UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
X Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant under Rule 14a-12
MEMBERS MUTUAL FUNDS
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
[LOGO OF MEMBERS
MUTUAL FUNDS]
MEMBERS(TM)
MUTUAL FUNDS
May 4, 2009
Dear Shareholder of the MEMBERS Mutual Funds:
You are receiving this Proxy Statement because you are a shareholder of
MEMBERS(R) Mutual Funds.
A joint special meeting of the shareholders of the Conservative Allocation Fund,
Moderate Allocation Fund, Aggressive Allocation Fund, Cash Reserves 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 and International Stock Fund (together, "Funds," and each,
a "Fund"), each a series of MEMBERS Mutual Funds, will be held at 5810 Mineral
Point Road, Madison, Wisconsin, on June 25, 2009 at 9:00 a.m., Central Time, or
any adjournments or postponements ("Meeting").
In connection with the Meeting, you are being asked to vote on several
proposals. In particular, we are asking you to consider approving a new
investment manager, Madison Asset Management, LLC, which will be a joint venture
between CUNA Mutual Insurance Society and Madison Investment Advisors, Inc.
Since 1974, Madison Investment Advisors, Inc. has served investment management
clients with a blend of investment philosophy and process, disciplined thinking
and a spirit of independence. The proposed transaction would give the Funds
access to the impressive investment expertise Madison Investment Advisors, Inc.
has to offer as well as the potential for new distribution avenues that may
improve the Funds' economies of scale. In connection with the proposed
transaction, Madison Asset Management, LLC has agreed that for two years
following the close of the proposed transaction, it would limit most fees and
expenses so as not to exceed those incurred by the Funds for the fiscal year
ended October 31, 2008. Also, Madison Asset Management, LLC is expected to offer
employment to many of the MEMBERS Capital Advisors, Inc. staff currently serving
the Funds. We are excited about this opportunity to combine the investment and
operations personnel currently serving the Funds with Madison Investment
Advisors, Inc.'s additional investment expertise, resources and distribution
potential. More information about Madison Investment Advisors, Inc. and Madison
Asset Management, LLC is provided in the attached proxy statement. Additional
proposals include electing certain members of the Board of Trustees, amending a
fundamental investment policy regarding borrowing and approving investment
subadvisors.
To save printing costs and operations expenses, we have created a single
combined proxy statement that encompasses all of the proposals on which
shareholders will vote. Therefore, some of the proposals may not apply to you.
To help identify the specific issues that affect you, please refer to the proxy
card.
THE FUNDS' BOARD OF TRUSTEES HAS CONCLUDED THAT THESE PROPOSALS ARE IN THE BEST
INTEREST OF FUND SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR
OF THE PROPOSALS.
YOUR VOTE IS IMPORTANT. Whether or not you plan to attend the Meeting, please
complete, sign and return your proxy card as soon as possible so that your vote
may be counted. A postage-paid envelope is enclosed for this purpose. You may
also provide proxy voting instructions by Internet, facsimile or telephone by
following the instructions on the enclosed proxy card. Please provide your proxy
voting instructions as soon as possible.
Thank you for your prompt attention and participation.
Sincerely
/s/ David P. Marks
David P. Marks
President
MEMBERS Mutual Funds
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MEMBERS MUTUAL FUNDS
5910 Mineral Point Road, Madison, WI 53705
Notice is hereby given that a joint special meeting ("Meeting") of the
shareholders of the Conservative Allocation Fund, Moderate Allocation Fund,
Aggressive Allocation Fund, Cash Reserves 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,
Fund and International Stock Fund (together, "Funds," and each, a "Fund"), each
a series of MEMBERS Mutual Funds, will be held on June 25, 2009 at 5810 Mineral
Point Road, Madison, Wisconsin 53705, at 9:00 a.m., Central Time or any
adjournments or postponements of the Meeting
The Meeting will be held to vote on the following proposals:
1) Election of certain members of the Board of Trustees;
2) Approval of an investment advisory agreement with a new investment
advisor;
3) Amendment of a fundamental investment policy regarding borrowing;
4) Approval of investment subadvisors; and
5) Such other matters as may properly come before the Meeting.
Shareholders of the Funds as of April 17, 2009 have the right to vote. A Proxy
Statement is available that describes the proposals, and a Proxy Card is
enclosed for you to provide your proxy voting instructions.
YOUR VOTE ON THESE PROPOSALS IS IMPORTANT. Please provide your proxy voting
instructions as soon as possible to save the expense of additional
solicitations. You can provide proxy voting instructions quickly and easily by
completing and mailing the enclosed Proxy Card, or by providing proxy voting
instructions by Internet, facsimile or telephone. Just follow the simple
instructions that appear on your enclosed Proxy Card. Please help avoid the
expense of a follow-up mailing by providing your proxy voting instructions
today.
By Order of the Board of Trustees
Holly S. Baggot
Secretary
May 4, 2009
FREQUENTLY ASKED QUESTIONS
Q. WHAT ARE THE PROPOSALS FOR THE UPCOMING SPECIAL SHAREHOLDER MEETING ON JUNE
25, 2009 ("MEETING")?
A. CUNA Mutual Insurance Society has agreed to enter into a joint venture with
Madison Investment Advisors, Inc. At the Meeting, you will be asked to
approve a number of proposals, some of which are related to the joint
venture, including (1) election of certain members of the Board of
Trustees; (2) approval of an investment advisory agreement with a new
investment advisor; (3) amendment of a fundamental investment policy
regarding borrowing; and (4) approval of investment subadvisors
("Proposals").
Q. HAS THE BOARD OF TRUSTEES APPROVED THESE PROPOSALS?
A. The Board of Trustees has approved and recommends a vote in favor of each
Proposal.
Q. WHAT HAPPENS IF PROPOSAL 1 IS NOT APPROVED?
A. The four nominees with the most votes will be elected. Therefore, we
anticipate that all nominees will be elected.
Q. WHAT HAPPENS IF PROPOSAL 2 IS NOT APPROVED?
A. The joint venture is contingent upon the approval of Proposal 2. If not all
Funds approve Proposal 2, the joint venture is not expected to go forward.
In that case, even those Funds that have approved Proposal 2 will not enter
into an agreement with the proposed new investment advisor. Also, Mr.
Blake, Ms. Frank, Mr. Imhoff and Mr. Wheeler would not serve on the Board
of Trustees, even if they have been elected. If the joint venture does not
go forward, the Board of Trustees is likely to consider alternative
measures, such as a different investment advisor, Fund reorganizations
and/or Fund liquidations.
Q. WHAT HAPPENS IF PROPOSAL 2 IS APPROVED?
A. If Proposal 2 is approved and the other contingencies to the joint venture
are satisfied, Madison Asset Management, LLC will become the new investment
advisor for the Funds. Madison Asset Management, LLC shares the investment
personnel and other resources of its parent, Madison Investment Advisors,
Inc. Therefore, the Funds are not only expected to continue to have access
to those personnel currently providing management services who are expected
to be employed by Madison Asset Management, LLC after the close of the
transaction, but would also be able to take advantage of the additional
investment expertise, resources and distribution potential Madison Asset
Management, LLC offers through its affiliation with Madison Investment
Advisors, Inc. Madison Asset Management, LLC is intended to be operated as
a joint venture between Madison Investment Advisors, Inc. and CUNA Mutual
Insurance Society, in which CUNA Mutual Insurance Society would have an
ownership interest as well as certain Fund oversight responsibility. CUNA
Mutual Insurance Society would also continue to provide services to the
owners of its variable annuity contracts and variable life insurance
policies that have allocated contract value to subaccounts investing in the
Funds.
Q. WILL MY FUND'S EXPENSES INCREASE?
A. Each Fund's management fee will remain the same. In addition, Madison Asset
Management, LLC will enter into agreements that will have the effect of
capping most fees and expenses of each Fund to no more than the amount of
such fees and expenses (as a percentage of assets) incurred by the Fund for
the fiscal period ended October 31, 2008.
Q. WHAT HAPPENS IF PROPOSAL 3 IS NOT APPROVED?
A. Any Fund that does not approve Proposal 3 will continue to operate under
the current fundamental investment limitation regarding borrowing.
Q. WHAT HAPPENS IF PROPOSAL 4 IS NOT APPROVED?
A. Approval of Proposal 4.a would provide the investment advisor the authority
to enter into and materially amend investment subadvisory agreements
without, in each case, obtaining shareholder approval ("manager of managers
authority"). MEMBERS Capital Advisors, Inc., the Funds' current investment
advisor, currently has manager of managers authority with respect to all
Funds. If Proposal 4.a is not approved, it will not affect MEMBERS Capital
Advisors, Inc.'s manager of managers authority with respect to any of the
Funds.
Madison Asset Management, LLC, the proposed new investment advisor,
currently does not have manager of managers authority with respect to any
Fund, but has applied to the Securities and Exchange Commission ("SEC") for
an exemptive order that would grant it the authority subject to shareholder
approval. If Proposal 4.a is not approved or the SEC does not grant the
exemptive order, Madison Asset Management, LLC will not have manager of
managers authority for any Fund. Without manager of managers authority, the
investment advisor would need to seek shareholder approval to retain a new
subadvisor, or to materially amend an existing subadvisory agreement.
If Madison Asset Management, LLC becomes the investment advisor to the
Funds, it plans to enter into its own subadvisory agreements with each of
the subadvisors that currently manage a Fund (except for the Mid Cap Value
and Mid Cap Growth Funds, which Madison Asset Management, LLC intends to
manage internally). If Proposal 4.a is approved and the SEC grants the
exemptive order, Madison Asset Management, LLC will be able to enter into
these agreements without further shareholder approval. Alternatively,
Proposals 4.b-4.e would also provide Madison Asset Management, LLC the
authority to enter into these agreements. If Madison Asset Management, LLC
becomes the new investment advisor, but is not given authority to enter
into its own agreements with the Funds' current investment subadvisors
(either through the SEC exemptive order and approval of Proposal 4.a or
through approval of Proposals 4.b-4.e), the subadvisors currently managing
the Funds will no longer be able to do so, and Madison Asset Management,
LLC would need to manage these Funds internally.
2
Q. WHO IS ENTITLED TO VOTE?
A. Shareholders of the MEMBERS Mutual Funds as of the record date, which was
April 17, 2009, have the right to vote.
Q. HOW CAN I VOTE?
A. Please refer to the enclosed proxy card for information on providing proxy
voting instructions by mail, Internet, facsimile or telephone. In addition,
shareholders may vote in person at the Meeting.
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MEMBERS MUTUAL FUNDS
5910 Mineral Point Road
Madison, WI 53705
May 4, 2009
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PROXY STATEMENT
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This Proxy Statement is being furnished on behalf of the Board of Trustees
("Board") of the MEMBERS Mutual Funds ("Trust") to shareholders of record as of
April 17, 2009 ("Record Date") of the Conservative Allocation Fund, Moderate
Allocation Fund, Aggressive Allocation Fund, Cash Reserves 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 and/or International Stock Fund (together, "Funds," and each, a
"Fund"), each a series of the Trust. This Proxy Statement and attached materials
are being mailed on or about May 4, 2009.
A joint special meeting of shareholders of the Trust ("Meeting") is to be held
on June 25, 2009 at 5810 Mineral Point Road, Madison, Wisconsin 53705, at 9:00
a.m., Central Time for the purposes of voting on the matters set forth below and
such other matters as may properly come before the Meeting.
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Proposal Record Date Shareholders Entitled
To Vote
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1.01 To elect Philip E. Blake to the Board All shareholders of the Trust,
of Trustees of the Trust to serve until voting together as a group
his successor has been duly elected
and qualified or until his retirement,
resignation, death or removal.
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1.02 To elect Katherine L. Frank to the All shareholders of the Trust,
Board of Trustees of the Trust to voting together as a group
serve until her successor has been
duly elected and qualified or until
her retirement, resignation, death
or removal.
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1.03 To elect James R. Imhoff, Jr. to the All shareholders of the Trust,
Board of Trustees of the Trust to serve voting together as a group
until his successor has been duly
elected and qualified or until his
retirement, resignation, death or
removal.
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1.04 To elect Lorence D. Wheeler to the All shareholders of the Trust,
Board of Trustees of the Trust to voting together as a group
serve until his successor has been
duly elected and qualified or until
his retirement, resignation, death
or removal.
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Proposal Record Date Shareholders Entitled
To Vote
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2. To approve an investment advisory All shareholders of each Fund,
agreement by and between the Trust, voting separately by Fund
on behalf of each of the Funds, and
Madison Asset Management, LLC.
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3. To amend and restate the fundamental All shareholders of each Fund,
investment restriction regarding the voting separately by Fund
ability of each Fund to borrow.
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4.a To approve manager of managers All shareholders of each Fund,
authority. voting separately by Fund
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4.b To approve a subadvisory agreement All shareholders of the High
between Madison Asset Management, Income Fund, voting together as a
LLC and Shenkman Capital Management, group
Inc. with respect to the High Income
Fund.
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4.c To approve a subadvisory agreement All shareholders of the Small Cap
between Madison Asset Management, Value Fund, voting together as a
LLC and Wellington Management group
Company LLP with respect to
the Small Cap Value Fund.
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4.d To approve a subadvisory agreement All shareholders of the Small Cap
between Madison Asset Management, Growth Fund, voting together as a
LLC and Paradigm Asset Management, group
LLC with respect to the Small Cap
Growth Fund.
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4.e To approve a subadvisory agreement All shareholders of the
between Madison Asset Management, International Stock Fund, voting
LLC and Lazard Asset Management, together as a group
LLC with respect to the International
Stock Fund.
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Copies of the Trust's most recent Annual Report and Semi-Annual Report to
shareholders will be furnished without charge upon request by writing to:
MEMBERS Mutual Funds, P O box 8390, Boston, MA 02266-8390 or by calling
1-800-877-6089.
TABLE OF CONTENTS
Page
SUMMARY...................................................................... 1
Proposed Transaction...................................................... 1
The Trust................................................................. 2
Solicitation of Votes..................................................... 2
Shareholder Information................................................... 3
Quorum.................................................................... 6
Adjournments and/or Postponements......................................... 6
PROPOSAL 1 - ELECTION OF TRUSTEE NOMINEES TO THE BOARD OF TRUSTEES........... 6
Trustee and Officer Information........................................... 6
Responsibilities of the Board............................................. 13
Committee and Board Meetings.............................................. 13
Shareholder Communications................................................ 14
Compensation of Trustees and Officers..................................... 14
Required Vote............................................................. 15
PROPOSAL 2 - TO APPROVE AN INVESTMENT ADVISORY AGREEMENT BY AND BETWEEN
THE TRUST, ON BEHALF OF EACH OF THE FUNDS, AND MADISON ASSET
MANAGEMENT, LLC.............................................................. 15
The Current Management Agreement.......................................... 15
The Proposed Investment Advisory Agreement................................ 18
Management of Similar Funds............................................... 19
Board Considerations in Approving the Proposed Investment Advisory
Agreement................................................................. 20
Required Vote............................................................. 23
PROPOSAL 3 - TO AMEND AND RESTATE THE FUNDAMENTAL INVESTMENT RESTRICTION
REGARDING THE ABILITY OF EACH FUND TO BORROW................................. 24
Required Vote............................................................. 24
PROPOSAL 4 - TO APPROVE INVESTMENT SUBADVISORS............................... 24
Introduction.............................................................. 25
Proposal 4.a - To Approve Manager of Managers Authority................... 25
Required Vote............................................................. 26
i
Proposals 4.b-4.e - To Approve Subadvisory Agreements Between MAM and
Certain Subadvisors....................................................... 27
Required Vote............................................................. 37
ADDITIONAL INFORMATION....................................................... 37
Independent Registered Public Accounting Firm............................. 37
Custodian................................................................. 38
Principal Underwriter..................................................... 38
Transfer Agent............................................................ 38
Administrator............................................................. 38
Other Business............................................................ 38
Shareholder Proposals..................................................... 38
Householding.............................................................. 38
Important Notice Regarding the Availability of Proxy Materials............ 38
APPENDIX A - PROPOSED INVESTMENT ADVISORY AGREEMENT..........................A-1
APPENDIX B - PROPOSED SUBADVISORY AGREEMENT..................................B-1
ii
SUMMARY
PROPOSED TRANSACTION
CMIS and its indirect wholly owned subsidiary, MEMBERS Capital Advisors, Inc.
("MCA"), the Trust's investment advisor, and certain of their affiliates, have
entered into an agreement with Madison Investment Advisors, Inc. ("Madison"),
and certain of its affiliates, under which a subsidiary of Madison, Madison
Asset Management, LLC ("MAM"), would acquire certain of CMIS' and MCA's assets
in exchange for providing CMIS cash and an interest in MAM ("Proposed
Transaction"). See "Proposal 2, Board Considerations in Approving the Proposed
Investment Advisory Agreement-Consideration of the Proposed Transaction" below.
In connection with the Proposed Transaction, MAM is expected to offer employment
to most of the investment and operations personnel employed by CMIS and/or MCA
who currently provide services to the Funds. In that regard, the Funds would not
only continue to have access to those personnel, but also have access to the
additional investment expertise, resources and potential distribution channels
MAM offers through its affiliation with Madison.
Since 1974, Madison has served investment management clients with a blend of
investment philosophy and process, disciplined thinking and a spirit of
independence. Madison and its subsidiaries managed an aggregate of approximately
$7.5 billion of actively managed mutual funds, fixed-income portfolios,
risk-sensitive equity accounts and personalized balanced portfolios as of
December 31, 2008. Madison is a 100% employee-owned firm, with approximately 75
full-time employees, including 42 investment professionals, housed in offices in
Madison, Wisconsin; Scottsdale, Arizona and Chicago, Illinois. Madison and its
subsidiaries provide asset management for insurance companies, nationally
marketed separately managed account programs ("wrap" accounts), retirement
plans, municipalities, high-net-worth individuals and a variety of other
institutional investors, including the Madison Mosaic Family of Mutual Funds and
two closed-end investment companies traded on the New York Stock Exchange, and
specialize in custom-tailored separate account management.
Because Madison is an employee-owned company, certain employees and officers of
Madison are also interested parties in the Proposed Transaction. In particular,
Frank E. Burgess is the founder, President, Director and majority owner of
Madison. In addition, in Proposal 1, the Board has nominated four new persons,
Philip E. Blake, Katherine L. Frank, James R. Imhoff, Jr. and Lorence D.
Wheeler, to serve as Trustees to the Trust. These Trustee nominees currently
serve as trustees for other investment companies advised by a Madison
subsidiary. Ms. Frank is also employed by and an officer of Madison and certain
of its affiliates.
In connection with the Proposed Transaction, MAM has agreed, for the minimum
time periods specified in Section 15(f) of the Investment Company Act of 1940,
as amended ("1940 Act"), and to use its best efforts to cause the Board to take
(or refrain from taking, as the case may be) such actions as are necessary to
ensure that: (i) at least 75% of the Board are not "interested persons" (as that
term is defined in the 1940 Act) of the Funds' investment advisor or any
interested person; (ii) no "unfair burden" (as that term is defined in Section
15(f)(2)(B) of the 1940 Act) is imposed as a result of the Proposed Transaction;
and (iii) each vacancy on the
1
Board is filled by a person who is not an interested person of the Funds'
investment advisor so as to comply with Section 15(f) of the 1940 Act and has
been selected and proposed for election by a majority of the Board who are not
interested persons.
The Proposed Transaction is contingent upon a number of conditions, which
include, but are not limited to, (1) election by the shareholders of the Trust
and the Ultra Series Fund of Mr. Blake, Ms. Frank, Mr. Imhoff and Mr. Wheeler to
serve on the Board; (2) approval of shareholders of the Trust and the Ultra
Series Fund of a new agreement with MAM; and (3) granting by U.S. Securities and
Exchange Commission ("SEC") of "no-action" relief and exemptive orders governing
two issues. One issue, which relates to the ability of MAM to enter into and
materially amend subadvisory agreements without, in each case, obtaining
shareholder approval, is described in Proposal 4. With respect to the other
issue, MCA, certain Funds and certain series of the Ultra Series Fund currently
operate under an exemptive order that allows them to invest in other investment
companies and other securities in a manner that would otherwise be prohibited by
the 1940 Act, commonly known as a "fund of funds" arrangement. If the related
"no-action" relief and exemptive order are granted, MAM, the Funds and Ultra
Series Fund would be allowed to continue to operate in a similar manner after
the Proposed Transaction is consummated. If all of the conditions of the
Proposed Transaction are not satisfied, the Proposed Transaction may not occur.
In that case, Mr. Blake, Ms. Frank, Mr. Imhoff and Mr. Wheeler are not expected
to serve on the Board, even if Proposal 1 is approved. In addition, MAM would
not become the investment advisor to the Trust, even if Proposal 2 is approved.
