STATEMENT OF ADDITIONAL INFORMATION

MEMBERS(R) MUTUAL FUNDS
CUNA Mutual Group
5910 Mineral Point Road
Madison, Wisconsin 53705

THIS IS NOT A PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE READ IN CONJUNCTION WITH THE CURRENTLY EFFECTIVE PROSPECTUS (THE "PROSPECTUS") FOR THE MEMBERS MUTUAL FUNDS (THE "TRUST"), WHICH IS REFERRED TO HEREIN. THE PROSPECTUS CONCISELY SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR SHOULD KNOW BEFORE INVESTING. FOR A COPY OF THE TRUST'S PROSPECTUS DATED FEBRUARY 29, 2008, PLEASE CALL 1-800-877-6089 OR WRITE MEMBERS MUTUAL FUNDS, P.O. BOX 8390, BOSTON, MA 02266-8390.

THE TRUST'S AUDITED FINANCIAL STATEMENTS ARE INCORPORATED HEREIN BY REFERENCE TO THE TRUST'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED OCTOBER 31, 2007, WHICH HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC") AND PROVIDED TO ALL SHAREHOLDERS. FOR A COPY, WITHOUT CHARGE, OF THE TRUST'S ANNUAL REPORT TO SHAREHOLDERS, PLEASE CALL MEMBERS MUTUAL FUNDS AT 1-800-877-6089 OR VISIT OUR WEBSITE AT WWW.MEMBERSFUNDS.COM.

February 29, 2008

TABLE OF CONTENTS

                                                                            PAGE
                                                                            ----
GENERAL INFORMATION......................................................      1

INVESTMENT PRACTICES.....................................................      1
   Lending Portfolio Securities..........................................      1
   Restricted and Illiquid Securities....................................      1
   Foreign Transactions..................................................      2
   Options on Securities and Securities Indices..........................      6
   Bank Loans............................................................      9
   Swap Agreements.......................................................     10
   Futures Contracts and Options on Futures Contracts....................     11
   Certain Bond Fund Practices...........................................     14
   Lower-Rated Corporate Debt Securities.................................     14
   Other Debt Securities.................................................     15
   Foreign Government Securities.........................................     16
   Convertible Securities................................................     17
   Repurchase Agreements.................................................     17
   Reverse Repurchase Agreements.........................................     17
   U.S. Government Securities............................................     18
   Forward Commitment and When-Issued Securities.........................     18
   Mortgage-Backed and Asset-Backed Securities...........................     19
   Other Securities Related to Mortgages.................................     20
   Real Estate Investment Trusts.........................................     22
   Exchange Traded Funds.................................................     23
   Shares of Other Investment Companies..................................     23
   Temporary Defensive Positions.........................................     23
   Types of Investment Risk..............................................     23
   Higher-Risk Securities and Practices..................................     25

FUND NAMES...............................................................     27

INVESTMENT LIMITATIONS...................................................     27

PORTFOLIO TURNOVER.......................................................     29

MANAGEMENT OF THE TRUST..................................................     29
   Trustees and Officers.................................................     29
   Trustee Compensation..................................................     31
   Committees............................................................     32
   Trustees' Holdings....................................................     33

SALES LOAD WAIVERS FOR CERTAIN AFFILIATED PERSONS OF THE TRUST...........     34

CONTROL PERSONS AND PRINCIPAL HOLDERS OF THE TRUST'S SECURITIES..........     34

PORTFOLIO MANAGEMENT.....................................................     36
   The Management Agreement..............................................     36
   MEMBERS Capital Advisors, Inc.........................................     37
   The Management Agreements with Subadvisers............................     37

PORTFOLIO MANAGERS.......................................................     39
   MEMBERS Capital Advisors, Inc.........................................     39
   Shenkman Capital Management, Inc......................................     41

   Wellington Management Company, LLP....................................     43
   Paradigm Asset Management Company, LLC................................     46
   Lazard Asset Management LLC...........................................     49

TRANSFER AGENT...........................................................     52

CUSTODIAN................................................................     52

DISTRIBUTION.............................................................     53
   Principal Underwriter and Distribution of Fund Shares.................     53
   Distribution Plans and Agreement......................................     53

BROKERAGE................................................................     55

PROXY VOTING POLICIES, PROCEDURES AND RECORDS............................     57

SELECTIVE DISCLOSURE OF PORTFOLIO HOLDINGS...............................     57

CODES OF ETHICS..........................................................     59

HOW SECURITIES ARE OFFERED...............................................     59
   Shares of Beneficial Interest.........................................     59
   Voting Rights.........................................................     60
   Limitation of Shareholder Liability...................................     60
   Limitation of Trustee and Officer Liability...........................     60
   Limitation of Interseries Liability...................................     60

NET ASSET VALUE OF SHARES................................................     61
   Cash Reserves Fund....................................................     61
   Portfolio Valuation...................................................     61

DISTRIBUTIONS AND TAXES..................................................     62
   Federal Tax Status of the Funds.......................................     66
   Shareholder Taxation..................................................     66

MORE ABOUT PURCHASING AND SELLING SHARES.................................     66
   Minimum Investments...................................................     68
   Offering Price........................................................     68
   Calculation of the Sales Charge.......................................     68
   Initial Sales Charge on Class A Shares................................     68
   Deferred Sales Charge on Class B and Class C Shares...................     69
   Special Redemptions...................................................     71

ADDITIONAL INVESTOR SERVICES.............................................     71
   Systematic Investment Program.........................................     71
   Systematic Withdrawal Program.........................................     71
   Exchange Privilege and Systematic Exchange Program....................     71
   Reinstatement or Reinvestment Privilege...............................     72

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM............................     72

FINANCIAL STATEMENTS.....................................................     72

APPENDIX A - SUMMARY OF PROXY VOTING POLICIES AND PROCEDURES.............    A-1

GENERAL INFORMATION

The Trust is a diversified, open-end management investment company consisting of separate investment portfolios or funds (each, a "fund") each of which has a different investment objective and policies. Each fund is a diversified, open-end management investment company, commonly known as a mutual fund. The funds described in both the prospectus and Statement of Additional Information (the "SAI") are 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 (COLLECTIVELY, THE "CORE FUNDS"), AND THE CONSERVATIVE ALLOCATION, MODERATE ALLOCATION AND AGGRESSIVE ALLOCATION FUNDS (COLLECTIVELY, THE "ALLOCATION FUNDS").

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 November 30, 2006 (the "Declaration of Trust") and its Certificate of Trust dated May 16, 1997 (the "Certificate"). The Certificate is on file with the Office of the Secretary of State in Delaware. Each shareholder agrees to be bound by the Declaration of Trust, as amended from time to time, upon such shareholder's initial purchase of shares of beneficial interest in any one of the funds.

INVESTMENT PRACTICES

The prospectus describes the investment objective and policies of each of the funds. The following information is provided for those investors wishing to have more comprehensive information than that contained in the prospectus.

Since each ALLOCATION FUND will invest in shares of other investment companies, except as disclosed in the prospectus, to the extent that an investment practice noted below describes specific securities, if an ALLOCATION FUND invests in those securities, it does so indirectly, through its investment in underlying funds.

LENDING PORTFOLIO SECURITIES

Each fund, except the CASH RESERVES and the ALLOCATION FUNDS, may lend portfolio securities. Loans will be made only in accordance with guidelines established by the Board of Trustees of the Trust (the "Board") and on the request of broker-dealers or institutional investors deemed qualified, and only when the borrower agrees to maintain cash or other liquid assets as collateral with a fund equal at all times to at least 102% of the value of the securities. A fund will continue to receive interest or dividends on the securities loaned and will, at the same time, earn an agreed-upon amount of interest on the collateral which will be invested in readily marketable short-term obligations of high quality. A fund will retain the right to call the loaned securities and may call loaned voting securities if important shareholder meetings are imminent. Such security loans will not be made if, as a result, the aggregate of such loans exceeds 33 1/3% of the value of a fund's assets. The fund may terminate such loans at any time. The primary risk involved in lending securities is that the borrower will fail financially and not return the loaned securities at a time when the collateral is not sufficient to replace the full amount of the loaned securities. To mitigate the risk, loans will be made only to firms deemed by the funds' investment adviser, MEMBERS Capital Advisors, Inc. ("MCA"), to be in good financial standing and will not be made unless, in MCA's judgment, the consideration to be earned from such loans would justify the risk.

RESTRICTED AND ILLIQUID SECURITIES

Each fund may invest in illiquid securities up to the percentage limits described below in the "Higher-Risk Securities and Practices" section. MCA or a fund's subadviser (collectively referred to herein as the "Investment Adviser") is responsible for determining the value and liquidity of investments held by each fund. Thus, it is up to the Investment Adviser to determine if any given security is illiquid. Investments may be illiquid because of the absence of a trading market, making it difficult to value them or dispose of them promptly at an acceptable price.

Illiquid investments often include repurchase agreements maturing in more than seven days, currency swaps, time deposits with a notice or demand period of more than seven days, certain over-the-counter option contracts (and assets used to cover such options), participation interests in loans and restricted securities. A restricted security is one that has a contractual restriction on resale or cannot be resold publicly until it is registered under the Securities Act of 1933, as amended (the "1933 Act").

Each fund may invest in restricted securities. Restricted securities are not, however, considered illiquid if they are eligible for sale to qualified institutional purchasers in reliance upon Rule 144A under the 1933 Act and are determined to be liquid by the Board or by the Investment Adviser under Board-approved procedures. Such guidelines would take into account trading activity for such securities, among other factors. To the extent that qualified institutional buyers become for a time uninterested in purchasing these restricted securities, a fund's holdings of those securities may become illiquid. Purchases by the INTERNATIONAL STOCK and HIGH INCOME FUNDS of securities of foreign issuers offered and sold outside the U.S., in reliance upon the exemption from registration provided by Regulation S under the 1933 Act, also may be liquid even though they are restricted.

FOREIGN TRANSACTIONS

Foreign Securities. Each fund may invest in foreign securities; provided, however, that the CASH RESERVES FUND is limited to U.S. dollar-denominated foreign money market securities (as defined below). The percentage limitations on each fund's investment in foreign securities are set forth in the prospectus and below in the "Higher-Risk Securities and Practices" section.

Foreign securities refers to securities that are: (1) issued by companies organized outside the U.S. or whose principal operations are outside the U.S. ("foreign issuers"), (2) issued by foreign governments or their agencies or instrumentalities (also "foreign issuers"), (3) principally traded outside of the U.S. or (4) quoted or denominated in a foreign currency ("non-dollar securities"). However, any dollar denominated security that is part of the Merrill Lynch U.S. Domestic Market Index is not considered a foreign security.

Foreign securities may offer potential benefits that are not available from investments exclusively in securities of domestic issuers or dollar-denominated securities. Such benefits may include the opportunity to invest in foreign issuers that appear to offer better opportunity for long-term capital appreciation or current earnings than investments in domestic issuers, the opportunity to invest in foreign countries with economic policies or business cycles different from those of the U.S. and the opportunity to invest in foreign securities markets that do not necessarily move in a manner parallel to U.S. markets.

Investing in foreign securities involves significant risks that are not typically associated with investing in U.S. dollar-denominated securities or in securities of domestic issuers. Such investments may be affected by changes in currency exchange rates, changes in foreign or U.S. laws or restrictions applicable to such investments and in exchange control regulations (e.g., currency blockage). Some foreign stock markets may have substantially less volume than, for example, the New York Stock Exchange and securities of some foreign issuers may be less liquid than securities of comparable domestic issuers. Commissions and dealer mark-ups on transactions in foreign investments may be higher than for similar transactions in the U.S. In addition, clearance and settlement procedures may be different in foreign countries and, in certain markets, on certain occasions, such procedures have been unable to keep pace with the volume of securities transactions, thus making it difficult to conduct such transactions.

Foreign issuers are not generally subject to uniform accounting, auditing and financial reporting standards comparable to those applicable to domestic companies. There may be less publicly available information about a foreign issuer than about a domestic one. In addition, there is generally less government regulation of stock exchanges, brokers, and listed and unlisted issuers in foreign countries than in the U.S. Furthermore, with respect to certain foreign countries, there is a possibility of expropriation or confiscatory taxation, imposition of withholding taxes on dividend or interest

payments, limitations on the removal of funds or other assets of the fund making the investment, or political or social instability or diplomatic developments which could affect investments in those countries.

Investments in short-term debt obligations issued either by foreign issuers or foreign financial institutions or by foreign branches of U.S. financial institutions (collectively, "foreign money market securities") present many of the same risks as other foreign investments. In addition, foreign money market securities present interest rate risks similar to those attendant to an investment in domestic money market securities.

Investments in ADRs, EDRs and GDRs. Many securities of foreign issuers are represented by American depository receipts ("ADRs"), European depository receipts ("EDRs") and Global depository receipts ("GDRs"). Each fund may invest in ADRs; and each fund, except the CASH RESERVES FUND, may invest in GDRs and EDRs.

ADRs are receipts typically issued by a U.S. financial institution or trust company which represent the right to receive securities of foreign issuers deposited in a domestic bank or a foreign correspondent bank. Prices of ADRs are quoted in U.S. dollars, and ADRs are traded in the U.S. on exchanges or over-the-counter and are sponsored and issued by domestic banks. In general, there is a large, liquid market in the U.S. for ADRs quoted on a national securities exchange or the NASDAQ Global Market. The information available for ADRs is subject to the accounting, auditing and financial reporting standards of the domestic market or exchange on which they are traded, which standards are more uniform and more exacting than those to which many foreign issuers may be subject.

EDRs and GDRs are receipts evidencing an arrangement with a non-U.S. bank similar to that for ADRs and are designed for use in non-U.S. securities markets. EDRs are typically issued in bearer form and are designed for trading in the European markets. GDRs, issued either in bearer or registered form, are designed for trading on a global basis. EDRs and GDRs are not necessarily quoted in the same currency as the underlying security.

Depository receipts do not eliminate all the risk inherent in investing in the securities of foreign issuers. To the extent that a fund acquires depository receipts through banks which do not have a contractual relationship with the foreign issuer of the security underlying the receipt to issue and service such depository receipts, there may be an increased possibility that the fund would not become aware of and be able to respond to corporate actions such as stock splits or rights offerings involving the foreign issuer in a timely manner. The market value of depository receipts is dependent upon the market value of the underlying securities and fluctuations in the relative value of the currencies in which the receipts and the underlying are quoted. In addition, the lack of information may result in inefficiencies in the valuation of such instruments. However, by investing in depository receipts rather than directly in the stock of foreign issuers, a fund will avoid currency risks during the settlement period for either purchases or sales.

Investments in Emerging Markets. Each fund, except the CASH RESERVES FUND, may invest in securities of issuers located in countries with emerging economies and/or securities markets. These countries are located in the Asia Pacific region, Eastern Europe, Central and South America and Africa. Political and economic structures in many of these countries may be undergoing significant evolution and rapid development, and such countries may lack the social, political and economic stability characteristic of more developed countries. Certain of these countries may have in the past failed to recognize private property rights and have at times nationalized or expropriated the assets of private companies. As a result, the risks of foreign investment generally, including the risks of nationalization or expropriation of assets, may be heightened. In addition, unanticipated political or social developments may affect the values of a fund's investments in those countries and the availability to the fund of additional investments in those countries.

The small size and inexperience of the securities markets in certain of these countries and the limited volume of trading in securities in those countries may also make investments in such countries illiquid and more volatile than investments in Japan or most Western European countries, and the funds may be required to establish special custody or other arrangements before making certain investments in those countries. There may be little financial or

accounting information available with respect to issuers located in certain of such countries, and it may be difficult as a result to assess the value or prospects of an investment in such issuers.

A fund's purchase or sale of portfolio securities in certain emerging markets may be constrained by limitations as to daily changes in the prices of listed securities, periodic trading or settlement volume and/or limitations on aggregate holdings of foreign investors. Such limitations may be computed based on aggregate trading volume by or holdings of a fund, MCA or its affiliates, a subadviser and its affiliates, and each such person's respective clients and other service providers. A fund may not be able to sell securities in circumstances where price, trading or settlement volume limitations have been reached.

Foreign investment in certain emerging securities markets is restricted or controlled to varying degrees that may limit investment in such countries or increase the administrative cost of such investments. For example, certain Asian countries require government approval prior to investments by foreign persons or limit investment by foreign persons to a specified percentage of an issuer's outstanding securities or a specific class of securities which may have less advantageous terms (including price) than securities of such company available for purchase by nationals. In addition, certain countries may restrict or prohibit investment opportunities in issuers or industries important to national interests. Such restrictions may affect the market price, liquidity and rights of securities that may be purchased by a fund.

Settlement procedures in emerging markets are frequently less developed and reliable than those in the U.S. and may involve a fund's delivery of securities before receipt of payment for their sale. In addition, significant delays are common in certain markets in registering the transfer of securities. Settlement or registration problems may make it more difficult for a fund to value its portfolio assets and could cause a fund to miss attractive investment opportunities, to have its assets uninvested or to incur losses due to the failure of a counterparty to pay for securities that the fund has delivered or due to the fund's inability to complete its contractual obligations.

Currently, there is no market or only a limited market for many management techniques and instruments with respect to the currencies and securities markets of emerging market countries. Consequently, there can be no assurance that suitable instruments for hedging currency and market related risks will be available at the times when the Investment Adviser of the fund wishes to use them.

