/31/2007 12,115 12,435 11,782
12/31/2008 7,137 7,524 7,386
[END CHART]
- ---------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN THROUGH DECEMBER 31, 2008(4,6)
Annual
Expense
1 Year Since Inception(5) Ratio
------------------------------ -------
AGGRESSIVE ALLOCATION FUND -41.09% -12.60% 1.37%
Aggressive Allocation Fund Custom Index(2) -39.49 -10.72 NA
Russell 3000(R) Index(3) -37.31 -11.37 NA
- ---------------------------------------------------------------------------------------------------------
NA Not Applicable. Index returns do not reflect fees or expenses.
(1) This chart compares a $10,000 investment made in the fund to a $10,000
investment made in the securities that make up the index.
(2) The Aggressive Allocation Fund Custom Index consists of 55% Russell 1000(R)
Index, 22% MSCI EAFE Index, 15% Russell 2000(R) Index, and 8% MSCI Emerging
Markets Index. The Russell 1000(R) Index is a large-cap market index which
measures the performance of the 1,000 largest companies in the Russell
3000(R) Index (see definition below). The Russell 2000(R) Index is a
small-cap market index which measures the performance of the remaining 2,000
companies in the Russell 3000(R) Index. The MSCI EAFE (Europe, Australasia &
Far East) Index is a free float-adjusted market capitalization index that is
designed to measure developed market equity performance, excluding the U.S.
and Canada. The MSCI Emerging Markets Index is a free-float adjusted market
capitalization index that measures equity performance in global emerging
markets.
(3) The Russell 3000(R) Index measures the performance of the 3,000 largest U.S.
companies based on total market capitalization, which represents 98% of the
investable U.S. equity market.
(4) Fund returns are calculated after fund level expenses have been subtracted,
but do not include any separate account fees, charges or expenses imposed by
the variable annuity and variable life insurance contracts that invest in
the fund, as described in the Prospectus. If these fees, charges, or
expenses were included, fund returns would have been lower. Fund returns
also assume that dividends and capital gains are reinvested in additional
shares of the fund. Investment return and principal value will fluctuate,
so an investor's shares, when redeemed, may be worth more or less than when
purchased. Further information relating to the fund's performance is
contained in the Prospectus and elsewhere in this report. The fund's past
performance is not indicative of future performance. Current performance may
be lower or higher than the performance data cited. For fund performance
data current to the most recent month-end, please call 1-800-798-5500.
Indices are unmanaged and investors cannot invest in them directly. Index
returns do not reflect fees or expenses.
(5) The fund commenced investment operations on June 30, 2006. The since
inception index returns are also from June 30, 2006.
(6) MEMBERS Capital Advisors reduced its management fee for the Aggressive
Allocation Fund from June 30, 2006 through April 30, 2008. If the management
fee had not been reduced, returns would have been lower.
- --------------------------------------------------------------------------------
7
================================================================================
BOND FUND PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
PERFORMANCE REVIEW
Over the twelve month period ended December 31, 2008, the broad bond market
represented by the Merrill Lynch U.S. Corporate, Government & Mortgage Index
returned 6.20% while the Ultra Series Bond Fund returned 2.86% and the
Morningstar Insurance Fund Intermediate-Term Bond category average returned
- -5.18%.
ECONOMIC & MARKET REVIEW
Over the period, the yield curve bull-steepened as the two-year U.S. Treasury
rate fell by approximately 47 basis points more than the ten-year U.S. Treasury
rate. Consistent with a flight to quality, all investment-grade and high-yield
sectors posted negative excess returns relative to U.S. Treasury returns.
Despite an overall negative tone to the prior twelve month period, April, May
and December provided a reprieve from the carnage. April and May followed the
Bear Stearns bailout and investors turned optimistic that government
intervention would stem the contagion. Similarly, the December respite came, in
part, to a new administration touting massive fiscal stimulus and the optimism
that a new year brings.
PORTFOLIO REVIEW
Sector weighting was the single most important factor for fund performance
versus both the index and peers. We remained underweight in agencies, mortgages
and corporate bonds while holding outsized positions in U.S. Treasuries and
cash relative to the index. We were also less invested in investment-grade and
high-yield corporate bonds relative to our peers. Within the corporate sector,
having relatively more exposure to the better performing subsectors in
industrials and utilities while significantly underweighting the worst
performing subsector, financials, contributed positively to performance.
Overweighting asset-backed securities and commercial mortgage-backed securities
was detrimental to performance over the period. Normally these sectors perform
better than many other spread sectors when credit uncertainty arises. However,
given the initial problems which arose in structured securities, this has not
been the case. That being said, the decision to be in these sectors in lieu of
investment-grade or high-yield corporate bonds was a good decision.
Yield curve positioning over the period was neither an overwhelming positive nor
negative for performance. On the plus side, we maintained a slightly
concentrated holding structure around a targeted duration which benefited the
fund as the yield curve steepened. However, overall fund duration was at times
less than that of the index which was a negative for performance as interest
rates declined.
ECONOMIC & MARKET OUTLOOK
The future remains uncertain with respect to the economy, financial markets, and
government initiatives. As a result, we expect to maintain our defensive yet
nimble posture. We plan to be net underweight the index in riskier asset
classes, and overweight U.S. Treasury securities which have benefited from
general risk aversion by many market participants. The U.S. Treasury securities
also provide liquidity that enables us to take advantage of unique opportunities
and leave us in a good position to add beaten-down assets should the market
turn.
MEMBERS Capital Advisors, Inc. - Adviser
Dean "Jack" Call, D.B.A, CFA, Portfolio Manager
- --------------------------------------------------------------------------------
8
================================================================================
BOND FUND PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
CUMULATIVE PERFORMANCE OF $10,000 INVESTMENT(1,3)
[CHART OF CUMULATIVE PERFORMANCE]
Merrill Lynch U.S. Corporate,
Bond Fund Government & Mortgage Index(2)
12/31/1998 $10,000 $10,000
12/31/1999 10,073 9,904
12/31/2000 10,890 11,066
12/31/2001 11,796 11,987
12/31/2002 12,804 13,235
12/31/2003 13,194 13,780
12/31/2004 13,638 14,378
12/31/2005 13,981 14,746
12/31/2006 14,541 15,384
12/31/2007 15,275 16,487
12/31/2008 15,712 17,510
[END CHART]
- -----------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN THROUGH DECEMBER 31, 2008(3)
Annual
Expense
1 Year 3 Years 5 Years 10 Years Ratio
-------------------------------------------- -------
BOND FUND 2.86% 3.97% 3.56% 4.62% 0.56%
Merrill Lynch U.S. Corporate, Government & Mortgage Index(2) 6.20 5.89 4.90 5.76 NA
- -----------------------------------------------------------------------------------------------------------------------
NA Not Applicable. Index returns do not reflect fees or expenses.
(1) This chart compares a $10,000 investment made in the fund to a $10,000
investment made in the securities that make up the index.
(2) The Merrill Lynch U.S. Corporate, Government & Mortgage Index, formerly the
Merrill Lynch U.S. Domestic Master Index, is a broad-based measure of the
total rate of return performance of the U.S. investment-grade bond markets.
The index is a capitalization-weighted aggregation of outstanding U.S.
treasury, agency and supranational mortgage pass-through, and
investment-grade corporate bonds meeting specified selection criteria.
(3) Fund returns are calculated after fund level expenses have been subtracted,
but do not include any separate account fees, charges or expenses imposed by
the variable annuity and variable life insurance contracts that invest in
the fund, as described in the Prospectus. If these fees, charges, or
expenses were included, fund returns would have been lower. Fund returns
also assume that dividends and capital gains are reinvested in additional
shares of the fund. Investment return and principal value will fluctuate,
so an investor's shares, when redeemed, may be worth more or less than when
purchased. Further information relating to the fund's performance is
contained in the Prospectus and elsewhere in this report. The fund's past
performance is not indicative of future performance. Current performance may
be lower or higher than the performance data cited. For fund performance
data current to the most recent month-end, please call 1-800-798-5500.
Indices are unmanaged and investors cannot invest in them directly. Index
returns do not reflect fees or expenses.
- --------------------------------------------------------------------------------
9
================================================================================
HIGH INCOME FUND PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
PERFORMANCE REVIEW
For the twelve month period ended December 31, 2008, the Ultra Series High
Income Fund returned -14.74%, outperforming both the Merrill Lynch U.S. High
Yield Master II Constrained Index which returned -26.11% and the Morningstar
Insurance Fund High Yield Bond category average which returned -27.25%.
ECONOMIC & MARKET REVIEW
The high-yield market ended 2008 on a high note for December. This positive
month was in clear contrast to the market's brutal quarter and year-to-date
performance. For the fourth quarter, the high-yield market returned -18.20% and
produced a jaw-dropping -26.29% return for the year. In the market's previous
worst year, high-yield bonds returned only -5.1% in 2000. The carnage in the
high-yield market was also reflected in the average price of a bond, which
plummeted from $92.86 at the end of 2007 to $61.15 at year end 2008. Meanwhile,
yield spreads over 10-year U.S. Treasuries widened 1,220 bps to 1,812 bps in
2008, according to the Merrill Lynch High Yield Index.
The market's strength in December was driven by optimism of an economic stimulus
plan, short covering, and high cash levels. This improvement occurred on little
volume due to the holiday calendar and many bonds were quoted up without actual
trades taking place.
The U.S. economic picture is bleak, with no clear signs of a recovery on the
horizon. Plunging home values, sharply rising unemployment, overburdened
consumers, and a retrenching industrial sector point to an extended economic
contraction. The U.S. economy cannot recover without stable home prices.
According to the S&P/Case-Shiller Home Price Index, the average home price
declined by 18% over the 12 months ended in October 2008, including a 2.2%
decrease in October alone. Even with 30-year fixed-rate mortgages averaging
5.01%, the lowest on record, home sales and prices have continued to slide. For
the second consecutive month, none of the 20 cities represented in the
S&P/Case-Shiller index posted a month-to-month increase. On a brighter note,
housing values remained 58% higher than they were in 2000, on average. The job
market seems to be the most grim indicator of the economic slump. The number of
Americans collecting unemployment benefits surged to a 26-year high in December
with a total of 4.6 million jobless claims. The U.S. lost 524,000 jobs in
December. Approximately 2.6 million jobs vanished in 2008, the most since 1945.
Clearly, consumer confidence and spending will continue to be adversely affected
by the hemorrhaging of jobs. Indeed, the Conference Board's consumer confidence
index fell to an all-time low of 38.0 in December from 44.7 in November and 90.6
at the end of December 2007.
PORTFOLIO REVIEW
Security selection was a primary contributor to the fund's outperformance for
the period, particularly in the media/cable, support services, and technology
sectors. The fund's underweight relative to the index and ultimately zero
weighting in printing & publishing and building materials, and zero exposure to
mortgage bank & thrifts, consumer/commercial/lease financing and real estate,
positively contributed to returns for the period while an underweight position
in automotive negatively impacted returns. During the period, CCC-rated bonds
and deeply discounted bonds (i.e., bonds priced below $80) were the worst
performing quality sectors within the overall market. The fund's underweight
position and positive selection in these sectors was a significant contributor
to the fund's outperformance for the reporting period. The fund outperformed by
a wide margin in 2008 due to our conservative and disciplined investment
philosophy. Accordingly, the fund will enter 2009 with a significantly more
conservative credit profile than the overall high yield market.
At end-of-period levels, the U.S. credit markets appeared to be discounting a
much more severe recession than the U.S. equity markets. For instance,
high-yield spreads were 67% higher than the spread levels set during the last
U.S. recession. As such, the market had already discounted an expected sharp
spike in default rates. Given the oversold condition of the high-yield market,
we expect a significant allocation of new money to flow to this asset class over
the near term, which should foster demand for existing bonds as well as help
revitalize the new issue market.
We expect the fund to continue to be positioned with the expectation that the
U.S economy will experience a protracted and potentially severe recession. We
have strategically minimized the portfolio's exposure to sectors that rely on
consumer discretionary spending or that are exposed to the homebuilding or
automotive sectors. Moreover, we have focused our investments on issuers that we
believe have reasonable debt levels and flexibility within their capital
structures to withstand a protracted economic downturn.
- --------------------------------------------------------------------------------
10
================================================================================
HIGH INCOME FUND PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
ECONOMIC & MARKET OUTLOOK
On a historical basis, corporate credits appear to be a bargain. Consequently,
many investors are looking for the storm to subside in the second half of 2009
and have started to commit funds to capitalize on distressed prices and
attractive yields. We believe the U.S. economy has not yet hit the bottom of the
current cycle. There is no doubt that this recession will be the worst of the
last 70 years. The biggest problem confronting the economy is: what will be the
growth drivers for the private sector? In previous downturns, rebuilding of
inventories, new home construction, job growth and consumer spending fueled an
economic rebound. However, these drivers do not appear likely any time in the
foreseeable future. Only unprecedented government spending and a
super-accommodative monetary policy are available to drive growth. From our
perspective, an eventual economic recovery is likely to be shallow and anemic,
without any real momentum until mid-2010 or 2011. U.S. deficit spending could
reach 27% of GDP, suggesting to us that the nation is likely to enter a very
slow-growth era in which government policies will favor consumers over
businesses, which signifies a failure to recognize that businesses are not the
problem but the solution.
The high yield and bank loan markets are at a crossroads. On one hand, the
market already has discounted a sharp spike in default rates. On the other hand,
a significant allocation of new money to high yield securities may revitalize
the new issue market. In any snap-back rally, the technical drivers usually
overtake credit fundamentals, and new money typically gravitates toward lower
dollar-price issues. Moreover, in euphoric markets, investors and traders
purchase the largest and most liquid issues with little consideration of their
creditworthiness. However, this is a tricky strategy due to the likelihood of
higher defaults over the next two years, as possibly two out of every 10 high
yield companies may default. In our judgment, strong analytical skills are a
prerequisite for navigating around unexpected credit problems. One should never
forget the difference between investing and gambling in risky, leveraged
credits!
We see both opportunities and challenges in 2009. Opportunities may be derived
from the severity of last year's correction, while challenges are presented by
an embattled economy. The biggest challenge will be to find the right
risk-adjusted opportunities. Eventually, this storm will pass, and investors who
have insight, patience and discipline should be the beneficiaries of staying the
course while others are rudderless.
MEMBERS Capital Advisors, Inc. - Adviser
Shenkman Capital Management, Inc. - Subadviser
Mark R. Shenkman; Frank X. Whitley; Mark J. Flanagan, CPA, CFA, Portfolio
Managers
- --------------------------------------------------------------------------------
11
================================================================================
HIGH INCOME FUND PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
CUMULATIVE PERFORMANCE OF $10,000 INVESTMENT SINCE INCEPTION(1,4)
[CHART OF CUMULATIVE PERFORMANCE]
Merrill Lynch U.S. High Yield Merrill Lynch U.S. High
High Income Fund Master II Constrained Index(2) Yield Master II Index(3)
10/31/2000 $10,000 $10,000 $10,000
12/31/2000 9,997 9,797 9,796
12/31/2001 10,342 10,236 10,235
12/31/2002 10,659 10,182 10,041
12/31/2003 12,628 13,030 12,867
12/31/2004 13,755 14,446 14,266
12/31/2005 14,100 14,847 14,657
12/31/2006 15,376 16,444 16,382
12/31/2007 15,727 16,861 16,741
12/31/2008 13,409 12,459 12,323
[END CHART]
- ---------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN THROUGH DECEMBER 31, 2008(4)
Annual
Expense
1 Year 3 Years 5 Years Since Inception(5) Ratio
------------------------------------------------------ -------
HIGH INCOME FUND -14.74% -1.66% 1.21% 3.66% 0.76%
Merrill Lynch U.S. High Yield Master II Constrained Index(2) -26.11 -5.67 -0.89 2.73 NA
Merrill Lynch U.S. High Yield Master II Index(3) -26.39 -5.61 -0.86 2.59 NA
- ----------------------------------------------------------------------------------------------------------------------------------
NA Not Applicable. Index returns do not reflect fees or expenses.
(1) This chart compares a $10,000 investment made in the fund to a $10,000
investment made in the securities that make up the index.
(2) Effective May 2008, the benchmark for the fund changed from the Merrill
Lynch U.S. High Yield Master II Index to the Merrill Lynch U.S. High Yield
Master II Constrained Index to better reflect the fund's portfolio. The
Merrill Lynch U.S. High Yield Master II Constrained Index tracks the
performance of below investment grade U.S. dollar denominated corporate
bonds publicly issued in the U.S. domestic market, but limits any individual
issuer to a maximum weighting of 2%.
(3) The Merrill Lynch U.S. High Yield Master II Index tracks the performance of
below-investment-grade U.S. dollar denominated corporate bonds publicly
issued in the U.S. domestic market.
(4) Fund returns are calculated after fund level expenses have been subtracted,
but do not include any separate account fees, charges or expenses imposed by
the variable annuity and variable life insurance contracts that invest in
the fund, as described in the Prospectus. If these fees, charges, or
expenses were included, fund returns would have been lower. Fund returns
also assume that dividends and capital gains are reinvested in additional
shares of the fund. Investment return and principal value will fluctuate,
so an investor's shares, when redeemed, may be worth more or less than when
purchased. Further information relating to the fund's performance is
contained in the Prospectus and elsewhere in this report. The fund's past
performance is not indicative of future performance. Current performance may
be lower or higher than the performance data cited. For fund performance
data current to the most recent month-end, please call 1-800-798-5500.
Indices are unmanaged and investors cannot invest in them directly. Index
returns do not reflect fees or expenses.
(5) The fund commenced investment operations on October 31, 2000. The since
inception index returns are also from October 31, 2000.
- --------------------------------------------------------------------------------
12
================================================================================
DIVERSIFIED INCOME FUND PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
PERFORMANCE REVIEW
For the twelve month period ended December 31, 2008, the Ultra Series
Diversified Income Fund returned -13.25% while the Russell 1000(R) Index
returned -37.60%, the Merrill Lynch U.S. Corporate, Government & Mortgage Index
returned 6.20%, and the Morningstar Insurance Fund Moderate Allocation category
average returned -28.03%. Of the sectors within the stock portfolio, financials
contributed to performance due primarily to our more conservative stock
selection, and partly due to being underweight the index. Also adding was stock
selection in utilities, although an underweight position relative to the index
detracted from performance. Also hurting performance within consumer
discretionary was an underweight position in one of last year's best performing
large cap stocks, McDonald's.
ECONOMIC & MARKET REVIEW
The U.S. economy entered into a recession in December 2007, and remained in
recession during 2008. The stock market as measured by the S&P 500 Index started
2008 by falling -6.0% in January, and never was in positive return territory
during the year. The steepest portion of the decline came in two months, from
September 19 to November 20, when the S&P 500 fell from 1,255 to 752, or 40%.
From November 20 to year end, the S&P 500 moved back up to 903, or by +20%,
ending the year on a positive note. Also over the period, the yield curve
bull-steepened as the two-year U.S. Treasury rate fell by approximately 47 basis
points more than the ten-year U.S. Treasury rate. Consistent with a flight to
quality, all investment-grade and high-yield sectors posted negative excess
returns relative to U.S. Treasury returns. Despite an overall negative tone to
the prior twelve month period, April, May and December provided a reprieve from
the carnage. April and May followed the Bear Stearns bailout and investors
turned optimistic that government intervention would stem the contagion.
Similarly, the December respite came, in part, to a new administration touting
massive fiscal stimulus and the optimism that a new year brings.
PORTFOLIO REVIEW
Within the stock portion of the fund, portfolio turnover started the year in a
normal steady fashion, and accelerated rapidly during the fourth quarter when
the steep market decline presented many buying and selling opportunities. Early
in 2008, we initiated positions in a diverse group of stocks, including the
steel-maker Nucor, Pepsi, and Waste Management. During the fourth quarter as
activity picked up, we eliminated our holdings in Carnival Cruise, Harley
Davidson, Anheuser Busch, Hartford, Prologis, Waste Management, Dow Chemical,
Freeport McMoran, and Embarq. We bought numerous new stocks in the fourth
quarter, including Stanley Works, VF Corp, Avon, Allstate, Boeing, Emerson
Electric, Honeywell, Illinois Tool Works, Northrop, Molex, Air Products, Alcoa,
and Public Services Group. The high pace of new names added into the portfolio
is likely to slow substantially should the market return to a more normal phase
of price movement.
Within the bond portion of the fund, sector weighting was the single most
important factor for fund performance versus both the index and peers. We
remained underweight in agencies, mortgages and corporate bonds while holding
outsized positions in U.S. Treasuries and cash relative to the index. We were
also less invested in investment-grade and high-yield corporate bonds relative
to our peers. Within the corporate sector, having relatively more exposure to
the better performing sub sectors in industrials and utilities while
significantly underweighting the worst performing sub sector, financials,
contributed positively to performance. Overweighting asset-backed securities and
commercial mortgage-backed securities was detrimental to performance over the
period. Normally these sectors perform better than many other spread sectors
when credit uncertainty arises. However, given the initial problems which arose
in structured securities, this has not been the case. That being said, the
decision to be in these sectors in lieu of investment-grade or high-yield
corporate bonds was a good decision based upon the relative outperformance that
was generated.
REVIEW OF TOP TEN HOLDINGS
Our top ten holdings for the stock allocation by average weight during 2008 were
5.6% Johnson & Johnson, 4.8% GE, 4.7% Chevron, 4.5% AT&T, 4.1% Pfizer, 3.8% JP
Morgan, 3.7% Bank of America, 3.6% Wells Fargo, 3.3% US Bancorp, and 2.7%
Verizon. The top ten averaged just over 40% of the stock portfolio weight during
the period. Performance of the top ten added +0.43% in total, including +0.37%
US Bancorp and +0.23% Wells Fargo, while GE detracted by -0.17% and Verizon by
- -0.09%.
ECONOMIC & MARKET OUTLOOK
Stocks normally rally off the bottom at midpoint during recessions, with
recessions usually lasting a year to a year and a half. The current recession is
already over one year old, so we believe there is some chance that we have
passed the midpoint of this recession, and stocks could eventually begin a new
bull market. However, for the stock portion of the fund, we expect to focus our
investments in companies with stronger balance sheets due to the current
difficult funding environment and
- --------------------------------------------------------------------------------
13
================================================================================
DIVERSIFIED INCOME FUND PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
high level of debt in the U.S. economy. Our stock portfolio positioning as we
enter 2009 is fairly conservative, although we expect to move into more
economically sensitive stocks as the recognition that we have been in a
recession for over a year depresses the stock valuations of cyclical stocks to
very attractive levels. Versus our index, we expect the stock portfolio to
remain overweight in health care, materials, and consumer staples, and we plan
to close the underweight in industrials. In addition, the stock portfolio is
underweight in financials and utilities. However, given the rich valuation of
utilities, we question whether they will act defensively going forward and are
concerned they may perform poorly if U.S. Treasury Bond yields return to more
normal (higher) levels.
The future remains uncertain with respect to the economy, financial markets, and
government initiatives. As a result, we expect to maintain our defensive yet
nimble posture. We plan to be net underweight the index in riskier asset
classes, and overweight U.S. Treasury securities which have benefited from
general risk aversion by many market participants. The U.S. Treasury securities
also provide liquidity that enables us to take advantage of unique opportunities
and leave us in a good position to add beaten-down assets should the market
turn.
MEMBERS Capital Advisors, Inc. - Adviser
John H. Brown, CFA; and Dean "Jack" Call, D.B.A, CFA, Portfolio Managers
- --------------------------------------------------------------------------------
14
================================================================================
DIVERSIFIED INCOME FUND PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
CUMULATIVE PERFORMANCE OF $10,000 INVESTMENT(1,4)
[CHART OF CUMULATIVE PERFORMANCE]
Diversified Russell 1000(R) Merrill Lynch U.S. Corporate,
Income Fund Index(2) Government & Mortgage Index(3)
12/31/1998 $10,000 $10,000 $10,000
12/31/1999 11,449 12,091 9,904
12/31/2000 11,890 11,149 11,066
12/31/2001 11,526 9,761 11,987
12/31/2002 10,243 7,648 13,235
12/31/2003 11,965 9,934 13,780
12/31/2004 12,963 11,066 14,378
12/31/2005 13,468 11,760 14,746
12/31/2006 14,811 13,578 15,384
12/31/2007 15,182 14,362 16,487
12/31/2008 13,171 8,962 17,510
[END CHART]
- -------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN THROUGH DECEMBER 31, 2008(4)
Annual
Expense
1 Year 3 Years 5 Years 10 Years Ratio
--------------------------------------------- -------
DIVERSIFIED INCOME FUND -13.25% -0.74% 1.94% 2.79% 0.71%
Russell 1000(R) Index(2) -37.60 -8.66 -2.04 -1.09 NA
Merrill Lynch U.S. Corporate, Government & Mortgage Index(3) 6.20 5.89 4.90 5.76 NA
- -------------------------------------------------------------------------------------------------------------------------
NA Not Applicable. Index returns do not reflect fees or expenses.
(1) This chart compares a $10,000 investment made in the fund to a $10,000
investment made in the securities that make up the index.
(2) The Russell 1000(R) Index is a large-cap market index which measures the
performance of the 1,000 largest companies in the Russell 3000(R) Index (the
Russell 3000(R) Index measures the performance of the 3,000 largest U.S.
companies based on total market capitalization).
(3) The Merrill Lynch U.S. Corporate, Government & Mortgage Index, formerly the
Merrill Lynch U.S. Domestic Master Index, is a broad-based measure of the
total rate of return performance of the U.S. investment-grade bond markets.
The index is a capitalization-weighted aggregation of outstanding U.S.
treasury, agency and supranational mortgage pass-through, and
investment-grade corporate bonds meeting specified selection criteria.
(4) Fund returns are calculated after fund level expenses have been subtracted,
but do not include any separate account fees, charges or expenses imposed by
the variable annuity and variable life insurance contracts that invest in
the fund, as described in the Prospectus. If these fees, charges, or
expenses were included, fund returns would have been lower. Fund returns
also assume that dividends and capital gains are reinvested in additional
shares of the fund. Investment return and principal value will fluctuate, so
an investor's shares, when redeemed, may be worth more or less than when
purchased. Further information relating to the fund's performance is
contained in the Prospectus and elsewhere in this report. The fund's past
performance is not indicative of future performance. Current performance may
be lower or higher than the performance data cited. For fund performance
data current to the most recent month-end, please call 1-800-798-5500.
Indices are unmanaged and investors cannot invest in them directly. Index
returns do not reflect fees or expenses.
- --------------------------------------------------------------------------------
15
================================================================================
LARGE CAP VALUE FUND PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
PERFORMANCE AND ECONOMIC & MARKET REVIEW
The Ultra Series Large Cap Value Fund experienced a return of -35.99% for the
year, outperforming the Russell 1000(R) Value Index which returned -36.85% and
the Morningstar Insurance Fund Large Value category average which returned
- -37.19%.
These extraordinary negative returns were the result of a severe bear market
brought on by the financial crisis, a global economic slowdown, and a continuing
drop in corporate profitability and earnings expectations. We began to see signs
of widespread weakness in mid 2007 and positioned the fund in a defensive
manner. We entered this year with an underweight relative to the index in
financials and maintained an underweight position most of the year, expecting
the credit crisis to produce losses greater than the market appeared to
anticipate. Conversely, the fund was overweight the consumer staples sector.
Staples include products that consumers purchase and use frequently, meaning
sales and profits hold up reasonably well in a recession. Both of these
strategic positions benefited the fund this year, as the consumer staples sector
was the best performing sector by a wide margin (down "only" -17%) while
financial stocks were the worst performers returning approximately -52%.
PORTFOLIO REVIEW
Stock selection was generally positive for the year. Within consumer staples,
the fund benefited from owning Wal-Mart as consumers traded down their spending
habits in a weakening economy. The fund also saw outperformance from its
holdings in Heinz, Kellogg and General Mills well ahead of the index.
Overweight positions relative to the index in Proctor & Gamble, Johnson &
Johnson and Clorox performed a similar role in the consumer products space.
Within financials, our preference for high quality, lower credit risk companies
was rewarded as significant holdings in strong banks such as Wells Fargo, US
Bancorp and BB&T each outperformed the sector by more than 30%. We did suffer
negative return contributions from some credit exposed financial stocks such as
Lehman Brothers, XL Capital and Prudential. In these cases, the value of the
firm's balance sheet assets came into question and led to significant stock
declines. We also saw negative return contributions from commodity stocks Alcoa
and Freeport McMoRan Copper as we underestimated the speed and severity of the
global economic slowdown which translated into a rapid decline in the price of
raw materials.
REVIEW OF TOP TEN HOLDINGS
As of year end, the top ten active overweight positions relative to the fund's
index were Wal-Mart, Travelers, MetLife, Waste Management, Johnson & Johnson, US
Bancorp, IBM, Target, Public Service Enterprise Group, and Sempra Energy.
Although they represent different sectors, these companies share the common
traits of being high quality, well managed, more defensive businesses that are
leaders in their industry that should perform relatively well in an economic
slowdown.
ECONOMIC AND MARKET OUTLOOK
As we exit year end 2008, the fund remains defensively positioned. We foresee
continued economic distress throughout the developed world and expect the
economic and profits recession to last well into 2009. We also expect to remain
tilted toward higher quality financial companies, but plan to reduce our
underweight relative to the index in that sector on the belief that government
programs and policies will lead to a stabilized financial system in the next
year. Furthermore, many valuation indicators we monitor suggest that stocks are
selling at below average prices, so we expect to direct a portion of our
research efforts toward identifying currently depressed companies that may offer
better than average return potential in an eventual recovery scenario that may
favor more cyclical opportunities.
MEMBERS Capital Advisors, Inc. - Adviser
Scott D. Opsal, CFA, Portfolio Manager
- --------------------------------------------------------------------------------
16
================================================================================
LARGE CAP VALUE FUND PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
CUMULATIVE PERFORMANCE OF $10,000 INVESTMENT(1,3)
[CHART OF CUMULATIVE PERFORMANCE]
Large Cap Value Fund Russell 1000(R) Value Index(2)
12/31/1998 $10,000 $10,000
12/31/1999 11,795 10,735
12/31/2000 11,891 11,488
12/31/2001 10,618 10,846
12/31/2002 8,331 9,162
12/31/2003 10,487 11,913
12/31/2004 11,790 13,879
12/31/2005 12,448 14,857
12/31/2006 15,007 18,163
12/31/2007 15,096 18,131
12/31/2008 9,663 11,450
[END CHART]
- -------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN THROUGH DECEMBER 31, 2008(3)
Annual
Expense
1 Year 3 Years 5 Years 10 Years Ratio
--------------------------------------------- -------
LARGE CAP VALUE FUND -35.99% -8.10% -1.62% -0.34% 0.61%
Russell 1000(R) Value Index(2) -36.85 -8.32 -0.79 1.36 NA
- -------------------------------------------------------------------------------------------------------------------------
NA Not Applicable. Index returns do not reflect fees or expenses.
(1) This chart compares a $10,000 investment made in the fund to a $10,000
investment made in the securities that make up the index.
(2) The Russell 1000(R) Value Index is a large-cap market index which measures
the performance of those Russell 1000 companies with lower price-to-book
ratios and lower forecasted growth values.
(3) Fund returns are calculated after fund level expenses have been subtracted,
but do not include any separate account fees, charges or expenses imposed by
the variable annuity and variable life insurance contracts that invest in
the fund, as described in the Prospectus. If these fees, charges, or
expenses were included, fund returns would have been lower. Fund returns
also assume that dividends and capital gains are reinvested in additional
shares of the fund. Investment return and principal value will fluctuate, so
an investor's shares, when redeemed, may be worth more or less than when
purchased. Further information relating to the fund's performance is
contained in the Prospectus and elsewhere in this report. The fund's past
performance is not indicative of future performance. Current performance may
be lower or higher than the performance data cited. For fund performance
data current to the most recent month-end, please call 1-800-798-5500.
Indices are unmanaged and investors cannot invest in them directly. Index
returns do not reflect fees or expenses.
- --------------------------------------------------------------------------------
17
================================================================================
LARGE CAP GROWTH FUND PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
PERFORMANCE REVIEW
For the twelve month period ended December 31, 2008, the Ultra Series Large Cap
Growth Fund outperformed its benchmark, the Russell 1000(R) Growth Index, by
1.24% despite extreme market volatility throughout the year. Brutal bear market
conditions gripped virtually all financial asset classes, including equities.
The Russell 1000(R) Growth Index returned -38.44% for the period and the
Morningstar Insurance Fund Large Growth category average returned -41.67%, while
the fund outperformed both and returned -37.20%. No active manager controls the
markets; however we do strive to add incremental relative value each period.
Sector emphasis on healthcare, energy, and technology aided performance, as did
underweight positions relative to the index in consumer discretionary and
utilities. Within the healthcare sector, we targeted biotechnology. Genentech,
one of our top ten holdings, was up 23% during the year. Roche, its controlling
shareholder, recognized its undervaluation by bidding for the remaining 44% of
the company it does not own. Vertex, another top ten holding, is expected to
have a first-to-market treatment for hepatitis C, a large chronic viral
condition. The stock reacted favorably to this scientific breakthrough. Within
energy, we are emphasizing natural gas stocks because we believe natural gas is
undervalued versus crude oil. In addition, we believed this domestically
produced clean fuel source will be preferred in the future. Winners in the
natural gas production area were Petrohawk Energy and EOG Resources, both
companies with excellent acreage positions for future development. Within
technology, we benefited from owning Google, IBM, and Microchip Technologies.
Google not only remained an innovative growth franchise, but like IBM and
Microchip, had steady earnings prospects and a solid balance sheet.
The most significant detractor from the fund's return relative to the index was
its underweight in consumer staples stocks, traditionally a defensive group.
While we did own Coca Cola, Wal-Mart, and Colgate to name a few, we believed
other consumer staples stocks were too expensive compared to alternatives.
ECONOMIC & MARKET REVIEW
The market peaked in mid-October of 2007, then trended sideways to down in an
orderly fashion until plummeting in September of 2008. In hindsight, the seizing
up of the credit markets last August was a prescient event triggering massive
deleveraging which ultimately drove the global economy into a deep recession.
Because of the enormity of the scale of the credit bubble, an accurate
prediction of the dimensions of its unwinding was elusive for most participants
in any traded market.
The economic effects from the peaking in credit were slow to develop because
interest rates were low and global growth was robust, as reflected in the
ensuing boom in commodities prices. For example, the price of crude oil was $90
per barrel on October 31, 2007 and did not peak until July of 2008 at $147 per
barrel. This 50% increase bolstered investors' confidence that economic growth
was more sustainable than it turned out to be. Concerns now have rapidly shifted
from inflationary fears to capital preservation. We believe the global recession
will be the worst in over 50 years.
PORTFOLIO REVIEW
During the period, we initiated significant positions in Petrohawk, Hologic, and
Axis Capital during the year. Petrohawk is a prime beneficiary of a new
unconventional natural gas field in the Haynesville formation in East Texas and
Louisiana. Hologic is the leading provider of digital mammography screening
equipment. Axis Capital is a property casualty re-insurer which will benefit
from an expected incipient turn in the pricing cycle.
Significant positions we sold out of during the year were Goldman Sachs, Harley
Davidson, and Applied Materials. Goldman Sachs, a leading investment bank, was
sold because its future profitability will likely be permanently lowered due to
a reduction in the debt leverage used in its businesses. Harley Davidson
motorcycles are highly discretionary purchases, and given the recession, further
earnings deterioration is likely. Applied Materials is a semi-conductor
equipment manufacturer which also has a solar division. While a promising
technology, we believed its solar production will miss expectations for growth.
REVIEW OF TOP TEN HOLDINGS
The top ten holdings of the fund accounted for approximately 35% of portfolio
assets, as our strategy is to concentrate fund assets toward our best ideas. We
strongly believed sustainable global growth franchises, such as these top five
holdings
- --------------------------------------------------------------------------------
18
================================================================================
LARGE CAP GROWTH FUND PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
listed below, will likely reward shareholders over time. These companies have
the balance sheet strength providing financial flexibility, are innovative, and
sell into global markets.
o Cisco Systems was selling as 12 times earnings, had $5 per share in cash,
no debt, over 20% net income margins.
o Google sold at 14 times earnings, had $45 per share in cash, no debt, over
20% net income margins.
o Genentech was selling at 20 times earnings, had $5.50 per share in cash,
low debt, over 20% net income margins.
o Microsoft sold at 10 times earnings, had $2.50 per share in cash, no debt,
over 20% net income margins.
o IBM sold at 9 times earnings, had $7.25 per share in cash, had 30% debt to
total capital, is estimated to generate over $9.00 per share in free cash
flow this year, and 75% of its business is services and software with
involvement in 150 different countries.
We do not simply buy and hold stocks; instead we actively manage our top ten as
drivers of portfolio performance. We believe different types of growth stocks
will be successful holdings under different economic and market conditions. In
2008, we focused on high-quality companies.
ECONOMIC & MARKET OUTLOOK
The rapidity and breadth of the economic collapse stemming in part from poorly
collateralized credit is stunning. Given the magnitude of the shock, it will
likely take time to recover. Policy responses have been equally forceful and
rapid, and we believe it is not a matter of "if" the massive government fiscal
and monetary stimulus will turn things around, but rather "when". There is an
old saying on Wall Street "Don't fight the Fed"; meaning once the Fed got
involved in a situation, its will would ultimately prevail. Given that in this
downturn, since not only is the Federal Reserve involved but so are U.S.
Treasury, Congress, foreign central banks, and foreign governments, it will
likely be true once again.
We believe equities will be priced at very attractive levels. While the economic
stress has caused earnings to deteriorate and induced some investors to sell, a
portion of the decline in stock prices is due to forced selling of positions as
the leverage in hedge funds and other entities is reduced. It is the latter that
is creating opportunities. We believe that equity volatility will remain above
average. This means that stock prices will likely have wide swings, both down
and up. Therefore, we expect to buy favored issues such as our top ten holdings
on dips and take profits when sentiment improves.
The United States is at a cross roads. On one path are the "old" systems and
attitudes which had developed over years of easy credit and overconfidence on
the part of all economic participants. On the other path is a potential
"re-engineered" country, which relatively quickly adapts its systems and
attitudes to the new global economic order. Should we effectively be able to
make this transition of re-aligning resources to solve legacy problems, we can
retain global financial leadership. We believe the markets are currently
debating the likelihood of which path we will take, and there are strong
arguments on both sides of the aisle. We are positioned with a bias towards
success in that transition, given current stock price levels and coordinated
policy responses.
MEMBERS Capital Advisors, Inc. - Adviser
Bruce A. Ebel, CFA, CIC, CFP(R), Portfolio Manager
- --------------------------------------------------------------------------------
19
================================================================================
LARGE CAP GROWTH FUND PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
CUMULATIVE PERFORMANCE OF $10,000 INVESTMENT(1,3)
[CHART OF CUMULATIVE PERFORMANCE]
Large Cap Growth Fund Russell 1000(R) Growth Index(2)
12/31/1998 $10,000 $10,000
12/31/1999 12,519 13,316
12/31/2000 13,055 10,330
12/31/2001 11,866 8,220
12/31/2002 8,139 5,928
12/31/2003 10,510 7,692
12/31/2004 11,449 8,176
12/31/2005 11,726 8,606
12/31/2006 12,650 9,387
12/31/2007 14,214 10,496
12/31/2008 8,926 6,462
[END CHART]
- -------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN THROUGH DECEMBER 31, 2008(3)
Annual
Expense
1 Year 3 Years 5 Years 10 Years Ratio
--------------------------------------------- -------
LARGE CAP GROWTH FUND -37.20% -8.69% -3.21% -1.13% 0.82%
Russell 1000(R) Growth Index(2) -38.44 -9.11 -3.42 -4.27 NA
- -------------------------------------------------------------------------------------------------------------------------
NA Not Applicable. Index returns do not reflect fees or expenses.
(1) This chart compares a $10,000 investment made in the fund to a $10,000
investment made in the securities that make up the index.
(2) The Russell 1000(R) Growth Index is a large-cap market index which measures
the performance of those Russell 1000 companies with higher price-to-book
ratios and higher forecasted growth values.
(3) Fund returns are calculated after fund level expenses have been subtracted,
but do not include any separate account fees, charges or expenses imposed by
the variable annuity and variable life insurance contracts that invest in
the fund, as described in the Prospectus. If these fees, charges, or
expenses were included, fund returns would have been lower. Fund returns
also assume that dividends and capital gains are reinvested in additional
shares of the fund. Investment return and principal value will fluctuate, so
an investor's shares, when redeemed, may be worth more or less than when
purchased. Further information relating to the fund's performance is
contained in the Prospectus and elsewhere in this report. The fund's past
performance is not indicative of future performance. Current performance may
be lower or higher than the performance data cited. For fund performance
data current to the most recent month-end, please call 1-800-798-5500.
Indices are unmanaged and investors cannot invest in them directly. Index
returns do not reflect fees or expenses.
- --------------------------------------------------------------------------------
20
================================================================================
MID CAP VALUE FUND PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
PERFORMANCE REVIEW
For the twelve month period ended December 31, 2008, the Ultra Series Mid Cap
Value Fund returned -36.45% compared with -38.44% for the Russell Midcap(R)
Value Index and -37.24 for the Morningstar Insurance Fund Mid-Cap Value category
average return of -37.24%.
ECONOMIC & MARKET REVIEW
The period was characterized by the ongoing bursting of the housing bubble that
in turn morphed into a broad-based economic slow-down. Rising delinquencies in
subprime mortgages began the downward spiral of house price declines, rising
foreclosures, mark-downs in securitized bonds of every stripe, earnings losses
for multiple financial institutions, and broad-based contagion across the global
financial system. The next leg of that is appearing to manifest itself in a
global economic slowdown that is negatively impacting consumer spending and in
turn reducing manufacturing, sales, and services across all sectors as well as
causing a sharp reversal in commodity prices including oil, metals, and gold.
PORTFOLIO REVIEW
The fund's segment managed by MEMBERS Capital Advisors, Inc. started off the
year overweight relative to the index in both materials and energy believing
that even with the economic slowdown in the U.S., the urbanization and expansion
of emerging markets would sustain demand in metals, fertilizers, and energy. The
fund was concurrently underweight relative to the index in financials due to the
expanding problems of housing, and in consumer discretionary on the slowing
economy and poor outlook for consumer spending. Defensive positions were held
in health care and consumer staples. As the year unfolded, and particularly in
the summer, the fund reversed course and reduced materials to underweight and
energy to neutral relative to the index as it became clearer that the downdraft
in the U.S. was affecting the global economy as well, and the demand for those
products would not hold. For example, one of the fund's largest holdings during
the year was The Mosaic Company, a fertilizer company, whose position was cut by
two-thirds. Similarly, the fund reduced positions in metal companies Nucor
Corporation and Freeport-McMoRan. Within consumer discretionary, we virtually
eliminated home builders from our holdings. And in financials, we expanded our
underweight relative to the index within commercial banks and REITs while
building our positions in better quality companies including BlackRock, Inc. and
JPMorgan Chase & Co.
For the year, the greatest positive contributions came from the fund's
underweight relative to the index of consumer discretionary stocks based on our
outlook for reduced consumer spending. Performance was also driven by stock
selection which was strongest in the consumer discretionary and consumer staples
sectors. The fund also saw a large benefit from holding larger-than-normal cash
reserves in a declining market. The greatest negatives came from holdings within
energy and materials, both sectors that strongly outperformed in the early part
of the fiscal year, but then sharply reversed beginning in mid-July 2008. Stock
selection in the industrials and health care sectors also detracted from
performance.
For the segment of the fund subadvised by Wellington Management Company, LLP,
the relative outperformance was driven by stock selection in the consumer
discretionary, materials, and information technology sectors. Sector allocation,
which is a fall-out of our bottom-up stock selections, also aided performance as
an overweight relative to the index to industrials and to the defensive consumer
staples sectors contributed positively to results. Stock selection in the
industrials and health care sectors detracted from performance as did an
overweight to consumer discretionary and an underweight of financials. Key
individual contributors to relative performance were Whiting Petroleum (energy),
O'Reilly Automotive (retailing), and Lance (food, beverage & tobacco).
Detractors from relative performance during the period included Orthofix
International (health care equipment & services), ACCO Brands (commercial &
professional services), and Arbitron (media).
REVIEW OF TOP TEN HOLDINGS
The fund was not highly concentrated given our outlook for continued economic
distress and the potential for negative surprises. The top ten holdings
(including cash) accounted for only 17% of the portfolio with only half-dozen
individual names over 100 basis points of relative overweight versus the index.
The list is an eclectic group that focused on higher quality names with sound
balance sheets and sustainable dividends; companies with some advantage in the
current environment, and attractive valuation, including JPMorgan Chase & Co.
and BlackRock, Inc.; TJX Companies, Inc., Costco Wholesale Corp., and Wal-Mart;
Maxim Integrated Products Inc. and Hologic Inc.
- --------------------------------------------------------------------------------
21
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MID CAP VALUE FUND PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
ECONOMIC & MARKET OUTLOOK
The markets already have severely corrected, but the timing of the ultimate
bottom remains unknown. Still, we expect valuations to become more attractive,
the Federal Reserve and U.S. Treasury have and are expected to continue to add
stimulus and liquidity to financial markets, and the "oil tax" has been cut in
half. The markets, therefore, have the makings for a recovery. As such, the fund
is positioned to take advantage of those factors and has built a cash position
to be ready to more aggressively add to holdings when appropriate. In addition,
we anticipate the quality of the portfolio will continue to be upgraded as we
swap companies with poorer outlooks and balance sheets for stronger competitors
at bargain prices.
MEMBERS Capital Advisors, Inc. - Adviser
Livia S. Asher, Portfolio Manager
Wellington Management Company, LLP - Subadviser
Timothy J. Mccormack, CFA; Shaun F. Pedersen, Portfolio Managers
- --------------------------------------------------------------------------------
22
================================================================================
MID CAP VALUE FUND PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
CUMULATIVE PERFORMANCE OF $10,000 INVESTMENT SINCE INCEPTION(1,3)
[CHART OF CUMULATIVE PERFORMANCE]
Mid Cap Russell Midcap(R)
Value Fund Value Index(2)
5/01/1999 $10,000 $10,000
12/31/1999 11,368 9,418
12/31/2000 14,079 11,224
12/31/2001 15,651 11,486
12/31/2002 12,926 10,378
12/31/2003 16,960 14,328
12/31/2004 19,651 17,725
12/31/2005 21,678 19,968
12/31/2006 25,355 24,004
12/31/2007 25,419 23,664
12/31/2008 16,155 14,566
[END CHART]
- -------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN THROUGH DECEMBER 31, 2008(3)
Annual
Expense
1 Year 3 Years 5 Years Since Inception(4) Ratio
-------------------------------------------------------- ---------
MID CAP VALUE FUND -36.45% -9.34% -0.97% 5.09% 1.02%
Russell Midcap(R) Value Index(2) -38.44 -9.98 0.33 3.96 NA
- -------------------------------------------------------------------------------------------------------------------------
NA Not Applicable. Index returns do not reflect fees or expenses.
(1) This chart compares a $10,000 investment made in the fund to a $10,000
investment made in the securities that make up the index.
(2) The Russell Midcap(R) Value Index is a mid-cap market index which measures
the performance of those Russell Midcap companies with lower price-to-book
ratios and lower forecasted growth values.
(3) Fund returns are calculated after fund level expenses have been subtracted,
but do not include any separate account fees, charges or expenses imposed
by the variable annuity and variable life insurance contracts that invest
in the fund, as described in the Prospectus. If these fees, charges, or
expenses were included, fund returns would have been lower. Fund returns
also assume that dividends and capital gains are reinvested in additional
shares of the fund. Investment return and principal value will fluctuate,
so an investor's shares, when redeemed, may be worth more or less than when
purchased. Further information relating to the fund's performance is
contained in the Prospectus and elsewhere in this report. The fund's past
performance is not indicative of future performance. Current performance
may be lower or higher than the performance data cited. For fund
performance data current to the most recent month-end, please call
1-800-798-5500. Indices are unmanaged and investors cannot invest in them
directly. Index returns do not reflect fees or expenses.
(4) The fund commenced investment operations on May 1, 1999. The since
inception index returns are also from May 1, 1999.
- --------------------------------------------------------------------------------
23
================================================================================
MID CAP GROWTH FUND PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
PERFORMANCE REVIEW
For the twelve month period ended December 31, 2008, the Ultra Series Mid Cap
Growth Fund returned -46.89% while the Russell Midcap(R) Growth Index returned
- -44.32% and the Morningstar Insurance Fund Mid-Cap Growth category average
returned -45.02%.
ECONOMIC & MARKET REVIEW
During the year, most major indices suffered double-digit negative returns.
Equity markets fell sharply amid a significant deterioration in both credit
market conditions and investor confidence. Forced deleveraging by financial
institutions triggered an unprecedented set of bank failures and mergers,
significantly reshaping the global financial map. Impaired access to capital
threatened to spill over into the real economy, reducing expectations for global
growth and forcing energy and commodity prices sharply lower. Economic data
reported during the most recent quarter provided little encouragement to
investors, as housing, employment, and manufacturing metrics all trended
downward. Within the Russell Midcap(R) Growth Index, all ten broad economic
sectors posted double-digit negative returns with five falling in excess of 45%.
PORTFOLIO REVIEW
Stock selection in the industrials, health care, and consumer staples sectors
detracted the most from relative performance. These negative results were
partially offset by strong stock selection in the information technology and
financials sectors. Though sector weights are a fall-out of bottom-up stock
selection, our underweight relative to the index to the underperforming
utilities sector and overweight to the defensive health care sector were
positive contributors to relative returns.
Key individual contributors to relative performance were Cephalon (pharma,
biotech & life sciences), Perot Systems (software & services), and Hub Group
(transportation). Shares of Cephalon, a Pennsylvania-based biopharmaceutical
firm, moved higher after the company raised its fiscal year 2008 sales and
earnings guidance and issued fiscal year 2009 earnings guidance above consensus
estimates. Perot Systems, a worldwide provider of information technology
services and business solutions, rallied as the company announced
better-than-expected revenue and earnings for the second quarter. Shares of Hub
Group, a freight transportation management company, increased as the company
reported strong quarterly earnings during the year. International mining company
Cliffs Natural Resources (formerly Cleveland-Cliffs), specialty retailer of
automotive aftermarket parts and accessories O'Reilly Automotive, and oilfield
service provider Complete Production Services were among the top contributors to
absolute performance during the period.
Detractors from relative performance included Coventry Health Care (health care
equipment & services), Terex (capital goods), and Hercules Offshore (energy).
Shares of Coventry Health Care, a diversified managed healthcare company, fell
sharply after the company posted a significant decline in quarterly earnings
hurt by charges on investment impairments, and lowered the midpoint of its full
year earnings outlook. Terex, a global manufacturer of mining and building
equipment, suffered from declining quarterly earnings and a reduced full-year
outlook, and the subsequent removal from the S&P 500 Index. Shares of Hercules
Offshore, provider of shallow-water drilling and marine services to the oil and
natural gas exploration & production industry, fell after the company reported
second quarter earnings that were weaker-than-expected, hurt by a steep
escalation in costs and expenses. Atwood Oceanics was among the names detracting
from absolute returns during the period.
ECONOMIC & MARKET OUTLOOK
We plan to continue to look for high-quality sustainable growth companies at
attractive valuations that we think will deliver improving margins, growing
profits, and higher returns on investments. We ended the period with an
overweight to the health care, energy, and information technology sectors and an
underweight to the utilities, consumer discretionary, and industrials sectors
relative to the index.
MEMBERS Capital Advisors, Inc. - Adviser
Wellington Management Company, LLP - Subadviser
Francis J. Boggan, CFA, Portfolio Manager
- --------------------------------------------------------------------------------
24
================================================================================
MID CAP GROWTH FUND PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
CUMULATIVE PERFORMANCE OF $10,000 INVESTMENT SINCE INCEPTION(1,3)
[CHART OF CUMULATIVE PERFORMANCE]
Mid Cap Russell Midcap(R)
Growth Fund Growth Index(2)
10/31/2000 $10,000 $10,000
12/31/2000 9,047 8,715
12/31/2001 6,252 6,959
12/31/2002 4,676 5,052
12/31/2003 6,238 7,210
12/31/2004 7,076 8,326
12/31/2005 7,695 9,333
12/31/2006 8,571 10,327
12/31/2007 9,294 11,508
12/31/2008 4,936 6,407
[END CHART]
- -------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN THROUGH DECEMBER 31, 2008(3)
Annual
Expense
1 Year 3 Years 5 Years Since Inception(4) Ratio
-------------------------------------------------------- ---------
MID CAP GROWTH FUND -46.89% -13.76% -4.58% -8.28% 0.87%
Russell Midcap(R) Growth Index(2) -44.32 -11.78 -2.33 -5.30 NA
- -------------------------------------------------------------------------------------------------------------------------
NA Not Applicable. Index returns do not reflect fees or expenses.
(1) This chart compares a $10,000 investment made in the fund to a $10,000
investment made in the securities that make up the index.
(2) The Russell Midcap(R) Growth Index is a mid-cap market index which measures
the performance of those Russell Midcap companies with higher price-to-book
ratios and higher forecasted growth values.
