STATEMENT OF ADDITIONAL INFORMATION

MEMBERS 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 prospectus for the MEMBERS Mutual Funds, which is referred to herein. The prospectus concisely sets forth information that a prospective investor should know before investing. For a copy of the prospectus, dated February 2000, call 1-800-877-6089 or write MEMBERS Mutual Funds, P.O. Box 60569, King of Prussia, PA 19406-0569.

February 28, 2000

TABLE OF CONTENTS Page

GENERAL INFORMATION...........................................................3

INVESTMENT PRACTICES..........................................................3
         Lending Portfolio Securities.........................................3
         Restricted and Illiquid Securities...................................3
         Options on Securities and Securities Indices.........................4
         Futures Contracts and Options on Futures Contracts...................6
         Foreign Transactions.................................................9
         Certain Bond Fund Practices.........................................14
         Lower-Rated Corporate Debt Securities...............................14
         Other Debt Securities...............................................15
         Convertible Securities..............................................17
         Repurchase Agreements...............................................17
         Reverse Repurchase Agreements.......................................17
         Government Securities...............................................18
         Forward Commitment and When-Issued Securities.......................18
         Mortgage-Backed and Asset-Backed Securities.........................19
         Other Securities Related to Mortgages...............................19
         Real Estate Investment Trusts.......................................22
         Practices that are Authorized but not Presently Employed............22
         Types of Investment Risk............................................23
         Higher-Risk Securities and Practices................................24

INVESTMENT LIMITATIONS.......................................................28

TEMPORARY DEFENSIVE POSITIONS................................................29

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

MANAGEMENT OF THE TRUST......................................................30
         Trustees and Officers...............................................30
         Trustee Compensation................................................31

SALES LOAD WAIVERS FOR CERTAIN AFFILIATED PERSONS OF THE TRUST...............32

CONTROL PERSONS AND PRINCIPAL HOLDERS OF THE TRUST'S SECURITIES..............32

PORTFOLIO MANAGEMENT.........................................................33
         The Management Agreement with CIMCO Inc.............................33
         CIMCO Inc...........................................................34
         The Management Agreements with Subadvisers..........................35
         The Subadviser for the High Income Fund.............................35
         The Subadvisers for the Emerging Growth Fund........................35
         The Subadvisers for the International Stock Fund....................36

DISTRIBUTION (12b-1) PLANS AND AGREEMENT.....................................36

TRANSFER AGENT...............................................................38

CUSTODIAN....................................................................38

INDEPENDENT AUDITORS.........................................................38

BROKERAGE....................................................................38

HOW SECURITIES ARE OFFERED...................................................40
         Shares of Beneficial Interest.......................................40
         Voting Rights.......................................................40
         Limitation of Shareholder Liability.................................41
         Limitation of Trustee and Officer Liability.........................41
         Limitation of Interseries Liability.................................41

MORE ABOUT PURCHASING AND SELLING SHARES.....................................42
         Offering Price......................................................42
         Initial Sales Charge on Class A Shares..............................42
         Deferred Sales Charge on Class B Shares.............................43
         Special Redemptions.................................................46

NET ASSET VALUE OF SHARES....................................................46
         Cash Reserves Fund..................................................46
         Valuation Procedures................................................47

ADDITIONAL INVESTOR SERVICES AND PROGRAMS....................................48
         Systematic Investment Program.......................................48
         Systematic Withdrawal Program.......................................48
         Exchange Privilege and Systematic Exchange Program..................48
         Reinstatement or Reinvestment Privilege.............................49

DIVIDENDS, DISTRIBUTIONS AND TAXES...........................................49
         Options and Futures Transactions....................................52
         Straddles...........................................................52
         Distributor.........................................................54

CALCULATION OF YIELDS AND TOTAL RETURNS......................................54
         Cash Reserves Fund Yields...........................................54
         Other Fund Yields...................................................56
         Average Annual Total Returns........................................56
         Other Total Returns.................................................57

LEGAL COUNSEL................................................................57

FINANCIAL STATEMENTS.........................................................57

GENERAL INFORMATION


The MEMBERS  Mutual Funds (the "Trust") is an investment  company  consisting of

eight separate investment portfolios or funds (each, a "fund") each of which has a different investment objective(s). Each fund is a diversified, open-end management investment company, commonly known as a mutual fund. The eight funds are: Cash Reserves, Bond, Balanced, High Income, Growth and Income, Capital Appreciation, Emerging Growth and International Stock.

The Trust was formed as a business trust under the laws of the State of Delaware on May 21, 1997. As a Delaware business trust, the Trust's operations are governed by its Declaration of Trust dated May 16, 1997 (the "Declaration") and 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, 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

MEMBERS Mutual Funds is a diversified open-end management investment company consisting of eight individual investment portfolio or funds, each with its own investment objective and policies. The prospectus describes the investment objective and policies of each of the eight funds. The following information is provided for those investors wishing to have more comprehensive information than that contained in the prospectus.