Foreign Currency Transactions. Because investment in foreign issuers will usually involve currencies of foreign countries, and because each fund, except the CASH RESERVES FUND, may have currency exposure independent of their securities positions, the value of the assets of these funds, as measured in U.S. dollars, will be affected by changes in foreign currency exchange rates. An issuer of securities purchased by a fund may be domiciled in a country other than the country in whose currency the instrument is denominated or quoted. The HIGH INCOME, MID CAP GROWTH and INTERNATIONAL STOCK FUNDS may also invest in securities quoted or denominated in the European Currency Unit ("ECU"), which is a "basket" consisting of specified amounts of the currencies of certain of the twelve member states of the European Economic Community. The specific amounts of currencies comprising the ECU may be adjusted by the Council of Ministers of the European Economic Community from time to time to reflect changes in relative values of the underlying currencies. In addition, these three funds may invest in securities quoted or denominated in other currency "baskets."

Currency exchange rates may fluctuate significantly over short periods of time causing, along with other factors, a fund's net asset value ("NAV") to fluctuate as well. They generally are determined by the forces of supply and demand in the foreign exchange markets and the relative merits of investments in different countries, actual or anticipated changes in interest rates and other complex factors, as seen from an international perspective. Currency exchange rates also can be affected unpredictably by intervention by U.S. or foreign governments or central banks, or the failure to intervene, or by currency controls or political developments in the U.S. or abroad. The market in forward foreign currency exchange contracts, currency swaps and other privately negotiated currency instruments offers less protection against defaults by the other party to such instruments than is available for currency instruments traded on

an exchange. To the extent that a substantial portion of a fund's total assets, adjusted to reflect the fund's net position after giving effect to currency transactions, is denominated or quoted in the currencies of foreign countries, the fund will be more susceptible to the risk of adverse economic and political developments within those countries.

In addition to investing in securities denominated or quoted in a foreign currency, certain of the funds may engage in a variety of foreign currency management techniques. These funds may hold foreign currency received in connection with investments in foreign securities when, in the judgment of the fund's Investment Adviser, it would be beneficial to convert such currency into U.S. dollars at a later date, based on anticipated changes in the relevant exchange rate. These funds will incur costs in connection with conversions between various currencies.

Forward Foreign Currency Exchange Contracts. Each fund, except the CASH RESERVES FUND, may also purchase or sell forward foreign currency exchange contracts for defensive or hedging purposes when the fund's Investment Adviser anticipates that the foreign currency will appreciate or depreciate in value, but securities denominated or quoted in that currency do not present attractive investment opportunities and are not held in the fund's portfolio. In addition, these funds may enter into forward foreign currency exchange contracts in order to protect against anticipated changes in future foreign currency exchange rates and may engage in cross-hedging by using forward contracts in a currency different from that in which the hedged security is denominated or quoted if the fund's Investment Adviser determines that there is a pattern of correlation between the two currencies.

These funds may enter into contracts to purchase foreign currencies to protect against an anticipated rise in the U.S. dollar price of securities it intends to purchase. They may enter into contracts to sell foreign currencies to protect against the decline in value of its foreign currency denominated or quoted portfolio securities, or a decline in the value of anticipated dividends from such securities, due to a decline in the value of foreign currencies against the U.S. dollar. Contracts to sell foreign currency could limit any potential gain which might be realized by a fund if the value of the hedged currency increased.

If a fund enters into a forward foreign currency exchange contract to buy foreign currency for any purpose, the fund will be required to place cash or liquid high grade debt securities in a segregated account with the fund's custodian in an amount equal to the value of the fund's total assets committed to the consummation of the forward contract. If the value of the securities placed in the segregated account declines, additional cash or securities will be placed in the segregated account so that the value of the account will equal the amount of a fund's commitment with respect to the contract.

Forward contracts are subject to the risk that the counterparty to such contract will default on its obligations. Since a forward foreign currency exchange contract is not guaranteed by an exchange or clearinghouse, a default on the contract would deprive a fund of unrealized profits, transaction costs or the benefits of a currency hedge or force the fund to cover its purchase or sale commitments, if any, at the current market price. A fund will not enter into such transactions unless the credit quality of the unsecured senior debt or the claims-paying ability of the counterparty is considered to be investment grade by the fund's Investment Adviser.

Options on Foreign Currencies. Each fund, except the CASH RESERVES FUND, may also purchase and sell (write) put and call options on foreign currencies for the purpose of protecting against declines in the U.S. dollar value of foreign portfolio securities and anticipated dividends on such securities and against increases in the U.S. dollar cost of foreign securities to be acquired. These funds may use options on currency to cross-hedge, which involves writing or purchasing options on one currency to hedge against changes in exchange rates for a different currency, if there is a pattern of correlation between the two currencies. As with other kinds of option transactions, however, the writing of an option on foreign currency will constitute only a partial hedge, up to the amount of the premium received. A fund could be required to purchase or sell foreign currencies at disadvantageous exchange rates, thereby incurring losses. The purchase of an option on foreign currency may constitute an effective hedge against exchange rate fluctuations; however, in the event of exchange rate movements adverse to a fund's position, the fund may forfeit the entire amount of the premium plus related transaction costs. In addition, these funds may purchase call or put options on currency to

seek to increase total return when the fund's Investment Adviser anticipates that the currency will appreciate or depreciate in value, but the securities quoted or denominated in that currency do not present attractive investment opportunities and are not held in the fund's portfolio. When purchased or sold to increase total return, options on currencies are considered speculative. Options on foreign currencies to be written or purchased by these funds will be traded on U.S. and foreign exchanges or over-the-counter. See the "-Risks Associated with Options Transactions" subsection, below, for a discussion of the liquidity risks associated with options transactions.

Special Risks Associated With Options on Currency. An exchange traded options position may be closed out only on an options exchange which provides a secondary market for an option of the same series. Although a fund will generally purchase or write only those options for which there appears to be an active secondary market, there is no assurance that a liquid secondary market on an exchange will exist for any particular option, or at any particular time. For some options no secondary market on an exchange may exist. In such event, it might not be possible to effect closing transactions in particular options, with the result that a fund would have to exercise its options in order to realize any profit and would incur transaction costs upon the sale of underlying securities pursuant to the exercise of put options. If a fund as a covered call option writer is unable to effect a closing purchase transaction in a secondary market, it will not be able to identify the underlying currency (or security quoted or denominated in that currency) until the option expires or it delivers the underlying currency upon exercise.

There is no assurance that higher than anticipated trading activity or other unforeseen events might not, at times, render certain of the facilities of the Options Clearing Corporation inadequate, and thereby result in the institution by an exchange of special procedures which may interfere with the timely execution of customers' orders.

Each fund, except the CASH RESERVES FUND, may purchase and write over-the-counter options to the extent consistent with its limitation on investments in restricted securities. See the "Higher-Risk Securities and Practices" section, below, for each fund's limitations on investments in restricted securities. Trading in over-the-counter options is subject to the risk that the other party will be unable or unwilling to close-out options purchased or written by a fund.

The amount of the premiums which a fund may pay or receive may be adversely affected as new or existing institutions, including other investment companies, engage in or increase their option purchasing and writing activities.

OPTIONS ON SECURITIES AND SECURITIES INDICES

Writing Options. Each fund, except the CASH RESERVES FUND, may write (sell) covered call and put options on any securities in which it may invest. A call option written by a fund obligates such fund to sell specified securities to the holder of the option at a specified price if the option is exercised at any time before the expiration date. All call options written by a fund are covered, which means that such fund will effectively own the securities subject to the option so long as the option is outstanding. A fund's purpose in writing covered call options is to realize greater income than would be realized on portfolio securities transactions alone. However, a fund may forgo the opportunity to profit from an increase in the market price of the underlying security.

A put option written by a fund would obligate such fund to purchase specified securities from the option holder at a specified price if the option is exercised at any time before the expiration date. All put options written by a fund would be covered, which means that such fund would have deposited with its custodian cash or liquid securities with a value at least equal to the exercise price of the put option. The purpose of writing such options is to generate additional income for a fund. However, in return for the option premium, a fund accepts the risk that it will be required to purchase the underlying securities at a price in excess of the securities' market value at the time of purchase.

In addition, in the Investment Adviser's discretion, a written call option or put option may be covered by maintaining cash or liquid securities (either of which may be denominated in any currency) in a segregated account with the fund's custodian, by entering into an offsetting forward contract and/or by purchasing an offsetting option which, by virtue of its exercise price or otherwise, reduces a fund's net exposure on its written option position.

Each fund, except the CASH RESERVES FUND, may also write and sell covered call and put options on any securities index composed of securities in which it may invest. Options on securities indices are similar to options on securities, except that the exercise of securities index options requires cash payments and does not involve the actual purchase or sale of securities. In addition, securities index options are designed to reflect price fluctuations in a group of securities or segment of the securities market rather than price fluctuations in a single security.

A fund may cover call options on a securities index by owning securities whose price changes are expected to be similar to those of the underlying index, or by having an absolute and immediate right to acquire such securities without additional cash consideration (or for additional cash consideration held in a segregated account by its custodian) upon conversion or exchange of other securities in its portfolio. A fund may cover call and put options on a securities index by maintaining cash or liquid securities with a value equal to the exercise price in a segregated account with its custodian.

A fund may terminate its obligations under an exchange-traded call or put option by purchasing an option identical to the one it has written. Obligations under over-the-counter options may be terminated only by entering into an offsetting transaction with the counterparty to such option. Such purchases are referred to as "closing purchase" transactions.

Purchasing Options. Each fund, except the CASH RESERVES FUND, may purchase put and call options on any securities in which it may invest or options on any securities index based on securities in which it may invest. A fund would also be able to enter into closing sale transactions in order to realize gains or minimize losses on options it had purchased.

A fund would normally purchase call options in anticipation of an increase in the market value of securities of the type in which it may invest. The purchase of a call option would entitle a fund, in return for the premium paid, to purchase specified securities at a specified price during the option period. A fund would ordinarily realize a gain if, during the option period, the value of such securities exceeded the sum of the exercise price, the premium paid and transaction costs; otherwise such a fund would realize a loss on the purchase of the call option.

A fund would normally purchase put options in anticipation of a decline in the market value of securities in its portfolio ("protective puts") or in securities in which it may invest. The purchase of a put option would entitle a fund, in exchange for the premium paid, to sell specified securities at a specified price during the option period. The purchase of protective puts is designed to offset or hedge against a decline in the market value of a fund's securities. Put options may also be purchased by a fund for the purpose of affirmatively benefiting from a decline in the price of securities which it does not own. A fund would ordinarily realize a gain if, during the option period, the value of the underlying securities decreased below the exercise price sufficiently to cover the premium and transaction costs; otherwise such a fund would realize no gain or loss on the purchase of the put option. Gains and losses on the purchase of protective put options would tend to be offset by countervailing changes in the value of the underlying portfolio securities.

A fund would purchase put and call options on securities indices for the same purpose as it would purchase options on individual securities.

Yield Curve Options. The BOND, HIGH INCOME and DIVERSIFIED INCOME FUNDS may enter into options on the yield "spread," or yield differential between two securities. Such transactions are referred to as "yield curve" options. In contrast to other types of options, a yield curve option is based on the difference between the yields of designated securities, rather than the prices of the individual securities, and is settled through cash payments. Accordingly, a yield

curve option is profitable to the holder if this differential widens (in the case of a call) or narrows (in the case of a put), regardless of whether the yields of the underlying securities increase or decrease.

These three funds may purchase or write yield curve options for the same purposes as other options on securities. For example, a fund may purchase a call option on the yield spread between two securities if it owns one of the securities and anticipates purchasing the other security and wants to hedge against an adverse change in the yield between the two securities. A fund may also purchase or write yield curve options in an effort to increase its current income if, in the judgment of the Investment Adviser, the fund will be able to profit from movements in the spread between the yields of the underlying securities. The trading of yield curve options is subject to all of the risks associated with the trading of other types of options. In addition, however, such options present risk of loss even if the yield of one of the underlying securities remains constant, if the spread moves in a direction or to an extent which was not anticipated.

Yield curve options written by the BOND, HIGH INCOME and DIVERSIFIED INCOME FUNDS will be "covered." A call (or put) option is covered if a fund holds another call (or put) option on the spread between the same two securities and maintains in a segregated account with its custodian cash or liquid securities sufficient to cover the fund's net liability under the two options. Therefore, a fund's liability for such a covered option is generally limited to the difference between the amount of the fund's liability under the option written by the fund less the value of the option held by the fund. Yield curve options may also be covered in such other manner as may be in accordance with the requirements of the counterparty with which the option is traded and applicable laws and regulations. Yield curve options are traded over-the-counter, and because they have been only recently introduced, established trading markets for these options have not yet developed.

Risks Associated with Options Transactions. There is no assurance that a liquid secondary market on an options exchange will exist for any particular exchange-traded option or at any particular time. If a fund is unable to effect a closing purchase transaction with respect to covered options it has written, the fund will not be able to sell the underlying securities or dispose of assets held in a segregated account until the options expire or are exercised. Similarly, if a fund is unable to effect a closing sale transaction with respect to options it has purchased, it will have to exercise the options in order to realize any profit and will incur transaction costs upon the purchase or sale of underlying securities.

Reasons for the absence of a liquid secondary market on an exchange include the following: (i) there may be insufficient trading interest in certain options;
(ii) restrictions may be imposed by an exchange on opening transactions or closing transactions or both; (iii) trading halts, suspensions or other restrictions may be imposed with respect to particular classes or series of options; (iv) unusual or unforeseen circumstances may interrupt normal operations on an exchange; (v) the facilities of an exchange or the Options Clearing Corporation may not at all times be adequate to handle current trading volume; or (vi) one or more exchanges could, for economic or other reasons, decide or be compelled at some future date to discontinue the trading of options (or a particular class or series of options), in which event the secondary market on that exchange (or in that class or series of options) would cease to exist, although outstanding options on that exchange that had been issued by the Options Clearing Corporation as a result of trades on that exchange would continue to be exercisable in accordance with their terms.

Each fund, except the CASH RESERVES FUND, may purchase and sell both options that are traded on U.S. and foreign exchanges and options traded over-the-counter with broker-dealers who make markets in these options. The ability to terminate over-the-counter options is more limited than with exchange-traded options and may involve the risk that broker-dealers participating in such transactions will not fulfill their obligations. Until such time as the staff of the SEC changes its position, the funds will treat purchased over-the counter options and all assets used to cover written over-the-counter options as illiquid securities, except that with respect to options written with primary dealers in U.S. Government securities pursuant to an agreement requiring a closing purchase transaction at a formula price, the amount of illiquid securities may be calculated with reference to the formula.

Transactions by a fund in options on securities and stock indices will be subject to limitations established by each of the exchanges, boards of trade or other trading facilities governing the maximum number of options in each class which may be written or purchased by a single investor or group of investors acting in concert. Thus, the number of options which a fund may write or purchase may be affected by options written or purchased by other investment advisory clients of the Investment Adviser. An exchange, board of trade or other trading facility may order the liquidations of positions found to be in excess of these limits, and it may impose certain other sanctions.

The writing and purchase of options is a highly specialized activity which involves investment techniques and risks different from those associated with ordinary portfolio securities transactions. The successful use of protective puts for hedging purposes depends in part on the Investment Adviser's ability to predict future price fluctuations and the degree of correlation between the options and securities markets.

BANK LOANS

The HIGH INCOME FUND may invest in bank loans to below-investment grade rated corporate issuers via loan participations and assignments. These bank loans may be secured or unsecured. The bank loans in which the HIGH INCOME FUND intends to invest are generally rated below investment grade by a nationally recognized rating service or not rated by any nationally recognized rating service. Participations and assignments involve special types of risk, including credit risk, interest rate risk, liquidity risk, and the risks of being a lender.

If the HIGH INCOME FUND purchases a participation, it may only be able to enforce its rights through the lender, and may assume the credit risk of the lender in addition to the borrower. Loan participations typically represent direct participation in a loan to a corporate borrower, and generally are offered by banks or other financial institutions or lending syndicates. The HIGH INCOME FUND may participate in such syndications, or can buy part of a loan via an assignment, becoming a part lender. When purchasing loan participations, the HIGH INCOME FUND assumes the credit risk associated with the corporate borrower and may assume the credit risk associated with an interposed bank or other financial intermediary.

A loan is often administered by an agent bank acting as agent for all holders. The agent bank administers the terms of the loan, as specified in the loan agreement. In addition, the agent bank is normally responsible for the collection of principal and interest payments from the corporate borrower and the apportionment of these payments to the credit of all institutions that are parties to the loan agreement. Unless, under the terms of the loan or other indebtedness, the HIGH INCOME FUND has direct recourse against the corporate borrower, the fund may have to rely on the agent bank or other financial intermediary to apply appropriate credit remedies against a corporate borrower.

A financial institution's employment as agent bank might be terminated in the event that it fails to observe a requisite standard of care or becomes insolvent. A successor agent bank would generally be appointed to replace the terminated agent bank, and assets held by the agent bank under the loan agreement should remain available to holders of such indebtedness. However, if assets held by the agent bank for the benefit of the HIGH INCOME FUND were determined to be subject to the claims of the agent bank's general creditors, the fund might incur certain costs and delays in realizing payment on a loan or loan participation and could suffer a loss of principal and/or interest. In situations involving other interposed financial institutions (e.g., an insurance company or governmental agency) similar risks may arise.