(3) Fund returns are calculated after fund level expenses have been subtracted,
but do not include any separate account fees, charges or expenses imposed
by the variable annuity and variable life insurance contracts that invest
in the fund, as described in the Prospectus. If these fees, charges, or
expenses were included, fund returns would have been lower. Fund returns
also assume that dividends and capital gains are reinvested in additional
shares of the fund. Investment return and principal value will fluctuate,
so an investor's shares, when redeemed, may be worth more or less than when
purchased. Further information relating to the fund's performance is
contained in the Prospectus and elsewhere in this report. The fund's past
performance is not indicative of future performance. Current performance
may be lower or higher than the performance data cited. For fund
performance data current to the most recent month-end, please call
1-800-798-5500. Indices are unmanaged and investors cannot invest in them
directly. Index returns do not reflect fees or expenses.
(4) The fund commenced investment operations on October 31, 2000. The since
inception index returns are also from October 31, 2000.
- --------------------------------------------------------------------------------
25
================================================================================
SMALL CAP VALUE FUND PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
PERFORMANCE REVIEW
For the twelve month period ended December 31, 2008, the Ultra Series Small Cap
Value Fund returned -25.54%, outperforming both the Russell 2000(R) Value Index
which returned -28.92% and the Morningstar Insurance Fund Small Value category
average which returned -32.33%. Within the Russell 2000(R) Value Index, all ten
broad economic sectors posted negative returns. The telecommunications services,
consumer discretionary, and energy sectors were the weakest performers, while
the utilities and consumer staples suffered the least.
ECONOMIC & MARKET REVIEW
During the year, most major indices suffered double-digit negative returns.
Equity markets fell sharply amid a significant deterioration in both credit
market conditions and investor confidence. Forced deleveraging by financial
institutions triggered an unprecedented set of bank failures and mergers,
significantly reshaping the global financial map. Impaired access to capital
threatened to spill over into the real economy, reducing expectations for global
growth and forcing energy and commodity prices sharply lower. Economic data
reported during the past quarter provided little encouragement to investors, as
housing, employment, and manufacturing metrics all trended downward.
PORTFOLIO REVIEW
Stock selection during the one year period drove the favorable relative return
as strong stock selection in consumer discretionary, materials, and energy
helped offset weak stock selection in industrials, health care, and financials.
Although sector allocation is a residual of our bottom-up stock selection, the
fund's underweight relative to the index in information technology contributed
positively while an overweight to the weakening consumer discretionary sector
and underweight to financials detracted from relative returns.
Key individual contributors to relative performance were Zep (materials),
Whiting Petroleum (energy), and Lance (food, beverage & tobacco). Cleaning
solutions provider, Zep, reported higher earnings due to favorable foreign
currency translation on international sales. Oil and gas exploration and
production company, Whiting Petroleum, profited during the first half of 2008
from the unprecedented run-up in oil prices. Shares of snack food manufacturer
Lance, Inc. benefited from news of the successful acquisition of Archway
Cookies. Other contributors to the fund's absolute performance were Compass
Minerals, a salt producer in North America and the U.K., and hotel franchisor
Choice Hotels International.
Detractors from relative performance during the period included Orthofix
International (health care equipment & services), ACCO Brands (commercial &
professional services), and ASTA Funding (diversified financials). Orthopedic
products manufacturer Orthofix International shares fell with concerns of higher
debt servicing costs and lowered earnings expectations related to changes in the
company's spine distributor network. ACCO Brands, a leading branded office
products supplier, declined after reporting lower than expected earnings driven
by weak end market demand and cost pressures. Shares of ASTA Funding, a consumer
receivable asset management and liquidation company, declined along with the
financial sector as earnings and cash flow slowed during the year. Cable
manufacturer Belden, media and marketing research firm Arbitron, and diversified
manufacturing company Carlisle were among other names detracting from absolute
returns during the period.
ECONOMIC & MARKET OUTLOOK
The Small Cap Value investment approach emphasizes individual stock selection;
sector weights are a residual of the process. We do, however, carefully
consider diversification across economic sectors to limit risk. We ended the
one-year period as of December 31, 2008 with an overweight to the industrials,
consumer discretionary, and health care sectors and an underweight to the
financials, information technology, and utilities sectors relative to the index.
MEMBERS Capital Advisors, Inc. - Adviser
Wellington Management Company, LLP - Subadviser
Timothy J. McCormack, CFA and Shaun F. Pederson, Portfolio Managers
- --------------------------------------------------------------------------------
26
================================================================================
SMALL CAP VALUE FUND PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
CUMULATIVE PERFORMANCE OF $10,000 INVESTMENT SINCE INCEPTION(1,3)
[CHART OF CUMULATIVE PERFORMANCE]
Small Cap Russell 2000(R)
Value Fund Value Index(2)
5/01/2007 $10,000 $10,000
12/31/2007 9,038 8,801
12/31/2008 6,729 6,255
[END CHART]
- -----------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN THROUGH DECEMBER 31, 2008(3)
Annual
Expense
1 Year Since Inception(4) Ratio
------------------------------ ---------
SMALL CAP VALUE FUND -25.54% -21.12% 1.12%
Russell 2000(R) Value Index(2) -28.92 -24.44 NA
- -----------------------------------------------------------------------------------------------------------------------
NA Not Applicable. Index returns do not reflect fees or expenses.
(1) This chart compares a $10,000 investment made in the fund to a $10,000
investment made in the securities that make up the index.
(2) The Russell 2000(R) Value Index is a small-cap market index which measures
the performance of those Russell 2000 companies with lower price-to-book
ratios and lower forecasted growth values.
(3) Fund returns are calculated after fund level expenses have been subtracted,
but do not include any separate account fees, charges or expenses imposed
by the variable annuity and variable life insurance contracts that invest
in the fund, as described in the Prospectus. If these fees, charges, or
expenses were included, fund returns would have been lower. Fund returns
also assume that dividends and capital gains are reinvested in additional
shares of the fund. Investment return and principal value will fluctuate,
so an investor's shares, when redeemed, may be worth more or less than when
purchased. Further information relating to the fund's performance is
contained in the Prospectus and elsewhere in this report. The fund's past
performance is not indicative of future performance. Current performance
may be lower or higher than the performance data cited. For fund
performance data current to the most recent month-end, please call
1-800-798-5500. Indices are unmanaged and investors cannot invest in them
directly. Index returns do not reflect fees or expenses.
(4) The fund commenced investment operations on May 1, 2007. The since
inception index returns are also from May 1, 2007.
- --------------------------------------------------------------------------------
27
================================================================================
SMALL CAP GROWTH FUND PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
PERFORMANCE REVIEW
For the twelve month period ended December 31, 2008, the Ultra Series Small Cap
Growth Fund returned -43.41%, while the Russell 2000(R) Growth Index returned
- -38.54% and the Morningstar Insurance Fund Small Growth category average
returned -40.97%.
ECONOMIC & MARKET REVIEW
The market as a whole was led drastically down by a failing economy and banking
system. While small capitalization companies were rewarded for their size, their
stock prices were also symmetrically penalized for their above average risk
relative to large company stocks during the downward trending market. That said,
the Russell 2000(R) Growth Index (-38.54%) marginally underperformed the broad
market Russell 3000(R) Index (-37.31%) and S&P 500 Index (-37.00%) amidst a
total breakdown in investor confidence and uncertainty about future earnings.
PORTFOLIO REVIEW
For the year, the fund did benefit from its underexposure relative to the index
to earnings variation and leverage. Also, the fund's negative active beta
policy, amidst one of the worst years in the market's history, accounted for a
significant contribution to the fund's return. Stock selection represented the
single largest detractor from the portfolio's performance accounting for 300 bps
of the loss. Additionally, an underexposure relative to the index to volatility
and the fund's larger relative size detracted from performance. Wabtec (rail
industry technology-based equipment provider), Forrester Research (independent
technology and market research company), and Greenhill & Co. (independent
investment banking firm) were among the fund's leading contributors to return
for the year. BE Aerospace (commercial aircraft and business jet interior
products manufacturer), Pharmnet Development Group (drug development services
company), and Walter Industries (producer and exporter of metallurgical coal for
the global steel industry) were among the fund's leading detractors from return
for the year.
ECONOMIC & MARKET OUTLOOK
In the face of a slowing global economy, we expect the fund to continue to
reduce its exposures to energy and materials and to a lesser extent,
industrials. At the same time, modest increases to financials due to attractive
valuations and the typically recession-proof telecommunications are anticipated.
We also plan to reduce the fund's exposure to companies whose earnings are
sensitive to currency fluctuation, which should play well if the dollar
continues to strengthen.
MEMBERS Capital Advisors, Inc. - Adviser
Paradigm Asset Management Company, LLC - Subadviser
James E. Francis, Jeffrey Marcus and Gregory Pai, Portfolio Managers
- --------------------------------------------------------------------------------
28
================================================================================
SMALL CAP GROWTH FUND PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
CUMULATIVE PERFORMANCE OF $10,000 INVESTMENT SINCE INCEPTION(1,3)
[CHART OF CUMULATIVE PERFORMANCE]
Small Cap Russell 2000(R)
Growth Fund Growth Index(2)
5/01/2007 $10,000 $10,000
12/31/2007 10,026 10,179
12/31/2008 5,674 6,256
[END CHART]
- -------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN THROUGH DECEMBER 31, 2008(3)
Annual
Expense
1 Year Since Inception(4) Ratio
------------------------------ ---------
SMALL CAP GROWTH FUND -43.41% -28.78% 1.12%
Russell 2000(R) Growth Index(2) -38.54 -24.44 NA
- -------------------------------------------------------------------------------------------------------------------------
NA Not Applicable. Index returns do not reflect fees or expenses.
(1) This chart compares a $10,000 investment made in the fund to a $10,000
investment made in the securities that make up the index.
(2) The Russell 2000(R) Growth Index is a small-cap market index which measures
the performance of those Russell 2000 companies with higher price-to-book
ratios and higher forecasted growth values.
(3) Fund returns are calculated after fund level expenses have been subtracted,
but do not include any separate account fees, charges or expenses imposed
by the variable annuity and variable life insurance contracts that invest
in the fund, as described in the Prospectus. If these fees, charges, or
expenses were included, fund returns would have been lower. Fund returns
also assume that dividends and capital gains are reinvested in additional
shares of the fund. Investment return and principal value will fluctuate,
so an investor's shares, when redeemed, may be worth more or less than when
purchased. Further information relating to the fund's performance is
contained in the Prospectus and elsewhere in this report. The fund's past
performance is not indicative of future performance. Current performance
may be lower or higher than the performance data cited. For fund
performance data current to the most recent month-end, please call
1-800-798-5500. Indices are unmanaged and investors cannot invest in them
directly. Index returns do not reflect fees or expenses.
(4) The fund commenced investment operations on May 1, 2007. The since
inception index returns are also from May 1, 2007.
- --------------------------------------------------------------------------------
29
================================================================================
GLOBAL SECURITIES FUND PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
PERFORMANCE REVIEW
For the twelve month period ended December 31, 2008, the Ultra Series Global
Securities Fund returned -38.14%, compared with the MSCI World Index which
returned -40.33% and the Morningstar Insurance Fund World Stock category average
which returned -41.76%.
ECONOMIC & MARKET REVIEW
A lackluster start to 2008 for both the U.S. economy and most global markets was
followed by a catastrophically weak second half. Certain areas of the economy
had been deteriorating for some time, in particular, homebuilding. But the
freezing up of the interbank lending market brought about the cessation of
normal financial activity across many parts of the globe. Forced selling of
assets by hedge funds reinforced the downward spiral, with Lehman Brothers an
early victim of the turmoil. The crisis initially was confined to financial
firms, but soon it spread further afield, as lenders reduced the amount of
credit available in an attempt to strengthen their capital base. The year ended
with most economies weakening further, unemployment rising and a slump in equity
prices.
PORTFOLIO REVIEW
Our investment approach has a value-oriented defensive style. We assess value by
analysis of the potential for company earnings and dividends to grow over time.
By relating these to current share prices, we seek to find companies that are
under-valued. Our process emphasizes in-depth business analysis and a long time
horizon for researching a company's potential going forward. One aim of this is
to include in the portfolio businesses with more resilient cash flows, which
should reduce the volatility of returns. Stock selection is the primary driver
for structuring the portfolio. This is combined with a top-down overlay which
assesses the relative valuation of equity markets around the world.
In the period we made a number of transactions, of particular note, earlier in
the year we increased our exposure to Japan by increasing holdings in the likes
of Seven & I, the convenience-to-department stores retailer, and Canon, the
manufacturer of printers, copiers and digital cameras. Also, we added to
information technology with the purchase of a position in TSMC. TSMC is a
Taiwanese-based semi-conductor manufacturer. It has a dominant position in the
integrated-circuit foundry business and is committed to returning value to
shareholders through both dividends and share buy-backs. Further, we added to
our telecoms weight with the addition of two new names: AT&T and Singapore
Telecommunications. AT&T is the largest telecommunications company in the U.S.
It offers wireline and wireless services that we believe should prove relatively
defensive over time. Also, its ability to bundle various telephony services is,
we believe, a key long-term competitive strength. Singapore Telecommunications
is the incumbent telecoms provider in Singapore. Further, the company has
operations in Australia and owns minority stakes in other operators across Asia.
We are attracted by the combination of defensive characteristics and growth
potential in emerging markets.
A dramatic part of events in equity markets last year was the weakness of
financials stocks with the sector as a whole more than halving in value over the
12 months to December. Over the year, our allocation to this sector was
underweight, but stock performance was weak, which was a drag on performance.
ECONOMIC & MARKET OUTLOOK
Governments across the world have responded to the situation with new spending
packages designed to arrest the deterioration in economic activity and
kick-start recovery. It is too early to say if the current round of stimuli will
work. Major parts of the plans in the U.S. and U.K. have been attempts to
stabilize the banking sector, which is key to any revival. Again it is too
early to say whether current measures will be sufficient to generate more
appropriate levels of bank lending. However, a number of economies are carrying
debt levels well above historical norms. Bringing down the ratio of debt to
income will be difficult as it is likely to require a combination of weaker
household spending and reduced investment. That implies not only a weak year
ahead in 2009, but also only moderate growth in the economy in the medium term.
Outside of the financial area, equity prices have also dropped sharply. We
believe that some of these reductions have been indiscriminate and offer
investors opportunities. We will maintain our disciplined, value-focused
approach to look for attractive investments.
MEMBERS Capital Advisors, Inc. - Adviser
Mondrian Investment Partners (U.S.), Inc. - Subadviser
Managed by Global Investment Committee; Members:
Nigel G. May, Elizabeth A. Desmond, Clive A. Gillmore, Brendan Baker, Andrew
Porter and Jonathan Spread
- --------------------------------------------------------------------------------
30
================================================================================
GLOBAL SECURITIES FUND PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
CUMULATIVE PERFORMANCE OF $10,000 INVESTMENT SINCE INCEPTION(1,3)
[CHART OF CUMULATIVE PERFORMANCE]
Global Morgan Stanley Capital International
Securities World Index(2)
Fund (MSCI World Index)
10/31/2000 $10,000 $10,000
12/31/2000 9,989 9,699
12/31/2001 8,959 8,096
12/31/2002 7,008 6,514
12/31/2003 9,899 8,713
12/31/2004 11,723 10,042
12/31/2005 13,360 11,049
12/31/2006 15,683 13,331
12/31/2007 16,588 14,605
12/31/2008 10,261 8,714
[END CHART]
- -------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN THROUGH DECEMBER 31, 2008(3)
Annual
Expense
1 Year 3 Years 5 Years Since Inception(4) Ratio
-------------------------------------------------------- ---------
GLOBAL SECURITIES FUND -38.14% -8.42% 0.72% 0.32% 0.97%
MSCI World Index(2) -40.33 -7.61 0.00 -1.67 NA
- -------------------------------------------------------------------------------------------------------------------------
NA Not Applicable. Index returns do not reflect fees or expenses.
(1) This chart compares a $10,000 investment made in the fund to a $10,000
investment made in the index.
(2) The MSCI World Index is free float-adjusted market capitalization index
that is designed to measure global developed market equity performance,
including the U.S. and Canada.
(3) Fund returns are calculated after fund level expenses have been subtracted,
but do not include any separate account fees, charges or expenses imposed
by the variable annuity and variable life insurance contracts that invest
in the fund, as described in the Prospectus. If these fees, charges, or
expenses were included, fund returns would have been lower. Fund returns
also assume that dividends and capital gains are reinvested in additional
shares of the fund. Investment return and principal value will fluctuate,
so an investor's shares, when redeemed, may be worth more or less than when
purchased. Further information relating to the fund's performance is
contained in the Prospectus and elsewhere in this report. The fund's past
performance is not indicative of future performance. Current performance
may be lower or higher than the performance data cited. For fund
performance data current to the most recent month-end, please call
1-800-798-5500. Indices are unmanaged and investors cannot invest in them
directly. Index returns do not reflect fees or expenses.
(4) The fund commenced investment operations on October 31, 2000. The since
inception index returns are also from October 31, 2000.
- --------------------------------------------------------------------------------
31
================================================================================
INTERNATIONAL STOCK FUND PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
PERFORMANCE REVIEW
The Ultra Series International Stock Fund returned -38.62% for the twelve month
period ended December 31, 2008, while the MSCI EAFE Index returned -43.06% and
the Morningstar Insurance Fund Foreign Large Blend category average returned
- -43.33%. Fund performance was hindered by exposure to the emerging markets which
returned approximately -53% during the year as measured by the MSCI Emerging
Markets Index. Global equity markets finished higher in December, but ended with
one of the worst quarters and years on record.
ECONOMIC & MARKET REVIEW
International equity markets experienced one of their worst years in history
amid further signs of deepening global weakness, with the MSCI EAFE Index
returning over -43% for the full calendar year. For U.S. dollar investors, the
strength of the U.S. dollar in 2008 impacted returns. The steep fall in equities
came as investors witnessed the collapse in debt markets and its impact on real
economic activity around the world. The bankruptcy of Lehman Brothers in the
middle of September precipitated a sharp worsening of the availability and cost
of credit, and led to a sudden, global deterioration in sentiment among both
consumers and businesses. This resulted in a severe curtailment of discretionary
expenditures for consumers, as well as curtailed capital expenditures and
inventory purchases for companies. Several of the world's largest economies (the
United States, Europe, and Japan) faltered into recession in 2008. In addition,
the slowdown exposed the vulnerability of emerging economies, sending the prices
of many commodities to the lowest levels seen in recent years. Oil prices, which
earlier this year traded above $140 per barrel, plunged to five-year lows. As a
result, central banks around the world took aggressive, coordinated action to
combat the lack of liquidity, the loss of confidence, and the risk of deflation.
The year was characterized by outperformance of the classic defensive sectors,
including health care, consumer staples, telecom services, and utilities
(especially in Japan, which performed strongly in U.S. dollar terms as the yen
appreciated). Among the weaker areas were the materials and consumer
discretionary sectors, driven by a fall in commodity prices and auto sales,
which also affected emerging market stocks. Financial stocks underperformed
following the realization that most of these companies require material capital
injections, which has the potential to substantially dilute existing equity
holders.
PORTFOLIO REVIEW
The fund's allocation to large capitalization developed markets finished ahead
of the MSCI EAFE Index for 2008. For the year, the fund benefited from its very
low exposure to the financials and materials sectors. Recent purchases near
market lows in October and November performed well, positively contributing for
the year. Examples included Japanese security company Secom, French
telecommunication and construction group Bouygues, and the newly-combined
Anheuser-Busch InBev, which we believe was even more attractively valued due to
concerns over its debt burden. French gas company GDF Suez, Swiss pharmaceutical
company Novartis, and Japanese apartment-builder Daito Trust Construction were
strong performers for the year. Weaker stocks for the year included Old Mutual,
which fell on concerns over the nature of its South African domicile as well as
the sensitivity to equities inherent in its insurance/asset management
businesses, and Telenor, which declined due to shareholder concerns over the
dilutive effects of a potential capital raising.
Within the small capitalization developed markets segment, stock selection in
Japan and the Netherlands detracted from performance, while stock selection in
France was strong. In terms of sectors, stock selection in the energy and
consumer discretionary sectors hampered performance, while stock selection in
the utilities and health care sectors contributed positively. A top performer
for the year was Neopost, the French manufacturer of mailing systems. Neopost is
the only global competitor to Pitney Bowes in the mailing systems industry.
These two dominant players enjoy a relatively stable product demand, and Neopost
has been a consistently profitable business. An underperformer for the year was
Dutch oil service company Fugro, after the price of oil peaked in July and then
fell dramatically through the remainder of the year. Other energy-related
names, such as Norway-based companies Odim and Songa Offshore, were also
underperformers in sympathy with the declining price of oil.
For the emerging markets segment, by sector, the most defensive were health care
and consumer staples, followed by utilities and telecom services. Financials
performed worst of all, followed by industrials, energy, and materials. Positive
stock performance was recorded in Truworths International, a South African
retailer, based on decent earnings results. Shares of Eurasian Natural
Resources, a Kazakh ferrochrome company, rose sharply due to strong metals
prices earlier in the year.
- --------------------------------------------------------------------------------
32
================================================================================
INTERNATIONAL STOCK FUND PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
Cemig, a Brazilian electric utility company, performed well as a result of its
defensive nature, with stable cash flows and an attractive dividend. Shares of
Oil & Natural Gas Corp., an Indian oil and gas company, fell on investor
concerns regarding the price of oil. Mobile TeleSystems, a Russian
telecommunication services company, experienced weakness due to forced selling
within the Russian market and currency concerns.
ECONOMIC & MARKET OUTLOOK
The material changes in the global credit markets since the summer of 2007 has
meant that both consumers and companies are finding it much harder and more
expensive to borrow money to spend or invest. Coupled with a clear shift in
sentiment, this has materially impacted demand for consumer and industrial
products. Despite government stimulus efforts, this condition will likely be
prolonged. Many companies enjoyed record profit margins and returns in the past,
but are vulnerable to clear downside profit levels across the globe. However, we
believe value will begin to emerge in some of the more economically sensitive
companies, as well as in strong, resilient businesses caught up in the general
sell-off. We believe that investors' profit expectations, while still too high,
will become much more realistic. The portfolio team plans to continue to focus
on stock selection, and remains confident that the strong track record of this
philosophy will continue in a variety of market conditions.
MEMBERS Capital Advisors, Inc. - Adviser
Lazard Asset Management - Subadviser
John R. Reinsberg, Lead Portfolio Manager; Gabrielle M. Boyle; Michael A.
Bennett; Michael G. Fry; Michael Powers; Brian Pessin, CFA; Edward Rosenfeld:
James M. McDonald, CFA; Rohit Chopra; and Erik McKee, Portfolio Managers
- --------------------------------------------------------------------------------
33
================================================================================
INTERNATIONAL STOCK FUND PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
CUMULATIVE PERFORMANCE OF $10,000 INVESTMENT SINCE INCEPTION(1,3)
[CHART OF CUMULATIVE PERFORMANCE]
International Morgan Stanley Capital International Europe,
Stock Fund Australasia & Far East Index(2) (MSCI EAFE)
10/31/2000 $10,000 $10,000
12/31/2000 9,745 10,033
12/31/2001 7,946 7,906
12/31/2002 7,312 6,668
12/31/2003 9,769 9,280
12/31/2004 11,771 11,200
12/31/2005 13,717 12,769
12/31/2006 17,034 16,198
12/31/2007 18,980 18,082
12/31/2008 11,650 10,296
[END CHART]
- -------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN THROUGH DECEMBER 31, 2008(3)
Annual
Expense
1 Year 3 Years 5 Years Since Inception(4) Ratio
-------------------------------------------------------- ---------
INTERNATIONAL STOCK FUND -38.62% -5.30% 3.58% 1.89% 1.22%
MSCI EAFE Index(2) -43.06 -6.92 2.10 0.36 NA
- -------------------------------------------------------------------------------------------------------------------------
NA Not Applicable. Index returns do not reflect fees or expenses.
(1) This chart compares a $10,000 investment made in the fund to a $10,000
investment made in the securities that make up the index.
(2) The MSCI EAFE (Europe, Australasia & Far East) Index is a free
float-adjusted market capitalization index that is designed to measure
developed market equity performance, excluding the U.S. and Canada.
(3) Fund returns are calculated after fund level expenses have been subtracted,
but do not include any separate account fees, charges or expenses imposed
by the variable annuity and variable life insurance contracts that invest
in the fund, as described in the Prospectus. If these fees, charges, or
expenses were included, fund returns would have been lower. Fund returns
also assume that dividends and capital gains are reinvested in additional
shares of the fund. Investment return and principal value will fluctuate,
so an investor's shares, when redeemed, may be worth more or less than when
purchased. Further information relating to the fund's performance is
contained in the Prospectus and elsewhere in this report. The fund's past
performance is not indicative of future performance. Current performance
may be lower or higher than the performance data cited. For fund
performance data current to the most recent month-end, please call
1-800-798-5500. Indices are unmanaged and investors cannot invest in them
directly. Index returns do not reflect fees or expenses.
(4) The fund commenced investment operations on October 31, 2000. The since
inception index returns are also from October 31, 2000.
- --------------------------------------------------------------------------------
34
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- --------------------------------------------------------------------------------
This page is left blank intentionally
- --------------------------------------------------------------------------------
35
================================================================================
TARGET RETIREMENT 2020 FUND PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
PERFORMANCE REVIEW
For the twelve month period ended December 31, 2008, the Ultra Series Target
Retirement 2020 Fund returned -35.31%, underperforming the Dow Jones Global
Target 2020 Index return of -22.30 and the Morningstar Insurance Fund Target
Date 2015-2029 category average return of -30.24.
PORTFOLIO REVIEW
With every major equity and fixed income asset class (except for
government-backed paper and cash) dropping in unison as a result of the ongoing
financial crisis, the long-term benefits of asset allocation went unrealized
this year. Major equity markets the world over all experienced significant price
declines. No equity asset class was spared. The deleveraging process accelerated
in the capital markets, with institutional and hedge fund investors being forced
to unwind their leveraged positions to raise liquidity. The resulting heavy
selling placed tremendous downward pressure on equity prices.
The primary detractor from the fund's performance was its higher allocation to
equities versus the benchmark index. The Russell 3000(R) Index returned -37.31%
for the year, and bonds as measured by the Barclays Capital Aggregate Bond
Index, faired much better returning 5.24%. In keeping with the long-term
investment time horizon of the fund, we expect to remain overweight to equities,
which have historically offered the potential for higher long-term returns.
International and emerging market equities experienced even steeper declines,
with the MSCI EAFE Index down -43.06% and the MSCI Emerging Markets Index down
- -53.18%. Weightings to both developed and emerging international markets
provided a substantial drag on the fund's performance. Additionally, the fund
had a number of holdings that experienced sizeable losses brought on by the
steep decline in energy and materials stocks.
ECONOMIC & MARKET OUTLOOK
As painful as 2008 was, the year did manage to end on a high note. After
bottoming out in late November, equities rallied significantly throughout
December. Bonds also posted nice gains in the final five weeks of the year.
However, until the credit markets unfreeze and the overall deleveraging process
is substantially complete, the markets will remain unsettled. On a positive
note, the historic declines suffered in many asset classes have created numerous
opportunities from a valuation standpoint, with corporate bonds being at the top
of the list. With yield spreads at record highs, we believe investors are being
more than adequately compensated for holding both investment and non-investment
grade corporate bonds. Pending any further deterioration in the credit markets,
we intend to opportunistically increase our positions in these asset classes
over the coming year.
Moving forward, we will continue to employ caution in our overall asset
allocation strategies within the fund, while awaiting more positive economic
news. At the same time we stand ready to capitalize on the aforementioned
opportunities in 2009.
MEMBERS Capital Advisors, Inc. - Adviser
David M. Schlimgen, CIMA(R), CIMC(R) and Patrick F. Ryan, CIMA(R) Portfolio
Managers
- --------------------------------------------------------------------------------
36
================================================================================
TARGET RETIREMENT 2020 FUND PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
CUMULATIVE PERFORMANCE OF $10,000 INVESTMENT SINCE INCEPTION(1,3)
[CHART OF CUMULATIVE PERFORMANCE]
Target Retirement Dow Jones Global Target
2020 Fund 2020 Index(2)
10/01/2007 $10,000 $10,000
12/31/2007 9,806 9,978
12/31/2008 6,343 7,753
[END CHART]
- -------------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN THROUGH DECEMBER 31, 2008(3)
Annual
Expense
1 Year Since Inception(4) Ratio
------------------------------ ---------
TARGET RETIREMENT 2020 FUND -35.31% -30.50% 1.34%
Dow Jones Global Target 2020 Index(2) -22.30 -18.36 NA
- -------------------------------------------------------------------------------------------------------------------------
NA Not Applicable. Index returns do not reflect fees or expenses.
(1) This chart compares a $10,000 investment made in the fund to a $10,000
investment made in the securities that make up the index.
(2) The Dow Jones Global Target 2020 Index is a benchmark for multi-asset class
portfolios with risk profiles that become more conservative as the year
2020 approaches. The index is a composite of other indexes that represent
stocks, bonds and cash.
(3) Fund returns are calculated after fund level expenses have been subtracted,
but do not include any separate account fees, charges or expenses imposed
by the variable annuity and variable life insurance contracts that invest
in the fund, as described in the Prospectus. If these fees, charges, or
expenses were included, fund returns would have been lower. Fund returns
also assume that dividends and capital gains are reinvested in additional
shares of the fund. Investment return and principal value will fluctuate,
so an investor's shares, when redeemed, may be worth more or less than when
purchased. Further information relating to the fund's performance is
contained in the Prospectus and elsewhere in this report. The fund's past
performance is not indicative of future performance. Current performance
may be lower or higher than the performance data cited. For fund
performance data current to the most recent month-end, please call
1-800-798-5500. Indices are unmanaged and investors cannot invest in them
directly. Index returns do not reflect fees or expenses.
(4) The fund commenced investment operations on October 1, 2007. The since
inception index returns are also from October 1, 2007.
- --------------------------------------------------------------------------------
37
================================================================================
TARGET RETIREMENT 2030 FUND PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
PERFORMANCE REVIEW
For the twelve month period ended December 31, 2008, the Ultra Series Target
Retirement 2030 Fund returned -38.35%, underperforming the Dow Jones Global
Target 2030 Index return of -32.02 and the Morningstar Insurance Fund
Target-Date 2030+ category average return of -36.26.
PORTFOLIO REVIEW
With every major equity and fixed income asset class (except for
government-backed paper and cash) dropping in unison as a result of the ongoing
financial crisis, the long-term benefits of asset allocation went unrealized
this year. Major equity markets the world over all experienced significant price
declines. No equity asset class was spared. The deleveraging process accelerated
in the capital markets, with institutional and hedge fund investors being forced
to unwind their leveraged positions to raise liquidity. The resulting heavy
selling placed tremendous downward pressure on equity prices.
The primary detractors from the fund's performance were its international equity
allocations and exposure to energy and materials stocks. The Russell 3000(R)
Index returned -37.31% for the year, international stocks as measured by the
MSCI EAFE Index, experienced even steeper declines down -43.06% and the MSCI
Emerging Markets Index returned -53.18%. Weightings to both developed and
emerging international markets provided a substantial drag on the fund's
performance. Additionally, a number of funds in the portfolio had sizeable
weightings to energy and materials stocks, which provided very strong first half
of the year returns. However, once the seriousness of the economic downturn
became better recognized, these cyclical sectors were hit especially hard as
evidenced by the Dow Jones AIG Energy Index return of -47.33%. Bonds fared much
better, as measured by the Barclays Capital Aggregate Index, returning 5.24%.
ECONOMIC & MARKET OUTLOOK
As painful as 2008 was, the year did manage to end on a high note. After
bottoming out in late November, equities rallied significantly throughout
December. Bonds also posted nice gains in the final five weeks of the year.
However, until the credit markets unfreeze, and the overall deleveraging process
is substantially complete, the markets will remain unsettled. On a positive
note, the historic declines suffered in many asset classes have created numerous
opportunities from a valuation standpoint, corporate bonds being at the top of
the list. With yield spreads at record highs, we believe investors are being
more than adequately compensated for holding both investment and non-investment
grade corporate bonds. Pending any further deterioration in the credit markets,
we intend to opportunistically increase our positions in these asset classes
over the coming year.
Moving forward, we will continue to employ caution in our overall asset
allocation strategies within the fund, while awaiting more positive economic
news. At the same time we stand ready to capitalize on the aforementioned
opportunities in 2009.
MEMBERS Capital Advisors, Inc. - Adviser
David M. Schlimgen, CIMA(R), CIMC(R) and Patrick F. Ryan, CIMA(R), Portfolio
Managers
- --------------------------------------------------------------------------------
38
================================================================================
TARGET RETIREMENT 2030 FUND PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
CUMULATIVE PERFORMANCE OF $10,000 INVESTMENT SINCE INCEPTION(1,3)
[CHART OF CUMULATIVE PERFORMANCE]
Target Retirement Dow Jones Global Target
2030 Fund 2030 Index(2)
10/01/2007 $10,000 $10,000
12/31/2007 9,749 9,843
12/31/2008 6,010 6,692
[END CHART]
- -------------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN THROUGH DECEMBER 31, 2008(3)
Annual
Expense
1 Year Since Inception(4) Ratio
------------------------------ ---------
TARGET RETIREMENT 2030 FUND -38.35% -33.43% 1.42%
Dow Jones Global Target 2030 Index(2) -32.02 -27.40 NA
- -------------------------------------------------------------------------------------------------------------------------
NA Not Applicable. Index returns do not reflect fees or expenses.
(1) This chart compares a $10,000 investment made in the fund to a $10,000
investment made in the securities that make up the index.
(2) The Dow Jones Global Target 2030 Index is a benchmark for multi-asset class
portfolios with risk profiles that become more conservative as the year
2030 approaches. The index is a composite of other indexes that represent
stocks, bonds and cash.
(3) Fund returns are calculated after fund level expenses have been subtracted,
but do not include any separate account fees, charges or expenses imposed
by the variable annuity and variable life insurance contracts that invest
in the fund, as described in the Prospectus. If these fees, charges, or
expenses were included, fund returns would have been lower. Fund returns
also assume that dividends and capital gains are reinvested in additional
shares of the fund. Investment return and principal value will fluctuate,
so an investor's shares, when redeemed, may be worth more or less than when
purchased. Further information relating to the fund's performance is
contained in the Prospectus and elsewhere in this report. The fund's past
performance is not indicative of future performance. Current performance
may be lower or higher than the performance data cited. For fund
performance data current to the most recent month-end, please call
1-800-798-5500. Indices are unmanaged and investors cannot invest in them
directly. Index returns do not reflect fees or expenses.
(4) The fund commenced investment operations on October 1, 2007. The since
inception index returns are also from October 1, 2007.
- --------------------------------------------------------------------------------
39
================================================================================
TARGET RETIREMENT 2040 FUND PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
PERFORMANCE REVIEW
For the twelve month period ended December 31, 2008, the Ultra Series Target
Retirement 2040 Fund returned -41.65%, underperforming the Dow Jones Global
Target 2040 Index return of -36.80, and the Morningstar Insurance Fund
Target-Date 2030+ category average return of -36.26.
PORTFOLIO REVIEW
With every major equity and fixed income asset class (except for
government-backed paper and cash) dropping in unison as a result of the ongoing
financial crisis, the long-term benefits of asset allocation went unrealized
this year. Major equity markets the world over all experienced significant price
declines. No equity asset class was spared. The deleveraging process accelerated
in the capital markets, with institutional and hedge fund investors being forced
to unwind their leveraged positions to raise liquidity. The resulting heavy
selling placed tremendous downward pressure on equity prices.
The primary detractors from the fund's performance were its international equity
allocations and exposure to energy and materials stocks. The Russell 3000(R)
Index returned -37.31% for the year, international stocks as measured by the
MSCI EAFE Index, experienced even steeper declines down -43.06% and the MSCI
Emerging Markets Index returned -53.18%. Weightings to both developed and
emerging international markets provided a substantial drag on the fund's
performance. Additionally, a number of funds in the portfolio had sizeable
weightings to energy and materials stocks, which provided very strong first half
of the year returns. However, once the seriousness of the economic downturn
became better recognized, these cyclical sectors were hit especially hard as
evidenced by the Dow Jones AIG Energy Index return of -47.33%. Bonds fared much
better, as measured by the Barclays Capital Aggregate Index, returning 5.24%.
ECONOMIC & MARKET OUTLOOK
As painful as 2008 was, the year did manage to end on a high note. After
bottoming out in late November, equities rallied significantly throughout
December. Bonds also posted nice gains in the final five weeks of the year.
However, until the credit markets unfreeze, and the overall deleveraging process
is substantially complete, the markets will remain unsettled. On a positive
note, the historic declines suffered in many asset classes have created numerous
opportunities from a valuation standpoint, corporate bonds being at the top of
the list. With yield spreads at record highs, we believe investors are being
more than adequately compensated for holding both investment and non-investment
grade corporate bonds. Pending any further deterioration in the credit markets,
we intend to opportunistically increase our positions in these asset classes
over the coming year.
Moving forward, we will continue to employ caution in our overall asset
allocation strategies within the fund, while awaiting more positive economic
news. At the same time we stand ready to capitalize on the aforementioned
opportunities in 2009.
MEMBERS Capital Advisors, Inc. - Adviser
David M. Schlimgen, CIMA(R), CIMC(R) and Patrick F. Ryan, CIMA(R), Portfolio
Managers
- --------------------------------------------------------------------------------
40
================================================================================
TARGET RETIREMENT 2040 FUND PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
CUMULATIVE PERFORMANCE OF $10,000 INVESTMENT SINCE INCEPTION(1,3)
[CHART OF CUMULATIVE PERFORMANCE]
Target Retirement Dow Jones Global Target
2040 Fund 2040 Index(2)
10/01/2007 $10,000 $10,000
12/31/2007 9,714 9,777
12/31/2008 5,668 6,179
[END CHART]
- -------------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN THROUGH DECEMBER 31, 2008(3)
Annual
Expense
1 Year Since Inception(4) Ratio
------------------------------ ---------
TARGET RETIREMENT 2040 FUND -41.65% -36.47% 1.41%
Dow Jones Global Target 2040 Index(2) -36.80 -31.87 NA
- -------------------------------------------------------------------------------------------------------------------------
NA Not Applicable. Index returns do not reflect fees or expenses.
(1) This chart compares a $10,000 investment made in the fund to a $10,000
investment made in the securities that make up the index.
(2) The Dow Jones Global Target 2040 Index is a benchmark for multi-asset class
portfolios with risk profiles that become more conservative as the year
2040 approaches. The index is a composite of other indexes that represent
stocks, bonds and cash.
(3) Fund returns are calculated after fund level expenses have been subtracted,
but do not include any separate account fees, charges or expenses imposed
by the variable annuity and variable life insurance contracts that invest
in the fund, as described in the Prospectus. If these fees, charges, or
expenses were included, fund returns would have been lower. Fund returns
also assume that dividends and capital gains are reinvested in additional
shares of the fund. Investment return and principal value will fluctuate,
so an investor's shares, when redeemed, may be worth more or less than when
purchased. Further information relating to the fund's performance is
contained in the Prospectus and elsewhere in this report. The fund's past
performance is not indicative of future performance. Current performance
may be lower or higher than the performance data cited. For fund
performance data current to the most recent month-end, please call
1-800-798-5500. Indices are unmanaged and investors cannot invest in them
directly. Index returns do not reflect fees or expenses.
(4) The fund commenced investment operations on October 1, 2007. The since
inception index returns are also from October 1, 2007.
- --------------------------------------------------------------------------------
41
================================================================================
CONSERVATIVE ALLOCATION FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
PORTFOLIO ALLOCATION AS A PERCENTAGE OF NET ASSETS
AS OF DECEMBER 31, 2008
[PIE CHART OF PORTFOLIO ALLOCATION]
Debt Securities 65%
Equity Securities 25%
Foreign Equity Securities 9%
Money Market Securities and Other Net Assets 1%
[END CHART]
PORTFOLIO HOLDINGS AS A PERCENTAGE OF TOTAL MARKET VALUE
AS OF DECEMBER 31, 2008
MEMBERS Bond Fund, Class Y 30%
T. Rowe Price Spectrum Income Fund 14%
Oppenheimer International Bond Fund, Class Y 11%
MEMBERS High Income Fund, Class Y 10%
MEMBERS International Stock Fund, Class Y 9%
MEMBERS Large Cap Growth Fund, Class Y 9%
MEMBERS Large Cap Value Fund, Class Y 6%
Victory Special Value Fund, Class I 6%
Fairholme Fund 4%
SSgA Prime Money Market Fund 1%
- --------------------------------------------------------------------------------
Shares Value (Note 2)
- ------ --------------
INVESTMENT COMPANIES - 100.03%
- --------------------------------------------------------------------------------------------------
DEBT SECURITIES - 65.26%
3,534,383 MEMBERS Bond Fund,
Class Y (R) ..................................................... $ 35,379,173
2,112,869 MEMBERS High Income Fund,
Class Y (R) ..................................................... 11,747,551
2,236,649 Oppenheimer International
Bond Fund, Class Y .............................................. 13,240,964
1,527,238 T. Rowe Price Spectrum
Income Fund ..................................................... 15,776,370
------------
76,144,058
------------
EQUITY SECURITIES - 24.94%
212,814 Fairholme Fund .................................................. 4,647,859
966,640 MEMBERS Large Cap Growth Fund,
Class Y (R) ..................................................... 10,101,384
738,536 MEMBERS Large Cap Value Fund,
Class Y (R) ..................................................... 7,230,266
695,099 Victory Special Value Fund,
Class I ......................................................... 7,124,762
------------
29,104,271
------------
FOREIGN EQUITY SECURITIES - 9.22%
1,309,422 MEMBERS International Stock
Fund, Class Y (R) ............................................... 10,763,450
------------
MONEY MARKET SECURITIES - 0.60%
694,484 SSgA Prime Money Market
Fund ............................................................ 694,484
------------
TOTAL INVESTMENT COMPANIES - 100.02%
(Cost $139,127,930*) ............................................ 116,706,263
NET OTHER ASSETS AND LIABILITIES - (0.02)%
- --------------------------------------------------------------------------------------------------
(28,195)
TOTAL NET ASSETS - 100.00%
- --------------------------------------------------------------------------------------------------
$116,678,068
- --------------------------------------------------------------------------------
* Aggregate cost for Federal tax purposes was $141,077,287.
(R) Affiliated Company (see Note 10).
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
42
================================================================================
MODERATE ALLOCATION FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
PORTFOLIO ALLOCATION AS A PERCENTAGE OF NET ASSETS
AS OF DECEMBER 31, 2008
[PIE CHART OF PORTFOLIO ALLOCATION]
Equity Securities 39%
Debt Securities 38%
Foreign Equity Securities 17%
Alternative Asset Classes 5%
Money Market Securities and Other Net Assets 1%
[END CHART]
PORTFOLIO HOLDINGS AS A PERCENTAGE OF TOTAL MARKET VALUE
AS OF DECEMBER 31, 2008
MEMBERS Bond Fund, Class Y 17%
MEMBERS International Stock Fund, Class Y 15%
MEMBERS Large Cap Growth Fund, Class Y 11%
MEMBERS Large Cap Value Fund, Class Y 9%
MEMBERS High Income Fund, Class Y 9%
T. Rowe Price Spectrum Income Fund 7%
Victory Special Value Fund, Class I 6%
Gateway Fund, Class Y 5%
Fairholme Fund 5%
Oppenheimer International Bond Fund, Class Y 5%
MEMBERS Small Cap Value Fund, Class Y 3%
MEMBERS Mid Cap Growth Fund, Class Y 3%
MEMBERS Small Cap Growth Fund, Class Y 3%
Principal International Emerging Markets
Fund, Institutional Class 1%
SSgA Prime Money Market Fund 1%
- --------------------------------------------------------------------------------
Shares Value (Note 2)
- ------ --------------
INVESTMENT COMPANIES - 100.03%
- --------------------------------------------------------------------------------------------------
ALTERNATIVE ASSET CLASSES - 5.42%
546,609 Gateway Fund, Class Y ........................................... $ 13,206,076
------------
DEBT SECURITIES - 38.34%
4,203,715 MEMBERS Bond Fund,
Class Y (R) ..................................................... 42,079,187
3,744,129 MEMBERS High Income Fund,
Class Y (R) ..................................................... 20,817,355
2,085,183 Oppenheimer International
Bond Fund, Class Y .............................................. 12,344,285
1,764,475 T. Rowe Price Spectrum Income
Fund ............................................................ 18,227,026
------------
93,467,853
------------
EQUITY SECURITIES - 39.11%
590,007 Fairholme Fund .................................................. 12,885,751
2,616,124 MEMBERS Large Cap Growth
Fund, Class Y (R) ............................................... 27,338,491
2,135,409 MEMBERS Large Cap Value Fund,
Class Y (R) ..................................................... 20,905,657
1,698,065 MEMBERS Mid Cap Growth Fund,
Class Y (R)* .................................................... 6,248,878
1,063,762 MEMBERS Small Cap Growth Fund,
Class Y (R)* .................................................... 5,999,620
958,708 MEMBERS Small Cap
Value Fund, Class Y (R) ......................................... 6,557,561
1,503,232 Victory Special Value Fund,
Class I ......................................................... 15,408,123
------------
95,344,081
------------
FOREIGN EQUITY SECURITIES - 16.50%
4,532,060 MEMBERS International Stock
Fund, Class Y (R) ............................................... 37,253,534
217,960 Principal International
Emerging Markets Fund,
Institutional Class ............................................. 2,957,723
------------
40,211,257
------------
MONEY MARKET SECURITIES - 0.65%
1,590,257 SSgA Prime Money Market
Fund ............................................................ 1,590,257
TOTAL INVESTMENT COMPANIES - 100.02%
(Cost $316,873,798**) ........................................... 243,819,524
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
43
================================================================================
MODERATE ALLOCATION FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
Value (Note 2)
--------------
NET OTHER ASSETS AND LIABILITIES - (0.02)%
- --------------------------------------------------------------------------------------------------
$ (58,445)
TOTAL NET ASSETS - 100.00%
- --------------------------------------------------------------------------------------------------
$243,761,079
- --------------------------------------------------------------------------------
* Non-income producing.
** Aggregate cost for Federal tax purposes was $320,032,522.
(R) Affiliated Company (see Note 10).
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
44
================================================================================
AGGRESSIVE ALLOCATION FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
PORTFOLIO ALLOCATION AS A PERCENTAGE OF NET ASSETS
AS OF DECEMBER 31, 2008
[PIE CHART OF PORTFOLIO ALLOCATION]
Equity Securities 55%
Foreign Equity Securities 28%
Debt Securities 9%
Alternative Asset Classes 7%
Money Market Securities and Other Net Assets 1%
[END CHART]
PORTFOLIO HOLDINGS AS A PERCENTAGE OF TOTAL MARKET VALUE
AS OF DECEMBER 31, 2008
MEMBERS International Stock Fund, Class Y 21%
MEMBERS Large Cap Growth Fund, Class Y 15%
Victory Special Value Fund, Class I 10%
MEMBERS Large Cap Value Fund, Class Y 9%
Gateway Fund, Class Y 7%
MEMBERS Mid Cap Growth Fund, Class Y 6%
MEMBERS Small Cap Value Fund, Class Y 5%
MEMBERS High Income Fund, Class Y 5%
Laudus International MarketMasters Fund 5%
Fairholme Fund 5%
MEMBERS Small Cap Growth Fund, Class Y 5%
MEMBERS Bond Fund, Class Y 4%
Principal International Emerging Markets
Fund, Institutional Class 2%
SSgA Prime Money Market Fund 1%
- --------------------------------------------------------------------------------
Shares Value (Note 2)
- ------ --------------
INVESTMENT COMPANIES - 100.02%
- --------------------------------------------------------------------------------------------------
ALTERNATIVE ASSET CLASSES - 7.34%
211,324 Gateway Fund, Class Y ........................................... $ 5,105,586
-----------
DEBT SECURITIES - 8.91%
261,024 MEMBERS Bond Fund,
Class Y (R) ..................................................... 2,612,846
646,053 MEMBERS High Income Fund,
Class Y (R) ..................................................... 3,592,055
-----------
6,204,901
-----------
EQUITY SECURITIES - 55.26%
156,008 Fairholme Fund .................................................. 3,407,210
993,435 MEMBERS Large Cap Growth Fund,
Class Y (R) ..................................................... 10,381,392
653,959 MEMBERS Large Cap Value Fund,
Class Y (R) ..................................................... 6,402,258
1,114,917 MEMBERS Mid Cap Growth Fund,
Class Y (R)* .................................................... 4,102,894
552,772 MEMBERS Small Cap Growth Fund,
Class Y (R)* .................................................... 3,117,633
555,395 MEMBERS Small Cap Value Fund,
Class Y (R) ..................................................... 3,798,901
708,459 Victory Special Value Fund,
Class I ......................................................... 7,261,702
-----------
38,471,990
-----------
FOREIGN EQUITY SECURITIES - 27.93%
314,369 Laudus International Market Masters
Fund ............................................................ 3,432,908
1,749,982 MEMBERS International Stock Fund,
Class Y (R) ..................................................... 14,384,856
119,879 Principal International
Emerging Markets Fund,
Institutional Class ............................................. 1,626,764
-----------
19,444,528
-----------
MONEY MARKET SECURITIES - 0.58%
405,285 SSgA Prime Money Market
Fund ............................................................ 405,285
-----------
TOTAL INVESTMENT COMPANIES - 100.02%
(Cost $99,316,354**) ............................................ 69,632,290
NET OTHER ASSETS AND LIABILITIES - (0.02)%
- --------------------------------------------------------------------------------------------------
(16,279)
TOTAL NET ASSETS - 100.00%
- --------------------------------------------------------------------------------------------------
$69,616,011
- --------------------------------------------------------------------------------
* Non-income producing.
** Aggregate cost for Federal tax purposes was $100,653,519.
(R) Affiliated Company (see Note 10).
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
45
================================================================================
MONEY MARKET FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
PORTFOLIO ALLOCATION AS A PERCENTAGE OF NET ASSETS
AS OF DECEMBER 31, 2008
[PIE CHART OF PORTFOLIO ALLOCATION]
Federal Home Loan Mortgage Corp. 27%
Federal National Mortgage Association 27%
U.S. Treasury Bills 19%
Federal Home Loan Bank 12%
Commercial Paper 8%
Cash and Other Net Assets 7%
[END CHART]
- --------------------------------------------------------------------------------
Par Value Value (Note 2)
- --------- --------------
COMMERCIAL PAPER - 7.84% (A)
- --------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS - 2.51%
$4,000,000 Proctor & Gamble Co.
2.100%, due 01/06/09 ............................................ $ 3,998,833
------------
OIL, GAS & CONSUMABLE FUELS - 1.88%
3,000,000 Chevron Corp.
1.050%, due 01/13/09 ............................................ 2,998,950
------------
PHARMACEUTICALS - 3.45%
5,500,000 Johnson & Johnson
0.750%, due 01/12/09 ............................................ 5,498,740
------------
TOTAL COMMERCIAL PAPER
(Cost $12,496,523) .............................................. 12,496,523
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 85.06%
- --------------------------------------------------------------------------------------------------
FEDERAL HOME LOAN BANK - 12.12% (A)
3,000,000 0.040%, due 01/05/09 ............................................ 2,999,987
2,053,000 0.010%, due 01/06/09 ............................................ 2,052,997
4,500,000 0.010%, due 01/07/09 ............................................ 4,499,992
760,000 0.050%, due 01/07/09 ............................................ 759,994
5,500,000 0.010%, due 01/08/09 ............................................ 5,499,989
3,500,000 0.030%, due 01/09/09 ............................................ 3,499,977
------------
19,312,936
------------
FEDERAL HOME LOAN MORTGAGE CORP. - 27.29%
2,500,000 0.500%, due 01/02/09 (A)......................................... 2,499,965
4,585,000 0.010%, due 01/09/09 (A)......................................... 4,584,990
650,000 5.250%, due 01/12/09 ............................................ 650,990
3,000,000 0.050%, due 01/27/09 (A)......................................... 2,999,892
2,500,000 0.120%, due 01/30/09 (A)......................................... 2,499,758
2,500,000 0.550%, due 02/03/09 (A)......................................... 2,498,740
1,500,000 0.600%, due 02/03/09 (A)......................................... 1,499,175
5,500,000 0.900%, due 02/09/09 (A)......................................... 5,494,637
3,600,000 0.751%, due 02/11/09 (A)......................................... 3,596,921
5,250,000 1.000%, due 02/23/09 (A)......................................... 5,242,271
500,000 0.200%, due 03/09/09 (A)......................................... 499,814
2,500,000 0.250%, due 03/13/09 (A)......................................... 2,498,767
915,000 5.750%, due 03/15/09 ............................................ 925,188
3,000,000 0.320%, due 06/09/09 (A)......................................... 2,995,760
5,000,000 1.801%, due 10/08/09 (G) ........................................ 4,997,979
------------
43,484,847
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 26.53%
7,508,000 5.250%, due 01/15/09 ............................................ 7,522,188
1,000,000 0.700%, due 01/20/09 (A)......................................... 999,631
5,750,000 0.750%, due 01/26/09 (A)......................................... 5,747,005
2,250,000 4.000%, due 01/26/09 ............................................ 2,255,330
5,000,000 1.010%, due 01/28/09 (A)......................................... 4,996,213
2,750,000 0.500%, due 01/30/09 (A)......................................... 2,748,892
3,907,000 0.600%, due 02/02/09 (A)......................................... 3,904,916
2,000,000 0.550%, due 02/09/09 (A)......................................... 1,998,808
3,766,000 0.050%, due 02/17/09 (A)......................................... 3,765,754
1,000,000 0.200%, due 02/17/09 (A)......................................... 999,739
5,500,000 1.220%, due 02/17/09 (A)......................................... 5,491,240
1,850,000 1.020%, due 02/27/09 (A)......................................... 1,847,012
------------
42,276,728
------------
U.S. TREASURY BILLS - 19.12% (A)
1,750,000 0.727%, due 01/02/09 ............................................ 1,749,965
5,000,000 1.812%, due 01/29/09 ............................................ 4,992,953
5,750,000 0.490%, due 02/05/09 ............................................ 5,747,264
6,250,000 0.018%, due 03/12/09 ............................................ 6,249,787
6,000,000 0.010%, due 04/02/09 ............................................ 5,999,848
5,750,000 1.480%, due 04/23/09 ............................................ 5,723,534
------------
30,463,351
------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(Cost $135,537,862) ............................................. 135,537,862
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
46
================================================================================
MONEY MARKET FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
Shares Value (Note 2)
- ------ --------------
INVESTMENT COMPANIES - 6.79%
5,502,602 SEI Daily Income Trust
Treasury II Fund ................................................ $ 5,502,602
5,310,174 SSgA US Treasury Money Market
Fund ............................................................ 5,310,174
------------
TOTAL INVESTMENT COMPANIES
(Cost $10,812,776) .............................................. 10,812,776
TOTAL INVESTMENTS - 99.69%
- --------------------------------------------------------------------------------------------------
(Cost $158,847,161**) ......................................................... 158,847,161
NET OTHER ASSETS AND LIABILITIES - 0.31%
- --------------------------------------------------------------------------------------------------
501,504
TOTAL NET ASSETS - 100.00%
- --------------------------------------------------------------------------------------------------
$159,348,665
- --------------------------------------------------------------------------------
** Aggregate cost for Federal tax purposes was $158,847,161.
(A) Rate noted represents annualized yield at time of purchase.