THE TRUST
The Trust was organized under the laws of the state of Delaware on May 21, 1997
and is a Delaware statutory trust. As a Delaware statutory trust, the Trust's
operations are governed by its Amended and Restated Declaration of Trust dated
May 29, 2008 and its Certificate of Trust dated May 16, 1997. The Trust is
registered with the SEC as an open-end management investment company under the
1940 Act. The Trust is comprised entirely of the 14 Funds.
Each share has one vote for each dollar of net asset value as of the Record
Date, and fractional votes are counted. If a proxy card is received that does
not specify a choice, its timely receipt will be considered as an instruction to
vote in favor of the Proposals. Consistent with the foregoing, proxy voting
instructions to abstain with respect to a Proposal, and broker "non-votes"
(voting instructions received from brokers or other nominees indicating that
they have not received instructions from the owner or other persons entitled to
give voting instructions) will effectively be votes against the Proposal.
SOLICITATION OF VOTES
Votes are being solicited by mail. Additional solicitations may be made by
telephone or facsimile by officers or employees of CMIS or its affiliates, who
will not be separately compensated for such activities, and/or by Georgeson,
Inc., a professional proxy solicitor, for an estimated fee of $7,500 plus
certain expenses. Brokers and other nominees may be reimbursed for their
reasonable expenses in communicating with the person(s) for whom they hold
shares of a Fund. The cost of
2
the solicitation will be borne by Madison, CMIS and/or their affiliates, but
not by the Funds. Shareholders should provide proxy voting instructions by
completing the enclosed Proxy Card and mailing it to the address shown on the
Proxy Card.
Shareholders may revoke proxy voting instructions at any time prior to the
Meeting by notifying the Funds in writing: CUNA Mutual Insurance Society, ATTN:
Legal, 4th Floor, 5910 Mineral Point Road, Madison, Wisconsin 53705.
SHAREHOLDER INFORMATION
As of the close of business on the Record Date, there were issued and
outstanding shares and net assets of each Fund as shown below. Each Fund had
several classes of shares outstanding as of the Record Date.
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Fund/Class Outstanding Shares Net Assets
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Aggressive Allocation A 2,349,011.243 $15,832,335.78
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Aggressive Allocation B 928,657.908 6,231,294.56
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Aggressive Allocation C 35,405.013 237,921.69
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Bond A 4,147,482.901 41,060,080.72
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Bond B 1,249,680.768 12,384,336.41
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Bond Y 13,077,446.256 129,466,717.93
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Cash Reserves A 19,411,593.029 19,411,593.03
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Cash Reserves B 5,301,255.368 5,301,255.37
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Conservative Allocation A 2,505,325.579 20,994,628.35
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Conservative Allocation B 610,179.481 5,113,304.05
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Conservative Allocation C 253,868.300 2,129,955.04
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Diversified Income A 6,927,435.111 64,563,695.23
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Diversified Income B 2,146,307.329 20,089,436.60
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High Income A 3,396,998.173 20,517,868.96
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High Income B 816,286.067 4,987,507.87
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High Income Y 10,219,948.688 61,626,290.59
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International Stock A 2,288,223.492 17,436,263.01
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International Stock B 596,826.955 4,482,170.43
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International Stock Y 11,885,678.634 90,450,014.40
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Large Cap Growth A 3,437,238.825 38,600,192.00
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Large Cap Growth B 951,866.067 9,927,963.08
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Large Cap Growth Y 7,118,083.173 80,363,159.02
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Large Cap Value A 5,274,243.435 47,679,160.65
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Large Cap Value B 1,114,592.394 9,931,018.23
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Large Cap Value Y 6,704,988.822 60,613,098.95
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Mid Cap Growth A 3,514,544.398 13,987,886.70
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Mid Cap Growth B 1,051,425.049 3,911,301.18
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Mid Cap Growth Y 4,505,226.724 18,065,959.16
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Mid Cap Value A 2,655,322.779 19,357,303.06
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Mid Cap Value B 859,281.119 5,929,039.72
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Mid Cap Value Y 453,364.825 3,345,832.41
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Moderate Allocation A 6,668,855.845 50,483,238.75
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3
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Fund/Class Outstanding Shares Net Assets
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Moderate Allocation B 2,228,729.785 16,849,197.17
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Moderate Allocation C 290,490.785 2,196,110.33
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Small Cap Growth A 57,766.716 315,406.27
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Small Cap Growth B 10,866.552 58,353.38
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Small Cap Growth Y 2,330,866.719 12,796,458.29
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Small Cap Value A 152,056.666 1,017,259.10
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Small Cap Value B 10,535.257 70,164.81
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Small Cap Value Y 2,362,832.413 15,736,463.87
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As of the Record Date, the following persons owned more than 5% of the
outstanding voting securities of any class of a Fund.
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Fund/Class Shareowner Ownership %
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Aggressive Erin Mcgowan, Somerset, NJ 08873 15.02
Allocation C ------------------------------------------------------------
Pershing LLC, Jersey City, NJ 07303* 7.36
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Pershing LLC, Jersey City, NJ 07303* 6.84
------------------------------------------------------------
Pershing LLC, Jersey City, NJ 07303* 5.97
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Pershing LLC, Jersey City, NJ 07303* 5.42
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Jesus S Mendiola, Missouri City, TX 77459 5.24
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Scott Horan, Waterloo, IA 50701 5.00
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Bond Y Ultra Series Moderate Allocation Fund(+) 34.85
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Ultra Series Conservative Allocation Fund(+) 30.94
------------------------------------------------------------
MEMBERS Moderate Allocation Fund(+) 9.50
------------------------------------------------------------
MEMBERS Conservative Allocation Fund(+) 6.57
------------------------------------------------------------
Trust Under CMIS NQ DC Plans For Employees
Post-04-DC State Street Trustee+ 5.77
- -----------------------------------------------------------------------------------
Conservative Pershing LLC, Jersey City, NJ 07303* 12.07
Allocation C
- -----------------------------------------------------------------------------------
High Income Y Ultra Series Moderate Allocation Fund(+) 39.10
------------------------------------------------------------
Ultra Series Conservative Allocation Fund(+) 27.44
------------------------------------------------------------
MEMBERS Moderate Allocation Fund(+) 10.71
------------------------------------------------------------
Ultra Series Aggressive Allocation Fund(+) 7.60
------------------------------------------------------------
MEMBERS Conservative Allocation Fund(+) 5.90
- -----------------------------------------------------------------------------------
International Stock Y Ultra Series Moderate Allocation Fund(+) 41.02
------------------------------------------------------------
Ultra Series Aggressive Allocation Fund(+) 16.60
------------------------------------------------------------
Ultra Series Conservative Allocation Fund(+) 12.56
------------------------------------------------------------
MEMBERS Moderate Allocation Fund(+) 11.55
- -----------------------------------------------------------------------------------
Large Cap Growth Y Ultra Series Moderate Allocation Fund(+) 38.51
------------------------------------------------------------
Ultra Series Aggressive Allocation Fund(+) 15.63
------------------------------------------------------------
Ultra Series Conservative Allocation Fund(+) 15.27
------------------------------------------------------------
MEMBERS Moderate Allocation Fund(+) 10.81
- -----------------------------------------------------------------------------------
Large Cap Value Y Ultra Series Moderate Allocation Fund(+) 37.01
------------------------------------------------------------
Ultra Series Conservative Allocation Fund(+) 15.96
------------------------------------------------------------
Ultra Series Aggressive Allocation Fund(+) 11.18
------------------------------------------------------------
MEMBERS Moderate Allocation Fund(+) 10.05
------------------------------------------------------------
Trust Under CMIS NQ DC Plans For Employees
Pre-05-DB State Street Trustee(+) 5.38
- -----------------------------------------------------------------------------------
* Ownership represents ownership of record rather than beneficial ownership.
(+) Address: 5910 Mineral Point Road, Madison, WI 53705
4
- -----------------------------------------------------------------------------------
Fund/Class Shareowner Ownership %
- -----------------------------------------------------------------------------------
Large Cap Value Y Trust Under CMIS NQ DC Plans For Employees
Pre-05-DC State Street Trustee(+) 5.19
- -----------------------------------------------------------------------------------
Mid Cap Growth Y Ultra Series Moderate Allocation Fund(+) 39.43
------------------------------------------------------------
Ultra Series Aggressive Allocation Fund(+) 27.42
------------------------------------------------------------
MEMBERS Moderate Allocation Fund(+) 10.76
------------------------------------------------------------
MEMBERS Aggressive Allocation Fund(+) 7.69
------------------------------------------------------------
Trust Under CMIS NQ DC Plans For Employees
Post-04-DC State Street Trustee(+) 6.90
- -----------------------------------------------------------------------------------
Mid Cap Value Y Trust Under CMIS NQ DC Plans For Employees
Pre-05-DB State Street Trustee(+) 50.45
------------------------------------------------------------
Trust Under CMIS NQ DC Plans For Employees
Post-04-DC State Street Trustee(+) 25.57
------------------------------------------------------------
Trust Under CMIS NQ DC Plan 'For Directors
State Street Trustee(+) 9.34
------------------------------------------------------------
Trust Under CMIS NQ DC Plans For Employees
Pre-05-DC State Street Trustee(+) 7.41
------------------------------------------------------------
Trust Under CMIS NQ DC Plans For Employees
Post-04-DB State Street Trustee(+) 7.23
- -----------------------------------------------------------------------------------
Moderate Allocation C Lonnie C Rogers, Danbury, CT 06810 6.89
------------------------------------------------------------
Sue L Reinhold, Pittsburgh, PA 15220 5.31
- -----------------------------------------------------------------------------------
Small Cap Growth A Alaska USA Federal Credit Union, Anchorage,
AK 99519 13.72
------------------------------------------------------------
Superior Federal Credit Union 457(B) Plan,
Lima, OH 45807 8.93
------------------------------------------------------------
Mark A Billings, Gifford, IL 61847 5.78
- -----------------------------------------------------------------------------------
Small Cap Growth B Pershing LLC, Jersey City, NJ 07303* 16.80
------------------------------------------------------------
Pershing LLC, Jersey City, NJ 07303* 12.34
------------------------------------------------------------
Marian M Selleck, Cameron, WI 54822 7.67
------------------------------------------------------------
Ryan Hassebroek, Prior Lake, MN 55372 7.55
------------------------------------------------------------
Daniel Selleck, Cameron, WI 54822 6.24
- -----------------------------------------------------------------------------------
Small Cap Growth Y Ultra Series Moderate Allocation Fund(+) 48.46
------------------------------------------------------------
Ultra Series Aggressive Allocation Fund(+) 27.32
------------------------------------------------------------
MEMBERS Moderate Allocation Fund(+) 12.70
------------------------------------------------------------
MEMBERS Aggressive Allocation Fund(+) 7.66
- -----------------------------------------------------------------------------------
Small Cap Value A Stephen T O'Brien, Harvard, MA 01451 76.91
- -----------------------------------------------------------------------------------
Small Cap Value B Pershing LLC, Jersey City, NJ 07303* 10.73
------------------------------------------------------------
John W Butler, Minneapolis, MN 55418 9.08
------------------------------------------------------------
David W Huckaby, Thompsons Stn, TN 37179 6.43
------------------------------------------------------------
Pershing LLC, Jersey City, NJ 07303* 6.05
------------------------------------------------------------
James E Doyle, Piedmont, OK 73078 5.46
------------------------------------------------------------
Daniel Selleck, Cameron, WI 54822 5.22
------------------------------------------------------------
Richard L Peterson, La Crescent, MN 55947 5.09
- -----------------------------------------------------------------------------------
Small Cap Value Y Ultra Series Moderate Allocation Fund(+) 42.95
------------------------------------------------------------
Ultra Series Aggressive Allocation Fund(+) 26.55
------------------------------------------------------------
MEMBERS Moderate Allocation Fund(+) 12.40
------------------------------------------------------------
MEMBERS Aggressive Allocation Fund(+) 6.80
- -----------------------------------------------------------------------------------
* Ownership represents ownership of record rather than beneficial ownership.
(+) Address: 5910 Mineral Point Road, Madison, WI 53705
5
As of the Record Date, the Trustees or Trustee nominees owned shares of the
Funds as follows:
Dollar Range of Equity Securities in the
Trust(1)
----------------------------------------------------------------------
Aggregate Dollar
Small Range of Equity
Aggressive Cap International Securities in
Name of Trustee Allocation Growth Stock Fund Complex(1),(2)
- -----------------------------------------------------------------------------------------------
Steven P. Riege $1 - $10,000 $1 - $10,000 $1 - $10,000
- -----------------------------------------------------------------------------------------------
Richard E. Struthers $10,001 - $50,000 $10,001 - $50,000
- -----------------------------------------------------------------------------------------------
(1) Dollar ranges are as follows: none; $1-$10,000; $10,001-$50,000;
$50,001-$100,000; and over $100,000.
(2) Fund Complex includes the Trust and the Ultra Series Fund with 18
portfolios.
As of the Record Date, the officers and Trustees of the Trust together
beneficially owned less than 1% of each Fund's shares.
QUORUM
The presence, in person or by proxy, of the holders of at least 20% of the
outstanding shares of each Fund constitutes a quorum for the Meeting for that
Fund.
ADJOURNMENTS AND/OR POSTPONEMENTS
It is possible that the Trust may propose one or more adjournments or
postponements of the Meeting. Any such adjournment or postponement with respect
to each Fund will require an affirmative vote by the holders of a majority of
the outstanding shares of that Fund present (in person or by proxy) at the
Meeting. The proxies are expected to vote in favor of any proposed adjournment
or postponement.
PROPOSAL 1 - ELECTION OF TRUSTEE NOMINEES TO THE BOARD OF TRUSTEES.
There are four Trustee nominees: Philip E. Blake, Katherine L. Frank, James R.
Imhoff, Jr. and Lorence D. Wheeler. Madison recommended to the Board that
these persons be nominated as new Trustees of the Trust, although the current
Trustees who are not "interested persons" of the Trust as defined in the 1940
Act ("Independent Trustees") made their own decision to recommend these
individuals to shareholders. None of the current Trustees or Trustee nominees
is related to any other Trustee or Trustee nominee. Each Trustee nominee will
be elected to serve until his or her successor is elected and qualified or until
his or her earlier death, retirement, resignation or removal.
The Board knows of no reason why any of the Trustee nominees will be unable to
serve and each of the nominees has indicated a willingness to serve or to
continue to serve as a Trustee if elected. However, should any nominee become
unable or unwilling to accept nomination or election, the persons named in the
proxy will exercise their voting power in favor of such other person or persons
as the Board may recommend. If the Proposed Transaction occurs, Rolf E.
Bjelland, David P. Marks and Linda S. Foltz are not expected to continue to
serve on the Board.
TRUSTEE AND OFFICER INFORMATION
Certain biographical and other information relating to the Trustees who will
continue to serve and Trustee nominees who are or would be Independent Trustees
6
is set forth below, including their year of birth, principal occupations for at
least the last five years, the length of time served and other public
directorships/trusteeships.
Each of the Independent Trustees oversees or will oversee all of the 14 Funds
that make up the Trust. Each Independent Trustee also oversees or is nominated
to oversee the 18 funds of the Ultra Series Fund.
- --------------------------------------------------------------------------------------------
Position(s)
and Length Other
Name, Address and of Time Principal Occupation(s) Directorships/
Birth Year of Served During Past Five Years Trusteeships
- --------------------------------------------------------------------------------------------
Philip E. Blake Trustee Retired investor. Madison Mosaic
550 Science Drive nominee Funds (13), Madison
Madison, WI 53711 Lee Enterprises, Inc. Strategic Sector
1944 (news and advertising Premium Fund, and
publisher), Vice Madison Claymore
President-Publishing, Covered Call Fund,
1998-2001. 2001-Present
Madison Newspapers, Madison Newspapers,
Inc., President and Inc., 1993-Present
Chief Executive
Officer, 1993-2000. Meriter Hospital &
Health Services,
2000-Present
Edgewood College,
2003-Present
- --------------------------------------------------------------------------------------------
7
- --------------------------------------------------------------------------------------------
Position(s)
and Length Other
Name, Address and of Time Principal Occupation(s) Directorships/
Birth Year of Served During Past Five Years Trusteeships
- --------------------------------------------------------------------------------------------
James R. Imhoff, Jr. Trustee First Weber Group (real Madison Mosaic
550 Science Drive nominee estate brokers), Chief Funds (13), Madison
Madison, WI 53711 Executive Officer, Strategic Sector
1944 1996-Present Premium Fund, and
Madison Claymore
Covered Call Fund,
1996-Present
Park Bank,
1978-Present
- --------------------------------------------------------------------------------------------
Steven P. Riege Trustee, The Rgroup (management None
5910 Mineral Point Rd 2005-Present consulting), Owner/
Madison, WI 53705 President, 2001-Present
1954
Robert W. Baird &
Company (financial
services), Senior Vice
President-Marketing and
Vice President-Human
Resources, 1986-2001
- --------------------------------------------------------------------------------------------
Richard E. Struthers Chair, Audit Clearwater Capital Park Nicollet
5910 Mineral Point Rd Committee, Management, Chair and Health
Madison, WI 53705 2006-Present Chief Executive Services,
1952 Officer, 1998-Present 2001-Present
Trustee, Park Nicollet Health MicroComponent
2004-Present Services, Chair, Technology, Inc.,
2001-Present 2008-2009
IAI Mutual Funds,
President and Director,
1992-1997
- --------------------------------------------------------------------------------------------
8
- --------------------------------------------------------------------------------------------
Position(s)
and Length Other
Name, Address and of Time Principal Occupation(s) Directorships/
Birth Year of Served During Past Five Years Trusteeships
- --------------------------------------------------------------------------------------------
Lorence D. Wheeler Trustee Retired investor. Madison Mosaic
550 Science Drive nominee Funds (13), Madison
Madison, WI 53711 Credit Union Benefits Strategic Sector
1938 Services, Inc. (a Premium Fund, and
provider of retirement Madison Claymore
plans and related Covered Call Fund,
services for credit 1996-Present
union employees
nationwide), President, Grand Mountain
1997-2001 Bank FSB and
Grand Mountain
Bancshares, Inc.
2003-Present
- --------------------------------------------------------------------------------------------
9
Certain biographical and other information relating to the Trustee nominee who
would not be considered Independent Trustees and officers and officer appointees
of the Trust is set forth below, including their year of birth, principal
occupations for at least the last five years and the length of time served.
Officers of the Trust are elected and appointed by the Board and hold office
until they resign, are removed or are otherwise disqualified to serve. Each of
the Trustee nominees, officers and officer appointees also holds or is nominated
or expected to hold the same position with the Ultra Series Fund, which has 18
series.
- --------------------------------------------------------------------------------------------
Position(s)
and Length Other
Name, Address and of Time Principal Occupation(s) Directorships/
Birth Year of Served During Past Five Years Trusteeships
- --------------------------------------------------------------------------------------------
Katherine L. Frank(1) Trustee Madison, Managing Madison Mosaic
550 Science Drive nominee and Director and Vice Income Trust;
Madison, WI 53711 President President, Madison Mosaic
1960 appointee(2) 1986-Present Tax-Free Trust;
Madison Mosaic
MAM, Director, Government Money
2004-Present Market Trust; and
Madison Mosaic, LLC Madison Strategic
(an investment Sector Premium
advisor), President, Fund, 1996-Present
1996-Present
Madison Mosaic Funds
(13) and Madison
Strategic Sector
Premium Fund,
President, 1996-Present
Madison/Claymore
Covered Call and
Equity Strategy Fund,
Vice President,
2005-Present
- --------------------------------------------------------------------------------------------
(1) Ms. Frank would be considered an "interested person" of the Trust as
defined in the 1940 Act because of her position with and ownership interest
in Madison. If the Proposed Transaction occurs, Ms. Frank is also expected
to replace Mr. Marks as President and principal executive officer of the
Trust.
10
- --------------------------------------------------------------------------------------------
Position(s)
and Length Other
Name, Address and of Time Principal Occupation(s) Directorships/
Birth Year of Served During Past Five Years Trusteeships
- --------------------------------------------------------------------------------------------
Frank E. Burgess Vice Madison, Founder, Madison/Claymore
550 Science Drive President President and Director, Covered Call and
Madison, WI 53711 appointee(2) 1973-Present Equity Strategy
1942 Fund, 2004-Present
MAM, Director, Capitol Bank,
2004-Present 1999-Present
Madison Mosaic Funds American Riviera
(13) and Madison Bank, 2005-Present
Strategic Sector Premium
Fund, Vice President and
Trustee, 1996-Present
- --------------------------------------------------------------------------------------------
Paul Lefurgey, CFA Vice Madison, Managing N/A
550 Science Drive President Director, Head of Fixed
Madison, WI 53711 appointee(2) Income and Senior
1964 Portfolio Manager,
2005-Present
MCA, Vice President,
2003-2005
Duff & Phelps Investment
Management,
Executive Vice
President, 1990-2003
- --------------------------------------------------------------------------------------------
Jay R. Sekelsky Vice President Madison, Managing N/A
550 Science Drive appointee(2) Director, 1990-Present
Madison, WI 53711
1959 Madison Mosaic, LLC,
Vice President,
1996-Present
Madison Mosaic Funds
(13), Madison Strategic
Sector Premium Fund and
Madison/Claymore Covered
Call and Equity Strategy
Fund, Vice President,
1996-Present
- --------------------------------------------------------------------------------------------
(2) If the Proposed Transaction occurs, Scott R. Powell is not expected to
continue as Vice President of the Trust. Mr. Burgess, Mr. Lefurgey and Mr.