Purchasers of loans and other forms of direct indebtedness depend primarily upon the creditworthiness of the corporate borrower for payment of principal and interest. If the HIGH INCOME FUND does not receive scheduled interest or principal payments on such indebtedness, the fund's share price and yield could be adversely affected. Loans that are fully secured offer the HIGH INCOME FUND more protection than an unsecured loan in the event of non-payment of scheduled interest or principal. However, there is no assurance that the liquidation of collateral from a secured loan would satisfy the corporate borrower's obligation, or that the collateral can be liquidated.

The HIGH INCOME FUND may invest in loan participations with credit quality comparable to that of issuers of its securities investments (i.e., below investment grade). Indebtedness of companies whose creditworthiness is poor involves substantially greater risks, and may be highly speculative. Some companies may never pay off their indebtedness, or may pay only a small fraction of the amount owed. Consequently, when investing in indebtedness of companies with poor credit, the HIGH INCOME FUND bears a substantial risk of losing the entire amount invested.

Loans and other types of direct indebtedness may not be readily marketable and may be subject to restrictions on resale. In some cases, negotiations involved in disposing of indebtedness may require weeks to complete. Consequently, some indebtedness may be difficult or impossible to dispose of readily at what the HIGH INCOME FUND's Investment Adviser believes to be a fair price. In addition, valuation of illiquid indebtedness involves a greater degree of judgment in determining the HIGH INCOME FUND's net asset value than if that value were based on available market quotations, and could result in significant variations in the fund's daily share price. At the same time, some loan interests are traded among certain financial institutions and, accordingly, may be deemed liquid. As the market for different types of indebtedness develops, the liquidity of these instruments is expected to improve. In addition, the HIGH INCOME FUND currently intends to treat indebtedness for which there is no readily available market as illiquid for purposes of the fund's limitation on illiquid investments.

Investments in loans through a direct assignment of the financial institution's interests with respect to the loan may involve additional risks to the HIGH INCOME FUND. For example, if a loan is foreclosed, the HIGH INCOME FUND could become part owner of any collateral, and would bear the costs and liabilities associated with owning and disposing of the collateral. In addition, it is conceivable that under emerging legal theories of lender liability, the HIGH INCOME FUND could be held liable as co-lender. It is unclear whether loans and other forms of direct indebtedness offer securities law protections against fraud and misrepresentation.

SWAP AGREEMENTS

Each fund, except the CASH RESERVES FUND, may enter into interest rate, credit default, index and currency exchange rate swap agreements for hedging purposes in attempts to obtain a particular desired return at a lower cost to the fund than if the fund had invested directly in an instrument that yielded the desired return, and to seek to increase the fund's total return. The BOND, DIVERSIFIED INCOME and HIGH INCOME FUNDS may also enter into special interest rate swap arrangements such as caps, floors and collars for both hedging purposes and to seek to increase total return. The HIGH INCOME FUND typically uses interest rate swaps to shorten the effective duration of their portfolios.

Swap agreements are contracts entered into by institutional investors for periods ranging from a few weeks to more than one year. In a standard "swap" transaction, two parties agree to exchange the returns (or differentials in rates of return) earned or realized on particular pre-determined investments or instruments. The gross returns to be exchanged or "swapped" between the parties are calculated with respect to a "notional amount" (i.e., the return on or increase in value of a particular dollar amount invested at a particular interest rate), in a particular foreign currency, or in a "basket" of securities representing a particular index. The "notional amount" of the swap agreement is only a fictive basis on which to calculate the obligations the parties to a swap agreement have agreed to exchange. A fund's obligations (or rights) under a swap agreement are equal only to the amount to be paid or received under the agreement based on the relative values of the positions held by each party (the "net amount"). A fund's obligations under a swap agreement are accrued daily (offset against any amounts owing to the fund) and any accrued but unpaid net amounts owed to a swap counterparty are covered by the maintenance of a segregated assets.

Interest rate swaps involve the exchange by the funds with another party of their respective commitments to pay or receive interest, such as an exchange of fixed rate payments for floating rate payments. Credit default swaps involve a contract by the funds with another party to transfer the credit exposure of a specific commitment between the parties. Currency swaps involve the exchange by a fund with another party of their respective rights to make or receive payments in specified currencies. The purchase of an interest rate cap entitles the purchaser to receive from the seller of the cap payments of interest on a notional amount equal to the amount by which a specified index exceeds a stated

interest rate. The purchase of an interest rate floor entitles the purchaser to receive from the seller of the floor payments of interest on a notional amount equal to the amount by which a specified index falls below a stated interest rate. An interest rate collar is the combination of a cap and a floor that preserves a certain return within a stated range of interest rates. Since interest rate swaps, currency swaps and interest rate caps, floors and collars are individually negotiated, the funds expect to achieve an acceptable degree of correlation between their portfolio investments and their interest rate or currency swap positions entered into for hedging purposes.

The HIGH INCOME FUND only enters into interest rate swaps on a net basis, which means the two payment streams are netted out, with the fund receiving or paying, as the case may be, only the net amount of the two payments. Interest rate swaps do not involve the delivery of securities, or underlying assets or principal. Accordingly, the risk of loss with respect to interest rate swaps is limited to the net amount of interest payments that the fund is contractually obligated to make. If the other party to an interest rate swap defaults, the fund's risk of loss consists of the net amount of interest payments that the fund is contractually entitled to receive. In contrast, currency swaps usually involve the delivery of the entire principal value of one designated currency in exchange for the other designated currency. Therefore, the entire principal value of a currency swap is subject to the risk that the other party to the swap will default on its contractual delivery obligations. The Trust maintains in a segregated account with its custodian, cash or liquid securities equal to the net amount, if any, of the excess of each fund's obligations over its entitlements with respect to swap transactions. No fund enters into swap transactions unless the unsecured commercial paper, senior debt or claims paying ability of the other party is considered investment grade by such fund's Investment Adviser.

The use of interest rate, credit default and currency swaps (including caps, floors and collars) is a highly specialized activity which involves investment techniques and risks different from those associated with traditional portfolio securities activities. If a fund's Investment Adviser is incorrect in its forecasts of market values, interest rates and currency exchange rates, the investment performance of each of the funds, except the CASH RESERVES FUND, would be less favorable than it would have been if this investment technique were not used.

In as much as swaps are entered into for good faith hedging purposes or are offset by segregated assets, no funds' Investment Adviser believes that swaps constitute senior securities as defined in the 1933 Act, and, accordingly, will not treat swaps as being subject to such fund's borrowing restrictions. An amount of cash or liquid securities having an aggregate value at least equal to the entire amount of the payment stream payable by the fund will be maintained in a segregated account by the fund's custodian. A fund will not enter into any interest rate swap (including caps, floors and collars), credit default swaps or currency swap unless the credit quality of the unsecured senior debt or the claim paying ability of the other party thereto is considered to be investment grade by the fund's Investment Adviser. If there is a default by the other party to such a transaction, the fund will have contractual remedies pursuant to the agreement related to the transaction. The swap market has grown substantially in recent years with a large number of banks and investment banking firms acting both as principals and as agents utilizing standardized swap documentation. As a result, the swap market has become relatively liquid compared with the markets for other similar instruments which are traded in the interbank market. Nevertheless, the staff of the SEC takes the position that currency swaps are illiquid investments subject to the funds' 15% limitation on such investments.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS

Each fund, except the CASH RESERVES FUND, may purchase and sell futures contracts and purchase and write options on futures contracts. These funds may purchase and sell futures contracts based on various securities (such as U.S. Government securities), securities indices, foreign currencies and other financial instruments and indices. A fund will engage in futures or related options transactions only for bona fide hedging purposes as defined below or for purposes of seeking to increase total returns to the extent permitted by regulations of the Commodity Futures Trading Commission (the "CFTC"). All futures contracts entered into by a fund are traded on U.S. exchanges or boards of trade that are licensed and regulated by the CFTC or on foreign exchanges.

Futures Contracts. A futures contract may generally be described as an agreement between two parties to buy and sell particular financial instruments for an agreed price during a designated month (or to deliver the final cash settlement price, in the case of a contract relating to an index or otherwise not calling for physical delivery at the end of trading in the contract).

When interest rates are rising or securities prices are falling, a fund can seek through the sale of futures contracts to offset a decline in the value of its current portfolio securities. When rates are falling or prices are rising, a fund, through the purchase of futures contracts, can attempt to secure better rates or prices than might later be available in the market when it effects anticipated purchases. Similarly, a fund can sell futures contracts on a specified currency to protect against a decline in the value of such currency and its portfolio securities which are denominated in such currency. Funds can purchase futures contracts on foreign currency to fix the price in U.S. dollars of a security denominated in such currency that such fund has acquired or expects to acquire.

Positions taken in the futures markets are not normally held to maturity, but are instead liquidated through offsetting transactions which may result in a profit or a loss. While a fund's futures contracts on securities or currency will usually be liquidated in this manner, it may instead make or take delivery of the underlying securities or currency whenever it appears economically advantageous for the fund to do so. A clearing corporation (associated with the exchange on which futures on a security or currency are traded) guarantees that, if still open, the sale or purchase will be performed on the settlement date.

Hedging Strategies. Hedging by use of futures contracts seeks to establish more certainly (than would otherwise be possible) the effective price, rate of return or currency exchange rate on securities that a fund owns or proposes to acquire. A fund may, for example, take a "short" position in the futures market by selling futures contracts in order to hedge against an anticipated rise in interest rates or a decline in market prices or foreign currency rates that would adversely affect the U.S. dollar value of the fund's portfolio securities. Such futures contracts may include contracts for the future delivery of securities held by a fund or securities with characteristics similar to those of the fund's portfolio securities. Similarly, a fund may sell futures contracts on a currency in which its portfolio securities are denominated or in one currency to hedge against fluctuations in the value of securities denominated in a different currency if there is an established historical pattern of correlation between the two currencies.

If, in the opinion of the Investment Adviser, there is a sufficient degree of correlation between price trends for a fund's portfolio securities and futures contracts based on other financial instruments, securities indices or other indices, the fund may also enter into such futures contracts as part of its hedging strategy. Although under some circumstances prices of securities in a fund's portfolio may be more or less volatile than prices of such futures contracts, the Investment Adviser will attempt to estimate the extent of this difference in volatility based on historical patterns and to compensate for it by having the fund enter into a greater or lesser number of futures contracts or by attempting to achieve only a partial hedge against price changes affecting the fund's securities portfolio. When hedging of this character is successful, any depreciation in the value of portfolio securities will substantially be offset by appreciation in the value of the futures position. On the other hand, any unanticipated appreciation in the value of the fund's portfolio securities would be substantially offset by a decline in the value of the futures position.

On other occasions, a fund may take a "long" position by purchasing such futures contracts. This would be done, for example, when a fund anticipates the subsequent purchase of particular securities when it has the necessary cash, but expects the prices or currency exchange rates then available in the applicable market to be less favorable than prices or rates that are currently available.

Options on Futures Contracts. The acquisition of put and call options on futures contracts will give a fund the right (but not the obligation) for a specified price, to sell or to purchase, respectively, the underlying futures contract at any time during the option period. As the purchaser of an option on a futures contract, a fund obtains the benefit of the futures position if prices move in a favorable direction but limits its risk of loss in the event of an unfavorable price movement to the loss of the premium and transaction costs.

The writing of a call option on a futures contract generates a premium which may partially offset a decline in the value of a fund's assets. By writing a call option, a fund becomes obligated, in exchange for the premium, to sell a futures contract which may have a value higher then the exercise price. Conversely, the writing of a put option on a futures contract generates a premium, which may partially offset an increase in the price of securities that the fund intends to purchase. However, a fund becomes obligated to purchase a futures contract, which may have a value lower than the exercise price. Thus, the loss incurred by the fund in writing options on futures is potentially unlimited and may exceed the amount of the premium received. A fund will incur transaction costs in connection with the writing of options on futures.

The holder or writer of an option on a futures contract may terminate its position by selling or purchasing an offsetting option on the same series. There is no guarantee that such closing transactions can be effected. A fund's ability to establish and close out positions on such options will be subject to the development and maintenance of a liquid market.

Other Considerations. Where permitted, a fund will engage in futures transactions and in related options transactions for hedging purposes or to seek to increase total return. A fund will determine that the price fluctuations in the futures contracts and options on futures used for hedging purposes are substantially related to price fluctuations in securities held by the fund or which it expects to purchase. Except as stated below, each fund's futures transactions will be entered into for traditional hedging purposes, that is to say, futures contracts will be used to protect against a decline in the price of securities (or the currency in which they are denominated) that the fund owns, or futures contracts will be purchased to protect the fund against an increase in the price of securities (or the currency in which they are denominated) it intends to purchase. As evidence of this hedging intent, each fund expects that on most of the occasions on which it takes a long futures or option position (involving the purchase of a futures contract), the fund will have purchased, or will be in the process of purchasing equivalent amounts of related securities (or assets denominated in the related currency) in the cash market at the time when the futures or option position is closed out. However, in particular cases, when it is economically advantageous for a fund to do so, a long futures position may be terminated or an option may expire without the corresponding purchase of securities or other assets.

The CFTC, a federal agency, regulates trading activity in futures contracts and related options contracts pursuant to the Commodity Exchange Act, as amended (the "CEA"). The CFTC requires the registration of a Commodity Pool Operator ("CPO"), which is defined as any person engaged in a business which is of the nature of an investment trust, syndicate or a similar form of enterprise, and who, in connection therewith, solicits, accepts or receives from others funds, securities or property for the purpose of trading in a commodity for future delivery on or subject to the rules of any contract market. The CFTC has adopted Rule 4.5, which provides an exclusion from the definition of commodity pool operator for any registered investment company which files a notice of eligibility. The funds, which may invest in futures transactions and related options transactions, have filed a notice of eligibility claiming exclusion from the status of CPO and, therefore, are not subject to registration or regulation as a CPO under the CEA.

As permitted, each fund will engage in transactions in futures contracts and in related options transactions only to the extent such transactions are consistent with the requirements of the Internal Revenue Code of 1986, as amended (the "Code"), for maintaining its qualification as a regulated investment company for federal income tax purposes (see the "Distributions and Taxes" section, below).

Transactions in futures contracts and options on futures involve brokerage costs, require margin deposits and, in the case of contracts and options obligating a fund to purchase securities or currencies, require the fund to segregate with its custodian cash or liquid securities in an amount equal to the underlying value of such contracts and options.

While transactions in futures contracts and options on futures may reduce certain risks, such transactions themselves entail certain other risks. Thus, unanticipated changes in interest rates, securities prices or currency exchange rates may result in a poorer overall performance for a fund than if it had not entered into any futures contracts or options

transactions. In the event of an imperfect correlation between a futures position and portfolio position which is intended to be protected, the desired protection may not be obtained and a fund may be exposed to risk of loss.

Perfect correlation between a fund's futures positions and portfolio positions may be difficult to achieve. The only futures contracts available to hedge a fund's portfolio are various futures on U.S. Government securities, securities indices and foreign currencies. In addition, it is not possible for a fund to hedge fully or perfectly against currency fluctuations affecting the value of securities denominated in foreign currencies because the value of such securities is likely to fluctuate as a result of independent factors not related to currency fluctuations.

CERTAIN BOND FUND PRACTICES

The BOND, HIGH INCOME and DIVERSIFIED INCOME FUNDS (collectively, the "bond funds") invest a significant portion of their assets in debt securities. As stated in the prospectus, the BOND and DIVERSIFIED INCOME FUNDS will emphasize investment grade, primarily intermediate term securities. If an investment grade security is downgraded by the rating agencies or otherwise falls below the investment quality standards stated in the prospectus, the fund's Investment Adviser will retain that instrument only if the fund's Investment Adviser believes it is in the best interest of the fund. The HIGH INCOME FUND may invest all of its assets in non-investment grade securities. See the "Lower-Rated Corporate Debt Securities" section, below, for a description of these securities and their attendant risks.

The bond funds may also make use of derivatives, including but not limited to options, futures and swaps to manage risks and returns, including the risk of fluctuating interest rates. These instruments will be used to control risk and obtain additional income and not with a view toward speculation. The BOND and DIVERSIFIED INCOME FUNDS will invest only in futures and options which are exchange-traded or sold over-the-counter. The HIGH INCOME FUND may invest in any non-U.S. futures and options.

In the debt securities market, purchases of some issues are occasionally made under firm (forward) commitment agreements. The purchase of securities under such agreements can involve risk of loss due to changes in the market rate of interest between the commitment date and the settlement date. As a matter of operating policy, no bond fund will commit itself to forward commitment agreements in an amount in excess of 25% of total assets and will not engage in such agreements for leveraging purposes. For purposes of this limitation, forward commitment agreements are defined as those agreements involving more than five business days between the commitment date and the settlement date, but do not include mortgage backed security "dollar rolls."

LOWER-RATED CORPORATE DEBT SECURITIES

As described in the prospectus, each fund, except the CASH RESERVES FUND, may make certain investments including corporate debt obligations that are unrated or rated in the lower rating categories (i.e., ratings of BB or lower by Standard & Poor's or Ba or lower by Moody's). Bonds rated BB or Ba or below by Standard & Poor's or Moody's (or comparable unrated securities) are commonly referred to as "lower-rated" securities or as "junk bonds" and are considered speculative and may be questionable as to principal and interest payments. In some cases, such bonds may be highly speculative, have poor prospects for reaching investment standing and be in default. As a result, investment in such bonds will entail greater speculative risks than those associated with investment in investment-grade bonds (i.e., bonds rated AAA, AA, A or BBB by Standard & Poor's or Aaa, Aa, A or Baa by Moody's).