(G) Floating rate note. Date shown is next reset date.
The industry classification method used for purposes of this report's
allocation charts and portfolio of investments schedules may differ
from the industry subclassification(s) used for Trust compliance
purposes.
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
47
================================================================================
BOND FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
PORTFOLIO ALLOCATION AS A PERCENTAGE OF NET ASSETS
AS OF DECEMBER 31, 2008
[PIE CHART OF PORTFOLIO ALLOCATION]
U.S. Government and Agency Obligations 33%
Mortgage Backed 30%
Corporate Notes and Bonds 24%
Commercial Mortgage Backed 7%
Asset Backed 3%
Cash and Other Net Assets 2%
Private Label Mortgage Backed 1%
[END CHART]
- --------------------------------------------------------------------------------
Par Value Value (Note 2)
- --------- --------------
ASSET BACKED - 2.89%
- --------------------------------------------------------------------------------------------------
$ 652,045 ABSC Long Beach Home Equity Loan
Trust, Series 2000-LB1, Class AF5 (M)
8.550%, due 09/21/30 ............................................ $ 649,924
1,543,674 Ameriquest Mortgage Securities, Inc.,
Series 2004-FR1, Class M2 (M)
5.207%, due 05/25/34 ............................................ 417,142
3,820,000 Chase Issuance Trust,
Series 2007-A17, Class A
5.120%, due 10/15/14 ............................................ 3,433,718
2,720,000 Daimler Chrysler Auto Trust,
Series 2007-A, Class A3A
5.000%, due 02/08/12 ............................................ 2,639,052
2,000,000 GMAC Mortgage Corp. Loan Trust,
Series 2004-HE2, Class M1 (G)
3.950%, due 10/25/33 ............................................ 1,780,825
1,575,432 Green Tree Financial Corp.,
Series 1998-2, Class A6 (G)
6.810%, due 12/01/27 ............................................ 1,216,959
2,750,000 MBNA Master Credit Card Trust,
Series 1999-B, Class A
5.900%, due 08/15/11 ............................................ 2,738,983
3,500,000 New Century Home Equity Loan Trust,
Series 2003-5, Class AI5 (G)
5.500%, due 11/25/33 ............................................ 2,373,004
2,475,000 Renaissance Home Equity Loan Trust,
Series 2005-4, Class M9 (M)
7.000%, due 02/25/36 ............................................ 1,202,221
1,395,104 Wells Fargo Home Equity Trust,
Series 2004-2, Class M8A (C)(G)
3.471%, due 05/25/34 ............................................ 124,248
------------
TOTAL ASSET BACKED
(Cost $22,267,270) .............................................. 16,576,076
COMMERCIAL MORTGAGE BACKED - 6.91%
- --------------------------------------------------------------------------------------------------
626,103 Bear Stearns Commercial Mortgage
Securities, Series 2001-TOP4, Class A1
5.060%, due 11/15/16 ............................................ 610,429
4,100,000 Bear Stearns Commercial Mortgage
Securities, Series 2003-T10,
Class E (C)(G)
5.540%, due 03/13/40 ............................................ 1,465,317
2,800,000 Bear Stearns Commercial
Mortgage Securities,
Series 2004-T16, Class A6 (G)
4.750%, due 02/13/46 ............................................ 2,299,248
1,810,000 Bear Stearns Commercial
Mortgage Securities,
Series 2005-T20, Class F (C)(G)
5.151%, due 10/12/42 ............................................ 438,096
4,200,000 Government National
Mortgage Association,
Series 2004-43, Class C (G)
5.008%, due 12/16/25 ............................................ 4,308,654
3,000,000 Greenwich Capital Commercial
Funding Corp.,
Series 2004-GG1, Class A7 (G)
5.317%, due 06/10/36 ............................................ 2,495,830
3,549,866 LB-UBS Commercial Mortgage Trust,
Series 2004-C1, Class A2
3.624%, due 01/15/29 ............................................ 3,447,243
3,200,000 LB-UBS Commercial Mortgage Trust,
Series 2004-C8, Class A6 (G)
4.799%, due 12/15/29 ............................................ 2,646,496
5,550,000 Morgan Stanley Capital I,
Series 2004-HQ4, Class A7
4.970%, due 04/14/40 ............................................ 4,661,697
5,740,000 Morgan Stanley Capital I,
Series 2006-IQ12, Class ANM
5.310%, due 12/15/43 ............................................ 5,229,227
7,000,000 Morgan Stanley Capital I,
Series 2004-T13, Class A3
4.390%, due 09/13/45 ............................................ 6,289,970
1,695,000 Multi Security Asset Trust,
Series 2005-RR4A, Class J (C)(G)
5.880%, due 11/28/35 ............................................ 204,332
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
48
================================================================================
BOND FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
Par Value Value (Note 2)
- --------- --------------
COMMERCIAL MORTGAGE BACKED (CONTINUED)
- --------------------------------------------------------------------------------------------------
$5,490,258 Wachovia Bank Commercial
Mortgage Trust,
Series 2003-C8, Class A2
3.894%, due 11/15/35 ............................................ $ 5,473,558
------------
TOTAL COMMERCIAL MORTGAGE BACKED
(Cost $48,516,715) .............................................. 39,570,097
PRIVATE LABEL MORTGAGE BACKED - 0.92%
- --------------------------------------------------------------------------------------------------
5,241,906 Banc of America Alternative Loan Trust,
Series 2005-12, Class 3CB1
6.000%, due 01/25/36 ............................................ 4,085,411
2,450,950 Banc of America Alternative Loan Trust,
Series 2006-3, Class 2CB1
6.000%, due 04/25/36 ............................................ 1,174,924
------------
TOTAL PRIVATE LABEL MORTGAGE BACKED
(Cost $7,673,565) ............................................... 5,260,335
CORPORATE NOTES AND BONDS - 24.01%
- --------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY - 0.88%
2,500,000 American Association of
Retired Persons (C)
7.500%, due 05/01/31 ............................................ 2,587,963
4,400,000 Erac USA Finance Co. (C)
6.700%, due 06/01/34 ............................................ 2,417,870
------------
5,005,833
------------
CONSUMER STAPLES - 0.82%
1,250,000 Coca-Cola Enterprises, Inc.
4.375%, due 09/15/09 ............................................ 1,254,258
2,330,000 Diageo Capital PLC (D)
5.500%, due 09/30/16 ............................................ 2,233,335
1,165,000 PepsiCo, Inc./NC
4.650%, due 02/15/13 ............................................ 1,197,830
------------
4,685,423
------------
ENERGY - 1.33%
2,460,000 Hess Corp.
7.875%, due 10/01/29 ............................................ 2,361,556
1,400,000 Transocean, Inc.
6.000%, due 03/15/18 ............................................ 1,275,121
2,310,000 Transocean, Ltd.
7.500%, due 04/15/31 ............................................ 2,172,162
2,275,000 Valero Energy Corp.
7.500%, due 04/15/32 ............................................ 1,818,915
------------
7,627,754
------------
FINANCE - 4.70%
2,500,000 American General Finance
Corp., Series H
4.625%, due 09/01/10 ............................................ 1,266,482
2,885,000 American General Finance Corp.
5.850%, due 06/01/13 ............................................ 1,095,763
1,165,000 Bank of America Corp.
5.750%, due 12/01/17 ............................................ 1,163,184
2,200,000 Bear Stearns Cos. LLC/The
7.250%, due 02/01/18 ............................................ 2,410,883
2,725,000 CIT Group, Inc.
7.625%, due 11/30/12 ............................................ 2,300,361
1,250,000 General Electric Global Insurance
Holding Corp.
7.000%, due 02/15/26 ............................................ 1,183,999
1,680,000 General Electric Global Insurance
Holding Corp.
7.750%, due 06/15/30 ............................................ 1,648,320
2,750,000 Goldman Sachs Group, Inc./The
5.700%, due 09/01/12 ............................................ 2,622,227
3,135,000 Lehman Brothers Holdings, Inc. (E)
5.750%, due 01/03/17 ............................................ 313
2,740,000 Merrill Lynch & Co., Inc.
6.150%, due 04/25/13 ............................................ 2,715,036
2,700,000 SLM Corp.
5.125%, due 08/27/12 ............................................ 2,020,569
1,250,000 Textron Financial Corp.
6.000%, due 11/20/09 ............................................ 1,167,544
750,000 UBS AG/Stamford Branch
5.750%, due 04/25/18 ............................................ 680,696
2,000,000 US Bank NA/Cincinnati, OH
6.300%, due 02/04/14 ............................................ 2,071,092
2,735,000 Wells Fargo & Co.
5.250%, due 10/23/12 ............................................ 2,804,456
2,065,000 Western Union Co./The
5.930%, due 10/01/16 ............................................ 1,764,782
------------
26,915,707
------------
FOOD & DRUG RETAILERS - 0.58%
3,450,000 Medco Health Solutions, Inc.
7.250%, due 08/15/13 ............................................ 3,345,044
------------
FORESTRY/PAPER - 0.34%
3,000,000 Weyerhaeuser Co.
7.375%, due 03/15/32 ............................................ 1,947,750
------------
HEALTH CARE - 3.05%
2,600,000 Eli Lilly & Co.
6.570%, due 01/01/16 ............................................ 2,833,329
1,740,000 Genentech, Inc.
5.250%, due 07/15/35 ............................................ 1,649,457
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
49
================================================================================
BOND FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
Par Value Value (Note 2)
- --------- --------------
CORPORATE NOTES AND BONDS (CONTINUED)
- --------------------------------------------------------------------------------------------------
HEALTH CARE (CONTINUED)
$3,960,000 Merck & Co., Inc./NJ
5.750%, due 11/15/36 ............................................ $ 4,169,975
3,500,000 Quest Diagnostics, Inc./DE
5.450%, due 11/01/15 ............................................ 3,070,585
3,600,000 WellPoint, Inc.
5.000%, due 12/15/14 ............................................ 3,127,011
2,370,000 Wyeth
6.500%, due 02/01/34 ............................................ 2,627,991
------------
17,478,348
------------
INDUSTRIALS - 2.94%
760,000 Boeing Co.
8.625%, due 11/15/31 ............................................ 963,683
1,380,000 Boeing Co.
6.875%, due 10/15/43 ............................................ 1,439,055
1,140,000 DR Horton, Inc.
5.250%, due 02/15/15 ............................................ 718,200
585,000 EI Du Pont de Nemours & Co.
5.000%, due 01/15/13 ............................................ 590,293
3,200,000 General Electric Co.
5.000%, due 02/01/13 ............................................ 3,236,131
1,800,000 GMAC LLC
7.250%, due 03/02/11 ............................................ 1,529,703
1,450,000 Lockheed Martin Corp.
7.650%, due 05/01/16 ............................................ 1,671,202
2,465,000 Waste Management, Inc.
7.125%, due 12/15/17 ............................................ 2,296,236
2,250,000 Westvaco Corp.
8.200%, due 01/15/30 ............................................ 1,712,439
2,870,000 WM Wrigley Jr. Co.
4.300%, due 07/15/10 ............................................ 2,669,100
------------
16,826,042
------------
MEDIA - 1.11%
3,080,000 Comcast Cable Communications
Holdings, Inc.
9.455%, due 11/15/22 ............................................ 3,450,703
3,000,000 Rogers Cable, Inc. (D)
6.250%, due 06/15/13 ............................................ 2,871,549
------------
6,322,252
------------
OFFICE ELECTRONICS - 0.40%
2,640,000 Xerox Corp.
6.875%, due 08/15/11 ............................................ 2,282,034
------------
REAL ESTATE INVESTMENT TRUSTS - 0.35%
2,725,000 HCP, Inc.
6.700%, due 01/30/18 ............................................ 1,306,700
1,060,000 Simon Property Group L.P.
5.875%, due 03/01/17 ............................................ 707,883
------------
2,014,583
------------
TELECOMMUNICATIONS - 1.42%
2,400,000 Cisco Systems, Inc.
5.500%, due 02/22/16 ............................................ 2,542,022
4,225,000 New Cingular Wireless Services, Inc.
7.875%, due 03/01/11 ............................................ 4,373,902
1,750,000 Sprint Nextel Corp.
6.000%, due 12/01/16 ............................................ 1,233,750
------------
8,149,674
------------
TRANSPORTATION - 1.01%
2,925,000 Burlington Northern Santa Fe Corp.
8.125%, due 04/15/20 ............................................ 3,185,331
1,268,000 Norfolk Southern Corp.
5.590%, due 05/17/25 ............................................ 1,136,517
1,400,000 Norfolk Southern Corp.
7.050%, due 05/01/37 ............................................ 1,464,014
7,633 Southwest Airlines Co. 1994-A
Pass Through Trust, Series A3
8.700%, due 07/01/11 ............................................ 7,623
------------
5,793,485
------------
UTILITIES - 5.08%
2,750,000 Consumers Energy Co.
5.650%, due 04/15/20 ............................................ 2,575,339
2,000,000 Energy East Corp.
8.050%, due 11/15/10 ............................................ 2,079,260
2,940,000 Illinois Power Co.
7.500%, due 06/15/09 ............................................ 2,951,448
3,445,000 Indianapolis Power & Light Co. (C)
6.050%, due 10/01/36 ............................................ 3,032,324
2,925,000 Pacific Gas & Electric Co.
6.050%, due 03/01/34 ............................................ 3,106,523
2,400,000 Progress Energy, Inc.
7.750%, due 03/01/31 ............................................ 2,402,906
3,250,000 Sierra Pacific Power Co., Series M
6.000%, due 05/15/16 ............................................ 3,110,123
3,500,000 Southern Power Co., Series B
6.250%, due 07/15/12 ............................................ 3,577,735
2,165,000 Southwestern Electric Power Co.,
Series E
5.550%, due 01/15/17 ............................................ 1,993,391
1,165,000 Virginia Electric and Power Co.
5.100%, due 11/30/12 ............................................ 1,138,930
3,000,000 Wisconsin Electric Power Co.
6.500%, due 06/01/28 ............................................ 3,105,006
------------
29,072,985
------------
TOTAL CORPORATE NOTES AND BONDS
(Cost $158,193,212) ............................................. 137,466,914
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
50
================================================================================
BOND FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
Par Value Value (Note 2)
- --------- --------------
MORTGAGE BACKED - 30.26%
- --------------------------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP. - 4.36%
$3,293,856 5.000%, due 05/01/18
Pool # E96322 ................................................... $ 3,400,318
103,137 8.000%, due 06/01/30
Pool # C01005 ................................................... 109,403
437,857 7.000%, due 03/01/31
Pool # C48129 ................................................... 460,146
258,972 6.500%, due 03/01/32
Pool # C65648 ................................................... 270,221
3,806,621 5.000%, due 07/01/33
Pool # A11325 ................................................... 3,899,569
799,640 6.000%, due 10/01/34
Pool # A28439 ................................................... 825,537
813,709 6.000%, due 10/01/34
Pool # A28598 ................................................... 840,062
5,856,620 5.500%, due 11/01/34
Pool # A28282 ................................................... 6,006,030
506,906 5.000%, due 04/01/35
Pool # A32314 ................................................... 518,729
1,257,402 5.000%, due 04/01/35
Pool # A32315 ................................................... 1,286,730
1,305,002 5.000%, due 04/01/35
Pool # A32316 ................................................... 1,335,440
384,479 5.000%, due 04/01/35
Pool # A32509 ................................................... 393,446
5,528,537 5.000%, due 01/01/37
Pool # A56371 ................................................... 5,656,620
------------
25,002,251
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 25.80%
2,526,269 4.000%, due 04/01/15
Pool # 255719 ................................................... 2,562,119
3,292,380 5.500%, due 04/01/16
Pool # 745444 ................................................... 3,442,839
177,951 6.000%, due 05/01/16
Pool # 582558 ................................................... 185,402
861,563 5.500%, due 09/01/17
Pool # 657335 ................................................... 891,980
1,122,195 5.500%, due 02/01/18
Pool # 673194 ................................................... 1,161,813
3,483,044 5.000%, due 05/01/20
Pool # 813965 ................................................... 3,584,736
3,371,840 4.500%, due 09/01/20
Pool # 835465 ................................................... 3,455,534
444,512 6.000%, due 05/01/21
Pool # 253847 ................................................... 460,284
148,090 7.000%, due 12/01/29
Pool # 762813 ................................................... 156,803
201,187 7.000%, due 11/01/31
Pool # 607515 ................................................... 212,885
324,135 6.500%, due 03/01/32
Pool # 631377 ................................................... 338,215
5,285 7.000%, due 04/01/32
Pool # 641518 ................................................... 5,592
381,523 7.000%, due 05/01/32
Pool # 644591 ................................................... 403,706
3,283,329 6.500%, due 06/01/32
Pool # 545691 ................................................... 3,425,948
4,594,285 5.500%, due 04/01/33
Pool # 690206 ................................................... 4,720,824
5,765,287 5.000%, due 10/01/33
Pool # 254903 ................................................... 5,901,557
5,849,565 5.500%, due 11/01/33
Pool # 555880 ................................................... 6,010,678
106,819 5.000%, due 05/01/34
Pool # 782214 ................................................... 109,277
1,456,435 5.000%, due 06/01/34
Pool # 778891 ................................................... 1,489,950
5,764,002 5.500%, due 06/01/34
Pool # 780384 ................................................... 5,919,155
85,152 7.000%, due 07/01/34
Pool # 792636 ................................................... 89,631
642,197 5.500%, due 08/01/34
Pool # 793647 ................................................... 659,484
2,837,144 5.500%, due 03/01/35
Pool # 810075 ................................................... 2,911,740
3,053,021 5.500%, due 03/01/35
Pool # 815976 ................................................... 3,133,293
3,580,556 5.500%, due 07/01/35
Pool # 825283 ................................................... 3,674,698
4,441,950 5.000%, due 08/01/35
Pool # 829670 ................................................... 4,541,389
2,110,259 5.500%, due 08/01/35
Pool # 826872 ................................................... 2,165,743
3,447,389 5.000%, due 09/01/35
Pool # 820347 ................................................... 3,524,563
3,594,087 5.000%, due 09/01/35
Pool # 835699 ................................................... 3,674,545
6,014,843 5.000%, due 10/01/35
Pool # 797669 ................................................... 6,149,493
862,310 5.500%, due 10/01/35
Pool # 836912 ................................................... 884,982
4,915,192 5.000%, due 11/01/35
Pool # 844809 ................................................... 5,025,225
4,870,021 5.000%, due 12/01/35
Pool # 850561 ................................................... 4,979,043
1,732,415 5.500%, due 02/01/36
Pool # 851330 ................................................... 1,777,965
1,805,443 5.500%, due 10/01/36
Pool # 896340 ................................................... 1,852,913
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
51
================================================================================
BOND FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
Par Value Value (Note 2)
- --------- --------------
MORTGAGE BACKED (CONTINUED)
- --------------------------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (CONTINUED)
$ 9,285,492 5.500%, due 10/01/36
Pool # 901723 ................................................... $ 9,529,632
4,941,080 6.500%, due 10/01/36
Pool # 894118 ................................................... 5,137,951
5,417,432 6.000%, due 11/01/36
Pool # 902510 ................................................... 5,599,779
4,664,088 5.500%, due 02/01/37
Pool # 905140 ................................................... 4,786,719
5,045,170 5.500%, due 05/01/37
Pool # 899323 ................................................... 5,177,537
3,127,402 5.500%, due 05/01/37
Pool # 928292 ................................................... 3,209,454
5,688,572 6.000%, due 10/01/37
Pool # 947563 ................................................... 5,862,707
6,089,477 5.500%, due 07/01/38
Pool # 986973 ................................................... 6,248,633
6,146,812 5.000%, due 08/01/38
Pool # 988934 ................................................... 6,282,495
6,158,558 6.500%, due 08/01/38
Pool # 987711 ................................................... 6,402,976
------------
147,721,887
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 0.10%
73,136 8.000%, due 10/20/15
Pool # 002995 ................................................... 77,755
245,553 6.500%, due 02/20/29
Pool # 002714 ................................................... 258,516
215,925 6.500%, due 04/20/31
Pool # 003068 ................................................... 227,382
------------
563,653
------------
TOTAL MORTGAGE BACKED
(Cost $166,995,915) ............................................. 173,287,791
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 32.56%
- --------------------------------------------------------------------------------------------------
FEDERAL FARM CREDIT BANK - 0.83%
4,000,000 5.875%, due 10/03/16 ............................................ 4,781,868
------------
FEDERAL HOME LOAN MORTGAGE
CORP. - 1.55%
2,500,000 4.875%, due 11/15/13 ............................................ 2,789,335
5,500,000 4.500%, due 01/15/14 ............................................ 6,066,500
------------
8,855,835
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 1.20%
2,400,000 5.250%, due 08/01/12 ............................................ 2,529,648
3,905,000 4.625%, due 10/15/14 ............................................ 4,335,847
------------
6,865,495
------------
U.S. TREASURY BONDS - 3.14%
1,000,000 10.625%, due 08/15/15 ........................................... 1,513,984
7,350,000 6.625%, due 02/15/27 ............................................ 10,991,697
4,000,000 4.500%, due 05/15/38 ............................................ 5,459,376
------------
17,965,057
------------
U.S. TREASURY NOTES - 25.84%
12,000,000 2.625%, due 03/15/09 ............................................ 12,058,596
3,640,000 4.875%, due 05/31/09 ............................................ 3,709,386
2,000,000 3.500%, due 02/15/10 ............................................ 2,071,094
1,400,000 2.125%, due 04/30/10 ............................................ 1,433,468
9,625,000 3.875%, due 05/15/10 ............................................ 10,090,831
4,750,000 3.875%, due 09/15/10 ............................................ 5,030,174
13,000,000 4.500%, due 11/15/10 ............................................ 13,957,736
1,485,000 4.750%, due 03/31/11 ............................................ 1,617,141
23,100,000 4.625%, due 12/31/11 ............................................ 25,581,448
6,425,000 4.625%, due 02/29/12 ............................................ 7,134,763
6,000,000 4.875%, due 06/30/12 ............................................ 6,743,904
4,000,000 3.625%, due 05/15/13 ............................................ 4,395,000
6,150,000 4.250%, due 08/15/14 ............................................ 7,068,656
6,565,000 4.250%, due 11/15/14 ............................................ 7,595,397
2,750,000 4.000%, due 02/15/15 ............................................ 3,133,281
8,900,000 4.250%, due 08/15/15 ............................................ 10,335,125
13,100,000 4.625%, due 02/15/17 ............................................ 15,492,794
5,370,000 4.500%, due 05/15/17 ............................................ 6,301,362
3,600,000 4.250%, due 11/15/17 ............................................ 4,193,719
------------
147,943,875
------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(Cost $166,104,101) ................ 186,412,130
Shares
- ------
INVESTMENT COMPANY - 1.29%
- --------------------------------------------------------------------------------------------------
7,367,332 SSgA Prime Money Market
Fund ............................................................ 7,367,332
------------
TOTAL INVESTMENT COMPANY
(Cost $7,367,332) ............................................... 7,367,332
TOTAL INVESTMENTS - 98.84%
- --------------------------------------------------------------------------------------------------
(Cost $577,118,110**) ......................................................... 565,940,675
NET OTHER ASSETS AND LIABILITIES - 1.16%
- --------------------------------------------------------------------------------------------------
6,621,728
TOTAL NET ASSETS - 100.00%
- --------------------------------------------------------------------------------------------------
$572,562,403
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
52
================================================================================
BOND FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
** Aggregate cost for Federal tax purposes was $577,424,124.
(C) Security sold within terms of a private placement memorandum exempt
from registration under section 144A of the Securities Act of 1933, as
amended, and may be sold only to dealers in that program or other
"qualified institutional investors." The securities have been
determined to be liquid under guidelines established by the Board of
Trustees.
(D) Notes and bonds, issued by foreign entities, denominated in U.S.
dollars. The aggregate of these securities is 0.89% of total net
assets.
(E) In Default. Issuer is bankrupt.
(G) Floating rate or variable rate note. Rate shown is as of December 31,
2008.
(M) Stated interest rate is contingent upon sufficient collateral market
value. If collateral market value falls below a stated level, the
issuer will either initiate a clean-up call or increase the stated
interest rate.
PLC Public Limited Company.
The industry classification method used for purposes of this report's
allocation charts and portfolio of investments schedules may differ
from the industry subclassification(s) used for Trust compliance
purposes.
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
53
================================================================================
HIGH INCOME FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
SECTOR ALLOCATION AS A PERCENTAGE OF NET ASSETS
AS OF DECEMBER 31, 2008
Health Care 12%
Utilities 11%
Cash and Other Net Assets 9%
Media - Cable 8%
Telecommunications 8%
Support Services 7%
Media - Diversified and Services 5%
Oil and Gas 5%
Environmental 4%
Technology 4%
Gaming 3%
Beverage/Food 3%
Packaging 3%
Consumer Products 3%
Forestry/Paper 2%
Transportation 2%
Media - Broadcasting 2%
General Industrial and Manufacturing 1%
Chemicals 1%
Automotive 1%
Aerospace/Defense 1%
Metals and Mining 1%
Leisure and Entertainment 1%
Food and Drug Retailers 1%
Non Food and Drug Retailers 1%
Real Estate Investment Trusts 1%
Restaurants 0%*
Hotels 0%*
Investment Management 0%*
* Rounds to 0%
- --------------------------------------------------------------------------------
Par Value Value (Note 2)
- --------- --------------
CORPORATE NOTES AND BONDS - 90.73%
- --------------------------------------------------------------------------------------------------
AEROSPACE/DEFENSE - 1.24%
$ 250,000 Alliant Techsystems, Inc.
6.750%, due 04/01/16 ............................................ $ 225,000
500,000 DRS Techologies, Inc.
6.625%, due 02/01/16 ............................................ 500,000
500,000 Moog, Inc. (C)
7.250%, due 06/15/18 ............................................ 400,000
------------
1,125,000
------------
AUTOMOTIVE - 1.30%
1,300,000 Goodyear Tire &
Rubber Co./The (G)
6.318%, due 12/01/09 ............................................ 1,183,000
------------
BEVERAGE/FOOD - 2.76%
500,000 B&G Foods, Inc.
8.000%, due 10/01/11 ............................................ 425,000
500,000 Constellation Brands, Inc.
7.250%, due 05/15/17 ............................................ 472,500
250,000 Constellation Brands,
Inc., Series B
8.125%, due 01/15/12 ............................................ 236,250
1,000,000 Del Monte Corp.
8.625%, due 12/15/12 ............................................ 970,000
180,000 Michael Foods, Inc.
8.000%, due 11/15/13 ............................................ 154,800
350,000 NBTY, Inc.
7.125%, due 10/01/15 ............................................ 248,500
------------
2,507,050
------------
CHEMICALS - 1.51%
450,000 Airgas, Inc. (C)
7.125%, due 10/01/18 ............................................ 384,750
500,000 Nalco Co.
7.750%, due 11/15/11 ............................................ 480,000
600,000 Nalco Co.
8.875%, due 11/15/13 ............................................ 507,000
------------
1,371,750
------------
CONSUMER PRODUCTS - 2.63%
150,000 Church & Dwight Co., Inc.
6.000%, due 12/15/12 ............................................ 144,000
240,000 Da-Lite Screen Co., Inc.
9.500%, due 05/15/11 ............................................ 211,200
500,000 Jarden Corp.
7.500%, due 05/01/17 ............................................ 341,250
900,000 Leslie's Poolmart
7.750%, due 02/01/13 ............................................ 720,000
500,000 Visant Corp.
7.625%, due 10/01/12 ............................................ 410,000
750,000 Visant Holding Corp.
8.750%, due 12/01/13 ............................................ 555,000
------------
2,381,450
------------
ENVIRONMENTAL - 3.59%
1,500,000 Allied Waste North America,
Inc., Series B
7.125%, due 05/15/16 ............................................ 1,365,000
1,000,000 Casella Waste Systems, Inc.
9.750%, due 02/01/13 ............................................ 800,000
500,000 Waste Services, Inc.
9.500%, due 04/15/14 ............................................ 355,000
1,000,000 WCA Waste Corp.
9.250%, due 06/15/14 ............................................ 740,000
------------
3,260,000
------------
FOOD & DRUG RETAILERS - 0.71%
250,000 Stater Brothers Holdings
8.125%, due 06/15/12 ............................................ 226,250
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
54
================================================================================
HIGH INCOME FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
Par Value Value (Note 2)
- --------- --------------
CORPORATE NOTES AND BONDS (CONTINUED)
- --------------------------------------------------------------------------------------------------
FOOD & DRUG RETAILERS (CONTINUED)
$ 500,000 Stater Brothers Holdings
7.750%, due 04/15/15 ............................................ $ 420,000
------------
646,250
------------
FORESTRY/PAPER - 2.02%
250,000 Domtar Corp.
7.875%, due 10/15/11 ............................................ 212,500
750,000 Georgia-Pacific LLC (C)
7.125%, due 01/15/17 ............................................ 630,000
250,000 Graphic Packaging
International, Inc.
8.500%, due 08/15/11 ............................................ 208,750
750,000 Rock-Tenn Co. (C)
9.250%, due 03/15/16 ............................................ 697,500
200,000 Verso Paper Holdings LLC/
Verso Paper, Inc., Series B
9.125%, due 08/01/14 ............................................ 79,000
------------
1,827,750
------------
GAMING - 3.31%
200,000 Chukchansi Economic
Development Authority (C)(G)
6.095%, due 11/15/12 ............................................ 99,500
650,000 Global Cash Access LLC/
Global Cash Finance Corp.
8.750%, due 03/15/12 ............................................ 520,000
300,000 Penn National Gaming, Inc.
6.750%, due 03/01/15 ............................................ 228,000
100,000 Pinnacle Entertainment, Inc.
8.250%, due 03/15/12 ............................................ 76,000
750,000 Scientific Games Corp. (C)
7.875%, due 06/15/16 ............................................ 603,750
1,000,000 Seneca Gaming Corp., Series B
7.250%, due 05/01/12 ............................................ 805,000
750,000 Shuffle Master, Inc. (P)
1.250%, due 04/15/24 ............................................ 671,250
------------
3,003,500
------------
GENERAL INDUSTRIAL &
MANUFACTURING - 1.54%
750,000 Baldor Electric Co.
8.625%, due 02/15/17 ............................................ 558,750
250,000 Chart Industries, Inc.
9.125%, due 10/15/15 ............................................ 187,500
750,000 SPX Corp. (C)
7.625%, due 12/15/14 ............................................ 652,500
------------
1,398,750
------------
HEALTH CARE - 11.58%
400,000 Advanced Medical Optics,
Inc. (P)
3.250%, due 08/01/26 ............................................ 140,000
750,000 Biomet, Inc.
10.000%, due 10/15/17 ........................................... 720,000
750,000 Carriage Services, Inc.
7.875%, due 01/15/15 ............................................ 592,500
1,250,000 CHS/Community Health
Systems, Inc.
8.875%, due 07/15/15 ............................................ 1,150,000
1,500,000 DaVita, Inc.
7.250%, due 03/15/15 ............................................ 1,425,000
650,000 DJO Finance LLC/DJO
Finance Corp.
10.875%, due 11/15/14 ........................................... 468,000
750,000 HCA, Inc./DE
8.750%, due 09/01/10 ............................................ 720,000
500,000 HCA, Inc./DE
6.750%, due 07/15/13 ............................................ 315,000
1,250,000 HCA, Inc./DE
9.250%, due 11/15/16 ............................................ 1,146,875
500,000 IASIS Healthcare LLC/
IASIS Capital Corp.
8.750%, due 06/15/14 ............................................ 387,500
750,000 Psychiatric Solutions, Inc.
7.750%, due 07/15/15 ............................................ 551,250
350,000 Res-Care, Inc.
7.750%, due 10/15/13 ............................................ 285,250
500,000 Service Corp. International/US
7.375%, due 10/01/14 ............................................ 425,000
500,000 Stewart Enterprises, Inc.
6.250%, due 02/15/13 ............................................ 387,500
650,000 Universal Hospital Services,
Inc. (G)
5.943%, due 06/01/15 ............................................ 396,500
600,000 Vanguard Health Holding Co.
II LLC
9.000%, due 10/01/14 ............................................ 501,000
1,000,000 Warner Chilcott Corp.
8.750%, due 02/01/15 ............................................ 890,000
------------
10,501,375
------------
HOTELS - 0.16%
200,000 Host Hotels & Resorts L.P.,
Series O, REIT
6.375%, due 03/15/15 ............................................ 149,000
------------
INVESTMENT MANAGEMENT - 0.07%
300,000 Nuveen Investments, Inc. (C)
10.500%, due 11/15/15 ........................................... 66,375
------------
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
55
================================================================================
HIGH INCOME FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
Par Value Value (Note 2)
- --------- --------------
CORPORATE NOTES AND BONDS (CONTINUED)
- --------------------------------------------------------------------------------------------------
LEISURE & ENTERTAINMENT - 0.84%
$ 650,000 Speedway Motorsports, Inc.
6.750%, due 06/01/13 ............................................ $ 468,000
400,000 Vail Resorts, Inc.
6.750%, due 02/15/14 ............................................ 298,000
------------
766,000
------------
MEDIA - BROADCASTING - 1.61%
314,000 Allbritton Communications Co.
7.750%, due 12/15/12 ............................................ 154,252
750,000 British Sky Broadcasting
Group PLC (D)
6.875%, due 02/23/09 ............................................ 753,440
500,000 British Sky Broadcasting
Group PLC (D)
8.200%, due 07/15/09 ............................................ 508,272
64,000 Sinclair Television Group, Inc.
8.000%, due 03/15/12 ............................................ 48,160
------------
1,464,124
------------
MEDIA - CABLE - 8.38%
1,500,000 Cablevision Systems Corp.,
Series B (G)
8.334%, due 04/01/09 ............................................ 1,496,250
750,000 Cablevision Systems Corp.,
Series B
8.000%, due 04/15/12 ............................................ 667,500
250,000 Comcast Cable
Communications LLC
6.875%, due 06/15/09 ............................................ 251,172
1,000,000 Comcast Corp. (G)
5.119%, due 07/14/09 ............................................ 986,340
500,000 DirecTV Holdings LLC/
DirecTV Financing Co.
8.375%, due 03/15/13 ............................................ 497,500
1,250,000 Echostar DBS Corp.
7.125%, due 02/01/16 ............................................ 1,043,750
600,000 Mediacom Broadband LLC/
Mediacom Broadband Corp.
8.500%, due 10/15/15 ............................................ 390,750
1,000,000 Time Warner, Inc. (G)
2.405%, due 11/13/09 ............................................ 962,525
500,000 Videotron Ltee (D)
6.875%, due 01/15/14 ............................................ 442,500
250,000 Videotron Ltee (C)(D)
9.125%, due 04/15/18 ............................................ 232,500
850,000 Virgin Media Finance PLC (D)
9.125%, due 08/15/16 ............................................ 629,000
------------
7,599,787
------------
MEDIA - DIVERSIFIED & SERVICES - 5.38%
1,000,000 Hughes Network Systems LLC/
HNS Finance Corp.
9.500%, due 04/15/14 ............................................ 812,500
750,000 Intelsat Jackson Holdings,
Ltd. (D)
11.250%, due 06/15/16 ........................................... 682,500
1,000,000 Intelsat Subsidiary Holding
Co., Ltd. (C)(D)
8.500%, due 01/15/13 ............................................ 925,000
210,000 Lamar Media Corp.
7.250%, due 01/01/13 ............................................ 167,475
500,000 Lamar Media Corp., Series C
6.625%, due 08/15/15 ............................................ 361,250
750,000 Quebecor Media, Inc. (D)
7.750%, due 03/15/16 ............................................ 506,250
1,450,000 Viacom, Inc. (G)
2.271%, due 06/16/09 ............................................ 1,422,665
------------
4,877,640
------------
METALS AND MINING - 1.22%
500,000 Arch Western Finance LLC
6.750%, due 07/01/13 ............................................ 435,000
250,000 Freeport-McMoRan Copper &
Gold, Inc.
8.375%, due 04/01/17 ............................................ 205,000
500,000 Peabody Energy Corp.
7.375%, due 11/01/16 ............................................ 470,000
------------
1,110,000
------------
NON FOOD & DRUG RETAILERS - 0.71%
750,000 Sally Holdings LLC/
Sally Capital, Inc.
9.250%, due 11/15/14 ............................................ 645,000
------------
OIL & GAS - 5.24%
500,000 Cimarex Energy Co.
7.125%, due 05/01/17 ............................................ 390,000
1,000,000 Complete Production
Services, Inc.
8.000%, due 12/15/16 ............................................ 630,000
700,000 Compton Petroleum
Finance Corp.
7.625%, due 12/01/13 ............................................ 210,000
500,000 Encore Acquisition Co.
6.000%, due 07/15/15 ............................................ 322,500
1,000,000 EXCO Resources, Inc.
7.250%, due 01/15/11 ............................................ 780,000
250,000 Helix Energy Solutions
Group, Inc. (C)
9.500%, due 01/15/16 ............................................ 132,500
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
56
================================================================================
HIGH INCOME FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
Par Value Value (Note 2)
- --------- --------------
CORPORATE NOTES AND BONDS (CONTINUED)
- --------------------------------------------------------------------------------------------------
OIL & GAS (CONTINUED)
$ 750,000 Key Energy Services, Inc.
8.375%, due 12/01/14 ............................................ $ 495,000
500,000 Mariner Energy, Inc.
8.000%, due 05/15/17 ............................................ 260,000
1,500,000 Petroplus Finance, Ltd. (C)(D)
7.000%, due 05/01/17 ............................................ 915,000
250,000 Range Resources Corp.
6.375%, due 03/15/15 ............................................ 202,500
500,000 Range Resources Corp.
7.250%, due 05/01/18 ............................................ 417,500
------------
4,755,000
------------
PACKAGING - 2.75%
1,000,000 Ball Corp.
6.625%, due 03/15/18 ............................................ 895,000
750,000 BWAY Corp.
10.000%, due 10/15/10 ........................................... 637,500
500,000 Crown Americas LLC/
Crown Americas Capital Corp.
7.625%, due 11/15/13 ............................................ 495,000
250,000 Greif, Inc.
6.750%, due 02/01/17 ............................................ 221,250
250,000 Owens-Illinois, Inc.
7.500%, due 05/15/10 ............................................ 247,500
------------
2,496,250
------------
REAL ESTATE INVESTMENT TRUSTS - 0.59%
700,000 Ventas Realty L.P./
Ventas Capital Corp.
6.750%, due 04/01/17 ............................................ 532,000
------------
RESTAURANTS - 0.28%
500,000 Seminole Hard Rock
Entertainment, Inc. (C)(G)
4.496%, due 03/15/14 ............................................ 253,750
------------
SUPPORT SERVICES - 7.13%
1,750,000 ARAMARK Corp.
8.500%, due 02/01/15 ............................................ 1,583,750
500,000 Cardtronics, Inc.
9.250%, due 08/15/13 ............................................ 335,000
1,000,000 Corrections Corp. of America
7.500%, due 05/01/11 ............................................ 990,000
750,000 Education Management LLC/
Education Management
Finance Corp.
10.250%, due 06/01/16 ........................................... 543,750
1,000,000 FTI Consulting, Inc.
7.750%, due 10/01/16 ............................................ 822,500
300,000 Iron Mountain, Inc.
8.625%, due 04/01/13 ............................................ 282,000
990,000 Iron Mountain, Inc.
7.750%, due 01/15/15 ............................................ 888,525
500,000 Mac-Gray Corp.
7.625%, due 08/15/15 ............................................ 460,000
750,000 VeriFone Holdings, Inc. (C)(P)
1.375%, due 06/15/12 ............................................ 315,000
450,000 West Corp.
9.500%, due 10/15/14 ............................................ 247,500
------------
6,468,025
------------
TECHNOLOGY - 3.56%
750,000 Celestica, Inc. (D)
7.625%, due 07/01/13 ............................................ 615,000
500,000 Flextronics International,
Ltd. (D)
6.500%, due 05/15/13 ............................................ 395,000
1,000,000 Sungard Data Systems, Inc.
9.125%, due 08/15/13 ............................................ 865,000
750,000 Sungard Data Systems, Inc. (C)
10.625%, due 05/15/15 ........................................... 641,250
500,000 Sungard Data Systems, Inc.
10.250%, due 08/15/15 ........................................... 330,000
750,000 Syniverse Technologies, Inc.,
Series B
7.750%, due 08/15/13 ............................................ 383,438
------------
3,229,688
------------
TELECOMMUNICATIONS - 7.57%
1,000,000 Centennial Communications
Corp. (G)
9.633%, due 01/01/13 ............................................ 970,000
1,000,000 Cincinnati Bell, Inc.
8.375%, due 01/15/14 ............................................ 770,000
700,000 Cincinnati Bell Telephone
Co. LLC
6.300%, due 12/01/28 ............................................ 441,000
1,250,000 Frontier Communications Corp.
6.625%, due 03/15/15 ............................................ 912,500
1,500,000 Nordic Telephone Co.
Holdings ApS (C)(D)
8.875%, due 05/01/16 ............................................ 1,050,000
400,000 Qwest Capital Funding, Inc.
7.250%, due 02/15/11 ............................................ 336,000
625,000 Qwest Communications
International, Inc. (G)
5.649%, due 02/15/09 ............................................ 621,875
750,000 Qwest Corp.
7.875%, due 09/01/11 ............................................ 690,000
1,000,000 Windstream Corp.
8.625%, due 08/01/16 ............................................ 885,000
250,000 Windstream Corp.
7.000%, due 03/15/19 ............................................ 192,500
------------
6,868,875
------------
TRANSPORTATION - 1.83%
500,000 Bristow Group, Inc.
6.125%, due 06/15/13 ............................................ 360,000
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
57
================================================================================
HIGH INCOME FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
Par Value Value (Note 2)
- --------- --------------
CORPORATE NOTES AND BONDS (CONTINUED)
- --------------------------------------------------------------------------------------------------
TRANSPORTATION (CONTINUED)
$ 750,000 Bristow Group, Inc.
7.500%, due 09/15/17 ............................................ $ 502,500
755,000 Gulfmark Offshore, Inc.
7.750%, due 07/15/14 ............................................ 536,050
400,000 Hornbeck Offshore Services,
Inc., Series B
6.125%, due 12/01/14 ............................................ 260,000
------------
1,658,550
------------
UTILITIES - 11.22%
500,000 Dynegy Holdings, Inc.
6.875%, due 04/01/11 ............................................ 437,500
500,000 Dynegy Holdings, Inc.
8.375%, due 05/01/16 ............................................ 355,000
1,500,000 Edison Mission Energy
7.200%, due 05/15/19 ............................................ 1,230,000
1,700,000 El Paso Corp.
7.250%, due 06/01/18 ............................................ 1,349,242
1,000,000 Energy Future Holdings
Corp. (C)
10.875%, due 11/01/17 ........................................... 710,000
1,000,000 Ferrellgas Partners L.P./
Ferrellgas Partners
Finance Corp.
8.750%, due 06/15/12 ............................................ 700,000
500,000 Inergy L.P./Inergy Finance Corp.
6.875%, due 12/15/14 ............................................ 390,000
1,000,000 MarkWest Energy Partners L.P./
MarkWest Energy Finance
Corp., Series B
8.750%, due 04/15/18 ............................................ 620,000
500,000 Mirant Americas
Generation LLC
8.300%, due 05/01/11 ............................................ 485,000
1,750,000 NRG Energy, Inc.
7.375%, due 02/01/16 ............................................ 1,627,500
500,000 NRG Energy, Inc.
7.375%, due 01/15/17 ............................................ 460,000
1,000,000 Suburban Propane
Partners L.P./ Suburban Energy
Finance Corp.
6.875%, due 12/15/13 ............................................ 820,000
750,000 Texas Competitive Electric
Holdings Co. LLC (B)(C)
10.500%, due 11/01/15 ........................................... 532,500
500,000 Williams Cos., Inc.
7.125%, due 09/01/11 ............................................ 460,000
------------
10,176,742
------------
TOTAL CORPORATE NOTES AND BONDS
(Cost $100,424,100) ............................................. 82,322,681
CERTIFICATE OF DEPOSIT - 3.04%
2,756,324 State Street Eurodollar
0.010%, due 01/02/09 ............................................ 2,756,324
------------
TOTAL CERTIFICATE OF DEPOSIT
(Cost $2,756,324) ............................................... 2,756,324
Shares
- ------
INVESTMENT COMPANY - 4.06%
- --------------------------------------------------------------------------------------------------
3,680,562 SSgA Prime Money
Market Fund ..................................................... 3,680,562
------------
TOTAL INVESTMENT COMPANY
(Cost $3,680,562) ............................................... 3,680,562
TOTAL INVESTMENTS - 97.83%
- --------------------------------------------------------------------------------------------------
(Cost $106,860,986**) ......................................................... 88,759,567
NET OTHER ASSETS AND LIABILITIES - 2.17%
- --------------------------------------------------------------------------------------------------
1,968,832
TOTAL NET ASSETS - 100.00%
- --------------------------------------------------------------------------------------------------
$ 90,728,399
- --------------------------------------------------------------------------------
** Aggregate cost for Federal tax purposes was $106,968,770.
(B) Represents a security with a specified coupon until a predetermined
date, at which time the stated rate is adjusted to a new contract rate.
(C) Security sold within terms of a private placement memorandum exempt from
registration under section 144A of the Securities Act of 1933, as
amended, and may be sold only to dealers in that program or other
"qualified institutional investors." The securities have been
determined to be liquid under guidelines established by the Board of
Trustees.
(D) Notes and bonds, issued by foreign entities, denominated in U.S.
dollars. The aggregate of these securities is 8.44% of total net assets.
(G) Floating rate or variable rate note. Rate shown is as of December 31,
2008.
(P) Convertible.
PLC Public Limited Company.
REIT Real Estate Investment Trust.
The industry classification method used for purposes of this report's
allocation charts and portfolio of investments schedules may differ from
the industry subclassification(s) used for Trust compliance purposes.
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
58
================================================================================
DIVERSIFIED INCOME FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
PORTFOLIO ALLOCATION AS A PERCENTAGE OF NET ASSETS
AS OF DECEMBER 31, 2008
[PIE CHART OF PORTFOLIO ALLOCATION]
Common Stocks 40%
Corporate Notes and Bonds 20%
Mortgage Backed 19%
U.S. Government and Agency Obligations 11%
Commercial Mortgage Backed 5%
Asset Backed 2%
Cash and Other Net Assets 2%
Private Label Mortgage Backed 1%
[END CHART]
- --------------------------------------------------------------------------------
Shares Value (Note 2)
- ------ --------------
COMMON STOCKS - 40.08%
- --------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY - 1.64%
135,000 Home Depot, Inc. ................................................ $ 3,107,700
52,000 McDonald's Corp. ................................................ 3,233,880
15,000 VF Corp. ........................................................ 821,550
------------
7,163,130
------------
CONSUMER STAPLES - 5.07%
159,000 Altria Group, Inc. .............................................. 2,394,540
20,000 Avon Products, Inc. ............................................. 480,600
64,000 Coca-Cola Co./The ............................................... 2,897,280
56,500 Kimberly-Clark Corp. ............................................ 2,979,810
81,918 Kraft Foods, Inc., Class A....................................... 2,199,498
19,000 PepsiCo, Inc./NC ................................................ 1,040,630
151,000 Philip Morris International,
Inc. ............................................................ 6,570,010
19,000 Procter & Gamble Co. ............................................ 1,174,580
107,000 SYSCO Corp. ..................................................... 2,454,580
------------
22,191,528
------------
ENERGY - 3.02%
42,000 BP PLC, ADR ..................................................... 1,963,080
115,000 Chevron Corp. ................................................... 8,506,550
53,500 ConocoPhillips .................................................. 2,771,300
------------
13,240,930
------------
FINANCIALS - 7.81%
18,000 Allstate Corp./The .............................................. 589,680
268,996 Bank of America Corp. ........................................... 3,787,464
67,000 Bank of New York Mellon
Corp./The ....................................................... 1,898,110
59,000 BB&T Corp. ...................................................... 1,620,140
200,005 Citigroup, Inc. ................................................. 1,342,034
227,054 JPMorgan Chase & Co. ............................................ 7,159,013
71,000 Marsh & McLennan Cos., Inc. ..................................... 1,723,170
39,000 PNC Financial Services
Group, Inc. ..................................................... 1,911,000
51,000 Travelers Cos., Inc./The ........................................ 2,305,200
186,000 US Banccorp ..................................................... 4,651,860
245,000 Wells Fargo & Co. ............................................... 7,222,600
------------
34,210,271
------------
HEALTH CARE - 8.23%
59,000 Abbott Laboratories ............................................. 3,148,830
193,000 Bristol-Myers Squibb Co. ........................................ 4,487,250
28,000 Eli Lilly & Co. ................................................. 1,127,560
152,000 Johnson & Johnson ............................................... 9,094,160
168,000 Merck & Co., Inc./NJ ............................................ 5,107,200
492,019 Pfizer, Inc. .................................................... 8,713,656
117,000 Wyeth ........................................................... 4,388,670
------------
36,067,326
------------
INDUSTRIALS - 4.44%
46,500 3M Co. .......................................................... 2,675,610
44,000 Boeing Co. ...................................................... 1,877,480
58,000 Emerson Electric Co. ............................................ 2,123,380
383,000 General Electric Co. ............................................ 6,204,600
17,000 Honeywell International, Inc. ................................... 558,110
28,000 Illinois Tool Works, Inc. ....................................... 981,400
21,500 Northrop Grumman Corp. .......................................... 968,360
14,000 Stanley Works/The ............................................... 477,400
65,000 United Parcel Service, Inc.,
Class B ......................................................... 3,585,400
------------
19,451,740
------------
INFORMATION TECHNOLOGY - 1.75%
50,000 Automatic Data Processing, Inc. ................................. 1,967,000
222,000 Intel Corp. ..................................................... 3,254,520
46,000 Molex, Inc. ..................................................... 666,540
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
59
================================================================================
DIVERSIFIED INCOME FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
Shares Value (Note 2)
- ------ --------------
COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------------------------------
INFORMATION TECHNOLOGY (CONTINUED)
68,000 Paychex, Inc. ................................................... $ 1,787,040
------------
7,675,100
------------
MATERIALS - 1.78%
20,000 Air Products & Chemicals, Inc. .................................. 1,005,400
70,000 Alcoa, Inc. ..................................................... 788,200
130,500 EI Du Pont de Nemours & Co. ..................................... 3,301,650
40,000 Nucor Corp. ..................................................... 1,848,000
28,500 Weyerhaeuser Co. ................................................ 872,385
------------
7,815,635
------------
TELECOMMUNICATION SERVICES - 3.53%
330,015 AT&T, Inc. ...................................................... 9,405,427
178,000 Verizon Communications, Inc. .................................... 6,034,200
------------
15,439,627
------------
UTILITIES - 2.81%
44,000 Consolidated Edison, Inc. ....................................... 1,712,920
123,000 Duke Energy Corp. ............................................... 1,846,230
30,500 FirstEnergy Corp. ............................................... 1,481,690
47,500 PG&E Corp. ...................................................... 1,838,725
47,500 Progress Energy, Inc. ........................................... 1,892,875
61,000 Public Service Enterprise Group, Inc. ........................... 1,779,370
48,000 Southern Co. .................................................... 1,776,000
------------
12,327,810
------------
TOTAL COMMON STOCKS
(Cost $206,014,491) ............................................. 175,583,097
COMMON STOCK UNIT - 0.18%
- --------------------------------------------------------------------------------------------------
FINANCIALS - 0.18%
38,000 AllianceBernstein Holding L.P. .................................. 790,020
------------
TOTAL COMMON STOCK UNIT
(Cost $3,229,736) ............................................... 790,020
Par Value
- ---------
ASSET BACKED - 2.05%
- --------------------------------------------------------------------------------------------------
$ 599,648 ABSC Long Beach Home Equity Loan Trust,
Series 2000-LB1, Class AF5 (M)
8.550%, due 09/21/30 ............................................ $ 597,698
808,591 Ameriquest Mortgage Securities, Inc.,
Series 2004-FR1, Class M2 (M)
5.207%, due 05/25/34 ............................................ 218,503
1,975,000 Carmax Auto Owner Trust,
Series 2007-2, Class B
5.370%, due 03/15/13 ............................................ 1,531,014
2,045,000 Chase Issuance Trust,
Series 2007-A17, Class A
5.120%, due 10/15/14 ............................................ 1,838,208
1,300,372 CIT Group Home Equity Loan Trust,
Series 2002-2, Class BF (M)
6.830%, due 06/25/33 ............................................ 58,717
1,460,000 Daimler Chrysler Auto Trust,
Series 2007-A, Class A3A
5.000%, due 02/08/12 ............................................ 1,416,550
1,120,000 GMAC Mortgage Corp. Loan Trust,
Series 2004-HE2, Class M1 (G)
3.950%, due 10/25/33 ............................................ 997,262
699,985 Green Tree Financial Corp.,
Series 1998-2, Class A6 (G)
6.810%, due 12/01/27 ............................................ 540,710
1,250,000 MBNA Master Credit Card Trust,
Series 1999-B, Class A
5.900%, due 08/15/11 ............................................ 1,244,992
1,025,000 Renaissance Home Equity Loan Trust,
Series 2005-4, Class M9 (M)
7.000%, due 02/25/36 ............................................ 497,889
649,392 Wells Fargo Home Equity Trust,
Series 2004-2, Class M8A (C)(G)
3.471%, due 05/25/34 ............................................ 57,835
------------
TOTAL ASSET BACKED
(Cost $12,863,268) .............................................. 8,999,378
COMMERCIAL MORTGAGE BACKED - 4.82%
- --------------------------------------------------------------------------------------------------
293,309 Bear Stearns Commercial
Mortgage Securities,
Series 2001-TOP4, Class A1
5.060%, due 11/15/16 ............................................ 285,967
1,815,000 Bear Stearns Commercial
Mortgage Securities,
Series 2003-T10, Class E (C)(G)
5.540%, due 03/13/40 ............................................ 648,671
1,325,000 Bear Stearns Commercial
Mortgage Securities,
Series 2004-T16, Class A6 (G)
4.750%, due 02/13/46 ............................................ 1,088,037
765,000 Bear Stearns Commercial
Mortgage Securities,
Series 2005-T20, Class F (C)(G)
5.151%, due 10/12/42 ............................................ 185,162
2,929,835 GMAC Commercial Mortgage
Securities, Inc.,
Series 2000-C1, Class A2 (G)
7.724%, due 03/15/33 ............................................ 2,929,657
2,100,000 Government National
Mortgage Association,
Series 2004-43, Class C (G)
5.008%, due 12/16/25 ............................................ 2,154,327
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
60
================================================================================
DIVERSIFIED INCOME FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
Par Value Value (Note 2)
- --------- --------------
COMMERCIAL MORTGAGE BACKED (CONTINUED)
- --------------------------------------------------------------------------------------------------
$1,400,000 Greenwich Capital Commercial
Funding Corp.,
Series 2004-GG1, Class A7 (G)
5.317%, due 06/10/36 ............................................ $ 1,164,721
1,596,064 LB-UBS Commercial Mortgage Trust,
Series 2004-C1, Class A2
3.624%, due 01/15/29 ............................................ 1,549,923
1,600,000 LB-UBS Commercial Mortgage Trust,
Series 2004-C8, Class A6 (G)
4.799%, due 12/15/29 ............................................ 1,323,248
2,600,000 Morgan Stanley Capital I,
Series 2004-HQ4, Class A7
4.970%, due 04/14/40 ............................................ 2,183,858
2,500,000 Morgan Stanley Capital I,
Series 2004-T13, Class A3
4.390%, due 09/13/45 ............................................ 2,246,418
2,710,000 Morgan Stanley Capital I,
Series 2006-IQ12, Class ANM
5.310%, due 12/15/43 ............................................ 2,468,851
2,690,000 Multi Security Asset Trust,
Series 2005-RR4A, Class H (C)(G)
5.880%, due 11/28/35 ............................................ 337,703
775,000 Multi Security Asset Trust,
Series 2005-RR4A, Class J (C)(G)
5.880%, due 11/28/35 ............................................ 93,426
2,443,002 Wachovia Bank Commercial
Mortgage Trust,
Series 2003-C8, Class A2
3.894%, due 11/15/35 ............................................ 2,435,571
------------
TOTAL COMMERCIAL MORTGAGE BACKED
(Cost $27,434,396) .............................................. 21,095,540
PRIVATE LABEL MORTGAGE BACKED - 0.99%
- --------------------------------------------------------------------------------------------------
2,026,870 Banc of America Alternative Loan Trust,
Series 2005-12, Class 3CB1
6.000%, due 01/25/36 ............................................ 1,579,692
2,721,134 Banc of America Alternative Loan Trust,
Series 2006-3, Class 2CB1
6.000%, due 04/25/36 ............................................ 1,304,443
2,938,022 Banc of America Alternative Loan Trust,
Series 2006-4, Class 5CB1
6.500%, due 05/25/46 ............................................ 1,435,042
------------
TOTAL PRIVATE LABEL MORTGAGE BACKED
(Cost $7,687,762) ............................................... 4,319,177
CORPORATE NOTES AND BONDS - 20.08%
- --------------------------------------------------------------------------------------------------
BEVERAGE/FOOD - 0.44%
2,025,000 Kraft Foods, Inc.