Lending Portfolio Securities

All funds, except the Cash Reserves Fund, may lend portfolio securities. Such loans will be made only in accordance with guidelines established by the Trustees and on the request of broker-dealers or institutional investors deemed qualified, and only when the borrower agrees to maintain cash or other liquid assets as collateral with the fund equal at all times to at least 100% of the value of the securities. The fund will continue to receive interest or dividends on the securities loaned and will, at the same time, earn an agreed-upon amount of interest on the collateral which will be invested in readily marketable obligations of high quality. The fund will retain the right to call the loaned securities and intends to call loaned voting securities if important shareholder meetings are imminent. Such security loans will not be made if, as a result, the aggregate of such loans exceeds 30% of the value of the fund's assets. The fund may terminate such loans at any time. 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 sufficient to replace the full amount of the loaned securities. To mitigate this risk, loans will be made only to firms deemed by the funds' investment adviser, CIMCO Inc. ("CIMCO"), to be creditworthy and will not be made unless, in CIMCO'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 on page 24 (Higher risk securities and practice table). CIMCO or the 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. 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 include most 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 (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 that are determined to be liquid by the Trust's board of trustees or by the Investment Adviser under board-approved procedures. Such guidelines would take into account trading activity for such securities and the availability of reliable pricing information, 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 Fund and the High Income Fund 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.

Options on Securities and Securities Indices

Writing Options. All of the funds (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 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 forego 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 high grade debt 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 the 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, a written call option or put option may be covered by maintaining cash or liquid, high grade debt securities (either of which may be denominated in any currency) in a segregated account with its 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.

The funds (other than 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 high-grade debt 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. The funds (other than 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.

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

Yield Curve Options. The Bond, Balanced, and High 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, the 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. The 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, Balanced, or High Income Funds will be "covered." A call (or put) option is covered if the 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, high grade debt securities sufficient to cover the fund's net liability under the two options. Therefore, the 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.

The funds (other than 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 Securities and Exchange Commission (the "Commission") 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.

Futures Contracts and Options on Futures Contracts

The funds (other than 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 ("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 (other than the Cash Reserves 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. These 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 portfolio securities or 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 the fund or securities with characteristics similar to those of a 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 than 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 only for bona fide hedging or to seek to increase total return to the extent permitted by CFTC regulations. 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, i.e., 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 75% or more 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.

As an alternative to literal compliance with the bona fide hedging definition, a CFTC regulation permits a fund to elect to comply with a different test, under which the aggregate initial margin and premiums required to establish positions in futures contracts and options on futures for the purpose of seeking to increase total return will not exceed 5 percent of the net asset value of the fund's portfolio, after taking into account unrealized profits and losses on any such positions and excluding the amount by which such options were in-the-money at the time of purchase. 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 "Dividends, Distributions, and Taxes" 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 liquid high grade debt 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 because no futures contracts based on individual equity securities are currently available. 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.

Foreign Transactions

Foreign Securities. Each fund may invest in foreign securities (as defined below), although 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 on foreign securities is set forth in the prospectus.

Foreign securities means securities that are: (1) issued by companies organized outside the U.S. or whose principal operations are outside the U.S. ("foreign issuers"), (2) issued by foreign governments or their agencies or instrumentalities (also "foreign issuers"), (3) principally traded outside of the U.S., or (4) quoted or denominated in a foreign currency ("non-dollar securities"). Foreign securities include ADRs, EDRs, GDRs, and foreign money market securities.

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

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

Foreign issuers are not generally subject to uniform accounting, auditing and financial reporting standards comparable to those applicable to domestic companies. There may be less publicly available information about a foreign issuer than about a domestic one. In addition, there is generally less government regulation of stock exchanges, brokers, and listed and unlisted issuers in foreign countries than in the U.S. Furthermore, with respect to certain foreign countries, there is a possibility of expropriation or confiscatory taxation, imposition of withholding taxes on dividend or interest payments, limitations on the removal of funds or other assets of the fund making the investment, or political or social instability or diplomatic developments which could affect investments in those countries.

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

Investments in ADRs, EDRs and GDRs. Many securities of foreign issuers are represented by American depository receipts ("ADRs"), European depository receipts ("EDRs") and global depository receipts ("GDRs"). Each of the funds may invest in ADRs, and each of the funds other than the 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 NASD's national market system. The information available for ADRs is subject to the accounting, auditing and financial reporting standards of the domestic market or exchange on which they are traded, which standards are more uniform and more exacting than those to which many foreign issuers may be subject.

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

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

Investments in Emerging Markets. The High Income and International Stock Funds may invest in securities of issuers located in countries with emerging economies and/or securities markets. These countries are located in the Asia Pacific region, Eastern Europe, Central and South America and Africa. Political and economic structures in many of these countries may be undergoing significant evolution and rapid development, and such countries may lack the social, political and economic stability characteristic of more developed countries. Certain of these countries may have in the past failed to recognize private property rights and have at times nationalized or expropriated the assets of private companies. As a result, the risks of foreign investment generally, including the risks of nationalization or expropriation of assets, may be heightened. In addition, unanticipated political or social developments may affect the values of a fund's investments in those countries and the 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 the High Income and International Stock Funds' investments in such countries illiquid and more volatile than investments in Japan or most Western European countries, and these funds may be required to establish special custody or other arrangements before making certain investments in those countries. There may be little financial or accounting information available with respect to issuers located in certain of such countries, and it may be difficult as a result to assess the value or prospects of an investment in such issuers.