Sekelsky are expected to be appointed as Vice Presidents of the Trust.
11
- --------------------------------------------------------------------------------------------
Position(s)
and Length Other
Name, Address and of Time Principal Occupation(s) Directorships/
Birth Year of Served During Past Five Years Trusteeships
- --------------------------------------------------------------------------------------------
Holly S. Baggot Secretary MCA, Director, Mutual N/A
5910 Mineral Point Rd 1999-Present; Funds 2008-Present;
Madison, WI 53705 Treasurer & Director, Mutual Fund
1960 Principal Operations, 2006-2008;
Financial Operations Officer-Mutual
Officer (PFO), Funds, 2005-2006; Senior
2008-Present; Manager-Product & Fund
Assistant Operations, 2001-2005
Treasurer,
1999-2007
- --------------------------------------------------------------------------------------------
Greg Hoppe Assistant Madison Strategic N/A
550 Science Drive Treasurer Sector Premium Fund,
Madison, WI 53711 Appointee(3) Chief Financial
1969 Officer & Treasurer,
2005-Present
Madison Mosaic, LLC,
Vice President,
1999-Present
Madison Mosaic Funds
(13), Chief Financial
Officer, 1999-Present
- --------------------------------------------------------------------------------------------
Cheryl R. Gilge Assistant MCA, Operations N/A
5910 Mineral Point Rd Treasurer, Associate,
Madison, WI 53705 2008-Present Administration,
1975 2007-Present; Fund
Administration
Analyst, 2005-2007;
Investment Support
Manager, 1999-2005
- --------------------------------------------------------------------------------------------
(3) If the Proposed Transaction occurs, Mr. Hoppe is expected to replace Dan
Owens as Assistant Treasurer of the Trust.
12
- --------------------------------------------------------------------------------------------
Position(s)
and Length Other
Name, Address and of Time Principal Occupation(s) Directorships/
Birth Year of Served During Past Five Years Trusteeships
- --------------------------------------------------------------------------------------------
W. Richard Mason Chief Madison, MAM, N/A
8777 N. Gainey Center Compliance Madison Scottsdale,
Drive, #220 Officer and LC and Madison
Scottsdale, AZ 85258 Chief Legal Mosaic, LLC, General
1960 Officer Counsel and Chief
appointee(4) Compliance Officer,
1996-Present
Mosaic Funds
Distributor, LLC,
Principal,
1998-Present
Concord Asset
Management, LLC,
General Counsel,
2004-Present
Madison Mosaic Funds
(13) and Madison
Strategic Sector
Premium Fund,
Secretary, General
Counsel, Chief
Compliance Officer,
1992-Present
- --------------------------------------------------------------------------------------------
(4) If the Proposed Transaction occurs, Mr. Mason is expected to replace Timothy
S. Halevan as Chief Compliance Officer and be appointed as the Chief Legal
Officer of the Trust.
RESPONSIBILITIES OF THE BOARD
The business and affairs of the Trust are managed under the direction of the
Board. The officers of the Trust are responsible for the day-to-day operations
of the Trust and report to the Board. MCA and its affiliates, under agreements
with the Trust, supervise and assist in the management of the Funds and the
purchase and sale of securities. If the Proposed Transaction occurs, MAM would
take over these responsibilities from MCA.
COMMITTEE AND BOARD MEETINGS
The Board held four meetings in the Funds' last fiscal year.
The Board has a standing Audit Committee, which consists entirely of Independent
Trustees. The Audit Committee of the Board held five meetings during the Funds'
last fiscal year. The Audit Committee, which has adopted and operates in
accordance with a separate Audit Committee charter, has as its purposes to meet
with the Funds' independent registered public accountants to review the
arrangements for and scope of the audit; discuss matters of concern relating to
the Funds' financial statements, including any adjustments to such statements
recommended by the independent registered public accountants, or other results
of the audit; consider the independent registered public accountants' comments
and
13
suggestions with respect to the Funds' financial policies, accounting procedures
and internal accounting controls; and review the form of audit opinion the
accountants propose to render to the Funds.
The Audit Committee also reviews any memoranda prepared by the independent
registered public accountants setting forth any recommended procedural changes;
considers the effect upon the Funds of any changes in accounting principles or
practices proposed by management or the independent registered public
accountants; reviews audit and non-audit services provided to the Funds by the
independent registered public accountants and the fees charged for such
services; considers whether to retain the accountants for the next fiscal year
and evaluates the independence of the independent registered public accountants;
and reports to the Board from time to time and makes such recommendations as the
committee deems necessary or appropriate.
All members of the Board wish to participate in the nomination of new members
(if any) and, therefore, the Board does not have a formal nominating committee.
However, only the Independent Trustees determine the nomination of a new
Independent Trustee.
SHAREHOLDER COMMUNICATIONS
Shareholders may send written communications to the Board of Trustees or to an
individual Trustee by mailing such correspondence to the Trustee or Trustees at
5910 Mineral Point Road, Madison, WI 53705. Properly submitted shareholder
communications will, as appropriate, be forwarded to the entire Board or to the
individual Trustee.
COMPENSATION OF TRUSTEES AND OFFICERS
Except for Mr. Halevan, the officers and Trustees of the Trust who are employees
of MCA or its affiliates do not receive any compensation from the Trust.
Independent Trustees receive from the Trust an annual retainer, which
compensates them for each regular Board and Audit Committee meeting attended,
with additional remuneration paid to the Chair of the Board and the Chair of the
Audit Committee. Independent Trustees also receive a per meeting fee for each
special meeting, if any, attended.
The following table sets forth compensation for the fiscal year ended October
31, 2008 paid by the Trust to Mr. Riege and Mr. Struthers:
- -------------------------------------------------------------------------------
Aggregate Compensation Total Compensation from
Trustee Name from Trust Trust and Fund Complex(1)
- -------------------------------------------------------------------------------
Steven P. Riege $25,625 $51,250
- -------------------------------------------------------------------------------
Richard E. Struthers $28,125 $56,250
- -------------------------------------------------------------------------------
(1) Fund Complex includes the Trust and the Ultra Series Fund with 18
portfolios.
Share Ownership. Except as otherwise noted in this Proxy Statement, none of the
Trustees or Trustee nominees own directly or indirectly any shares of the Trust,
or of CMIS, MCA, CUNA Brokerage Services, Inc., MAM or any of their affiliates.
Ms. Frank has a less than 5% ownership interest in Madison.
14
REQUIRED VOTE
The election of a Trustee requires a plurality vote of votes cast in person or
by proxy at the Meeting, provided a quorum is present. This means the four
nominees with the most votes will be elected. Therefore, we anticipate that all
nominees will be elected.
The persons named in the accompanying proxy card intend, in the absence of
contrary instructions, to vote all proxies "FOR" all the nominees. Shareholders
may vote "FOR" or "WITHHOLD" their vote for the nominees. If you return your
proxy card and give no proxy voting instructions, your shares will be voted
"FOR" all of the nominees. "WITHHOLD" votes are counted as present for purposes
of determining a quorum.
THE BOARD OF THE TRUST RECOMMENDS A VOTE FOR THE ELECTION OF THE TRUSTEE
NOMINEES.
PROPOSAL 2 - TO APPROVE AN INVESTMENT ADVISORY
AGREEMENT BY AND BETWEEN THE TRUST, ON BEHALF OF EACH
OF THE FUNDS, AND MADISON ASSET MANAGEMENT, LLC.
Each Fund is currently managed by MCA pursuant to an investment management
agreement. MCA currently manages the assets of certain Funds using a "manager of
managers" approach under which MCA may manage some or all of the Funds' assets
and may allocate some or all of the Funds' assets among one or more specialist
subadvisors. MCA has retained a subadvisor to provide day-to-day portfolio
management for all or a portion of the assets of the High Income, Mid Cap
Growth, Mid Cap Value, Small Cap Growth, Small Cap Value and International Stock
Funds. Under the proposed investment advisory agreement ("Proposed Investment
Advisory Agreement"), MAM will provide all of the services currently provided by
MCA. In addition, while MAM is expected to evaluate going forward whether each
Fund has the appropriate portfolio managers and subadvisors, most portfolio
managers and subadvisors who currently manage the Funds are expected to continue
to do so at the close of the Proposed Transaction. Edward J. Meier, with respect
to the Cash Reserves Fund, Scott R. Powell, with respect to the Aggressive
Allocation, Moderate Allocation and Conservative Allocation Funds, and
Wellington Management Company, LLP, with respect to the Mid Cap Growth and Mid
Cap Value Funds, are not expected to continue to manage those Funds. Rather,
those Funds would be managed by other Madison investment personnel. Also, all of
the Funds will have access to the additional Madison investment personnel and
resources.
THE CURRENT MANAGEMENT AGREEMENT
The current investment management agreement with MCA was last approved by the
Board, including a majority of Independent Trustees on December 5, 2008. It was
last approved by the initial shareholder on November 17, 1997 for the Cash
Reserves, Bond, Diversified Income, High Income, Large Cap Value, Large Cap
Growth and International Stock Funds; on February 25, 2000 for the Mid Cap
Growth Fund; on February 19, 2001 for the Mid Cap Value Fund; on June 30, 2006
for the Conservative Allocation, Moderate Allocation and Aggressive Allocation
15
Funds; and on December 27, 2006 for the Small Cap Growth and Small Cap Value
Funds.
MCA is wholly owned by CUNA Mutual Investment Corporation, which is wholly owned
by CMIS, all of which are principally located at 5910 Mineral Point Road,
Madison, Wisconsin 53705. The following are MCA's principal executive officers
and directors, each of whose principal address is 5910 Mineral Point Road,
Madison, Wisconsin 53705, except for Mr. Halevan, whose principal address is
2000 Heritage Way, Waverly, Iowa 50677.
- ----------------------------------------------------------------------------
Name Title
- ----------------------------------------------------------------------------
David P. Marks Director and President
- ----------------------------------------------------------------------------
Kurt Y. Lin Vice President
- ----------------------------------------------------------------------------
Thomas J. Merfeld Vice President
- ----------------------------------------------------------------------------
James H. Metz Vice President
- ----------------------------------------------------------------------------
John W. Petchler Vice President
- ----------------------------------------------------------------------------
Scott R. Powell Vice President
- ----------------------------------------------------------------------------
Mary E. Hoffmann Secretary and Treasurer
- ----------------------------------------------------------------------------
Timothy S. Halevan Vice President and Chief Compliance Officer
- ----------------------------------------------------------------------------
Tracy K. Lien Assistant Secretary
- ----------------------------------------------------------------------------
Each of these persons may also hold other titles and/or positions with
affiliates of MCA.
The existing investment management agreement requires that MCA provide
continuous professional investment management of the investments of the Trust,
including establishing an investment program complying with the investment
objectives, policies, and restrictions of each Fund. MCA also provides limited
administrative services under the investment management agreement. For its
services under the investment management agreement, each Fund pays MCA
compensation in the form of an investment management fee, which is paid monthly
and is calculated as a percentage of the average daily net assets of the Fund at
the annual rates shown below:
- ----------------------------------------------------
Fund Management Fee(1)
- ----------------------------------------------------
Conservative Allocation 0.20%
- ----------------------------------------------------
Moderate Allocation 0.20%
- ----------------------------------------------------
Aggressive Allocation 0.20%
- ----------------------------------------------------
Cash Reserves 0.40%
- ----------------------------------------------------
Bond 0.50%
- ----------------------------------------------------
High Income 0.55%
- ----------------------------------------------------
Diversified Income 0.65%
- ----------------------------------------------------
Large Cap Value 0.55%
- ----------------------------------------------------
Large Cap Growth 0.75%
- ----------------------------------------------------
Mid Cap Value 0.95%
- ----------------------------------------------------
Mid Cap Growth 0.75%
- ----------------------------------------------------
Small Cap Value 1.00%
- ----------------------------------------------------
16
- ----------------------------------------------------
Fund Management Fee(1)
- ----------------------------------------------------
Small Cap Growth 1.00%
- ----------------------------------------------------
International Stock 1.05%
- ----------------------------------------------------
(1) Except for the Conservative Allocation, Moderate Allocation and Aggressive
Allocation Funds, each Fund's management fee will be reduced by 0.05% on
assets exceeding $500 million, and by another 0.05% on assets exceeding $1
billion.
MCA has contractually agreed, until at least February 27, 2010, to reimburse all
ordinary expenses, other than management, 12b-1, and service fees, of each Fund
in excess of the following percentages of the average daily net assets of the
Fund (excluding taxes, interest, brokerage commissions and extraordinary
expenses incurred by each Fund):
- -------------------------------------------------------
Fund Expense Limit
- -------------------------------------------------------
Conservative Allocation 0.25%
- -------------------------------------------------------
Moderate Allocation 0.25%
- -------------------------------------------------------
Aggressive Allocation 0.25%
- -------------------------------------------------------
Cash Reserves 0.15%
- -------------------------------------------------------
Bond 0.15%
- -------------------------------------------------------
High Income 0.20%
- -------------------------------------------------------
Diversified Income 0.20%
- -------------------------------------------------------
Large Cap Value 0.40%
- -------------------------------------------------------
Large Cap Growth 0.20%
- -------------------------------------------------------
Mid Cap Value 0.20%
- -------------------------------------------------------
Mid Cap Growth 0.40%
- -------------------------------------------------------
Small Cap Value 0.25%
- -------------------------------------------------------
Small Cap Growth 0.25%
- -------------------------------------------------------
International Stock 0.30%
- -------------------------------------------------------
Any reimbursement made by MCA to a Fund is subject to repayment by the Fund to
the extent that the Fund can make the repayment while remaining within its
expense cap. Under the expense cap agreement, such repayments (if any), measured
on a fiscal year basis, must be made within three years from the date the
reimbursement occurred and cannot exceed the expense caps in place during the
year in which the expenses were initially waived.
The investment management agreement provides: (1) that it shall continue in
effect for two years from its effective date and thereafter shall continue
automatically for periods of one year so long as such continuance is
specifically approved at least annually by the vote of a majority of the
Independent Trustees or by a vote of the majority of outstanding Fund shares;
(2) that it may be terminated, without the payment of any penalty, by MCA, by
the Board or by vote of a majority of outstanding Fund shares on sixty (60) days
written notice to the non-terminating party; and (3) that it will terminate
automatically in the event of its assignment.
The investment management agreement also contains provisions that: (1) limit
MCA's liability for any error of judgment, mistake of law, loss arising out of
any investment, or for any act or omission in the management of a Fund to
instances of willful misfeasance, bad faith, gross negligence or reckless
disregard for its duties
17
under the investment management agreement; (2) allow MCA to effect transactions
between a Fund and MCA's other clients in an manner deemed equitable to all; and
(3) allow MCA to aggregate orders to purchase or sell securities for a Fund and
other MCA clients in order to obtain favorable execution and lower brokerage
commissions or prices.
For the fiscal year ended October 31, 2008, each Fund paid the following amounts
to MCA.
- ------------------------------------------------
Fund Amount
- ------------------------------------------------
Conservative Allocation $ 54,734
- ------------------------------------------------
Moderate Allocation 163,842
- ------------------------------------------------
Aggressive Allocation 53,334
- ------------------------------------------------
Cash Reserves 69,411
- ------------------------------------------------
Bond 671,199
- ------------------------------------------------
High Income 392,802
- ------------------------------------------------
Diversified Income 813,679
- ------------------------------------------------
Large Cap Value 903,472
- ------------------------------------------------
Large Cap Growth 1,238,664
- ------------------------------------------------
Mid Cap Value 511,593
- ------------------------------------------------
Mid Cap Growth 543,410
- ------------------------------------------------
Small Cap Value 211,065
- ------------------------------------------------
Small Cap Growth 250,627
- ------------------------------------------------
International Stock 1,315,045
- ------------------------------------------------
The table below shows the commissions and other compensation received by CUNA
Brokerage Services, Inc. ("CBSI"), an affiliate of MCA and the principal
distributor of the Funds, during the Trust's most recent fiscal year:
- -------------------------------------------------------------------------------
Net Underwriting Compensation on
Discounts and Redemptions and Brokerage Other
Commissions(1) Repurchases(2) Commissions Compensation(3)
- -------------------------------------------------------------------------------
$2,137,175 $378,745 none $3,290,401
- -------------------------------------------------------------------------------
(1) Reflects amount paid to CBSI from front-end sales loads.
(2) Reflects amount paid to CBSI from contingent deferred sales charges.
(3) Reflects amount paid to CBSI under Rule 12b-1 distribution and service
plans.
THE PROPOSED INVESTMENT ADVISORY AGREEMENT
The Proposed Investment Advisory Agreement was approved by the Board, including
a majority of the Independent Trustees, on April 15, 2009. The Proposed
Investment Advisory Agreement, a form of which is attached as Appendix A to this
Proxy Statement, includes the same management fee rates shown in the table above
and is otherwise substantially the same as the current investment management
agreement with MCA, except as described below.
The Proposed Investment Advisory Agreement does not address allocation between
or aggregation of securities transactions of a Fund and MAM's other clients, but
MAM anticipates it will carry out these activities in a manner that is equitable
to all of its clients and consistent with seeking best execution. In addition,
MAM will enter into a Services Agreement with the Trust, which, in association
with the Proposed Investment Advisory Agreement, will make MAM responsible for
18
providing or arranging for the provision of all of the services required for the
Fund to operate.
In connection with the two agreements, MAM, in exchange for the fee specified in
the agreements, would be responsible for all of the expenses of operating the
Funds, except for securities transaction commissions and expenses, certain
taxes, interest, share distribution expenses, and extraordinary and
non-recurring expenses. The effect of the two agreements would be, for two years
following the closing of the Proposed Transaction, to cap the expenses of the
Funds covered by the agreements to no more than the amount of such expenses (as
a percentage of assets) incurred by the Funds for the fiscal year ended October
31, 2008.
MAM is wholly owned by Madison. If the Proposed Transaction occurs, CMIS will
hold a non-voting ownership interest in MAM and will have limited governance
oversight with respect to certain matters involving the Funds. See "Board
Considerations in Approving the Proposed Investment Advisory
Agreement-Consideration of the Proposed Transaction" below. MAM and Madison are
principally located at 550 Science Drive, Madison, Wisconsin 53711.
The following are MAM's principal executive officers and directors.
- ---------------------------------------------------------
Name Title
- ---------------------------------------------------------
Frank E. Burgess Director
- ---------------------------------------------------------
Katherine L. Frank Director
- ---------------------------------------------------------
Elizabeth A. Dettman Director
- ---------------------------------------------------------
W. Richard Mason Chief Compliance Officer
- ---------------------------------------------------------
Each of these persons may also hold other titles and/or positions with
affiliates of MAM. Mr. Burgess is also the majority owner of Madison.
For the fiscal year ended October 31, 2008, no Fund paid any amounts to MAM or
its affiliates.
MANAGEMENT OF SIMILAR FUNDS
Madison and its affiliates manage series of the Madison Mosaic Funds, which have
investment objectives and/or strategies that are similar to the Funds. In
addition, if the Proposed Transaction occurs, MAM is expected to also manage the
Ultra Series Fund, which includes series that have investment objectives and/or
strategies that are similar to the Funds. The management fee paid or proposed to
be paid by these funds is described below.