6.500%, due 11/01/31 ............................................ 1,943,526
------------
CONSUMER DISCRETIONARY - 0.90%
2,000,000 American Association of Retired
Persons (C)
7.500%, due 05/01/31 ............................................ 2,070,370
1,850,000 Erac USA Finance Co. (C)
6.700%, due 06/01/34 ............................................ 1,016,605
1,600,000 Royal Caribbean Cruises, Ltd. (D)
7.250%, due 06/15/16 ............................................ 872,000
------------
3,958,975
------------
CONSUMER STAPLES - 0.38%
1,055,000 Diageo Capital PLC (D)
5.500%, due 09/30/16 ............................................ 1,011,231
620,000 PepsiCo, Inc./NC
4.650%, due 02/15/13 ............................................ 637,472
------------
1,648,703
------------
ENERGY - 1.35%
2,000,000 Chesapeake Energy Corp.
6.375%, due 06/15/15 ............................................ 1,580,000
1,500,000 ConocoPhillips
6.650%, due 07/15/18 ............................................ 1,567,717
1,150,000 Hess Corp.
7.875%, due 10/01/29 ............................................ 1,103,979
750,000 Transocean, Inc.
6.000%, due 03/15/18 ............................................ 683,101
1,030,000 Transocean, Ltd.
7.500%, due 04/15/31 ............................................ 968,540
------------
5,903,337
------------
FINANCE - 4.81%
1,115,000 American General Finance Corp.
5.850%, due 06/01/13 ............................................ 423,493
1,500,000 American General Finance
Corp., Series H
4.625%, due 09/01/10 ............................................ 759,890
620,000 Bank of America Corp.
5.750%, due 12/01/17 ............................................ 619,033
1,130,000 Bear Stearns Cos. LLC/The
7.250%, due 02/01/18 ............................................ 1,238,317
1,450,000 CIT Group, Inc.
7.625%, due 11/30/12 ............................................ 1,224,045
1,000,000 General Electric Global Insurance
Holding Corp.
7.000%, due 02/15/26 ............................................ 947,199
785,000 General Electric Global Insurance
Holding Corp.
7.750%, due 06/15/30 ............................................ 770,197
2,000,000 Goldman Sachs Group, Inc./The
6.650%, due 05/15/09 ............................................ 2,006,768
1,735,000 Lehman Brothers Holdings, Inc. (E)
5.750%, due 01/03/17 ............................................ 173
1,415,000 Merrill Lynch & Co., Inc.
6.150%, due 04/25/13 ............................................ 1,402,108
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
61
================================================================================
DIVERSIFIED INCOME FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
Par Value Value (Note 2)
- --------- --------------
CORPORATE NOTES AND BONDS (CONTINUED)
- --------------------------------------------------------------------------------------------------
FINANCE (CONTINUED)
$2,400,000 National Rural Utilities
Cooperative Finance Corp., Series C
7.250%, due 03/01/12 ............................................ $ 2,471,098
3,240,000 Nissan Motor Acceptance Corp. (C)
5.625%, due 03/14/11 ............................................ 3,185,620
1,505,000 SLM Corp.
5.125%, due 08/27/12 ............................................ 1,126,280
580,000 Textron Financial Corp.
6.000%, due 11/20/09 ............................................ 541,740
2,000,000 US Bank NA/Cincinnati, OH
6.300%, due 02/04/14 ............................................ 2,071,092
1,450,000 Wells Fargo & Co.
5.250%, due 10/23/12 ............................................ 1,486,823
935,000 Western Union Co./The
5.930%, due 10/01/16 ............................................ 799,066
------------
21,072,942
------------
FOOD & DRUG RETAILERS - 0.34%
1,550,000 Medco Health Solutions, Inc.
7.250%, due 08/15/13 ............................................ 1,502,846
------------
HEALTH CARE - 2.56%
3,950,000 Amgen, Inc.
5.850%, due 06/01/17 ............................................ 4,079,335
1,200,000 Eli Lilly & Co.
6.570%, due 01/01/16 ............................................ 1,307,690
740,000 Genentech, Inc.
5.250%, due 07/15/35 ............................................ 701,493
1,320,000 Merck & Co., Inc./NJ
5.750%, due 11/15/36 ............................................ 1,389,992
1,500,000 Quest Diagnostics, Inc./DE
5.450%, due 11/01/15 ............................................ 1,315,965
1,400,000 WellPoint, Inc.
5.000%, due 12/15/14 ............................................ 1,216,059
1,100,000 Wyeth
6.500%, due 02/01/34 ............................................ 1,219,743
------------
11,230,277
------------
INDUSTRIALS - 1.43%
350,000 Boeing Co.
8.625%, due 11/15/31 ............................................ 443,801
620,000 Boeing Co.
6.875%, due 10/15/43 ............................................ 646,532
515,000 DR Horton, Inc.
5.250%, due 02/15/15 ............................................ 324,450
310,000 EI Du Pont de Nemours & Co.
5.000%, due 01/15/13 ............................................ 312,805
800,000 GMAC LLC
7.250%, due 03/02/11 ............................................ 679,868
780,000 Lockheed Martin Corp.
7.650%, due 05/01/16 ............................................ 898,991
1,150,000 Waste Management, Inc.
7.125%, due 12/15/17 ............................................ 1,071,267
1,025,000 Westvaco Corp.
8.200%, due 01/15/30 ............................................ 780,111
1,170,000 WM Wrigley Jr. Co.
4.300%, due 07/15/10 ............................................ 1,088,100
------------
6,245,925
------------
MEDIA - 0.74%
1,780,000 Comcast Cable Communications
Holdings, Inc.
9.455%, due 11/15/22 ............................................ 1,994,237
1,315,000 Rogers Cable, Inc. (D)
6.250%, due 06/15/13 ............................................ 1,258,696
------------
3,252,933
------------
REAL ESTATE INVESTMENT TRUSTS - 1.30%
2,685,000 Equity One, Inc.
3.875%, due 04/15/09 ............................................ 2,618,713
1,450,000 HCP, Inc.
6.700%, due 01/30/18 ............................................ 695,308
2,400,000 Nationwide Health Properties,
Inc., Series D
8.250%, due 07/01/12 ............................................ 2,025,751
530,000 Simon Property Group L.P.
5.875%, due 03/01/17 ............................................ 353,942
------------
5,693,714
------------
TELECOMMUNICATIONS - 0.36%
960,000 Cisco Systems, Inc.
5.500%, due 02/22/16 ............................................ 1,016,809
795,000 Sprint Nextel Corp.
6.000%, due 12/01/16 ............................................ 560,475
------------
1,577,284
------------
TRANSPORTATION - 0.79%
1,365,000 Burlington Northern Santa Fe Corp.
8.125%, due 04/15/20 ............................................ 1,486,488
957,000 Norfolk Southern Corp.
5.590%, due 05/17/25 ............................................ 857,766
1,050,000 Norfolk Southern Corp.
7.050%, due 05/01/37 ............................................ 1,098,010
------------
3,442,264
------------
UTILITIES - 4.68%
1,250,000 Consumers Energy Co.
5.650%, due 04/15/20 ............................................ 1,170,609
2,000,000 Energy East Corp.
8.050%, due 11/15/10 ............................................ 2,079,260
1,300,000 Illinois Power Co.
7.500%, due 06/15/09 ............................................ 1,305,062
1,555,000 Indianapolis Power & Light Co. (C)
6.050%, due 10/01/36 ............................................ 1,368,726
4,000,000 MidAmerican Energy Co.
5.650%, due 07/15/12 ............................................ 4,006,624
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
62
================================================================================
DIVERSIFIED INCOME FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
Par Value Value (Note 2)
- --------- --------------
CORPORATE NOTES AND BONDS (CONTINUED)
- --------------------------------------------------------------------------------------------------
UTILITIES (CONTINUED)
$1,600,000 Nevada Power Co., Series R
6.750%, due 07/01/37 ............................................ $ 1,427,690
1,365,000 Pacific Gas & Electric Co.
6.050%, due 03/01/34 ............................................ 1,449,710
2,000,000 Progress Energy, Inc.
7.750%, due 03/01/31 ............................................ 2,002,422
474,000 Sierra Pacific Power Co., Series M
6.000%, due 05/15/16 ............................................ 453,599
1,500,000 Southern Power Co., Series B
6.250%, due 07/15/12 ............................................ 1,533,315
835,000 Southwestern Electric Power Co.,
Series E
5.550%, due 01/15/17 ............................................ 768,814
620,000 Virginia Electric and Power Co.
5.100%, due 11/30/12 ............................................ 606,126
2,400,000 Westar Energy, Inc.
6.000%, due 07/01/14 ............................................ 2,318,568
------------
20,490,525
------------
TOTAL CORPORATE NOTES AND BONDS
(Cost $99,180,387) .............................................. 87,963,251
MORTGAGE BACKED - 19.15%
- --------------------------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE
CORP. - 2.21%
82,509 8.000%, due 06/01/30
Pool # C01005 ................................................... 87,523
387,700 6.500%, due 01/01/32
Pool # C62333 ................................................... 405,025
105,355 6.500%, due 03/01/32
Pool # C65648 ................................................... 109,932
3,806,621 5.000%, due 07/01/33
Pool # A11325 ................................................... 3,899,569
370,847 6.000%, due 10/01/34
Pool # A28439 ................................................... 382,858
377,372 6.000%, due 10/01/34
Pool # A28598 ................................................... 389,594
274,116 5.000%, due 04/01/35
Pool # A32314 ................................................... 280,510
561,486 5.000%, due 04/01/35
Pool # A32315 ................................................... 574,582
448,592 5.000%, due 04/01/35
Pool # A32316 ................................................... 459,055
255,350 5.000%, due 04/01/35
Pool # A32509 ................................................... 261,305
2,764,269 5.000%, due 01/01/37
Pool # A56371 ................................................... 2,828,310
------------
9,678,263
------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION - 16.90%
1,186,042 4.000%, due 04/01/15
Pool # 255719 ................................................... 1,202,873
1,272,365 5.500%, due 04/01/16
Pool # 745444 ................................................... 1,330,511
326,244 6.000%, due 05/01/16
Pool # 582558 ................................................... 339,903
1,989,171 5.000%, due 12/01/17
Pool # 672243 ................................................... 2,059,680
2,072,852 4.500%, due 09/01/20
Pool # 835465 ................................................... 2,124,303
378,167 6.000%, due 05/01/21
Pool # 253847 ................................................... 391,585
69,351 7.000%, due 12/01/29
Pool # 762813 ................................................... 73,432
201,187 7.000%, due 11/01/31
Pool # 607515 ................................................... 212,885
2,830 7.000%, due 04/01/32
Pool # 641518 ................................................... 2,995
209,748 7.000%, due 05/01/32
Pool # 644591 ................................................... 221,943
1,187,050 6.500%, due 06/01/32
Pool # 545691 ................................................... 1,238,612
938,717 6.500%, due 09/01/33
Pool # 737582 ................................................... 978,760
1,584,934 5.500%, due 10/01/33
Pool # 254904 ................................................... 1,628,587
5,849,565 5.500%, due 11/01/33
Pool # 555880 ................................................... 6,010,678
4,538,759 5.000%, due 05/01/34
Pool # 780890 ................................................... 4,643,202
40,757 7.000%, due 07/01/34
Pool # 792636 ................................................... 42,901
620,428 5.500%, due 08/01/34
Pool # 793647 ................................................... 637,129
2,962,108 5.500%, due 03/01/35
Pool # 815976 ................................................... 3,039,989
1,488,586 5.500%, due 07/01/35
Pool # 825283 ................................................... 1,527,724
926,016 5.500%, due 08/01/35
Pool # 826872 ................................................... 950,363
1,408,965 5.000%, due 09/01/35
Pool # 820347 ................................................... 1,440,506
1,504,442 5.000%, due 09/01/35
Pool # 835699 ................................................... 1,538,121
1,884,168 5.000%, due 10/01/35
Pool # 797669 ................................................... 1,926,347
1,884,341 5.500%, due 10/01/35
Pool # 836912 ................................................... 1,933,885
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
63
================================================================================
DIVERSIFIED INCOME FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
Par Value Value (Note 2)
- --------- --------------
MORTGAGE BACKED (CONTINUED)
- --------------------------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION (CONTINUED)
$2,037,260 5.000%, due 12/01/35
Pool # 850561 ................................................... $ 2,082,867
3,722,472 5.500%, due 12/01/35
Pool # 844583 ................................................... 3,820,346
778,095 5.500%, due 02/01/36
Pool # 851330 ................................................... 798,553
2,681,253 5.500%, due 09/01/36
Pool # 831820 ................................................... 2,751,751
3,257,432 6.000%, due 09/01/36
Pool # 831741 ................................................... 3,357,329
812,324 5.500%, due 10/01/36
Pool # 896340 ................................................... 833,682
3,482,060 5.500%, due 10/01/36
Pool # 901723 ................................................... 3,573,612
2,273,550 6.500%, due 10/01/36
Pool # 894118 ................................................... 2,364,136
2,809,773 6.000%, due 11/01/36
Pool # 902510 ................................................... 2,904,348
3,244,114 5.500%, due 12/01/36
Pool # 902853 ................................................... 3,329,410
3,101,809 5.500%, due 12/01/36
Pool # 903059 ................................................... 3,183,363
3,061,980 5.500%, due 12/01/36
Pool # 907512 ................................................... 3,142,487
3,319,627 5.500%, due 12/01/36
Pool # 907635 ................................................... 3,406,908
2,880,247 6.000%, due 12/01/36
Pool # 903002 ................................................... 2,968,577
------------
74,014,283
------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 0.04%
177,821 6.500%, due 04/20/31
Pool # 003068 ................................................... 187,256
------------
TOTAL MORTGAGE BACKED
(Cost $81,062,801) .............................................. 83,879,802
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 11.03%
- --------------------------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE
CORP. - 0.35%
1,400,000 4.500%, due 01/15/14 ............................................ 1,544,200
------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION - 0.18%
750,000 5.250%, due 08/01/12 ............................................ 790,515
------------
U.S. TREASURY BONDS - 1.80%
5,270,000 6.625%, due 02/15/27 ............................................ 7,881,122
------------
U.S. TREASURY NOTES - 8.70%
700,000 2.625%, due 03/15/09 ............................................ 703,418
1,400,000 4.875%, due 05/31/09 ............................................ 1,426,687
1,850,000 3.875%, due 05/15/10 ............................................ 1,939,536
500,000 4.500%, due 11/15/10 ............................................ 536,836
500,000 4.750%, due 03/31/11 ............................................ 544,492
3,900,000 4.875%, due 04/30/11 ............................................ 4,275,679
6,150,000 4.625%, due 12/31/11 ............................................ 6,810,645
3,400,000 4.625%, due 02/29/12 ............................................ 3,775,595
2,500,000 4.000%, due 11/15/12 ............................................ 2,775,195
1,980,000 3.625%, due 05/15/13 ............................................ 2,175,525
310,000 4.000%, due 02/15/14 ............................................ 351,366
2,450,000 4.250%, due 08/15/14 ............................................ 2,815,969
3,550,000 4.500%, due 02/15/16 ............................................ 4,179,017
1,100,000 4.625%, due 02/15/17 ............................................ 1,300,922
3,830,000 4.500%, due 05/15/17 ............................................ 4,494,267
------------
38,105,149
------------
TOTAL U.S. GOVERNMENT AND AGENCY
OBLIGATIONS
(Cost $42,196,562) .............................................. 48,320,986
Shares
- ------
INVESTMENT COMPANY - 0.96%
- --------------------------------------------------------------------------------------------------
4,183,327 SSgA Prime Money Market Fund .................................... 4,183,327
------------
TOTAL INVESTMENT COMPANY
(Cost $4,183,327) ............................................... 4,183,327
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
64
================================================================================
DIVERSIFIED INCOME FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
Value (Note 2)
--------------
TOTAL INVESTMENTS - 99.34%
- --------------------------------------------------------------------------------------------------
(Cost $483,852,730**) ......................................................... $435,134,578
NET OTHER ASSETS AND LIABILITIES - .66%
- --------------------------------------------------------------------------------------------------
2,912,390
TOTAL NET ASSETS - 100.00%
- --------------------------------------------------------------------------------------------------
$438,046,968
- --------------------------------------------------------------------------------
** Aggregate cost for Federal tax purposes was $485,001,034.
(C) Security sold within terms of a private placement memorandum exempt from
registration under section 144A of the Securities Act of 1933, as
amended, and may be sold only to dealers in that program or other
"qualified institutional investors." The securities have been determined
to be liquid underguidelines established by the Board of Trustees.
(D) Notes and bonds, issued by foreign entities, denominated in U.S.
dollars. The aggregate of these securities is 0.72% of total net assets.
(E) In Default. Issuer is bankrupt.
(G) Floating rate or variable rate note. Rate shown is as of December 31,
2008.
(M) Stated interest rate is contingent upon sufficient collateral market
value. If collateral market value falls below a stated level, the issuer
will either initiate a clean-up call or increase the stated interest
rate.
ADR American Depositary Receipt.
PLC Public Limited Company.
The industry classification method used for purposes of this report's
allocation charts and portfolio of investments schedules may differ from
the industry subclassification(s) used for Trust compliance purposes.
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
65
================================================================================
LARGE CAP VALUE FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
SECTOR ALLOCATION AS A PERCENTAGE OF NET ASSETS
AS OF DECEMBER 31, 2008
[PIE CHART OF SECTOR ALLOCATION]
Financials 22%
Energy 18%
Health Care 14%
Consumer Staples 10%
Industrials 8%
Consumer Discretionary 6%
Telecommunication Services 6%
Utilities 6%
Information Technology 4%
Cash and Other Net Assets 3%
Materials 3%
[END CHART]
- --------------------------------------------------------------------------------
Shares Value (Note 2)
- ------ --------------
COMMON STOCKS - 96.34%
- --------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY - 5.88%
89,500 Carnival Corp. .................................................. $ 2,176,640
225,342 Comcast Corp., Class A. ......................................... 3,803,773
105,400 Home Depot, Inc. ................................................ 2,426,308
134,900 Johnson Controls, Inc. .......................................... 2,449,784
43,300 Kohl's Corp. * .................................................. 1,567,460
212,900 Lowe's Cos., Inc. ............................................... 4,581,608
224,800 News Corp., Class A ............................................. 2,043,432
86,600 Omnicom Group, Inc. ............................................. 2,331,272
99,200 Target Corp. .................................................... 3,425,376
117,100 Time Warner Cable, Inc., Class A *............................... 2,511,795
449,500 Time Warner, Inc. ............................................... 4,521,970
175,600 Walt Disney Co./The ............................................. 3,984,364
------------
35,823,782
------------
CONSUMER STAPLES - 10.43%
159,900 Altria Group, Inc. .............................................. 2,408,094
104,700 Archer-Daniels-Midland Co. ...................................... 3,018,501
92,900 Coca-Cola Co./The ............................................... 4,205,583
30,800 Costco Wholesale Corp. .......................................... 1,617,000
121,700 CVS/Caremark Corp. .............................................. 3,497,658
26,300 Energizer Holdings, Inc.* ....................................... 1,423,882
55,500 General Mills, Inc. ............................................. 3,371,625
86,100 HJ Heinz Co. .................................................... 3,237,360
34,600 Kellogg Co. ..................................................... 1,517,210
262,257 Kraft Foods, Inc., Class A. ..................................... 7,041,600
68,400 Molson Coors Brewing Co., Class B ............................... 3,346,128
299,700 Procter & Gamble Co. ............................................ 18,527,454
184,700 Wal-Mart Stores, Inc. ........................................... 10,354,282
------------
63,566,377
------------
ENERGY - 17.91%
80,600 Anadarko Petroleum Corp. ........................................ 3,107,130
79,200 Apache Corp. .................................................... 5,902,776
311,646 Chevron Corp. ................................................... 23,052,455
227,900 ConocoPhillips .................................................. 11,805,220
87,900 Devon Energy Corp. .............................................. 5,775,909
28,300 EOG Resources, Inc. ............................................. 1,884,214
610,500 Exxon Mobil Corp. ............................................... 48,736,215
99,700 Marathon Oil Corp. .............................................. 2,727,792
32,400 Schlumberger, Ltd. .............................................. 1,371,492
57,600 Valero Energy Corp. ............................................. 1,246,464
100,900 XTO Energy, Inc. ................................................ 3,558,743
------------
109,168,410
------------
FINANCIALS - 22.20%
79,126 Allstate Corp./The .............................................. 2,592,168
81,200 AON Corp. ....................................................... 3,709,216
35,700 Arch Capital Group, Ltd. * ...................................... 2,502,570
837,042 Bank of America Corp. ........................................... 11,785,551
186,600 Bank of New York Mellon Corp./The ............................... 5,286,378
133,500 BB&T Corp. ...................................................... 3,665,910
18,600 BlackRock, Inc. ................................................. 2,495,190
66,600 Capital One Financial Corp. ..................................... 2,123,874
52,000 Chubb Corp. ..................................................... 2,652,000
890,814 Citigroup, Inc. ................................................. 5,977,362
66,700 Equity Residential, REIT ........................................ 1,988,994
71,400 Goldman Sachs Group, Inc./The ................................... 6,025,446
112,100 Hartford Financial Services Group, Inc. ......................... 1,840,682
578,588 JPMorgan Chase & Co. ............................................ 18,242,880
91,200 Keycorp ......................................................... 777,024
75,300 Marsh & McLennan Cos., Inc. ..................................... 1,827,531
175,400 MetLife, Inc. ................................................... 6,114,444
153,800 Morgan Stanley .................................................. 2,466,952
83,000 PNC Financial Services Group, Inc. .............................. 4,067,000
128,100 Prudential Financial, Inc. ...................................... 3,876,306
113,900 Regions Financial Corp. ......................................... 906,644
24,200 Simon Property Group, Inc., REIT ................................ 1,285,746
82,900 State Street Corp. .............................................. 3,260,457
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
66
================================================================================
LARGE CAP VALUE FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
Shares Value (Note 2)
- ------ --------------
COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------------------------------
FINANCIALS (CONTINUED)
47,900 SunTrust Banks, Inc. ............................................ $ 1,414,966
199,300 Travelers Cos., Inc./The ........................................ 9,008,360
55,200 Unum Group ...................................................... 1,026,720
364,700 US Banccorp ..................................................... 9,121,147
57,900 Vornado Realty Trust, REIT ...................................... 3,494,265
534,800 Wells Fargo & Co. ............................................... 15,765,904
------------
135,301,687
------------
HEALTH CARE - 13.70%
145,400 Amgen, Inc. * ................................................... 8,396,850
66,400 Coventry Health Care, Inc. *..................................... 988,032
107,175 Covidien, Ltd. .................................................. 3,884,022
53,000 Eli Lilly & Co. ................................................. 2,134,310
337,400 Johnson & Johnson ............................................... 20,186,642
106,600 Life Technologies Corp. * ....................................... 2,484,846
61,700 Medco Health Solutions, Inc. * .................................. 2,585,847
212,000 Merck & Co., Inc./NJ ............................................ 6,444,800
973,400 Pfizer, Inc. .................................................... 17,238,914
82,400 Thermo Fisher Scientific, Inc. * ................................ 2,807,368
168,000 UnitedHealth Group, Inc. ........................................ 4,468,800
70,900 WellPoint, Inc. * ............................................... 2,987,017
236,700 Wyeth ........................................................... 8,878,617
------------
83,486,065
------------
INDUSTRIALS - 7.89%
25,200 Deere & Co. ..................................................... 965,664
43,500 Emerson Electric Co. ............................................ 1,592,535
28,700 FedEx Corp. ..................................................... 1,841,105
1,399,100 General Electric Co. ............................................ 22,665,420
61,400 Illinois Tool Works, Inc. ....................................... 2,152,070
20,600 L-3 Communications
Holdings, Inc. .................................................. 1,519,868
50,500 Norfolk Southern Corp. .......................................... 2,376,025
60,600 Northrop Grumman Corp. .......................................... 2,729,424
85,400 Raytheon Co. .................................................... 4,358,816
55,300 United Technologies Corp. ....................................... 2,964,080
147,900 Waste Management, Inc. .......................................... 4,901,406
------------
48,066,413
------------
INFORMATION TECHNOLOGY - 3.58%
63,400 Automatic Data Processing, Inc. ................................. 2,494,156
94,200 Cisco Systems, Inc. * ........................................... 1,535,460
64,200 Computer Sciences Corp. * ....................................... 2,255,988
119,900 EMC Corp./Massachusetts * ....................................... 1,255,353
67,935 Hewlett-Packard Co. ............................................. 2,465,361
166,300 Intel Corp. ..................................................... 2,437,958
37,500 International Business Machines Corp. ........................... 3,156,000
192,600 Maxim Integrated Products, Inc. ................................. 2,199,492
70,500 Microsoft Corp. ................................................. 1,370,520
100,400 Symantec Corp. * ................................................ 1,357,408
79,400 Tyco Electronics, Ltd. .......................................... 1,287,074
------------
21,814,770
------------
MATERIALS - 2.79%
45,800 Air Products & Chemicals, Inc. .................................. 2,302,366
101,400 Alcoa, Inc. ..................................................... 1,141,764
103,900 Dow Chemical Co./The ............................................ 1,567,851
162,900 EI Du Pont de Nemours & Co. ..................................... 4,121,370
87,896 Freeport-McMoRan Copper & Gold, Inc. ............................ 2,148,178
78,400 Nucor Corp. ..................................................... 3,622,080
69,600 Weyerhaeuser Co. ................................................ 2,130,456
------------
17,034,065
------------
TELECOMMUNICATION SERVICES - 5.79%
798,287 AT&T, Inc. ...................................................... 22,751,180
369,335 Verizon Communications, Inc. .................................... 12,520,456
------------
35,271,636
------------
UTILITIES - 6.17%
83,300 American Electric Power Co., Inc. ............................... 2,772,224
184,900 Duke Energy Corp. ............................................... 2,775,349
84,900 Edison International............................................. 2,726,988
55,900 Exelon Corp. .................................................... 3,108,599
55,400 FirstEnergy Corp. ............................................... 2,691,332
86,500 FPL Group, Inc. ................................................. 4,353,545
57,100 NSTAR ........................................................... 2,083,579
93,600 PG&E Corp. ...................................................... 3,623,256
90,600 Public Service Enterprise Group, Inc. ........................... 2,642,802
18,000 Questar Corp. ................................................... 588,420
95,300 Sempra Energy ................................................... 4,062,639
166,700 Southern Co. .................................................... 6,167,900
------------
37,596,633
------------
TOTAL COMMON STOCKS
(Cost $665,069,132) ............................................. 587,129,838
INVESTMENT COMPANIES - 3.04%
- --------------------------------------------------------------------------------------------------
280,000 Consumer Discretionary Select Sector SPDR Fund ETF .............. 6,039,600
229,900 SPDR S&P Homebuilders ETF ....................................... 2,751,903
9,723,653 SSgA Prime Money Market Fund .................................... 9,723,653
------------
TOTAL INVESTMENT COMPANIES
(Cost $18,675,266) .............................................. 18,515,156
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
67
================================================================================
LARGE CAP VALUE FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
Value (Note 2)
--------------
TOTAL INVESTMENTS - 99.38%
- --------------------------------------------------------------------------------------------------
(Cost $683,744,398**) ......................................................... $605,644,994
NET OTHER ASSETS AND LIABILITIES - 0.62%
- --------------------------------------------------------------------------------------------------
3,798,607
TOTAL NET ASSETS - 100.00%
- --------------------------------------------------------------------------------------------------
$609,443,601
- --------------------------------------------------------------------------------
* Non-income producing.
** Aggregate cost for Federal tax purposes was $685,854,074.
ETF Exchange Traded Fund.
REIT Real Estate Investment Trust.
The industry classification method used for purposes of this report's
allocation charts and portfolio of investments schedules may differ from
the industry subclassification(s) used for Trust compliance purposes.
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
68
================================================================================
LARGE CAP GROWTH FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
SECTOR ALLOCATION AS A PERCENTAGE OF NET ASSETS
AS OF DECEMBER 31, 2008
[PIE CHART OF SECTOR ALLOCATION]
Information Technology 32%
Health Care 19%
Consumer Staples 11%
Energy 11%
Industrials 10%
Consumer Discretionary 8%
Financials 4%
Materials 3%
Cash and Other Net Assets 1%
Utilities 1%
[END CHART]
- --------------------------------------------------------------------------------
Shares Value (Note 2)
- ------ --------------
COMMON STOCKS - 98.18%
- --------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY - 7.68%
25,200 Amazon.com, Inc. * .............................................. $ 1,292,256
3,200 Autozone, Inc. * ................................................ 446,304
27,900 Coach, Inc. * ................................................... 579,483
64,300 Comcast Corp., Class A .......................................... 1,085,384
1,046,700 Interpublic Group of Cos., Inc. * ............................... 4,144,932
121,500 Kohl's Corp. * .................................................. 4,398,300
80,800 McDonald's Corp. ................................................ 5,024,952
27,700 Nike, Inc., Class B ............................................. 1,412,700
16,200 Polo Ralph Lauren Corp. ......................................... 735,642
47,100 Staples, Inc. ................................................... 844,032
59,700 Starbucks Corp. * ............................................... 564,762
99,300 Target Corp. .................................................... 3,428,829
60,900 Tiffany & Co. ................................................... 1,439,067
34,800 TJX Cos., Inc. .................................................. 715,836
31,000 Yum! Brands, Inc. ............................................... 976,500
------------
27,088,979
------------
CONSUMER STAPLES - 10.81%
131,200 Coca-Cola Co./The ............................................... 5,939,424
100,600 Colgate-Palmolive Co. ........................................... 6,895,124
38,800 Costco Wholesale Corp. .......................................... 2,037,000
272,400 Philip Morris International, Inc. ............................... 11,852,124
202,900 Wal-Mart Stores, Inc. ........................................... 11,374,574
------------
38,098,246
------------
ENERGY - 10.62%
53,200 Cameron International Corp. * ................................... 1,090,600
16,400 Diamond Offshore Drilling, Inc. ................................. 966,616
50,900 EOG Resources, Inc. ............................................. 3,388,922
72,400 Exxon Mobil Corp. ............................................... 5,779,692
58,800 Hess Corp. ...................................................... 3,154,032
53,100 National Oilwell Varco, Inc. * .................................. 1,297,764
44,600 Noble Corp. ..................................................... 985,214
77,400 Occidental Petroleum Corp. ...................................... 4,643,226
46,700 Peabody Energy Corp. ............................................ 1,062,425
312,100 PetroHawk Energy Corp. * ........................................ 4,878,123
25,400 Range Resources Corp. ........................................... 873,506
103,100 Schlumberger, Ltd. .............................................. 4,364,223
41,600 Southwestern Energy Co. * ....................................... 1,205,152
25,161 Transocean, Ltd. * .............................................. 1,188,857
80,000 Weatherford International, Ltd. * ............................... 865,600
47,766 XTO Energy, Inc. ................................................ 1,684,707
------------
37,428,659
------------
FINANCIALS - 3.83%
23,200 Aflac, Inc. ..................................................... 1,063,488
51,000 American Express Co. ............................................ 946,050
121,000 Axis Capital Holdings, Ltd. ..................................... 3,523,520
8,500 BlackRock, Inc. ................................................. 1,140,275
112,100 Charles Schwab Corp./The ........................................ 1,812,657
3,700 CME Group, Inc. ................................................. 770,007
10,000 IntercontinentalExchange, Inc. * ................................ 824,400
13,600 Mastercard, Inc., Class A ....................................... 1,943,848
14,800 Northern Trust Corp. ............................................ 771,672
9,800 PartnerRe, Ltd. ................................................. 698,446
------------
13,494,363
------------
HEALTH CARE - 19.38%
106,600 Abbott Laboratories ............................................. 5,689,242
70,100 Baxter International, Inc. ...................................... 3,756,659
21,100 Becton Dickinson & Co. .......................................... 1,443,029
9,400 Biogen Idec, Inc. * ............................................. 447,722
138,700 Bristol-Myers Squibb Co. ........................................ 3,224,775
82,400 Celgene Corp. * ................................................. 4,555,072
57,300 Express Scripts, Inc. * ......................................... 3,150,354
30,000 Gen-Probe, Inc. * ............................................... 1,285,200
178,400 Genentech, Inc. * ............................................... 14,791,144
32,900 Genzyme Corp. * ................................................. 2,183,573
72,100 Gilead Sciences, Inc. * ......................................... 3,687,194
175,500 Hologic, Inc. * ................................................. 2,293,785
3,000 Intuitive Surgical, Inc. * ...................................... 380,970
67,200 Johnson & Johnson ............................................... 4,020,576
54,700 Medtronic, Inc. ................................................. 1,718,674
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
69
================================================================================
LARGE CAP GROWTH FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
Shares Value (Note 2)
- ------ --------------
COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------------------------------
HEALTH CARE (CONTINUED)
259,581 Schering-Plough Corp. ........................................... $ 4,420,664
35,600 St. Jude Medical, Inc. * ........................................ 1,173,376
207,600 UnitedHealth Group, Inc. ........................................ 5,522,160
150,300 Vertex Pharmaceuticals, Inc. * .................................. 4,566,114
------------
68,310,283
------------
INDUSTRIALS - 9.80%
74,900 Boeing Co. ...................................................... 3,195,983
13,900 Burlington Northern Santa Fe Corp. .............................. 1,052,369
55,400 Caterpillar, Inc. ............................................... 2,474,718
32,500 CH Robinson Worldwide, Inc. ..................................... 1,788,475
35,700 CSX Corp. ....................................................... 1,159,179
20,800 Cummins, Inc. ................................................... 555,984
33,300 Deere & Co. ..................................................... 1,276,056
51,800 Emerson Electric Co. ............................................ 1,896,398
16,500 Expeditors International of Washington, Inc. .................... 548,955
14,300 Flowserve Corp. ................................................. 736,450
200,000 General Electric Co. ............................................ 3,240,000
77,200 Honeywell International, Inc. ................................... 2,534,476
15,700 ITT Corp. ....................................................... 722,043
25,900 Lockheed Martin Corp. ........................................... 2,177,672
160,800 Quanta Services, Inc. * ......................................... 3,183,840
14,600 Union Pacific Corp. ............................................. 697,880
53,900 United Parcel Service, Inc., Class B ............................ 2,973,124
43,600 United Technologies Corp. ....................................... 2,336,960
25,200 WW Grainger, Inc. ............................................... 1,986,768
------------
34,537,330
------------
INFORMATION TECHNOLOGY - 31.96%
47,200 Accenture, Ltd., Class A ........................................ 1,547,688
41,800 Adobe Systems, Inc. * ........................................... 889,922
21,900 Affiliated Computer Services, Inc., Class A * ................... 1,006,305
23,700 Akamai Technologies, Inc. * ..................................... 357,633
31,000 Altera Corp. .................................................... 518,010
87,300 Apple, Inc. * ................................................... 7,451,055
871,500 Cisco Systems, Inc. * ........................................... 14,205,450
59,200 Citrix Systems, Inc. * .......................................... 1,395,344
139,000 Corning, Inc. ................................................... 1,324,670
99,200 Dell, Inc. * .................................................... 1,015,808
62,200 eBay, Inc. * .................................................... 868,312
254,000 EMC Corp./Massachusetts * ....................................... 2,659,380
6,000 First Solar, Inc. * ............................................. 827,760
33,400 Google, Inc., Class A * ......................................... 10,275,510
97,700 Hewlett-Packard Co. ............................................. 3,545,533
675,400 Intel Corp. ..................................................... 9,901,364
121,000 International Business Machines Corp. ........................... 10,183,360
434,305 Maxim Integrated Products, Inc. ................................. 4,959,763
62,400 Microchip Technology, Inc. ...................................... 1,218,672
656,500 Microsoft Corp. ................................................. 12,762,360
59,700 Novellus Systems, Inc. * ........................................ 736,698
86,400 Nuance Communication, Inc. * .................................... 895,104
359,500 Oracle Corp. * .................................................. 6,373,935
25,300 Paychex, Inc. ................................................... 664,884
235,500 QUALCOMM, Inc. .................................................. 8,437,965
38,200 Salesforce.com, Inc. * .......................................... 1,222,782
174,000 Texas Instruments, Inc. ......................................... 2,700,480
39,100 Varian Semiconductor Equipment Associates, Inc. * ............... 708,492
61,300 Visa, Inc., Class A ............................................. 3,215,185
65,400 Yahoo!, Inc. * .................................................. 797,880
------------
112,667,304
------------
MATERIALS - 2.81%
44,500 Monsanto Co. .................................................... 3,130,575
76,600 Nucor Corp. ..................................................... 3,538,920
54,300 Praxair, Inc. ................................................... 3,223,248
------------
9,892,743
------------
TELECOMMUNICATION SERVICES - 0.30%
58,000 NII Holdings, Inc. * ............................................ 1,054,440
------------
UTILITIES - 0.99%
43,800 FPL Group, Inc. ................................................. 2,204,454
30,300 Sempra Energy ................................................... 1,291,689
------------
3,496,143
------------
TOTAL COMMON STOCKS
(Cost $401,716,239) ............................................. 346,068,490
INVESTMENT COMPANY - 0.99%
- --------------------------------------------------------------------------------------------------
3,473,044 SSgA Prime Money Market Fund .................................... 3,473,044
------------
TOTAL INVESTMENT COMPANY
(Cost $3,473,044) ............................................... 3,473,044
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
70
================================================================================
LARGE CAP GROWTH FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
Value (Note 2)
--------------
TOTAL INVESTMENTS - 99.17%
- --------------------------------------------------------------------------------------------------
(Cost $405,189,283**) ......................................................... $349,541,534
NET OTHER ASSETS AND LIABILITIES - 0.83%
- --------------------------------------------------------------------------------------------------
2,931,755
TOTAL NET ASSETS - 100.00%
- --------------------------------------------------------------------------------------------------
$352,473,289
- --------------------------------------------------------------------------------
* Non-income producing.
** Aggregate cost for Federal tax purposes was $414,598,884.
The industry classification method used for purposes of this report's
allocation charts and portfolio of investments schedules may differ
from the industry subclassification(s) used for Trust compliance
purposes.
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
71
================================================================================
MID CAP VALUE FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
SECTOR ALLOCATION AS A PERCENTAGE OF NET ASSETS
AS OF DECEMBER 31, 2008
[PIE CHART OF SECTOR ALLOCATION]
Financials 27%
Utilities 14%
Consumer Discretionary 10%
Consumer Staples 10%
Industrials 10%
Information Technology 8%
Health Care 6%
Materials 5%
Energy 5%
Cash and Other Net Assets 4%
Telecommunication Services 1%
[END CHART]
- --------------------------------------------------------------------------------
Shares Value (Note 2)
- ------ --------------
COMMON STOCKS - 96.03%
- --------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY - 9.93%
32,600 Arbitron, Inc. .................................................. $ 432,928
14,500 Autoliv, Inc. ................................................... 311,170
3,800 Autozone, Inc. * ................................................ 529,986
16,600 Carnival Corp. .................................................. 403,712
44,400 Cato Corp./The, Class A ......................................... 670,440
31,400 CBS Corp., Class B .............................................. 257,166
14,900 CEC Entertainment, Inc. * ....................................... 361,325
17,700 Choice Hotels International, Inc. ............................... 532,062
53,400 Eastman Kodak Co. ............................................... 351,372
144,419 Ford Motor Co. * ................................................ 330,719
19,700 Fortune Brands, Inc. ............................................ 813,216
23,600 Genuine Parts Co. ............................................... 893,496
33,900 Hibbett Sports, Inc. * .......................................... 532,569
174,000 Interpublic Group of Cos., Inc. * ............................... 689,040
24,300 JC Penney Co., Inc. ............................................. 478,710
31,400 KB Home ......................................................... 427,668
15,500 LKQ Corp. * ..................................................... 180,730
138,700 Mattel, Inc. .................................................... 2,219,200
12,500 Matthews International Corp., Class A ........................... 458,500
32,300 O'Reilly Automotive, Inc. * ..................................... 992,902
10,000 Pulte Homes, Inc. ............................................... 109,300
34,400 Saks, Inc. * .................................................... 150,672
32,300 Scripps Networks Interactive, Inc., Class A ..................... 710,600
33,400 Sonic Corp. * ................................................... 406,478
68,600 Stage Stores, Inc. .............................................. 565,950
53,900 TJX Cos., Inc. .................................................. 1,108,723
29,600 Valassis Communications, Inc. * ................................. 39,072
10,300 VF Corp. ........................................................ 564,131
31,500 Virgin Media, Inc. .............................................. 157,185
------------
15,679,022
------------
CONSUMER STAPLES - 9.99%
12,600 Bunge, Ltd. .................................................... 652,302
15,400 Casey's General Stores, Inc. ................................... 350,658
19,400 Clorox Co. ..................................................... 1,077,864
64,100 ConAgra Foods, Inc. ............................................ 1,057,650
46,900 Constellation Brands, Inc., Class A * .......................... 739,613
29,000 Costco Wholesale Corp. ......................................... 1,522,500
13,300 Energizer Holdings, Inc. * ..................................... 720,062
23,900 Herbalife, Ltd. ................................................ 518,152
31,000 HJ Heinz Co. ................................................... 1,165,600
19,300 Hormel Foods Corp. ............................................. 599,844
31,700 Lance, Inc. .................................................... 727,198
21,000 Lorillard, Inc. ................................................ 1,183,350
25,700 Molson Coors Brewing Co., Class B .............................. 1,257,244
40,500 Safeway, Inc. .................................................. 962,685
50,200 Sara Lee Corp. ................................................. 491,458
41,900 Tyson Foods, Inc., Class A ..................................... 367,044
16,300 UST, Inc. ...................................................... 1,130,894
22,400 Wal-Mart Stores, Inc. .......................................... 1,255,744
------------
15,779,862
------------
ENERGY - 5.07%
62,800 BJ Services Co. ................................................ 732,876
20,600 Chesapeake Energy Corp. ........................................ 333,102
95,000 El Paso Corp. .................................................. 743,850
34,300 Forest Oil Corp. * ............................................. 565,607
25,400 Helmerich & Payne, Inc. ........................................ 577,850
18,500 Nabors Industries, Ltd. * ...................................... 221,445
22,400 Newfield Exploration Co. * ..................................... 442,400
26,300 Noble Energy, Inc. ............................................. 1,294,486
9,600 Overseas Shipholding Group, Inc. ............................... 404,256
50,700 PetroHawk Energy Corp. * ....................................... 792,441
19,000 Plains Exploration & Production Co. * .......................... 441,560
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
72
================================================================================
MID CAP VALUE FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
Shares Value (Note 2)
- ------ --------------
COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------------------------------
ENERGY (CONTINUED)
3,800 SEACOR Holdings, Inc. * ......................................... $ 253,270
19,600 St. Mary Land & Exploration Co. ................................. 398,076
36,100 Tesoro Corp. .................................................... 475,437
9,800 Whiting Petroleum Corp. * ....................................... 327,908
------------
8,004,564
------------
FINANCIALS - 26.82%
900 Alleghany Corp. * ............................................... 253,800
18,100 Ameriprise Financial, Inc. ...................................... 422,816
80,500 Annaly Capital Management, Inc., REIT ........................... 1,277,535
45,600 AON Corp. ....................................................... 2,083,008
19,800 Arch Capital Group, Ltd. * ...................................... 1,387,980
53,699 Ares Capital Corp. .............................................. 339,915
11,100 Asset Acceptance Capital Corp. * ................................ 56,721
37,176 Associated Banc-Corp. ........................................... 778,093
13,600 Assurant, Inc. .................................................. 408,000
31,400 Assured Guaranty, Ltd. .......................................... 357,960
16,900 AvalonBay Communities, Inc., REIT................................ 1,023,802
42,200 Axis Capital Holdings, Ltd. ..................................... 1,228,864
14,000 BlackRock, Inc. ................................................. 1,878,100
16,600 Boston Properties, Inc., REIT ................................... 913,000
15,900 Credit Acceptance Corp. * ....................................... 217,830
35,850 Delphi Financial Group, Inc., Class A ........................... 661,074
31,300 Discover Financial Services ..................................... 298,289
36,800 Equity Residential, REIT ........................................ 1,097,376
16,168 Everest Re Group, Ltd. .......................................... 1,231,031
16,000 Fidelity National Financial, Inc., Class A ...................... 284,000
87,500 Fifth Third Bancorp ............................................. 722,750
13,100 Financial Federal Corp. ......................................... 304,837
8,900 First American Corp. ............................................ 257,121
9,100 First Midwest Bankcorp, Inc./IL ................................. 181,727
66,200 Hudson City Bancorp, Inc. ....................................... 1,056,552
22,450 International Bancshares Corp. .................................. 490,084
13,200 IPC Holdings, Ltd. .............................................. 394,680
63,200 JPMorgan Chase & Co. ............................................ 1,992,696
83,200 Keycorp ......................................................... 708,864
25,400 Kimco Realty Corp., REIT ........................................ 464,312
7,000 Leucadia National Corp. * ....................................... 138,600
12,800 M&T Bank Corp. .................................................. 734,848
52,900 Marsh & McLennan Cos., Inc. ..................................... 1,283,883
28,098 Marshall & Ilsley Corp. ......................................... 383,257
11,400 MB Financial, Inc. .............................................. 318,630
235,400 National City Corp. ............................................. 426,074
17,738 NewAlliance Bancshares, Inc. .................................... 233,609
11,600 Northern Trust Corp. ............................................ 604,824
25,400 People's United Financial, Inc. ................................. 452,882
18,300 Platinum Underwriters Holdings, Ltd. ............................ 660,264
34,400 Principal Financial Group, Inc. ................................. 776,408
54,100 Progressive Corp./The ........................................... 801,221
5,400 PS Business Parks, Inc., REIT ................................... 241,164
10,100 Public Storage, REIT ............................................ 802,950
26,800 Realty Income Corp., REIT ....................................... 620,420
75,300 Regions Financial Corp. ......................................... 599,388
18,400 Reinsurance Group of America, Inc. .............................. 787,888
17,900 SL Green Realty Corp., REIT ..................................... 463,610
12,400 State Street Corp. .............................................. 487,692
25,000 Torchmark Corp. ................................................. 1,117,500
103,100 Unum Group ...................................................... 1,917,660
62,700 US Banccorp ..................................................... 1,568,127
9,000 Ventas, Inc., REIT .............................................. 302,130
26,100 Vornado Realty Trust, REIT ...................................... 1,575,135
31,200 Webster Financial Corp. ......................................... 429,936
6,400 Westamerica Bancorporation ...................................... 327,360
37,400 WR Berkley Corp. ................................................ 1,159,400
14,500 XL Capital, Ltd., Class A ....................................... 53,650
13,000 Zions Bancorporation ............................................ 318,630
------------
42,359,957
------------
HEALTH CARE - 6.31%
16,300 AmerisourceBergen Corp. ......................................... 581,258
17,900 Amsurg Corp. * .................................................. 417,786
24,600 Centene Corp. * ................................................. 484,866
19,200 Charles River Laboratories International, Inc. * ................ 503,040
43,200 Cigna Corp. ..................................................... 727,920
36,600 Coventry Health Care, Inc. * .................................... 544,608
30,300 Forest Laboratories, Inc. * ..................................... 771,741
119,600 Hologic, Inc. * ................................................. 1,563,172
20,800 Humana, Inc. * .................................................. 775,424
43,370 Life Technologies Corp. * ....................................... 1,010,955
20,100 Medco Health Solutions, Inc. * .................................. 842,391
22,400 Orthofix International N.V. * ................................... 343,392
13,216 Teva Pharmaceutical Industries, Ltd., ADR ....................... 562,605
66,800 Universal American Corp./NY * ................................... 589,176
6,700 Wyeth ........................................................... 251,317
------------
9,969,651
------------
INDUSTRIALS - 10.53%
72,400 ACCO Brands Corp. * ............................................. 249,780
13,700 Acuity Brands, Inc. ............................................. 478,267
31,200 Albany International Corp., Class A ............................. 400,608
47,025 Belden, Inc. .................................................... 981,882
48,200 Carlisle Cos., Inc. ............................................. 997,740
23,500 Cooper Industries, Ltd., Class A ................................ 686,905
9,800 Danaher Corp. ................................................... 554,778
21,700 Dover Corp. ..................................................... 714,364
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
73
================================================================================
MID CAP VALUE FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
Shares Value (Note 2)
- ------ --------------
COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------------------------------
INDUSTRIALS (CONTINUED)
12,040 ESCO Technologies, Inc. * ....................................... $ 493,038
4,800 Flowserve Corp. ................................................. 247,200
18,300 GATX Corp. ...................................................... 566,751
9,500 General Dynamics Corp. .......................................... 547,105
30,800 General Electric Co. ............................................ 498,960
10,087 Genesee & Wyoming, Inc., Class A * .............................. 307,654
16,900 Graco, Inc. ..................................................... 401,037
37,500 Ingersoll-Rand Co., Ltd., Class A ............................... 650,625
25,600 ITT Corp. ....................................................... 1,177,344
26,000 KBR, Inc. ....................................................... 395,200
10,500 L-3 Communications Holdings, Inc. ............................... 774,690
34,900 Mueller Industries, Inc. ........................................ 875,292
6,000 Norfolk Southern Corp. .......................................... 282,300
12,900 Parker Hannifin Corp. ........................................... 548,766
18,400 Republic Services, Inc. ......................................... 456,136
18,200 RR Donnelley & Sons Co. ......................................... 247,156
8,500 Simpson Manufacturing Co., Inc. ................................. 235,960
105,900 Southwest Airlines Co. .......................................... 912,858
19,500 United Stationers, Inc. * ....................................... 653,055
7,200 URS Corp. * ..................................................... 293,544
12,800 WW Grainger, Inc. ............................................... 1,009,152
------------
16,638,147
------------
INFORMATION TECHNOLOGY - 7.78%
21,300 Affiliated Computer Services, Inc., Class A * ................... 978,735
43,500 Arrow Electronics, Inc. * ....................................... 819,540
74,000 Brocade Communications Systems, Inc. * .......................... 207,200
44,900 CA, Inc. ........................................................ 831,997
38,000 Computer Sciences Corp. * ....................................... 1,335,320
20,300 Diebold, Inc. ................................................... 570,227
33,300 Electronics for Imaging, Inc. * ................................. 318,348
7,200 Fiserv, Inc. * .................................................. 261,864
35,000 Intersil Corp., Class A ......................................... 321,650
128,900 Maxim Integrated Products, Inc. ................................. 1,472,038
18,700 MAXIMUS, Inc. ................................................... 656,557
14,500 Microchip Technology, Inc. ...................................... 283,185
39,600 Molex, Inc. ..................................................... 573,804
39,800 Novellus Systems, Inc. * ........................................ 491,132
20,300 SanDisk Corp. * ................................................. 194,880
41,300 Seagate Technology .............................................. 182,959
62,400 Sun Microsystems, Inc. * ........................................ 238,368
29,500 Synopsys, Inc. * ................................................ 546,340
20,300 Teradata Corp. * ................................................ 301,049
29,700 Websense, Inc. * ................................................ 444,609
93,900 Xerox Corp. ..................................................... 748,383
25,100 Zebra Technologies Corp., Class A * ............................. 508,526
------------
12,286,711
------------
MATERIALS - 4.76%
13,000 Air Products & Chemicals, Inc. .................................. 653,510
14,700 Aptargroup, Inc. ................................................ 518,028
29,100 Celanese Corp., Series A ........................................ 361,713
4,300 Compass Minerals International, Inc. ............................ 252,238
8,300 Deltic Timber Corp. ............................................. 379,725
17,300 Ecolab, Inc. .................................................... 608,095
18,100 EI Du Pont de Nemours & Co. ..................................... 457,930
21,965 Freeport-McMoRan Copper and Gold, Inc. .......................... 536,825
14,500 Mosaic Co./The .................................................. 501,700
22,000 Nucor Corp. ..................................................... 1,016,400
24,900 Owens-Illinois, Inc. * .......................................... 680,517
16,300 Sigma-Aldrich Corp. ............................................. 688,512
28,300 Weyerhaeuser Co. ................................................ 866,263
------------
7,521,456
------------
TELECOMMUNICATION SERVICES - 1.07%
21,400 Crown Castle International Corp. * .............................. 376,212
17,800 Embarq Corp. .................................................... 640,088
97,400 Qwest Communications International, Inc. ........................ 354,536
9,900 Telephone & Data Systems, Inc. .................................. 314,325
------------
1,685,161
------------
UTILITIES - 13.77%
34,300 Ameren Corp. .................................................... 1,140,818
75,900 American Electric Power Co., Inc. ............................... 2,525,952
12,400 Atmos Energy Corp. .............................................. 293,880
49,200 Edison International ............................................ 1,580,304
5,300 Entergy Corp. ................................................... 440,589
7,500 New Jersey Resources Corp. ...................................... 295,125
15,700 NRG Energy, Inc. * .............................................. 366,281
53,500 NSTAR ........................................................... 1,952,215
28,800 Oneok, Inc. ..................................................... 838,656
65,500 PG&E Corp. ...................................................... 2,535,505
51,100 Progress Energy, Inc. ........................................... 2,036,335
15,700 Questar Corp. ................................................... 513,233
47,800 Sempra Energy ................................................... 2,037,714
21,900 UGI Corp. ....................................................... 534,798
18,300 Unisource Energy Corp. .......................................... 537,288
24,600 Westar Energy, Inc. ............................................. 504,546
11,000 WGL Holdings, Inc. .............................................. 359,590
31,500 Wisconsin Energy Corp. .......................................... 1,322,370
104,300 Xcel Energy, Inc. ............................................... 1,934,765
------------
21,749,964
------------
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
74
================================================================================
MID CAP VALUE FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
Shares Value (Note 2)
- ------ --------------
COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $199,627,344) ............................................. $151,674,495
INVESTMENT COMPANIES - 3.61%
- --------------------------------------------------------------------------------------------------
5,418,894 SSgA Prime Money Market Fund .................................... 5,418,894
24,300 SPDR S&P Homebuilders ETF ....................................... 290,871
------------
TOTAL INVESTMENT COMPANIES
(Cost $5,727,198) ............................................... 5,709,765
TOTAL INVESTMENTS - 99.64%
- --------------------------------------------------------------------------------------------------
(Cost $205,354,542**) ......................................................... 157,384,260
NET OTHER ASSETS AND LIABILITIES - 0.36%
- --------------------------------------------------------------------------------------------------
564,656
TOTAL NET ASSETS - 100.00%
- --------------------------------------------------------------------------------------------------
$157,948,916
- --------------------------------------------------------------------------------
** Aggregate cost for Federal tax purposes was $209,010,103.
* Non-income producing.