A fund's purchase or sale of portfolio securities in certain emerging markets may be constrained by limitations as to daily changes in the prices of listed securities, periodic trading or settlement volume and/or limitations on aggregate holdings of foreign investors. Such limitations may be computed based on aggregate trading volume by or holdings of a fund, CIMCO and 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 Generally. Because investment in foreign issuers will usually involve currencies of foreign countries, and because the High Income, Emerging Growth, and International Stock Funds may have currency exposure independent of their securities positions, the value of the assets of these funds, as measured in U.S. dollars, will be affected by changes in foreign currency exchange rates.

An issuer of securities purchased by a fund may be domiciled in a country other than the country in whose currency the instrument is denominated or quoted. The High Income, Emerging Growth, 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 two funds may invest in securities quoted or denominated in other currency "baskets."

Currency exchange rates may fluctuate significantly over short periods of time causing, along with other factors, a fund's NAV to fluctuate as well. They generally are determined by the forces of supply and demand in the foreign exchange markets and the relative merits of investments in different countries, actual or anticipated changes in interest rates and other complex factors, as seen from an international perspective. Currency exchange rates also can be affected unpredictably by intervention by U.S. or foreign governments or central banks, or the failure to intervene, or by currency controls or political developments in the U.S. or abroad. The market in forward foreign currency exchange contracts, currency swaps and other privately negotiated currency instruments offers less protection against defaults by the other party to such instruments than is available for currency instruments traded on an exchange. To the extent that a substantial portion of a fund's total assets, adjusted to reflect the fund's net position after giving effect to currency transactions, is denominated or quoted in the currencies of foreign countries, the fund will be more susceptible to the risk of adverse economic and political developments within those countries.

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

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

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

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

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

Options on Foreign Currencies. The High Income and International Stock Funds may also purchase and sell (write) put and call options on foreign currencies for the purpose of protecting against declines in the U.S. dollar value of foreign portfolio securities and anticipated dividends on such securities and against increases in the U.S. dollar cost of foreign securities to be acquired. These funds may use options on currency to cross-hedge, which involves writing or purchasing options on one currency to hedge against changes in exchange rates for a different currency, if there is a pattern of correlation between the two currencies. As with other kinds of option transactions, however, the writing of an option on foreign currency will constitute only a partial hedge, up to the amount of the premium received. A fund could be required to purchase or sell foreign currencies at disadvantageous exchange rates, thereby incurring losses. The purchase of an option on foreign currency may constitute an effective hedge against exchange rate fluctuations; however, in the event of exchange rate movements adverse to a fund's position, the fund may forfeit the entire amount of the premium plus related transaction costs. In addition, these funds may purchase call or put options on currency to seek to increase total return when the fund's Investment Adviser anticipates that the currency will appreciate or depreciate in value, but the securities quoted or denominated in that currency do not present attractive investment opportunities and are not held in the fund's portfolio. When purchased or sold to increase total return, options on currencies are considered speculative. Options on foreign currencies to be written or purchased by these funds will be traded on U.S. and foreign exchanges or over-the-counter. See "Stock Index Futures and Related Options" above for a discussion of the liquidity risks associated with options transactions.

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

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

The High Income Fund and International Stock Fund may each 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" chart 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 the fund.

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

Interest Rate Swaps, Currency Swaps and Interest Rate Caps, Floors and Collars. The High Income Fund and International Stock Fund may each enter into interest rate and currency swaps for hedging purposes and to seek to increase total return. The High Income Fund may also enter into special interest rate swap arrangements such as caps, floors and collars for both hedging purposes and to seek to increase total return. The High Income Fund typically uses interest rate swaps to shorten the effective duration of its portfolio. Interest rate swaps involve the exchange by the High Income Fund with another party of their respective commitments to pay or receive interest, such as an exchange of fixed rate payments for floating rate payments. Currency swaps involve the exchange by the funds with another party of their respective rights to make or receive payments in specified currencies. The purchase of an interest rate cap entitles the purchaser to receive from the seller of the cap payments of interest on a notional amount equal to the amount by which a specified index exceeds a stated interest rate. The purchase of an interest rate floor entitles the purchaser to receive from the seller of the floor payments of interest on a notional amount equal to the amount by which a specified index falls below a stated interest rate. An interest rate collar is the combination of a cap and a floor that preserves a certain return within a stated range of interest rates. Since interest rate swaps, currency swaps and interest rate caps, floors and collars are individually negotiated, these two funds expect to achieve an acceptable degree of correlation between their portfolio investments and their interest rate or currency swap positions entered into for hedging purposes.

The High Income Fund only enters into interest rate swaps on a net basis, which means the two payment streams are netted out, with the fund receiving or paying, as the case may be, only the net amount of the two payments. Interest rate swaps do not involve the delivery of securities, or underlying assets or principal. Accordingly, the risk of loss with respect to interest rate swaps is limited to the net amount of interest payments that the fund is contractually obligated to make. If the other party to an interest rate swap defaults, the fund's risk of loss consists of the net amount of interest payments that the fund is contractually entitled to receive. In contrast, currency swaps usually involve the delivery of the entire principal value of one designated currency in exchange for the other designated currency. Therefore, the entire principal value of a currency swap is subject to the risk that the other party to the swap will default on its contractual delivery obligations. The Trust maintains in a segregated account with its custodian, cash or liquid securities equal to the net amount, if any, of the excess of each fund's obligations over its entitlements with respect to swap transactions. Neither fund enters into swap transactions unless the unsecured commercial paper, senior debt or claims paying ability of the other party is considered investment grade by such fund's Investment Adviser.