An economic downturn could severely affect the ability of highly leveraged issuers of junk bonds to service their debt obligations or to repay their obligations upon maturity. Factors having an adverse impact on the market value of lower rated securities will have an adverse effect on a fund's NAV to the extent it invests in such securities. In addition, a fund may incur additional expenses to the extent it is required to seek recovery upon a default in payment of principal or interest on its portfolio holdings.

The secondary market for junk bond securities, which is concentrated in relatively few market makers, may not be as liquid as the secondary market for more highly rated securities, a factor which may have an adverse effect on a fund's ability to dispose of a particular security when necessary to meet its liquidity needs. Under adverse market or economic conditions, the secondary market for junk bond securities could contract further, independent of any specific adverse changes in the condition of a particular issuer. As a result, a fund's Investment Adviser could find it more difficult to sell these securities or may be able to sell the securities only at prices lower than if such securities were widely traded. Prices realized upon the sale of such lower rated or unrated securities, under these circumstances, may be less than the prices used in calculating a fund's NAV.

Since investors generally perceive that there are greater risks associated with lower-rated debt securities, the yields and prices of such securities may tend to fluctuate more than those for higher rated securities. In the lower quality segments of the fixed-income securities market, changes in perceptions of issuers' creditworthiness tend to occur more frequently and in a more pronounced manner than do changes in higher quality segments of the fixed-income securities market resulting in greater yield and price volatility.

Another factor which causes fluctuations in the prices of fixed-income securities is the supply and demand for similarly rated securities. In addition, the prices of fixed-income securities fluctuate in response to the general level of interest rates. Fluctuations in the prices of portfolio securities subsequent to their acquisition will not affect cash income from such securities but will be reflected in a fund's NAV.

Lower-rated (and comparable non-rated) securities tend to offer higher yields than higher-rated securities with the same maturities because the historical financial condition of the issuers of such securities may not have been as strong as that of other issuers. Since lower rated securities generally involve greater risks of loss of income and principal than higher-rated securities, investors should consider carefully the relative risks associated with investment in securities which carry lower ratings and in comparable non-rated securities. In addition to the risk of default, there are the related costs of recovery on defaulted issues. A fund's Investment Adviser will attempt to reduce these risks through diversification of these funds' portfolios and by analysis of each issuer and its ability to make timely payments of income and principal, as well as broad economic trends in corporate developments.

OTHER DEBT SECURITIES

Custody Receipts. All of the funds may also acquire securities issued or guaranteed as to principal and interest by the U.S. Government, its agencies, authorities or instrumentalities in the form of custody receipts. Such receipts evidence ownership of future interest payments, principal payments or both on certain notes or bonds issued by the U.S. Government, its agencies, authorities or instrumentalities. For certain securities law purposes, custody receipts are not considered obligations of the U.S. Government.

Zero Coupon, Deferred Interest, Pay-in-Kind and Capital Appreciation Bonds. The
BOND, DIVERSIFIED INCOME, HIGH INCOME and MID CAP GROWTH FUNDS may invest in zero coupon bonds as well as in capital appreciation bonds ("CABs"), deferred interest and pay-in-kind bonds. Zero coupon, deferred interest, pay-in-kind and CABs are debt obligations which are issued at a significant discount from face value. The original discount approximates the total amount of interest the bonds will accrue and compound over the period until maturity or the first interest accrual date at a rate of interest reflecting the market rate of the security at the time of issuance.

Zero coupon bonds are debt obligations that do not entitle the holder to any periodic payments of interest prior to maturity or provide for a specified cash payment date when the bonds begin paying current interest. As a result, zero coupon bonds are generally issued and traded at a significant discount from their face value. The discount approximates the present value amount of interest the bonds would have accrued and compounded over the period until maturity. CABs are distinct from traditional zero coupon bonds because the investment return is considered to be in the form of compounded interest rather than accreted original issue discount. For this reason, the initial principal

amount of a CAB would be counted against a municipal issuer's statutory debt limit, rather than the total par value, as is the case for a traditional zero coupon bond.

Zero coupon bonds benefit the issuer by mitigating its initial need for cash to meet debt service, but generally provide a higher rate of return to compensate investors for the deferment of cash interest or principal payments. Such securities are often issued by companies that may not have the capacity to pay current interest and so may be considered to have more risk than current interest-bearing securities. In addition, the market price of zero coupon bonds generally is more volatile than the market prices of securities that provide for the periodic payment of interest. The market prices of zero coupon bonds are likely to fluctuate more in response to changes in interest rates than those of interest-bearing securities having similar maturities and credit quality.

Zero coupon bonds carry the additional risk that, unlike securities that provide for the periodic payment of interest to maturity, the fund will realize no cash until a specified future payment date unless a portion of such securities is sold. If the issuer of such securities defaults, the fund may obtain no return at all on their investment. In addition, the fund's investment in zero coupon bonds may require it to sell certain of its portfolio securities to generate sufficient cash to satisfy certain income distribution requirements.

While zero coupon bonds do not require the periodic payment of interest, deferred interest bonds generally provide for a period of delay before the regular payment of interest begins. Although this period of delay is different for each deferred interest bond, a typical period is approximately one-third of the bond's term to maturity. Pay-in-kind securities are securities that have interest payable by the delivery of additional securities. Such investments benefit the issuer by mitigating its initial need for cash to meet debt service, but some also provide a higher rate of return to attract investors who are willing to defer receipt of such cash. Such investments experience greater volatility in market value due to changes in interest rates than debt obligations which provide for regular payments of interest. A fund will accrue income on such investments for tax and accounting purposes, as required, which is distributable to shareholders and which, because no cash is received at the time of accrual, may require the liquidation of other portfolio securities to satisfy the fund's distribution obligations.

Structured Securities. The BOND, HIGH INCOME and DIVERSIFIED INCOME FUNDS may invest in structured securities. The value of the principal of and/or interest on such securities is determined by reference to changes in the value of specific currencies, interest rates, commodities, indices or other financial indicators (the "Reference") or the relative change in two or more References. The interest rate or the principal amount payable upon maturity or redemption may be increased or decreased depending upon changes in the applicable Reference. The terms of the structured securities may provide that in certain circumstances no principal is due at maturity and, therefore, may result in the loss of the fund's investment. Structured securities may be positively or negatively indexed, so that appreciation of the Reference may produce an increase or decrease in the interest rate or value of the security at maturity. In addition, changes in interest rates or the value of the security at maturity may be a multiple of changes in the value of the Reference. Consequently, structured securities may entail a greater degree of market risk than other types of fixed-income securities. Structured securities may also be more volatile, less liquid and more difficult to accurately price than less complex fixed-income investments.

FOREIGN GOVERNMENT SECURITIES

All of the funds may invest in debt obligations of foreign governments and governmental agencies, including those of countries with emerging economies and/or securities markets. Investment in sovereign debt obligations involves special risks not present in debt obligations of corporate issuers. The issuer of the debt or the governmental authorities that control the repayment of the debt may be unable or unwilling to repay principal or interest when due in accordance with the terms of such debt, and the funds may have limited recourse in the event of a default. Periods of economic uncertainty may result in the volatility of market prices of sovereign debt, and in turn the fund's NAV, to a greater extent than the volatility inherent in debt obligations of U.S. issuers. A sovereign debtor's willingness or ability to repay principal and pay interest in a timely manner may be affected by, among other factors, its cash flow situation, the

extent of its foreign currency reserves, the availability of sufficient foreign exchange on the date a payment is due, the relative size of the debt service burden to the economy as a whole, the sovereign debtor's policy toward principal international lenders and the political constraints to which a sovereign debtor may be subject.

CONVERTIBLE SECURITIES

Each fund, except the CASH RESERVES FUND, may each invest in convertible securities. Convertible securities may include corporate notes or preferred stock but are ordinarily a long-term debt obligation of the issuer convertible at a stated conversion rate into common stock of the issuer. As with all debt and income-bearing securities, the market value of convertible securities tends to decline as interest rates increase and, conversely, to increase as interest rates decline. Convertible securities generally offer lower interest or dividend yields than non-convertible securities of similar quality. However, when the market price of the common stock underlying a convertible security exceeds the conversion price, the price of the convertible security tends to reflect the value of the underlying common stock. As the market price of the underlying common stock declines, the convertible security tends to trade increasingly on a yield basis, and thus may not decline in price to the same extent as the underlying common stock. Convertible securities rank senior to common stocks in an issuer's capital structure and are consequently of higher quality and entail less risk than the issuer's common stock. In evaluating a convertible security, a fund's Investment Adviser gives primary emphasis to the attractiveness of the underlying common stock. The convertible debt securities in which the HIGH INCOME FUND invests are not subject to any minimum rating criteria. The convertible debt securities in which any other fund may invest are subject to the same rating criteria as that fund's investments in non-convertible debt securities. Convertible debt securities, the market yields of which are substantially below prevailing yields on non-convertible debt securities of comparable quality and maturity, are treated as equity securities for the purposes of a fund's investment policies or restrictions.

REPURCHASE AGREEMENTS

Each fund may enter into repurchase agreements. In a repurchase agreement, a security is purchased for a relatively short period (usually not more than seven days) subject to the obligation to sell it back to the seller at a fixed time and price plus accrued interest. The funds will enter into repurchase agreements only with member banks of the Federal Reserve System, U.S. Central Credit Union and with "primary dealers" in U.S. Government securities. A fund's Investment Adviser will continuously monitor the creditworthiness of the parties with whom the funds enter into repurchase agreements.

The Trust has established a procedure providing that the securities serving as collateral for each repurchase agreement must be delivered to the Trust's custodian either physically or in book-entry form and that the collateral must be marked to market daily to ensure that each repurchase agreement is fully collateralized at all times. In the event of bankruptcy or other default by a seller of a repurchase agreement, a fund could experience delays in liquidating the underlying securities during the period in which the fund seeks to enforce its rights thereto, possible subnormal levels of income, declines in value of the underlying securities or lack of access to income during this period and the expense of enforcing its rights.

REVERSE REPURCHASE AGREEMENTS

Each fund may also enter into reverse repurchase agreements which involve the sale of U.S. Government securities held in its portfolio to a bank with an agreement that the fund will buy back the securities at a fixed future date at a fixed price plus an agreed amount of "interest" which may be reflected in the repurchase price. Reverse repurchase agreements are considered to be borrowings by a fund entering into them. Reverse repurchase agreements involve the risk that the market value of securities purchased by a fund with proceeds of the transaction may decline below the repurchase price of the securities sold by the fund which it is obligated to repurchase. A fund that has entered into a reverse repurchase agreement will also continue to be subject to the risk of a decline in the market value of the securities sold under the agreements because it will reacquire those securities upon effecting their repurchase. To

minimize various risks associated with reverse repurchase agreements, each fund will establish and maintain with the Trust's custodian a separate account consisting of liquid securities, of any type or maturity, in an amount at least equal to the repurchase prices of the securities (plus any accrued interest thereon) under such agreements. No fund will enter into reverse repurchase agreements and other borrowings (except from banks as a temporary measure for extraordinary emergency purposes) in amounts in excess of 30% of the fund's total assets (including the amount borrowed) taken at market value. No fund will use leverage to attempt to increase income. No fund will purchase securities while outstanding borrowings exceed 5% of the fund's total assets. Each fund will enter into reverse repurchase agreements only with federally insured banks which are approved in advance as being creditworthy by the Board. Under procedures established by the Board, a fund's Investment Adviser will monitor the creditworthiness of the banks involved.

U.S. GOVERNMENT SECURITIES

Each fund may purchase U.S. Government securities. U.S. Government securities are obligations issued or guaranteed by the U.S. Government, its agencies, authorities or instrumentalities.

Certain U.S. Government securities, including U.S. Treasury bills, notes and bonds, and Government National Mortgage Association certificates ("Ginnie Maes"), are supported by the full faith and credit of the U.S. Certain other U.S. Government securities, issued or guaranteed by Federal agencies or government sponsored enterprises, are not supported by the full faith and credit of the U.S. Government, but may be supported by the right of the issuer to borrow from the U.S. Treasury. These securities include obligations of the Federal Home Loan Mortgage Corporation ("Freddie Macs"), and obligations supported by the credit of the instrumentality, such as Federal National Mortgage Association Bonds ("Fannie Maes"). No assurance can be given that the U.S. Government will provide financial support to such Federal agencies, authorities, instrumentalities and government sponsored enterprises in the future. U.S. Government securities may also include zero coupon bonds.

Ginnie Maes, Freddie Macs and Fannie Maes are mortgage-backed securities which provide monthly payments which are, in effect, a "pass-through" of the monthly interest and principal payments (including any prepayments) made by individual borrowers on the pooled mortgage loans. Collateralized mortgage obligations ("CMOs") in which a fund may invest are securities issued by a corporation or trust or a U.S. Government instrumentality that are collateralized by a portfolio of mortgages or mortgage-backed securities. Mortgage-backed securities may be less effective than traditional debt obligations of similar maturity at maintaining yields during periods of declining interest rates (see the "Mortgage-Backed and Asset-Backed Securities" section, below).

Each fund may invest in separately traded principal and interest components of securities guaranteed or issued by the U.S. Treasury if such components are traded independently under the Separate Trading of Registered Interest and Principal of Securities program ("STRIPS").

Each fund may acquire securities issued or guaranteed as to principal and interest by the U.S. Government, its agencies, authorities or instrumentalities in the form of custody receipts. Such receipts evidence ownership of future interest payments, principal payments or both on certain notes or bonds issued by the U.S. Government, its agencies, authorities or instrumentalities. For certain securities law purposes, custody receipts are not considered obligations of the U.S. Government.

FORWARD COMMITMENT AND WHEN-ISSUED SECURITIES

Each fund may purchase securities on a when-issued or forward commitment basis. "When-issued" refers to securities whose terms are specified and for which a market exists, but which have not been issued. Each fund will engage in when-issued transactions with respect to securities purchased for its portfolio in order to obtain what is considered to be an advantageous price and yield at the time of the transaction. For when-issued transactions, no payment is made

until delivery is due, often a month or more after the purchase. In a forward commitment transaction, a fund contracts to purchase securities for a fixed price at a future date beyond customary settlement time.

When a fund engages in forward commitment and when-issued transactions, it relies on the seller to consummate the transaction. The failure of the issuer or seller to consummate the transaction may result in a fund's losing the opportunity to obtain a price and yield considered to be advantageous. The purchase of securities on a when-issued or forward commitment basis also involves a risk of loss if the value of the security to be purchased declines prior to the settlement date.

On the date a fund enters into an agreement to purchase securities on a when-issued or forward commitment basis, the fund will segregate cash or liquid securities, of any type or maturity, equal in value to the fund's commitment. These assets will be valued daily at market, and additional cash or securities will be segregated to the extent that the total value of the assets in the account declines below the amount of the when-issued commitments. Alternatively, a fund may enter into offsetting contracts for the forward sale of other securities that it owns.

MORTGAGE-BACKED AND ASSET-BACKED SECURITIES

The BOND, HIGH INCOME, DIVERSIFIED INCOME and LARGE CAP VALUE FUNDS may invest in mortgage-backed securities, which represent direct or indirect participation in, or are collateralized by and payable from, fixed rate or variable rate mortgage loans secured by real property. These funds may also invest in asset-backed securities, which represent participations in, or are secured by and payable from, assets such as motor vehicle installment sales, installment loan contracts, leases of various types of real and personal property, receivables from revolving credit (i.e., credit card) agreements and other categories of receivables. Such assets are securitized though the use of trusts and special purpose corporations. Payments or distributions of principal and interest may be guaranteed up to certain amounts and for a certain time period by a letter of credit or a pool insurance policy issued by a financial institution unaffiliated with the Trust, or other credit enhancements may be present.

Mortgage-backed and asset-backed securities are often subject to more rapid repayment than their stated maturity date would indicate as a result of the pass-through of prepayments of principal on the underlying loans. A fund's ability to maintain positions in such securities will be affected by reductions in the principal amount of such securities resulting from prepayments, and its ability to reinvest the returns of principal at comparable yields is subject to generally prevailing interest rates at that time. To the extent that a fund invests in mortgage-backed and asset-backed securities, the values of its portfolio securities will vary with changes in market interest rates generally and the differentials in yields among various kinds of U.S. Government securities and other mortgage-backed and asset-backed securities.

Asset-backed securities present certain additional risks that are not presented by mortgage-backed securities because asset-backed securities generally do not have the benefit of a security interest in collateral that is comparable to mortgage assets. Credit card receivables are generally unsecured and the debtors on such receivables are entitled to the protection of a number of state and federal consumer credit laws, many of which give such debtors the right to set-off certain amounts owed on the credit cards, thereby reducing the balance due. Automobile receivables generally are secured, but by automobiles (normally a depreciating asset) rather than residential real property. Most issuers of automobile receivables permit the loan servicers to retain possession of the underlying obligations. If the servicer were to sell these obligations to another party, there is a risk that the purchaser would secure an interest superior to that of the holders of the asset-backed securities. In addition, because of the large number of vehicles involved in a typical issuance and technical requirements under state laws, the trustee for the holders of the automobile receivables may not have a proper security interest in the underlying automobiles. Therefore, there is the possibility that, in some cases, recoveries on repossessed collateral may not be available to support payments on these securities.