ADR American Depositary Receipt
ETF Exchange Traded Fund.
REIT Real Estate Investment Trust
The industry classification method used for purposes of this report's
allocation charts and portfolio of investments schedules may differ
from the industry subclassification(s) used for Trust compliance
purposes.
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
75
================================================================================
MID CAP GROWTH FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
SECTOR ALLOCATION AS A PERCENTAGE OF NET ASSETS
AS OF DECEMBER 31, 2008
[PIE CHART OF SECTOR ALLOCATION]
Information Technology 21%
Health Care 17%
Industrials 16%
Consumer Discretionary 16%
Energy 10%
Financials 7%
Consumer Staples 4%
Materials 4%
Cash & Other Net Assets 3%
Telecommunication Services 1%
Utilities 1%
[END CHART]
- --------------------------------------------------------------------------------
Shares Value (Note 2)
- ------ --------------
COMMON STOCKS - 97.51%
- --------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY - 15.92%
83,300 Aeropostale, Inc. * ............................................. $ 1,341,130
159,782 Buckle, Inc./The ................................................ 3,486,443
117,800 Chico's FAS, Inc. * ............................................. 492,404
146,600 GameStop Corp., Class A * ....................................... 3,175,356
131,400 Guess ?, Inc. ................................................... 2,016,990
153,095 Gymboree Corp. * ................................................ 3,994,249
96,600 O'Reilly Automotive, Inc. * ..................................... 2,969,484
36,600 priceline.com, Inc. * ........................................... 2,695,590
113,200 Sotheby's ....................................................... 1,006,348
98,282 Steiner Leisure, Ltd. * ......................................... 2,901,285
194,687 True Religion Apparel, Inc. * ................................... 2,421,906
------------
26,501,185
------------
CONSUMER STAPLES - 3.46%
37,900 Avon Products, Inc. ............................................. 910,737
99,800 Herbalife, Ltd. ................................................. 2,163,664
183,800 SUPERVALU, Inc. ................................................. 2,683,480
------------
5,757,881
------------
ENERGY - 10.39%
244,200 Atwood Oceanics, Inc. * ......................................... 3,731,376
34,900 Consol Energy, Inc. ............................................. 997,442
508,500 Hercules Offshore, Inc. * ....................................... 2,415,375
82,800 National Oilwell Varco, Inc. * .................................. 2,023,632
33,300 Noble Corp. ..................................................... 735,597
52,600 Noble Energy, Inc. .............................................. 2,588,972
68,600 St. Mary Land & Exploration Co. ................................. 1,393,266
80,500 Ultra Petroleum Corp. * ......................................... 2,778,055
19,000 Whiting Petroleum Corp. * ....................................... 635,740
------------
17,299,455
------------
FINANCIALS - 7.01%
66,100 Ameriprise Financial, Inc. ...................................... 1,544,096
358,000 Assured Guaranty, Ltd. .......................................... 4,081,200
55,300 Hartford Financial Services Group, Inc. ......................... 908,026
490,325 Huntington Bancshares, Inc./OH .................................. 3,755,889
101,172 TCF Financial Corp. ............................................. 1,382,010
------------
11,671,221
------------
HEALTH CARE - 17.02%
57,000 Beckman Coulter, Inc. ........................................... 2,504,580
38,700 Cephalon, Inc. * ................................................ 2,981,448
68,200 Charles River Laboratories International, Inc. * ................ 1,786,840
235,700 Coventry Health Care, Inc. * .................................... 3,507,216
53,200 Cubist Pharmaceuticals, Inc. * .................................. 1,285,312
45,600 Hospira, Inc. * ................................................. 1,222,992
101,100 Humana, Inc. * .................................................. 3,769,008
145,467 Life Technologies Corp. * ....................................... 3,390,836
108,600 Psychiatric Solutions, Inc. * ................................... 3,024,510
79,100 St. Jude Medical, Inc. * ........................................ 2,607,136
61,700 Waters Corp. * .................................................. 2,261,305
------------
28,341,183
------------
INDUSTRIALS - 16.35%
10,500 DynCorp International, Inc., Class A * .......................... 159,285
62,900 Flowserve Corp. ................................................. 3,239,350
65,800 Foster Wheeler, Ltd. * .......................................... 1,538,404
130,200 Graco, Inc. ..................................................... 3,089,646
191,688 Herman Miller, Inc. ............................................. 2,497,694
128,400 HUB Group, Inc., Class A * ...................................... 3,406,452
71,825 Manpower, Inc. .................................................. 2,441,332
260,800 Oshkosh Corp. ................................................... 2,318,512
53,800 Precision Castparts Corp. ....................................... 3,200,024
95,500 Terex Corp. * ................................................... 1,654,060
153,300 Thomas & Betts Corp. * .......................................... 3,682,266
------------
27,227,025
------------
INFORMATION TECHNOLOGY - 20.98%
239,400 Akamai Technologies, Inc. * ..................................... 3,612,546
91,000 Alliance Data Systems Corp. * ................................... 4,234,230
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
76
================================================================================
MID CAP GROWTH FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
Shares Value (Note 2)
- ------ --------------
COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------------------------------
INFORMATION TECHNOLOGY (CONTINUED)
136,100 Amdocs, Ltd. * .................................................. $ 2,489,269
73,300 Amphenol Corp., Class A ......................................... 1,757,734
121,700 BMC Software, Inc. * ............................................ 3,274,947
175,700 Cognizant Technology Solutions Corp., Class A * ................. 3,173,142
54,400 Flir Systems, Inc. * ............................................ 1,668,992
241,400 NetApp, Inc. * .................................................. 3,372,358
438,800 Perot Systems Corp., Class A * .................................. 5,998,396
137,300 Polycom, Inc. * ................................................. 1,854,923
243,200 Western Union Co./The ........................................... 3,487,488
------------
34,924,025
------------
MATERIALS - 4.22%
53,900 Cliffs Natural Resources, Inc. .................................. 1,380,379
106,000 Pactiv Corp. * .................................................. 2,637,280
121,900 Terra Industries, Inc. .......................................... 2,032,073
125,600 Yamana Gold, Inc. ............................................... 969,632
------------
7,019,364
------------
TELECOMMUNICATION SERVICES - 1.51%
138,000 NII Holdings, Inc. * ............................................ 2,508,840
------------
UTILITIES - 0.65%
36,600 Idacorp, Inc. ................................................... 1,077,870
------------
TOTAL COMMON STOCKS
(Cost $240,533,774) ............................................. 162,328,049
INVESTMENT COMPANY - 1.72%
- --------------------------------------------------------------------------------------------------
2,862,522 SSgA Prime Money Market Fund .................................... 2,862,522
------------
TOTAL INVESTMENT COMPANY
(Cost $2,862,522) ............................................... 2,862,522
TOTAL INVESTMENTS - 99.23%
- --------------------------------------------------------------------------------------------------
(Cost $243,396,296**) ......................................................... 165,190,571
NET OTHER ASSETS AND LIABILITIES - 0.77%
- --------------------------------------------------------------------------------------------------
1,274,342
TOTAL NET ASSETS - 100.00%
- --------------------------------------------------------------------------------------------------
$166,464,913
- --------------------------------------------------------------------------------
* Non-income producing.
** Aggregate cost for Federal tax purposes was $267,111,989.
The industry classification method used for purposes of this report's
allocation charts and portfolio of investments schedules may differ
from the industry subclassification(s) used for Trust compliance
purposes.
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
77
================================================================================
SMALL CAP VALUE FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
SECTOR ALLOCATION AS A PERCENTAGE OF NET ASSETS
AS OF DECEMBER 31, 2008
[PIE CHART OF SECTOR ALLOCATION]
Industrials 21%
Financials 20%
Consumer Discretionary 16%
Health Care 9%
Information Technology 8%
Cash and Other Net Assets 6%
Utilities 6%
Consumer Staples 5%
Materials 5%
Energy 4%
[END CHART]
- --------------------------------------------------------------------------------
Shares Value (Note 2)
- ------ --------------
COMMON STOCKS - 94.18%
- --------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY - 16.22%
6,100 Arbitron, Inc. ................................................. $ 81,008
7,800 Cato Corp./The, Class A ........................................ 117,780
2,700 CEC Entertainment, Inc. * ...................................... 65,475
3,000 Choice Hotels International, Inc. .............................. 90,180
5,700 Helen of Troy, Ltd. * ......................................... 98,952
5,500 Hibbett Sports, Inc. * ......................................... 86,405
2,600 LKQ Corp. * .................................................... 30,316
2,000 Matthews International Corp., Class A ......................... 73,360
7,000 Modine Manufacturing Co. ....................................... 34,090
6,300 Sonic Corp. * .................................................. 76,671
11,700 Stage Stores, Inc. ............................................. 96,525
2,900 Tempur-Pedic International, Inc. ............................... 20,561
3,100 Unifirst Corp./MA ............................................... 92,039
5,800 Valassis Communications, Inc. * ................................ 7,656
----------
971,018
----------
CONSUMER STAPLES - 4.84%
2,800 Casey's General Stores, Inc. ................................... 63,756
4,400 Herbalife, Ltd. ................................................ 95,392
5,700 Lance, Inc. .................................................... 130,758
----------
289,906
----------
ENERGY - 3.46%
3,600 Penn Virginia Corp. ............................................ 93,528
800 SEACOR Holdings, Inc. * ....................................... 53,320
1,800 Whiting Petroleum Corp. * ...................................... 60,228
----------
207,076
----------
FINANCIALS - 20.32%
3,800 Acadia Realty Trust, REIT....................................... 54,226
2,400 American Campus Communities, Inc., REIT ........................ 49,152
9,533 Ares Capital Corp. ............................................. 60,344
5,000 Asset Acceptance Capital Corp. * ............................... 25,550
5,400 Assured Guaranty, Ltd. ......................................... 61,560
3,200 Credit Acceptance Corp. * ...................................... 43,840
6,600 Delphi Financial Group, Inc., Class A ......................... 121,704
2,300 Financial Federal Corp. ........................................ 53,521
1,900 First Midwest Bankcorp, Inc./IL ................................ 37,943
3,690 International Bancshares Corp. ................................. 80,553
2,500 IPC Holdings, Ltd. ............................................. 74,750
2,200 MB Financial, Inc. ............................................. 61,490
2,800 NewAlliance Bancshares, Inc. ................................... 36,876
3,500 Platinum Underwriters Holdings, Ltd. ........................... 126,280
1,400 PS Business Parks, Inc., REIT .................................. 62,524
4,600 Realty Income Corp., REIT ...................................... 106,490
6,200 U-Store-It Trust, REIT ......................................... 27,590
5,500 Webster Financial Corp. ........................................ 75,790
1,100 Westamerica Bancorporation ..................................... 56,265
----------
1,216,448
----------
HEALTH CARE - 8.93%
3,000 Amsurg Corp. * .................................................. 70,020
4,300 Centene Corp. * ................................................. 84,753
3,200 Charles River Laboratories International, Inc. * ................ 83,840
1,800 Corvel Corp. * ................................................. 39,564
2,700 ICU Medical, Inc. * ............................................. 89,478
4,200 Orthofix International N.V. * .................................. 64,386
11,600 Universal American Corp./NY * .................................. 102,312
----------
534,353
----------
INDUSTRIALS - 20.76%
12,700 ACCO Brands Corp. * ............................................. 43,815
2,500 Acuity Brands, Inc. ............................................. 87,275
5,600 Albany International Corp., Class A ............................. 71,904
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
78
================================================================================
SMALL CAP VALUE FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
Shares Value (Note 2)
- ------ --------------
COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------------------------------
INDUSTRIALS (CONTINUED)
8,200 Belden, Inc. ................................................... $ 171,216
6,600 Bowne & Co., Inc. .............................................. 38,808
8,400 Carlisle Cos., Inc. ............................................ 173,880
2,100 ESCO Technologies, Inc. * ..................................... 85,995
3,000 GATX Corp. ..................................................... 92,910
1,900 Genesee & Wyoming, Inc., Class A * ............................. 57,950
5,800 Mueller Industries, Inc. ....................................... 145,464
2,500 Quixote Corp. .................................................. 16,250
1,900 Simpson Manufacturing Co., Inc. ................................ 52,744
2,600 Sterling Construction Co., Inc. * .............................. 48,204
3,400 United Stationers, Inc. * ...................................... 113,866
6,800 Vitran Corp., Inc. * ........................................... 42,160
----------
1,242,441
----------
INFORMATION TECHNOLOGY - 8.50%
3,600 Diebold, Inc. .................................................. 101,124
5,900 Electronics for Imaging, Inc. * ................................ 56,404
3,100 MAXIMUS, Inc. .................................................. 108,841
8,000 NAM TAI Electronics, Inc. ...................................... 44,000
5,200 Websense, Inc. * ............................................... 77,844
10,000 Xyratex, Ltd. * ................................................ 29,500
4,500 Zebra Technologies Corp., Class A * ............................ 91,170
----------
508,883
----------
MATERIALS - 5.19%
2,500 Aptargroup, Inc. ............................................... 88,100
700 Compass Minerals International, Inc. ........................... 41,062
1,500 Deltic Timber Corp. ............................................ 68,625
5,850 Zep, Inc. ...................................................... 112,963
----------
310,750
----------
UTILITIES - 5.96%
2,800 Atmos Energy Corp. ............................................. 66,360
1,250 New Jersey Resources Corp. ..................................... 49,188
3,200 Unisource Energy Corp. ......................................... 93,952
4,000 Westar Energy, Inc. ............................................ 82,040
2,000 WGL Holdings, Inc. ............................................. 65,380
----------
356,920
----------
TOTAL COMMON STOCKS
(Cost $7,757,693) .............................................. 5,637,795
Par Value
- ---------
CERTIFICATE OF DEPOSIT - 0.12%
- --------------------------------------------------------------------------------------------------
$6,931 State Street Eurodollar
0.010%, due 01/02/09 ........................................... $ 6,931
----------
TOTAL CERTIFICATE OF DEPOSIT
(Cost $6,931) .................................................. 6,931
Shares
- ------
INVESTMENT COMPANY - 4.23%
- --------------------------------------------------------------------------------------------------
253,151 SSgA Prime Money
Market Fund .................................................... 253,151
----------
TOTAL INVESTMENT COMPANY
(Cost $253,151) ................................................ 253,151
TOTAL INVESTMENTS - 98.53%
- --------------------------------------------------------------------------------------------------
(Cost $8,017,775**) ........................................................... 5,897,877
NET OTHER ASSETS AND LIABILITIES - 1.47%
- --------------------------------------------------------------------------------------------------
87,820
TOTAL NET ASSETS - 100.00%
- --------------------------------------------------------------------------------------------------
$5,985,697
- --------------------------------------------------------------------------------
* Non-income producing.
** Aggregate cost for Federal tax purposes was $8,045,712.
REIT Real Estate Investment Trust.
The industry classification method used for purposes of this report's
allocation charts and portfolio of investments schedules may differ from
the industry subclassification(s) used for Trust compliance purposes.
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
79
================================================================================
SMALL CAP GROWTH FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
SECTOR ALLOCATION AS A PERCENTAGE OF NET ASSETS
AS OF DECEMBER 31, 2008
[PIE CHART OF SECTOR ALLOCATION]
Industrials 25%
Health Care 21%
Information Technology 19%
Financials 11%
Consumer Discretionary 9%
Energy 5%
Cash and Other Net Assets 3%
Materials 4%
Consumer Staples 1%
Telecommunication Services 1%
Utilities 1%
[END CHART]
- --------------------------------------------------------------------------------
Shares Value (Note 2)
- ------ --------------
COMMON STOCKS - 97.24%
- --------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY - 8.64%
1,100 Aaron Rents, Inc. .............................................. $ 29,282
1,300 Aeropostale, Inc. * ............................................ 20,930
600 Carter's, Inc. * ............................................... 11,556
1,000 CEC Entertainment, Inc. * ...................................... 24,250
1,900 Corinthian Colleges, Inc. * .................................... 31,103
500 Deckers Outdoor Corp. * ........................................ 39,935
700 DeVry, Inc. .................................................... 40,187
600 DineEquity, Inc. ............................................... 6,936
1,900 Drew Industries, Inc. * ........................................ 22,800
1,100 Ethan Allen Interiors, Inc. .................................... 15,807
900 Interactive Data Corp. ......................................... 22,194
900 Marvel Entertainment, Inc. * ................................... 27,675
1,200 Men's Wearhouse, Inc. .......................................... 16,248
300 NetFlix, Inc. * ................................................ 8,967
2,100 World Wrestling Entertainment,
Inc., Class A .................................................. 23,268
1,100 Zumiez, Inc. * ................................................. 8,195
----------
349,333
----------
CONSUMER STAPLES - 1.15%
500 Green Mountain Coffee Roasters,
Inc. * ......................................................... 19,350
1,700 Winn-Dixie Stores, Inc. * ...................................... 27,370
----------
46,720
----------
ENERGY - 4.99%
1,200 Atwood Oceanics, Inc. * ........................................ 18,336
600 Bill Barrett Corp. * ........................................... 12,678
700 CARBO Ceramics, Inc. ........................................... 24,871
600 Comstock Resources, Inc. * ..................................... 28,350
1,000 IHS, Inc., Class A * ........................................... 37,420
1,500 Penn Virginia Corp. ............................................ 38,970
700 Petroleum Development Corp. * .................................. 16,849
1,800 Petroquest Energy, Inc. * ...................................... 12,168
700 Walter Industries, Inc. ........................................ 12,257
----------
201,899
----------
FINANCIALS - 11.06%
300 Alexandria Real Estate Equities, Inc., REIT ................... 18,102
800 Corporate Office Properties Trust SBI MD, REIT ................. 24,560
800 EastGroup Properties, Inc., REIT ............................... 28,464
600 GAMCO Investors, Inc., Class A ................................. 16,392
800 Greenhill & Co., Inc. .......................................... 55,816
600 Hancock Holding Co. ............................................ 27,276
900 Highwoods Properties, Inc., REIT ............................... 24,624
800 Home Properties, Inc., REIT .................................... 32,480
900 KBW, Inc. * ................................................... 20,700
900 Knight Capital Group, Inc., Class A * .......................... 14,535
1,100 Mid-America Apartment Communities, Inc., REIT .................. 40,876
700 Nationwide Health Properties, Inc., REIT ...................... 20,104
600 Potlatch Corp., REIT ........................................... 15,606
1,000 Signature Bank/New York, NY * .................................. 28,690
600 Stifel Financial Corp. * ....................................... 27,510
400 SVB Financial Group * .......................................... 10,492
1,000 Waddell & Reed Financial, Inc., Class A ........................ 15,460
900 Washington Real Estate Investment Trust, REIT .................. 25,470
----------
447,157
----------
HEALTH CARE - 21.26%
800 Alexion Pharmaceuticals, Inc. * ................................ 28,952
1,700 Alkermes, Inc. * ............................................... 18,105
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
80
================================================================================
SMALL CAP GROWTH FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
Shares Value (Note 2)
- ------ --------------
COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------------------------------
HEALTH CARE (CONTINUED)
400 AMAG Pharmaceuticals, Inc. * ................................... $ 14,340
800 Amedisys, Inc. * ............................................... 33,072
2,600 AMN Healthcare Services, Inc. * ................................ 21,996
1,100 Arthrocare Corp. * ............................................. 5,247
400 Centene Corp. * ................................................ 7,884
900 Cepheid, Inc. * ................................................ 9,342
1,000 Eclipsys Corp. * ............................................... 14,190
900 Emeritus Corp. * ............................................... 9,027
1,500 Icon PLC, ADR * ................................................ 29,535
900 Immucor, Inc. * ................................................ 23,922
1,200 Isis Pharmaceuticals, Inc. * ................................... 17,016
1,200 KV Pharmaceutical Co., Class A * ............................... 3,456
200 Landauer, Inc. ................................................. 14,660
900 Magellan Health Services, Inc. * ............................... 35,244
600 Martek Biosciences Corp. * ..................................... 18,186
800 Medicines Co./The * ............................................ 11,784
1,800 Medicis Pharmaceutical Corp., Class A .......................... 25,020
1,500 Mednax, Inc. * ................................................. 47,550
800 MWI Veterinary Supply, Inc. * .................................. 21,568
1,000 Myriad Genetics, Inc. * ........................................ 66,260
800 Onyx Pharmaceuticals, Inc. * ................................... 27,328
500 OSI Pharmaceuticals, Inc. * .................................... 19,525
300 Owens & Minor, Inc. ............................................ 11,295
800 Perrigo Co. .................................................... 25,848
1,400 PSS World Medical, Inc. * ...................................... 26,348
1,200 Psychiatric Solutions, Inc. * .................................. 33,420
800 Regeneron Pharmaceuticals, Inc. * .............................. 14,688
900 SonoSite, Inc. * ............................................... 17,172
700 STERIS Corp. ................................................... 16,723
1,300 Thoratec Corp. * ............................................... 42,237
1,200 Valeant Pharmaceuticals International * ........................ 27,480
500 Varian, Inc. * ................................................. 16,755
600 West Pharmaceutical Services, Inc. ............................. 22,662
1,700 Wright Medical Group, Inc. * ................................... 34,731
600 XenoPort, Inc. * ............................................... 15,048
1,700 Zoll Medical Corp. * ........................................... 32,113
----------
859,729
----------
INDUSTRIALS - 24.94%
1,000 Actuant Corp., Class A. ........................................ 19,020
800 Acuity Brands, Inc. ............................................ 27,928
800 Advisory Board Co./The * ....................................... 17,840
500 Ameron International Corp. ..................................... 31,460
1,500 Beacon Roofing Supply, Inc. * .................................. 20,820
1,100 Belden, Inc. ................................................... 22,968
1,100 Bucyrus International, Inc. .................................... 20,372
1,000 Clarcor, Inc. .................................................. 33,180
700 Clean Harbors, Inc. * .......................................... 44,408
500 Curtiss-Wright Corp. ........................................... 16,695
600 Esterline Technologies Corp. * ................................. 22,734
500 Franklin Electric Co., Inc. .................................... 14,055
600 Genesee & Wyoming, Inc.,
Class A * ...................................................... 18,300
900 GeoEye, Inc. * ................................................. 17,307
800 HUB Group, Inc., Class A * ..................................... 21,224
800 Kaydon Corp. ................................................. 27,480
1,200 Korn/Ferry International * ..................................... 13,704
1,100 Ladish Co., Inc. * ............................................ 15,235
700 Layne Christensen Co. * ........................................ 16,807
200 Lindsay Corp. .................................................. 6,358
500 Madger Meter, Inc. ............................................. 14,510
800 Mcgrath RentCorp. .............................................. 17,088
800 Middleby Corp. * ............................................... 21,816
700 Mine Safety Appliances Co. ..................................... 16,737
500 Moog, Inc., Class A * .......................................... 18,285
1,200 Navigant Consulting, Inc. * .................................... 19,044
700 Nordson Corp. .................................................. 22,603
1,100 RBC Bearings, Inc. * ........................................... 22,308
500 Resources Connection, Inc. * ................................... 8,190
2,600 SYKES Enterprises, Inc. * ...................................... 49,712
500 Teledyne Technologies, Inc. * .................................. 22,275
1,000 Tetra Tech, Inc. * ............................................. 24,150
1,200 TransDigm Group, Inc. * ........................................ 40,284
1,600 Triumph Group, Inc. ............................................ 67,936
700 United Stationers, Inc. * ...................................... 23,443
400 Valmont Industries, Inc. ....................................... 24,544
1,400 Wabtec Corp. ................................................... 55,650
1,600 Waste Connections, Inc. * ...................................... 50,512
300 Watsco, Inc. ................................................. 11,520
800 Watson Wyatt Worldwide, Inc.,
Class A ........................................................ 38,256
500 Woodward Governor Co. .......................................... 11,510
----------
1,008,268
----------
INFORMATION TECHNOLOGY - 19.37%
400 ACI Worldwide, Inc. * .......................................... 6,360
900 Advanced Energy Industries, Inc. * ............................. 8,955
800 Advent Software, Inc. * ........................................ 15,976
900 Anixter International, Inc. * .................................. 27,108
1,100 Blackboard, Inc. * ............................................. 28,853
1,200 Cabot Microelectonics Corp. * .................................. 31,284
800 CACI International, Inc.,
Class A * ...................................................... 36,072
700 Comtech Telecommunications
Corp. * ........................................................ 32,074
500 CSG Systems International, Inc. * .............................. 8,735
600 Cymer, Inc. * .................................................. 13,146
1,300 EMS Technologies, Inc. * ....................................... 33,631
2,300 Forrester Research, Inc. * ..................................... 64,883
800 Gartner, Inc. * ................................................ 14,264
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
81
================================================================================
SMALL CAP GROWTH FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
Shares Value (Note 2)
- ------ --------------
COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------------------------------
INFORMATION TECHNOLOGY (CONTINUED)
1,800 Informatica Corp. * ............................................ $ 24,714
400 Itron, Inc. * .................................................. 25,496
900 IXYS Corp. ..................................................... 7,434
1,000 Jack Henry & Associates, Inc. .................................. 19,410
700 Littelfuse, Inc. * ............................................. 11,620
2,200 Micros Systems, Inc. * ......................................... 35,904
2,600 Microsemi Corp. * .............................................. 32,864
1,500 Neutral Tandem, Inc. * ......................................... 24,330
1,700 Nice Systems, Ltd., ADR * ...................................... 38,199
1,500 Parametric Technology Corp. * .................................. 18,975
800 Progress Software Corp. * ...................................... 15,408
900 Quest Software, Inc. * ......................................... 11,331
900 Rofin-Sinar Technologies, Inc. * ............................... 18,522
1,100 Scansource, Inc. * ............................................. 21,197
4,300 SkillSoft PLC, ADR * ........................................... 30,702
300 Sohu.com, Inc. * ............................................... 14,202
900 Solera Holdings, Inc. * ........................................ 21,690
900 SPSS, Inc. * ................................................... 24,264
1,300 Standard Microsystems Corp. * .................................. 21,242
800 Sybase, Inc. * ................................................. 19,816
900 Synaptics, Inc. * ............................................. 14,904
800 Ultratech, Inc. * .............................................. 9,568
----------
783,133
----------
MATERIALS - 4.09%
500 Aptargroup, Inc. ............................................... 17,620
700 Arch Chemicals, Inc. ........................................... 18,249
171 Clearwater Paper Corp. * ....................................... 1,434
700 Deltic Timber Corp. ............................................ 32,025
500 Greif, Inc., Class A. .......................................... 16,715
1,100 Silgan Holdings, Inc. .......................................... 52,591
1,600 Terra Industries, Inc. ......................................... 26,672
----------
165,306
----------
TELECOMMUNICATION SERVICES - 0.98%
1,600 NTELOS Holdings Corp. .......................................... 39,456
----------
UTILITIES - 0.76%
700 ITC Holdings Corp. ............................................. 30,576
----------
TOTAL COMMON STOCKS
(Cost $4,753,824) .............................................. 3,931,577
INVESTMENT COMPANY - 2.74%
- --------------------------------------------------------------------------------------------------
110,875 SSgA Prime Money
Market Fund .................................................... 110,875
----------
TOTAL INVESTMENT COMPANY
(Cost $110,875)................................................. 110,875
TOTAL INVESTMENTS - 99.98%
- --------------------------------------------------------------------------------------------------
(Cost $4,864,699**)............................................................ 4,042,452
NET OTHER ASSETS AND LIABILITIES - 0.02%
- --------------------------------------------------------------------------------------------------
799
TOTAL NET ASSETS - 100.00%
- --------------------------------------------------------------------------------------------------
$4,043,251
- --------------------------------------------------------------------------------
* Non-income producing.
** Aggregate cost for Federal tax purposes was $4,880,177.
ADR American Depositary Receipt.
PLC Public Limited Company.
REIT Real Estate Investment Trust.
The industry classification method used for purposes of this report's
allocation charts and portfolio of investments schedules may differ from
the industry subclassification(s) used for Trust compliance purposes.
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
82
================================================================================
GLOBAL SECURITIES FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
GEOGRAPHICAL ALLOCATION AS A PERCENTAGE OF NET ASSETS
AS OF DECEMBER 31, 2008
[PIE CHART OF GEOGRAPHICAL ALLOCATION]
United States 39%
Europe (excluding United Kingdom) 25%
Japan 14%
United Kingdom 13%
Pacific Basin 8%
Cash and Other Net Assets 1%
[END CHART]
- --------------------------------------------------------------------------------
Shares Value (Note 2)
- ------ --------------
COMMON STOCKS - 99.09%
- --------------------------------------------------------------------------------------------------
AUSTRALIA - 4.55%
84,089 Amcor, Ltd. .................................................... $ 341,768
85,138 Foster's Group, Ltd. ........................................... 327,540
17,584 National Australia Bank, Ltd. 257,787
151,642 Telstra Corp., Ltd. ............................................ 406,037
------------
1,333,132
------------
BELGIUM - 0.16%
34,957 Fortis ......................................................... 46,275
13,256 Fortis VVPR Strips* ............................................ 18
------------
46,293
------------
FINLAND - 0.52%
11,988 UPM-Kymmene OYJ ................................................ 152,001
------------
FRANCE - 8.85%
16,490 Carrefour S.A. ................................................. 633,267
20,315 France Telecom S.A. ............................................ 568,234
4,177 Renault S.A. ................................................... 108,954
7,921 Societe Generale ............................................... 401,179
16,201 Total S.A. ..................................................... 883,241
------------
2,594,875
------------
GERMANY - 3.20%
27,061 Deutsche Telekom AG ............................................ 411,153
5,867 RWE AG ......................................................... 527,424
------------
938,577
------------
ITALY - 1.74%
205,473 UniCredit SpA .................................................. 511,534
------------
JAPAN - 14.46%
10,900 Astellas Pharma, Inc. .......................................... 443,536
15,000 Canon, Inc. .................................................... 470,873
116 Nippon Telegraph & Telephone
Corp. (L) ...................................................... 644,404
24,000 Nitto Denko Corp. .............................................. 461,095
18,000 Seven & I Holdings Co., Ltd. ................................... 616,675
12,500 Takeda Pharmaceutical Co.,
Ltd. ........................................................... 648,406
18,100 Tokio Marine Holdings, Inc. .................................... 530,370
94 West Japan Railway Co. ......................................... 427,689
------------
4,243,048
------------
NETHERLANDS - 2.06%
30,272 ING Groep N.V. ................................................. 316,439
24,407 Reed Elsevier N.V. ............................................. 287,565
------------
604,004
------------
SINGAPORE - 1.83%
71,000 Oversea-Chinese Banking Corp.,
Ltd. ........................................................... 247,373
163,000 Singapore Telecommunications,
Ltd. ........................................................... 290,225
------------
537,598
------------
SPAIN - 5.31%
72,689 Iberdrola S.A. ................................................. 674,932
39,381 Telefonica S.A. ................................................ 882,743
------------
1,557,675
------------
SWITZERLAND - 2.91%
17,060 Novartis AG .................................................... 854,782
------------
TAIWAN - 1.21%
44,824 Taiwan Semiconductor
Manufacturing Co., Ltd., ADR ................................... 354,110
------------
UNITED KINGDOM - 13.37%
36,044 Aviva PLC ...................................................... 204,025
99,669 BP PLC ......................................................... 763,692
67,613 GKN PLC ........................................................ 95,731
56,646 GlaxoSmithKline PLC ............................................ 1,051,599
100,810 HBOS PLC ....................................................... 102,311
97,694 Lloyds TSB Group PLC ........................................... 178,811
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
83
================================================================================
GLOBAL SECURITIES FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
Shares Value (Note 2)
- ------ --------------
COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------------------------------
UNITED KINGDOM (CONTINUED)
105,740 Royal Bank of Scotland
Group PLC....................................................... $ 76,441
27,400 Royal Dutch Shell PLC, A Shares ................................ 714,138
32,424 Unilever PLC ................................................... 736,092
------------
3,922,840
------------
UNITED STATES - 38.92%
9,500 3M Co. ......................................................... 546,630
35,500 Alcoa, Inc. .................................................... 399,730
12,900 AT&T, Inc. ..................................................... 367,650
41,350 Bank of America Corp. .......................................... 582,208
14,200 CBS Corp., Class B.............................................. 116,298
15,800 Chevron Corp. .................................................. 1,168,726
40,000 Citigroup, Inc. ................................................ 268,400
39,100 ConAgra Foods, Inc. ............................................ 645,150
621 Fairpoint Communications, Inc. ................................. 2,037
49,100 General Electric Co. ........................................... 795,420
20,900 Genuine Parts Co. .............................................. 791,274
17,300 HJ Heinz Co. ................................................... 650,480
22,900 Merck & Co., Inc./NJ............................................ 696,160
44,000 Microsoft Corp. ................................................ 855,360
24,400 Oracle Corp. * ................................................. 432,612
47,700 Pfizer, Inc. ................................................... 844,767
25,700 Verizon Communications, Inc. ................................... 871,230
43,900 Wachovia Corp. ................................................. 243,206
30,400 Wyeth........................................................... 1,140,304
------------
11,417,642
------------
TOTAL COMMON STOCKS
(Cost $51,115,906) ............................................. 29,068,111
WARRANTS AND RIGHTS - 0.00%
- --------------------------------------------------------------------------------------------------
BELGIUM - 0.00%
34,957 Fortis Bank S.A./N.V.
Exp. 07/01/14 (L) * ........................................... -
------------
UNITED KINGDOM - 0.00%
139,510 HBOS PLC
Exp. 09/01/09
(Exercise Price $1.63) (L)* .................................... -
42,467 Lloyds TSB Group PLC
Exp. 09/01/09
(Exercise Price $2.49) (L)* .................................... -
------------
TOTAL WARRANTS AND RIGHTS
(Cost $0) ...................................................... -
INVESTMENT COMPANY - 0.67%
- --------------------------------------------------------------------------------------------------
UNITED STATES - 0.67%
197,080 SSgA Prime Money
Market Fund .................................................... 197,080
------------
TOTAL INVESTMENT COMPANY
(Cost $197,080)................................................. 197,080
TOTAL INVESTMENTS - 99.76%***
- --------------------------------------------------------------------------------------------------
(Cost $51,312,986**)........................................................... 29,265,191
NET OTHER ASSETS AND LIABILITIES - 0.24%
- --------------------------------------------------------------------------------------------------
70,533
TOTAL NET ASSETS - 100.00%
- --------------------------------------------------------------------------------------------------
$ 29,335,724
- --------------------------------------------------------------------------------
* Non-income producing.
** Aggregate cost for Federal tax purposes was $51,409,842.
*** The aggregate amount of foreign securities fair valued pursuant to a
systematic fair valuation model as a percent of net assets was 54.02%.
(L) Security valued at fair value using methods determined in good faith by or
at the discretion of the Board of Trustees (see Note 2).
ADR American Depositary Receipt.
PLC Public Limited Company.
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
84
================================================================================
GLOBAL SECURITIES FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
OTHER INFORMATION:
Industry Concentration
% of Net Assets
---------------
Pharmaceuticals 19.3%
Diversified Telecommunication Services 15.1%
Oil, Gas & Consumable Fuels 12.0%
Food Products 6.9%
Commercial Banks 6.9%
Industrial Conglomerates 4.6%
Software 4.4%
Food & Staples Retailing 4.3%
Diversified Financial Services 4.1%
Distributors 2.7%
Insurance 2.5%
Electric Utilities 2.3%
Multi-Utilities 1.8%
Office Electronics 1.6%
Chemicals 1.6%
Road & Rail 1.4%
Media 1.4%
Metals & Mining 1.4%
Semiconductors &
Semiconductor Equipment 1.2%
Containers & Packaging 1.2%
Beverages 1.1%
Net Other Assets & Liabilities 1.0%
Paper & Forest Products 0.5%
Automobiles 0.4%
Auto Components 0.3%
---------------
100.0%
===============
The industry classification method used for purposes of this report's allocation
charts and portfolio of investments schedules may differ from the industry
subclassification(s) used for Trust compliance purposes.
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
85
================================================================================
INTERNATIONAL STOCK FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
GEOGRAPHICAL ALLOCATION AS A PERCENTAGE OF NET ASSETS
AS OF DECEMBER 31, 2008
[PIE CHART OF GEOGRAPHICAL ALLOCATION]
Europe (excluding United Kingdom) 41%
United Kingdom 20%
Japan 17%
Pacific Basin 6%
Cash & Other Net Assets 5%
Latin America 3%
Africa 2%
Other Countries 6%
[END CHART]
- --------------------------------------------------------------------------------
Shares Value (Note 2)
- ------ --------------
COMMON STOCKS - 94.77%
- --------------------------------------------------------------------------------------------------
ARGENTINA - 0.25%
8,670 Tenaris S.A., ADR. ............................................. $ 181,897
-----------
AUSTRALIA - 0.14%
27,728 ABC Learning Centres, Ltd. (L) -
24,539 Fairfax Media, Ltd. ............................................ 28,154
12,125 James Hardie Industries N.V. ................................... 39,712
28,524 Macquarie Infrastructure Group ................................ 34,212
-----------
102,078
-----------
AUSTRIA - 0.06%
1,706 Andritz AG ..................................................... 43,605
-----------
BAHRAIN - 0.02%
3,980 Investcorp Bank BSC, GDR (C)(L) ................................ 11,940
-----------
BELGIUM - 0.96%
26,500 Anheuser-Busch InBev N.V. ...................................... 614,384
5,640 Arseus N.V. .................................................... 49,224
1,040 EVS Broadcast Equipment S.A. ................................... 37,079
-----------
700,687
-----------
BRAZIL - 1.59%
43,840 Banco do Brasil S.A. ........................................... 275,974
13,790 Cia de Concessoes Rodoviarias .................................. 139,733
7,370 Empresa Brasileira de Aeronautica S.A., ADR. ................... 119,468
7,333 Iochpe Maxion S.A. ............................................. 27,514
44,100 JHSF Participacoes S.A. ........................................ 31,203
26,039 Redecard S.A. .................................................. 286,965
9,808 Souza Cruz S.A. ................................................ 185,477
10,880 Tam S.A., ADR. ................................................. 89,651
-----------
1,155,985
-----------
CANADA - 1.86%
1,000 First Quantum Minerals, Ltd. ................................... 14,265
44,400 TELUS Corp. .................................................... 1,336,855
-----------
1,351,120
-----------
CHINA - 0.10%
675,000 Shougang Concord International Enterprises Co., Ltd. ........... 75,792
-----------
EGYPT - 0.45%
2,869 Eastern Tobacco ............................................... 93,703
3,927 Egyptian Co. for Mobile Services ............................... 103,318
5,243 Orascom Construction Industries ................................ 132,845
-----------
329,866
-----------
FINLAND - 1.82%
2,110 Konecranes OYJ ................................................. 36,135
74,300 Nokia OYJ ...................................................... 1,151,868
2,140 Nokian Renkaat OYJ ............................................. 23,993
3,330 Sampo OYJ, A Shares ............................................ 62,198
1,950 Vacon PLC ...................................................... 50,125
-----------
1,324,319
-----------
FRANCE - 10.45%
10,350 BNP Paribas .................................................... 435,207
16,000 Bouygues ....................................................... 677,241
14,900 Carrefour S.A. ................................................. 572,206
32,300 GDF Suez ....................................................... 1,599,722
10,500 Groupe Danone .................................................. 633,727
776 Neopost S.A. ................................................... 70,239
23,612 Sanofi-Aventis S.A. ............................................ 1,499,690
1,086 Sechilienne-Sidec .............................................. 48,614
1 Societe Generale ............................................... 51
36,887 Total S.A. ..................................................... 2,010,993
747 Virbac S.A. .................................................... 60,163
-----------
7,607,853
-----------
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
86
================================================================================
INTERNATIONAL STOCK FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
Shares Value (Note 2)
- ------ --------------
COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------------------------------
GERMANY - 7.42%
15,950 Adidas AG ...................................................... $ 613,440
9,400 Allianz SE ..................................................... 1,008,226
10,765 Compugroup Holding AG * ........................................ 45,191
1,700 CTS Eventim AG ................................................ 57,367
16,800 Daimler AG .................................................... 638,337
41,000 E.ON AG. ....................................................... 1,657,923
966 Gerresheimer AG ................................................ 26,484
560 Pfeiffer Vacuum Technology AG .................................. 37,081
1,154 SGL Carbon AG * ................................................ 39,429
16,219 Siemens AG ..................................................... 1,214,811
1,217 Wincor Nixdorf AG .............................................. 58,024
-----------
5,396,313
-----------
GREECE - 1.69%
22,292 National Bank of Greece S.A. ................................... 412,853
27,013 OPAP S.A. ...................................................... 776,522
4,168 Piraeus Bank S.A. ............................................. 37,533
-----------
1,226,908
-----------
HONG KONG - 0.08%
10,405 Esprit Holdings, Ltd. .......................................... 59,309
-----------
HUNGARY - 0.06%
2,987 OPT Bank Nyrt. * ............................................... 45,381
-----------
INDIA - 0.94%
5,500 Hero Honda Motors, Ltd. ........................................ 91,657
24,345 Oil & Natural Gas Corp., Ltd. .................................. 335,441
9,886 Punjab National Bank, Ltd. ..................................... 108,082
40,484 Satyam Computer Services, Ltd. ................................. 146,608
-----------
681,788
-----------
INDONESIA - 1.25%
1,425,900 Bank Mandiri Persero Tbk PT .................................... 271,786
130,500 PT Astra International Tbk. .................................... 131,650
16,560 Telekomunikasi Indonesia Tbk PT, ADR ........................... 415,159
212,000 United Tractors Tbk PT ......................................... 88,081
-----------
906,676
-----------
IRELAND - 1.17%
31,191 CRH PLC ........................................................ 787,188
4,423 DCC PLC ........................................................ 64,028
-----------
851,216
-----------
ISLE OF MAN - 0.07%
22,357 Hansard Global PLC ............................................. 50,787
-----------
ISRAEL - 0.54%
79,675 Bank Hapoalim BM * ............................................. 172,876
13,012 Delek Automotive Systems, Ltd. ................................. 67,183
22,264 Israel Chemicals, Ltd. ......................................... 155,029
-----------
395,088
-----------
ITALY - 2.17%
3,216 Ansaldo STS SpA ................................................ 45,312
62,120 ENI SpA ........................................................ 1,471,988
8,069 MARR SpA ....................................................... 60,868
-----------
1,578,168
-----------
JAPAN - 17.29%
6,290 Amano Corp. .................................................... 49,375
3,830 Asahi Pretec Corp. ............................................. 44,746
22,900 Canon, Inc. .................................................... 718,866
33,310 Daito Trust Construction Co., Ltd. ............................. 1,744,154
2,690 Don Quijote Co., Ltd. .......................................... 53,590
82 East Japan Railway Co. (L)...................................... 654,851
820 Hisamitsu Pharmaceutical Co., Inc. ............................. 33,478
35,600 HOYA Corp. ..................................................... 618,437
6,340 Ichiyoshi Securities Co., Ltd. ................................. 50,752
83 INPEX Corp. .................................................... 655,746
1,530 Jafco Co., Ltd. ................................................ 39,113
334 Japan Tobacco, Inc. ............................................ 1,106,009
2,940 JSR Corp. ...................................................... 33,089
167 KDDI Corp. ..................................................... 1,189,439
2,590 Konami Corp. ................................................... 66,678
2,890 MISUMI Group, Inc. ............................................. 34,669
45,100 Mitsubishi Corp. ............................................... 633,134
1,600 Nomura Research Institute, Ltd. ................................ 30,366
3,390 Ohara, Inc. .................................................... 27,461
27,500 Olympus Corp. .................................................. 552,222
2,910 Roland DG Corp. ................................................ 43,561
18,500 Secom Co., Ltd. ................................................ 952,910
169 Sumitomo Mitsui Financial Group, Inc. (L) ...................... 754,152
6,620 Suruga Bank, Ltd. .............................................. 65,563
1,820 Sysmex Corp. ................................................... 66,819
4,180 T Hasegawa Co., Ltd. ........................................... 56,311
18,550 T&D Holdings, Inc. ............................................. 777,809
11,200 Tokio Marine Holdings, Inc. .................................... 328,185
215,500 Tokyo Gas Co., Ltd. ............................................ 1,092,041
2,580 Union Tool Co. ................................................. 58,905
900 USS Co., Ltd. .................................................. 47,619
-----------
12,580,050
-----------
MALAYSIA - 0.24%
6,430 British American Tobacco Malaysia Bhd .......................... 82,826
109,630 PLUS Expressways Bhd ........................................... 94,744
-----------
177,570
-----------
MEXICO - 0.88%
4,300 America Movil SAB de C.V., ADR ................................. 133,257
5,850 Desarrolladora Homex SAB de C.V., ADR * ........................ 133,555
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
87
================================================================================
INTERNATIONAL STOCK FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
Shares Value (Note 2)
- ------ --------------
COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------------------------------
MEXICO (CONTINUED)
5,510 Fomento Economico Mexicano SAB de C.V., ADR .................... $ 166,016
6,170 Grupo Televisa S.A., ADR. ...................................... 92,180
33,640 Kimberly-Clark de Mexico SAB de C.V., Class A .................. 111,741
-----------
636,749
-----------
NETHERLANDS - 0.24%
1,825 Fugro N.V. ..................................................... 52,395
5,089 Innoconcepts ................................................... 23,507
1,613 Koninklijke Boskalis Westminster N.V. .......................... 37,467
2,191 SBM Offshore N.V. .............................................. 28,711
1,434 Ten Cate N.V. .................................................. 32,399
-----------
174,479
-----------
NORWAY - 0.67%
780 Kongsberg Gruppen AS ........................................... 37,060
6,510 ODIM ASA * ..................................................... 27,674
12,690 Songa Offshore SE * ............................................ 24,891
59,100 Telenor ASA .................................................... 395,489
-----------
485,114
-----------
PHILIPPINES - 0.55%
8,520 Philippine Long Distance Telephone Co., ADR .................... 400,014
-----------
RUSSIA - 1.37%
6,000 Eurasia Drilling Co., Ltd., GDR (C)(L)* ........................ 21,000
5,910 Evraz Group S.A., GDR .......................................... 50,826
12,210 LUKOIL, ADR .................................................... 395,888
3,820 Mechel, ADR .................................................... 15,280
8,300 Mobile Telesystems OJSC, ADR ................................... 221,444
6,448 Oriflame Cosmetics S.A., SDR ................................... 186,833
143,708 TNK-BP Holding ................................................. 93,410
606 Vsmpo-Avisma Corp. ............................................. 12,120
-----------
996,801
-----------
SINGAPORE - 1.23%
20,340 Cosco Corp. Singapore, Ltd., ADR ............................... 65,698
46,630 Ezra Holdings, Ltd. ............................................ 22,205
454,300 Singapore Telecommunications, Ltd. ............................. 808,890
-----------
896,793
-----------
SOUTH AFRICA - 1.95%
34,137 Aquarius Platinum, Ltd. ........................................ 86,434
3,333 ArcelorMittal South Africa, Ltd. ............................... 32,220
12,708 Kumba Iron Ore, Ltd. ........................................... 224,514
11,499 Massmart Holdings, Ltd. ........................................ 105,542
21,525 Murray & Roberts Holdings, Ltd. ................................ 112,694
17,036 Nedbank Group, Ltd. ............................................ 177,506
48,846 Pretoria Portland Cement Co., Ltd. ............................. 166,604
104,175 Sanlam, Ltd. ................................................... 192,847
58,641 Steinhoff International Holdings, Ltd. ......................... 79,903
65,576 Truworths International, Ltd. .................................. 243,475
-----------
1,421,739
-----------
SOUTH KOREA - 1.43%
176 Amorepacific Corp. ............................................. 92,014
2,678 GS Engineering & Construction Corp. ............................ 127,413
1,328 Hite Brewery Co., Ltd. * ....................................... 173,446
7,250 KB Financial Group, Inc. * ..................................... 198,712
940 Samsung Electronics Co., Ltd., GDR (C) ......................... 164,509
5,999 Shinhan Financial Group Co., Ltd. .............................. 138,941
6,900 Woongjin Coway Co., Ltd. ....................................... 148,245
-----------
1,043,280
-----------
SPAIN - 1.14%
78,125 Banco Santander S.A. ........................................... 753,994
3,461 Indra Sistemas S.A. ............................................ 78,641
-----------
832,635
-----------
SWEDEN - 1.74%
9,486 Duni AB ........................................................ 29,989
6,430 Elekta AB, B Shares ............................................ 63,667
4,068 Getinge AB, B Shares ........................................... 48,752
435 Getinge AB, Bonus Shares * ..................................... 5,020
4,310 Indutrade AB ................................................... 36,664
140,680 Telefonaktiebolaget LM Ericsson, B Shares ...................... 1,078,946
-----------
1,263,038
-----------
SWITZERLAND - 11.06%
281 Acino Holding AG .............................................. 60,986
2,200 Bank Sarasin & Cie AG, Series B ................................ 65,722
365 Burckhardt Compression Holding AG .............................. 52,613
43,250 Nestle S.A. .................................................... 1,704,594
42,097 Novartis AG .................................................... 2,109,249
12,250 Roche Holding AG ............................................... 1,885,688
1,955 Swisscom AG .................................................... 631,138
1,858 Swissquote Group Holding S.A. .................................. 65,228
1,040 Tecan Group AG ................................................. 38,456
57,800 UBS AG * ....................................................... 838,319
2,760 Zurich Financial Services AG ................................... 599,128
-----------
8,051,121
-----------
TAIWAN - 0.58%
198,946 Advanced Semiconductor Engineering, Inc. ....................... 72,065
41,350 Advantech Co., Ltd. ............................................ 60,543
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
88
================================================================================
INTERNATIONAL STOCK FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
Shares Value (Note 2)
- ------ --------------
COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------------------------------
TAIWAN (CONTINUED)
1 Chinatrust Financial Holding Co., Ltd. ......................... $ 1
55,981 HON HAI Precision Industry Co., Ltd. ........................... 110,364
5,000 HTC Corp. ...................................................... 50,436
93,643 Taiwan Semiconductor Manufacturing Co., Ltd. ................... 128,172
-----------
421,581
-----------
THAILAND - 0.18%
19,170 Banpu PCL ...................................................... 133,770
-----------
TURKEY - 0.91%
18,756 Ford Otomotiv Sanayi AS ........................................ 52,981
77,414 Turkcell Iletisim Hizmet AS .................................... 445,587
60,239 Turkiye Is Bankasi, Series C ................................... 162,024
-----------
660,592
-----------
UNITED KINGDOM - 20.22%
16,775 Ashmore Group PLC .............................................. 32,328
263,973 BAE Systems PLC ................................................ 1,438,720
36,200 BG Group PLC ................................................... 502,592
175,675 BP PLC ......................................................... 1,346,072
22,530 British American Tobacco PLC ................................... 585,405
4,852 Charter International PLC ...................................... 23,152
2,275 Chemring Group PLC ............................................. 64,055
53,500 Diageo PLC ..................................................... 744,213
3,888 Dignity PLC .................................................... 33,665
58,300 GlaxoSmithKline PLC ............................................ 1,082,304
31,648 Hampson Industries PLC ......................................... 46,753
9,207 Healthcare Locums PLC .......................................... 16,944
76,800 HSBC Holdings PLC .............................................. 735,070
9,351 IG Group Holdings PLC .......................................... 34,602
50,634 Imperial Tobacco Group PLC ..................................... 1,352,593
5,819 Intertek Group PLC ............................................. 65,913
56,812 National Grid PLC .............................................. 561,454
423,488 Old Mutual PLC ................................................. 338,336
172,800 Prudential PLC ................................................. 1,052,042
14,270 Reckitt Benckiser Group PLC .................................... 531,621
45,122 Sepura, Ltd. ................................................... 22,219
151,800 Tesco PLC ...................................................... 790,865
54,400 Unilever PLC ................................................... 1,234,993
6,022 Victrex PLC .................................................... 41,785
1,012,262 Vodafone Group PLC ............................................. 2,037,799
-----------
14,715,495
-----------
TOTAL COMMON STOCKS
(Cost $87,400,019) ............................................. 68,967,597
PREFERRED STOCKS - 0.74%
- --------------------------------------------------------------------------------------------------
BRAZIL - 0.67%
13,310 AES Tiete S.A. ................................................. 86,300
22,416 Cia Vale do Rio Doce ........................................... 229,639
3,900 Eletropaulo Metropolitana Eletricidade de Sao Paulo S.A. ....... 43,739
36,570 Klabin S.A. .................................................... 51,907
15,230 Suzano Papele Celulose S.A. .................................... 78,958
-----------
490,543
-----------
GERMANY - 0.06%
961 Fuchs Petrolub AG .............................................. 46,168
-----------
TOTAL PREFERRED STOCKS
(Cost $778,476) ................................................ 536,711
INVESTMENT COMPANY - 4.47%
- --------------------------------------------------------------------------------------------------
UNITED STATES - 4.47%
3,251,504 SSgA Prime Money Market Fund ................................... 3,251,504
-----------
TOTAL INVESTMENT COMPANY
(Cost $3,251,504) .............................................. 3,251,504
TOTAL INVESTMENTS - 99.98%***
- --------------------------------------------------------------------------------------------------
(Cost $91,429,999**) .......................................................... 72,755,812
NET OTHER ASSETS AND LIABILITIES - 0.02%
- --------------------------------------------------------------------------------------------------
12,402
TOTAL NET ASSETS - 100.00%
- --------------------------------------------------------------------------------------------------
$72,768,214
- --------------------------------------------------------------------------------
* Non-income producing.