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

Inasmuch as swaps are entered into for good faith hedging purposes or are offset by a segregated account as described below, neither fund's Investment Adviser believe that swaps constitute senior securities as defined in the Act and, accordingly, will not treat swaps as being subject to such fund's borrowing restrictions. An amount of cash or liquid, high grade debt securities having an aggregate net asset value at least equal to the entire amount of the payment stream payable by the fund will be maintained in a sewed account by the fund's custodian. A fund will not enter into any interest rate swap (including caps, floors and collars) or currency swap unless the credit quality of the unsecured senior debt or the claim paying ability of the other party thereto is considered to be investment grade by the fund's Investment Adviser. If there is a default by the other party to such a transaction, the fund will have contractual remedies pursuant to the agreement, related to the transaction. The swap market has grown substantially in recent years with a large number of banks and investment banking firms acting both as principals and as agents utilizing standardized swap documentation. As a result, the swap market has become relatively liquid comparison with the markets for other similar instruments which are traded in the interbank market. Nevertheless, the staff of the Commission takes the position that currency swaps are illiquid investments subject to these funds' 15% limitation on such investments.

Certain Bond Fund Practices

The Bond, High Income and Balanced Funds (collectively, the "Bond Funds") invest a significant portion of their assets in debt securities. As stated in the prospectus, the Bond Fund and Balanced Fund will emphasize investment grade, primarily intermediate term securities. If an investment grade security is downgraded by the rating agencies or otherwise falls below the investment quality standards stated in the prospectus, management will retain that instrument only if management believes it is in the best interest of the fund. Management does not currently intend to invest more than ten percent (10%) of the total assets of either the Bond Fund or Balanced Fund in corporate debt securities which are not in the four highest ratings by Standard & Poor's Rating Group ("Standard & Poor's") or by Moody's Investors Service, Inc. ("Moody's") ("non-investment grade" or "junk" securities), but, on occasion, each fund may do so. The High Income Fund may invest all of its assets in non-investment grade securities. See "Non-Investment Grade Securities" below for a description of these securities and their attendant risks and "Ratings" below for a description of the rating categories.

All three Bond Funds may also invest in debt options, interest rate futures contracts, and options on interest rate futures contracts, and may utilize interest rate futures and options to manage the risk of fluctuating interest rates. These instruments will be used to control risk or obtain additional income and not with a view toward speculation. The Bond Fund and Balanced Fund will invest only in futures and options which are traded on U.S. exchanges or boards of trade. The High Income Fund may invest in non-U.S. futures and options.

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

Lower-Rated Corporate Debt Securities

As described in the prospectus, each fund, other than the 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 & Poors 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). (See "Ratings" below for a description of the rating categories.)

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

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

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

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

Lower-rated (and comparable non-rated) securities tend to offer higher yields than higher-rated securities with the same maturities because the historical financial condition of the issuers of such securities may not have been as strong as that of other issuers. 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. The Investment Adviser will attempt to reduce these risks through diversification of these funds' portfolios and by analysis of each issuer and its ability to make timely payments of income and principal, as well as broad economic trends in corporate developments.

Other Debt Securities

U.S. Government Securities. All of the funds may purchase U.S. Government Securities. U.S. Government Securities are obligations issued or guaranteed by the U.S. Government, its agencies, authorities or instrumentalities. Some U.S. Government Securities, such as Treasury bills, notes and bonds, which differ only in their interest rates, maturities and times of issuance, are supported by the full faith and credit of the United States. Others, such as obligations issued or guaranteed by U.S. Government agencies, authorities or instrumentalities are supported either by (a) the full faith and credit of the U.S. Government (such as securities of the Small Business Administration), (b) the right of the issuer to borrow from the Treasury (such as securities of the Federal Home Loan Banks), (c) the discretionary authority of the U.S. Government to purchase the agency's obligations (such as securities of the Federal National Mortgage Association), or (d) only the credit of the issuer. No assurance can be given that the U.S. Government will provide financial support to U.S. Government agencies, authorities or instrumentalities in the future. U.S. Government Securities may also include zero coupon bonds.

Each fund may also 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").

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

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

Zero coupon bonds are debt obligations that do not entitle the holder to any periodic payments of interest prior to maturity or provide for a specified cash payment date when the bonds begin paying current interest. As a result, zero coupon bonds are generally issued and traded at a significant discount from their face value. The discount approximates the present value amount of interest the bonds would have accrued and compounded over the period until matured.