The BOND FUND may invest in mortgage-backed and asset-backed securities that represent mortgage, commercial or consumer loans originated by financial institutions. To the extent permitted by law and available in the market, such investments may constitute a significant portion of such fund's investments. Subject to the appropriate regulatory

approvals, the BOND FUND may purchase securities issued by pools that are structured, serviced, or otherwise supported by MCA or its affiliates.

OTHER SECURITIES RELATED TO MORTGAGES

Mortgage Pass-Through Securities. The BOND, DIVERSIFIED INCOME and HIGH INCOME FUNDS may invest in mortgage pass-through securities. Mortgage pass-through securities are securities representing interests in "pools" of mortgage loans. Monthly payments of interest and principal by the individual borrowers on mortgages are passed through to the holders of the securities (net of fees paid to the issuer or guarantor of the securities) as the mortgages in the underlying mortgage pools are paid off. The average lives of mortgage pass-through securities are variable when issued because their average lives depend on prepayment rates. The average life of these securities is likely to be substantially shorter than their stated final maturity as a result of unscheduled principal prepayments. Prepayments on underlying mortgages result in a loss of anticipated interest, and all or part of a premium if any has been paid, and the actual yield (or total return) to the holder of a pass-through security may be different than the quoted yield on such security. Mortgage prepayments generally increase with falling interest rates and decrease with rising interest rates. Like other fixed income securities, when interest rates rise the value of a mortgage pass-though security generally will decline; however, when interest rates are declining, the value of mortgage pass-through securities with prepayment features may not increase as much as that of other fixed income securities.

Interests in pools of mortgage-related securities differ from other forms of debt securities, which normally provide for periodic payment of interest in fixed amounts with principal payments at maturity or specified call dates. Instead, these securities provide a monthly payment which consists of both interest and principal payments. In effect, these payments are a "pass-through" of the monthly payments made by the individual borrowers on their mortgage loans, net of any fees paid to the issuer or guarantor of such securities. Additional payments are caused by prepayments of principal resulting from the sale, refinancing or foreclosure of the underlying property, net of fees or costs which may be incurred. Some mortgage pass-through securities (such as securities issued by the Government National Mortgage Association ("GNMA")), are described as "modified pass-through." These securities entitle the holder to receive all interests and principal payments owned on the mortgages in the mortgage pool, net of certain fees, at the scheduled payment dates regardless of whether the mortgagor actually makes the payment.

The principal governmental guarantor of mortgage pass-through securities is GNMA. GNMA is a wholly owned U.S. Government corporation within the Department of Housing and Urban Development. GNMA is authorized to guarantee, with the full faith and credit of the U.S. Government, the timely payment of principal and interest on securities issued by institutions approved by GNMA (such as savings and loan institutions, commercial banks and mortgage bankers) and backed by pools of Federal Housing Administration-insured or Veteran's Administration (VA)-guaranteed mortgages. These guarantees, however, do not apply to the market value or yield of mortgage pass-through securities. GNMA securities are often purchased at a premium over the maturity value of the underlying mortgages. This premium is not guaranteed and will be lost if prepayment occurs.

Government-related guarantors (i.e., whose guarantees are not backed by the full faith and credit of the U.S. Government) include the Federal National Mortgage Association ("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC"). FNMA is a government-sponsored corporation owned entirely by private stockholders. It is subject to general regulation by the Secretary of Housing and Urban Development. FNMA purchases conventional residential mortgages (i.e., mortgages not insured or guaranteed by any governmental agency) from a list of approved seller/servicers which include state and federally-chartered savings and loan associations, mutual savings banks, commercial banks, credit unions and mortgage bankers. Pass-through securities issued by FNMA are guaranteed as to timely payment by FNMA of principal and interest.

FHLMC was created by Congress in 1970 as a corporate instrumentality of the U.S. Government for the purpose of increasing the availability of mortgage credit for residential housing. FHLMC issues Participation Certificates ("PCs") which represent interest in conventional mortgages (i.e., not federally insured or guaranteed) from FHLMC's national

portfolio. FHLMC guarantees timely payment of interest and ultimate collection of principal regardless of the status of the underlying mortgage loans.

Credit unions, commercial banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers and other secondary market issuers also create pass-through pools of mortgage loans. Such issuers may also be the originators and/or servicers of the underlying mortgage-related securities. Pools created by such non-governmental issuers generally offer a higher rate of interest than government and government-related pools because there are no direct or indirect government or agency guarantees of payments in the former pools. However, timely payment of interest and principal of mortgage loans in these pools may be supported by various forms of insurance or guarantees, including individual loan, title, pool and hazard insurance and letters of credit. The insurance and guarantees are issued by governmental entities, private insurers and the mortgage poolers. There can be no assurance that the private insurers or guarantors can meet their obligations under the insurance policies or guarantee arrangements. The HIGH INCOME FUND may also buy mortgage-related securities without insurance or guarantees.

CMOs and Multiclass Pass-Through Securities. The BOND, DIVERSIFIED INCOME and HIGH INCOME FUNDS may invest a portion of their assets in CMOs, which are debt obligations collateralized by mortgage loans or mortgage pass-through securities. The following is a description of CMOs and types of CMOs but is not intended to be an exhaustive or exclusive list of each type of CMO a fund may invest in. Typically, CMOs are collateralized by certificates issued by GNMA, FNMA or FHLMC, but also may be collateralized by whole loans or private mortgage pass-through securities (such collateral collectively hereinafter referred to as "Mortgage Assets"). The BOND, DIVERSIFIED INCOME and HIGH INCOME FUNDS may also invest a portion of their assets in multiclass pass-through securities which are equity interests in a trust composed of Mortgage Assets. Unless the context indicates otherwise, all references herein to CMOs include multiclass pass-through securities. Payments of principal of and interest on the Mortgage Assets, and any reinvestment income thereon, provide the funds to pay debt service on the CMOs or make scheduled distributions on the multiclass pass-through securities. CMOs may be issued by agencies or instrumentalities of the United States government or by private originators of, or investors in, mortgage loans, including credit unions, savings and loan associations, mortgage banks, commercial banks, investment banks and special purpose subsidiaries of the foregoing. The issuer of a series of CMOs may elect to be treated as a Real Estate Mortgage Investment Conduit ("REMIC").

In a CMO, a series of bonds or certificates are usually issued in multiple classes with different maturities. Each class of CMOs, often referred to as a "tranche," is issued at a specific fixed or floating coupon rate and has a stated maturity or final distribution date. Principal prepayments on the Mortgage Assets may cause the CMOs to be retired substantially earlier than their stated maturities or final distribution dates, resulting in a loss of all or a part of the premium if any has been paid. Interest is paid or accrues on all classes of the CMOs on a monthly, quarterly or semiannual basis. The principal of and interest on the Mortgage Assets may be allocated among the several classes of a series of a CMO in innumerable ways. In a common structure, payments of principal, including any principal pre-payments, on the Mortgage Assets are applied to the classes of the series of a CMO in the order of their respective stated maturities or final distribution dates, so that no payment of principal will be made on any class of CMOs until all other classes having an earlier stated maturity or final distribution date have been paid in full. Certain CMOs may be stripped (securities which provide only the principal or interest factor of the underlying security). See the "-Stripped Mortgage-Backed Securities" subsection, below, for a discussion of the risks of investing in these stripped securities and of investing in classes consisting primarily of interest payments or principal payments.

The BOND, DIVERSIFIED INCOME and HIGH INCOME FUNDS may also invest in parallel pay CMOs and Planned Amortization Class CMOs ("PAC Bonds"). Parallel pay CMOs are structured to provide payments of principal on each payment date to more than one class. These simultaneous payments are taken into account in calculating the stated maturity date or final distribution date of each class, which, as with other CMO structures, must be retired by its stated maturity date or final distribution date, but may be retired earlier. PAC Bonds generally require payments of a specified amount of principal on each payment date. PAC Bonds are always parallel pay CMOs with the required principal payment on such securities having the highest priority after interest has been paid to all classes.

Stripped Mortgage-Backed Securities. The BOND, DIVERSIFIED INCOME and HIGH INCOME FUNDS may invest a portion of its assets in stripped mortgage-backed securities ("SMBS") which are derivative multiclass mortgage securities issued by agencies or instrumentalities of the U.S. Government or by private originators of, or investors in, mortgage loans, including savings and loan associations, mortgage banks, commercial banks and investment banks.

SMBS are usually structured with two classes that receive different proportions of the interest and principal distributions from a pool of Mortgage Assets. A common type of SMBS will have one class receiving some of the interest and most of the principal from the Mortgage Assets, while another class receives most of the interest and the remainder of the principal. In the most extreme case, one class will receive an "IO" (the right to receive all of the interest) while the other class will receive a "PO" (the right to receive all of the principal). The yield to maturity on an IO is extremely sensitive to the rate of principal payments (including prepayments) on the related underlying Mortgage Assets, and a rapid rate of principal payments may have a material adverse effect on such security's yield to maturity. If the underlying Mortgage Assets experience greater than anticipated prepayments of principal, the BOND, DIVERSIFIED INCOME and HIGH INCOME FUNDS may fail to fully recoup its initial investment in these securities. The market value of the class consisting primarily or entirely of principal payments generally is unusually volatile in response to changes in interest rates.

Mortgage Dollar Rolls. The BOND, DIVERSIFIED INCOME and HIGH INCOME FUNDS may enter into mortgage "dollar rolls" in which the fund sells securities for delivery in the current month and simultaneously contracts with the same counterparty to repurchase substantially similar (same type, coupon and maturity) but not identical securities on a specified future date. During the roll period, a fund loses the right to receive principal and interest paid on the securities sold. However, a fund would benefit to the extent of any difference between the price received for the securities sold and the lower forward price for the future purchase as well as from the receipt of any associated fee income plus interest earned on cash proceeds of the securities sold until the settlement date for the forward purchase. Unless such benefits exceed the income, capital appreciation and gain or loss due to mortgage prepayments that would have been realized on the securities sold as part of the mortgage dollar roll, the use of this technique will diminish the investment performance of a fund. Successful use of mortgage dollar rolls depends upon the Investment Adviser's ability to predict correctly interest rates and mortgage prepayments. There is no assurance that mortgage dollar rolls can be successfully employed. A fund will hold and maintain until the settlement date segregated cash or liquid assets in an amount equal to the forward purchase price. For financial reporting and tax purposes, each fund treats mortgage dollar rolls as two separate transactions; one involving the purchase of a security and a separate transaction involving a sale. These funds do not currently intend to enter into mortgage dollar rolls that are accounted for as a financing.

REAL ESTATE INVESTMENT TRUSTS

Each fund, except the CASH RESERVES FUND, may invest in shares of real estate investment trusts ("REITs"). REITs are pooled investment vehicles that invest primarily in income-producing real estate or real estate related loans or interests. REITs are generally classified as equity REITs, mortgage REITs or a combination of equity and mortgage REITs. Equity REITs invest the majority of their assets directly in real property and derive income primarily from the collection of rents. Equity REITs can also realize capital gains by selling properties that have appreciated in value. Mortgage REITs invest the majority of their assets in real estate mortgages and derive income from the collection of interest payments. REITs are not taxed on income distributed to shareholders provided they comply with several requirements of the Code. A fund will indirectly bear its proportionate share of any expenses paid by REITs in which it invests in addition to the expenses paid by a fund.

Investing in REITs involves certain unique risks. Equity REITs may be affected by changes in the value of the underlying property owned by such REITs, while mortgage REITs may be affected by the quality of any credit extended. REITs are dependent upon management skills, are not diversified (except to the extent the Code requires), and are subject to the risks inherent in the financing projects. REITs are subject to heavy cash flow dependency, default by borrowers, self-liquidation, and the possibilities of failing to qualify for the exemption from tax for

distributed income under the Code and failing to maintain their exemptions from the Investment Company Act of 1940, as amended (the "1940 Act"). REITs (especially mortgage REITS) are also subject to interest rate risk.

EXCHANGE TRADED FUNDS

Each fund may invest in exchange traded funds ("ETFs"), which are shares of publicly-traded unit investment trusts, open-end funds, or depositary receipts that seek to track the performance and dividend yield of specific indexes or companies in related industries. These indexes may be either broad-based, sector or international. ETF shareholders are generally subject to the same risks as holders of the underlying securities they are designed to track.

ETFs are also subject to certain additional risks, including (1) the risk that their prices may not correlate perfectly with changes in the prices of the underlying securities they are designed to track and (2) the risk of possible trading halts due to market conditions or other reasons, based on the policies of the exchange upon which an ETF trades. In addition, an exchange traded sector fund may be adversely affected by the performance of that specific sector or group of industries on which it is based. The fund would bear, along with other shareholders of an ETF, its pro rata portion of the ETF's expenses, including management fees. Accordingly, in addition to bearing their proportionate share of the fund's expenses (i.e., management fees and operating expenses), shareholders of the fund may also indirectly bear similar expenses of an ETF.

SHARES OF OTHER INVESTMENT COMPANIES

Each fund, other than the ALLOCATION FUNDS, may invest up to 10% of its assets in shares of other investment companies. Each fund, other than the ALLOCATION FUNDS, complies with the general statutory limits for such investments prescribed by the 1940 Act. The statutory limits are that immediately after any investment: (a) not more than 5% of a fund's total assets are invested in the securities of any one investment company; (b) not more than 10% of a fund's total assets are invested in the aggregate in securities of investment companies as a group; (c) not more than 3% of the outstanding voting stock of any one investment company will be owned by the fund; and (d) not more than 10% of the outstanding voting stock of any one investment company will be owned in the aggregate by the fund and other investment companies advised by MCA, or any of its affiliates.

The Trust and MCA have obtained an order from the SEC to permit the ALLOCATION FUNDS to invest in underlying funds in amounts in excess of the statutory limits described above. The ALLOCATION FUNDS may invest up to 100% of their assets in shares of other investment companies and will invest substantially all of their assets in shares of both affiliated and unaffiliated investment companies.

As a shareowner of another investment company, a fund would bear, along with other shareowners, its pro rata portion of the expenses of such other investment company, including advisory fees, general fund expenses, trading, custodial and interest expenses and distribution/shareholder servicing fees (if any). These expenses would be in addition to the advisory and other expenses that a fund bears directly in connection with its own operations and may represent a duplication of fees to shareowners of the fund.

TEMPORARY DEFENSIVE POSITIONS

Although each fund expects to pursue its investment objective utilizing its principal investment strategies regardless of market conditions, each fund may invest up to 100% in money market securities as a defensive tactic in abnormal market conditions.

SECURITY OR PRACTICE             DESCRIPTION                                                        RELATED RISKS
--------------------             -----------                                                        -------------
ADRs                             ADRs are receipts typically issued by a U.S. financial             Market, currency,
                                 institution which evidence ownership of underlying securities of   information, natural event,
                                 foreign corporate issuers. Generally, ADRs are in registered       and political risks (i.e.,
                                 form and are designed for trading in U.S. markets.                 the risks of foreign
                                                                                                    securities).

Asset-Backed Securities          Securities backed by pools of commercial and/or consumer loans     Credit, extension,
                                 such as motor vehicle installment sales, installment loan          prepayment, and interest
                                 contracts, leases of various types of real and personal            rate risks.
                                 property, receivables from revolving credit (i.e., credit card)
                                 agreements and other categories of receivables.

Borrowing                        The borrowing of money from financial institutions or through      Leverage and credit risks.
                                 reverse repurchase agreements.

Emerging Market Securities       Any foreign securities primarily traded on exchanges located in    Credit, market, currency,
                                 or issued by companies organized or primarily operating in         information, liquidity,
                                 countries that are considered lesser developed than countries      interest rate, valuation,
                                 like the U.S., Australia, Japan, or those of Western Europe.       natural event, and political
                                                                                                    risks.

EDRs and GDRs                    EDRs and GDRs are receipts evidencing an arrangement with a        Market, currency,
                                 non-U.S. financial institution similar to that for ADRs and are    information, natural event,
                                 designed for use in non-U.S. securities markets. EDRs and GDRs     and political risks (i.e.,
                                 are not necessarily quoted in the same currency as the             the risks of foreign
                                 underlying security.                                               securities).

Foreign Money Market             Short-term debt obligations issued either by foreign financial     Market, currency,
Securities                       institutions or by foreign branches of U.S. financial              information, interest rate,
                                 institutions or foreign issuers.                                   natural event, and political
                                                                                                    risks.

Foreign Securities               Securities issued by companies organized or whose principal        Market, currency,
                                 operations are outside the U.S., securities issued by companies    information, natural event,
                                 whose securities are principally traded outside the U.S., or       and political risks.
                                 securities denominated or quoted in foreign currency. The term
                                 "foreign securities" includes ADRs, EDRs, GDRs, and foreign
                                 money market securities.

Forward Foreign Currency         Contracts involving the right or obligation to buy or sell a       Currency, liquidity, and
Exchange Contracts               given amount of foreign currency at a specified price and future   leverage risks. When used
                                 date.                                                              for hedging, also has
                                                                                                    hedging, correlation, and
                                                                                                    opportunity risks. When
                                                                                                    used speculatively, also has
                                                                                                    speculation risks.

Futures Contracts (including     In general, an agreement to buy or sell a specific amount of a     Interest rate, currency,
financial futures contracts)     commodity, financial instrument, or index at a particular price    market, hedging or
                                 on a stipulated future date. Financial futures contracts           speculation, leverage,
                                 include interest rate futures contracts, securities index          correlation, liquidity,
                                 futures contracts, and currency futures contracts. Unlike an       credit, and opportunity
                                 option, a futures contract obligates the buyer to buy and the      risks.
                                 seller to sell the

SECURITY OR PRACTICE             DESCRIPTION                                                        RELATED RISKS
--------------------             -----------                                                        -------------
                                 underlying commodity or financial instrument at the agreed-upon
                                 price and date or to pay or receive money in an amount equal to
                                 such price.