- ------------------------------------------------------------------------------
Net Assets as of
March 31, 2009
Fund Management Fee (in thousands)
- ------------------------------------------------------------------------------
Mosaic Balanced 0.75% $ 9,335
- ------------------------------------------------------------------------------
Mosaic Core Bond 0.40% 8,831
- ------------------------------------------------------------------------------
Mosaic Disciplined Equity 0.75% 2,949
- ------------------------------------------------------------------------------
Mosaic Government 0.40% 4,249
- ------------------------------------------------------------------------------
Mosaic Government Money Market 0.50% 30,181
- ------------------------------------------------------------------------------
Mosaic Institutional Bond 0.30% 3,408
- ------------------------------------------------------------------------------
Mosaic Investors 0.75% 24,814
- ------------------------------------------------------------------------------
19
- ------------------------------------------------------------------------------
Net Assets as of
March 31, 2009
Fund Management Fee (in thousands)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Mosaic Mid-Cap 0.75% 91,609
- ------------------------------------------------------------------------------
Mosaic Small/Mid Cap 0.75% 702
- ------------------------------------------------------------------------------
Ultra Series Conservative Allocation 0.30% 120,738
- ------------------------------------------------------------------------------
Ultra Series Moderate Allocation 0.30% 238,948
- ------------------------------------------------------------------------------
Ultra Series Aggressive Allocation 0.30% 69,474
- ------------------------------------------------------------------------------
Ultra Series Money Market 0.45% 137,097
- ------------------------------------------------------------------------------
Ultra Series Bond 0.55% 558,108
- ------------------------------------------------------------------------------
Ultra Series High Income 0.75% 93,787
- ------------------------------------------------------------------------------
Ultra Series Diversified Income 0.70% 386,933
- ------------------------------------------------------------------------------
Ultra Series Large Cap Value 0.60% 499,171
- ------------------------------------------------------------------------------
Ultra Series Large Cap Growth 0.80% 346,812
- ------------------------------------------------------------------------------
Ultra Series Mid Cap Value 1.00% 138,716
- ------------------------------------------------------------------------------
Ultra Series Mid Cap Growth 0.85% 157,076
- ------------------------------------------------------------------------------
Ultra Series Small Cap Value 1.10% 5,271
- ------------------------------------------------------------------------------
Ultra Series Small Cap Growth 1.10% 3,489
- ------------------------------------------------------------------------------
Ultra Series Global Securities 0.95% 24,180
- ------------------------------------------------------------------------------
Ultra Series International Stock 1.20% 61,728
- ------------------------------------------------------------------------------
Ultra Series Target Retirement 2020 0.40% 9,627
- ------------------------------------------------------------------------------
Ultra Series Target Retirement 2030 0.40% 9,520
- ------------------------------------------------------------------------------
Ultra Series Target Retirement 2040 0.40% 7,864
- ------------------------------------------------------------------------------
If the Proposed Transaction occurs, MAM is expected to enter into agreements
with Ultra Series Fund that will, for two years following the closing of the
Proposed Transaction, effectively cap most of its operating expenses to no more
than the amount incurred during the fiscal year ended December 31, 2008.
BOARD CONSIDERATIONS IN APPROVING THE PROPOSED INVESTMENT ADVISORY AGREEMENT
The Board approved the Proposed Investment Advisory Agreement at an in-person
meeting held on April 15, 2009. Prior to that meeting, the Board met several
times, including with personnel of MCA and Madison, to discuss the Proposed
Transaction. The Board requested and received information from MCA and Madison
regarding the Proposed Transaction and Madison. In taking these steps, the
Independent Trustees were assisted by, and consulted privately with, independent
counsel to the Independent Trustees. In approving the Proposed Investment
Advisory Agreement, the Board considered a number of factors, including those
discussed below.
Nature, Extent and Quality of Services to be Provided by MAM. The Board received
and considered a variety of information pertaining to the nature, extent and
quality of the services to be provided by MAM. The Board noted that, except with
respect to Mr. Meier and Mr. Powell, the portfolio managers and, except with
respect to the Mid Cap Value and Mid Cap Growth Funds, the subadvisors currently
managing the Funds' portfolios were expected to continue to do so. MAM provided
information on the professional qualifications and experience of its portfolio
management teams; organization, resources and research capabilities; compliance,
20
regulatory and litigation experience, portfolio transaction execution and soft
dollar policies and practices, and policies and procedures for allocating
transactions among accounts. After reviewing this information and discussing it
with representatives of MAM, the Board concluded that it was satisfied with the
nature, extent and quality of the services to be provided by MAM.
Investment Performance. The Board received information regarding the composite
performance of MAM. It also noted that most of the Funds were expected to
continue to be managed by the same portfolio managers and/or subadvisors, and
have access to Madison's additional investment personnel and resources. Based on
the foregoing reviews, the Board concluded that the investment experience of MAM
and the proposed Fund management teams was sufficient.
Cost of Services Provided and Profitability. The Board noted that the proposed
management fees were those that had previously been approved by the Board at its
December 5, 2008 meeting. In addition, MAM had agreed to enter into a Services
Agreement that, when taken with the Proposed Investment Advisory Agreement,
would have the effect, for two years following the closing of the Proposed
Transaction, of capping most fees and expenses of the Funds to no more than the
amount incurred (as a percentage of assets) by the Funds for the fiscal year
ended October 31, 2008. In this regard, the Board determined that no undue
burden would be imposed on shareholders as a result of the appointment of MAM as
investment adviser.
The Board considered that Madison and its affiliates manage certain other mutual
funds with similar investment objectives or principal investment strategies as
the Funds for a lower management fee. The Board also noted that the investment
advisor, not the Funds, pays the subadvisors' fees.
The Board noted that to the extent a Fund invests in other mutual funds also
managed by the investment advisor, the investment advisor receives investment
advisory fees from both the Fund and the underlying mutual fund. The Board was
satisfied in this regard that the investment advisor provides separate services
to each of the Fund and the underlying mutual fund in exchange for the fees
received from it.
Finally, the Board recognized that the unprecedented recent declines in
worldwide stock markets had a corresponding effect on total Fund assets. As a
result, the amount of compensation and fees paid by the Funds for their
management under the Proposed Investment Advisory Agreement was expected to be
considerably lower than they had been in the recent periods.
Based on all this information, the Board concluded that the proposed management
fees and total expenses borne by the Funds are reasonable in relation to the
services provided, and that the investment advisor's level of profitability from
its investment advisory agreement with the Funds is well within reason.
Economies of Scale. The Board had previously received information concerning how
large a Fund must be before it realized economies of scale. The Board also
considered that the management fee breakpoint schedule in place for most of the
Funds, which was previously approved, would continue. In that regard, the Board
21
believed that Proposed Investment Advisory Agreement provides a reasonable
sharing, as between the investment adviser and Fund shareholders, of the
economies of scale that would exist at higher asset levels.
Other Benefits to MAM from a Relationship with the Funds. The Board also
considered the nature and extent of other benefits that may flow to MAM from its
relationship with the Funds. As discussed above, the Board noted that MAM would
receive two levels of fees from the Funds that invest in other Funds. However,
the Board was satisfied that MAM would provide separate services for the two
layers of fees paid in such instances.
The Board also considered that MAM may subcontract its non-advisory services to
third parties for lower fees than those paid to MAM by the Funds for those
services. In that regard, MAM may increase its overall profitability in
connection with the services it provides to the Funds.
The Board also noted that MAM expected to execute a portion of the Funds'
portfolio transactions on a "soft dollar" basis, pursuant to which it would
receive research services from or through the executing brokers. In connection
with each regular Board meeting, the Board intends to review the quality of
execution of the portfolio transactions executed by MAM on behalf of the Funds.
Finally, the Board noted MAM intends to seek to achieve "best execution" in
executing all of the Funds' portfolio transactions, and that it represents its
soft dollar practices comply with applicable law. Based on these reviews, the
Board was satisfied with the expected quality of execution of the Funds'
portfolio transactions, and it did not believe the soft dollar benefits to be
received by MAM would be excessive, although the Board intends to monitor this.
Based on the foregoing information, the Board concluded that while additional
benefits may flow to MAM from its relationships with the Funds, the nature and
extent of these additional benefits are not unreasonable when considered in the
context of the overall services to be provided to, and fees to be received from,
the Funds by MAM.
Consideration of the Proposed Transaction. The Board also considered the terms
of the Proposed Transaction between Madison and MAM, on one hand, and CMIS and
MCA, on the other. Under these terms, CMIS will receive cash payments over a
period of six years and, in addition, will receive a percentage of ongoing
revenues of MAM net of subadvisory and certain other fees. In addition, the
Funds will continue to be distributed through CBSI's networking arrangements
with the credit unions CMIS' serves, and CMIS will have certain governance
rights over MAM with respect to limited Fund matters. Madison recommended Mr.
Blake, Ms. Frank, Mr. Imhoff and Mr. Wheeler as new Trustees of the Trust,
although the Independent Trustees made their own decision to nominate these
individuals to shareholders.
Also, the Board considered the ability of Madison to make the required cash
payments and the potential impact of these cash-payment requirements on the
financial flexibility of Madison and MAM. The Board also considered the
incentive CMIS and MCA had to recommend MAM as the Funds' new investment
advisor, in light of the payments CMIS will receive if MAM is approved. In
addition, the Board considered representations by CMIS and MCA to the effect
that they intend
22
to focus their efforts on core strategic businesses, leading them to seek
alternative strategies for the management of the Funds. The Board considered
information provided by CMIS and MCA concerning the alternative strategies and
the impact they might have on Fund shareholders. The Board concluded that,
although CMIS and MCA had an incentive to recommend MAM as the Funds' new
investment advisor, the proposed arrangements between MAM and the Funds
nevertheless should be advantageous to Fund shareholders, and are reasonable in
light of CMIS' and MCA's representations.
Other Considerations. The Board also considered CMIS' agreement to purchase, at
its own expense, so-called "tail" coverage for the Trustees under the Trust's
current directors liability insurance policy. In addition, MAM acknowledged that
the expense of a new liability insurance policy covering only the Independent
Trustees would be included in the expenses it will pay under the proposed
investment advisory and services fee structure. Further, CMIS has agreed to
indemnify the current Independent Trustees to the extent their right of
indemnification from the Trusts becomes practically unavailable or is denied in
connection with the Proposed Transaction, subject to the terms of an
indemnification agreement.
Board Conclusion. After taking the foregoing information and the other
information provided by MAM into account, the Board (including a majority of
Independent Trustees), acting in the exercise of its business judgment,
unanimously approved the Proposed Investment Advisory Agreement.
REQUIRED VOTE
For each Fund, the approval of the Proposed Investment Advisory Agreement
requires the affirmative vote of the lesser of (1) at least 67% of Fund shares
present at the meeting if more than 50% of the outstanding shares of the Fund as
of the Record Date are present in person or by proxy or (2) more than 50% of the
outstanding shares of the Fund as of the Record Date.
The persons named as proxies in the accompanying proxy card intend, in the
absence of contrary instructions, to vote all proxies "FOR" the Proposed
Investment Advisory Agreement. Shareholders may vote "FOR" or "AGAINST" the
Proposed Investment Advisory Agreement, or may "ABSTAIN" from voting on this
Proposal. If you return your signed proxy card and give no proxy voting
instructions, the proxies will vote "FOR" the Proposed Investment Advisory
Agreement. Abstentions are counted as shares that are present for purposes of
determining a quorum, but unvoted. Therefore, abstentions have the effect of a
vote against the Proposal.
THE BOARD OF THE TRUST RECOMMENDS A VOTE FOR THE PROPOSED INVESTMENT ADVISORY
AGREEMENT.
23
PROPOSAL 3 - TO AMEND AND RESTATE THE FUNDAMENTAL INVESTMENT RESTRICTION
REGARDING THE ABILITY OF EACH FUND TO BORROW.
Currently, each Fund is subject a fundamental investment limitation that states
the Fund may not:
Borrow money, except (a) the Fund may borrow from banks (as defined in the
1940 Act) and through reverse repurchase agreements in amounts up to 30% of
its total assets (including the amount borrowed), (b) the Fund may, to the
extent permitted by applicable law, borrow up to an additional 5% of its
total assets for temporary purposes, (c) the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and
sales of portfolio securities, (d) the Fund may purchase securities on
margin to the extent permitted by applicable law and (e) the Fund may
engage in transactions in mortgage dollar rolls which are accounted for as
financings.
This fundamental investment limitation is more restrictive than that required by
applicable law. You are being asked to approve a new fundamental investment
limitation that would provide each Fund the flexibility to borrow to the fullest
extent allowed by applicable law. If approved, each Fund would be subject to a
fundamental investment limitation that indicates the Fund may not:
Borrow money, except that it may (a) borrow from any lender for temporary
purposes in amounts not in excess of 5% of its total assets and (b) borrow
from banks in any amount for any purpose, provided that immediately after
borrowing from a bank the Fund's aggregate borrowings from any source do
not exceed 33 1/3% of the Fund's total assets (including the amount
borrowed). If, after borrowing from a bank, a Fund's aggregate borrowings
later exceed 33 1/3% of the Fund's total assets, the Fund will, within
three days after exceeding such limit (not including Sundays or holidays),
reduce the amount of its borrowings to meet the limitation. A Fund may make
additional investments while it has borrowings outstanding. A Fund may make
other borrowings to the extent permitted by applicable law.
Neither MCA nor MAM has any current intent to change any Fund's current
borrowing practices whether or not Proposal 3 is approved.
REQUIRED VOTE
For each Fund, the approval of the amended fundamental investment limitation
requires the affirmative vote of the lesser of (1) at least 67% of Fund shares
present at the meeting if more than 50% of the outstanding shares of the Fund as
of the Record Date are present in person or by proxy or (2) more than 50% of the
outstanding shares of the Fund as of the Record Date.
The persons named as proxies in the accompanying proxy card intend, in the
absence of contrary instructions, to vote all proxies "FOR" the amended
investment limitation. Shareholders may vote "FOR" or "AGAINST" the amended
investment limitation, or may "ABSTAIN" from voting on this Proposal. If you
return your signed proxy card and give no proxy voting instructions, the proxies
will vote "FOR" the amended investment limitation. Abstentions are counted as
shares that
24
are present for purposes of determining a quorum, but unvoted. Therefore,
abstentions have the effect of a vote against the Proposal.
THE BOARD OF THE TRUST RECOMMENDS A VOTE FOR THE AMENDED FUNDAMENTAL INVESTMENT
LIMITATION.
PROPOSAL 4 - TO APPROVE INVESTMENT SUBADVISORS.
INTRODUCTION
MCA currently retains subadvisors for a number of the Funds. In 1998, the SEC
granted an exemptive order under which MCA may enter into and materially amend
investment subadvisory agreements for a Fund without obtaining shareholder
approval in each case ("manager of managers authority"). If the Proposed
Transaction is approved, MAM is expected to enter into subadvisory agreements
with the subadvisors that currently manage the Funds (except for the Mid Cap
Value and Mid Cap Growth Funds), and may in the future retain other subadvisors.
MAM has also applied for an exemptive order similar to MCA's exemptive order
and, in the interim, for "no-action" relief from the SEC to permit MAM to
temporarily operate pursuant to the terms of MCA's exemptive order.
PROPOSAL 4.a - TO APPROVE MANAGER OF MANAGERS AUTHORITY
The Funds have retained an investment advisor to provide, among other services,
its expertise in determining how the Funds' portfolios should be managed. In
certain circumstances, the investment advisor may determine that retaining an
investment subadvisor with special expertise would be beneficial with respect to
all or a portion of a Fund's portfolio. However, investment advisors are
generally restricted from entering into or amending investment subadvisory
agreements without obtaining, in each case, shareholder approval. The exemptive
order obtained by MCA allows it to enter into and materially amend investment
subadvisory agreements for a Fund without obtaining shareholder approval in each
case. MAM has also applied for an order under substantially similar terms.
MCA's exemptive order is subject to the condition that the shareholders of each
Fund approve the manager of managers authority before the first time it is
exercised and the following additional conditions, all of which are expected to
apply to an exemptive order obtained by MAM:
1. The investment advisor will provide management services to the Funds and,
subject to the review and approval of the Board, will: (i) set the overall
investment strategies of the Funds; (ii) recommend subadvisors; (iii)
allocate and, when appropriate, reallocate, the assets of the Funds among
subadvisors in those cases where a Fund has more than one subadvisor; and
(iv) monitor and evaluate the investment performance of the subadvisors,
including their compliance with the investment objectives, policies, and
restrictions of the Funds.
2. Within 90 days of the hiring of any subadvisor, the investment advisor
will furnish shareholders of the affected Fund with an information
statement about the subadvisor.
25
3. The Funds will disclose in their prospectus the existence, substance and
effect of the order and indicate they employ the manager of managers
approach. The prospectus will prominently disclose that the investment
advisor has the ultimate responsibility for the investment performance of
the Fund due to its responsibility to oversee subadvisors and recommend
their hiring, termination and replacement.
4. No Trustee, officer or investment advisor will own, directly or indirectly
(other than through a pooled investment vehicle that is not controlled by
any such trustee or officer), any interest in a subadvisor except for: (a)
ownership of interests in the investment advisor or any entity that
controls, is controlled by or under common control with the investment
advisor, or (b) or ownership of less than 1% of the outstanding securities
of any class of equity or debt securities of any publicly traded company
that is either a subadvisor or controls, is controlled by or is under
common control with a subadvisor.
5. Shareholder approval will continue to be required in each case where the
investment advisor enters into or materially amends a subadvisory agreement
with a subadvisor that is affiliated with the investment advisor.
6. At all times, a majority of the Board will be Independent Trustees, and the
nomination of new or additional Independent Trustees will be placed within
the discretion of the then-existing Independent Trustees.
7. When a change of subadvisor is proposed for a Fund with an affiliated
subadvisor, the Board, including a majority of the Independent Trustees,
will make a separate finding, reflected in the minutes of meetings of the
Board, that the change of subadvisors is in the best interest of the Fund
and its shareholders and does not involve a conflict of interest from which
the investment advisor or affiliated subadvisor derives an inappropriate
advantage.
With respect to each of the Funds, MCA's manager of managers authority was
previously approved by the Fund's initial shareholder, and MCA currently manages
certain of the Funds with the manager of managers approach consistent with its
exemptive order. With respect to MAM, none of the Funds have approved this
authority. Therefore, Proposal 4.a applies to all of the Funds with respect to
MAM. The Board believes it would be in the best interest of these Funds to
provide the Funds' investment advisor the flexibility to retain investment
subadvisors in its discretion, subject to Board oversight and the conditions
described above.
REQUIRED VOTE
For each Fund, the approval of the manager of managers authority requires the
affirmative vote of the lesser of (1) at least 67% of Fund shares present at the
meeting if more than 50% of the outstanding shares of the Fund as of the Record
Date are present in person or by proxy or (2) more than 50% of the outstanding
shares of the Fund as of the Record Date.
The persons named as proxies in the accompanying proxy card intend, in the
absence of contrary instructions, to vote all proxies "FOR" the manager of
managers authority. Shareholders may vote "FOR" or "AGAINST" the manager of
managers authority, or may "ABSTAIN" from voting on this Proposal. If you return
26
your signed proxy card and give no proxy voting instructions, the proxies will
vote "FOR" the manager of managers authority. Abstentions are counted as shares
that are present for purposes of determining a quorum, but unvoted. Therefore,
abstentions have the effect of a vote against the Proposal.
THE BOARD OF THE TRUST RECOMMENDS A VOTE FOR THE MANAGER OF MANAGERS AUTHORITY.
PROPOSALS 4.b-4.e - TO APPROVE SUBADVISORY AGREEMENTS BETWEEN MAM AND CERTAIN
SUBADVISORS
If the Proposed Transaction occurs, MAM currently expects to enter into
subadvisory agreements with the current subadvisors to the Funds (except for the
Mid Cap Value and Mid Cap Growth Funds) under substantially the same terms as
the current subadvisory agreements, a form of which is provided as Exhibit B to
this Proxy Statement. To the extent that MAM does not obtain an exemptive order
providing it manager of managers authority and/or shareholders of the applicable
Funds do not approve Proposal 4.a, MAM will not have the authority to retain the
current subadvisors unless the shareholders of each applicable Fund approve each
subadvisory agreement.
The Current Subadvisory Agreements
The current subadvisory agreements were last approved by the Board, including a
majority of Independent Trustees, on December 5, 2008. None of the current
subadvisory agreements required shareholder approval. Even though subadvisors
have day-to-day responsibility over the management of the High Income, Mid Cap
Growth, Small Cap Value, Small Cap Growth and International Stock Funds, and the
small-cap portion of the assets of the Mid Cap Value Fund, MCA retains the
ultimate responsibility for the performance of these Funds and oversees the
subadvisors and recommend their hiring, termination, and replacement.
Shenkman Capital Management, Inc. ("SCM"). SCM, principally located at 461 Fifth
Avenue, 22nd Floor, New York, New York 10017, is the only subadvisor managing
the assets of the High Income Fund. SCM is independently owned by employees and
directors and focuses exclusively on managing high yield assets. SCM manages
assets for institutional, endowment, ERISA, foundation and public pension
accounts. As of December 31, 2008, SCM managed over $7.7 billion in assets,
which included investment advisory services for four other registered investment
companies having aggregate assets of approximately $413 million.
Mark R. Shenkman, Frank X. Whitley and Mark J. Flanagan, CPA, CFA are the Fund's
co-portfolio managers. Mr. Shenkman has been the President and Chief Investment
Officer of SCM since he founded the company in 1985. Mr. Whitley, Executive Vice
President and Senior Portfolio Manager of SCM, joined the firm in 1988 and
became a portfolio manager in 1994. Mr. Flanagan, Executive Vice President and
Portfolio Manager of SCM, joined the firm in 1992 and became a portfolio manager
in 2002.
27
The following are SCM's principal executive officers and directors, each of
whose principal address is 461 Fifth Avenue, 22nd Floor, New York, New York
10017.