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

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

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

Foreign Government Securities. All of the funds may invest in debt obligations of foreign governments and governmental agencies, including those of emerging countries. Investment in sovereign debt obligations involves special risks not present in debt obligations of corporate issuers. The issuer of the debt or the governmental authorities that control the repayment of the debt may be unable or unwilling to repay principal or interest when due in accordance with the terms of such debt, and the funds may have limited recourse in the event of a default. Periods of economic uncertainty may result in the volatility of market prices of sovereign debt, and in turn the fund's net asset value, to a greater extent than the volatility inherent in debt obligations of U.S. issuers. A sovereign debtor's willingness or ability to repay principal and pay interest in a timely manner may be affected by, among other factors, its cash flow situation, the extent of its foreign currency reserves, the availability of sufficient foreign exchange on the date a payment is due, the relative size of the debt service burden to the economy as a whole, the sovereign debtor's policy toward principal international lenders and the political constraints to which a sovereign debtor may be subject.

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

Convertible Securities

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

Repurchase Agreements

Each fund may enter into repurchase agreements. In a repurchase agreement, a security is purchased for a relatively short period (usually not more than 7 days) subject to the obligation to sell it back to the issuer at a fixed time and price plus accrued interest. The funds will enter into repurchase agreements only with member banks of the Federal Reserve System and with "primary dealers" in U.S. Government securities. The Investment Adviser will continuously monitor the creditworthiness of the parties with whom the funds enter into repurchase agreements.

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

Reverse Repurchase Agreements

Each fund may also enter into reverse  repurchase  agreements  which involve the
sale of U.S.  Government  securities  held in its  portfolio  to a bank  with an

agreement that the fund will buy back the securities at a fixed future date at a fixed price plus an agreed amount of "interest" which may be reflected in the repurchase price. Reverse repurchase agreements are considered to be borrowings by the fund entering into them. Reverse repurchase agreements involve the risk that the market value of securities purchased by the fund with proceeds of the transaction may decline below the repurchase price of the securities sold by the fund which it is obligated to repurchase. A fund that has entered into a reverse repurchase agreement will also continue to be subject to the risk of a decline in the market value of the securities sold under the agreements because it will reacquire those securities upon effecting their repurchase. To minimize various risks associated with reverse repurchase agreements, each fund will establish and maintain with the Trust's custodian a separate account consisting of liquid securities, of any type or maturity, in an amount at least equal to the repurchase prices of the securities (plus any accrued interest thereon) under such agreements. No fund will enter into reverse repurchase agreements and other borrowings (except from banks as a temporary measure for extraordinary emergency purposes) in amounts in excess of 30% of the fund's total assets (including the amount borrowed) taken at market value. No fund will use leverage to attempt to increase income. No fund will purchase securities while outstanding borrowings exceed 5% of the fund's total assets. Each fund will enter into reverse repurchase agreements only with federally insured banks which are approved in advance as being creditworthy by the Trustees. Under procedures established by the Trustees, the Investment Adviser will monitor the creditworthiness of the banks involved.

Government Securities

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., 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.

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

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 available and for which a market exists, but which have not been issued. Each fund will engage in when-issued transactions with respect to securities purchased for its portfolio in order to obtain what is considered to be an advantageous price and yield at the time of the transaction. For when-issued transactions, no payment is made until delivery is due, often a month or more after the purchase. In a forward commitment transaction, a fund contracts to purchase securities for a fixed price at a future date beyond customary settlement time.

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

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

Mortgage-Backed and Asset-Backed Securities

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

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

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

The Cash Reserves Fund and Bond Fund may invest in mortgage-backed and asset-backed securities that represent mortgage, commercial or consumer loans originated by credit unions or other financial institutions. To the extent permitted by law and available in the market, such investments may constitute a significant portion of each fund's investments. Subject to the appropriate regulatory approvals, the Cash Reserves Fund and Bond Fund may purchase securities issued by pools that are structured, serviced, or otherwise supported by CIMCO or its affiliates.

Other Securities Related to Mortgages

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

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

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

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

FHLMC was created by Congress in 1970 as a corporate instrumentality of the U.S. Government for the purpose of increasing the availability of mortgage credit for residential housing. FHLMC issues Participation Certificates ("PCS") which represent interest in conventional mortgages (i.e., not federally insured or guaranteed) from FHLMC's national portfolio. FHLMC guarantees timely payment of interest and ultimate collection of principal regardless of the status of the underlying mortgage loans.

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

Collateralized Mortgage Obligations and Multiclass Pass-Through Securities. The High Income Fund may invest a portion of its assets in collateralized mortgage obligations or "CMOs", which are debt obligations collateralized by mortgage loans or mortgage pass-through securities. Typically, CMOs are collateralized by certificates issued by GNMA, FNMA or FHLMC, but also may be collateralized by whole loans or private mortgage pass-through securities (such collateral collectively hereinafter referred to as "Mortgage Assets"). The High Income Fund may also invest a portion of its assets in multiclass pass-through securities which are equity interests in a trust composed of Mortgage Assets. Unless the context indicates otherwise, all references herein to CMOs include multiclass pass-through securities. Payments of principal of and interest on the Mortgage Assets, and any reinvestment income thereon, provide the funds to pay debt service on the CMOs or make scheduled distributions on the multiclass pass-through securities. CMOs may be issued by agencies or instrumentalities of the United States government or by private originators of, or investors in, mortgage loans, including credit unions, savings and loan associations, mortgage banks, commercial banks, investment banks and special purpose subsidiaries of the foregoing. The issuer of a series of CMOs may elect to be treated as a Real Estate Mortgage Investment Conduit (a "REMIC").