** Aggregate cost for Federal tax purposes was $94,194,143.
*** The aggregate amount of foreign securities fair valued pursuant to a
systematic fair valuation model as a percent of net assets was 84.06%.
(C) Security sold within terms of a private placement memorandum exempt from
registration under section 144A of the Securities Act of 1933, as amended,
and may be sold only to dealers in that program or other "qualified
institutional investors." The securities have been determined to be liquid
under guidelines established by the Board of Trustees.
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
89
================================================================================
INTERNATIONAL STOCK FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(L) Security valued at fair value using methods determined in good faith by or
at the discretion of the Board of Trustees (see Note 2).
ADR American Depositary Receipt.
GDR Global Depositary Receipt.
PLC Public Limited Company.
SDR Swedish Depositary Receipt.
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
90
================================================================================
INTERNATIONAL STOCK FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
OTHER INFORMATION:
Industry Concentration
% of Net Assets
---------------
Oil, Gas & Consumable Fuels 9.7%
Pharmaceuticals 9.2%
Insurance 6.1%
Wireless Telecommunication Services 5.7%
Diversified Telecommunication Services 5.4%
Commercial Banks 5.0%
Food Products 4.9%
Tobacco 4.7%
Net Other Assets & Liabilities 4.5%
Gas Utilities 3.7%
Electric Utilities 3.2%
Communications Equipment 3.1%
Electrical Equipment 3.0%
Real Estate Management & Development 2.4%
Aerospace & Defense 2.3%
Beverages 2.3%
Food & Staples Retailing 2.1%
Diversified Financial Services 1.6%
Capital Markets 1.5%
Construction Materials 1.4%
Metals & Mining 1.3%
Electronic Equipment & Instruments 1.3%
Automobiles 1.3%
Industrial Conglomerates 1.2%
Textiles, Apparel & Luxury Goods 1.2%
Commercial Services & Supplies 1.1%
Office Electronics 1.1%
Hotels, Restaurants & Leisure 1.1%
Distributors 1.0%
Household Products 0.9%
Road & Rail 0.9%
IT Services 0.7%
Construction & Engineering 0.6%
Machinery 0.5%
Personal Products 0.5%
Transportation Infrastructure 0.4%
Health Care Equipment & Supplies 0.4%
Household Durables 0.3%
Chemicals 0.3%
Computers & Peripherals 0.3%
Semiconductors & Semiconductor Equipment 0.3%
Specialty Retail 0.2%
Software 0.2%
Paper & Forest Products 0.2%
Media 0.2%
Air Freight & Logistics 0.1%
Energy Equipment & Services 0.1%
Leisure Equipment & Products 0.1%
Multiline Retail 0.1%
Auto Components 0.1%
Multi-Utilities 0.1%
Marine 0.1%
Building Products * 0.0%
Health Care Providers & Services * 0.0%
---------------
100.0%
===============
*Rounds to 0.0%
The industry classification method used for purposes of this report's
allocation charts and portfolio of investments schedules may differ from the
industry subclassification(s) used for Trust compliance purposes.
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
91
================================================================================
TARGET RETIREMENT 2020 FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
PORTFOLIO ALLOCATION AS A PERCENTAGE OF NET ASSETS
AS OF DECEMBER 31, 2008
[PIE CHART OF PORTFOLIO ALLOCATION]
Equity Securities 48%
Debt Securities 24%
Foreign Equity Securities 20%
Alternative Asset Classes 7%
Money Market Securities and Other Net Assets 1%
[END CHART]
PORTFOLIO HOLDINGS AS A PERCENTAGE OF TOTAL MARKET VALUE
AS OF DECEMBER 31, 2008
MEMBERS Large Cap Growth Fund, Class Y 12%
MEMBERS International Stock Fund, Class Y 9%
MEMBERS High Income Fund, Class Y 9%
MEMBERS Large Cap Value Fund, Class Y 8%
Laudus International MarketMasters Fund 8%
MEMBERS Bond Fund, Class Y 7%
Manning & Napier Equity Series Fund 6%
CRM Mid Cap Value Fund, Institutional Class 5%
Victory Special Value Fund, Class I 5%
T. Rowe Price Spectrum Income Fund 5%
Gateway Fund, Class Y 5%
Neuberger Berman Partners Fund, Institutional Class 5%
Royce Value Fund, Institutional Class 4%
MEMBERS Small Cap Value Fund, Class Y 3%
Oppenheimer International Bond Fund, Class Y 3%
Principal International Emerging Markets Fund, Institutional Class 3%
PIMCO CommodityRealReturn Strategy Fund, Institutional Class 2%
SSgA Prime Money Market Fund 1%
- --------------------------------------------------------------------------------
Shares Value (Note 2)
- ------ --------------
INVESTMENT COMPANIES - 100.03%
- --------------------------------------------------------------------------------------------------
ALTERNATIVE ASSET CLASSES - 6.87%
18,321 Gateway Fund, Class Y .......................................... $ 442,644
24,498 PIMCO Commodity RealReturn Strategy Fund, Institutional Class .. 156,542
----------
599,186
----------
DEBT SECURITIES - 24.31%
58,219 MEMBERS Bond Fund, Class Y (R) ................................. 582,771
143,471 MEMBERS High Income Fund, Class Y (R) .......................... 797,702
48,581 Oppenheimer International Bond Fund, Class Y ................... 287,597
43,676 T. Rowe Price Spectrum Income Fund ............................. 451,176
----------
2,119,246
----------
EQUITY SECURITIES - 48.19%
25,532 CRM Mid Cap Value Fund, Institutional Class .................... 483,836
41,388 Manning & Napier Equity Series Fund ............................ 503,688
98,175 MEMBERS Large Cap Growth Fund, Class Y (R) ..................... 1,025,925
69,828 MEMBERS Large Cap Value Fund, Class Y (R) ...................... 683,613
44,142 MEMBERS Small Cap Value Fund, Class Y (R) ...................... 301,934
26,739 Neuberger Berman Partners Fund, Institutional Class ............ 413,656
45,379 Royce Value Fund, Institutional Class * ........................ 317,650
45,997 Victory Special Value Fund, Class I ............................ 471,469
----------
4,201,771
----------
FOREIGN EQUITY SECURITIES - 19.54%
62,420 Laudus International MarketMasters Fund, Select Shares ......... 681,622
98,160 MEMBERS International Stock Fund, Class Y (R) .................. 806,872
15,825 Principal International Emerging Markets Fund,
Institutional Class ............................................ 214,745
----------
1,703,239
----------
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
92
================================================================================
TARGET RETIREMENT 2020 FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
Shares Value (Note 2)
- ------ --------------
MONEY MARKET SECURITIES - 1.12%
97,799 SSgA Prime Money Market Fund $ 97,799
----------
TOTAL INVESTMENT COMPANIES - 100.03%
(Cost $10,613,852**) ........................................... 8,721,241
NET OTHER ASSETS AND LIABILITIES - (0.03)%
- --------------------------------------------------------------------------------------------------
(2,720)
TOTAL NET ASSETS - 100.00%
- --------------------------------------------------------------------------------------------------
$8,718,521
- --------------------------------------------------------------------------------
* Non-income producing.
** Aggregate cost for Federal tax purposes was $11,494,980.
(R) Affiliated Company (see Note 10).
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
93
================================================================================
TARGET RETIREMENT 2030 FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
PORTFOLIO ALLOCATION AS A PERCENTAGE OF NET ASSETS
AS OF DECEMBER 31, 2008
[PIE CHART OF PORTFOLIO ALLOCATION]
Equity Securities 54%
Foreign Equity Securities 23%
Debt Securities 14%
Alternative Asset Classes 8%
Money Market Securities and Other Net Assets 1%
[END CHART]
PORTFOLIO HOLDINGS AS A PERCENTAGE OF TOTAL MARKET VALUE
AS OF DECEMBER 31, 2008
MEMBERS Large Cap Growth Fund, Class Y 12%
MEMBERS International Stock Fund, Class Y 11%
Laudus International MarketMasters Fund 9%
MEMBERS Large Cap Value Fund, Class Y 8%
Victory Special Value Fund, Class I 7%
MEMBERS High Income Fund, Class Y 7%
CRM Mid Cap Value Fund, Institutional Class 7%
Gateway Fund, Class Y 6%
Manning & Napier Equity Series Fund 6%
Neuberger Berman Partners Fund, Institutional Class 6%
Royce Value Fund, Institutional Class 4%
MEMBERS Small Cap Value Fund, Class Y 4%
T. Rowe Price Spectrum Income Fund 4%
Principal International Emerging Markets Fund, Institutional Class 3%
MEMBERS Bond Fund, Class Y 3%
PIMCO CommodityRealReturn Strategy Fund, Institutional Class 2%
SSgA Prime Money Market Fund 1%
- --------------------------------------------------------------------------------
Shares Value (Note 2)
- ------ --------------
INVESTMENT COMPANIES - 100.03%
- --------------------------------------------------------------------------------------------------
ALTERNATIVE ASSET CLASSES - 7.62%
19,309 Gateway Fund, Class Y .......................................... $ 466,507
22,461 PIMCO CommodityRealReturn Strategy Fund, Institutional Class ... 143,524
----------
610,031
----------
DEBT SECURITIES - 13.97%
25,786 MEMBERS Bond Fund, Class Y (R) ................................. 258,120
102,867 MEMBERS High Income Fund, Class Y (R) .......................... 571,942
27,978 T. Rowe Price Spectrum Income Fund ............................. 289,014
----------
1,119,076
----------
EQUITY SECURITIES - 53.68%
29,430 CRM Mid Cap Value Fund, Institutional Class .................... 557,706
38,192 Manning & Napier Equity Series Fund ............................ 464,791
90,852 MEMBERS Large Cap Growth Fund, Class Y (R) ..................... 949,399
64,790 MEMBERS Large Cap Value Fund, Class Y (R) ...................... 634,292
47,441 MEMBERS Small Cap Value Fund, Class Y (R) ...................... 324,496
29,779 Neuberger Berman Partners Fund, Institutional Class ............ 460,679
47,792 Royce Value Fund, Institutional Class * ........................ 334,547
56,039 Victory Special Value Fund, Class I ............................ 574,396
----------
4,300,306
----------
FOREIGN EQUITY SECURITIES - 23.60%
68,554 Laudus International MarketMasters Fund, Select Shares ......... 748,608
105,380 MEMBERS InternationalStock Fund, Class Y (R) ................... 866,221
20,292 Principal International Emerging Markets Fund,
Institutional Class ............................................ 275,359
----------
1,890,188
----------
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
94
================================================================================
TARGET RETIREMENT 2030 FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
Shares Value (Note 2)
- ------ --------------
MONEY MARKET SECURITIES - 1.16%
93,187 SSgA Prime Money Market Fund ................................... $ 93,187
----------
TOTAL INVESTMENT COMPANIES - 100.03%
(Cost $10,331,120**) ........................................... 8,012,788
NET OTHER ASSETS AND LIABILITIES - (0.03)%
- --------------------------------------------------------------------------------------------------
(2,502)
TOTAL NET ASSETS - 100.00%
- --------------------------------------------------------------------------------------------------
$8,010,286
- --------------------------------------------------------------------------------
* Non-income producing.
** Aggregate cost for Federal tax purposes was $10,673,598.
(R) Affiliated Company (see Note 10).
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
95
================================================================================
TARGET RETIREMENT 2040 FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
PORTFOLIO ALLOCATION AS A PERCENTAGE OF NET ASSETS
AS OF DECEMBER 31, 2008
[PIE CHART OF PORTFOLIO ALLOCATION]
Equity Securities 60%
Foreign Equity Securities 27%
Alternative Asset Classes 8%
Debt Securities 4%
Money Market Securities and Other Net Assets 1%
[END CHART]
PORTFOLIO HOLDINGS AS A PERCENTAGE OF TOTAL MARKET VALUE
AS OF DECEMBER 31, 2008
MEMBERS Large Cap Growth Fund, Class Y 12%
MEMBERS International Stock Fund, Class Y 12%
Laudus International MarketMasters Fund 11%
Victory Special Value Fund, Class I 9%
CRM Mid Cap Value Fund, Institutional Class 9%
MEMBERS Large Cap Value Fund, Class Y 8%
Manning & Napier Equity Series Fund 6%
Neuberger Berman Partners Fund, Institutional Class 6%
Gateway Fund, Class Y 6%
Royce Value Fund, Institutional Class 5%
MEMBERS Small Cap Value Fund, Class Y 4%
Principal International Emerging Markets Fund, Institutional Class 4%
MEMBERS Bond Fund, Class Y 4%
PIMCO CommodityRealReturn Strategy Fund, Institutional Class 2%
SSgA Prime Money Market Fund 2%
- --------------------------------------------------------------------------------
Shares Value (Note 2)
- ------ --------------
INVESTMENT COMPANIES - 100.03%
- --------------------------------------------------------------------------------------------------
ALTERNATIVE ASSET CLASSES - 7.65%
15,552 Gateway Fund, Class Y .......................................... $ 375,747
17,636 PIMCO CommodityRealReturn Strategy Fund, Institutional Class ... 112,695
----------
488,442
----------
DEBT SECURITIES - 4.28%
27,282 MEMBERS Bond Fund, Class Y (R) ................................. 273,089
----------
EQUITY SECURITIES - 59.77%
30,195 CRM Mid Cap Value Fund, Institutional Class .................... 572,189
33,058 Manning & Napier Equity Series Fund ............................ 402,320
72,598 MEMBERS Large Cap Growth Fund, Class Y (R) ..................... 758,646
51,685 MEMBERS Large Cap Value Fund, Class Y (R) ...................... 505,993
42,548 MEMBERS Small Cap Value Fund, Class Y (R) ...................... 291,029
25,548 Neuberger Berman Partners Fund, Institutional Class ............ 395,235
43,072 Royce Value Fund, Institutional Class * ........................ 301,503
57,513 Victory Special Value Fund, Class I ............................ 589,513
----------
3,816,428
----------
FOREIGN EQUITY SECURITIES - 27.13%
63,202 Laudus International MarketMasters Fund, Select Shares ......... 690,162
91,980 MEMBERS International Stock Fund, Class Y (R) .................. 756,076
21,069 Principal International Emerging Markets Fund,
Institutional Class ............................................ 285,900
----------
1,732,138
----------
MONEY MARKET SECURITIES - 1.20%
77,057 SSgA Prime Money Market Fund ................................... 77,057
----------
TOTAL INVESTMENT COMPANIES - 100.03%
(Cost $8,110,099**) ............................................ 6,387,154
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
96
================================================================================
TARGET RETIREMENT 2040 FUND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
Value (Note 2)
--------------
NET OTHER ASSETS AND LIABILITIES - (0.03)%
- --------------------------------------------------------------------------------------------------
$ (1,910)
TOTAL NET ASSETS - 100.00%
- --------------------------------------------------------------------------------------------------
$6,385,244
- --------------------------------------------------------------------------------
* Non-income producing.
** Aggregate cost for Federal tax purposes was $8,505,566.
(R) Affiliated Company (see Note 10).
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
97
================================================================================
STATEMENTS OF ASSETS AND LIABILITIES AS OF DECEMBER 31, 2008
- --------------------------------------------------------------------------------
CONSERVATIVE MODERATE AGGRESSIVE
ALLOCATION ALLOCATION ALLOCATION
FUND FUND FUND
======================================================================================================================
ASSETS:
Investments in securities, at cost
Unaffiliated issuers $ 49,938,231 $ 97,096,196 $ 30,493,190
Affiliated issuers(1) 89,189,699 219,777,602 68,823,164
Net unrealized (depreciation)
Unaffiliated issuers (8,453,792) (20,476,955) (9,253,735)
Affiliated issuers(1) (13,967,875) (52,577,319) (20,430,329)
------------------------------------------------
Total investments at value 116,706,263 243,819,524 69,632,290
Cash 44 92 48
Receivables:
Investments sold - - -
Fund shares sold 149,036 701,593 244,133
Dividends and interest 189 120 203
Other assets - - -
------------------------------------------------
Total Assets 116,855,532 244,521,329 69,876,674
------------------------------------------------
LIABILITIES:
Payables:
Investments purchased 102,227 564,781 198,201
Fund shares redeemed 46,809 136,812 45,932
Accrued management fees 28,428 58,657 16,530
------------------------------------------------
Total Liabilities 177,464 760,250 260,663
------------------------------------------------
Net assets applicable to outstanding capital stock $116,678,068 $243,761,079 $ 69,616,011
================================================
REPRESENTED BY:
Capital stock and additional paid-in capital $143,800,246 $348,165,776 $112,354,357
Accumulated undistributed (distribution in excess of)
net investment income (loss) 240,488 391,722 69,076
Accumulated net realized gain (loss) on investments sold and
foreign currency related transactions (4,940,999) (31,742,145) (13,123,358)
Unrealized depreciation of investments (including appreciation
(depreciation) of foreign currency related transactions) (22,421,667) (73,054,274) $(29,684,064)
------------------------------------------------
Total net assets - representing net assets applicable to
outstanding capital stock $116,678,068 $243,761,079 $ 69,616,011
================================================
Number of Class Z Shares issued and outstanding 13,761,587 32,440,084 10,591,275
================================================
NET ASSET VALUE per share of outstanding capital stock,
offering price and redemption price $ 8.48 $ 7.51 $ 6.57
================================================
- --------------------------------------------------------
(1) See Note 10 for information on affiliated issuers.
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
98
================================================================================
MONEY MARKET HIGH INCOME DIVERSIFIED LARGE CAP LARGE CAP
FUND BOND FUND FUND INCOME FUND VALUE FUND GROWTH FUND
============================================================================================================
$158,847,161 $577,118,110 $106,860,986 $483,852,730 $683,744,398 $405,189,283
- - - - - -
- (11,177,435) (18,101,419) (48,718,152) (78,099,404) (55,647,749)
- - - - - -
- -----------------------------------------------------------------------------------------------------------
158,847,161 565,940,675 88,759,567 435,134,578 605,644,994 349,541,534
- - - - - -
- - - 433,421 - 1,816,874
297,372 2,217,888 136,501 242,109 3,156,175 1,243,847
259,542 5,052,449 1,933,187 3,231,433 1,492,582 553,289
- 514 - - - -
- -----------------------------------------------------------------------------------------------------------
159,404,075 573,211,526 90,829,255 439,041,541 610,293,751 353,155,544
- -----------------------------------------------------------------------------------------------------------
- - - 415,992 - -
- 383,407 45,650 320,671 539,265 435,105
55,410 265,716 55,206 257,910 310,885 247,150
- -----------------------------------------------------------------------------------------------------------
55,410 649,123 100,856 994,573 850,150 682,255
- -----------------------------------------------------------------------------------------------------------
$159,348,665 $572,562,403 $ 90,728,399 $438,046,968 $609,443,601 $352,473,289
===========================================================================================================
$159,348,665 $589,466,876 $122,656,258 $504,075,613 $786,502,996 $496,141,639
- 555,248 157,472 308,614 362,466 29,904
- (6,282,286) (13,983,912) (17,619,107) (99,322,485) (88,050,505)
- (11,177,435) (18,101,419) (48,718,152) (78,099,376) (55,647,749)
- -----------------------------------------------------------------------------------------------------------
$159,348,665 $572,562,403 $ 90,728,399 $438,046,968 $609,443,601 $352,473,289
===========================================================================================================
159,348,665 57,582,102 12,361,840 30,293,190 31,389,766 24,311,073
===========================================================================================================
$ 1.00 $ 9.94 $ 7.34 $ 14.46 $ 19.42 $ 14.50
===========================================================================================================
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
99
================================================================================
STATEMENTS OF ASSETS AND LIABILITIES AS OF DECEMBER 31, 2008
- --------------------------------------------------------------------------------
MID CAP MID CAP SMALL CAP
VALUE FUND GROWTH FUND VALUE FUND
======================================================================================================================
ASSETS:
Investments in securities, at cost
Unaffiliated issuers $205,354,542 $243,396,296 $ 8,017,775
Affiliated issuers(1) - - -
Net unrealized appreciation (depreciation)
Unaffiliated issuers (47,970,282) (78,205,725) (2,119,898)
Affiliated issuers(1) - - -
------------------------------------------------
Total investments at value 157,384,260 165,190,571 5,897,877
Cash - - -
Foreign currency(2) - - -
Receivables:
Investments sold 112,104 2,863,939 8,195
Fund shares sold 247,047 632,455 87,127
Dividends and interest 472,840 124,151 15,120
Other assets 1,102 - -
------------------------------------------------
Total Assets 158,217,353 168,811,116 6,008,319
------------------------------------------------
LIABILITIES:
Payable to custodian - - 2
Payables:
Investments purchased - 2,091,423 18,244
Fund shares redeemed 131,941 135,652 378
Accrued management fees 136,496 119,128 3,998
Accrued expenses and other payables - - -
------------------------------------------------
Total Liabilities 268,437 2,346,203 22,622
------------------------------------------------
Net assets applicable to outstanding capital stock $157,948,916 $166,464,913 $ 5,985,697
================================================
REPRESENTED BY:
Capital stock and additional paid-in capital $248,534,129 $312,104,390 $ 8,535,955
Accumulated undistributed (distribution in excess of)
net investment income (loss) 12,168 5,837 -
Accumulated net realized loss on investments sold and
foreign currency related transactions (42,627,099) (67,439,589) (430,360)
Unrealized depreciation of investments (including appreciation
(depreciation) of foreign currency related transactions) (47,970,282) (78,205,725) (2,119,898)
------------------------------------------------
Total net assets - representing net assets applicable to
outstanding capital stock $157,948,916 $166,464,913 $ 5,985,697
================================================
Number of Class Z Shares issued and outstanding 16,602,116 55,248,889 917,286
================================================
NET ASSET VALUE per share of outstanding capital stock,
offering price and redemption price $ 9.51 $ 3.01 $ 6.53
================================================
- ---------------------------------------------------------------
(1) See Note 10 for information on affiliated issuers.
(2) Cost of Foreign Currency of $1,025 and $264,840 for the Global Securities
and International Stock Funds, respectively.
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
100
================================================================================
GLOBAL TARGET TARGET TARGET
SMALL CAP SECURITIES INTERNATIONAL RETIREMENT RETIREMENT RETIREMENT
GROWTH FUND FUND STOCK FUND 2020 FUND 2030 FUND 2040 FUND
=============================================================================================================
$ 4,864,699 $ 51,312,986 $ 91,429,999 $ 5,736,888 $ 6,028,423 $ 5,091,376
- - - 4,876,964 4,302,697 3,018,723
(822,247) (22,047,795) (18,674,187) (1,214,464) (1,620,105) (1,289,055)
- - - (678,147) (698,227) (433,890)
- ------------------------------------------------------------------------------------------------------------
4,042,452 29,265,191 72,755,812 8,721,241 8,012,788 6,387,154
- 2 32,500 - - -
- 974 265,382 - - -
- - 27,097 27,423 - -
10,026 32,297 166,722 28,115 28,260 32,015
2,145 69,895 179,865 5 7 9
- 1,939 74,535 - - -
- ------------------------------------------------------------------------------------------------------------
4,054,623 29,370,298 73,501,913 8,776,784 8,041,055 6,419,178
- ------------------------------------------------------------------------------------------------------------
- - - - - -
- - 612,333 - 4,737 29,740
8,544 11,858 42,123 55,537 23,523 2,275
2,828 22,716 79,002 2,726 2,509 1,919
- - 241 - - -
- ------------------------------------------------------------------------------------------------------------
11,372 34,574 733,699 58,263 30,769 33,934
- ------------------------------------------------------------------------------------------------------------
$ 4,043,251 $ 29,335,724 $ 72,768,214 $ 8,718,521 $ 8,010,286 $ 6,385,244
============================================================================================================
$ 7,192,093 $ 52,249,626 $105,593,194 $12,358,070 $11,658,949 $ 9,511,079
- 48,913 (62,466) 11,421 33,992 31,910
(2,326,595) (913,666) (14,084,850) (1,758,359) (1,364,323) (1,434,800)
(822,247) (22,049,149) (18,677,664) (1,892,611) (2,318,332) (1,722,945)
- ------------------------------------------------------------------------------------------------------------
$ 4,043,251 $ 29,335,724 $ 72,768,214 $ 8,718,521 $ 8,010,286 $ 6,385,244
============================================================================================================
718,383 5,043,891 9,584,668 1,443,354 1,392,732 1,176,008
============================================================================================================
$ 5.63 $ 5.82 $ 7.59 $ 6.04 $ 5.75 $ 5.43
============================================================================================================
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
101
================================================================================
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2008
- --------------------------------------------------------------------------------
CONSERVATIVE MODERATE AGGRESSIVE
ALLOCATION ALLOCATION ALLOCATION
FUND FUND FUND
===========================================================================================================================
INVESTMENT INCOME:
Interest $ 2,349 $ 4,981 $ 3,278
Dividends
Unaffiliated issuers 1,784,161 2,488,009 372,558
Affiliated issuers(1) 2,123,404 3,818,628 584,270
Less: Foreign taxes withheld - - -
Securities lending income - - -
------------------------------------------------------
Total investment income 3,909,914 6,311,618 960,106
------------------------------------------------------
EXPENSES:
Management fees 307,462 763,339 235,825
Trustees' fees 2,028 6,668 2,083
Audit fees 6,636 16,313 6,679
Compliance expense 2,620 8,619 2,694
------------------------------------------------------
Total expenses before management fee reduction 318,746 794,939 247,281
Less management fee reduction (27,355) (77,619) (24,474)
------------------------------------------------------
Total expenses net of management fee reduction 291,391 717,320 222,807
------------------------------------------------------
NET INVESTMENT INCOME 3,618,523 5,594,298 737,299
------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments (including net realized
gain (loss) on foreign currency related transactions)
Unaffiliated issuers (3,000,083) (25,370,798) (10,100,246)
Affiliated issuers(1) (2,425,057) (7,252,286) (3,095,203)
Capital gain distributions received from underlying funds
Unaffiliated issuers 494,501 526,958 64,586
Affiliated issuers(1) 265,726 916,619 354,536
Net change in unrealized depreciation on investments
(including net unrealized appreciation (depreciation) on
foreign currency related transactions)(2) (20,937,322) (68,550,378) (29,087,936)
------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (25,602,235) (99,729,885) (41,864,263)
------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $(21,983,712) $(94,135,587) $(41,126,964)
======================================================
- -------------------------------------------------------
(1) See Note 10 for information on affiliated issuers.
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
102
================================================================================
- --------------------------------------------------------------------------------
MONEY MARKET HIGH INCOME DIVERSIFIED LARGE CAP LARGE CAP
FUND BOND FUND FUND INCOME FUND VALUE FUND GROWTH FUND
======================================================================================================================
$2,577,789 $ 32,413,409 $ 9,393,113 $ 17,144,495 $ 126,978 $ 114,442
- - - 9,792,453 27,261,076 7,406,128
- - - - - -
- - - - (13,339) (9,806)
- 871,432 82,089 375,048 296,886 234,031
- ----------------------------------------------------------------------------------------------------------------------
2,577,789 33,284,841 9,475,202 27,311,996 27,671,601 7,744,795
- ----------------------------------------------------------------------------------------------------------------------
542,205 3,391,576 869,758 3,764,258 5,477,468 4,325,277
3,481 19,256 3,795 18,567 34,452 20,276
10,804 29,170 6,046 28,742 41,449 30,107
4,498 24,892 4,908 24,006 44,538 26,213
- ----------------------------------------------------------------------------------------------------------------------
560,988 3,464,894 884,507 3,835,573 5,597,907 4,401,873
- - - - - -
- ----------------------------------------------------------------------------------------------------------------------
560,988 3,464,894 884,507 3,835,573 5,597,907 4,401,873
- ----------------------------------------------------------------------------------------------------------------------
2,016,801 29,819,947 8,590,695 23,476,423 22,073,694 3,342,922
- ----------------------------------------------------------------------------------------------------------------------
19,466 772,456 (11,911,310) (17,051,142) (99,539,308) (86,382,103)
- - - - - -
- - - - - -
- - - - - -
- (14,489,323) (14,023,592) (82,034,000) (312,297,708) (151,997,328)
- ----------------------------------------------------------------------------------------------------------------------
19,466 (13,716,867) (25,934,902) (99,085,142) (411,837,016) (238,379,431)
- ----------------------------------------------------------------------------------------------------------------------
$2,036,267 $ 16,103,080 $(17,344,207) $(75,608,719) $(389,763,322) $(235,036,509)
======================================================================================================================
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
103
================================================================================
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2008
- --------------------------------------------------------------------------------
MID CAP MID CAP SMALL CAP
VALUE FUND GROWTH FUND VALUE FUND
==========================================================================================================================
INVESTMENT INCOME:
Interest $ 103,841 $ 145,851 $ 7,427
Dividends
Unaffiliated issuers 5,917,621 1,772,631 125,972
Affiliated issuers(3) - - -
Less: Foreign taxes withheld - (5,647) -
Securities lending income 425,537 798,971 -
-----------------------------------------------------
Total investment income 6,446,999 2,711,806 133,399
-----------------------------------------------------
EXPENSES:
Management fees 2,501,687 2,418,039 68,417
Trustees' fees 8,692 10,544 172
Audit fees 20,811 21,923 640
Compliance expense 11,236 13,634 223
-----------------------------------------------------
Total expenses 2,542,426 2,464,140 69,452
-----------------------------------------------------
NET INVESTMENT INCOME (LOSS) 3,904,573 247,666 63,947
-----------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments (including net realized
gain (loss) on foreign currency related transactions)(1)
Unaffiliated issuers (43,084,929) (62,918,236) (391,085)
Affiliated issuers(3) - - -
Capital gain distributions received from underlying funds
Unaffiliated issuers - - -
Affiliated issuers(3) - - -
Net change in unrealized depreciation on investments
(including net unrealized appreciation (depreciation) on
foreign currency related transactions)(2) (67,225,588) (97,671,167) (1,521,635)
-----------------------------------------------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS (110,310,517) (160,589,403) (1,912,720)
-----------------------------------------------------
NET DECREASE IN NET ASSETS FROM OPERATIONS $(106,405,944) $(160,341,737) $(1,848,773)
=====================================================
- -------------------------------------------------------
(1) Includes foreign capital gains taxes paid of $1 and $39,772 for the Global
Securities and International Stock Funds, respectively.
(2) Net of deferred foreign capital gains taxes of $1,867 for the International
Stock Funds.
(3) See Note 10 for information on affiliated issuers.
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
104
GLOBAL TARGET TARGET TARGET
SMALL CAP SECURITIES INTERNATIONAL RETIREMENT RETIREMENT RETIREMENT
GROWTH FUND FUND STOCK FUND 2020 FUND 2030 FUND 2040 FUND
==================================================================================================================
$ 7,121 $ 10,817 $ 75,212 $ 166 $ 175 $ 190
46,842 1,925,120 4,748,655 104,885 81,275 54,680
- - - 96,908 80,601 49,026
- (108,727) (386,531) - - -
- 61,077 151,387 - - -
- ------------------------------------------------------------------------------------------------------------------
53,963 1,888,287 4,588,723 201,959 162,051 103,896
- ------------------------------------------------------------------------------------------------------------------
61,742 402,667 1,501,217 25,106 23,258 17,328
187 1,204 4,556 77 48 37
651 2,972 13,674 161 139 128
242 1,559 5,889 99 58 48
- ------------------------------------------------------------------------------------------------------------------
62,822 408,402 1,525,336 25,443 23,503 17,541
- ------------------------------------------------------------------------------------------------------------------
(8,859) 1,479,885 3,063,387 176,516 138,548 86,355
- ------------------------------------------------------------------------------------------------------------------
(2,289,210) (244,126) (13,589,243) (1,388,066) (957,281) (929,424)
- - - (399,642) (441,865) (531,708)
- - - 49,377 43,370 29,300
- - - 19,972 21,234 18,442
(826,558) (21,001,971) (48,756,010) (1,774,347) (2,227,775) (1,630,888)
- ------------------------------------------------------------------------------------------------------------------
(3,115,768) (21,246,097) (62,345,253) (3,492,706) (3,562,317) (3,044,278)
- ------------------------------------------------------------------------------------------------------------------
$(3,124,627) $(19,766,212) $(59,281,866) $(3,316,190) $(3,423,769) $(2,957,923)
==================================================================================================================
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
105
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
CONSERVATIVE MODERATE
ALLOCATION FUND ALLOCATION FUND
============================= ==============================
FOR THE YEAR ENDED DECEMBER 31, 2008 2007 2008 2007
================================================================================================================================
OPERATIONS:
Net investment income $ 3,618,523 $ 1,315,944 $ 5,594,298 $ 2,980,013
Net realized gain (loss) on investments (4,664,913) 1,131,426 (31,179,507) 5,264,470
Net change in unrealized appreciation
(depreciation) on investments (20,937,322) (1,628,228) (68,550,378) (4,924,759)
-----------------------------------------------------------------
Increase (decrease) in net assets from operations (21,983,712) 819,142 (94,135,587) 3,319,724
-----------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (3,634,290) (1,337,594) (5,366,853) (3,543,202)
Realized gains on investments (1,067,962) (124,860) (4,983,537) (885,283)
-----------------------------------------------------------------
Change in net assets from distributions (4,702,252) (1,462,454) (10,350,390) (4,428,485)
CLASS Z SHARE TRANSACTIONS:
Proceeds from sale of shares 84,012,864 61,428,617 129,854,947 181,374,016
Net asset value of shares issued in
reinvestment of distributions 4,702,252 1,462,454 10,350,390 4,428,485
-----------------------------------------------------------------
88,715,116 62,891,071 140,205,337 185,802,501
Cost of shares repurchased (12,098,409) (4,613,331) (10,239,275) (3,406,601)
-----------------------------------------------------------------
Net increase (decrease) in net assets
from capital share transactions 76,616,707 58,277,740 129,966,062 182,395,900
-----------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 49,930,743 57,634,428 25,480,085 181,287,139
-----------------------------------------------------------------
NET ASSETS:
Beginning of year $ 66,747,325 $ 9,112,897 $218,280,994 $ 36,993,855
-----------------------------------------------------------------
End of year $116,678,068 $66,747,325 $243,761,079 $218,280,994
=================================================================
Undistributed (distribution in excess of)
net investment income included in net assets $ 240,488 $ - $ 391,722 $ -
=================================================================
OTHER INFORMATION:
Class Z Capital Share transactions:
Shares sold 8,261,031 5,625,040 12,933,160 15,964,667
Shares issued in reinvestment of distributions 531,666 135,786 1,184,768 393,825
-----------------------------------------------------------------
8,792,697 5,760,826 14,117,928 16,358,492
Shares redeemed (1,231,070) (420,633) (1,144,403) (299,137)
-----------------------------------------------------------------
Net increase (decrease) in shares outstanding 7,561,627 5,340,193 12,973,525 16,059,355
=================================================================
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
106
================================================================================
- --------------------------------------------------------------------------------
AGGRESSIVE
ALLOCATION FUND MONEY MARKET FUND BOND FUND
============================= ============================== ===============================
2008 2007 2008 2007 2008 2007
=============================================================================================================
$ 737,299 $ 365,406 $ 2,016,801 $ 5,112,129 $ 29,819,947 $ 30,881,540
(12,776,327) 2,991,440 19,466 1,312 772,456 (4,743,510)
(29,087,936) (996,895) - - (14,489,323) 5,540,265
- -------------------------------------------------------------------------------------------------------------
(41,126,964) 2,359,951 2,036,267 5,113,441 16,103,080 31,678,295
- -------------------------------------------------------------------------------------------------------------
(668,223) (747,349) (2,036,267) (5,113,441) (29,315,915) (26,026,147)
(2,705,263) (1,054,128) - - - -
- -------------------------------------------------------------------------------------------------------------
(3,373,486) (1,801,477) (2,036,267) (5,113,441) (29,315,915) (26,026,147)
47,294,376 47,262,363 108,119,221 98,409,862 38,082,556 54,574,518
3,373,486 1,801,477 2,036,267 5,072,748 29,315,915 26,026,147
- -------------------------------------------------------------------------------------------------------------
50,667,862 49,063,840 110,155,488 103,482,610 67,398,471 80,600,665
(4,671,398) (3,049,096) 62,139,357) (92,612,240) (127,856,686) (99,291,968)
- -------------------------------------------------------------------------------------------------------------
45,996,464 46,014,744 48,016,131 10,870,370 (60,458,215) (18,691,303)
- -------------------------------------------------------------------------------------------------------------
1,496,014 46,573,218 48,016,131 10,870,370 (73,671,050) (13,039,155)
- -------------------------------------------------------------------------------------------------------------
$ 68,119,997 $21,546,779 $111,332,534 $100,462,164 $ 646,233,453 $659,272,608
- -------------------------------------------------------------------------------------------------------------
$ 69,616,011 $68,119,997 $159,348,665 $111,332,534 $ 572,562,403 $646,233,453
=============================================================================================================
$ 69,076 $ - $ - $ - $ 555,248 $ 205,601
=============================================================================================================
4,898,248 4,030,257 108,119,221 98,409,862 3,694,547 5,322,584
353,586 155,012 2,036,267 5,072,748 2,939,189 2,562,733
- -------------------------------------------------------------------------------------------------------------
5,251,834 4,185,269 110,155,488 103,482,610 6,633,736 7,885,317
(527,898) (258,269) (62,139,357) (92,612,240) (12,480,000) (9,682,054)
- -------------------------------------------------------------------------------------------------------------
4,723,936 3,927,000 48,016,131 10,870,370 (5,846,264) (1,796,737)
=============================================================================================================
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
107
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
HIGH INCOME FUND DIVERSIFIED INCOME FUND
============================== ================================
FOR THE YEAR ENDED DECEMBER 31, 2008 2007 2008 2007
===============================================================================================================================
OPERATIONS:
Net investment income $ 8,590,695 $ 11,293,723 $ 23,476,423 $ 29,174,710
Net realized gain (loss) on investments (11,911,310) (1,916,036) (17,051,142) 14,511,757
Net change in unrealized appreciation
(depreciation) on investments (14,023,592) (6,104,762) (82,034,000) (25,941,465)
-------------------------------------------------------------------------
Increase (decrease) in net assets
from operations (17,344,207) 3,272,925 (75,608,719) 17,745,002
-------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (9,037,895) (10,814,779) (23,213,706) (26,851,759)
Realized gains on investments - (66,885) (534,313) (17,304,597)
-------------------------------------------------------------------------
Change in net assets from distributions (9,037,895) (10,881,664) (23,748,019) (44,156,356)
CLASS Z SHARE TRANSACTIONS:
Proceeds from sale of shares 3,099,561 9,502,847 5,937,046 9,738,908
Net asset value of shares issued in
reinvestment of distributions 9,037,895 10,881,664 23,748,019 44,156,356
-------------------------------------------------------------------------
12,137,456 20,384,511 29,685,065 53,895,264
Cost of shares repurchased (30,071,870) (30,988,573) (129,887,650) (125,758,306)
-------------------------------------------------------------------------
Net increase (decrease) in net assets
from capital share transactions (17,934,414) (10,604,062) (100,202,585) (71,863,042)
-------------------------------------------------------------------------
TOTAL DECREASE IN NET ASSETS (44,316,516) (18,212,801) (199,559,323) (98,274,396)
-------------------------------------------------------------------------
NET ASSETS:
Beginning of year $135,044,915 $153,257,716 $ 637,606,291 $ 735,880,687
-------------------------------------------------------------------------
End of year $ 90,728,399 $135,044,915 $ 438,046,968 $ 637,606,291
=========================================================================
Undistributed (distribution in excess of)
net investment income included in net assets $ 157,472 $ 461,799 $ 308,614 $ 256,183
=========================================================================
OTHER INFORMATION:
Class Z Capital Share transactions:
Shares sold 377,537 932,906 360,534 522,491
Shares issued in reinvestment of distributions 1,219,447 1,140,146 1,641,275 2,498,744
-------------------------------------------------------------------------
1,596,984 2,073,052 2,001,809 3,021,235
Shares redeemed (3,386,525) (3,001,873) (7,897,382) (6,690,445)
-------------------------------------------------------------------------
Net increase (decrease) in shares outstanding (1,789,541) (928,821) (5,895,573) (3,669,210)
=========================================================================
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
108
================================================================================
- --------------------------------------------------------------------------------
LARGE CAP VALUE FUND LARGE CAP GROWTH FUND MID CAP VALUE FUND
================================== ================================ ===============================
2008 2007 2008 2007 2008 2007
=======================================================================================================================
$ 22,073,694 $ 25,140,565 $ 3,342,922 $ 2,277,274 $ 3,904,573 $ 4,046,841
(99,539,308) 110,518,250 (86,382,103) 51,827,163 (43,084,929) 37,003,319
(312,297,708) (122,534,310) (151,997,328) 23,625,381 (67,225,588) (38,436,046)
- -----------------------------------------------------------------------------------------------------------------------
(389,763,322) 13,124,505 (235,036,509) 77,729,818 (106,405,944) 2,614,114
- -----------------------------------------------------------------------------------------------------------------------
(21,524,382) (24,834,958) (3,336,233) (2,309,437) (3,619,123) (3,321,111)
(840,025) (110,586,111) (1,186,434) (19,098,900) (403,215) (37,639,303)
- -----------------------------------------------------------------------------------------------------------------------
(22,364,407) (135,421,069) (4,522,667) (21,408,337) (4,022,338) (40,960,414)
15,895,797 29,802,595 47,534,033 24,927,525 10,959,054 30,738,583
22,364,407 135,421,069 4,522,667 21,408,337 4,022,338 40,960,414
- -----------------------------------------------------------------------------------------------------------------------
38,260,204 165,223,664 52,056,700 46,335,862 14,981,392 71,698,997
(246,122,223) (204,271,626) (125,263,796) (107,178,673) (63,942,544) (59,227,022)
- -----------------------------------------------------------------------------------------------------------------------
(207,862,019) (39,047,962) (73,207,096) (60,842,811) (48,961,152) 12,471,975
- -----------------------------------------------------------------------------------------------------------------------
(619,989,748) (161,344,526) (312,766,272) (4,521,330) (159,389,434) (25,874,325)
- -----------------------------------------------------------------------------------------------------------------------
$1,229,433,349 $1,390,777,875 $ 665,239,561 $ 669,760,891 $ 317,338,350 $343,212,675
- -----------------------------------------------------------------------------------------------------------------------
$ 609,443,601 $1,229,433,349 $ 352,473,289 $ 665,239,561 $ 157,948,916 $317,338,350
=======================================================================================================================
$ 362,466 $ 238,093 $ 29,904 $ 32,874 $ 12,168 $ 325,430
=======================================================================================================================
685,787 838,613 2,377,672 1,072,115 871,303 1,688,545
1,150,037 4,271,398 284,492 909,546 403,077 2,652,712
- -----------------------------------------------------------------------------------------------------------------------
1,835,824 5,110,011 2,662,164 1,981,661 1,274,380 4,341,257
(9,493,310) (5,645,811) (6,834,822) (4,692,774) (5,364,886) (3,210,992)
- -----------------------------------------------------------------------------------------------------------------------
(7,657,486) (535,800) (4,172,658) (2,711,113) (4,090,506) 1,130,265
=======================================================================================================================
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
109
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
MID CAP GROWTH FUND SMALL CAP VALUE FUND
=============================== ==========================
FOR THE YEAR ENDED DECEMBER 31, 2008 2007 2008 2007(1)
=====================================================================================================================
OPERATIONS:
Net investment income $ 247,666 $ (1,590,143) $ 63,947 $ 50,654
Net realized gain (loss) on investments (62,918,236) 36,181,585 (391,085) 19,717
Net change in unrealized appreciation
(depreciation) on investments (97,671,167) (3,421,053) (1,521,635) (598,263)
---------------------------------------------------------------
Increase (decrease) in net assets
from operations (160,341,737) 31,170,389 (1,848,773) (527,892)
---------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (241,829) - (58,710) (49,800)
Realized gains on investments (3,840,199) (37,588,559) (1,246) (63,900)
---------------------------------------------------------------
Change in net assets from distributions (4,082,028) (37,588,559) (59,956) (113,700)
CLASS Z SHARE TRANSACTIONS:
Proceeds from sale of shares 11,326,492 21,510,473 2,761,819 6,215,991
Net asset value of shares issued in
reinvestment of distributions 4,082,028 37,588,559 59,956 113,700
---------------------------------------------------------------
15,408,520 59,099,032 2,821,775 6,329,691
Cost of shares repurchased (51,838,104) (59,407,053) (551,009) (64,439)
---------------------------------------------------------------
Net increase (decrease) in net assets
from capital share transactions (36,429,584) (308,021) 2,270,766 6,265,252
---------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (200,853,349) (6,726,191) 362,037 5,623,660
---------------------------------------------------------------
NET ASSETS:
Beginning of year $ 367,318,262 $374,044,453 $ 5,623,660 $ -
---------------------------------------------------------------
End of year $ 166,464,913 $367,318,262 $ 5,985,697 $5,623,660
===============================================================
Undistributed (distribution in excess of)
net investment income included in net assets $ 5,837 $ - $ - $ 854
===============================================================
OTHER INFORMATION:
Class Z Capital Share transactions:
Shares sold 2,778,937 3,337,309 345,858 629,326
Shares issued in reinvestment of distributions 780,262 6,407,545 9,415 12,732
---------------------------------------------------------------
3,559,199 9,744,854 355,273 642,058
Shares redeemed (12,214,832) (9,354,812) (72,967) (7,078)
---------------------------------------------------------------
Net increase (decrease) in shares outstanding (8,655,633) 390,042 282,306 634,980
===============================================================
- -------------------------------------------------------
(1) Fund commenced investment operations on May 1, 2007.