- -----------------------------------------------------------------------------
Name Title
- -----------------------------------------------------------------------------
Mark R. Shenkman President, Director
- -----------------------------------------------------------------------------
Albert Fuss Director
- -----------------------------------------------------------------------------
Victor M. Rosenzweig Director
- -----------------------------------------------------------------------------
Frank X. Whitley Executive Vice President
- -----------------------------------------------------------------------------
Mark J. Flanagan Executive Vice President
- -----------------------------------------------------------------------------
Richard H. Weinstein Executive Vice President, General
Counsel & Chief Compliance Officer
- -----------------------------------------------------------------------------
Robert Stricker Senior Vice President
- -----------------------------------------------------------------------------
Kim I. Hekking Senior Vice President
- -----------------------------------------------------------------------------
For its services to the Fund, SCM receives a management fee from MCA, computed
and accrued daily and paid monthly, based on the average daily net assets in the
Fund at the following rates.
- ------------------------------------------------
Net Assets Rate
- ------------------------------------------------
First $100 million 0.375%
Next $150 million 0.350%
Next $250 million 0.325%
Above $500 million 0.300%
- ------------------------------------------------
The subadvisory agreement provides: (1) that it shall continue in effect for two
years from its effective date and thereafter shall continue automatically for
periods of one year so long as such continuance is specifically approved at
least annually by the vote of a majority of the Independent Trustees or by a
majority in interest of shareholders; (2) that it may be terminated by a Fund,
SCM or MCA at any time, without the payment of any penalty, by vote of a
majority of the Trustees or by vote of a majority in interest of the
shareholders on sixty (60) days written notice to the non-terminating party; and
(3) that it will terminate automatically in the event of its assignment or upon
the termination of the current investment management agreement with MCA.
The subadvisory agreement also contains provisions that limit SCM's liability
for any error of judgment, mistake of law, loss arising out of any investment,
or for any act or omission in the management of a Fund to instances of willful
misfeasance, bad faith, gross negligence or reckless disregard for its duties
under the subadvisory agreement and designate the laws of New York as the
governing law for the subadvisory agreement.
For the fiscal year ended October 31, 2008, MCA paid $267,660 to SCM with
respect to the MEMBERS Mutual Funds.
The Fund did not make any payments to any affiliate of SCM during the fiscal
year ended October 31, 2008.
SCM also sub-advises the following funds, which have investment objective(s) and
strategies that are similar to the High Income Fund: (a) Ultra Series High
Income Fund, for which it receives a management fee at the same rate described
above for
28
the High Income Fund; (b) Harbor High Yield Bond Fund ($250 million as of March
31, 2009), for which it receives a management fee of 0.32%; and (c) Old Westbury
Global Opportunities Fund ($442 million as of March 31, 2009), for which it
receives a management fee of 0.43%.
Wellington Management Company LLP ("Wellington"). Wellington, principally
located at 75 State Street, Boston, Massachusetts 02109, manages the Mid Cap
Growth Fund, the small-cap portion of the assets within the Mid Cap Value Fund
and the Small Cap Value Fund. Wellington is a professional investment counseling
firm that provides investment services to investment companies, employee benefit
plans, endowments, foundations and other institutions. Wellington and its
predecessor organizations have provided investment advisory services for over 70
years. As of December 31, 2008, Wellington had investment management authority
with respect to approximately $420 billion in assets. If MAM becomes the Funds'
investment advisor, it is expected to enter into a subadvisory agreement with
Wellington with respect to the Small Cap Value Fund. However, MAM currently
anticipates managing the Mid Cap Value and Mid Cap Growth Funds internally.
Timothy J. McCormack, CFA, Senior Vice President and Equity Portfolio Manager of
Wellington, has served as the portfolio manager of the Small Cap Value Fund
since July 1, 2008. Mr. McCormack has been involved in portfolio management and
securities analysis for the Small Cap Value Fund since 2006. Mr. McCormack
joined Wellington as an investment professional in 2000.
Shaun F. Pedersen, Vice President and Equity Portfolio Manager of Wellington,
has been involved in portfolio management and securities analysis for the Small
Cap Value Fund since 2006. Mr. Pedersen joined Wellington as an investment
professional in 2004.
The following is Wellington's principal executive officer, whose principal
address is 75 State Street, Boston, Massachusetts 02109.
- -----------------------------------------------------------------------------
Name Title
- -----------------------------------------------------------------------------
Edmund NMN Wellington, III President & Chief Compliance Officer
- -----------------------------------------------------------------------------
For its services to the Fund, Wellington receives a management fee from MCA,
computed and accrued daily and paid monthly, based on 0.70% of the Fund's
average daily net assets.
The subadvisory agreement provides: (1) that it shall continue in effect for two
years from its effective date and thereafter shall continue automatically for
periods of one year so long as such continuance is specifically approved at
least annually by the vote of a majority of the Independent Trustees or by a
majority in interest of shareholders; (2) that it may be terminated by the Fund,
Wellington or MCA at any time, without the payment of any penalty, by vote of a
majority of the Trustees or by vote of a majority in interest of the
shareholders on sixty (60) days written notice to the non-terminating party; and
(3) that it will terminate automatically in the event of its assignment or upon
the termination of the current investment management agreement with MCA.
29
The subadvisory agreement also contains provisions that limit Wellington's
liability for any error of judgment, mistake of law, loss arising out of any
investment, or for any act or omission in the management of a Fund to instances
of willful misfeasance, bad faith, gross negligence or reckless disregard for
its duties under the subadvisory agreement and designate the laws of the
Commonwealth of Massachusetts as the governing law for the subadvisory
agreement.
For the fiscal year ended October 31, 2008, MCA paid $573,601 to Wellington with
respect to the MEMBERS Mutual Funds.
The Funds did not make any payments to any affiliate of Wellington during the
fiscal year ended October 31, 2008.
Wellington also sub-advises the following funds, which have investment
objective(s) and strategies that are similar to the Small Cap Value Fund: (a)
Ultra Series Small Cap Value Fund, for which it receives a management fee at the
same rate described above for the Small Cap Value Fund; (b) Transamerica
Partners Institutional Small Core Fund ($91 million as of March 31, 2009), for
which it receives a management fee of 0.50%; (c) John Hancock Small Cap Value
Fund ($209 million as of March 31, 2009), for which it receives an undisclosed
management fee; (d) JHF II Small Cap Value Fund ($10 million as of March 31,
2009), for which it receives an undisclosed management fee; and (e) USAA Small
Cap Stock Fund ($182 million as of March 31, 2009), for which it receives a
management fee of 0.70%.
Paradigm Asset Management, LLC ("Paradigm"). Paradigm, principally located at
445 Hamilton Avenue, White Plains, New York 10601, is the only subadvisor
managing the assets of the Small Cap Growth Fund. Paradigm is a limited
liability company that was established in 1991. Paradigm provides investment
management services to investment companies, employee benefit plans, endowments,
foundations, and other institutions and had approximately $800 million in assets
under management as of December 31, 2008.
James E. Francis, President and Chief Executive Officer of Paradigm, leads the
portfolio management team of the Small Cap Growth Fund. Mr. Francis was the
co-founder of the firm in 1991 and has overseen the investment process since the
firm's inception. The other members of the team include Jeffrey E. Marcus and
Gregory Pai.
Jeffrey E. Marcus, Senior Portfolio Manager, joined Paradigm in 1991 as a
portfolio manager. Mr. Marcus has been involved in portfolio management and
investment analysis since 1988. Prior to joining Paradigm, Mr. Marcus was an
investment analyst for Warner Lambert.
Gregory Pai, Managing Director and Portfolio Manager, joined Paradigm in 1996 as
a senior partner. He has been involved in portfolio management since he joined
Paradigm. Prior to joining Paradigm, Mr. Pai held senior positions in the media
industry and was a management consultant with Price Waterhouse & Company.
The following are Paradigm's principal executive officers and directors, whose
principal address is 445 Hamilton Avenue, White Plains, New York 10601.
30
- -------------------------------------------------------------------------
Name Title
- -------------------------------------------------------------------------
James E. Francis President, Chief Executive Officer &
Chief Investment Officer
- -------------------------------------------------------------------------
Gregory Pai Managing Director and Chief Compliance
Officer
- -------------------------------------------------------------------------
Eugene J. Duffy Executive Vice President
- -------------------------------------------------------------------------
Jeffrey E. Marcus Senior Portfolio Manager
- -------------------------------------------------------------------------
For its services to the Fund, Paradigm receives a management fee from MCA,
computed and accrued daily and paid monthly, based on the average daily net
assets in the Fund at a rate of 0.70%.
The subadvisory agreement provides: (1) that it shall continue in effect for two
years from its effective date and thereafter shall continue automatically for
periods of one year so long as such continuance is specifically approved at
least annually by the vote of a majority of the Independent Trustees or by a
majority in interest of shareholders; (2) that it may be terminated by the Fund,
Paradigm or MCA at any time, without the payment of any penalty, by vote of a
majority of the Trustees or by vote of a majority in interest of the
shareholders on sixty (60) days written notice to the non-terminating party; and
(3) that it will terminate automatically in the event of its assignment or upon
the termination of the current investment management agreement with MCA.
The subadvisory agreement also contains provisions that limit Paradigm's
liability for any error of judgment, mistake of law, loss arising out of any
investment, or for any act or omission in the management of a Fund to instances
of willful misfeasance, bad faith, gross negligence or reckless disregard for
its duties under the subadvisory agreement and designate the laws of Delaware as
the governing law for the subadvisory agreement.
For the fiscal year ended October 31, 2008, MCA paid $175,210 to Paradigm with
respect to MEMBERS Mutual Funds.
The Funds did not make any payments to any affiliate of Paradigm during the
fiscal year ended October 31, 2008.
Paradigm also sub-advises the Ultra Series Small Cap Growth Fund, for which it
receives a management fee at the same rate described above for the Small Cap
Growth Fund.
Lazard Asset Management LLC ("Lazard"). Lazard, principally located at 30
Rockefeller Plaza, 59th Floor, New York, New York 10112, is the only subadvisor
managing the assets of the International Stock Fund. Lazard began managing
separate account international equity portfolios in 1985. Lazard employs over
100 global investment professionals, with smaller teams responsible for
portfolio construction. Lazard is a New York-based subsidiary of Lazard Freres &
Co. LLC ("LF & Co."), a New York limited liability company. Lazard provides its
institutional and private clients with a wide variety of investment banking,
brokerage management and related services. LF & Co. established Lazard as its
investment management division and registered it with the SEC as an investment
adviser on May 1, 1970. Investment management services are also provided by
31
Lazard Asset Management Limited, based in London, Lazard Asset Management
(Deutschland) GmbH, based in Frankfurt, Lazard Asset Management Italy, based in
Milan, Lazard Japan Asset Management KK, based in Tokyo, and Lazard Asset
Management Pacific Co., based in Sydney, all of which are controlled by Lazard.
Investment research is undertaken on a global basis utilizing the global
investment team members worldwide. Net assets under management of Lazard were
$79.8 billion as of December 31, 2008.
Portfolio managers at Lazard manage multiple accounts for a diverse client base,
including private clients, institutions and investment funds. Lazard manages all
portfolios on a team basis. The team is involved at all levels of the investment
process. This team approach allows for every portfolio manager to benefit from
his or her peers, and for clients to receive the firm's best thinking, not that
of a single portfolio manager. Lazard manages all like-investment mandates
against a model portfolio. Specific client objectives, guidelines or limitations
then are applied against the model, and any necessary adjustments are made.
John R. Reinsberg is Deputy Chairman of Lazard and is responsible for
international and global products. He also oversees the day-to-day operations of
Lazard's international equity investment team. He began working in the
investment field in 1981. Prior to joining Lazard in 1992, Mr. Reinsberg served
as Executive Vice President of General Electric Investment Corporation and
Trustee of the General Electric Pension Trust. His other past affiliations
include Jardine Matheson (Hong Kong) and Hill & Knowlton, Inc. Mr. Reinsberg has
a MBA from Columbia University and a BA from the University of Pennsylvania.
Michael A. Bennett is a Managing Director of Lazard and a portfolio manager for
the International Equity, International Equity Select, European Equity Select,
and Global Equity teams. He began working in the investment field in 1987. Prior
to joining Lazard in 1992, Mr. Bennett served as an international equity analyst
with General Electric Investment Corporation. Previously he was with Keith
Lippert Associates and Arthur Andersen & Company. He is a CPA, has a MBA from
the University of Chicago's Graduate School of Business and a BS from New York
University.
Michael G. Fry is a Managing Director and portfolio manager within Lazard Asset
Management Limited in London. Prior to joining the firm in 2005, Mr. Fry held
several positions at UBS Global Asset Management, including lead portfolio
manager and Head of Global Equity Portfolio Management, Global Head of Equity
Research and Head of Australian Equities. Mr. Fry began working in the
investment field in 1987.
James M. Donald, CFA, is a Managing Director of Lazard. In addition to his
duties as a Portfolio Manager/Analyst, he also serves as Head of the Emerging
Markets Group. Prior to joining the firm in 1996, Mr. Donald worked at Mercury
Asset Management, which he joined in 1985. At Mercury Asset Management, he was
on the emerging markets team between 1992 and 1996 and worked on the
international equity team between 1985 and 1992. Mr. Donald received a BA (Hons)
in history from University of Western Ontario.
32
Brian Pessin, CFA, is a Director of Lazard and a Portfolio Manager/Analyst.
Prior to joining Lazard in 1999, Mr. Pessin was associated with Dawson, Samberg
Capital Management, Gabelli & Company and Auerbach, Grayson & Co. He has been
working in the investment field since 1994. Mr. Pessin received his MBA from
Columbia University and a BA in Economics from Cornell University.
Michael Powers, Managing Director of Lazard and a Portfolio Manager on the
Global Equity and International Equity portfolio teams. He began working in the
investment field in 1990 when he joined Lazard. Michael has an MBA from Long
Island University and a BA from Brown University.
Erik McKee, Senior Vice President of Lazard and a Research Analyst on the
Emerging Markets Equity team, focusing on the materials and industrials sectors.
He began working in the investment field in 1996. Prior to joining Lazard in
1999, he was with Bank of America and Unibanco in Sao Paulo, Brazil. Erik has a
BA in International Finance from Brown University. He also studied history at
the Sorbonne in Paris.
Rohit Chopra, Senior Vice President of Lazard and a Portfolio Manager/Analyst on
the Emerging Markets Equity team, focusing on consumer and telecommunications
research and analysis. He began working in the investment field in 1996. Prior
to joining the Firm in 1999, Rohit was with Financial Resources Group, Deutsche
Bank and Morgan Stanley, Dean Witter, Discover Company. He has a BS in Finance
and Information Systems from New York University and also studied at the London
School of Economics and Political Science.
Edward Rosenfeld, Senior Vice President of Lazard and a Portfolio
Manager/Analyst on the European, International and Global Small Cap Equity
teams. He began working in the investment industry in 1996. Prior to joining
Lazard in 2001, Edward was an analyst with J.P. Morgan. He has an MBA from the
University of Chicago and a BA from Columbia College.
The following are Lazard's principal executive officers and directors, whose
principal address is 30 Rockefeller Plaza, 59th Floor, New York, New York 10112.
- ---------------------------------------------------------------------------
Name Title
- ---------------------------------------------------------------------------
Gerald B. Mazzari Chief Operating Officer
- ---------------------------------------------------------------------------
Bruce J. Wasserstein Director
- ---------------------------------------------------------------------------
Charles G. Ward Director
- ---------------------------------------------------------------------------
Nathan A. Paul General Counsel
- ---------------------------------------------------------------------------
Ashish Bhutani Director and Chief Executive Officer
- ---------------------------------------------------------------------------
Brian D. Simon Chief Compliance Officer
- ---------------------------------------------------------------------------
For its services to the Fund, Lazard receives a management fee from MCA,
computed and accrued daily and paid monthly, based on the average daily net
assets in the Fund at the following rates.
- -----------------------------------------------------------
Sub-Portfolio/Net Assets Rate
- -----------------------------------------------------------
Securities Contained in the EAFE Index
First $25 million 0.65%
Next $25 million 0.55%
33
- -----------------------------------------------------------
Sub-Portfolio/Net Assets Rate
- -----------------------------------------------------------
Above $25 million 0.50%
International Small Cap Securities
All Assets 0.75%
Emerging Markets Securities
All Assets 1.05%
- -----------------------------------------------------------
The subadvisory agreement provides: (1) that it shall continue in effect for two
years from its effective date and thereafter shall continue automatically for
periods of one year so long as such continuance is specifically approved at
least annually by the vote of a majority of the Independent Trustees or by a
majority in interest of shareholders; (2) that it may be terminated by the Fund,
Lazard or MCA at any time, without the payment of any penalty, by vote of a
majority of the Trustees or by vote of a majority in interest of the
shareholders on sixty (60) days written notice to the non-terminating party; and
(3) that it will terminate automatically in the event of its assignment or upon
the termination of the current investment management agreement with MCA.
The subadvisory agreement also contains provisions that limit Lazard's liability
for any error of judgment, mistake of law, loss arising out of any investment,
or for any act or omission in the management of a Fund to instances of willful
misfeasance, bad faith, gross negligence or reckless disregard for its duties
under the subadvisory agreement and designate the laws of Iowa as the governing
law for the subadvisory agreement.
For the fiscal year ended October 31, 2008, MCA paid $739,437 to Lazard with
respect to the MEMBERS Mutual Funds.
The Funds did not make any payments to any affiliate of Lazard during the fiscal
year ended October 31, 2008.
Lazard also advises or sub-advises the following funds, which have investment
objective(s) and strategies that are similar to the International Stock Fund:
(a) Ultra Series International Stock Fund, for which it receives a management
fee at the same rate described above for the International Stock Fund; (b)
Lazard International Equity Portfolio ($112 million as of March 31, 2009), for
which it receives a management fee of 0.75%; (c) Lazard Retirement International
Equity Portfolio ($170 million as of March 31, 2009), for which it receives a
management fee of 0.75%; (d) American Beacon International Equity Fund, ($199
million as of March 31, 2009) for which it receives a management fee of 0.41%;
(e) Lazard International Small Cap Portfolio ($63 million as of March 31, 2009),
for which it receives a management fee of 0.75%; (f) Lazard Emerging Markets
Portfolio ($4,689 million as of March 31, 2009), for which it receives a
management fee of 1.00%; (g) Lazard Retirement Emerging Markets Portfolio ($225
million as of March 31, 2009), for which it receives a management fee of 1.00%;
(h) MGI Non-US Core Equity Fund ($27 million as of March 31, 2009), for which it
receives a management fee of 0.80%; (i) First American Funds International
Select Fund ($37 million as of March 31, 2009), for which it receives a
management fee of 0.75%; and (j) Lazard/JNL Emerging Markets Series ($213
million as of March 31, 2009), for which it receives a management fee of 0.67%.
34
The Proposed Subadvisory Agreements
The proposed subadvisory agreements were approved by the Board, including a
majority of the Independent Trustees, on April 15, 2009. The proposed
subadvisory agreements, a form of which is attached as Appendix B to this Proxy
Statement, are substantially the same as the current subadvisory agreements,
except for the named investment advisor. Under the proposed subadvisory
agreements, MAM, not the Funds, would be responsible for paying the subadvisors'
fees. Approval of Proposals 4.b-4.e will not affect the management fee paid by
the Funds to MAM.
Board Considerations in Approving the Proposed Subadvisory Agreements
The Board approved the proposed subadvisory agreements at an in-person meeting
held on April 15, 2009. The Board considered that the proposed subadvisory
agreements were substantially similar, except as noted, to the current
subadvisory agreements the Board had previously approved on December 5, 2008. In
connection with that approval, Board reviewed the performance of each subadvisor
of each Fund at each regular Board meeting, including appropriate comparative
information. At those meetings, the Board also received 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 subadvisors.
In addition, before the December 2008 meeting, the Board asked the subadvisors
to provide written information addressing factors to be considered by the Board
in deciding whether or not to approve the agreements. Counsel to the independent
trustees provided the Board with a memorandum reviewing its duties under the
1940 Act with respect to approval of the agreements. Before the December 2008
meeting, the Board and counsel also asked the subadvisors 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 each subadvisor 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 current subadvisory agreements.
Last, at the April 2009 meeting, the Board requested and received updated
information regarding the subadvisors. 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 Subadvisors. The Board
received and considered a variety of information pertaining to the nature,
extent and quality of the services provided by the subadvisors. 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
subadvisors' 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 each
35
subadvisor 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 subadvisors, the Board concluded that it was generally satisfied with the
nature, extent and quality of the services provided by the subadvisors.
Investment Performance of the Funds and Subadvisors. As noted above, the Board
reviews the performance of the Funds and their subadvisors 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 subadvisor 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 the High Income Fund, Small Cap Value
Fund and International Stock Fund outperformed and the Small Cap Growth Fund
ranked below the median of their respective Morningstar peer group 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
the subadvisor was taking to improve performance.