Illiquid Securities              Any investment that may be difficult or impossible to sell         Liquidity, valuation and
                                 within seven days for the price at which the fund values it.       market risks.

Mortgage-Backed Securities       Securities backed by pools of mortgages, including passthrough     Credit, extension,
                                 certificates, PACs, TACs, CMOs, and when available, pools of       prepayment, and interest
                                 mortgage loans generated by credit unions.                         rate risks.

Non-Investment Grade             Investing in debt securities rated below BBB/Baa (i.e., "junk"     Credit, market, interest
Securities                       bonds).                                                            rate, liquidity, valuation,
                                                                                                    and information risks.

Options (including options on    In general, an option is the right to buy (called a "call") or     Interest rate, currency,
financial futures contracts)     sell (called a "put") property for an agreed-upon price at any     market, hedging or
                                 time prior to an expiration date. Both call and put options may    speculation, leverage,
                                 be either written (i.e., sold) or purchased on securities,         correlation, liquidity,
                                 indices, interest rate futures contracts, index futures            credit, and opportunity
                                 contracts, or currency futures contracts.                          risks.

Repurchase Agreements            The purchase of a security that the seller agrees to buy back      Credit risk.
                                 later at the same price plus interest.

Restricted Securities            Securities originally issued in a private placement rather than    Liquidity, valuation, and
                                 a public offering. These securities often cannot be freely         market risks.
                                 traded on the open market.

Reverse Repurchase Agreements    The lending of short-term debt securities; often used to           Leverage and credit risks.
                                 facilitate borrowing.

Securities Lending               The lending of securities to financial institutions, which         Credit risk.
                                 provide cash or government securities as collateral.

Shares of Other Investment       The purchase of shares issued by other investment companies.       Market risks and the
Companies                        These investments are subject to the fees and expenses of the      layering of fees and
                                 underlying investment company(s).                                  expenses.

Short-Term Trading               Selling a security soon after purchase or purchasing it soon       Market, liquidity and
                                 after it was sold (a fund engaging in short-term trading will      opportunity risks.
                                 have higher turnover and transaction expenses).

Smaller Capitalization           The purchase of securities issued by a company with a market       Market risk.
Companies                        capitalization (i.e., the price per share of its common stock
                                 multiplied by the number of shares of common stock outstanding)
                                 within the range of those companies represented in either the
                                 S&P Small Cap 600 Index or the Russell 2000(R) Index.

Swaps                            The entry into interest rate, credit default, index and currency   Market, liquidity, currency,
                                 exchange rate swap agreements whereby the parties agree to         credit, leverage and
                                 exchange rates of return (or differentials therein) earned or      opportunity risks.
                                 realized on predetermined investments or instruments.

When-Issued Securities and       The purchase or sale of securities for delivery at a future        Market, opportunity, and
Forward Commitments              date; market value may change before delivery.                     leverage risks.

                                                                  LARGE    LARGE     MID
                           CASH              HIGH    DIVERSIFIED   CAP      CAP      CAP
                         RESERVES  BOND     INCOME      INCOME    VALUE   GROWTH    VALUE
                         -------- ------    ------   ----------- ------   ------   ------
Borrowing                  30         30        30        30         30       30       30
Repurchase Agreements       *          *         *         *          *        *        *
Securities Lending          X     33 1/3    33 1/3    33 1/3     33 1/3   33 1/3   33 1/3
Short-Term Trading          *          *         *         *          *        *        *
When-Issued
   Securities;
Forward Commitments        25         25        25        25         25       25       25
Shares of Other
   Investment
   Companies(1)            10         10        10        10         10       10       10
Non-Investment Grade
   Securities               X         20        *         20         20       20       20

                           MID     SMALL    SMALL
                           CAP      CAP     CAP      INT'L    CONS.  MOD.   AGG.
                         GROWTH    VALUE   GROWTH    STOCK   ALLOC. ALLOC. ALLOC.
                         ------   ------   ------   ------   ------ ------ ------
Borrowing                    30       30       30       30      30     30     30
Repurchase Agreements         *        *        *        *       *      *      *
Securities Lending       33 1/3   33 1/3   33 1/3   33 1/3       X      X      X
Short-Term Trading            *        *        *        *       *      *      *
When-Issued
   Securities;
Forward Commitments           *        *        *       25      **     **     **
Shares of Other
   Investment
   Companies(1)              10       10       10       10     100    100    100
Non-Investment Grade
   Securities                20       30       30       20      **     **     **

                                                                  LARGE    LARGE     MID
                           CASH              HIGH    DIVERSIFIED   CAP      CAP      CAP
                         RESERVES  BOND     INCOME      INCOME    VALUE   GROWTH    VALUE
                         -------- ------    ------   ----------- ------   ------   ------
Foreign Securities         25(2)      25        50        25         25       25       25
Emerging Market
   Securities               X         10        25        15         15       15       15
Illiquid Securities(3)     10         15        15        15         15       15       15
Restricted Securities      25**       15        30        15         15       15       15
Mortgage-Backed
   Securities               X         50***     30        25***      10        X        X
Swaps                       X         15        15        15         15       15       15
Options on Securities,
   Indices or Currencies    X         10**      10        15         20       20       20
Futures Contracts(4)        X         10**      10**      15         20       20       20
Options on Futures
   Contracts(4)             X         10**      10**      15         20       20       20
Forward Foreign
   Currency Exchange
   Contracts                X         10**      10        10**       10**     10**     10**

                           MID     SMALL    SMALL
                           CAP      CAP     CAP      INT'L    CONS.  MOD.   AGG.
                         GROWTH    VALUE   GROWTH    STOCK   ALLOC. ALLOC. ALLOC.
                         ------   ------   ------   ------   ------ ------ ------
Foreign Securities           25       20       20        *      **     **     **
Emerging Market
   Securities                15       15       15       50      **     **     **
Illiquid Securities(3)       15       15       15       15      **     **     **
Restricted Securities        15       15       15       15      **     **     **
Mortgage-Backed
   Securities                 X        X        X        X      **     **     **
Swaps                        15       15       15       15      **     **     **
Options on Securities,
   Indices or Currencies     20**     25**     25**     10**    **     **     **
Futures Contracts(4)         20**     25**     25**     10**    **     **     **
Options on Futures
   Contracts(4)              20**     25**     25**     10**    **     **     **
Forward Foreign
   Currency Exchange
   Contracts                 10       10**     10**     10**    **     **     **

CASH RESERVES FUND          25% (limited to U.S. dollar denominated foreign money market securities)
BOND FUND                   25%
HIGH INCOME FUND            50%
DIVERSIFIED INCOME FUND     25%
LARGE CAP VALUE FUND        25%
LARGE CAP GROWTH FUND       25%
MID CAP VALUE FUND          25%
MID CAP GROWTH FUND         25%
SMALL CAP VALUE FUND        20%
SMALL CAP GROWTH FUND       20%
INTERNATIONAL STOCK FUND   100%

                                   TERM OF
                                    OFFICE                                                  NUMBER OF       OTHER
                                     AND                                                    PORTFOLIOS     OUTSIDE
                     POSITION(S)  LENGTH OF                                                OVERSEEN IN  DIRECTORSHIPS
     NAME AND         HELD WITH      TIME           PRINCIPAL OCCUPATION(S) DURING             FUND        HELD BY
   YEAR OF BIRTH      THE TRUST     SERVED                  PAST FIVE YEARS                 COMPLEX(1)    TRUSTEES
-------------------  -----------  ---------  --------------------------------------------  -----------  -------------
David P. Marks(2,3)  Trustee,     2006 -     CUNA Mutual Insurance Society, Madison,            32       CBRE Realty
1947                 President    Present    WI, Chief Investment Officer, 2005-Present                    Finance,
                     and                     MEMBERS Capital Advisors, Inc., Madison, WI,                2005-Present
                     Principal               President, 2005-Present
                     Executive               CUNA Mutual Life Insurance Company, Madison,
                     Officer                 WI, Chief Investment Officer, 2005-2007
                     (PEO)                   Citigroup Insurance Investors, Hartford,
                                             CT, Chief Investment Officer, 2004-2005

                                   TERM OF
                                    OFFICE                                                  NUMBER OF       OTHER
                                     AND                                                    PORTFOLIOS     OUTSIDE
                     POSITION(S)  LENGTH OF                                                OVERSEEN IN  DIRECTORSHIPS
     NAME AND         HELD WITH      TIME           PRINCIPAL OCCUPATION(S) DURING             FUND        HELD BY
   YEAR OF BIRTH      THE TRUST     SERVED                  PAST FIVE YEARS                 COMPLEX(1)    TRUSTEES
-------------------  -----------  ---------  --------------------------------------------  -----------  -------------
                                             Cigna Investments, Hartford, CT, Chief
                                             Investment Officer, 2002-2004
                                             Green Mountain Partners, Quechee, VT,
                                             2001-2002
                                             Allianz Investments, Westport, CT, Chief
                                             Investment Officer, 1991-2001

Molly Nelson(2)      Chief        2005 -     MEMBERS Capital Advisors, Inc., Madison, WI,      N/A           N/A
1962                 Compliance   Present    Vice President, Chief Compliance Officer,
                     Officer                 2005- Present
                                             Harris Associates L.P., Chicago, IL, Chief
                                             Compliance Officer/Advisor, 1985-2005

Mary E. Hoffmann(2)  Treasurer &  1998 -     MEMBERS Capital Advisors, Inc., Madison,          N/A           N/A
1970                 Principal    Present    WI, Vice President-Finance & Operations,
                     Financial               2006-Present; Assistant Vice
                     Officer                 President-Finance & Operations, 2001-2005
                     (PFO)

Holly S. Baggot(2)   Secretary    1999 -     MEMBERS Capital Advisors, Inc., Madison,          N/A           N/A
1960                 and          Present    WI, Director, Mutual Fund Operations,
                     Assistant               2006-Present; Operations Officer-Mutual
                     Treasurer               Funds, 2005-2006; Senior Manager-Product
                                             & Fund Operations, 2001-2005

Dan Owens(2)         Assistant    2000 -     MEMBERS Capital Advisors, Inc., Madison,          N/A           N/A
1966                 Treasurer    Present    WI, Director, Investment Operations,
                                             2006-Present; Investment Operations
                                             Officer, 2005-2006; Senior
                                             Manager-Portfolio Operations, 2001-2005

                                     TERM OF
                                      OFFICE                                               NUMBER OF       OTHER
                                       AND                                                 PORTFOLIOS     OUTSIDE
                       POSITION(S)  LENGTH OF                                             OVERSEEN IN  DIRECTORSHIPS
      NAME AND          HELD WITH      TIME           PRINCIPAL OCCUPATION(S) DURING          FUND        HELD BY
    YEAR OF BIRTH       THE TRUST   SERVED(1)                 PAST FIVE YEARS              COMPLEX(2)    TRUSTEES
---------------------  -----------  ---------  -----------------------------------------  -----------  -------------
Rolf F. Bjelland, CLU  Chairman     2006 -     Lutheran Brotherhood Mutual Funds               32       Regis Corp.,
1938                                Present    Chairman and President, 1983-2002                          Director,
                                               Lutheran Brotherhood (now Thrivent                       1982-Present
                       Trustee      2003-      Financial), Minneapolis, MN, Chief
                                    Present    Investment Officer, 1983 to 2002

Linda S. Foltz         Trustee      2006 -     Dougherty Consulting, LLC, President/           32          Direct
1950                                Present    Owner, 2005-Present                                         Supply,
                                               Direct Supply, Inc., Executive Vice                          Inc.,
                                               President of Corporate Development and                     Director,
                                               Chief Financial Officer, 1988-2005                       2003-Present

Steven P. Riege        Trustee      2005 -     The Rgroup, Owner/President, 2001-Present       32           None
1954                                Present    Robert W. Baird & Company, Milwaukee, WI,
                                               Senior Vice President Marketing and Vice
                                               President Human Resources, 1986-2001

Richard E. Struthers   Trustee      2004 -     Clearwater Capital Management,                  32           Park
1952                                Present    Minneapolis, MN, Chairman and Chief                        Nicollet
                                               Executive Officer, 1998-Present                             Health
                                                                                                          Services

                                     TERM OF
                                      OFFICE                                               NUMBER OF       OTHER
                                       AND                                                 PORTFOLIOS     OUTSIDE
                       POSITION(S)  LENGTH OF                                             OVERSEEN IN  DIRECTORSHIPS
      NAME AND          HELD WITH      TIME           PRINCIPAL OCCUPATION(S) DURING          FUND        HELD BY
    YEAR OF BIRTH       THE TRUST   SERVED(1)                 PAST FIVE YEARS              COMPLEX(2)    TRUSTEES
---------------------  -----------  ---------  -----------------------------------------  -----------  -------------
                                               Park Nicollet Health Services, Director,                 2001-Present
                                               2001-Present, Chairman, Finance and
                                               Investment Committee, 2006-Present
                                               IAI Mutual Funds, President and Director,
                                               1992-1997

                      POSITIONS HELD WITH AFFILIATED PERSONS OR      OTHER FUNDS IN FUND COMPLEX FOR
      NAME                PRINCIPAL UNDERWRITER OF THE TRUST         WHICH THE SAME POSITION IS HELD
----------------   -----------------------------------------------   -------------------------------
David P. Marks     MEMBERS Capital Advisors, Inc.                           Ultra Series Fund
                   President, 2005-Present; Director, 2006-Present     consisting of 18 portfolios

Molly Nelson       MEMBERS Capital Advisors, Inc.                           Ultra Series Fund
                   Vice President and Chief Compliance Officer,        consisting of 18 portfolios
                   2005-Present

Mary E. Hoffmann   MEMBERS Capital Advisors, Inc.                           Ultra Series Fund
                   Vice President-Finance & Operations,                consisting of 18 portfolios
                   2006-Present; Assistant Vice President-Finance
                   & Operations, 2001-2005

Holly S. Baggot    MEMBERS Capital Advisors, Inc.                           Ultra Series Fund
                   Director, Mutual Fund Operations, 2006-Present;     consisting of 18 portfolios
                   Operations Officer-Mutual Funds, 2005-2006;
                   Senior Manager, Product & Fund Operations,
                   2001-2005

Dan Owens          MEMBERS Capital Advisors, Inc.                           Ultra Series Fund
                   Director, Investment Operations, 2006-Present;      consisting of 18 portfolios
                   Investment Operations Officer, 2005-2006;
                   Senior Manager-Portfolio Operations, 2001-2005

                       AGGREGATE COMPENSATION       TOTAL COMPENSATION FROM
TRUSTEE NAME                FROM TRUST(1)       TRUST AND FUND COMPLEX(1,2)
------------           ----------------------   ------------------------------
David P. Marks(3)               none                         none
Rolf F. Bjelland               $26,250                     $52,500
Linda S. Foltz(4)              $19,750                     $39,500
Steven P. Riege                $19,750                     $39,500
Richard E. Struthers           $22,250                     $44,500

                                           DOLLAR RANGE OF EQUITY SECURITIES IN THE TRUST(1)
                      ------------------------------------------------------------------------------------------  AGGREGATE DOLLAR
                                                                    LARGE  LARGE  MID    MID  SMALL  SMALL        RANGE OF EQUITY
                      CONS.  MOD.  AGG.   CASH         HIGH   DIV.   CAP    CAP   CAP    CAP   CAP    CAP  INT'L   SECURITIES IN
NAME OF TRUSTEE       ALLOC ALLOC ALLOC RESERVES BOND INCOME INCOME VALUE GROWTH VALUE GROWTH VALUE GROWTH STOCK FUND COMPLEX(1, 2)
---------------       ----- ----- ----- -------- ---- ------ ------ ----- ------ ----- ------ ----- ------ ----- ------------------
David P. Marks         $__   $__   $__     $__    $__   $__    $__   $__    $__   $__   $__    $__    $__   $__
Lawrence R. Halverson  $__   $__   $__     $__    $__   $__    $__   $__    $__   $__   $__    $__    $__   $__

                                           DOLLAR RANGE OF EQUITY SECURITIES IN THE TRUST(1)
                      ------------------------------------------------------------------------------------------  AGGREGATE DOLLAR
                                                                    LARGE  LARGE  MID    MID  SMALL  SMALL         RANGE OF EQUITY
                      CONS.  MOD.  AGG.   CASH         HIGH   DIV.   CAP    CAP   CAP    CAP   CAP    CAP  INT'L    SECURITIES IN
NAME OF TRUSTEE       ALLOC ALLOC ALLOC RESERVES BOND INCOME INCOME VALUE GROWTH VALUE GROWTH VALUE GROWTH STOCK FUND COMPLEX(1, 2)
---------------       ----- ----- ----- -------- ---- ------ ------ ----- ------ ----- ------ ----- ------ ----- ------------------
Rolf F. Bjelland       $__   $__   $__     $__    $__   $__    $__   $__    $__   $__    $__   $__    $__   $__
Linda S. Foltz         $__   $__   $__     $__    $__   $__    $__   $__    $__   $__    $__   $__    $__   $__
Steven P. Riege        $__   $__   $__     $__    $__   $__    $__   $__    $__   $__    $__   $__    $__   $__
Richard E. Struthers   $__   $__   $__     $__    $__   $__    $__   $__    $__   $__    $__   $__    $__   $__