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
110
================================================================================
- --------------------------------------------------------------------------------
SMALL CAP GROWTH FUND GLOBAL SECURITIES FUND INTERNATIONAL STOCK FUND
=========================== ============================== ==============================
2008 2007(1) 2008 2007 2008 2007
=============================================================================================================
$ (8,859) $ 7,059 $ 1,479,885 $ 1,226,453 $ 3,063,387 $ 2,779,371
(2,289,210) 4,122 (244,126) 17,804,102 (13,589,243) 21,911,188
(826,558) 4,311 (21,001,971) (15,689,251) (48,756,010) (4,910,846)
- -------------------------------------------------------------------------------------------------------------
(3,124,627) 15,492 (19,766,212) 3,341,304 (59,281,866) 19,779,713
- -------------------------------------------------------------------------------------------------------------
(559) (6,500) (2,174,907) (1,145,322) (2,364,650) (3,443,415)
(788) (41,100) (667,981) (17,308,430) (6,216,528) (18,191,445)
- -------------------------------------------------------------------------------------------------------------
(1,347) (47,600) (2,842,888) (18,453,752) (8,581,178) (21,634,860)
1,984,927 6,065,122 1,729,364 5,117,282 5,064,766 22,698,217
1,347 47,600 2,842,888 18,453,752 8,581,178 21,634,860
- -------------------------------------------------------------------------------------------------------------
1,986,274 6,112,722 4,572,252 23,571,034 13,645,944 44,333,077
(850,945) (46,718) (8,661,497) (9,644,780) (37,165,993) (44,030,376)
- -------------------------------------------------------------------------------------------------------------
1,135,329 6,066,004 (4,089,245) 13,926,254 (23,520,049) 302,701
- -------------------------------------------------------------------------------------------------------------
(1,990,645) 6,033,896 (26,698,345) (1,186,194) (91,383,093) (1,552,446)
- -------------------------------------------------------------------------------------------------------------
$ 6,033,896 $ - $ 56,034,069 $ 57,220,263 $164,151,307 $165,703,753
- -------------------------------------------------------------------------------------------------------------
$ 4,043,251 $6,033,896 $ 29,335,724 $ 56,034,069 $ 72,768,214 $164,151,307
=============================================================================================================
$ - $ 559 $ 48,913 $ 82,523 $ (62,466) $ (609,555)
=============================================================================================================
237,028 606,417 216,936 341,627 495,769 1,554,388
145 4,750 440,417 1,762,108 846,956 1,595,705
- -------------------------------------------------------------------------------------------------------------
237,173 611,167 657,353 2,103,735 1,342,725 3,150,093
(125,383) (4,574) (1,056,000) (645,065) (4,010,459) (2,921,343)
- -------------------------------------------------------------------------------------------------------------
111,790 606,593 (398,647) 1,458,670 (2,667,734) 228,750
=============================================================================================================
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
111
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
TARGET RETIREMENT 2020 FUND TARGET RETIREMENT 2030 FUND
============================= =============================
FOR THE YEAR ENDED DECEMBER 31, 2008 2007(1) 2008 2007(1)
========================================================================================================================
OPERATIONS:
Net investment income $ 176,516 $ 22,279 $ 138,548 $ 10,338
Net realized gain (loss) on investments (1,718,359) 64,758 (1,334,542) 52,208
Net change in unrealized depreciation
on investments (1,774,347) (118,264) (2,227,775) (90,557)
------------------------------------------------------------------
Decrease in net assets from operations (3,316,190) (31,227) (3,423,769) (28,011)
------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (211,428) (45,500) (139,545) (31,900)
Realized gains on investments (35,204) - (25,438) -
------------------------------------------------------------------
Change in net assets from distributions (246,632) (45,500) (164,983) (31,900)
CLASS Z SHARE TRANSACTIONS:
Proceeds from sale of shares 11,494,999 2,607,664 10,553,873 1,554,233
Net asset value of shares issued in
reinvestment of distributions 246,632 45,500 164,983 31,900
------------------------------------------------------------------
11,741,631 2,653,164 10,718,856 1,586,133
Cost of shares repurchased (1,984,280) (52,445) (641,296) (4,744)
------------------------------------------------------------------
Net increase in net assets from
capital share transactions 9,757,351 2,600,719 10,077,560 1,581,389
------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 6,194,529 2,523,992 6,488,808 1,521,478
------------------------------------------------------------------
NET ASSETS:
Beginning of year $ 2,523,992 $ - $ 1,521,478 $ -
------------------------------------------------------------------
End of year $ 8,718,521 $2,523,992 $ 8,010,286 $1,521,478
==================================================================
Undistributed (distribution in excess of)
net investment income included in net assets $ 11,421 $ 12,789 $ 33,992 $ 5,591
==================================================================
OTHER INFORMATION:
Class Z Capital Share transactions:
Shares sold 1,407,757 262,957 1,287,487 156,630
Shares issued in reinvestment of distributions 38,543 4,697 26,965 3,329
------------------------------------------------------------------
1,446,300 267,654 1,314,452 159,959
Shares redeemed (265,109) (5,491) (81,180) (499)
------------------------------------------------------------------
Net increase in shares outstanding 1,181,191 262,163 1,233,272 159,460
==================================================================
- -------------------------------------------------------
(1) Fund commenced investment operations on October 1, 2007.
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
112
================================================================================
- --------------------------------------------------------------------------------
TARGET RETIREMENT 2040 FUND
=============================
2008 2007(1)
=============================
$ 86,355 $ 7,786
(1,413,390) 49,483
(1,630,888) (92,057)
- -----------------------------
(2,957,923) (34,788)
- -----------------------------
(80,259) (28,400)
(24,465) -
- -----------------------------
(104,724) (28,400)
8,734,729 1,240,553
104,724 28,400
- -----------------------------
8,839,453 1,268,953
(584,507) (12,820)
- -----------------------------
8,254,946 1,256,133
- -----------------------------
5,192,299 1,192,945
- -----------------------------
$ 1,192,945 $ -
- -----------------------------
$ 6,385,244 $1,192,945
=============================
$ 31,910 $ 5,485
=============================
1,117,010 124,175
17,272 2,980
- -----------------------------
1,134,282 127,155
(84,076) (1,353)
- -----------------------------
1,050,206 125,802
=============================
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
113
================================================================================
FINANCIAL HIGHLIGHTS FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING
- --------------------------------------------------------------------------------
CONSERVATIVE ALLOCATION FUND
===================================================
FOR THE YEAR ENDED DECEMBER 31,
------------------------------- INCEPTION
2008 2007 to 12/31/06(1)
=========================================================================================================================
NET ASSET VALUE at beginning of period $ 10.77 $ 10.60 $ 10.00
---------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(2) 0.35 0.45 0.23
Net realized and unrealized gain (loss) on investments (2.27) (0.03) 0.51
---------------------------------------------------
Total from investment operations (1.92) 0.42 0.74
---------------------------------------------------
LESS DISTRIBUTIONS:
Distributions from net investment income (0.27) (0.23) (0.14)
Distributions from capital gains (0.10) (0.02) -
---------------------------------------------------
Total distributions (0.37) (0.25) (0.14)
---------------------------------------------------
Net increase (decrease) in net asset value (2.29) 0.17 0.60
---------------------------------------------------
NET ASSET VALUE at end of period $ 8.48 $ 10.77 $ 10.60
===================================================
TOTAL RETURN(3) (17.89)% 3.92% 7.34%(5)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (in 000's) $116,678 $ 66,747 $ 9,113
Ratio of expenses to average net assets
Before management fee reduction 0.31% 0.31% 0.34%(6)
After management fee reduction 0.28% 0.21% 0.24%(6)
Ratio of net investment income to average net assets 3.53% 4.12% 4.25%(6)
Portfolio Turnover 71% 28% 24%(5)
MODERATE ALLOCATION FUND
===================================================
FOR THE YEAR ENDED DECEMBER 31,
------------------------------- INCEPTION
2008 2007 to 12/31/06(1)
=========================================================================================================================
NET ASSET VALUE at beginning of period $ 11.21 $ 10.86 $ 10.00
---------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(2) 0.21 0.28 0.20
Net realized and unrealized gain (loss) on investments (3.55) 0.32 0.79
---------------------------------------------------
Total from investment operations (3.34) 0.60 0.99
---------------------------------------------------
LESS DISTRIBUTIONS:
Distributions from net investment income (0.17) (0.19) (0.13)
Distributions from capital gains (0.19) (0.06) (0.00)(4)
---------------------------------------------------
Total distributions (0.36) (0.25) (0.13)
---------------------------------------------------
Net increase (decrease) in net asset value (3.70) 0.35 0.86
---------------------------------------------------
NET ASSET VALUE at end of period $ 7.51 $ 11.21 $ 10.86
===================================================
TOTAL RETURN(3) (30.23)% 5.56% 9.87%(5)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (in 000's) $243,761 $218,281 $36,994
Ratio of expenses to average net assets
Before management fee reduction 0.31% 0.31% 0.34%(6)
After management fee reduction 0.28% 0.21% 0.24%(6)
Ratio of net investment income to average net assets 2.20% 2.45% 3.74%(6)
Portfolio Turnover 69% 29% 23%(5)
- -------------------------------------------------------
(1) Commenced investment operations June 30, 2006.
(2) Based on average shares outstanding during the year.
(3) These returns are after all charges at the mutual fund level have been
subtracted. These returns are higher than the returns at the separate
account level because charges made at the separate account level have not
been subtracted. Total returns are not annualized for periods less than one
year.
(4) Amount represents less than $0.005 per share.
(5) Not annualized.
(6) Annualized.
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
114
================================================================================
FINANCIAL HIGHLIGHTS FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING
- --------------------------------------------------------------------------------
AGGRESSIVE ALLOCATION FUND
==========================================================
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------- INCEPTION
2008 2007 to 12/31/06(1)
================================================================================================================================
NET ASSET VALUE at beginning of period $ 11.61 $ 11.10 $ 10.00
--------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(2) 0.09 0.09 0.15
Net realized and unrealized gain (loss) on investments (4.74) 0.77 1.10
--------------------------------------------------------
Total from investment operations (4.65) 0.86 1.25
--------------------------------------------------------
LESS DISTRIBUTIONS:
Distributions from net investment income (0.06) (0.14) (0.15)
Distributions from capital gains (0.33) (0.21) -
--------------------------------------------------------
Total distributions (0.39) (0.35) (0.15)
--------------------------------------------------------
Net increase (decrease) in net asset value (5.04) 0.51 1.10
--------------------------------------------------------
NET ASSET VALUE at end of period $ 6.57 $ 11.61 $ 11.10
========================================================
TOTAL RETURN(3) (41.09)% 7.69% 12.49%(5)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (in 000's) $69,616 $68,120 $21,547
Ratio of expenses to average net assets
Before management fee reduction 0.31% 0.31% 0.33%(6)
After management fee reduction 0.28% 0.21% 0.23%(6)
Ratio of net investment income to average net assets 0.94% 0.79% 2.71%(6)
Portfolio Turnover 67% 46% 21%(5)
MONEY MARKET FUND
==============================================================
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
2008 2007 2006 2005 2004
================================================================================================================================
NET ASSET VALUE at beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(2) 0.02 0.05 0.04 0.03 0.01
Net realized and unrealized gain on investments 0.00(4) 0.00(4) 0.00(4) - 0.00(4)
--------------------------------------------------------------
Total from investment operations 0.02 0.05 0.04 0.03 0.01
--------------------------------------------------------------
LESS DISTRIBUTIONS:
Distributions from net investment income (0.02) (0.05) (0.04) (0.03) (0.01)
--------------------------------------------------------------
Net increase (decrease) in net asset value - - - - -
--------------------------------------------------------------
NET ASSET VALUE at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
==============================================================
TOTAL RETURN(3) 1.75% 4.71% 4.54% 2.78% 0.92%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (in 000's) $159,349 $111,333 $100,462 $94,637 $129,004
Ratio of expenses to average net assets 0.47% 0.46% 0.46% 0.46% 0.45%
Ratio of net investment income to average net assets 1.67% 4.58% 4.42% 2.73% 0.90%
- -------------------------------------------------------
(1) Commenced investment operations June 30, 2006.
(2) Based on average shares outstanding during the year.
(3) These returns are after all charges at the mutual fund level have been
subtracted. These returns are higher than the returns at the separate
account level because charges made at the separate account level have not
been subtracted. Total returns are not annualized for periods less than one
year.
(4) Amount represents less than $0.005 per share.
(5) Not annualized.
(6) Annualized.
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
115
================================================================================
FINANCIAL HIGHLIGHTS FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING
- --------------------------------------------------------------------------------
BOND FUND
================================================================
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
2008 2007 2006 2005 2004
=================================================================================================================================
NET ASSET VALUE at beginning of period $ 10.19 $ 10.11 $ 10.17 $ 10.34 $ 10.43
----------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(1) 0.50 0.49 0.47 0.42 0.42
Net realized and unrealized gain (loss) on investments (0.21) 0.02 (0.06) (0.16) (0.07)
----------------------------------------------------------------
Total from investment operations 0.29 0.51 0.41 0.26 0.35
----------------------------------------------------------------
LESS DISTRIBUTIONS:
Distributions from net investment income (0.54) (0.43) (0.47) (0.43) (0.44)
----------------------------------------------------------------
Net increase (decrease) in net asset value (0.25) 0.08 (0.06) (0.17) (0.09)
----------------------------------------------------------------
NET ASSET VALUE at end of period $ 9.94 $ 10.19 $ 10.11 $ 10.17 $ 10.34
================================================================
TOTAL RETURN(2) 2.86% 5.05% 4.01% 2.51% 3.36%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (in 000's) $572,562 $646,233 $659,273 $623,976 $574,156
Ratio of expenses to average net assets 0.56% 0.56% 0.56% 0.56% 0.55%
Ratio of net investment income to average net assets 4.84% 4.81% 4.54% 4.06% 4.02%
Portfolio Turnover 12% 29% 27% 51% 67%
HIGH INCOME FUND
================================================================
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
2008 2007 2006 2005 2004
=================================================================================================================================
NET ASSET VALUE at beginning of period $ 9.54 $ 10.16 $ 10.01 $ 10.40 $ 10.16
----------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(1) 0.67 0.76 0.74 0.68 0.74
Net realized and unrealized gain (loss) on investments (2.07) (0.53) 0.16 (0.42) 0.16
----------------------------------------------------------------
Total from investment operations (1.40) 0.23 0.90 0.26 0.90
----------------------------------------------------------------
LESS DISTRIBUTIONS:
Distributions from net investment income (0.80) (0.85) (0.74) (0.65) (0.66)
Distributions from capital gains - (0.00)(3) (0.01) - -
----------------------------------------------------------------
Total distributions (0.80) (0.85) (0.75) (0.65) (0.66)
----------------------------------------------------------------
Net increase (decrease) in net asset value (2.20) (0.62) 0.15 (0.39) 0.24
----------------------------------------------------------------
NET ASSET VALUE at end of period $ 7.34 $ 9.54 $ 10.16 $ 10.01 $ 10.40
================================================================
TOTAL RETURN(2) (14.74)% 2.29% 9.03% 2.51% 8.92%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (in 000's) $ 90,728 $135,045 $153,528 $134,032 $118,318
Ratio of expenses to average net assets 0.76% 0.76% 0.77% 0.76% 0.76%
Ratio of net investment income to average net assets 7.42% 7.27% 7.12% 6.47% 7.08%
Portfolio Turnover 45% 73% 64% 86%(4) 58%
- -------------------------------------------------------
(1) Based on average shares outstanding during the year.
(2) These returns are after all charges at the mutual fund level have been
subtracted. These returns are higher than the returns at the separate
account level because charges made at the separate account level have not
been subtracted. Total returns are not annualized for periods less than one
year.
(3) Amount represents less than $0.005 per share.
(4) Subadviser change February 28, 2005.
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
116
================================================================================
FINANCIAL HIGHLIGHTS FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING
- --------------------------------------------------------------------------------
DIVERSIFIED INCOME FUND
====================================================================
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
2008 2007 2006 2005 2004
===================================================================================================================================
NET ASSET VALUE at beginning of period $ 17.62 $ 18.46 $ 19.40 $ 19.11 $ 18.04
--------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(1) 0.72 0.79 0.49 0.42 0.43
Net realized and unrealized gain (loss) on investments (3.05) (0.32) 1.45 0.32 1.08
--------------------------------------------------------------------
Total from investment operations (2.33) 0.47 1.94 0.74 1.51
--------------------------------------------------------------------
LESS DISTRIBUTIONS:
Distributions from net investment income (0.81) (0.80) (0.55) (0.45) (0.44)
Distributions from capital gains (0.02) (0.51) (2.33) - -
--------------------------------------------------------------------
Total distributions (0.83) (1.31) (2.88) (0.45) (0.44)
--------------------------------------------------------------------
Net increase (decrease) in net asset value (3.16) (0.84) (0.94) 0.29 1.07
--------------------------------------------------------------------
NET ASSET VALUE at end of period $ 14.46 $ 17.62 $ 18.46 $ 19.40 $ 19.11
====================================================================
TOTAL RETURN(2) (13.25)% 2.51% 9.98%(3) 3.89% 8.34%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (in 000's) $438,047 $637,606 $735,881 $785,301 $785,856
Ratio of expenses to average net assets 0.71% 0.71% 0.71% 0.71% 0.70%
Ratio of net investment income to average net assets 4.37% 4.21% 2.52% 2.18% 2.34%
Portfolio Turnover 14% 41% 62% 52% 38%
LARGE CAP VALUE FUND
====================================================================
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
2008 2007 2006 2005 2004
===================================================================================================================================
NET ASSET VALUE at beginning of period $ 31.49 $ 35.14 $ 31.62 $ 30.47 $ 27.52
--------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(1) 0.65 0.68 0.65 0.54 0.46
Net realized and unrealized gain (loss) on investments (11.99) (0.45) 5.87 1.16 2.95
--------------------------------------------------------------------
Total from investment operations (11.34) 0.23 6.52 1.70 3.41
--------------------------------------------------------------------
LESS DISTRIBUTIONS:
Distributions from net investment income (0.71) (0.71) (0.67) (0.55) (0.46)
Distributions from capital gains (0.02) (3.17) (2.33) - -
--------------------------------------------------------------------
Total distributions (0.73) (3.88) (3.00) (0.55) (0.46)
--------------------------------------------------------------------
Net increase (decrease) in net asset value (12.07) (3.65) 3.52 1.15 2.95
--------------------------------------------------------------------
NET ASSET VALUE at end of period $ 19.42 $ 31.49 $ 35.14 $ 31.62 $ 30.47
====================================================================
TOTAL RETURN(2) (35.99)% 0.60% 20.55% 5.58% 12.43%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (in 000's) $609,444 $1,229,433 $1,390,778 $1,239,868 $1,205,082
Ratio of expenses to average net assets 0.61% 0.61% 0.61% 0.61% 0.60%
Ratio of net investment income to average net assets 2.42% 1.87% 1.91% 1.74% 1.67%
Portfolio Turnover 38% 45% 35% 28% 15%
- -------------------------------------------------------
(1) Based on average shares outstanding during the year.
(2) These returns are after all charges at the mutual fund level have been
subtracted. These returns are higher than the returns at the separate
account level because charges made at the separate account level have not
been subtracted. Total returns are not annualized for periods less than one
year.
(3) In 2006, 0.01% of the Fund's total return consisted of a voluntary
reimbursement by the Adviser for a realized investment loss. Excluding this
reimbursement, the total return would have been 9.97%.
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
117
================================================================================
FINANCIAL HIGHLIGHTS FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING
- --------------------------------------------------------------------------------
LARGE CAP GROWTH FUND
=================================================================
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
2008 2007 2006 2005 2004
==================================================================================================================================
NET ASSET VALUE at beginning of period $ 23.36 $ 21.47 $ 19.97 $ 19.68 $ 18.19
-----------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(1) 0.12 0.08 0.07 0.17 0.15
Net realized and unrealized gain (loss) on investments (8.80) 2.59 1.51 0.30 1.48
-----------------------------------------------------------------
Total from investment operations (8.68) 2.67 1.58 0.47 1.63
-----------------------------------------------------------------
LESS DISTRIBUTIONS:
Distributions from net investment income (0.14) (0.09) (0.08) (0.18) (0.14)
Distributions from capital gains (0.04) (0.69) - - -
-----------------------------------------------------------------
Total distributions (0.18) (0.78) (0.08) (0.18) (0.14)
-----------------------------------------------------------------
Net increase (decrease) in net asset value (8.86) 1.89 1.50 0.29 1.49
-----------------------------------------------------------------
NET ASSET VALUE at end of period $ 14.50 $ 23.36 $ 21.47 $ 19.97 $ 19.68
=================================================================
TOTAL RETURN(2) (37.20)% 12.36% 7.88% 2.42% 8.94%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (in 000's) $352,473 $665,240 $669,761 $688,812 $693,762
Ratio of expenses to average net assets 0.82% 0.81% 0.81% 0.81% 0.80%
Ratio of net investment income to average net assets 0.62% 0.34% 0.35% 0.86% 0.82%
Portfolio Turnover 123% 76% 87% 73% 26%
MID CAP VALUE FUND
=================================================================
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
2008 2007 2006 2005 2004
==================================================================================================================================
NET ASSET VALUE at beginning of period $ 15.34 $ 17.54 $ 17.30 $ 16.58 $ 14.66
-----------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(1) 0.21 0.21 0.20 0.11 0.18
Net realized and unrealized gain (loss) on investments (5.80) (0.15) 2.74 1.61 2.14
-----------------------------------------------------------------
Total from investment operations (5.59) 0.06 2.94 1.72 2.32
-----------------------------------------------------------------
LESS DISTRIBUTIONS:
Distributions from net investment income (0.22) (0.18) (0.20) (0.11) (0.15)
Distributions from capital gains (0.02) (2.08) (2.50) (0.89) (0.25)
-----------------------------------------------------------------
Total distributions (0.24) (2.26) (2.70) (1.00) (0.40)
-----------------------------------------------------------------
Net increase (decrease) in net asset value (5.83) (2.20) 0.24 0.72 1.92
-----------------------------------------------------------------
NET ASSET VALUE at end of period $ 9.51 $ 15.34 $ 17.54 $ 17.30 $ 16.58
=================================================================
TOTAL RETURN(2) (36.45)% 0.25% 16.96% 10.32% 15.86%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (in 000's) $157,949 $317,338 $343,213 $275,279 $218,060
Ratio of expenses to average net assets 1.02% 1.01% 1.01% 1.01% 1.00%
Ratio of net investment income to average net assets 1.56% 1.16% 1.12% 0.62% 1.20%
Portfolio Turnover 81% 68% 95% 29% 25%
- -------------------------------------------------------
(1) Based on average shares outstanding during the year.
(2) These returns are after all charges at the mutual fund level have been
subtracted. These returns are higher than the returns at the separate
account level because charges made at the separate account level have not
been subtracted. Total returns are not annualized for periods less than one
year.
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
118
================================================================================
FINANCIAL HIGHLIGHTS FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING
- --------------------------------------------------------------------------------
MID CAP GROWTH FUND
===========================================================
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
2008 2007 2006 2005 2004
============================================================================================================================
NET ASSET VALUE at beginning of period $ 5.75 $ 5.89 $ 6.74 $ 6.80 $ 6.20
-----------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(2) 0.00(4) (0.03) (0.02) (0.01) 0.00(4)
Net realized and unrealized gain (loss) on investments (2.68) 0.53 0.78 0.59 0.81
-----------------------------------------------------------
Total from investment operations (2.68) 0.50 0.76 0.58 0.81
-----------------------------------------------------------
LESS DISTRIBUTIONS:
Distributions from net investment income (0.00)(4) - - - (0.00)(4)
Distributions from capital gains (0.06) (0.64) (1.61) (0.64) (0.21)
-----------------------------------------------------------
Total distributions (0.06) (0.64) (1.61) (0.64) (0.21)
-----------------------------------------------------------
Net increase (decrease) in net asset value (2.74) (0.14) (0.85) (0.06) 0.60
-----------------------------------------------------------
NET ASSET VALUE at end of period $ 3.01 $ 5.75 $ 5.89 $ 6.74 $ 6.80
===========================================================
TOTAL RETURN(3) (46.89)% 8.44% 11.38% 8.75% 13.41%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (in 000's) $166,465 $367,318 $374,044 $373,921 $336,673
Ratio of expenses to average net assets 0.87% 0.86% 0.86% 0.86% 0.85%
Ratio of net investment income to average net assets 0.09% (0.41)% (0.22)% (0.13)% 0.04%
Portfolio Turnover 108% 104% 204% 88% 77%
SMALL CAP VALUE FUND
=============================
FOR THE
YEAR ENDED INCEPTION
2008 to 12/31/07(1)
==============================================================================================
NET ASSET VALUE at beginning of period $ 8.86 $ 10.00
-----------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(2) 0.08 0.09
Net realized and loss on investments (2.34) (1.05)
-----------------------------
Total from investment operations (2.26) (0.96)
-----------------------------
LESS DISTRIBUTIONS:
Distributions from net investment income (0.07) (0.08)
Distributions from capital gains (0.00)(4) (0.10)
-----------------------------
Total distributions (0.07) (0.18)
-----------------------------
Net decrease in net asset value (2.33) (1.14)
-----------------------------
NET ASSET VALUE at end of period $ 6.53 $ 8.86
=============================
TOTAL RETURN(3) (25.54)% (9.62)%(5)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (in 000's) $ 5,986 $ 5,624
Ratio of expenses to average net assets 1.12% 1.04%(6)
Ratio of net investment income to average net assets 1.03% 1.45%(6)
Portfolio Turnover 28% 13%(5)
- -------------------------------------------------------
(1) Commenced investment operations May 1, 2007.
(2) Based on average shares outstanding during the year.
(3) These returns are after all charges at the mutual fund level have been
subtracted. These returns are higher than the returns at the separate
account level because charges made at the separate account level have not
been subtracted. Total returns are not annualized for periods less than one
year.
(4) Amount represents less than $0.005 per share.
(5) Not annualized.
(6) Annualized.
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
119
================================================================================
FINANCIAL HIGHLIGHTS FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING
- --------------------------------------------------------------------------------
SMALL CAP GROWTH FUND
=============================
FOR THE
YEAR ENDED INCEPTION
2008 to 12/31/07(1)
=============================================================================================
NET ASSET VALUE at beginning of period $ 9.95 $ 10.00
--------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(2) (0.01) 0.01
Net realized and unrealized gain (loss) on investments (4.31) 0.02
--------------------------
Total from investment operations (4.32) 0.03
--------------------------
LESS DISTRIBUTIONS:
Distributions from net investment income (0.00)(4) (0.01)
Distributions from capital gains (0.00)(4) (0.07)
--------------------------
Total distributions (0.00) (0.08)
--------------------------
Net decrease in net asset value (4.32) (0.05)
--------------------------
NET ASSET VALUE at end of period $ 5.63 $ 9.95
--------------------------
TOTAL RETURN(3) (43.41)% 0.26%(5)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (in 000's) $ 4,043 $ 6,034
Ratio of expenses to average net assets 1.12% 1.03%(6)
Ratio of net investment income to average net assets (0.16)% 0.19%(6)
Portfolio Turnover 109% 75%(5)
GLOBAL SECURITIES FUND
===============================================================
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
2008 2007 2006 2005 2004
================================================================================================================================
NET ASSET VALUE at beginning of period $ 10.30 $ 14.36 $ 12.87 $ 11.49 $ 9.72
---------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(2) 0.29 0.31 0.14 0.09 0.06
Net realized and unrealized gain (loss) on investments (4.18) 0.57 2.07 1.52 1.73
---------------------------------------------------------------
Total from investment operations (3.89) 0.88 2.21 1.61 1.79
---------------------------------------------------------------
LESS DISTRIBUTIONS:
Distributions from net investment income (0.46) (0.31) (0.16) (0.09) (0.02)
Distributions from capital gains (0.13) (4.63) (0.56) (0.14) -
---------------------------------------------------------------
Total distributions (0.59) (4.94) (0.72) (0.23) (0.02)
---------------------------------------------------------------
Net increase (decrease) in net asset value (4.48) (4.06) 1.49 1.38 1.77
---------------------------------------------------------------
NET ASSET VALUE at end of period $ 5.82 $ 10.30 $ 14.36 $ 12.87 $ 11.49
===============================================================
TOTAL RETURN(3) (38.14)% 5.77% 17.38% 13.97% 18.42%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (in 000's) $29,336 $56,034 $57,220 $42,450 $29,979
Ratio of expenses to average net assets 0.97% 0.96% 0.97% 0.97% 0.96%
Ratio of net investment income to average net assets 3.50% 2.06% 1.01% 0.80% 0.60%
Portfolio Turnover 15% 112%(7) 21% 27% 18%
- -------------------------------------------------------
(1) Commenced investment operations May 1, 2007.
(2) Based on average shares outstanding during the year.
(3) These returns are after all charges at the mutual fund level have been
subtracted. These returns are higher than the returns at the separate
account level because charges made at the separate account level have not
been subtracted. Total returns are not annualized for periods less than one
year.
(4) Amount represents less than $0.005 per share.
(5) Not annualized.
(6) Annualized.
(7) Subadviser change May 1, 2007.
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
120
================================================================================
FINANCIAL HIGHLIGHTS FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING
- --------------------------------------------------------------------------------
INTERNATIONAL STOCK FUND
===============================================================
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
2008 2007 2006 2005 2004
================================================================================================================================
NET ASSET VALUE at beginning of period $ 13.40 $ 13.78 $ 12.38 $ 11.36 $ 9.54
---------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(2) 0.26 0.23 0.19 0.17 0.12
Net realized and unrealized gain (loss) on investments (5.27) 1.36 2.78 1.71 1.84
---------------------------------------------------------------
Total from investment operations (5.01) 1.59 2.97 1.88 1.96
---------------------------------------------------------------
LESS DISTRIBUTIONS:
Distributions from net investment income (0.26) (0.32) (0.20) (0.15) (0.14)
Distributions from capital gains (0.54) (1.65) (1.37) (0.71) -
---------------------------------------------------------------
Total distributions (0.80) (1.97) (1.57) (0.86) (0.14)
---------------------------------------------------------------
Net increase (decrease) in net asset value (5.81) (0.38) 1.40 1.02 1.82
---------------------------------------------------------------
NET ASSET VALUE at end of period $ 7.59 $ 13.40 $ 13.78 $ 12.38 $ 11.36
===============================================================
TOTAL RETURN(3) (38.62)% 11.42% 24.19% 16.53% 20.48%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (in 000's) $72,768 $164,151 $165,704 $108,482 $78,477
Ratio of expenses to average net assets 1.22% 1.21% 1.22% 1.21% 1.21%
Ratio of net investment income to average net assets 2.45% 1.60% 1.48% 1.47% 1.16%
Portfolio Turnover 43% 62% 62% 52% 46%
TARGET RETIREMENT 2020 FUND
=============================
FOR THE
YEAR ENDED INCEPTION
2008 to 12/31/07(1)
=============================================================================================
NET ASSET VALUE at beginning of period $ 9.63 $10.00
---------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(2) 0.22 0.13
Net realized and unrealized loss on investments (3.60) (0.32)
---------------------------
Total from investment operations (3.38) (0.19)
---------------------------
LESS DISTRIBUTIONS:
Distributions from net investment income (0.16) (0.18)
Distributions from capital gains (0.05) -
---------------------------
Total distributions (0.21) (0.18)
---------------------------
Net decrease in net asset value (3.59) (0.37)
---------------------------
NET ASSET VALUE at end of period $ 6.04 $ 9.63
===========================
TOTAL RETURN(3) (35.31)% (1.94)%(4)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (in 000's) $ 8,719 $2,524
Ratio of expenses to average net assets 0.40% 0.43%(5)
Ratio of net investment income to average net assets 2.80% 5.17%(5)
Portfolio Turnover 74% 3%(4)
- -------------------------------------------------------
(1) Commenced investment operations October 1, 2007.
(2) Based on average shares outstanding during the year.
(3) These returns are after all charges at the mutual fund level have been
subtracted. These returns are higher than the returns at the separate
account level because charges made at the separate account level have not
been subtracted. Total returns are not annualized for periods less than one
year.
(4) Not annualized.
(5) Annualized.
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
121
================================================================================
FINANCIAL HIGHLIGHTS FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING
- --------------------------------------------------------------------------------
TARGET RETIREMENT 2030 FUND
==============================
FOR THE
YEAR ENDED INCEPTION
2008 to 12/31/07(1)
=====================================================================================
NET ASSET VALUE at beginning of period $ 9.54 $10.00
--------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(2) 0.18 0.09
Net realized and unrealized loss on investments (3.82) (0.34)
--------------------
Total from investment operations (3.64) (0.25)
--------------------
LESS DISTRIBUTIONS:
Distributions from net investment income (0.11) (0.21)
Distributions from capital gains (0.04) -
--------------------
Total distributions (0.15) (0.21)
--------------------
Net decrease in net asset value (3.79) (0.46)
--------------------
NET ASSET VALUE at end of period $ 5.75 $ 9.54
====================
TOTAL RETURN(3) (38.35)% (2.51)%(4)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (in 000's) $ 8,010 $1,521
Ratio of expenses to average net assets 0.40% 0.44%(5)
Ratio of net investment income to average net assets 2.38% 3.53%(5)
Portfolio Turnover 52% 1%(4)
TARGET RETIREMENT 2040 FUND
==============================
FOR THE
YEAR ENDED INCEPTION
2008 to 12/31/07(1)
=====================================================================================
NET ASSET VALUE at beginning of period $ 9.48 $10.00
--------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(2) 0.14 0.07
Net realized and unrealized loss
on investments (4.06) (0.36)
--------------------
Total from investment operations (3.92) (0.29)
--------------------
LESS DISTRIBUTIONS:
Distributions from net investment income (0.08) (0.23)
Distributions from capital gains (0.05) -
--------------------
Total distributions (0.13) (0.23)
--------------------
Net decrease in net asset value (4.05) (0.52)
--------------------
NET ASSET VALUE at end of period $ 5.43 $ 9.48
====================
TOTAL RETURN(3) (41.65)% (2.86)%(4)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (in 000's) $ 6,385 $1,193
Ratio of expenses to average net assets 0.40% 0.44%(5)
Ratio of net investment income to average net assets 1.99% 2.76(5)
Portfolio Turnover 62% 1%(4)
- -------------------------------------------------------
(1) Commenced investment operations October 1, 2007.
(2) Based on average shares outstanding during the year.
(3) These returns are after all charges at the mutual fund level have been
subtracted. These returns are higher than the returns at the separate
account level because charges made at the separate account level have not
been subtracted. Total returns are not annualized for periods less than one
year.
(4) Not annualized.
(5) Annualized.
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
122
================================================================================
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. DESCRIPTION OF THE FUND
The Ultra Series Fund (the "Trust"), a Massachusetts business trust, is
registered under the Investment Company Act of 1940 (the "1940 Act"), as
amended, as a diversified, open-end management investment company. The Trust is
a series fund with 18 investment portfolios (the "funds"), each with different
investment objectives and policies. The funds currently available are the Money
Market Fund, Bond Fund, High Income Fund, Diversified Income Fund, Large Cap
Value Fund, Large Cap Growth Fund, Mid Cap Value Fund, Mid Cap Growth Fund,
Small Cap Value Fund, Small Cap Growth Fund, Global Securities Fund, and
International Stock Fund (collectively, the "Core Funds"), the Conservative
Allocation Fund, Moderate Allocation Fund and Aggressive Allocation Fund
(collectively, the "Target Allocation Funds"), and the Target Retirement 2020
Fund, Target Retirement 2030 Fund, and Target Retirement 2040 Fund
(collectively, the "Target Date Funds"). The Declaration of Trust permits the
Board of Trustees to issue an unlimited number of full and fractional shares of
the Trust without par value. As of the date of this report, the trustees have
authorized the issuance of one class of shares of the funds designated as Class
Z. Class Z shares are offered to separate accounts (the "Accounts") of CUNA
Mutual Insurance Society and to qualified pension and retirement plans of CUNA
Mutual Insurance Society or its affiliates ("CUNA Mutual Group"). The Trust
may, in the future, offer other share classes to separate accounts of insurance
companies and to qualified pension and retirement plans that are not affiliated
with CUNA Mutual Group. The Trust does not offer shares directly to the general
public.
In December 2008, the Trust's Board of Trustees approved a reclassification of
Class Z shares as Class I shares, effective as of May 1, 2009, and the
addition of a class of shares, Class II shares. Class II shares are not
currently offered for sale.
The Trust has entered into a Management Agreement with MEMBERS Capital
Advisors, Inc. (the "Investment Adviser" or "MCA"). The Investment Adviser, in
turn, has entered into subadvisory agreements with certain subadvisers
("Subadvisers") for the management of the investments of the High Income, Mid
Cap Growth, Small Cap Value, Small Cap Growth, Global Securities, and
International Stock Funds and a portion of the Mid Cap Value Fund.
2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles ("GAAP") in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
income and expenses during the reported period. Actual results could differ
from those estimates. The following is a summary of significant accounting
policies consistently followed by each fund in the preparation of its financial
statements.
PORTFOLIO VALUATION: Equity securities and exchange-traded funds ("ETFs")
listed on any U.S. or foreign stock exchange or quoted on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") are
valued at the last quoted sale price or official closing price on that
exchange or NASDAQ on the valuation day (provided that, for securities traded
on NASDAQ, the funds utilize the NASDAQ Official Closing Price). If no sale
occurs, (a) equities traded on a U.S. exchange or on NASDAQ are valued at the
mean between the closing bid and closing asked prices and (b) equity
securities traded on a foreign exchange are valued at the official bid price.
Debt securities purchased with a remaining maturity of 61 days or more are
valued by a pricing service selected by the Trust or on the basis of
dealer-supplied quotations. Investments in shares of open-ended mutual funds,
including money market funds, are valued at their daily net asset value
("NAV") which is calculated as of the close of regular trading on the New York
Stock Exchange (usually 3:00 p.m. Central Time) on each day on which the New
York Stock Exchange is open for business. NAV per share is determined by
dividing each fund's total net assets by the number of shares of such fund
outstanding at the time of calculation. Because the assets of each Target
Allocation and each Target Date Fund consist primarily of shares of underlying
funds, the NAV of each fund is determined based on the NAV's of the underlying
funds. Total net assets are determined by adding the total current value of
portfolio securities, cash, receivables, and other assets and subtracting
liabilities. Short-term instruments having maturities of 60 days or less and
all securities in the Money Market Fund are valued on an amortized cost basis,
which approximates market value.
Over-the-counter securities not listed or traded on NASDAQ are valued at the
last sale price on the valuation day. If no sale occurs on the valuation day,
an over-the-counter security is valued at the mean between the last bid and
asked prices. Over-the-counter options are valued based upon prices provided by
market makers in such securities or dealers in such currencies. Exchange traded
options are valued at the last sale or bid price on the exchange where such
option contract is principally traded. futures contracts generally are valued
at the settlement price established by the exchange(s) on which the contracts
are primarily traded. The Trust's Valuation Committee (the "Committee") shall
estimate the fair value of futures positions affected by the daily limit by
using its valuation procedures for determining fair value, when necessary. Spot
and forward foreign currency exchange contracts are valued based on quotations
supplied by dealers in such contracts. Overnight
- --------------------------------------------------------------------------------
123
================================================================================
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
repurchase agreements are valued at cost, and term repurchase agreements (i.e,
those whose maturity exceeds seven days), swaps, caps, collars and floors are
valued at the average of the closing bids obtained daily from at least one
dealer.
The value of all assets and liabilities expressed in foreign currencies will be
converted into U.S. dollar values using the then-current exchange rate.
All other securities for which either quotations are not readily available, no
other sales have occurred, or in the Investment Adviser's opinion, do not
reflect the current market value, are appraised at their fair values as
determined in good faith by the Committee and under the general supervision of
the Board of Trustees. When fair value pricing of securities is employed, the
prices of securities used by the funds to calculate NAV may differ from market
quotations or official closing prices. Because the Target Allocation and Target
Date Funds primarily invest in underlying funds, government securities and
short-term paper, it is not anticipated that the Investment Adviser will need
to "fair" value any of the investments of these funds. However, an underlying
fund may need to "fair" value one or more of its investments, which may, in
turn, require a Target Allocation or Target Date Fund to do the same because of
delays in obtaining the underlying Fund's NAV.
A fund's investments (or underlying fund) will be valued at fair value if in
the judgment of the Committee an event impacting the value of an investment
occurred between the closing time of a security's primary market or exchange
(for example, a foreign exchange or market) and the time the fund's share price
is calculated as of the close of regular trading on the New York Stock Exchange
(usually 3:00 p.m. Central Time). Significant events may include, but are not
limited to, the following: (1) significant fluctuations in domestic markets,
foreign markets or foreign currencies; (2) occurrences not directly tied to the
securities markets such as natural disasters, armed conflicts or significant
government actions; and (3) major announcements affecting a single issuer or an
entire market or market sector. In responding to a significant event, the
Committee would determine the fair value of affected securities considering
factors including, but not limited to: fundamental analytical data relating to
the investment; the nature and duration of any restrictions on the disposition
of the investment; and the forces influencing the market(s) in which the
investment is purchased or sold. The Committee may rely on an independent fair
valuation service to adjust the valuations of foreign equity securities based
on specific market-movement parameters established by the Committee and
approved by the Trust.
SECURITY TRANSACTIONS AND INVESTMENT INCOME: Security transactions are
accounted for on a trade date basis. Net realized gains or losses on sales are
determined by the identified cost method. Interest income is recorded on an
accrual basis. Dividend income is recorded on ex-dividend date. Amortization
and accretion are recorded on the effective yield method.
FEDERAL INCOME TAXES: It is each fund's policy to comply with the requirements
of Subchapter M of the Internal Revenue Code of 1986 applicable to regulated
investment companies and to distribute substantially all its taxable income to
its shareholders. Accordingly, no provisions for federal income taxes are
recorded in the accompanying financial statements.
In July 2006, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes--an
Interpretation of FASB Statement No. 109" ("FIN 48"). FIN 48 addresses the
accounting for uncertainty in income taxes and establishes for all entities,
including pass-through entities, such as the funds, a minimum threshold for
financial statement recognition of the benefit of positions taken in filing tax
returns (including whether an entity is taxable in a particular jurisdiction),
and requires certain expanded tax disclosures. As required, the funds adopted
FIN 48 effective June 29, 2007 for all open tax years and have determined that
no material uncertain tax positions exist. As a result, the funds have not
recorded any liabilities for material unrecognized tax benefits as of December
31, 2008. It is the funds' policy to recognize accrued interest and penalties
related to uncertain tax benefits in income taxes, as appropriate. Tax years
that remain open to examination by major tax jurisdictions include 2004 through
2008.
EXPENSES: Expenses that are directly related to one fund are charged directly
to that fund. Other operating expenses are prorated to the funds on the basis
of relative net assets.
REPURCHASE AGREEMENTS: Each fund may engage in repurchase agreements. In a
repurchase agreement, a security is purchased for a relatively short period
(usually not more than 7 days) subject to the obligation to sell it back to the
issuer at a fixed time and price plus accrued interest. The funds will enter
into repurchase agreements only with member banks of the Federal Reserve System
and with "primary dealers" in U.S. Government securities. As of December 31,
2008, none of the funds had open repurchase agreements.
The Trust has established a procedure providing that the securities serving as
collateral for each repurchase agreement must be delivered to the Trust's
custodian either physically or in book-entry form and that the collateral must
be marked
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NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
to market daily to ensure that the repurchase agreement is fully collateralized
at all times. In the event of bankruptcy or other default by a seller of a
repurchase agreement, a fund could experience one of the following: delays in
liquidating the underlying securities during the period in which the fund seeks
to enforce its rights thereto, possible subnormal levels of income, declines in
value of the underlying securities, or lack of access to income during this
period and the expense of enforcing its rights.
FOREIGN CURRENCY TRANSACTIONS: The books and records are maintained in U.S.
dollars. Foreign currency denominated transactions (i.e., market value of
investment securities, assets and liabilities, purchases and sales of
investment securities, and income and expenses) are translated into U.S.
dollars at the current rate of exchange.
Each fund, except the Money Market Fund, reports certain foreign
currency-related transactions as components of realized gains or losses for
financial reporting purposes, whereas such components are treated as ordinary
income for federal income tax purposes. The Money Market Fund can only invest
in U.S. dollar-denominated foreign money market securities.
The funds do not isolate the portion of gains and losses on investments in
securities that is due to changes in the foreign exchange rates from that which
is due to changes in market prices of securities. Such amounts are categorized
as gain or loss on investments for financial reporting purposes.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS: Each fund, except the Money Market
Fund, may purchase and sell forward foreign currency exchange contracts for
defensive or hedging purposes. When entering into forward foreign currency
exchange contracts, the funds agree to receive or deliver a fixed quantity of
foreign currency for an agreed-upon price on an agreed future date. These
contracts are valued daily. The funds' net assets reflect unrealized gains or
losses on the contracts as measured by the difference between the forward
foreign currency exchange rates at the dates of entry into the contracts and
the forward rates at the reporting date. The funds realize a gain or a loss at
the time the forward foreign currency exchange contracts are settled or closed
out with an offsetting contract. Realized and unrealized gains and losses are
included in the Statements of Operations. As of December 31, 2008, none of the
funds had open forward foreign currency exchange contracts.
If a fund enters into a forward foreign currency exchange contract to buy
foreign currency for any purpose, the fund will be required to place cash or
other liquid assets in a segregated account with the fund's custodian in an
amount equal to the value of the fund's total assets committed to the
consummation of the forward contract. If the value of the securities in the
segregated account declines, additional cash or securities will be placed in
the segregated account so that the value of the account will equal the amount
of the fund's commitment with respect to the contract.
FUTURES CONTRACTS: Each fund, except the Money Market Fund, may purchase and
sell futures contracts and purchase and write options on futures contracts. The
funds will engage in futures contracts or related options transactions to hedge
certain market positions. Upon entering into a futures contract, the fund is
required to pledge to the broker an amount of cash, U.S. Government securities
or other assets, equal to a certain percentage of the contract (initial margin
deposit). Subsequent payments, known as "variation margin," are made or
received by the fund each day, depending on the daily fluctuations in the fair
value of the futures contract. When a fund enters into a futures contract, the
fund segregates cash or other liquid securities, of any type or maturity, equal
in value to the fund's commitment. The fund recognizes a gain or loss equal to
the daily change in the value of the futures contracts. Should market
conditions move unexpectedly, the fund may not achieve the anticipated benefits
of the futures contracts and may realize a loss. As of December 31, 2008, none
of the funds have open futures contracts.
DELAYED DELIVERY SECURITIES: Each fund may purchase securities on a when-issued
or delayed delivery basis. "When-issued" refers to securities whose terms are
available and for which a market exists, but that have not been issued. For
when-issued or delayed delivery transactions, no payment is made until delivery
date, which is typically longer than the normal course of settlement, and often
a month or more after the purchase. When a fund enters into an agreement to
purchase securities on a when-issued or delayed delivery basis, the fund
segregates cash or other liquid securities, of any type or maturity, equal in
value to the fund's commitment. Losses may arise due to changes in the market
value of the underlying securities, if the counterparty does not perform under
the contract, or if the issuer does not issue the securities due to political,
economic or other factors. As of December 31, 2008, none of the funds had
entered into such transactions.
RECLASSIFICATION ADJUSTMENTS: Paid-in capital, undistributed net investment
income, and accumulated net realized gain (loss) have been adjusted in the
Statements of Assets and Liabilities for permanent book-tax differences for all
funds.
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125
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NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Differences primarily relate to the tax treatment of net operating losses,
paydown gains and losses, foreign currency gains and losses, and distributions
from real estate investment trusts and passive foreign investment companies.
To the extent these book and tax differences are permanent in nature, such
amounts are reclassified at the end of the fiscal year among paid-in capital in
excess of par value, undistributed net investment income (loss) and
undistributed net realized gain (loss) on investments and foreign currency
translations. Accordingly, at December 31, 2008 reclassifications were recorded
as follows:
UNDISTRIBUTED NET ACCUMULATED NET
FUND PAID-IN CAPITAL INVESMENT INCOME (LOSS) REALIZED GAIN (LOSS)
- ---- --------------- ----------------------- --------------------
Conservative Allocation $ - $ 256,255 $ (256,255)
Moderate Allocation - 164,277 (164,277)
Money Market - 19,466 (19,466)
Bond (6,650,383) (154,385) 6,804,768
High Income - 142,873 (142,873)
Diversified Income - (210,286) 210,286
Large Cap Value - (424,939) 424,939
Large Cap Growth - (9,659) 9,659
Mid Cap Value - (598,712) 598,712
Small Cap Value (63) (6,091) 6,154
Small Cap Growth (9,240) 8,859 381
Global Securities (290) 661,412 (661,122)
International Stock - (151,648) 151,648
Target Retirement 2020 - 33,544 (33,544)
Target Retirement 2030 - 29,398 (29,398)
Target Retirement 2040 - 20,329 (20,329)
FAIR VALUE MEASUREMENTS: Each fund adopted the Financial Accounting Standards
Board ("FASB") Statement of Financial Accounting Standards No. 157, Fair Value
Measurements ("FAS 157"), effective January 1, 2008. In accordance with FAS
157, fair value is defined as the price that each fund would receive upon
selling an investment in a timely transaction to an independent buyer in the
principal or most advantageous market of the investment. FAS 157 has
established a three-tier hierarchy to maximize the use of observable market
data "inputs" and minimize the use of unobservable "inputs" and to establish
classification of fair value measurements for disclosure purposes. Inputs refer
broadly to the assumptions that market participants would use in pricing the
asset or liability, including assumptions about risk (for example, the risk
inherent in a particular valuation technique used to measure fair value
including such a pricing model and/or the risk inherent in the inputs to the
valuation technique). Inputs may be observable or unobservable. Observable
inputs are inputs that reflect the assumptions market participants would use in
pricing the asset or liability developed based on market data obtained from
sources independent of the reporting entity. Unobservable inputs are inputs
that reflect the reporting entity's own assumptions about the assumptions
market participants would use in pricing the asset or liability developed based
on the best information available in the circumstances. The three-tier
hierarchy of inputs is summarized in the three broad Levels listed below:
o Level 1 - quoted prices in active markets for identical investments
o Level 2 - other significant observable inputs (including quoted prices
for similar investments, interest rates, prepayment speeds, credit risk,
etc.)
o Level 3 - significant unobservable inputs (including the Fund's own
assumptions in determining the fair value of investments)
The valuation techniques used by the funds to measure fair value for the year
ended December 31, 2008 maximized the use of observable inputs and minimized
the use of unobservable inputs. The funds utilized the following fair value
techniques: multi-dimensional relational pricing model and option adjusted
spread pricing; the funds estimated the price that would have prevailed in a
liquid market for an international equity security given information available
at the time of evaluation.
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126
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NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The following is a summary of the inputs used as of December 31, 2008 in
valuing the funds' investments carried at fair value:
ACTIVE MARKETS FOR SIGNIFICANT OTHER SIGNIFICANT
IDENTICAL INVESTMENTS OBSERVABLE INPUTS UNOBSERVABLE INPUTS FAIR VALUE
FUND (LEVEL 1) (LEVEL 2) (LEVEL 3) AT 12/31/2008
- ---- --------- --------- --------- -------------
Conservative Allocation $116,706,263 $ - $- $116,706,263
Moderate Allocation 243,819,524 - - 243,819,524
Aggressive Allocation 69,632,290 - - 69,632,290
Money Market 10,812,776 148,034,385 - 158,847,161
Bond 193,779,462 372,161,213 - 565,940,675
High Income 6,436,887 82,322,680 - 88,759,567
Diversified Income 228,877,430 206,257,148 - 435,134,578
Large Cap Value 605,644,994 - - 605,644,994
Large Cap Growth 349,541,534 - - 349,541,534
Mid Cap Value 157,384,260 - - 157,384,260
Mid Cap Growth 165,190,571 - - 165,190,571
Small Cap Value 5,897,877 - - 5,897,877
Small Cap Growth 4,042,452 - - 4,042,452
Global Securities 11,968,832 17,296,359 -(1) 29,265,191
International Stock 7,080,153 65,675,659 -(1) 72,755,812
Target Retirement 2020 8,721,241 - - 8,721,241
Target Retirement 2030 8,012,788 - - 8,012,788
Target Retirement 2040 6,387,154 - - 6,387,154
- -------------------------------------------
(1) Includes securities valued at zero as of December 31, 2008.
The following is a reconciliation of the fair valuations using significant
unobservable inputs (Level 3) for the Funds during the year ended December 31,
2008:
FAIR VALUE PURCHASES AT FAIR VALUE
BEGINNING BALANCE COST/SALES AMORTIZATION REALIZED UNREALIZED ENDING BALANCE
FUND 1/1/2008 (PROCEEDS) DISC/(PREM) GAIN/(LOSS) GAIN/(LOSS) 12/31/2008
- ---- -------- ---------- ----------- ----------- ----------- ----------
International Stock $98,068 $- $- $- $(98,068) $-
NEW ACCOUNTING PRONOUNCEMENTS: In March 2008, FASB issued Statement of
Financial Accounting Standards No. 161, "Disclosures about Derivative
Instruments and Hedging Activities" ("FAS 161"). FAS 161 is effective for
fiscal years and interim periods beginning after November 15, 2008. FAS 161
requires enhanced disclosures about funds' derivative and hedging activities.
Management has evaluated FAS 161 and has determined that there is no impact on
the Funds' financial statements as the Funds currently do not hold derivative
financial instruments.
3. ADVISORY, ADMINISTRATION AND DISTRIBUTION AGREEMENTS
For services under the Management Agreement, MCA is entitled to receive a
management fee, which is calculated daily and paid monthly, at an annual rate
based upon the following percentages of average daily net assets: 0.45% for the
Money Market Fund, 0.55% for the Bond Fund, 0.75% for the High Income Fund,
0.70% for the Diversified Income Fund, 0.60% for the Large Cap Value Fund,
0.80% for the Large Cap Growth Fund, 1.00% for the Mid Cap Value Fund, 0.85%
for the Mid Cap Growth Fund, 1.10% for the Small Cap Value and Small Cap Growth
Funds, 0.95% for the Global Securities Fund, 1.20% for the International Stock
Fund, 0.30% for each of the Target Allocation Funds, and 0.40% for each of the
Target Date Funds. MCA contractually agreed to reduce the management fee of the
Target Allocation Funds from .30% to .20% until April 30, 2008. That
contractual agreement was discontinued effective May 1, 2008.