Other Benefits to the Subadvisors from their Relationships with the Funds. The
Board also considered the nature and extent of other benefits that may flow to
the subadvisors from their relationships with the Funds. The Board noted that
some subadvisors execute a portion of the Funds' portfolio transactions on a
"soft dollar" basis, pursuant to which the subadvisors receive research services
from or through the executing brokers. The Board noted that the reported
execution and soft dollar benefits received by the subadvisors were reasonable
in light of the transactions each subadvisor executes on behalf of the Funds.
Finally, the Board noted the subadvisors' 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 subadvisors were excessive.
Based on the foregoing information, the Board concluded that while additional
benefits flow to the subadvisors 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 the Funds by these
entities.
MAM Oversight of Subadvisors. The Board further considered the ability of MAM to
supervise each subadvisor's management of the applicable Funds. The Board
concluded that MAM has or will have sufficient resources and expertise to
provide oversight of the subadvisors to the Funds.
Board Conclusion. After taking the foregoing information and the other
information provided by MAM into account, the Board (including a majority of
Independent
36
Trustees), acting in the exercise of its business judgment, unanimously approved
the proposed subadvisory agreements.
REQUIRED VOTE
For each Fund, the approval of each proposed subadvisory agreement requires the
affirmative vote of the lesser of (1) at least 67% of Fund shares present at the
meeting if more than 50% of the outstanding shares of the Fund as of the Record
Date are present in person or by proxy or (2) more than 50% of the outstanding
shares of the Fund as of the Record Date.
The persons named as proxies in the accompanying proxy card intend, in the
absence of contrary instructions, to vote all proxies "FOR" the proposed
subadvisory agreements. Shareholders may vote "FOR" or "AGAINST" the proposed
subadvisory agreements, or may "ABSTAIN" from voting on this Proposal. If you
return your signed proxy card and give no proxy voting instructions, the proxies
will vote "FOR" the proposed subadvisory agreements. Abstentions are counted as
shares that are present for purposes of determining a quorum, but unvoted.
Therefore, abstentions have the effect of a vote against the Proposal.
THE BOARD OF THE TRUST RECOMMENDS A VOTE FOR THE PROPOSED SUBADVISORY
AGREEMENTS.
ADDITIONAL INFORMATION
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP, 111 S. Wacker Drive, Chicago, Illinois 60606, is the
independent registered public accounting firm of the Trust and has informed the
Trust that it has no material direct or indirect financial interest in the
Funds.
The following table sets forth the aggregate fees paid to Deloitte & Touche LLP
for the Trust's two most recently completed fiscal years for professional
services rendered for: (i) the audit of the Funds' annual financial statements
included in the Trust's reports to shareholders; (ii) all other audit-related
services provided to the Funds; and (iii) all other non-audit services provided
to the Funds, MCA and entities controlling, controlled by or under common
control with MCA that provide services to the Funds. For the Funds' most recent
fiscal year, Deloitte & Touche LLP did not render any professional services for
financial information systems design and implementation services to the Funds,
MCA or entities controlling, controlled by or under common control with MCA that
provide services to the Funds.
The Audit Committee has determined that the provision of audit-related services
and the provision of non-audit services are compatible with maintaining the
independence of Deloitte & Touche LLP. Representatives of Deloitte & Touche LLP
are not expected to be available at the Meeting.
- ------------------------------------------------------------------------------------
Fiscal Year Audit Fees Audit-Related Fees Tax Fees All Other Fees
- ------------------------------------------------------------------------------------
2008 $228,000 $0 $39,995 $0
- ------------------------------------------------------------------------------------
2007 $214,120 $0 $42,475 $0
- ------------------------------------------------------------------------------------
The Audit Committee is required to preapprove audit and non-audit services
37
performed for the Funds by Deloitte & Touche LLP in order to ensure that the
provision of such services does not impair its independence. The Audit Committee
also is required to preapprove certain non-audit services performed by Deloitte
& Touche LLP for MCA and certain affiliates if the services relate directly to
the operations and financial reporting of the Funds. The Audit Committee is not
required to preapprove services for which preapproval is not required by
applicable law. All audit-related, tax and other services were preapproved by
the Audit Committee.
CUSTODIAN
State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts
02110, acts as custodian of the Trust's assets.
PRINCIPAL UNDERWRITER
CUNA Brokerage Services, Inc., 2000 Heritage Way, Waverly, Iowa 50677, acts as
the Trust's principal underwriter. If the Proposed Transaction is approved,
Mosaic Funds Distributor, LLC, 8777 N. Gainey Center Drive, Suite 220,
Scottsdale, Arizona 85258, is expected to become the Trust's principal
underwriter. Mosaic Funds Distributor, LLC is a wholly owned subsidiary of
Madison.
TRANSFER AGENT
Boston Financial Data Services, 2000 Crown Colony Drive, Quincy, Massachusetts
02169 is the Trust's transfer agent.
ADMINISTRATOR
State Street Bank and Trust Company, 801 Pennsylvania Avenue, Kansas City,
Missouri 64105, is the Funds' administrator.
OTHER BUSINESS
Management knows of no business to be presented at the Meeting other than the
matters set forth in this Proxy Statement, but should any other matter requiring
the vote of shareholders arise, the proxies will vote thereon according to their
best judgment in the interest of the Trust and the Funds.
SHAREHOLDER PROPOSALS
As a general matter, the Trust does not hold annual or regular meeting of the
shareholders. Ordinarily, there will be no shareholder meeting unless required
by the 1940 Act or otherwise. Shareholders wishing to submit proposals for
inclusion in a proxy statement for a subsequent meeting of the shareholders
should send their written proposals to the Secretary of the Trust, Attn: Holly
S. Baggot, 4C-14, 5910 Mineral Point Road, Madison, Wisconsin 53705. Proposals
must be received by the Trust within a reasonable period of time prior to any
such shareholder meeting.
HOUSEHOLDING
One Proxy Statement may be delivered to multiple shareholders at the same
address unless you request otherwise. You may request that we do not household
proxy statements and/or obtain additional copies of the proxy statement by
calling 1-800-877-6089 or writing to: MEMBERS Mutual Funds, P O Box 8390,
Boston, MA 02266-8390.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
Electronic copies of this Proxy Statement and related materials are available at
https://www.proxy-direct.com/mem20077.
38
APPENDIX A
PROPOSED INVESTMENT ADVISORY AGREEMENT
This Agreement is made by and between Madison Asset Management, LLC, a Wisconsin
limited liability company having its principal place of business in Madison,
Wisconsin (the "Advisor"), and MEMBERS Mutual Funds Trust, a Delaware business
trust created pursuant to a Declaration of Trust (the "Trust").
The parties hereto, intending so to be legally bound, agree with each other as
follows:
1. Appointment and Acceptance. The Trust hereby appoints the Advisor to manage
the investment of the assets of each existing series of the Trust and to
administer its affairs; and the Advisor hereby accepts such appointment. The
Advisor shall employ its best efforts to supervise the investment management of
each existing series of the Trust.
2. Discretion of the Advisor. In the performance of its duties hereunder the
Advisor shall have full authority to act as it deems advisable, except that it
shall be bound by the terms of the Declaration of Trust and By-Laws of the
Trust, and by any written direction given by the Trustees of the Trust not
inconsistent with this Agreement; and it shall be guided by the investment
policies of the Trust from time to time duly in effect. Subject only to the
foregoing, the Advisor shall have full authority to purchase and sell securities
for each existing series of the Trust; the Advisor may determine the persons
with whom such securities transactions are to be made and the terms thereof.
3. Other Activities of the Advisor. The Advisor and any of its affiliates shall
be free to engage in any other lawful activity, including the rendering to
others of services similar to those rendered to the Trust hereunder; and the
Advisor or any interested person thereof shall be free to invest in the Trust as
a shareholder, to become an officer or Trustee of the Trust if properly elected,
or to enter into any other relationship with the Trust approved by the Trustees
and in accordance with law.
The Advisor agrees that it will not deal with itself or with any affiliated
person or promoter or principal underwriter of the Trust (or any affiliated
person of the foregoing) acting as a principal, in effecting securities
transactions for the account of the Trust. It is further agreed that in
effecting any such transaction with such a person acting as a broker or agent,
compensation to such person shall be permitted, provided that the transaction is
in the ordinary course of such person's business and the amount of such
compensation does not exceed one percent of the purchase or sale price of the
securities involved.
If the Advisor or any affiliate thereof provides any other goods or services
which otherwise would be paid for by the Trust pursuant to this Agreement, then
the Trust shall pay the Advisor or such affiliate the cost reasonably allocated
by the Advisor or affiliate to such goods or services.
4. Investment by Advisor. The Advisor shall not take, and shall not permit any
of its shareholders, officers, directors or employees to take long or short
positions in the shares of the Trust, except for the purchase of shares of the
Trust for investment purposes at the same price as is available to the public at
the time of purchase, or in
A-1
connection with the original capitalization of the Trust. In connection with
purchases or sales of portfolio securities for the account of the Trust neither
the Advisor nor any officer, director or employee of the Advisor, shall act as a
principal or receive any commission therefor.
5. Expenses of the Trust. The Trust shall pay all of its expenses not expressly
assumed by the Advisor herein. Without limitation, the expenses of the Trust,
assumed by the Trust hereby, shall include the following:
a. Expenses related to the continued existence of the Trust.
b. Fees and expenses of the Trustees (except those affiliated with the
Advisor), the officers and the administrative employees of the Trust.
c. Fees paid to the Advisor hereunder.
d. Fees and expenses of preparing, printing and distributing official filings,
reports, prospectuses and documents required pursuant to applicable state
and Federal securities law and expenses of reports to shareholders.
e. Fees and expenses of custodians, transfer agents, dividend disbursing
agents, shareholder servicing agents, registrars, and similar agents.
f. Expenses related to the issuance, registration, repurchase, exchange and
redemption of shares and certificates representing shares.
g. Auditing, accounting, legal, insurance, portfolio administration,
association membership, printing, postage, and other administrative
expenses.
h. Expenses relating to qualification or licensing of the Trust, shares in the
Trust, or officers, employees and agents of the Trust under applicable
state and Federal securities law.
i. Expenses related to shareholder meetings and proxy solicitations and
materials.
j. Interest expense, taxes and franchise fees, and all brokerage commissions
and other costs related to purchase and sales of portfolio securities.
In addition, the Trust shall assume all losses and liabilities incurred in the
administration to the Trust and of its investment portfolio; and it shall pay
such non-recurring expenses as may arise through litigation, administrative
proceedings, claims against the Trust, the indemnification of Trustees,
officers, employees, shareholders and agents, or otherwise.
6. Compensation to the Advisor.
a. For its services hereunder, the Trust shall pay to the advisor a management
fee as provided herein per annum of the average daily net assets of each of
the portfolios of the Trust.
- ---------------------------------------------------------------------------------
Annual Fee in Annual Fee in
Fund Basis Points Fund Basis Points
- ---------------------------------------------------------------------------------
Conservative Allocation 20 Large Cap Value 55
- ---------------------------------------------------------------------------------
Moderate Allocation 20 Large Cap Growth 75
- ---------------------------------------------------------------------------------
Aggressive Allocation 20 Mid Cap Growth 95
- ---------------------------------------------------------------------------------
A-2
- ---------------------------------------------------------------------------------
Annual Fee in Annual Fee in
Fund Basis Points Fund Basis Points
- ---------------------------------------------------------------------------------
Cash Reserves 40 Small Cap Value 75
- ---------------------------------------------------------------------------------
Bond 50 Small Cap Growth 100
- ---------------------------------------------------------------------------------
High Income 55 International Stock 105
- ---------------------------------------------------------------------------------
Diversified Income 65
- ------------------------------------------
b. For the Cash Reserves, Bond, High Income, Diversified Income, Large Cap
Value, Large Cap Growth, Mid Cap Value, Mid Cap Growth, Small Cap Value,
Small Cap Growth and International Stock funds, the management fee is
reduced by five (5) basis points on assets exceeding $500 million and by
another five (5) basis points on assets exceeding $1 billion.
c. With respect to any series of the Trust subsequently authorized by the
Trustees, the management fee provided herein may be established by mutual
agreement between the parties at the time the additional portfolio is
authorized, provided such revision to this Agreement is approved by the
Trustees, including the vote of a majority of those Trustees who are not
interested persons of the Trust, cast in person at a meeting called for
that purpose. The Advisor shall have the right to waive any portion of its
management fee during any period, and it may permanently reduce the amount
of the fee under such terms as it may determine by written notice thereof
to the Trust. The Advisor shall have the right to make payments out of its
management fee or other resources to others, as it solely determines.
7. Limitation of Expenses of the Trust. In addition to investment management
expenses related to the Trust, the Advisor shall pay the fees and expenses of
any Trustees and officers of the Trust affiliated with the Advisor, all
promotional expenses of the Trust to the extent not paid for by the Trust
pursuant to a Plan of Distribution, the rent expense of the Trust's principal
executive office premises, and the expenses of formation of the Trust.
The Advisor shall further reimburse the Trust for all of its expenses, excluding
securities transaction commissions and expenses, taxes, interest, share
distribution expenses, and extra-ordinary and non-recurring expenses, which
exceed during any fiscal year the applicable expense limitation in any State or
other jurisdiction in which the Trust, during the fiscal year, becomes subject
to regulation by qualification or sale of its shares. Any such required
reimbursement shall be made within a reasonable period following the close of
the fiscal year to which it relates; and the Advisor may elect to pay all or a
portion of any such reimbursement it anticipates will be required at any time or
from time to time during the fiscal year to which the reimbursement relates.
8. Limitation of Advisor's Liability. The Advisor shall not be liable for any
loss incurred in connection with its duties hereunder, nor for any action taken,
suffered or omitted and believed by it to be advisable or within the scope of
its authority or discretion, except for acts or omissions involving willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
assumed by it under this Agreement.
A-3
9. Limitation of Trust's Liability. The Advisor acknowledges that it has
received notice of and accepts the limitations upon the Trust's liability set
forth in its Declaration of Trust. The Advisor agrees that the Trust's
obligations hereunder in any case shall be limited to the Trust and to its
assets and that the Advisor shall not seek satisfaction of any such obligation
from the shareholders of the Trust nor from any Trustee, officer, employee or
agent of the Trust.
10. Term of Agreement. This Agreement continued in effect for two years from the
date of its execution; and it shall continue in force thereafter (but subject to
the termination provisions below), provided that it is specifically approved at
least annually by the Trustees of the Trust or by a majority vote of the
outstanding securities of each series of the Trust's shares with respect to
which it is to continue in effect, and in either case by the vote of a majority
of the Trustees who are not interested persons of the Trust, cast in person at a
meeting called for that purpose.
11. Termination by Notice. Notwithstanding any provision of this Agreement, it
may be terminated at any time, without penalty, by the Trustees of the Trust or,
with respect to any series of the Trust's shares, by the vote of a majority of
the outstanding voting securities of such series, or by the Advisor, upon sixty
days written notice to the other party.
12. Termination Upon Assignment. This Agreement may not be assigned by the
Advisor and shall automatically terminate immediately upon any assignment.
Nothing herein shall prevent the Advisor from employing any other persons or
agents, at its own expense, to assist it in the performance of its duties
hereunder, subject to applicable approval or other requirements of the
Investment Company Act of 1940, as amended.
13. Name of the Trust. The Trust shall have the exclusive right to the use of
the name "MEMBERS Mutual Funds."
14. Use of Terms. The terms "affiliated person", "interested person",
"assignment", "broker", and "majority of the outstanding voting securities" as
used herein, shall have the same meanings as in the Investment Company Act of
1940 and any applicable regulations thereunder.
15. Control of Advisor. The Advisor is controlled by Madison Investment
Advisors, Inc. a registered investment adviser located in Madison, Wisconsin.
Because of this relationship, the Advisor shares personnel and resources with
Madison Investment Advisors, Inc. As such, individuals performing services for
and resources utilized by the Advisor may also perform services for and be
utilized by Madison Investment Advisors, Inc., respectively.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed on their
behalf by their respective officers duly authorized and their respective seals
to be affixed hereto, this ____ day of ________________, 2009.
A-4
APPENDIX B
PROPOSED SUBADVISORY AGREEMENT
THIS INVESTMENT SUB-ADVISORY AGREEMENT ("AGREEMENT"), effective as of
the ___ day of _________________, 2009, by and between MADISON ASSET MANAGEMENT,
LLC, a Wisconsin limited liability corporation ("MAM" or the "ADVISER") and [ ],
a [ ] (the "SUB-ADVISER").
Adviser and Sub-Adviser agree as follows:
1. Adviser hereby engages the services of Sub-Adviser in connection with
Adviser's management of a portion of the assets (which could be up to 100%) of
the [ ] FUND (the "PORTFOLIO") of MEMBERS MUTUAL FUNDS (the "FUND").
Adviser intends to use a manager of managers approach to the management of
the Portfolio, as well as other portfolios in the Fund. Therefore, the number of
sub-advisers and the percentage of assets of the Portfolio managed by each
sub-adviser will be determined by the Fund's Board of Trustees and MAM from time
to time. Sub-Adviser will be given thirty (30) days' written notice of all
changes effecting this Agreement or the Sub-Adviser's role hereunder; provided,
however, that no such change shall be effective until receipt thereof by the
Sub-Adviser. Pursuant to this Agreement and subject to the oversight and
supervision by Adviser and the officers and the Board of Trustees of the Fund,
Sub-Adviser shall manage the investment and reinvestment of the assets of the
Portfolio as requested by MAM.
2. Sub-Adviser hereby accepts the appointment by Adviser in the foregoing
capacity and agrees, at its own expense, to render the services set forth herein
and to provide the office space, furnishings, equipment and personnel required
by it to perform such services on the terms and for the compensation provided in
this Agreement. All other expenses to be incurred in the operation of the
Portfolio will be borne by the Fund.
3. In particular, Sub-Adviser shall furnish continuously an investment
program for the Portfolio and shall determine from time to time in its
discretion the securities and other investments to be purchased or sold or
exchanged and what portions of the Portfolio shall be held in various
securities, cash or other investments. In this connection, Sub-Adviser shall
provide Adviser and the officers and Trustees of the Fund with such reports and
documentation as the latter shall reasonably request regarding Sub-Adviser's
management of the Portfolio's assets.
4. Sub-Adviser shall carry out its responsibilities under this Agreement in
compliance with: (a) the Portfolio's investment objective, policies and
restrictions as set forth in the Fund's current registration statement, (b) such
policies or directives as the Fund's Trustees may from time to time establish or
issue and deliver to the Sub-Adviser, and (c) applicable law and related
regulations. Adviser shall promptly notify Sub-Adviser of changes to (a) or (b)
above and shall notify Sub-Adviser of changes to (c) above promptly after it
becomes aware of such changes and any such changes shall not affect any
transaction initiated prior to the receipt of notice thereof by Sub-Adviser.
B-1
5. The Sub-Adviser and Adviser acknowledge that the Sub-Adviser is not the
compliance agent for the Fund or for the Adviser, and does not have access to
all of the Fund's or the Portfolio's books and records necessary to perform
certain compliance testing. To the extent that the Sub-Adviser has agreed to
perform the services specified in this Agreement in accordance with the Fund's
registration statement, the Fund's Declaration of Trust, the Portfolio's
prospectus and any policies adopted by the Fund's Board of Trustees applicable
to the Portfolio, and in accordance with applicable law, the Sub-Adviser shall
perform such services based upon its books and records with respect to the
Portfolio, which comprise a portion the Portfolio's books and records, and upon
information and written instructions received from the Fund or the Adviser, and
shall not be held responsible under this Agreement so long as it performs such
services in accordance with this Agreement. The Adviser shall promptly provide
the Sub-Adviser with copies of the Fund's registration statement, the Fund's
Declaration of Trust, the Portfolio's currently effective prospectus and any
written policies or procedures adopted by the Fund's Board of Trustees
applicable to the Portfolio and any amendments or revisions thereto; provided,
however, that any such amendments and revisions shall not binding on the
Sub-Adviser until received.
6. Sub-Adviser shall take all actions which it considers necessary to
implement the investment policies of the Portfolio, and in particular, to place
all orders for the purchase or sale of securities or other investments for the
Portfolio with brokers or dealers selected by it, and to that end, Sub-Adviser
is authorized as the agent of the Fund to give instructions to the Fund's
custodian as to deliveries of securities or other investments and payments of
cash for the account of the Portfolio. In connection with the selection of
brokers or dealers and the placing of purchase and sale orders with respect to
investments of the Portfolio, Sub-Adviser is directed at all times to seek to
obtain best execution and price within the policy guidelines determined by the
Fund's Board of Trustees and set forth in the Fund's current registration
statement.