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

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

Stripped Mortgage-Backed Securities. The High Income Fund may invest a portion of its assets in stripped mortgage-backed securities ("SMBS") which are derivative multiclass mortgage securities issued by agencies or instrumentalities of the United States government or by private originators of, or investors in, mortgage loans, including savings and loan associations, mortgage banks, commercial banks and investment banks.

SMBS are usually structured with two classes that receive different proportions of the interest and principal distributions from a pool of Mortgage Assets. A common type of SMBS will have one class receiving some of the interest and most of the principal from the Mortgage Assets, while another class receives most of the interest and the remainder of the principal. In the most extreme case, one class will receive an "IO" (the right to receive all of the interest) while the other class will receive a "PO" (the right to receive all of the principal). The yield to maturity on an IO is extremely sensitive to the rate of principal payments (including prepayments) on the related underlying Mortgage Assets, and a rapid rate of principal payments may have a material adverse effect on such security's yield to maturity. If the underlying Mortgage Assets experience greater than anticipated prepayments of principal, the High Income Fund may fail to fully recoup its initial investment in these securities. The market value of the class consisting primarily or entirely of principal payments generally is unusually volatile in response to changes in interest rates. Because SMBS were only recently introduced, established trading markets for these securities have not yet developed, although the securities are traded among institutional investors and investment banking firms.

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

Real Estate Investment Trusts

The Bond, Balanced, High Income, Emerging Growth and Growth and Income Funds 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 of 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 risks.

Practices that are Authorized but not Presently Employed

No fund (other than the International Stock Fund) has a current intention of investing in options, financial futures, stock index futures and related options in the foreseeable future. No fund has a current intention of engaging in the lending of portfolio securities in the foreseeable future. If any fund uses one of these practices in the foreseeable future, no more than 10% of the fund's total assets will be at risk thereby.

All of the funds may invest in foreign securities, although only the International Stock Fund and the High Income Fund are expected to do so with any regularity. However, all of the funds may, and are expected to, invest in American Depository Receipts ("ADRs") traded on U.S. exchanges. ADRs represent shares of foreign issues traded on foreign exchanges and may have many of the risks associated with foreign securities.

If a fund enters into futures contracts or call options thereon, reverse repurchase agreements, firm commitment agreements or standby commitment agreements, the fund will obtain approval from the Board of Trustees to establish a segregated account with the fund's custodian. The segregated account will hold liquid assets and the cash value of the segregated account will be not less than the market value of the futures contracts and call options thereon, reverse repurchase agreements, firm commitment agreements and standby commitment agreements.

Security or Practice             Description                                          Related Risks

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

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

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

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

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

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

Foreign Securities               Securities issued by companies organized or whose    Market, currency,
                                 principal operations are outside the U.S.,           information, natural event,
                                 securities issued by companies whose securities      and political risks.
                                 are principally traded outside the U.S., or
                                 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   Currency, liquidity, and
Exchange Contracts               or sell a given amount of foreign currency at a      leverage risks.  When used
                                 specified price and future 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   Interest rate, currency,
financial futures contracts)     amount of a commodity, financial instrument, or      market, hedging or
                                 index at a particular price on a stipulated future   speculation, leverage,
                                 date. Financial futures contracts include interest   correlation, liquidity,
                                 rate futures contracts, securities index futures     credit, and opportunity
                                 contracts, and currency futures contracts.  Unlike   risks.
                                 an option, a futures contract obligates the buyer
                                 to buy and the seller to sell the 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   Liquidity,  valuation and
                                 to sell at the time the fund would like to sell it   market  risks.
                                 for the price at which the fund values it.

Mortgage-Backed Securities       Securities backed by pools of mortgages, including   Credit,    extension,
                                 passthrough certificates,  planned amortization      prepayment,   and  interest
                                 classes (PACs), targeted amortization classes        rate  risks.
                                 (TACs),   collateralized  mortgage  obligations
                                 (CMOs),  and when available,  pools of mortgage
                                 loans generated by credit unions.

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

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

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

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

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

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

Shares of Other Investment       The purchase of shares issued by other investment    Market risks and the
Companies                        companies.  These investments are subject to the     layering of fees and
                                 fees and expenses of both the MEMBERS Mutual Funds   expenses.
                                 and the other investment company.

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

Smaller Capitalization           The purchase of securities issued by a company       Market risk.
Companies                        with a market capitalization (i.e., the price per
                                 share of its common stock multiplied by the number
                                 of shares of common stock outstanding) of less
                                 than $1 billion.