                                               LARGE   LARGE   MID  SMALL   SMALL
                                 CASH    HIGH   CAP    CAP     CAP   CAP    CAP   INT'L  CONS.  MOD.   AGG.
SHAREHOLDER                    RESERVES INCOME VALUE  GROWTH GROWTH VALUE  GROWTH STOCK ALLOC. ALLOC. ALLOC.
-----------                    -------- ------ -----  ------ ------ -----  ------ ----- ------ ------ ------
CUNA Mutual Insurance Society   _____%                                            _____%
2000 Heritage Way
Waverly, IA 50677

CUMIS Insurance Society, Inc.
2000 Heritage Way
Waverly, IA 50677                                                   _____% _____%

Trust Under CMIS Non-Qualified
Deferred Compensation Plan for
Employees
5910 Mineral Point Road
Madison, WI 53705               _____%  _____% _____% _____% _____%

Alaska USA Trust Company
PO Box 196757
Anchorage, AK 99519-6757                _____%

Pershing LLC*
One Pershing Plaza, 14th Floor
Jersey City, NJ 07399                                                                   _____%

                                                       LARGE LARGE   MID     MID  SMALL  SMALL
                                 CASH           HIGH    CAP   CAP    CAP     CAP   CAO    CAP  INT'1
SHAREHOLDER                    RESERVES  BOND  INCOME  VALUE GROWTH VALUE  GROWTH VALUE GROWTH STOCK
-----------                    -------- ------ ------  ----- ------ -----  ------ ----- ------ -----
CUMIS Insurance Society, Inc.   _____%  _____% _____%        _____%
2000 Heritage Way
Waverly, IA 50677
Pershing LLC*
One Pershing Plaza, 14th Floor
Jersey City, NJ 07399           _____%  _____% _____%  _____%_____% _____% _____% _____%_____% _____%

                                                                  LARGE  LARGE   MID     MID  SMALL   SMALL
                                            CASH           HIGH    CAP    CAP    CAP     CAP   CAO     CAP  INT'1
SHAREHOLDER                               RESERVES  BOND  INCOME  VALUE  GROWTH VALUE  GROWTH VALUE  GROWTH STOCK
-----------                               -------- ------ ------  -----  ------ -----  ------ -----  ------ -----
MEMBERS Conservative Allocation Fund       _____%  _____% _____%         _____%
5910 Mineral Point Road
Madison, WI 53705

MEMBERS Moderate Allocation Fund
5910 Mineral Point Road
Madison, WI 53705                          _____%  _____% _____%  _____% _____% _____% _____% _____% _____% _____%

MEMBERS Aggressive Allocation Fund
5910 Mineral Point Road
Madison, WI 53705                                                 _____% _____% _____% _____% _____% _____% _____%

Ultra Series Conservative Allocation Fund
5910 Mineral Point Road
Madison, WI 53705                          _____%  _____% _____%  _____% _____%

Ultra Series Moderate Allocation Fund
5910 Mineral Point Road
Madison, WI 53705                          _____%  _____% _____%  _____% _____% _____% _____% _____% _____% _____%

Ultra Series Aggressive Allocation Fund
5910 Mineral Point Road
Madison, WI 53705                                                 _____% _____% _____% _____% _____% _____% _____%

                                              TOTAL ADVISORY FEES   TOTAL ADVISORY FEES   TOTAL ADVISORY FEES
                                              INCURRED DURING THE   INCURRED DURING THE   INCURRED DURING THE
                                               FISCAL YEAR ENDED     FISCAL YEAR ENDED     FISCAL YEAR ENDED
           FUND              MANAGEMENT FEE     OCTOBER 31, 2007     OCTOBER 31, 2006       OCTOBER 31, 2005
           ----              --------------   -------------------   -------------------   -------------------
Cash Reserves                    0.40%            $__________            $   65,883            $   73,584
Bond                             0.50%            $__________            $  518,600            $  563,848
High Income                      0.55%            $__________            $  298,829            $  377,280
Diversified Income               0.65%            $__________            $1,245,230            $1,367,472
Large Cap Value                  0.55%            $__________            $  983,596            $  989,033
Large Cap Growth                 0.75%            $__________            $  939,119            $1,041,788
Mid Cap Value                    0.95%            $__________            $  637,040            $  632,671
Mid Cap Growth                   0.75%            $__________            $  377,980            $  332,655
Small Cap Value(1)               1.00%            $__________                     0                     0
Small Cap Growth(1)              1.00%            $__________                     0                     0
International Stock              1.05%            $__________            $  903,240            $  654,726
Conservative Allocation(2)       0.20%            $__________            $    1,247                     0
Moderate Allocation(2)           0.20%            $__________            $    3,061                     0
Aggressive Allocation(2)         0.20%            $__________            $    1,303                     0
   Totals                                         $__________            $5,975,128            $6,033,057

FUND                      CLASS A   CLASS B   CLASS C   CLASS Y
----                      -------   -------   -------   -------
Conservative Allocation    0.70%     1.45%     1.45%      n/a
Moderate Allocation        0.70%     1.45%     1.45%      n/a
Aggressive Allocation      0.70%     1.45%     1.45%      n/a
Cash Reserves              0.55%     1.30%      n/a      0.55%
Bond                       0.90%     1.65%      n/a      0.65%
High Income                1.00%     1.75%      n/a      0.75%
Diversified Income         1.10%     1.85%      n/a       n/a
Large Cap Value            1.20%     1.95%      n/a      0.95%
Large Cap Growth           1.20%     1.95%      n/a      0.95%

FUND                      CLASS A   CLASS B   CLASS C   CLASS Y
----                      -------   -------   -------   -------
Mid Cap Value              1.40%     2.15%      n/a      1.15%
Mid Cap Growth             1.40%     2.15%      n/a      1.15%
Small Cap Value            1.50%     2.25%      n/a      1.25%
Small Cap Growth           1.50%     2.25%      n/a      1.25%
International Stock        1.60%     2.35%      n/a      1.35%

David P. Marks      Director, Chair and President
Faye A. Patzner     Director and Secretary
Mary E. Hoffmann    Director, Treasurer, Assistant Secretary and Assistant Treasurer
Thomas J. Merfeld   Director
John W. Petchler    Vice President
James H. Metz       Vice President
Molly Nelson        Chief Compliance Officer
Tracy K. Lien       Assistant Secretary

Fiscal year ended
    October 31       Amount
-----------------   --------
       2007         $_______
       2006         $203,779
       2005         $171,594

Fiscal year ended
    October 31       Amount
-----------------   --------
       2005         $85,747

Fiscal year ended
    October 31       Amount
-----------------   --------
       2007         $______
       2006         $80,488
       2005         $79,706

Fiscal year ended
    October 31       Amount
-----------------   --------
       2007         $_______
       2006         $252,147
       2005         $221,202

Fiscal year ended
    October 31       Amount
-----------------   --------
       2007         $_______

Fiscal year ended
    October 31       Amount
-----------------   --------
       2007         $_______

Fiscal year ended
    October 31       Amount
-----------------   --------
       2007         $_______
       2006         $536,753
       2005         $412,891

                                                                                                 TOTAL ASSETS IN
                                                                              ACCOUNTS WITH       ACCOUNTS WITH
                                        NUMBER OF OTHER   TOTAL ASSETS IN   PERFORMANCE-BASED   PERFORMANCE-BASED
          TYPES OF ACCOUNTS            ACCOUNTS MANAGED       ACCOUNTS        ADVISORY FEES       ADVISORY FEES
          -----------------            ----------------   ---------------   -----------------   -----------------
Registered Investment Companies
Other Pooled Investment Vehicles
Other Accounts

                                                                                                 TOTAL ASSETS IN
                                                                              ACCOUNTS WITH       ACCOUNTS WITH
                                        NUMBER OF OTHER   TOTAL ASSETS IN   PERFORMANCE-BASED   PERFORMANCE-BASED
          TYPES OF ACCOUNTS            ACCOUNTS MANAGED       ACCOUNTS        ADVISORY FEES       ADVISORY FEES
          -----------------            ----------------   ---------------   -----------------   -----------------
Registered Investment Companies
Other Pooled Investment Vehicles
Other Accounts

                                                                                                 TOTAL ASSETS IN
                                                                              ACCOUNTS WITH       ACCOUNTS WITH
                                        NUMBER OF OTHER   TOTAL ASSETS IN   PERFORMANCE-BASED   PERFORMANCE-BASED
          TYPES OF ACCOUNTS            ACCOUNTS MANAGED       ACCOUNTS        ADVISORY FEES       ADVISORY FEES
          -----------------            ----------------   ---------------   -----------------   -----------------
Registered Investment Companies                                $_____               0                   0
Other Pooled Investment Vehicles               0                    0               0                   0
Other Accounts                                 0                    0               0                   0

                                                                                                 TOTAL ASSETS IN
                                                                              ACCOUNTS WITH       ACCOUNTS WITH
                                        NUMBER OF OTHER   TOTAL ASSETS IN   PERFORMANCE-BASED   PERFORMANCE-BASED
          TYPES OF ACCOUNTS            ACCOUNTS MANAGED       ACCOUNTS        ADVISORY FEES       ADVISORY FEES
          -----------------            ----------------   ---------------   -----------------   -----------------
Registered Investment Companies                                $_____               0                   0
Other Pooled Investment Vehicles               0                    0               0                   0
Other Accounts                                 0                    0               0                   0

                                                                                                 TOTAL ASSETS IN
                                                                              ACCOUNTS WITH       ACCOUNTS WITH
                                        NUMBER OF OTHER   TOTAL ASSETS IN   PERFORMANCE-BASED   PERFORMANCE-BASED
          TYPES OF ACCOUNTS            ACCOUNTS MANAGED       ACCOUNTS        ADVISORY FEES       ADVISORY FEES
          -----------------            ----------------   ---------------   -----------------   -----------------
Registered Investment Companies                                $_____               0                   0
Other Pooled Investment Vehicles               0                    0               0                   0
Other Accounts                                                 $_____               0                   0

                                                                                                 TOTAL ASSETS IN
                                                                              ACCOUNTS WITH       ACCOUNTS WITH
                                        NUMBER OF OTHER   TOTAL ASSETS IN   PERFORMANCE-BASED   PERFORMANCE-BASED
          TYPES OF ACCOUNTS            ACCOUNTS MANAGED       ACCOUNTS        ADVISORY FEES       ADVISORY FEES
          -----------------            ----------------   ---------------   -----------------   -----------------
Registered Investment Companies                                $_____               0                   0
Other Pooled Investment Vehicles               0                    0               0                   0
Other Accounts                                 0                    0               0                   0

                                                                                                 TOTAL ASSETS IN
                                                                              ACCOUNTS WITH       ACCOUNTS WITH
                                        NUMBER OF OTHER   TOTAL ASSETS IN   PERFORMANCE-BASED   PERFORMANCE-BASED
          TYPES OF ACCOUNTS            ACCOUNTS MANAGED       ACCOUNTS        ADVISORY FEES       ADVISORY FEES
          -----------------            ----------------   ---------------   -----------------   -----------------
Registered Investment Companies                                $____                0                   0
Other Pooled Investment Vehicles               0                   0                0                   0
Other Accounts                                 0                   0                0                   0

                                                                                                 TOTAL ASSETS IN
                                                                              ACCOUNTS WITH       ACCOUNTS WITH
                                        NUMBER OF OTHER   TOTAL ASSETS IN   PERFORMANCE-BASED   PERFORMANCE-BASED
          TYPES OF ACCOUNTS            ACCOUNTS MANAGED       ACCOUNTS        ADVISORY FEES       ADVISORY FEES
          -----------------            ----------------   ---------------   -----------------   -----------------
Registered Investment Companies                                $_____               0                   0
Other Pooled Investment Vehicles              0                     0               0                   0
Other Accounts                                0                     0               0                   0

                               DOLLAR RANGE OF EQUITY SECURITIES IN THE TRUST(1)
-------------------------------------------------------------------------------------------------------------- AGGREGATE DOLLAR
                                                                  LARGE  LARGE  MID    MID  SMALL  SMALL        RANGE OF EQUITY
                    CONS.  MOD.  AGG.  CASH          HIGH   DIV.   CAP   CAP    CAP    CAP   CAP   CAP   INT'L   SECURITIES IN
  NAME OF TRUSTEE   ALLOC ALLOC ALLOC RESERVES BOND INCOME INCOME VALUE GROWTH VALUE GROWTH VALUE GROWTH STOCK FUND COMPLEX(1,2)
------------------- ----- ----- ----- -------- ---- ------ ------ ----- ------ ----- ------ ----- ------ ----- -----------------
Patrick F. Ryan      $__   $__   $__     $__    $__   $__   $__    $__   $__    $__   $__    $__   $__    $__
David M. Schlimgen   $__   $__   $__     $__    $__   $__   $__    $__   $__    $__   $__    $__   $__    $__
Edward J. Meier      $__   $__   $__     $__    $__   $__   $__    $__   $__    $__   $__    $__   $__    $__
Dean J. "Jack" Call  $__   $__   $__     $__    $__   $__   $__    $__   $__    $__   $__    $__   $__    $__
John H. Brown        $__   $__   $__     $__    $__   $__   $__    $__   $__    $__   $__    $__   $__    $__
Scott D. Opsal       $__   $__   $__     $__    $__   $__   $__    $__   $__    $__   $__    $__   $__    $__
Bruce A. Ebel        $__   $__   $__     $__    $__   $__   $__    $__   $__    $__   $__    $__   $__    $__
Livia S. Asher       $__   $__   $__     $__    $__   $__   $__    $__   $__    $__   $__    $__   $__    $__

                                                                                             TOTAL ASSETS IN
                                                                          ACCOUNTS WITH       ACCOUNTS WITH
                                    NUMBER OF OTHER   TOTAL ASSETS IN   PERFORMANCE-BASED   PERFORMANCE-BASED
         TYPES OF ACCOUNTS         ACCOUNTS MANAGED       ACCOUNTS        ADVISORY FEES       ADVISORY FEES
         -----------------         ----------------   ---------------   -----------------   -----------------
Registered Investment Companies                            $_____               0                     0
Other Pooled Investment Vehicles                           $_____                                $_____
Other Accounts                                             $_____                                $_____

                                                                                             TOTAL ASSETS IN
                                                                          ACCOUNTS WITH       ACCOUNTS WITH
                                    NUMBER OF OTHER   TOTAL ASSETS IN   PERFORMANCE-BASED   PERFORMANCE-BASED
         TYPES OF ACCOUNTS         ACCOUNTS MANAGED      ACCOUNTS         ADVISORY FEES       ADVISORY FEES
         -----------------         ----------------   ---------------   -----------------   -----------------
Registered Investment Companies            0                   0                 0                     0
Other Pooled Investment Vehicles                          $_____                                  $_____
Other Accounts                                            $_____                 0                     0

                                                                                             TOTAL ASSETS IN
                                                                          ACCOUNTS WITH       ACCOUNTS WITH
                                    NUMBER OF OTHER   TOTAL ASSETS IN   PERFORMANCE-BASED   PERFORMANCE-BASED
         TYPES OF ACCOUNTS         ACCOUNTS MANAGED       ACCOUNTS        ADVISORY FEES       ADVISORY FEES
         -----------------         ----------------   ---------------   -----------------   -----------------
Registered Investment Companies                            $_____               0                     0
Other Pooled Investment Vehicles                           $_____                                $_____
Other Accounts                                             $_____               0                     0

                                                                                                              AGGREGATE
                                                                                                                DOLLAR
                                      DOLLAR RANGE OF EQUITY SECURITIES IN THE TRUST(1)                        RANGE OF
                 ------------------------------------------------------------------------------------------     EQUITY
                                                               LARGE  LARGE  MID    MID  SMALL  SMALL         SECURITIES
                 CONS.  MOD.  AGG.   CASH         HIGH   DIV.   CAP   CAP    CAP    CAP   CAP    CAP  INT'L    IN FUND
NAME OF TRUSTEE  ALLOC ALLOC ALLOC RESERVES BOND INCOME INCOME VALUE GROWTH VALUE GROWTH VALUE GROWTH STOCK COMPLEX (1,2)
---------------  ----- ----- ----- -------- ---- ------ ------ ----- ------ ----- ------ ----- ------ ----- -------------
Mark R. Shenkman  $__   $__   $__     $__    $__   $__    $__   $__    $__   $__    $__   $__    $__   $__
Frank X. Whitley  $__   $__   $__     $__    $__   $__    $__   $__    $__   $__    $__   $__    $__   $__
Mark J. Flanagan  $__   $__   $__     $__    $__   $__    $__   $__    $__   $__    $__   $__    $__   $__

                                         BENCHMARK INDEX AND/OR
        FUND                      PEER GROUP FOR THE INCENTIVE PERIOD*
        ----                      ------------------------------------
MID CAP GROWTH FUND    Russell 2500(TM) Growth Index (prior to March 1, 2007,
                       the Russell 2500 Growth Index was used)
MID CAP VALUE FUND     Russell 2500(TM) Value Index (prior to May 1, 2005, the
                       Russell 2000(R) Value Index was used)
SMALL CAP VALUE FUND   Russell 2000(R) Value Index