In addition to seeking the best price and execution, Sub-Adviser may also
take into consideration research and statistical information and wire and other
quotation services provided by brokers and dealers to Sub-Adviser. Sub-Adviser
is also authorized to effect individual securities transactions at commission
rates in excess of the minimum commission rates available, if it determines in
good faith that such amount of commission is reasonable in relation to the value
of the brokerage and research services provided by such broker or dealer, viewed
in terms of either that particular transaction or Sub-Adviser's overall
responsibilities with respect to the Portfolio. The policies with respect to
brokerage allocation, determined from time to time by the Fund's Board of
Trustees are those disclosed in the Fund's currently effective registration
statement. Sub-Adviser will periodically evaluate the statistical data, research
and other investment services provided to it by brokers and dealers. Such
services may be used by Sub-Adviser in connection with the performance of its
obligations under this Agreement or in connection with other advisory or
investment operations including using such information in managing its own
accounts and the accounts of its other clients.
B-2
On occasions when Sub-Adviser deems the purchase or sale of a security to
be in the best interest of the Portfolio as well as other clients of the
Sub-Adviser, the Sub-Adviser to the extent permitted by applicable laws and
regulations, may, but shall be under no obligation to, aggregate the securities
to be purchased or sold to attempt to obtain a more favorable price or lower
brokerage commissions and efficient execution. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transactions, will be made by the Sub-Adviser in the manner the Sub-Adviser
considers to be the most equitable and consistent with its fiduciary obligations
to the Portfolio and to its other clients.
7. Unless the Adviser gives the Sub-Adviser written instructions to the
contrary, the Sub-Adviser shall vote or abstain from voting all proxies
solicited by or with respect to the issuers of securities in which assets of the
Portfolio may be invested in accordance with the Sub-Adviser's Proxy Voting
Policy and Procedures (as the same may be amended from time to time).
8. Sub-Adviser's services under this Agreement are not exclusive.
Sub-Adviser may provide the same or similar services to other clients. The
Adviser understands and agrees that the Sub-Adviser and its employees and
affiliates may give advice and effect transactions for their own account and for
the account of other clients for which they provide investment advisory
services, including other clients' discretionary accounts, that may differ from
advice given, or the time or nature of action taken, with respect to the
Portfolio. The Adviser also understands that the Sub-Adviser may render advice
and/or take action on securities of companies with respect to which the
Sub-Adviser acts as investment adviser and that in certain instances, it may be
necessary for the Sub-Adviser to execute transactions between or among client
accounts (including rebalancing trades between client accounts) by executing
simultaneous purchase and sale orders for the same security with a broker/dealer
selected in accordance with the Sub-Adviser's applicable policies and
procedures. The Adviser further understands and agrees that nothing contained in
this Agreement shall be deemed to impose upon the Sub-Adviser any obligation to
purchase or sell, or to recommend for purchase or sale, for the Portfolio any
security or other asset that the Sub-Adviser or its employees or affiliates may
purchase or sell for their own account or for the account of any other client,
if in the sole discretion of the Sub-Adviser it is for any reason undesirable or
impracticable to take such action or make such recommendation for the Portfolio.
Sub-Adviser shall for all purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Adviser, the Fund or the Portfolio or
otherwise be deemed agents of the Adviser, the Fund or the Portfolio.
9. Sub-Adviser or an affiliated person of Sub-Adviser may act as broker for
the Portfolio in connection with the purchase or sale of securities or other
investments for the Portfolio, subject to: (a) the requirement that Sub-Adviser
seek to obtain best execution and price within the policy guidelines determined
by the Fund's Board of Trustees and set forth in the Fund's current registration
statement; (b) the provisions of the Investment Advisers Act of 1940 (the
"Advisers Act"); (c) the provisions of the Securities Exchange Act of 1934, as
amended; and (d) other applicable provisions of law. Such brokerage services are
not within the scope of
B-3
the duties of Sub-Adviser under this Agreement. Subject to the requirements of
applicable law and any procedures adopted by Fund's board of Trustees,
Sub-Adviser or its affiliated persons may receive brokerage commissions, fees or
other remuneration from the Portfolio or the Fund for such services in addition
to Sub-Adviser's fees for services under this Agreement.
10. For the services rendered, the facilities furnished and the expenses
assumed by Sub-Adviser, Adviser shall pay Sub-Adviser at the end of each month,
a fee based on the average daily net assets of the Portfolio at the following
annual rates: [ ]
Sub-Adviser's fee shall be accrued daily at 1/365th of the applicable
annual rate set forth above (1/366th during leap years). For the purpose of
accruing compensation, the net assets of the Portfolio shall be determined in
the manner and on the dates set forth in the current prospectus of the Fund,
and, on days on which the net assets are not so determined, the net asset value
computation to be used shall be as determined on the next day on which the net
assets shall have been determined. In the event of termination of this
Agreement, all compensation due through the date of termination will be
calculated on a pro-rated basis through the date of termination and paid within
thirty business days of the date of termination.
During any period when the determination of net asset value is suspended,
the net asset value of the Portfolio as of the last business day prior to such
suspension shall for this purpose be deemed to be the net asset value at the
close of each succeeding business day until it is again determined.
11. Sub-Adviser hereby undertakes and agrees to maintain, in the form and
for the period required by Rule 31a-2 under the Investment Company Act of 1940,
as amended (the "1940 Act"), all records relating to the Portfolio's investments
that are generated in connection with the Sub-Adviser's provision of services
hereunder that are required to be maintained by the Fund pursuant to the
requirements of Rule 31a-1 under the 1940 Act.
Sub-Adviser agrees that all books and records which it maintains for the
Portfolio or the Fund are the property of the Fund and further agrees to
surrender promptly to the Adviser or the Fund any such books, records or
information upon the Adviser's or the Fund's request. All such books and records
shall be made available, within five business days of a written request, to the
Fund's accountants or auditors during regular business hours at Sub-Adviser's
offices. Adviser and the Fund or either of their authorized representatives
shall have the right to copy any records in the possession of Sub-Adviser which
pertain to the Portfolio or the Fund. Such books, records, information or
reports shall be made available to properly authorized government
representatives consistent with state and federal law and/or regulations. In the
event of the termination of this Agreement, all such books, records or other
information shall be returned to Adviser or the Fund free from any claim or
assertion of rights by Sub-Adviser. Nothing herein shall preclude the
Sub-Adviser from making such copies of the books, records and other information
of the Portfolio or the Fund as are necessary for the Sub-Adviser to comply with
the legal and regulatory requirements applicable to the Sub-Adviser.
B-4
12. The Adviser and Sub-Adviser shall cooperate with each other in
providing information, reports and other materials to regulatory and
administrative bodies having proper jurisdiction over the Portfolio, the Adviser
and the Sub-Adviser in connection with the services provided pursuant to this
Agreement; provided, however, that this agreement to cooperate does not apply to
the provision of information, reports and other materials which either the
Adviser or the Sub-Adviser reasonably believes the regulatory or administrative
body does not have the authority to request or is the privileged or confidential
information of the Adviser or Sub-Adviser.
13. Each party hereto agrees that it will not disclose or use any records
or information obtained pursuant to this Agreement in any manner whatsoever
except as authorized in this Agreement and that it will keep confidential any
non-public information obtained pursuant to this Agreement and disclose such
information only if the other party has authorized such disclosure, or if such
disclosure is required by federal or state regulatory authorities or other
applicable governmental laws, rules and regulations, subpoenas or court orders.
Notwithstanding the foregoing, the Adviser agrees that the Sub-Adviser may refer
to the performance record of the Portfolio.
14. In the absence of willful misfeasance, bad faith or gross negligence on
the part of Sub-Adviser or its officers, Trustees or employees, or reckless
disregard by Sub-Adviser of its duties under this Agreement, Sub-Adviser shall
not be liable to Adviser, the Portfolio, the Fund or to any shareholder of the
Portfolio for any act or omission in the course of, or connected with, rendering
services hereunder or for any losses that may be sustained in the purchase,
holding or sale of any security, except to the extent specified in Section 36(b)
of the 1940 Act concerning loss resulting from a breach of fiduciary duty with
respect to the receipt of compensation for services. The Adviser shall indemnify
the Sub-Adviser for any damages and related expenses (including reasonable
attorneys' fees) incurred by the Sub-Adviser as a result of the performance of
its duties hereunder, unless the same shall result from behavior found by a
final judicial determination to constitute willful, bad faith, gross negligence
or a reckless disregard of the Sub-Adviser's obligations hereunder.
15. Representations and Warranties.
a. Adviser represents and warrants that:
(1) Adviser is registered with the U.S. Securities and Exchange Commission
under the Advisers Act. The Adviser shall remain so registered throughout the
term of this Agreement and shall notify Sub-Adviser immediately if Adviser
ceases to be so registered as an investment adviser;
(2) The Adviser is a limited liability corporation duly organized and
validly existing under the laws of the State of Wisconsin with the power to own
and possess its assets and carry on its business as it is now being conducted;
(3) The execution, delivery and performance by the Adviser of this
Agreement are within the Adviser's powers and have been duly authorized by all
necessary action on the part of its directors, and no action by or in respect
of, or filing with, any governmental body, agency or official is required on the
part of the Adviser for
B-5
the execution, delivery and performance of this Agreement by the parties hereto,
and the execution, delivery and performance of this Agreement by the parties
hereto does not contravene or constitute a default under: (a) any provision of
applicable law, rule or regulation; (b) the Advisers Articles of Incorporation
or Bylaws; or (c) any agreement, judgment, injunction, order, decree or other
instruments binding upon the Adviser;
(4) This Agreement is a valid and binding Agreement of the Adviser;
(5) The Adviser's Form ADV is publicly available at
www.adviserinfo.sec.gov. The Adviser represents that it will notify the
Sub-Advisor within a reasonable time after filing any material amendment to its
Form ADV with the Securities and Exchange Commission ("SEC"). The information
contained in the Adviser's Form ADV is accurate and complete in all material
respects and does not omit to state any material fact necessary in order to make
the statements made, in light of the circumstances under which they are made,
not misleading;
(6) The Adviser acknowledges that it received a copy of the Sub-Adviser's
current Form ADV II or disclosure brochure in lieu thereof, at least 48 hours
prior to the execution of this Agreement and has delivered a copy of the same to
the Fund; and
(7) The Fund: (a) is a "qualified institutional buyer" as defined in Rule
144A under the Securities Act of 1933, as amended; and (b) has an appropriate
anti-money laundering program that complies with U.S. and other applicable laws,
rules and regulations and is designed to detect and report any activity that
raises suspicion of money laundering activities.
b. Sub-Adviser represents and warrants that:
(1) Sub-Adviser is registered with the U.S. Securities and Exchange
Commission under the Advisers Act. The Sub-Adviser shall remain so registered
throughout the term of this Agreement and shall notify Adviser immediately if
Sub-Adviser ceases to be so registered as an investment adviser;
(2) The Sub-Adviser is a corporation duly organized and validly existing
under the laws of the State of New York with the power to own and possess its
assets and carry on its business as it is now being conducted;
(3) The execution, delivery and performance by the Sub-Adviser of this
Agreement are within the Sub-Adviser's powers and have been duly authorized by
all necessary action on the part of the Sub-Adviser, and no action by or in
respect of, or filing with, any governmental body, agency or official is
required on the part of the Sub-Adviser for the execution, delivery and
performance of this Agreement by the parties hereto;
(4) This Agreement is a valid and binding Agreement of the Sub-Adviser;
(5) The Sub-Adviser's Form ADV is publicly available at
www.adviserinfo.sec.gov and the Sub-Adviser represents that it will notify the
Advisor within a reasonable time after filing any material amendment to its Form
ADV. The information contained in the Sub-Adviser's Form ADV is accurate and
B-6
complete in all material respects and does not omit to state any material fact
necessary in order to make the statements made, in light of the circumstances
under which they are made, not misleading; and
(6) The Sub-Adviser acknowledges that it received a copy of the Adviser's
current Form ADV II or Disclosure Brochure in lieu thereof, at least 48 hours
prior to the execution of this Agreement.
16. The Adviser will not use, and will not permit the Fund to use, the
Sub-Adviser's name (or that of any affiliate) or any derivative thereof or logo
associated therewith in Fund literature without prior review and approval by the
Sub-Adviser.
17. This Agreement shall not become effective unless and until it is
approved by the Board of Trustees of the Fund, including a majority of Trustees
who are not parties to this Agreement or interested persons of any such party to
this Agreement. This Agreement shall come into full force and effect on the date
which it is so approved. This Agreement shall continue in effect for two years
and shall thereafter continue in effect from year to year so long as such
continuance is specifically approved at least annually by (i) the Board of
Trustees of the Fund, or by the vote of a majority of the outstanding shares of
the class of stock representing an interest in the Portfolio; and (ii) a
majority of those Trustees who are not parties to this Agreement or interested
persons of any such party cast in person at a meeting called for the purpose of
voting on such approval.
18. This Agreement may be terminated at any time without the payment of any
penalty, by the Fund's Board of Trustees, or by vote of a majority of the
outstanding shares of the class of stock representing an interest in the
Portfolio on sixty (60) days written notice to the Adviser and Sub-Adviser, or
by the Adviser, or by the Sub-Adviser, on sixty (60) days written notice to the
other. This Agreement shall automatically terminate in the event of its
assignment or in the event of the termination of the investment advisory
agreement between the Adviser and the Fund regarding the Adviser's management of
the Portfolio. The termination of this Agreement shall not affect any right or
liability of a party arising prior to termination. Notwithstanding any such
termination, the Portfolio, Fund and Adviser shall be obligated to honor all
orders and trades effected by the Sub-Adviser prior to the effective date of
such termination.
19. This Agreement may not be amended by either party unless such amendment
is specifically approved by a majority of those Trustees who are not parties to
this Agreement or interested persons of any such party cast in person at a
meeting called for the purpose of voting on such approval, and is signed in
writing by the parties hereto.
20. The terms "assignment", "affiliated person" and "interested person",
when used in this Agreement, shall have the respective meanings specified in the
1940 Act. The term "majority of the outstanding shares of the class" means the
lesser of (a) 67% or more of the shares of such class present at a meeting if
more than 50% of such shares are present or represented by proxy or (b) more
than 50% of the shares of such class.
B-7
21. This Agreement shall be construed in accordance with laws of the New
York, and applicable provisions of the Advisers Act.
22. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
(End of Proxy Statement)
B-8
PROXY MEMBERS (R) MUTUAL FUNDS PROXY
SPECIAL MEETING OF SHAREHOLDERS - JUNE 25, 2009
The undersigned, as the legal owner of shares of MEMBERS Mutual Funds, hereby
appoints Holly Baggot or Scott Powell, or either of them, as proxies for the
undersigned, with full power of substitution in each of them, to attend the
special meeting of the shareholders to be held at 5810 Mineral Point Road,
Madison, WI 53705, on June 25, 2009, at 9:00 a.m., Central Time ("Meeting"), and
any adjournment or postponement of the Meeting, to vote at the Meeting on behalf
of the undersigned in accordance with the instructions below, and to otherwise
represent the undersigned at the Meeting with all powers possessed by the
undersigned if personally present at the Meeting.
Please check in the appropriate boxes below, date this form, and sign it exactly
as your name appears below. By signing this form, you acknowledge receipt of the
Notice of Special Meeting of Shareholders and the accompanying proxy statement.
IF YOU RETURN THIS FORM SIGNED, BUT UNMARKED, THE SHARES WILL BE VOTED "FOR"
EACH PROPOSAL. The proxies, as applicable, will vote in their best judgment with
respect to any other matter that is properly brought before the Meeting.
VOTE VIA THE INTERNET: WWW.PROXY-DIRECT.COM
VOTE VIA THE TELEPHONE: 1-866-241-6192
VOTE VIA FACSIMILE: 1-888-796-9932
------------------ -----------------------
------------------ -----------------------
NOTE: Please sign exactly as your name
appears at left. Joint owners each should
sign. When signing as attorney, executor,
administrator, trustee or guardian, please
give full title as such. If a corporation,
please sign in full corporate name by
President or authorized officer. If a
partnership, please sign in partnership
name by authorized person.
-------------------------------------------
Signature of Owner
-------------------------------------------
Signature of Joint Owner, if any
-------------------------------------------
Date MMF_20077_042809
FUND FUND FUND
- ---- ---- ----
Aggressive Allocation Bond Cash Reserves
Conservative Allocation Diversified Income High Income
International Stock Large Cap Growth Large Cap Value
Mid Cap Growth Mid Cap Value Moderate Allocation
Small Cap Growth Small Cap Value
VOTING OPTIONS
READ YOUR PROXY STATEMENT AND HAVE IT AT HAND WHEN VOTING.
================================== ======================= =============================== ==============================
[LOGO OF VOTE ON THE INTERNET] [LOGO OF VOTE BY PHONE] [LOGO OF VOTE BY FASCIMILE] [LOGO OF VOTE BY MAIL]
VOTE ON THE INTERNET VOTE BY PHONE VOTE BY FASCIMILE VOTE BY MAIL
LOG ON TO: CALL 1-866-241-6192 VOTE, SIGN AND DATE THIS PROXY VOTE, SIGN AND DATE THIS PROXY
WWW.PROXY-DIRECT.COM FOLLOW THE RECORDED CARD AND FAX TO: CARD AND RETURN IN THE
FOLLOW THE ON-SCREEN INSTRUCTIONS INSTRUCTIONS 1-888-796-9932 POSTAGE-PAID ENVELOPE
AVAILABLE 24 HOURS AVAILABLE 24 HOURS AVAILABLE 24 HOURS
================================== ======================= =============================== ==============================
PLEASE MARK BOXES BELOW IN BLUE OR BLACK INK AS FOLLOWS. EXAMPLE:
- --------------------------------------------------------------------------------
TO VOTE FOR ALL PROPOSALS MARK THE BOX. NO OTHER VOTE IS NECESSARY. [ ]
- --------------------------------------------------------------------------------
1. TO ELECT TRUSTEES: FOR WITHHOLD FOR ALL
ALL ALL EXCEPT
01. Philip E. Blake 02. Katherine L. Frank 03. James R. Imhoff, Jr. [ ] [ ] [ ]
04. Lorence D. Wheeler
If you do not wish to vote for a particular nominee(s), mark the "For All
Except" and write the nominee number(s) on the line provided below.
- --------------------------------------------------------------------------------
2. TO APPROVE AN INVESTMENT ADVISORY AGREEMENT BY AND BETWEEN THE TRUST, ON
BEHALF OF EACH OF THE FUNDS, AND MADISON ASSET MANAGEMENT, LLC, AS DESCRIBED
IN THE PROXY STATEMENT.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
Aggressive Allocation [ ] [ ] [ ] Bond [ ] [ ] [ ] Cash Reserves [ ] [ ] [ ]
Conservative Allocation [ ] [ ] [ ] Diversified Income [ ] [ ] [ ] High Income [ ] [ ] [ ]
International Stock [ ] [ ] [ ] Large Cap Growth [ ] [ ] [ ] Large Cap Value [ ] [ ] [ ]
Mid Cap Growth [ ] [ ] [ ] Mid Cap Value [ ] [ ] [ ] Moderate Allocation [ ] [ ] [ ]
Small Cap Growth [ ] [ ] [ ] Small Cap Value [ ] [ ] [ ]
3. TO APPROVE THE AMENDMENT AND RESTATEMENT OF THE FUNDAMENTAL INVESTMENT
RESTRICTION REGARDING THE ABILITY OF EACH FUND TO BORROW, AS DESCRIBED IN
THE PROXY STATEMENT.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
Aggressive Allocation [ ] [ ] [ ] Bond [ ] [ ] [ ] Cash Reserves [ ] [ ] [ ]
Conservative Allocation [ ] [ ] [ ] Diversified Income [ ] [ ] [ ] High Income [ ] [ ] [ ]
International Stock [ ] [ ] [ ] Large Cap Growth [ ] [ ] [ ] Large Cap Value [ ] [ ] [ ]
Mid Cap Growth [ ] [ ] [ ] Mid Cap Value [ ] [ ] [ ] Moderate Allocation [ ] [ ] [ ]
Small Cap Growth [ ] [ ] [ ] Small Cap Value [ ] [ ] [ ]
4. APPROVAL OF INVESTMENT SUBADVISORS:
4.a TO APPROVE THE MANAGER OF MANAGERS AUTHORITY FOR EACH OF THE FUNDS, AS
DESCRIBED IN THE PROXY STATEMENT.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
Aggressive Allocation [ ] [ ] [ ] Bond [ ] [ ] [ ] Cash Reserves [ ] [ ] [ ]
Conservative Allocation [ ] [ ] [ ] Diversified Income [ ] [ ] [ ] High Income [ ] [ ] [ ]
International Stock [ ] [ ] [ ] Large Cap Growth [ ] [ ] [ ] Large Cap Value [ ] [ ] [ ]
Mid Cap Growth [ ] [ ] [ ] Mid Cap Value [ ] [ ] [ ] Moderate Allocation [ ] [ ] [ ]
Small Cap Growth [ ] [ ] [ ] Small Cap Value [ ] [ ] [ ]
4.b TO APPROVE THE SUBADVISORY AGREEMENT BETWEEN MADISON ASSET MANAGEMENT, LLC
AND SHENKMAN CAPITAL MANAGEMENT, INC., FOR THE HIGH INCOME FUND AS DESCRIBED
IN THE PROXY STATEMENT.