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

                                                                                               Growth    Capital
                                                    Cash                             High       and       Appre-   Emerging   Int'l
                                                  Reserves     Bond     Balanced    Income     Income    ciation    Growth    Stock
Investment Practices
Borrowing; Reverse Repurchase Agreements             30         30         30         30         30        30         30        30
Repurchase Agreements                                 *          *          *          *          *         *          *         *
Securities Lending                                    X         30         30         30         30        30         30        30
Short-term Trading                                    *          *          *          *          *         *          *         *
When-Issued Securities; Forward Commitments          25         25         25         25         25        25          *        25
Conventional Securities
Shares of Other Investment Companies                  X         10**       10**       10**       10**      10**       10**      10**
Non-Investment Grade Securities                       X         20         10          *          5         5          5         5
Foreign Securities                                   25(1)      20         25         50         25        25         25         *
Emerging Market Securities                            X         10         10         25          X         X         10        25
Illiquid Securities(2)                               10         15         15         15         10        10         15        15
Restricted Securities                                25**       15         15         30**       10        10         15        15
Mortgage-backed Securities; REITs                     X         30         15         30         10         X          0         X
Derivative Securities and Contracts
Options and Futures Contracts
o  Options on Securities or Indices                   X         10**       10**       10**       10**      10**       10**      10
o  Futures Contracts(3)                               X          5**        5**        5**        5**       5**        5**       5
o  Options on Futures Contracts(3)                    X         10**       10**       10**       10**      10**       10**      10
Forward Foreign Currency Exchange Contracts           X          X          X         10          X         X         10        10

Cash Reserves Fund         25%, but limited to U.S. dollar denominated
                                foreign money market securities
Bond Fund                  20%
Balanced Fund              25%
High Income Fund           50%
Growth and Income Fund     25%
Capital Appreciation Fund  25%
Emerging Growth Fund       25%
International Stock Fund   100%

Name, Address                        Position(s) Held            Principal Occupation
and Age                              with the Fund               During Past Five Years

Michael S. Daubs*                     Trustee (Chairman)         CIMCO Inc.
 5910 Mineral Point Road              1997 - Present             President, 1982 - Present
Madison, WI 53705
Age - 56                                                         CUNA Mutual Insurance Society
                                                                 Chief Officer - Investments
                                                                 1990 - Present

                                                                 CUNA Mutual Life Insurance Company
                                                                 Chief Officer - Investments
                                                                 1973 - Present

Lawrence R. Halverson*                Trustee, President and     CIMCO Inc.
5910 Mineral Point Road               Principal Executive        Senior Vice President, 1996 - Present
Madison, WI 53705                     Officer                    Vice President, 1987 - 1996
Age - 54                              1997 - Present             Secretary, 1992 - Present

                                                                 CUNA Brokerage Services, Inc.
                                                                 President
                                                                 1996 - 1998

Holly S. Baggot*                      Secretary and Assistant    CIMCO Inc.
5910 Mineral Point Road               Treasurer                  Operations & Administration Manager  - MEMBERS Mutual
Madison, WI 53705                     1999 - Present             Funds
Age - 39                                                         1998 - Present
                                                                 Investment Project Mgr. -  Mutual Funds, 1997

                                                                 Mayor, City of Madison
                                                                 Secretary to Mayor
                                                                 1989 - 1997

Mary E. Hoffmann*                     Treasurer                  CIMCO Inc.
5910 Mineral Point Road               1998 - Present             Product Operations and Finance Manager
Madison, WI  53705                                               1998 - Present
Age - 30
                                                                 CUNA Mutual Insurance Society
                                                                 Investment Accounting Supervisor
                                                                 1996 - 1998

                                                                 McGladrey and Pullen, LLP
                                                                 (Madison, Wisconsin)
                                                                 Financial Auditor
                                                                 1993 - 1996

Gwendolyn M. Boeke                    Trustee                    Evangelical Lutheran Church in America
2000 Heritage Way                     1997 - Present             (Chicago, Illinois)
Waverly, IA 50677                                                Regional Director, ECLA Foundation
Age - 65                                                         1990 - Present

Alfred L. Disrud                      Trustee                    Planned Giving Services
2000 Heritage Way                     1997 - Present             (Waverly, Iowa)
Waverly, IA 50677                                                Owner
Age - 78                                                         1986 - Present

Keith S. Noah                         Trustee                    Noah, Smith, & Schuknecht, L.L.C.
2000 Heritage Way                     1997 - Present             (Charles City, Iowa)
Waverly, IA 50677                                                Partner
Age - 79                                                         1948 - Present

Thomas C. Watt                        Trustee                    MidAmerica Energy Company (Waterloo, Iowa)
2000 Heritage Way                     1997 - Present             Manager, Business Initiatives
Waverly, IA 50677                                                1987 - 1999
Age - 63
                                                                 Midwest Power Systems, Inc. (Waterloo, Iowa)
                                                                 District Manager
                                                                 1992 - 1997

Trustee Compensation

                           Aggregate Compensation    Total Compensation from
Name of Person, Position        from Trust(1)       Trust and Fund Complex(1)(2)

Michael S. Daubs(3)                None                       None
Lawrence R. Halverson(3)           None                       None
Gwendolyn M. Boeke                $4,000                     $8,000
Alfred L. Disrud                  $4,000                     $8,000
Keith S. Noah                     $4,000                     $8,000
Thomas C. Watt                    $4,000                     $8,000

                                                                                  Growth    Capital     Emerging
                                     Cash                              High        and      Appre-       Growth        Int'l
           Shareholder              Reserves     Bond     Balanced     Income     Income*   ciation       Fund**       Stock

CUNA Mutual Insurance Society        36.750     21.800                                                                 18.019
5910 Mineral Point Road
Madison, WI  53705

CUNA Mutual Life Insurance Co.       36.774     21.814                 66.088                                          10.813
5910 Mineral Point Road
Madison, WI 53705