                                                                                             TOTAL ASSETS IN
                                                                          ACCOUNTS WITH       ACCOUNTS WITH
                                    NUMBER OF OTHER   TOTAL ASSETS IN   PERFORMANCE-BASED   PERFORMANCE-BASED
         TYPES OF ACCOUNTS         ACCOUNTS MANAGED       ACCOUNTS        ADVISORY FEES       ADVISORY FEES
         -----------------         ----------------   ---------------   -----------------   -----------------
Registered Investment Companies                            $_____               0                     0
Other Pooled Investment Vehicles                           $_____               0                     0
Other Accounts                                             $_____               1                $_____

                                                                                             TOTAL ASSETS IN
                                                                          ACCOUNTS WITH       ACCOUNTS WITH
                                    NUMBER OF OTHER   TOTAL ASSETS IN   PERFORMANCE-BASED   PERFORMANCE-BASED
         TYPES OF ACCOUNTS         ACCOUNTS MANAGED       ACCOUNTS        ADVISORY FEES       ADVISORY FEES
         -----------------         ----------------   ---------------   -----------------   -----------------
Registered Investment Companies                            $_____               0                     0
Other Pooled Investment Vehicles                           $_____               0                     0
Other Accounts                                             $_____                                $_____

                                                                                             TOTAL ASSETS IN
                                                                          ACCOUNTS WITH       ACCOUNTS WITH
                                    NUMBER OF OTHER   TOTAL ASSETS IN   PERFORMANCE-BASED   PERFORMANCE-BASED
         TYPES OF ACCOUNTS         ACCOUNTS MANAGED       ACCOUNTS        ADVISORY FEES       ADVISORY FEES
         -----------------         ----------------   ---------------   -----------------   -----------------
Registered Investment Companies                            $_____               0                     0
Other Pooled Investment Vehicles                           $_____               0                     0
Other Accounts                                             $_____                                $_____

                                                                                             TOTAL ASSETS IN
                                                                          ACCOUNTS WITH       ACCOUNTS WITH
                                    NUMBER OF OTHER   TOTAL ASSETS IN   PERFORMANCE-BASED   PERFORMANCE-BASED
         TYPES OF ACCOUNTS         ACCOUNTS MANAGED       ACCOUNTS        ADVISORY FEES       ADVISORY FEES
         -----------------         ----------------   ---------------   -----------------   -----------------
Registered Investment Companies                            $_____               0                     0
Other Pooled Investment Vehicles                           $_____               0                     0
Other Accounts                                             $_____                                $_____

                                                                                                                  AGGREGATE
                                                                                                                    DOLLAR
                                          DOLLAR RANGE OF EQUITY SECURITIES IN THE TRUST(1)                        RANGE OF
                     ------------------------------------------------------------------------------------------     EQUITY
                                                                   LARGE  LARGE  MID    MID  SMALL  SMALL         SECURITIES
                     CONS.  MOD.  AGG.   CASH         HIGH   DIV.   CAP   CAP    CAP    CAP   CAP    CAP  INT'L    IN FUND
NAME OF TRUSTEE      ALLOC ALLOC ALLOC RESERVES BOND INCOME INCOME VALUE GROWTH VALUE GROWTH VALUE GROWTH STOCK COMPLEX (1, 2)
---------------      ----- ----- ----- -------- ---- ------ ------ ----- ------ ----- ------ ----- ------ ----- --------------
Francis J. Boggan     $__   $__   $__     $__    $__   $__    $__   $__    $__   $__    $__   $__    $__   $__
Stephen T. O'Brien    $__   $__   $__     $__    $__   $__    $__   $__    $__   $__    $__   $__    $__   $__
Timothy J. McCormack  $__   $__   $__     $__    $__   $__    $__   $__    $__   $__    $__   $__    $__   $__
Shaun F. Pederson     $__   $__   $__     $__    $__   $__    $__   $__    $__   $__    $__   $__    $__   $__

                                                                                             TOTAL ASSETS IN
                                                                          ACCOUNTS WITH       ACCOUNTS WITH
                                    NUMBER OF OTHER   TOTAL ASSETS IN   PERFORMANCE-BASED   PERFORMANCE-BASED
         TYPES OF ACCOUNTS         ACCOUNTS MANAGED       ACCOUNTS        ADVISORY FEES       ADVISORY FEES
         -----------------         ----------------   ---------------   -----------------   -----------------
Registered Investment Companies              0                  0                  0                  0
Other Pooled Investment Vehicles             0                  0                  0                  0
Other Accounts                          $_____             $_____             $_____             $_____

                                                                                             TOTAL ASSETS IN
                                                                          ACCOUNTS WITH       ACCOUNTS WITH
                                    NUMBER OF OTHER   TOTAL ASSETS IN   PERFORMANCE-BASED   PERFORMANCE-BASED
         TYPES OF ACCOUNTS         ACCOUNTS MANAGED       ACCOUNTS        ADVISORY FEES       ADVISORY FEES
         -----------------         ----------------   ---------------   -----------------   -----------------
Registered Investment Companies              0                  0                  0                  0
Other Pooled Investment Vehicles             0                  0                  0                  0
Other Accounts                          $_____             $_____             $_____             $_____

                                                                                             TOTAL ASSETS IN
                                                                          ACCOUNTS WITH       ACCOUNTS WITH
                                    NUMBER OF OTHER   TOTAL ASSETS IN   PERFORMANCE-BASED   PERFORMANCE-BASED
         TYPES OF ACCOUNTS         ACCOUNTS MANAGED       ACCOUNTS        ADVISORY FEES       ADVISORY FEES
         -----------------         ----------------   ---------------   -----------------   -----------------
Registered Investment Companies              0                  0                  0                  0
Other Pooled Investment Vehicles             0                  0                  0                  0
Other Accounts                          $_____             $_____             $_____             $_____

                                                                                                                  AGGREGATE
                                                                                                                    DOLLAR
                                          DOLLAR RANGE OF EQUITY SECURITIES IN THE TRUST(1)                        RANGE OF
                     ------------------------------------------------------------------------------------------     EQUITY
                                                                   LARGE  LARGE  MID    MID  SMALL  SMALL         SECURITIES
                     CONS.  MOD.  AGG.   CASH         HIGH   DIV.   CAP   CAP    CAP    CAP   CAP    CAP  INT'L    IN FUND
NAME OF TRUSTEE      ALLOC ALLOC ALLOC RESERVES BOND INCOME INCOME VALUE GROWTH VALUE GROWTH VALUE GROWTH STOCK COMPLEX (1,2)
---------------      ----- ----- ----- -------- ---- ------ ------ ----- ------ ----- ------ ----- ------ ----- -------------
James E. Francis      $__   $__   $__     $__    $__   $__    $__   $__    $__   $__    $__   $__    $__   $__
Jeffrey E. Marcus     $__   $__   $__     $__    $__   $__    $__   $__    $__   $__    $__   $__    $__   $__
Gregory Pai           $__   $__   $__     $__    $__   $__    $__   $__    $__   $__    $__   $__    $__   $__

                                                                                          TOTAL ASSETS IN
                                                                       ACCOUNTS WITH       ACCOUNTS WITH
                                    NUMBER OF OTHER   TOTAL ASSETS   PERFORMANCE-BASED   PERFORMANCE-BASED
        TYPES OF ACCOUNTS          ACCOUNTS MANAGED    IN ACCOUNTS     ADVISORY FEES       ADVISORY FEES
        -----------------          ----------------   ------------   -----------------   -----------------
Registered Investment Companies                          $_____              0                 $_____
Other Pooled Investment Vehicles                         $_____              0                 $_____
Other Accounts                                           $_____              0                 $_____

                                                                                          TOTAL ASSETS IN
                                                                       ACCOUNTS WITH       ACCOUNTS WITH
                                    NUMBER OF OTHER   TOTAL ASSETS   PERFORMANCE-BASED   PERFORMANCE-BASED
        TYPES OF ACCOUNTS          ACCOUNTS MANAGED    IN ACCOUNTS     ADVISORY FEES       ADVISORY FEES
        -----------------          ----------------   ------------   -----------------   -----------------
Registered Investment Companies                          $_____              0                   0
Other Pooled Investment Vehicles                         $_____              0                   0
Other Accounts                                           $_____              0                   0

                                                                                          TOTAL ASSETS IN
                                                                       ACCOUNTS WITH       ACCOUNTS WITH
                                    NUMBER OF OTHER   TOTAL ASSETS   PERFORMANCE-BASED   PERFORMANCE-BASED
        TYPES OF ACCOUNTS          ACCOUNTS MANAGED    IN ACCOUNTS     ADVISORY FEES       ADVISORY FEES
        -----------------          ----------------   ------------   -----------------   -----------------
Registered Investment Companies                          $_____              0                   0
Other Pooled Investment Vehicles                         $_____              0                   0
Other Accounts                                           $_____              0                   0

                                                                                          TOTAL ASSETS IN
                                                                       ACCOUNTS WITH       ACCOUNTS WITH
                                    NUMBER OF OTHER   TOTAL ASSETS   PERFORMANCE-BASED   PERFORMANCE-BASED
        TYPES OF ACCOUNTS          ACCOUNTS MANAGED    IN ACCOUNTS     ADVISORY FEES       ADVISORY FEES
        -----------------          ----------------   ------------   -----------------   -----------------
Registered Investment Companies                          $_____              0                   0
Other Pooled Investment Vehicles                         $_____              0                   0
Other Accounts                                           $_____              0                   0

                                                                                          TOTAL ASSETS IN
                                                                       ACCOUNTS WITH       ACCOUNTS WITH
                                    NUMBER OF OTHER   TOTAL ASSETS   PERFORMANCE-BASED   PERFORMANCE-BASED
        TYPES OF ACCOUNTS          ACCOUNTS MANAGED    IN ACCOUNTS     ADVISORY FEES       ADVISORY FEES
        -----------------          ----------------   ------------   -----------------   -----------------
Registered Investment Companies                          $_____              0                   0
Other Pooled Investment Vehicles                         $_____              0                   0
Other Accounts                                           $_____              0                   0

                                                                                          TOTAL ASSETS IN
                                                                       ACCOUNTS WITH       ACCOUNTS WITH
                                    NUMBER OF OTHER   TOTAL ASSETS   PERFORMANCE-BASED   PERFORMANCE-BASED
        TYPES OF ACCOUNTS          ACCOUNTS MANAGED    IN ACCOUNTS     ADVISORY FEES       ADVISORY FEES
        -----------------          ----------------   ------------   -----------------   -----------------
Registered Investment Companies                          $_____              0                   0
Other Pooled Investment Vehicles                         $_____              0                   0
Other Accounts                                           $_____              0                   0

                              DOLLAR RANGE OF EQUITY SECURITIES IN THE TRUST(1)
-------------------------------------------------------------------------------------------------------------  AGGREGATE DOLLAR
                                                                 LARGE  LARGE  MID    MID  SMALL  SMALL         RANGE OF EQUITY
                   CONS.  MOD.  AGG.   CASH         HIGH   DIV.   CAP    CAP   CAP    CAP   CAP    CAP  INT'L SECURITIES IN FUND
  NAME OF TRUSTEE  ALLOC ALLOC ALLOC RESERVES BOND INCOME INCOME VALUE GROWTH VALUE GROWTH VALUE GROWTH STOCK    COMPLEX(1, 2)
------------------ ----- ----- ----- -------- ---- ------ ------ ----- ------ ----- ------ ----- ------ ----- ------------------
John R. Reinsberg   $__   $__   $__     $__    $__   $__    $__   $__    $__   $__    $__   $__    $__   $__
Michael A. Bennett  $__   $__   $__     $__    $__   $__    $__   $__    $__   $__    $__   $__    $__   $__
Michael G. Fry      $__   $__   $__     $__    $__   $__    $__   $__    $__   $__    $__   $__    $__   $__
James Donald        $__   $__   $__     $__    $__   $__    $__   $__    $__   $__    $__   $__    $__   $__
Brian Pessin        $__   $__   $__     $__    $__   $__    $__   $__    $__   $__    $__   $__    $__   $__
Kevin O'Hare        $__   $__   $__     $__    $__   $__    $__   $__    $__   $__    $__   $__    $__   $__

REGULAR MAIL:                           EXPRESS, CERTIFIED OR REGISTERED MAIL:
MEMBERS Mutual Funds                    MEMBERS Mutual Funds
P.O. Box 8390                           c/o Boston Financial Data Services
Boston, MA 02266-8390                   30 Dan Road
                                        Canton, MA 02021-2809

                                NET UNDERWRITING   COMPENSATION ON
                                  DISCOUNTS AND    REDEMPTIONS AND    BROKERAGE         OTHER
NAME OF PRINCIPAL UNDERWRITER    COMMISSIONS(1)     REPURCHASES(2)   COMMISSIONS   Compensation(3)
-----------------------------   ----------------   ---------------   -----------   ---------------
CUNA Brokerage Services, Inc.        $_____             $_____           none           $_____

Advertising                                                               $__________
Printing and mailing of prospectuses to other than current shareholders   $__________
Compensation to underwriters                                              $__________
Compensation to selling brokers                                           $__________
Compensation to sales personnel                                           $__________
Interest, carrying, or other financing charges                            $__________

FUND                            2007       2006       2005
--------------------------   ---------   --------   --------
Cash Reserves                $________         --         --
Bond                         $________         --         --
High Income                  $________   $  2,112   $  3,991
Diversified Income           $________   $ 87,840   $ 52,797
Large Cap Value              $________   $ 67,121   $ 34,285
Large Cap Growth             $________   $173,326   $ 44,841
Mid Cap Value                $________   $ 66,531   $ 47,590
Mid Cap Growth               $________   $ 94,527   $ 70,172
Small Cap Value(1)           $________         --         --
Small Cap Growth(1)          $________         --         --
International Stock          $________   $157,270   $114,348

FUND                            2007       2006       2005
--------------------------   ---------   --------   --------
Conservative Allocation(2)   $________         --         --
Moderate Allocation(2)       $________   $     18         --
Aggressive Allocation(2)     $________   $     18         --

                             CARRYOVER EXPIRING IN:
                             -------------------------------------------------------------------------------------
FUND                           2008       2009       2010       2011       2012       2013       2014       2015
--------------------------   --------   --------   --------   --------   --------   --------   --------   --------
CASH RESERVES                $_______   $_______   $_______   $_______   $_______   $_______   $_______   $_______
BOND                         $_______   $_______   $_______   $_______   $_______   $_______   $_______   $_______
HIGH INCOME                  $_______   $_______   $_______   $_______   $_______   $_______   $_______   $_______
DIVERSIFIED INCOME           $_______   $_______   $_______   $_______   $_______   $_______   $_______   $_______
LARGE CAP VALUE              $_______   $_______   $_______   $_______   $_______   $_______   $_______   $_______
LARGE CAP GROWTH             $_______   $_______   $_______   $_______   $_______   $_______   $_______   $_______
MID CAP VALUE                $_______   $_______   $_______   $_______   $_______   $_______   $_______   $_______
MID CAP GROWTH               $_______   $_______   $_______   $_______   $_______   $_______   $_______   $_______
SMALL CAP VALUE(1)           $_______   $_______   $_______   $_______   $_______   $_______   $_______   $_______
SMALL CAP GROWTH(1)          $_______   $_______   $_______   $_______   $_______   $_______   $_______   $_______
INTERNATIONAL STOCK          $_______   $_______   $_______   $_______   $_______   $_______   $_______   $_______
CONSERVATIVE ALLOCATION(2)   $_______   $_______   $_______   $_______   $_______   $_______   $_______   $_______
MODERATE ALLOCATION(2)       $_______   $_______   $_______   $_______   $_______   $_______   $_______   $_______
AGGRESSIVE ALLOCATION(2)     $_______   $_______   $_______   $_______   $_______   $_______   $_______   $_______

                        ERISA PLANS                                  NON-ERISA PLANS
                      --------------   --------------------------------------------------------------------------
                       401(A) PLAN,
      TYPE OF         401(K) PLAN OR     SUPPLEMENTAL                              IRA OR         NON-RETIREMENT
   DISTRIBUTION         403(B) PLAN       403(B) PLAN         457 PLAN          IRA ROLLOVER           PLAN
-------------------   --------------   ----------------   ----------------   -----------------   ----------------
Death or Disability   Waived           Waived             Waived             Waived              Waived

                                                                             Waived for
                                                                             mandatory
                                                                             distributions or    Waived for up to
                                                                             up to 12% of        12% of account
                                                                             account value       value annually
                                                                             annually in         in periodic
Over 70 1/2           Waived           Waived             Waived             periodic payments   payments

                                                                             Waived for Life
                                                                             Expectancy or up    Waived for up to
                                                                             to 12% of           12% of account
                                                                             account value       value annually
Between                                                                      annually in         in periodic
59 1/2 and 70 1/2     Waived           Waived             Waived             periodic payments   payments

                                       Waived for         Waived for         Waived for
                                       annuity payments   annuity payments   annuity payments
                                       (72t) or up to     (72t) or up to     (72t) or up to      Waived for up to
                                       12% of account     12% of account     12% of account      12% of account
                                       value annually     value annually     value annually      value annually
                                       in periodic        in periodic        in periodic         in periodic
Under 59 1/2          Waived           payments           payments           payments            payments

Loans                 Waived           Waived             N/A                N/A                 N/A

Termination of Plan   Not Waived       Not Waived         Not Waived         Not Waived          N/A

Hardships             Waived           Waived             Waived             N/A                 N/A

Return of Excess      Waived           Waived             Waived             Waived              N/A