FOR AGAINST ABSTAIN
High Income [ ] [ ] [ ]
4.c TO APPROVE THE SUBADVISORY AGREEMENT BETWEEN MADISON ASSET MANAGEMENT, LLC
AND WELLINGTON MANAGEMENT COMPANY LLP, FOR THE SMALL CAP VALUE FUND AS
DESCRIBED IN THE PROXY STATEMENT.
FOR AGAINST ABSTAIN
Small Cap Value [ ] [ ] [ ]
4.d TO APPROVE THE SUBADVISORY AGREEMENT BETWEEN MADISON ASSET MANAGEMENT, LLC
AND PARADIGM ASSET MANAGEMENT, LLC, FOR THE SMALL CAP GROWTH FUND AS
DESCRIBED IN THE PROXY STATEMENT.
FOR AGAINST ABSTAIN
Small Cap Growth [ ] [ ] [ ]
4.e TO APPROVE THE SUBADVISORY AGREEMENT BETWEEN MADISON ASSET MANAGEMENT, LLC
AND LAZARD ASSET MANAGEMENT LLC, FOR THE INTERNATIONAL STOCK FUND AS
DESCRIBED IN THE PROXY STATEMENT.
FOR AGAINST ABSTAIN
International Stock [ ] [ ] [ ]
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE MEMBERS
MUTUAL FUNDS SHAREHOLDER MEETING TO BE HELD ON JUNE 25, 2009.
THE PROXY STATEMENT FOR THIS MEETING IS AVAILABLE
AT: HTTPS://WWW.PROXY-DIRECT.COM/MEM20077
PLEASE VOTE, DATE AND SIGN THIS PROXY CARD AND RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE MMF_20077_042809
[LOGO OF COMPUTERSHARE]
-----------------------
Fund Services
MEMBERS/WO#20077: TOUCH-TONE TELEPHONE VOTING SCRIPT
EXPECTED MAIL DATE: 04/__/09
MEETING DATE: June 25, 2009
TEST CONTROL NUMBER (s): 077 99999 000 099
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TEST SECURITY CODE (s): 9999 9999
---------------------------------
WHEN CONNECTED TO THE TOLL-FREE NUMBER 1-866-241-6192, THE
SHAREHOLDER WILL HEAR:
"Welcome! Please enter the 14 digit number located in the shaded
box on; your voting instruction card."
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WHEN THE SHAREHOLDER ENTERS THE NUMBER, HE/SHE WILL HEAR:
- --------------------------------------------------------------------------------
To proceed, please enter the 8 digit code located in the non-shaded box on
your proxy card
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WHEN THE SHAREHOLDER ENTERS THE CODE, HE/SHE WILL HEAR:
"THIS IS THE AUTOMATED TELEPHONE VOTING SITE FOR THE SPECIAL MEETING OF
SHAREHOLDERS OF THE MEMBERS MUTUAL FUNDS"
"TO VOTE AS THE BOARD RECOMMENDS ON ALL PROPOSALS, PRESS 1 NOW."
"TO VOTE ON EACH PROPOSAL SEPARATELY, PRESS 0 NOW."
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OPTION 1: IF VOTING AS THE BOARD RECOMMENDS:
--------------------------------------------
"To hear how you have voted, press 1." "To cancel your vote, press 2." "To save how you have voted, press 3."
IF THE SHAREHOLDER PRESSES 1 TO HEAR THE VOTES:
"Your vote will be saved automatically should you decide to hang up during vote playback."
"Your vote has been cast as follows, "YOU HAVE VOTED AS THE BOARD RECOMMENDED."
"To hear how you have voted, press 1." "To cancel your vote, press 2." "To save how you have voted, press 3."
IF THE SHAREHOLDER PRESSES 2 TO CANCEL THE VOTES:
"Your vote has been canceled." "To enter another vote, press 1 now." "To end this call, press 0 now."
IF THE SHAREHOLDER PRESSES 3 TO SAVE THE VOTES:
"Your vote has been saved." "To enter another vote, press 1 now." "To end this call press 0 now."
IF THE SHAREHOLDER ELECTS TO VOTE ANOTHER PROXY, HE/SHE IS RETURNED TO THE ABOVE SPEECH
"PLEASE ENTER THE NUMBER".
IF THE SHAREHOLDER ELECTS TO END THE CALL, HE/SHE WILL HEAR:
"Thank you for voting."
- --------------------------------------------------------------------------------
OPTION 2: IF THE SHAREHOLDER OPTS TO VOTE ON EACH PROPOSAL SEPARATELY:
----------------------------------------------------------------------
"PROPOSAL 1: To VOTE FOR ALL nominees, press 1. To WITHHOLD from all nominees, press 9.
To WITHHOLD FROM AN INDIVIDUAL nominee press 0."
IF THE SHAREHOLDER PRESSES 0, TO WITHHOLD FROM AN INDIVIDUAL NOMINEE, HE/SHE WILL HEAR:
"To enter a vote to withhold from an individual nominee, enter the two digit number that appears next to the nominee
you DO NOT wish to vote for."
"Press 0, if you have completed voting on nominees"
AFTER THE SHAREHOLDER ENTERS THE FIRST NOMINEE NUMBER, HE/SHE HEARS:
"Press 1 to WITHHOLD FROM another nominee, or press 0 if you have COMPLETED
VOTING ON THE NOMINEES."
IF THE CONTRACT OWNER PRESSES 0 AND HAS NOT ENTERED ANY NOMINEE NUMBERS, HE/SHE WILL HEAR:
"Since no nominee numbers have been entered your vote has been cast to vote FOR ALL NOMINEES"
- ----------------------------------------------------------------------------------------------------------------------
*IF A SHAREHOLDER OWNS MULTIPLE HOLDINGS, HE/SHE WILL HEAR:*
"PROPOSAL 2: To vote FOR ALL press 1. To vote AGAINST ALL press 9. To ABSTAIN ALL press 0."
"To vote each holding individually press 4"
IF THE SHAREHOLDER OPTS TO VOTE EACH HOLDING INDIVIDUALLY, HE/SHE WILL HEAR:
"FOR HOLDING #1: To vote FOR press 1. AGAINST press 9. ABSTAIN press 0."
"FOR HOLDING #2: To vote FOR press 1. AGAINST press 9. ABSTAIN press 0."
"FOR HOLDING #3: To vote FOR press 1. AGAINST press 9. ABSTAIN press 0."
"FOR HOLDING #4: To vote FOR press 1. AGAINST press 9. ABSTAIN press 0."
"FOR HOLDING #5: To vote FOR press 1. AGAINST press 9. ABSTAIN press 0."
"FOR HOLDING #6: To vote FOR press 1. AGAINST press 9. ABSTAIN press 0."
"FOR HOLDING #7: To vote FOR press 1. AGAINST press 9. ABSTAIN press 0."
"FOR HOLDING #8: To vote FOR press 1. AGAINST press 9. ABSTAIN press 0."
"FOR HOLDING #9: To vote FOR press 1. AGAINST press 9. ABSTAIN press 0."
"FOR HOLDING #10: To vote FOR press 1. AGAINST press 9. ABSTAIN press 0."
"FOR HOLDING #11: To vote FOR press 1. AGAINST press 9. ABSTAIN press 0."
"FOR HOLDING #12: To vote FOR press 1. AGAINST press 9. ABSTAIN press 0."
"FOR HOLDING #13: To vote FOR press 1. AGAINST press 9. ABSTAIN press 0."
"FOR HOLDING #14: To vote FOR press 1. AGAINST press 9. ABSTAIN press 0."
"PROPOSAL 3: To vote FOR ALL press 1. To vote AGAINST ALL press 9. To ABSTAIN ALL press 0."
"To vote each holding individually press 4"
IF THE SHAREHOLDER OPTS TO VOTE EACH HOLDING INDIVIDUALLY, HE/SHE WILL HEAR:
"FOR HOLDING #1: To vote FOR press 1. AGAINST press 9. ABSTAIN press 0."
"FOR HOLDING #2: To vote FOR press 1. AGAINST press 9. ABSTAIN press 0."
"FOR HOLDING #3: To vote FOR press 1. AGAINST press 9. ABSTAIN press 0."
"FOR HOLDING #4: To vote FOR press 1. AGAINST press 9. ABSTAIN press 0."
"FOR HOLDING #5: To vote FOR press 1. AGAINST press 9. ABSTAIN press 0."
"FOR HOLDING #6: To vote FOR press 1. AGAINST press 9. ABSTAIN press 0."
"FOR HOLDING #7: To vote FOR press 1. AGAINST press 9. ABSTAIN press 0."
"FOR HOLDING #8: To vote FOR press 1. AGAINST press 9. ABSTAIN press 0."
"FOR HOLDING #9: To vote FOR press 1. AGAINST press 9. ABSTAIN press 0."
"FOR HOLDING #10: To vote FOR press 1. AGAINST press 9. ABSTAIN press 0."
"FOR HOLDING #11: To vote FOR press 1. AGAINST press 9. ABSTAIN press 0."
"FOR HOLDING #12: To vote FOR press 1. AGAINST press 9. ABSTAIN press 0."
"FOR HOLDING #13: To vote FOR press 1. AGAINST press 9. ABSTAIN press 0."
"FOR HOLDING #14: To vote FOR press 1. AGAINST press 9. ABSTAIN press 0."
"PROPOSAL 4a: To vote FOR ALL press 1. To vote AGAINST ALL press 9. To ABSTAIN ALL press 0."
"To vote each holding individually press 4"
IF THE SHAREHOLDER OPTS TO VOTE EACH HOLDING INDIVIDUALLY, HE/SHE WILL HEAR:
"FOR HOLDING #1: To vote FOR press 1. AGAINST press 9. ABSTAIN press 0."
"FOR HOLDING #2: To vote FOR press 1. AGAINST press 9. ABSTAIN press 0."
"FOR HOLDING #3: To vote FOR press 1. AGAINST press 9. ABSTAIN press 0."
"FOR HOLDING #4: To vote FOR press 1. AGAINST press 9. ABSTAIN press 0."
"FOR HOLDING #5: To vote FOR press 1. AGAINST press 9. ABSTAIN press 0."
"FOR HOLDING #6: To vote FOR press 1. AGAINST press 9. ABSTAIN press 0."
"FOR HOLDING #7: To vote FOR press 1. AGAINST press 9. ABSTAIN press 0."
"FOR HOLDING #8: To vote FOR press 1. AGAINST press 9. ABSTAIN press 0."
"FOR HOLDING #9: To vote FOR press 1. AGAINST press 9. ABSTAIN press 0."
"FOR HOLDING #10: To vote FOR press 1. AGAINST press 9. ABSTAIN press 0."
"FOR HOLDING #11: To vote FOR press 1. AGAINST press 9. ABSTAIN press 0."
"FOR HOLDING #12: To vote FOR press 1. AGAINST press 9. ABSTAIN press 0."
"FOR HOLDING #13: To vote FOR press 1. AGAINST press 9. ABSTAIN press 0."
"FOR HOLDING #14: To vote FOR press 1. AGAINST press 9. ABSTAIN press 0."
"PROPOSAL 4b: To vote FOR ALL press 1. To vote AGAINST ALL press 9. To ABSTAIN ALL press 0."
"PROPOSAL 4c: To vote FOR ALL press 1. To vote AGAINST ALL press 9. To ABSTAIN ALL press 0."
"PROPOSAL 4d: To vote FOR ALL press 1. To vote AGAINST ALL press 9. To ABSTAIN ALL press 0."
"PROPOSAL 4e: To vote FOR ALL press 1. To vote AGAINST ALL press 9. To ABSTAIN ALL press 0."
WHEN THE SHAREHOLDER HAS COMPLETED VOTING ON ALL PROPOSALS, HE/SHE WILL HEAR:
"To hear how you have voted, press 1." "To cancel your vote, press 2." "To save how you have voted, press 3."
IF THE SHAREHOLDER PRESSES 1, TO HEAR THE VOTES, HE/SHE WILL HEAR:
"Your vote will be saved automatically should you decide to hang up during vote playback."
"Your vote has been cast as follows (vote for each proposal(s) and or holding(s) are given)."
"To hear how you have voted, press 1." "To cancel your vote, press 2." "Tosave how you have voted, press 3."
IF THE SHAREHOLDER PRESSES 2, TO CANCEL THE VOTES, HE/SHE WILL HEAR:
"Your vote has been canceled." "To enter another vote, press 1 now." "To end this call, press 0 now."
IF THE SHAREHOLDER PRESSES 3, TO SAVE THE VOTES, HE/SHE WILL HEAR:
"Your vote has been saved." "To enter another vote, press 1 now." "To end this call press 0 now."
IF THE SHAREHOLDER ELECTS TO VOTE ANOTHER PROXY, HE/SHE IS RETURNED TO THE ABOVE SPEECH
"PLEASE ENTER THE NUMBER".
IF THE SHAREHOLDER ELECTS TO END THE CALL, HE/SHE WILL HEAR:
"Thank you for voting."
CALL IS TERMINATED.
[LOGO OF MEMBERS
MUTUAL FUNDS]
MEMBERS(TM)
MUTUAL FUNDS
Mark All -> Board Recommended
Proposals Mark All -> For Against Abstain
- -------------------------------------------------------------------------------------------------------------
1.01 Elect Philip E. Blake to the Board of Trustees o For o Withhold
- -------------------------------------------------------------------------------------------------------------
1.02 Elect Katherine L. Frank to the Board of Trustees o For o Withhold
- -------------------------------------------------------------------------------------------------------------
1.03 Elect James R. Imhoff, Jr. to the Board of Trustees o For o Withhold
- -------------------------------------------------------------------------------------------------------------
1.04 Elect Lorence D. Wheeler to the Board of Trustees o For o Withhold
- -------------------------------------------------------------------------------------------------------------
2 To approve an investment advisory agreement between the
Trust, on behalf of each of the Funds, and Madison Asset FUND SPECIFIC VOTE
Management. LLC, as described in the proxy statement.
- -------------------------------------------------------------------------------------------------------------
MEMBERS Aggressive Allocation Fund o For o Against o Abstain
- -------------------------------------------------------------------------------------------------------------
MEMBERS Bond Fund o For o Against o Abstain
- -------------------------------------------------------------------------------------------------------------
MEMBERS Cash Reserves Fund o For o Against o Abstain
- -------------------------------------------------------------------------------------------------------------
MEMBERS Conservative Allocation Fund o For o Against o Abstain
- -------------------------------------------------------------------------------------------------------------
MEMBERS Diversified Income Fund o For o Against o Abstain
- -------------------------------------------------------------------------------------------------------------
MEMBERS High Income Fund o For o Against o Abstain
- -------------------------------------------------------------------------------------------------------------
MEMBERS International Stock Fund o For o Against o Abstain
- -------------------------------------------------------------------------------------------------------------
MEMBERS Large Cap Growth Fund o For o Against o Abstain
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MEMBERS Large Cap Value Fund o For o Against o Abstain
- -------------------------------------------------------------------------------------------------------------
MEMBERS Mid Cap Growth Fund o For o Against o Abstain
- -------------------------------------------------------------------------------------------------------------
MEMBERS Mid Cap Value Fund o For o Against o Abstain
- -------------------------------------------------------------------------------------------------------------
MEMBERS Moderate Allocation Fund o For o Against o Abstain
- -------------------------------------------------------------------------------------------------------------
MEMBERS Small Cap Growth Fund o For o Against o Abstain
- -------------------------------------------------------------------------------------------------------------
MEMBERS Small Cap Value Fund o For o Against o Abstain
- -------------------------------------------------------------------------------------------------------------
3 To approve an amendment and restatement of the fundamental
investment restriction regarding the ability of each Fund to FUND SPECIFIC VOTE
borrow, as described in the proxy statement.
- -------------------------------------------------------------------------------------------------------------
MEMBERS Aggressive Allocation Fund o For o Against o Abstain
- -------------------------------------------------------------------------------------------------------------
MEMBERS Bond Fund o For o Against o Abstain
- -------------------------------------------------------------------------------------------------------------
MEMBERS Cash Reserves Fund o For o Against o Abstain
- -------------------------------------------------------------------------------------------------------------
MEMBERS Conservative Allocation Fund o For o Against o Abstain
- -------------------------------------------------------------------------------------------------------------
MEMBERS Diversified Income Fund o For o Against o Abstain
- -------------------------------------------------------------------------------------------------------------
MEMBERS High Income Fund o For o Against o Abstain
- -------------------------------------------------------------------------------------------------------------
MEMBERS International Stock Fund o For o Against o Abstain
- -------------------------------------------------------------------------------------------------------------
MEMBERS Large Cap Growth Fund o For o Against o Abstain
- -------------------------------------------------------------------------------------------------------------
MEMBERS Large Cap Value Fund o For o Against o Abstain
- -------------------------------------------------------------------------------------------------------------
MEMBERS Mid Cap Growth Fund o For o Against o Abstain
- -------------------------------------------------------------------------------------------------------------
MEMBERS Mid Cap Value Fund o For o Against o Abstain
- -------------------------------------------------------------------------------------------------------------
MEMBERS Moderate Allocation Fund o For o Against o Abstain
- -------------------------------------------------------------------------------------------------------------
MEMBERS Small Cap Growth Fund o For o Against o Abstain
- -------------------------------------------------------------------------------------------------------------
MEMBERS Small Cap Value Fund o For o Against o Abstain
- -------------------------------------------------------------------------------------------------------------
4.a To approve manager of managers authority for each of the FUND SPECIFIC VOTE
Funds, as described in the proxy statement.
- -------------------------------------------------------------------------------------------------------------
MEMBERS Aggressive Allocation Fund o For o Against o Abstain
- -------------------------------------------------------------------------------------------------------------
MEMBERS Bond Fund o For o Against o Abstain
- -------------------------------------------------------------------------------------------------------------
MEMBERS Cash Reserves Fund o For o Against o Abstain
- -------------------------------------------------------------------------------------------------------------
MEMBERS Conservative Allocation Fund o For o Against o Abstain
- -------------------------------------------------------------------------------------------------------------
MEMBERS Diversified Income Fund o For o Against o Abstain
- -------------------------------------------------------------------------------------------------------------
MEMBERS High Income Fund o For o Against o Abstain
- -------------------------------------------------------------------------------------------------------------
MEMBERS International Stock Fund o For o Against o Abstain
- -------------------------------------------------------------------------------------------------------------
MEMBERS Large Cap Growth Fund o For o Against o Abstain
- -------------------------------------------------------------------------------------------------------------
MEMBERS Large Cap Value Fund o For o Against o Abstain
- -------------------------------------------------------------------------------------------------------------
MEMBERS Mid Cap Growth Fund o For o Against o Abstain
- -------------------------------------------------------------------------------------------------------------
MEMBERS Mid Cap Value Fund o For o Against o Abstain
- -------------------------------------------------------------------------------------------------------------
MEMBERS Moderate Allocation Fund o For o Against o Abstain
- -------------------------------------------------------------------------------------------------------------
MEMBERS Small Cap Growth Fund o For o Against o Abstain
- -------------------------------------------------------------------------------------------------------------
MEMBERS Small Cap Value Fund o For o Against o Abstain
- -------------------------------------------------------------------------------------------------------------
4.b To approve the Subadvisory Agreement between Madison FUND SPECIFIC VOTE
Asset Management, LLC and Shenkman Capital Management,
Inc., for the High Income Fund as described in the proxy
statement.
- -------------------------------------------------------------------------------------------------------------
MEMBERS High Income Fund o For o Against o Abstain
- -------------------------------------------------------------------------------------------------------------
4.c To approve the Subadvisory Agreement between Madison
Asset Management, LLC and Wellington Management LLP, FUND SPECIFIC VOTE
for the Small Cap Value Fund as described in the proxy
statement.
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
MEMBERS Small Cap Value Fund o For o Against o Abstain
- -------------------------------------------------------------------------------------------------------------
4.d To approve the Subadvisory Agreement between Madison FUND SPECIFIC VOTE
Asset Management, LLC and Paradigm Asset Management,
LLC, for the Small Cap Growth Fund as described in the proxy
statement
- -------------------------------------------------------------------------------------------------------------
MEMBERS Small Cap Growth Fund o For o Against o Abstain
- -------------------------------------------------------------------------------------------------------------
4.e To approve the Subadvisory Agreement between Madison
Asset Management, LLC and Lazard Asset Management LLC, FUND SPECIFIC VOTE
for the International Stock Fund as described in the proxy
statement.
- -------------------------------------------------------------------------------------------------------------
MEMBERS International Stock Fund o For o Against o Abstain
- -------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
If you have questions regarding the voting process, please call (800)877-6089.
--------------------
Cancel Vote & Exit
--------------------