MCA is solely responsible for the payment of all fees to the Subadvisers. The
Subadvisers for the funds are Shenkman Capital Management, Inc. for the High
Income Fund, Wellington Management Company, LLP for a portion of the Mid Cap
Value Fund, the entire Mid Cap Growth Fund and Small Cap Value Fund, Paradigm
for the Small Cap Growth Fund, Mondrian Investment Partners Limited for the
Global Securities Fund and Lazard Asset Management LLC for the International
Stock Fund. MCA manages the other portion of the Mid Cap Value Fund, and the
entire Bond Fund, Diversified Income Fund, Large Cap Growth Fund, Large Cap
Value Fund, Money Market Fund, Target Allocation Funds and the Target Date
Funds.
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127
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NOTES TO FINANCIAL STATEMENTS
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In addition to the management fee, the Trust is responsible for fees of the
disinterested trustees, brokerage commissions and other expenses incurred in
connection with the acquisition or disposition of investments, costs of
borrowing money, expenses for independent audits, tax, compliance and
extraordinary expenses as approved by a majority of the disinterested trustees.
Certain officers and trustees of the Trust are also officers of MCA. With the
exception of the Chief Compliance Officer, the Trust does not compensate these
officers or trustees. As part of the Trust's required compliance program, the
Trust pays a portion of the Chief Compliance Officer's annual salary.
Unaffiliated trustees receive from the Trust an annual retainer, which
compensates them for each regular Board and Committee meeting attended, with
additional remuneration paid to the Chair of the Board and the Chair of the
Audit Committee. Unaffiliated trustees also receive a per meeting fee for each
special meeting, if any, attended.
All fund shares are distributed through CUNA Brokerage Services. Inc. ("CUNA
Brokerage"), an affiliated company, pursuant to a distribution agreement
between the Trust and CUNA Brokerage. CUNA Brokerage's principal place of
business is located at 2000 Heritage Way, Waverly, IA 50677.
The Trust has entered into participation agreements with CUNA Mutual Insurance
Society setting forth the terms and conditions pursuant to which the Accounts
and retirement plans purchase and redeem shares of the funds. Investments in
the Trust by the Accounts are made through either variable annuity or variable
life insurance contracts. Net purchase payments under the variable contracts
are placed in one or more sub-accounts of the Accounts, and the assets of each
sub-account are invested (without sales or redemption charges) in shares of the
fund corresponding to that sub-account. Shares are purchased and redeemed at a
price equal to the shares' net asset value. The assets of each fund are held
separate from the assets of the other funds.
4. DIVIDENDS FROM NET INCOME AND DISTRIBUTIONS OF CAPITAL GAINS
The Money Market Fund declares dividends from net investment income and net
realized gains from investment transactions, if any, daily, which are
reinvested in additional full and fractional shares of the Fund. The Bond Fund,
High Income Fund, Diversified Income Fund, Large Cap Value Fund, Large Cap
Growth Fund, Small Cap Value, Small Cap Growth, Mid Cap Value Fund, Mid Cap
Growth Fund, Global Securities Fund, International Stock Fund, Target
Allocation Funds, and Target Date Funds declare dividends from net investment
income and net realized gains from investment transactions, if any, annually,
which are reinvested in additional full and fractional shares of the respective
funds.
Income and capital gain distributions, if any, are determined in accordance
with federal income tax regulations, which may differ from accounting
principles generally accepted in the United States of America. Taxable
distributions from income and realized capital gains of the funds may differ
from book amounts earned during the period due to differences in the timing of
capital gains recognition, and due to the reclassification of certain gains or
losses from capital to income.
5. SECURITIES TRANSACTIONS
For the year ended December 31, 2008, aggregate cost of purchases and proceeds
from sales of securities, other than short-term investments, were as follows:
U.S. GOVERNMENT SECURITIES OTHER INVESTMENT SECURITIES
-------------------------- ---------------------------
FUND PURCHASES SALES PURCHASES SALES
- ---- --------- ----- --------- -----
Conservative Allocation $ - $ - $144,702,051 $ 73,124,404
Moderate Allocation - - 296,070,944 177,061,778
Aggressive Allocation - - 95,650,205 53,286,106
Bond 44,571,909 71,956,827 25,333,090 45,018,983
High Income - - 47,102,332 69,223,998
Diversified Income 2,586,186 49,858,122 71,904,265 120,869,594
Large Cap Value - - 344,520,490 549,549,478
Large Cap Growth - - 661,746,769 738,922,765
Mid Cap Value - - 199,335,671 244,178,909
Mid Cap Growth - - 303,688,155 343,889,894
Small Cap Value - - 3,806,134 1,703,818
Small Cap Growth - - 7,523,327 5,921,002
Global Securities - - 6,415,166 10,582,727
International Stock - - 52,314,937 78,808,278
Target Retirement 2020 - - 14,172,525 4,695,751
Target Retirement 2030 - - 12,928,775 3,050,198
Target Retirement 2040 - - 10,880,643 2,760,999
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128
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NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6. FOREIGN SECURITIES
Each fund may invest in foreign securities; provided, however, that the Money
Market Fund is limited to U.S. dollar-denominated foreign money market
securities. Foreign securities refer to securities that are: (1) issued by
companies organized outside the U.S. or whose principal operations are outside
the U.S., (2) issued by foreign governments or their agencies or
instrumentalities, (3) principally traded outside the U.S., or (4) quoted or
denominated in a foreign currency. Foreign securities include American
Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"), Global
Depositary Receipts ("GDRs"), Swedish Depositary Receipts ("SDRs") and
foreign money market securities. Dollar-denominated securities that are part of
the Merrill Lynch U.S. Domestic Master Index are not considered a foreign
security.
Certain funds have reclaim receivable balances, in which the funds are due a
reclaim on the taxes that have been paid to some foreign jurisdictions. The
values of all reclaims are not significant for any of the funds and are
reflected in Other Assets on the Statement of Assets and Liabilities. On a
periodic basis, these receivables are reviewed to ensure the current receivable
balance is reflective of the amount deemed to be collectible.
7. SECURITIES LENDING
Each fund, except the Target Allocation, Money Market, Small Cap Value, Small
Cap Growth Funds, and Target Retirement Funds, entered into a Securities
Lending Agreement (the "Agreement") with State Street Bank and Trust Company
("State Street"). Under the terms of the Agreement, the Funds may lend
portfolio securities to qualified borrowers in order to earn additional income.
The Agreement requires that loans are collateralized at all times by cash or
other liquid assets at least equal to 102% of the value of the securities,
which is determined on a daily basis. At December 31, 2008, none of the funds
had securities on loan.
Amounts earned as interest on investments of cash collateral, net of rebates
and fees, are included in the Statement of Operations.
The primary risk associated with securities lending is if the borrower
defaults on its obligation to return the securities loaned because of
insolvency or other reasons, the funds could experience delays and costs in
recovering securities loaned or in gaining access to the collateral.
8. TAX INFORMATION
The tax character of distributions paid during the years ended December 31,
2008 and 2007 was as follows:
ORDINARY INCOME LONG-TERM CAPITAL GAIN
--------------- ----------------------
FUND 2008 2007 2008 2007
- ---- ---- ---- ---- ----
Conservative Allocation $ 3,634,290 $ 1,348,767 $1,067,962 $ 113,687
Moderate Allocation 5,446,230 3,679,207 4,904,160 749,278
Aggressive Allocation 709,922 867,381 2,663,564 934,096
Money Market 2,036,267 5,113,441 - -
Bond 29,315,915 26,026,147 - -
High Income 9,037,895 10,814,779 - 66,885
Diversified Income 23,213,706 26,878,629 534,313 17,277,727
Large Cap Value 21,758,147 32,646,965 606,260 102,774,104
Large Cap Growth 3,336,233 2,309,437 1,186,434 19,098,900
Mid Cap Value 3,735,154 15,999,520 287,184 24,960,894
Mid Cap Growth 241,829 11,966,315 3,840,199 25,622,244
Small Cap Value 59,956 113,700 - -
Small Cap Growth 1,347 47,600 - -
Global Securities 2,360,900 2,704,422 481,988 15,749,330
International Stock 3,262,701 5,895,088 5,318,477 15,739,772
Target Retirement 2020 211,743 45,500 34,889 -
Target Retirement 2030 139,545 31,900 25,438 -
Target Retirement 2040 80,259 28,400 24,465 -
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129
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NOTES TO FINANCIAL STATEMENTS
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As of December 31, 2008, the components of distributable earnings on a tax
basis were as follows:
FUND ORDINARY INCOME LONG-TERM CAPITAL GAIN NET UNREALIZED DEPRECIATION
- ---- --------------- ---------------------- ---------------------------
Conservative Allocation $240,488 $- $ (24,371,024)
Moderate Allocation 391,722 - (76,212,998)
Aggressive Allocation 69,076 - (31,021,229)
Bond 592,302 - (11,483,449)
High Income 190,527 - (18,209,203)
Diversified Income 308,614 - (49,866,454)
Large Cap Value 362,466 - (80,209,052)
Large Cap Growth 29,904 - (65,057,350)
Mid Cap Value 12,168 - (51,625,843)
Mid Cap Growth 5,837 - (101,921,418)
Small Cap Value - - (2,147,835)
Small Cap Growth - - (837,725)
Global Securities 48,913 - (22,146,005)
International Stock 83,748 - (21,439,687)
Target Retirement 2020 11,421 - (2,773,739)
Target Retirement 2030 33,992 - (2,660,810)
Target Retirement 2040 31,910 - (2,118,412)
For federal income tax purposes, the funds listed below have capital loss
carryovers as of October 31, 2008, which are available to offet future capital
gains, if any:
FUND 2009 2010 2011 2012 2013 2014 2015 2016
- ---- ---- ---- ---- ---- ---- ---- ---- ----
Conservative Allocation $- $ - $ - $ - $ - $ - $ - $ 2,991,644
Moderate Allocation - - - - - - - 17,885,475
Aggressive Allocation - - - - - - - 6,446,542
Bond - 1,857,702 104,606 1,560,242 1,445,891 816,322 228,563 -
High Income - - - - - - 640,978 10,602,862
Diversified Income - - - - - - 16,470,805
Large Cap Value - - - - - - - 97,212,808
Large Cap Growth - - - - - - - 78,640,904
Mid Cap Value - - - - - - - 38,971,539
Mid Cap Growth - - - - - - - 21,456,972
Small Cap Value - - - - - - - 306,489
Small Cap Growth - - - - - - - 892,538
Global Securities - - - - - - - 751,246
International Stock - - - - - - - 1,823,628
Target Retirement 2030 - - - - - - - 40,540
Target Retirement 2040 - - - - - - - 28,331
The Bond Fund utilized $926,841 of prior capital loss carryovers during the
year ended December 31, 2008. The Bond Fund had $6,650,383 of capital loss
carryovers expire as of December 31, 2008.
After October 31, 2008, the following funds had capital and currency losses in
the following amounts:
FUND POST-OCTOBER CAPITAL LOSS POST-OCTOBER CURRENCY LOSSES
- ---- ------------------------- ----------------------------
Moderate Allocation $10,697,947 $-
Aggressive Allocation 5,339,651 -
High Income 2,665,346 -
Mid Cap Growth 22,266,927 -
Small Cap Value 95,935 -
Small Cap Growth 1,418,579 -
Global Securities 65,564 -
International Stock 9,645,410 -
Target Retirement 2020 877,232 -
Target Retirement 2030 981,306 -
Target Retirement 2040 1,011,003 -
For federal income tax purposes, these amounts are deferred and deemed to have
occurred in the next fiscal year.
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130
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NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
At December 31, 2008, the aggregate gross unrealized appreciation
(depreciation) and net unrealized appreciation (depreciation) for all
securities as computed on a federal income tax basis for each fund were as
follows:
FUND APPRECIATION DEPRECIATION NET
- ---- ------------ ------------ ---
Conservative Allocation $ 855,690 $ (25,226,714) $ (24,371,024)
Moderate Allocation 1,041,620 (77,254,618) (76,212,998)
Aggressive Allocation 180,581 (31,201,810) (31,021,229)
Bond 28,105,587 (39,589,036) (11,483,449)
High Income 149,698 (18,358,901) (18,209,203)
Diversified Income 17,519,472 (67,385,928) (49,866,456)
Large Cap Value 78,679,881 (158,888,961) (80,209,080)
Large Cap Growth 16,553,029 (81,610,379) (65,057,350)
Mid Cap Value 6,452,429 (58,078,272) (51,625,843)
Mid Cap Growth 2,481,622 (104,403,040) (101,921,418)
Small Cap Value 196,763 (2,344,598) (2,147,835)
Small Cap Growth 214,698 (1,052,423) (837,725)
Global Securities 271,504 (22,416,155) (22,144,651)
International Stock 3,266,262 (24,704,593) (21,438,331)
Target Retirement 2020 25,526 (2,799,265) (2,773,739)
Target Retirement 2030 13,070 (2,673,880) (2,660,810)
Target Retirement 2040 13,686 (2,132,098) (2,118,412)
The differences between cost amounts for book purposes and tax purposes are
primarily due to the tax deferral of losses.
9. CONCENTRATION OF RISK
Investing in certain financial instruments, including forward foreign currency
contracts and futures contracts, involves certain risks, other than that
reflected in the Statements of Assets and Liabilities. Risks associated with
these instruments include potential for an illiquid secondary market for the
instruments or inability of counterparties to perform under the terms of the
contracts, changes in the value of foreign currency relative to the U.S. dollar
and financial statement volatility resulting from an imperfect correlation
between the movements in the prices of the instruments and the prices of the
underlying securities and interest rates being hedged. The High Income Fund,
Mid Cap Growth Fund, International Stock Fund, and the Global Securities Fund
enter into these contracts primarily to protect these funds from adverse
currency movements.
Investing in foreign securities involves certain risks not necessarily found
in U.S. markets. These include risks associated with adverse changes in
economic, political, regulatory and other conditions, changes in currency
exchange rates, exchange control regulations, expropriation of assets or
nationalization, imposition of withholding taxes on dividend or interest
payments or capital gains, and possible difficulty in obtaining and enforcing
judgments against foreign entities. Further, issuers of foreign securities are
subject to different, and often less comprehensive, accounting, reporting and
disclosure requirements than domestic issuers.
The High Income Fund invests in securities offering high current income which
generally will include bonds in the below investment grade categories of
recognized ratings agencies (so-called "junk bonds"). These securities
generally involve more credit risk than securities in the higher rating
categories. In addition, the trading market for high yield securities may be
relatively less liquid than the market for higher-rated securities. The fund
generally invests at least 80% of its assets in high yield securities.
The Target Allocation Funds and Target Date Funds are fund of funds, meaning
that they invest primarily in the shares of other registered investment
companies (the "underlying funds"), including ETFs. Thus, each fund's
investment performance and its ability to achieve its investment goal are
directly related to the performance of the underlying funds in which it
invests; and the underlying fund's performance, in turn, depends on the
particular securities in which that underlying fund invests and the expenses of
that fund. Accordingly, these funds are subject to the risks of the underlying
funds in direct proportion to the allocation of their respective assets among
the underlying funds.
Additionally, the Target Allocation Funds and Target Date Funds are subject to
asset allocation risk and manager risk. Manager risk (i.e., fund selection
risk) is the risk that the fund(s) selected to fulfill a particular asset class
under performs their
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131
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NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
peer. Asset allocation risk is the risk that the allocation of the fund's
assets among the various asset classes and market segments will cause the fund
to under perform other funds with a similar investment objective.
10. CAPITAL SHARES AND AFFILIATED OWNERSHIP
All capital shares outstanding at December 31, 2008, are owned by separate
investment accounts and/or pension plans of CUNA Mutual Insurance Society and
by CUNA Mutual Insurance Society. The fair value of investments in the Funds by
affiliates were as follows:
CUNA MUTUAL
INSURANCE
FUND SOCIETY
- ---- -------
Small Cap Value $3,364,682
Small Cap Growth 2,836,997
Global Securities 8,495,328
Target Retirement 2020 634,270
Target Retirement 2030 600,966
Target Retirement 2040 566,802
The Target Allocation Funds and Target Date Funds invest in underlying funds,
of which certain underlying funds (the "affiliated underlying funds"), may be
deemed to be under common control because of the same Board of Trustees. The
MEMBERS Mutual Funds audited financial statements for the fiscal year ended
October 31, 2008 are available at no cost on the Securities and Exchange
Commission's website at www.sec.gov, by calling 1-800-877-6089 or by visiting
the MEMBERS Mutual Funds' website at www.membersfunds.com. A summary of the
transactions with each affiliated underlying fund during the year ended
December 31, 2008 follows:
BALANCE OF BALANCE OF
SHARES SHARES
HELD AT GROSS GROSS HELD AT VALUE AT REALIZED DISTRIBUTIONS
FUND/UNDERLYING FUND 12/31/2007 ADDITIONS SALES 12/31/2008 12/31/2008 GAIN (LOSS) RECEIVED(2)
- -------------------- ---------- --------- ----- ---------- ---------- ----------- -------------
CONSERVATIVE ALLOCATION FUND
MEMBERS Bond
Fund Class Y 783,968 2,912,370 161,955 3,534,383 $35,379,173 $ (17,007) $ 817,267
MEMBERS High Income
Fund Class Y 442,983 1,897,350 227,464 2,112,869 11,747,551 (210,980) 860,681
MEMBERS International Stock
Fund Class Y 232,656 1,156,592 79,826 1,309,422 10,763,450 (438,576) 493,112
MEMBERS Large Cap Growth
Fund Class Y 429,426 918,588 381,374 966,640 10,101,384 (642,470) 40,429
MEMBERS Large Cap Value
Fund Class Y 356,568 591,521 209,553 738,536 7,230,266 (684,984) 177,641
MEMBERS Mid Cap Growth
Fund Class Y(1) 332,237 512,592 844,829 - - (431,040) -
- --------------------------------------------------------------------------------------------------------------------------------
TOTALS $75,221,824 $(2,425,057) $2,389,130
- -------------------------------------------
(1) Non-income producing.
(2) Distributions received includes distributions from net investment income
and from capital gains from the underlying funds.
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132
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NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
BALANCE OF BALANCE OF
SHARES SHARES
HELD AT GROSS GROSS HELD AT VALUE AT REALIZED DISTRIBUTIONS
FUND/UNDERLYING FUND 12/31/2007 ADDITIONS SALES 12/31/2008 12/31/2008 GAIN (LOSS) RECEIVED(2)
- -------------------- ---------- --------- ----- ---------- ---------- ----------- -------------
MODERATE ALLOCATION FUND
MEMBERS Bond
Fund Class Y 2,289,768 2,202,007 288,060 4,203,715 $ 42,079,187 $ 16,491 $1,207,172
MEMBERS High Income
Fund Class Y 2,074,418 2,519,641 849,930 3,744,129 20,817,355 (535,764) 1,148,025
MEMBERS International Stock
Fund Class Y 980,110 3,619,256 67,306 4,532,060 37,253,534 (435,312) 1,700,982
MEMBERS Large Cap Growth
Fund Class Y 1,451,664 1,637,669 473,209 2,616,124 27,338,491 (998,655) 109,016
MEMBERS Large Cap Value
Fund Class Y 1,128,103 1,476,462 469,156 2,135,409 20,905,657 (1,057,718) 512,131
MEMBERS Mid Cap Growth
Fund Class Y(1) 2,378,051 1,155,727 1,835,713 1,698,065 6,248,878 (1,336,743) -
MEMBERS Mid Cap Value
Fund Class Y(1) 803,589 41,777 845,366 - - (2,051,836) -
MEMBERS Small Cap Growth
Fund Class Y(1) 952,968 565,808 455,014 1,063,762 5,999,620 (795,833) -
MEMBERS Small Cap Value
Fund Class Y 799,549 179,234 20,075 958,708 6,557,561 (56,916) 57,921
- --------------------------------------------------------------------------------------------------------------------------------
TOTALS $167,200,283 $(7,252,286) $4,735,247
BALANCE OF BALANCE OF
SHARES SHARES
HELD AT GROSS GROSS HELD AT VALUE AT REALIZED DISTRIBUTIONS
FUND/UNDERLYING FUND 12/31/2007 ADDITIONS SALES 12/31/2008 12/31/2008 GAIN (LOSS) RECEIVED(2)
- -------------------- ---------- --------- ----- ---------- ---------- ----------- -------------
AGGRESSIVE ALLOCATION FUND
MEMBERS Bond
Fund Class Y - 261,024 - 261,024 $ 2,612,846 $ - $ 9,851
MEMBERS High Income
Fund Class Y - 646,053 - 646,053 3,592,055 - 38,904
MEMBERS International Stock
Fund Class Y 604,290 1,185,346 39,654 1,749,982 14,384,856 (227,440) 657,917
MEMBERS Large Cap Growth
Fund Class Y 579,685 573,333 159,583 993,435 10,381,392 (329,022) 41,469
MEMBERS Large Cap Value
Fund Class Y 395,801 457,784 199,626 653,959 6,402,258 (402,289) 157,019
MEMBERS Mid Cap Growth
Fund Class Y(1) 1,035,046 710,982 631,111 1,114,917 4,102,894 (480,704) -
MEMBERS Mid Cap Value
Fund Class Y(1) 467,396 43,567 510,963 - - (1,185,526) -
MEMBERS Small Cap Growth
Fund Class Y(1) 480,388 346,089 273,705 552,772 3,117,633 (396,500) -
MEMBERS Small Cap Value
Fund Class Y 510,214 108,647 63,466 555,395 3,798,901 (73,722) 33,646
- --------------------------------------------------------------------------------------------------------------------------------
TOTALS $48,392,835 $(3,095,203) $938,806
- -------------------------------------------
(1) Non-income producing.
(2) Distributions received includes distributions from net investment income and
from capital gains from the underlying funds.
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133
================================================================================
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
BALANCE OF BALANCE OF
SHARES SHARES
HELD AT GROSS GROSS HELD AT VALUE AT REALIZED DISTRIBUTIONS
FUND/UNDERLYING FUND 12/31/2007 ADDITIONS SALES 12/31/2008 12/31/2008 GAIN (LOSS) RECEIVED(2)
- -------------------- ---------- --------- ----- ---------- ---------- ----------- -------------
TARGET RETIREMENT 2020 FUND
MEMBERS Bond
Fund Class Y - 59,602 1,383 58,219 $ 582,771 $ 5 $ 3,199
MEMBERS High Income
Fund Class Y 32,366 166,474 55,369 143,471 797,702 (63,895) 52,969
MEMBERS International Stock
Fund Class Y - 100,393 2,233 98,160 806,872 (1,592) 37,062
MEMBERS Large Cap Growth
Fund Class Y 15,046 102,181 19,052 98,175 1,025,925 (78,276) 4,117
MEMBERS Large Cap Value
Fund Class Y 15,694 72,594 18,460 69,828 683,613 (76,385) 16,848
MEMBERS Mid Cap Growth
Fund Class Y(1) 14,090 72,263 86,353 - - (178,734) -
MEMBERS Small Cap Value
Fund Class Y - 45,226 1,084 44,142 301,934 (765) 2,685
- --------------------------------------------------------------------------------------------------------------------------------
TOTALS $4,198,817 $(399,642) $116,880
BALANCE OF BALANCE OF
SHARES SHARES
HELD AT GROSS GROSS HELD AT VALUE AT REALIZED DISTRIBUTIONS
FUND/UNDERLYING FUND 12/31/2007 ADDITIONS SALES 12/31/2008 12/31/2008 GAIN (LOSS) RECEIVED(2)
- -------------------- ---------- --------- ----- ---------- ---------- ----------- -------------
TARGET RETIREMENT 2030 FUND
MEMBERS Bond
Fund Class Y - 26,007 221 25,786 $ 258,120 $ 2 $ 1,460
MEMBERS High Income
Fund Class Y 15,275 117,454 29,862 102,867 571,942 (36,612) 38,868
MEMBERS International Stock
Fund Class Y - 106,337 957 105,380 866,221 (968) 39,405
MEMBERS Large Cap Growth
Fund Class Y 9,106 90,159 8,413 90,852 949,399 (36,182) 3,771
MEMBERS Large Cap Value
Fund Class Y 9,430 65,298 9,938 64,790 634,292 (45,453) 15,474
MEMBERS Mid Cap Growth
Fund Class Y(1) 10,604 79,938 90,542 - - (201,444) -
MEMBERS Small Cap Growth
Fund Class Y(1) 4,281 32,309 36,590 - - (120,717) -
MEMBERS Small Cap Value
Fund Class Y - 47,902 461 47,441 324,496 (491) 2,857
- --------------------------------------------------------------------------------------------------------------------------------
TOTALS $3,604,470 $(441,865) $101,835
- -------------------------------------------
(1) Non-income producing.
(2) Distributions received includes distributions from net investment income and
from capital gains from the underlying funds.
- --------------------------------------------------------------------------------
134
================================================================================
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
BALANCE OF BALANCE OF
SHARES SHARES
HELD AT GROSS GROSS HELD AT VALUE AT REALIZED DISTRIBUTIONS
FUND/UNDERLYING FUND 12/31/2007 ADDITIONS SALES 12/31/2008 12/31/2008 GAIN (LOSS) RECEIVED(2)
- -------------------- ---------- --------- ----- ---------- ---------- ----------- -------------
TARGET RETIREMENT 2040 FUND
MEMBERS Bond
Fund Class Y - 27,589 307 27,282 $ 273,089 $ 5 $ 1,459
MEMBERS High Income
Fund Class Y 6,898 47,717 54,615 - - (61,478) 13,958
MEMBERS International Stock
Fund Class Y - 93,027 1,047 91,980 756,076 (692) 34,224
MEMBERS Large Cap Growth
Fund Class Y 7,192 75,720 10,314 72,598 758,646 (53,313) 2,998
MEMBERS Large Cap Value
Fund Class Y 7,364 54,911 10,590 51,685 505,993 (53,056) 12,280
MEMBERS Mid Cap Growth
Fund Class Y(1) 11,590 88,999 100,589 - - (236,537) -
MEMBERS Small Cap Growth
Fund Class Y(1) 4,454 34,286 38,740 - - (126,204) -
MEMBERS Small Cap Value
Fund Class Y - 43,068 520 42,548 291,029 (433) 2,549
- --------------------------------------------------------------------------------------------------------------------------------
TOTALS $2,584,833 $(531,708) $67,468
- -------------------------------------------
(1) Non-income producing.
(2) Distributions received includes distributions from net investment income and
from capital gains from the underlying funds.
- --------------------------------------------------------------------------------
135
================================================================================
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of Ultra Series Fund:
We have audited the accompanying statements of assets and liabilities,
including the portfolio of Ultra Series Fund comprising the Conservative
Allocation Fund, Moderate Allocation Fund, Aggressive Allocation Fund, Money
Market Fund, Bond Fund, High Income Fund, Diversified Income Fund, Large Cap
Value Fund, Large Cap Growth Fund, Mid Cap Value Fund, Mid Cap Growth Fund,
Small Cap Value Fund, Small Cap Growth Fund, Global Securities Fund,
International Stock Fund, Target Retirement 2020 Fund, Target Retirement 2030
Fund, and Target Retirement 2040 Fund (collectively, the "Funds") as of
December 31, 2008, and the related statements of operations for the year then
ended, and the statements of changes in net assets and the financial highlights
for the periods presented. These financial statements and financial highlights
are the responsibility of the Funds' management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. The Funds are not required to have, nor were we engaged to
perform, an audit of their internal control over financial reporting. Our
audits included consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the
Funds' internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. Our procedures
included confirmation of securities owned as of December 31, 2008, by
correspondence with the custodian and brokers; where replies were not received
from brokers, we performed other auditing procedures. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial positions of each
of the Funds as of December 31, 2008, the results of their operations for the
year then ended, and the changes in their net assets and financial highlights
for each of the periods presented, in conformity with accounting principles
generally accepted in the United States of America.
/s/ DELOITTE & TOUCHE LLP
Chicago, Illinois
February 19, 2009
- --------------------------------------------------------------------------------
136
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OTHER INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
FUND EXPENSES PAID BY SHAREHOLDERS
As a shareholder of the Funds, you pay no transaction costs, but do incur
ongoing costs which include management fees; disinterested trustee fees;
brokerage commissions and other expenses incurred in connection with the
acquisition or disposition of investments; costs of borrowing money; expenses
for independent audits, taxes, and extraordinary expenses as approved by a
majority of the disinterested trustees. The examples in the table that follows
are intended to help you understand your ongoing costs (in dollars) of
investing in the Funds and to compare these costs with the ongoing costs of
investing in other mutual funds.
The examples below are based on an investment of $1,000 invested at the
beginning of the period and held for the entire six month period ended December
31, 2008. Expenses paid during the period in the table below are equal to the
fund's annualized expense ratio, multiplied by the average account value over
the period, multiplied by 184/366 (to reflect the one-half fiscal year period).
ACTUAL EXPENSES
The table below provides information about actual account values using actual
expenses and actual returns for the Funds. You may use the information in this
table, together with the amount you invested, to estimate the expenses that you
paid over the period. Simply divide your account value by $1,000 (for example,
an $8,600 account value divided by $1,000 = 8.6), then multiply the result by
the number in the table for the fund you own under the heading entitled
"Actual" to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table also provides information about hypothetical account values and
hypothetical expenses based on the Funds' actual expense ratios and an assumed
rate of return of 5% per year before expenses, which are not the Funds' actual
returns. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Funds and other funds. To do so, compare the 5% hypothetical example of the
funds you own with the 5% hypothetical examples that appear in the shareholder
reports of other similar funds.
ACTUAL HYPOTHETICAL
-------------------------- -------------------------
EXPENSES EXPENSES
BEGINNING ANNUAL ENDING PAID ENDING PAID
ACCOUNT EXPENSE ACCOUNT DURING ACCOUNT DURING
FUND VALUE RATIO VALUE PERIOD VALUE PERIOD
- ---- ----- ----- ----- ------ ----- ------
Conservative Allocation $1,000 0.31% $ 843.00 $1.44 $1,023.58 $1.58
Moderate Allocation 1,000 0.31% 736.50 1.35 1,023.58 1.58
Aggressive Allocation 1,000 0.32% 640.00 1.32 1,023.53 1.63
Money Market 1,000 0.46% 1,006.50 2.32 1,022.82 2.34
Bond 1,000 0.56% 1,018.80 2.84 1,022.32 2.85
High Income 1,000 0.77% 859.40 3.60 1,021.27 3.91
Diversified Income 1,000 0.72% 928.50 3.49 1,021.52 3.66
Large Cap Value 1,000 0.62% 737.30 2.71 1,022.02 3.15
Large Cap Growth 1,000 0.82% 682.50 3.47 1,021.01 4.17
Mid Cap Value 1,000 1.02% 691.60 4.34 1,020.01 5.18
Mid Cap Growth 1,000 0.87% 572.40 3.44 1,020.76 4.42
Small Cap Value 1,000 1.12% 780.80 5.01 1,019.51 5.69
Small Cap Growth 1,000 1.12% 621.10 4.56 1,019.51 5.69
Global Securities 1,000 0.97% 725.80 4.21 1,020.26 4.93
International Stock 1,000 1.23% 696.50 5.25 1,018.95 6.24
Target Retirement 2020 1,000 0.40% 688.30 1.70 1,023.13 2.03
Target Retirement 2020 1,000 0.40% 663.90 1.67 1,023.13 2.03
Target Retirement 2020 1,000 0.40% 633.30 1.64 1,023.13 2.03
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any separate account fees, charges, or
expenses imposed by the variable annuity or variable life insurance contracts,
or retirement and pension plans that use the funds. The information provided in
the hypothetical example table is useful in comparing ongoing fund costs only,
and will not help you determine the relative total costs of owning different
funds. In addition, if these fees, charges or expenses were included, your
costs would have been higher.
- --------------------------------------------------------------------------------
137
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OTHER INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULES
The Trust files its complete schedule of portfolio holdings with the SEC for
the first and third quarters of each fiscal year on Form N-Q. Form N-Q is
available to shareholders at no cost on the SEC's website at www.sec.gov. Form
N-Q may also be reviewed and copied at the Commission's Public Reference Room
in Washington, DC. More information on the operation of the Public Reference
Room may be obtained by calling 1-800-SEC-0330.
PROXY VOTING POLICIES, PROCEDURES AND RECORDS
A description of the policies and procedures used by the Trust to vote proxies
related to portfolio securities is available to shareholders at no cost on the
SEC's website at www.sec.gov or by calling CUNA Mutual Insurance Society at
1-800-798-5500. The proxy voting records for the Trust for the most recent
twelve-month period ended June 30 are available to shareholders at no cost on
the SEC's website at www.sec.gov.
BOARD APPROVAL OF INVESTMENT ADVISORY AND SUBADVISORY AGREEMENTS
Under the Investment Company Act of 1940, as amended (the "Act"), each mutual
fund's investment advisory agreement, and any subadvisory agreement, must be
approved at least annually by the fund's board of trustees, including a
majority of the trustees who are not "interested persons" under the Act (the
"independent trustees").
The board of trustees (the "Board") of Ultra Series Fund (the "Trust") reviews
the performance of each series of the Trust (each, a "Fund" and collectively,
the "Funds") and the investment adviser and subadviser of each Fund at each
regular board meeting, including appropriate comparative information. At these
meetings, the Board also receives updates concerning the investment strategies
being pursued by the Funds, changes in the Funds' investment processes and
portfolio management personnel, the expenses incurred by the Funds, and various
other matters which may impact the Funds' performance and that of the Funds'
investment adviser and subadvisers.
In addition, the Board considers whether to approve the continuation of the
Funds' investment advisory and subadvisory agreements at an in-person meeting
held near the end of each year. The most recent such meeting was held December
4-5, 2008.
Before the December 2008 meeting, the Board asked the Funds' investment
adviser and subadvisers to provide written information addressing factors to be
considered by the Board in deciding whether or not to approve the agreements.
In addition, counsel to the independent trustees provided the Board with a
memorandum reviewing its duties under the Act with respect to approval of the
agreements. Before the December 2008 meeting, the Board and counsel also asked
the investment adviser and subadvisers to expand upon certain of the written
information they had provided, and they held a conference call with
representatives of the investment adviser to discuss the information provided.
At the December 2008 meeting, representatives of the investment adviser
reviewed the written information it had provided and responded to further
questions from the Board concerning this information and related matters. In
addition, at this meeting, representatives of each subadviser made
presentations and responded to follow-up questions from the Board. After these
presentations and discussions, the Board (including a majority of independent
trustees) unanimously approved the investment advisory agreement and each
subadvisory agreement. In determining to approve these agreements, the Board
considered the following factors and reached the following conclusions:
NATURE, EXTENT AND QUALITY OF SERVICES PROVIDED BY THE INVESTMENT ADVISER AND
SUBADVISERS: The Board received and considered a variety of information
pertaining to the nature, extent and quality of the services provided by the
investment adviser and subadvisers. This information generally included the
professional qualifications and experience of the portfolio management teams
for each Fund; the portfolio management processes utilized by these teams; the
organization, resources and research capabilities of the investment management
companies of which these teams are a part; and the investment adviser's and
subadvisers' compliance, regulatory and litigation experience, their portfolio
transaction execution and soft dollar policies and practices, and their
policies and procedures for allocating transactions among accounts. In
particular, the Board discussed with the investment adviser and each subadviser
the status of the firm's financial condition and future expectations for any
expense and/or staff reductions in consideration of recent market events. After
reviewing this information and discussing it with representatives of the
investment adviser and subadvisers, the Board concluded that it was generally
satisfied with the nature, extent and quality of the services provided by the
investment adviser and subadvisers.
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138
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OTHER INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT PERFORMANCE OF THE FUNDS AND THEIR INVESTMENT ADVISER AND
SUBADVISERS: As noted above, the Board reviews the performance of the Funds and
their investment adviser and subadvisers at each regular Board meeting held
throughout the year. In addition, at the December 2008 meeting, the Board
reviewed recent performance of the Funds compared to (i) the performance of
their respective unmanaged market benchmark indices and (ii) the performance of
their respective Morningstar peer groups adjusted for fund structure and size.
The Board also considered written discussions the investment adviser and, in
the case of the subadvised Funds, the subadviser provided to it regarding the
major elements of each Fund's investment strategy that contributed positively
or negatively to the Fund's performance during the preceding year as well as
expectations for the next year.
Among other things, the Board noted that seven Funds outperformed and an
additional five Funds ranked at or just below the median of their respective
Morningstar peer group for the 12 months ended September 30, 2008. In addition,
the Board noted that of the remaining six Funds, (i) three had only been in
existence for one year, (ii) two had shown recent improvement and (iii) the
remaining Fund outperformed its benchmark index for the 12 months ended
September 30, 2008.
Based on the foregoing reviews, the Board concluded that it was comfortable
with the Funds' performance or with the steps which the investment adviser or
subadviser is taking to improve performance. The Board also determined that it
will monitor the progress of the lower performing Funds during the coming year.
COST OF SERVICES PROVIDED AND PROFITABILITY: At the December 2008 meeting, the
Board reviewed written information prepared by the Funds' investment adviser
setting forth, on a fund-by-fund basis, the investment adviser's pre-tax
profitability under its investment advisory agreement with the Funds for the
year ended September 30, 2008. In the course of its review, the Board noted
that some of the Funds were operated at a loss to the investment adviser. With
respect to the other Funds, the Board noted that the pre-tax margins reported
by the investment adviser appeared reasonable and were substantially lower than
the margins which have been upheld in reported judicial decisions concerning
investment advisory fees.
The Board also considered how each Fund's total expense ratio compares to those
of the other funds in its Morningstar peer group. Because the Funds are
so-called "unitary fee" funds, which pay a single fee covering both investment
advisory and most other administrative services, the Board did not consider
comparative Morningstar data pertaining to investment advisory fees standing
alone. The Board noted that ten Funds' total expense ratio ranked in the third
quintile or better compared to their respective Morningstar peer groups, with
the remaining eight Funds ranked below the third quintile. Six of those lower
ranking Funds were Funds that invested in other mutual funds. To that extent,
it was unclear whether the Morningstar peer groups reported fees at both the
fund and underlying fund level, as the Funds did.
The Board considered that the investment adviser manages certain other mutual
funds with similar investment objectives or principal investment strategies as
the Funds for a lower management fee. However, as noted above, the Funds'
management fee includes most of the Funds' administrative expenses while the
management fee charged to the other mutual funds includes only investment
advisory services. The Board also noted that the investment adviser, not the
Funds, pays the subadvisers' fees.
The Board noted that to the extent a Fund invests in other mutual funds also
managed by the investment adviser, the investment adviser receives investment
advisory fees from both the Fund and the underlying mutual fund. The Board was
satisfied in this regard that the investment adviser provides separate services
to each of the Fund and the underlying mutual fund in exchange for the fees
received from it.
Based on all this information, the Board concluded that the management fees and
total expenses borne by the Funds are reasonable in relation to the services
provided, and that the investment adviser's level of profitability from its
investment advisory agreement with the Funds is well within reason.
ECONOMIES OF SCALE: The investment adviser provided the Board with information
concerning how large a Fund must be before the investment adviser begins to
realize economies of scale under its management agreement. The investment
adviser also noted that under its unitary fee agreement, economies of scale can
change from year to year as the amounts charged by third-party service
providers and borne by the investment adviser change. In addition, the
investment adviser noted that the larger Funds' total expense ratios generally
rank well in their Morningstar peer groups. Accordingly, the investment adviser
did not recommend the institution of breakpoints in the Funds' management fee
schedules at this time. The Board, taking these factors into account,
determined not to pursue breakpoints for the Funds at this time.
OTHER BENEFITS TO THE INVESTMENT ADVISER AND SUBADVISERS FROM THEIR
RELATIONSHIPS WITH THE FUNDS: The Board also considered the nature and extent
of other benefits that may flow to the investment adviser and subadvisers from
their
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139
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OTHER INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
relationships with the Funds. As discussed above, the Board noted that with
respect to a Fund that invests in other mutual funds managed by the investment
adviser, the investment adviser receives fees from both the Fund and the
underlying mutual fund. However, the Board was satisfied that the investment
adviser provides separate services for the two layers of fees paid in such
instances.
The Board also noted that the investment adviser and some subadvisers execute a
portion of the Funds' portfolio transactions on a "soft dollar" basis, pursuant
to which the investment adviser and subadvisers receive research services from
or through the executing brokers. In connection with each regular Board
meeting, the Board reviews a third-party evaluation of the quality of execution
of the portfolio transactions executed by the investment adviser on behalf of
the Funds. The Board noted that these evaluations generally have indicated that
the quality of the Funds' executions compares favorably with that of other
mutual funds. The Board also noted that the reported execution and soft dollar
benefits received by the subadvisers were reasonable in light of the
transactions each subadviser executes on behalf of the Funds.
Finally, the Board noted the investment adviser's and the subadvisers'
representations that they seek to achieve "best execution" in executing all of
the Funds' portfolio transactions, and that their soft dollar practices comply
with applicable law. Based on these reviews, the Board was satisfied with the
quality of execution of the Funds' portfolio transactions, and it did not
believe the soft dollar benefits received by the investment adviser and
subadvisers were excessive.
Based on the foregoing information, the Board concluded that while additional
benefits flow to the investment adviser and subadvisers from their
relationships with the Funds, the nature and extent of these additional
benefits are not unreasonable when considered in the context of the overall
services provided to, and fees received from, the Funds by these entities.
Board Conclusion: After taking the foregoing information and the other
information provided by the investment adviser and subadvisers into account,
the Board (including a majority of independent trustees), acting in the
exercise of its business judgment, unanimously approved the continuation of the
investment advisory agreement and the subadvisory agreements. In doing so, the
Board did not assign specific weights to the various factors considered, nor
did it deem any one factor or set of factors to be decisive. Instead, it
considered the total mix of information provided to it in reaching its
decisions.
- --------------------------------------------------------------------------------
140
================================================================================
TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------
Each trustee and officer oversees 32 portfolios in the fund complex, which
consists of the Ultra Series Fund with 18 portfolios and the MEMBERS Mutual
Funds with 14 portfolios. The address of each trustee and officer is 5910
Mineral Point Road, Madison WI 53705. The Statement of Additional Information,
which includes additional information about the trustees and officers, is
available at no cost on the SEC's website at www.sec.gov or by calling CUNA
Mutual Insurance Society at 1-800-798-5500.
NAME;
POSITION(S) HELD WITH THE FUND & PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS;
YEAR ELECTED(1); YEAR OF BIRTH OTHER OUTSIDE DIRECTORSHIPS
- ---------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- ---------------------------------------------------------------------------------------------------------------------------------
Rolf F. Bjelland, CLU MEMBERS Mutual Funds: Chairman (since 2006) and Trustee
Chairman (2006) (since 2003); Lutheran Brotherhood Mutual Funds: Chairman and
Trustee (2003) President (1983-2002); Lutheran Brotherhood (now Thrivent Financial):
1938 Chief Investment Officer (1983-2002).
Other Directorships: Regis Corp. (since 1982).
- ---------------------------------------------------------------------------------------------------------------------------------
Linda S. Foltz, CPA MEMBERS Mutual Funds: Trustee (since 2006); Dougherty Consulting,
Trustee (2006) LLC: President/Owner (since 2005); Direct Supply, Inc.: Executive Vice
1950 President of Corporate Development and Chief Financial Officer
(1988-2005).
Other Directorships: Direct Supply, Inc. (since 2003).
- ---------------------------------------------------------------------------------------------------------------------------------
Steven P. Riege MEMBERS Mutual Funds: Trustee (since 2005); The Rgroup:
Trustee (2005) Owner/President (since 2001); Robert W. Baird & Company: Senior
1954 Vice President Marketing and Vice President Human Resources (1986-2001).
Other Directorships: None
- ---------------------------------------------------------------------------------------------------------------------------------
Richard E. Struthers MEMBERS Mutual Funds: Trustee (since 2004); Clearwater Capital
Trustee (2004) Management: Chairman and Chief Executive Officer (since 1998); Park
1952 Nicollet Health Services: Director (since 2001) and Chairman, Finance
and Investment Committee (since 2006); IAI Mutual Funds:
President and Director (1992-1997). Other Directorships: Park Nicollet
Health Services (since 2001) and Micro Component Technology, Inc.
(since 2008).
- ---------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES AND OFFICERS
- ---------------------------------------------------------------------------------------------------------------------------------
David P. Marks, CFA CUNA Mutual Insurance Society: Chief Investment Officer (since 2005); MEMBERS
Trustee, President & Capital Advisors, Inc.: President (since 2005); CUNA Mutual Life Insurance
Principal Executive Officer (2006) Company: Chief Investment Officer (2005-2007); MEMBERS Mutual Funds: Trustee,
1947 President, and Principal Executive Officer (since 2006); Citigroup Insurance
Investors: Chief Investment Officer (2004-2005); CIGNA Investments: Chief
Investment Officer, (2002-2004); Green Mountain Partners: Partner (2001-2002);
Allianz Investments: Chief Investment Officer (1991-2001).
Other Directorships: CBRE Realty Finance (since 2005).
- ---------------------------------------------------------------------------------------------------------------------------------
Scott R. Powell, CFA MEMBERS Capital Advisors, Inc: Managing Director-Common Stock and
Vice President (2008) MAP (since 2008); Managing Director-Managed Accounts and Mutual
1962 Funds (2006-2008); MEMBERS Mutual Funds: Vice President (since 2008);
Virchow Krause Wealth Management, LLC: Partner, Managing Director,
(2003-2006); Jacobus Wealth Management, Inc.: (2001-2003).
- ---------------------------------------------------------------------------------------------------------------------------------
Timothy S. Halevan MEMBERS Capital Advisors, Inc.: Vice President and Chief Compliance Officer
Chief Compliance Officer (2009) (since 2009); CUNA Brokerage Services, Inc.: Vice President, Chief Compliance
1961 Officer (since 2001); MEMBERS Mutual Funds: Chief Compliance Officer
(since 2009).
- ---------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
141
================================================================================
TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------
NAME;
POSITION(S) HELD WITH THE FUND & PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS;
YEAR ELECTED(1); YEAR OF BIRTH OTHER OUTSIDE DIRECTORSHIPS
=================================================================================================================================
INTERESTED TRUSTEES AND OFFICERS (CONTINUED)
=================================================================================================================================
Holly S. Baggot MEMBERS Capital Advisors, Inc.: Director, Mutual Funds (since July 2008);
Secretary (1999) Treasurer Director, Mutual Fund Operations, (2006-2008), Operations Officer-Mutual Funds
and Principal Financial Officer(2008) (2005-2006), Senior Manager-Product and Fund Operations (2001-2005);
Assistant Treasurer (1999-2007) MEMBERS Mutual Funds: Treasurer and Principal Financial Officer (since 2008);
1960 Secretary (since 1999), and Assistant Treasurer (1997-2007).
- ---------------------------------------------------------------------------------------------------------------------------------
Dan P. Owens MEMBERS Capital Advisors, Inc.: Director, Investment Operations, (since
Assistant Treasurer (2000) June 2006), Investment Operations Officer (2005-2006), and Senior Manager-
1966 Portfolio Operations (2001-2005); MEMBERS Mutual Funds: Assistant
Treasurer (since 2000).
- ---------------------------------------------------------------------------------------------------------------------------------
Cheryl R. Gilge MEMBERS Capital Advisors, Inc.: Operations Associate, Mutual Fund
Assistant Treasurer (2009) Administration (since 2007), Fund Administration Analyst (2005-2007),
1975 Investment Support Manager (1999-2005); MEMBERS Mutual Funds:
Assistant Treasurer (since 2009).
- ---------------------------------------------------------------------------------------------------------------------------------
(1) The board of trustees adopted term limits authorizing each independent
trustee to serve in such capacity until reaching the age of 75.
- --------------------------------------------------------------------------------
142
[LOGO OF CUNA MUTUAL GROUP](R) CUNA MUTUAL GROUP
- -------------------------------------------------
CUNA Mutual Insurance Society
2000 Heritage Way
Waverly, IA 50677
Form 1965-0209
[LOGO OF CUNA MUTUAL GROUP](R) CUNA MUTUAL GROUP ----------------------
- ------------------------------------------------- Presorted Standard
U.S. Postage
CUNA Mutual Insurance Society PAID
2000 Heritage Way Carol Stream, IL
Waverly, IA 50677 Permit No. 1
----------------------
Form 1965-0209
ITEM 2. CODE OF ETHICS.
As of the period ended December 31, 2008, Ultra Series Fund (also referred to
herein as the "Registrant" or the "Trust") has adopted a code of ethics ("Code")
that applies to the Trust's principal executive officer, principal financial
officer, principal accounting officer or controller, or persons performing
similar functions. The Code was amended effective August 21, 2008 which
included administrative changes as well as a change in the Principal Financial
Officer. The new Principal Financial Officer is Holly S. Baggot. A copy of the
Code is filed as an exhibit to this Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Registrant's board of trustees has determined that the Registrant has four
audit committee financial experts serving on its Audit Committee. The names of
the audit committee financial experts are Richard E. Struthers, Linda S. Foltz,
Rolf F. Bjelland and Steven P. Riege, each of whom is an "independent" trustee
for purposes of this Item.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees
----------
For the fiscal years ended December 31, 2008 and December 31, 2007, the
aggregate fees for professional services rendered by Deloitte & Touche
LLP ("Deloitte & Touche"), the Trust's independent public accountant,
for the audit of the Trust's annual financial statements and services
normally provided by such firm in connection with statutory and
regulatory filings and engagements for such fiscal years, totaled
$238,350 and $221,120, respectively.
(b) Audit Related Fees
------------------
For the fiscal years ended December 31, 2008 and December 31, 2007, the
aggregate fees for professional services rendered by Deloitte & Touche
for assurance and related services by such firm that were reasonably
related to the performance of the audit of the Trust's annual financial
statements other than those referenced in paragraph (a) above, totaled
totaled $0 and $0, respectively.
(c) Tax Fees
--------
For the fiscal years ended December 31, 2008 and December 31, 2007, the
aggregate fees for professional services rendered by Deloitte & Touche
for tax compliance, tax advice and tax planning for such fiscal years,
totaled $51,795 and $8,700, respectively.
Included in the scope of services comprising the fees disclosed
under this Item 4(c) were the following services for the fiscal year
ended December 31, 2008: Review and sign as signature preparer for
U.S. Income Tax Return for Regulated Investment Companies, Form
1120-RIC and the Return of Excise Tax on Undistributed Income of
Regulated
Investment Companies, Form 8613;and for the fiscal year ended December
31, 2007: review and sign as signature preparer the Return of Excise Tax
on Undistributed Income of Regulated Investment Companies, Form 8613 for
the International Stock, High Income, Global Securities and Mid Cap
Growth Funds.
(d) All Other Fees
--------------
For the fiscal years ended December 31, 2008 and December 31, 2007, the
aggregate fees for professional services rendered by Deloitte & Touche
for products and services other than those reported in subparagraphs (a)
through (c) of this Item 4, for such fiscal years, totaled $0 and $0,
respectively.
(e)(1) Pursuant to Rule 2-01(c)(7) of Regulation S-X, the Registrant's Audit
Committee has established pre-approval policies and procedures with
respect to audit, audit-related, tax, and other non-audit services. In
accordance with these policies, certain services have received the Audit
Committee's general pre-approval, while other services must be
specifically pre-approved.
(e)(2) The Audit Committee has pre-approved, as required by Rule
2-01(c)(7)(i)(C) of Regulation S-X, 100% of the services described in
this Item 4(b) through (d), which such services are described above.
(f) Not applicable.
(g) During the Trust's fiscal years ended December 31, 2008 and December 31,
2007, the aggregate non-audit fees billed by Deloitte & Touche for
services rendered to the Trust (other than as already disclosed above)
and to MEMBERS Capital Advisors, Inc. ("MCA"), the Trust's investment
adviser, and to any entity controlling, controlled by, or under common
control with MCA that provides ongoing services to the Trust, totaled $0
and $0, respectively.
(h) The Trust's Audit Committee has considered the provision of the
non-audit services that were rendered to MCA, and any entity
controlling, controlled by, or under common control with MCA that
provides ongoing services to the Registrant that were not pre-approved
pursuant to paragraph Rule 2-01(c)(7)(ii) of Regulation S-X and has
determined that the provision of such services is compatible with
maintaining Deloitte & Touche's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS
Schedule I - Investments in Securities of Unaffiliated Issuers as of December
31, 2008 is included as part of the report to shareholders filed under Item 1
hereto.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASES.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The President and Treasurer of the Registrant have concluded that the
Registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940) are effective
based on their evaluation of the disclosure controls and procedures
as of a date within 90 days of the filing date of this report.
(b) There have been no changes in the Registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Investment
Company Act of 1940) that occurred during the second fiscal quarter
of the period covered by this report that have materially affected,
or are reasonably likely to materially affect, the Registrant's
internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Sarbanes-Oxley Code of Ethics dated August 21, 2008 for period ended
December 31, 2008, is filed herewith.
(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of
2002, are filed herewith.
(a)(3) Not applicable.
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, are furnished herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
ULTRA SERIES FUND
BY: /s/ David P. Marks
------------------
David P. Marks
President
DATE: 2/25/09
-------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
BY: /s/ David P. Marks
------------------
David P. Marks
President, Ultra Series Fund
DATE: 2/25/09
-------
BY: /s/ Holly S. Baggot
-------------------
Holly S. Baggot
Treasurer, Ultra Series Fund
DATE: 2/25/09
-------
EXHIBIT INDEX
12(a)(1) Sarbanes-Oxley Code of Ethics dated August 21, 2008 for period ended
December 31, 2008, is filed herewith.
12(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of
2002, are filed herewith.
(a)(3) Not applicable.
12(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, are furnished herewith.