CUMIS Insurance Society, Inc.                                                                              100.00      64.374
5910 Mineral Point Road
Madison, WI  53705

CUNA Brokerage Services                                    7.448
2000 Heritage Way
Waverly, IA 50677

                                                       Total Advisory Fees
                                                Incurred during the Fiscal Year
Fund                           Management Fee         Ended October 31, 1999

Cash Reserves                      0.40%             $           24,668
Bond                               0.50%                         58,724
Balanced                           0.65%                        235,956
High Income                        0.55%                         78,156
Growth and Income                  0.55%                        273,436
Capital Appreciation               0.75%                        189,945
Emerging Growth                    0.75%                            --
International Stock                1.05%                        350,091

                                               Total     $     1,210,976

Fund                            Other Expense "Cap"
----                            -------------------
Cash Reserves                          0.15%
Bond                                   0.15%
Balanced                               0.20%
High Income                            0.20%
Growth and Income                      0.20%
Capital Appreciation                   0.20%
Emerging Growth                        0.20%
International Stock                    0.30%

Joyce A. Harris               Director and Chair
James C. Hickman              Director
Michael B. Kitchen            Director
Michael S. Daubs              Director and President
George A. Nelson              Director and Vice Chair
Lawrence R. Halverson         Senior Vice President
Jeffrey B. Pantages           Senior Vice President
Thomas J. Merfeld             Vice President and Secretary - Treasurer
Daniel J. Larson              Vice President
Kimberly M. Gant              Assistant Treasurer
Janice C. Doyle               Assistant Secretary
Tracy K. Gunderson            Assistant Secretary
Helen M. Wagabaza             Assistant Secretary

                  Percentage                Net Assets Managed by MFS
                  ----------                -------------------------
                  0.400%                    First $10,000,000
                  0.375%                    Next $90,000,000
                  0.350%                    Next $150,000,000
                  0.325%                    Next $250,000,000
                  0.300%                    Over $500,000,000


Pursuant to the above formula,  CIMCO paid a management fee to MFS in the amount

Percentage                Net Assets Managed by MFS
----------                -------------------------
0.450%                    First $200,000,000
0.400%                    Over $200,000,000

                  Percentage                Net Assets Managed by IAI
                  ----------                -------------------------
                  0.75%                     First $25,000,000
                  0.60%                     Next $25,000,000
                  0.50%                     Over $50,000,000


Pursuant to the above formula,  CIMCO paid a management fee to IAI in the amount

                         ERISA Plans                                  Non-ERISA Plans

                      401(a) Plan,
Type of Distribution  401(k) Plan or     Supplemental                          IRA or             Non-Retirement
                      403(b) Plan        403(b) Plan        457 Plan           IRA Rollover       Plan

Death or Disability   Waived             Waived             Waived             Waived             Waived

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

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

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

Dividends and interest received by a fund may be subject to income,  withholding
or other taxes  imposed by foreign  countries  and U.S.  possessions  that would
reduce the yield on its securities.  Tax conventions  between certain  countries
and the U.S. may reduce or eliminate these foreign taxes,  however,  and foreign
countries  generally  do not  impose  taxes  on  capital  gains  in  respect  of

                    Current Yield = ((NCS - ES)/UV) x (365/7)

Where:

     NCS  = the net change in the value of the Cash Reserves Fund  (exclusive of
          realized  gains or losses  on the sale of  securities  and  unrealized

                 Effective yield = (1 + ((NCS-ES)/UV))365/7 - 1
Where:

     NCS  = the net change in the value of the Cash Reserves Fund  (exclusive of
          realized  gains or losses  on the sale of  securities  and  unrealized

Cash Reserves Fund                      -0.87%
Bond Fund                               -3.55%
Balanced Fund                            7.28%
High Income Fund                         1.40%
Growth and Income Fund                  10.46%
Capital Appreciation Fund               17.06%
International Stock Fund                13.42%

Where:

     CTR  = The cumulative  total return net of any fund  recurring  charges for
          the period.

                                                               Value
         Par Value                                            (Note 2)

 U.S. GOVERNMENT AND AGENCY OBLIGATIONS (A) - 48.95%

                  Federal Home Loan Mortgage Corp. - 20.04%
$        350,000  5.335%, due 11/15/99                     $        349,292
         200,000  5.391%, due 11/24/99                              199,329
         360,000  5.381%, due 12/15/99                              357,696
         300,000  5.168%, due 01/03/00                              297,359
         400,000  5.700%, due 01/10/00                              395,707

                                                                  1,599,383

                  Federal Home Loan Bank - 17.14%
         300,000  5.073%, due 12/08/99                              298,495
         180,000  5.303%, due 12/10/99                              179,002
         100,000  5.413%, due 12/17/99                               99,329
         400,000  5.716%, due 02/15/00                              393,481
         300,000  5.040%, due 03/29/00                              299,939
         100,000  4.997%, due 03/31/00                               98,025

                                                                  1,368,271

                  Federal Farm Credit Bank - 8.64%
         400,000  5.283%, due 11/08/99                              399,600
         291,000  5.384%, due 11/29/99                              289,814

                                                                    689,414

                  Federal National Mortgage Association - 3.13%
         250,000  5.167%, due 11/04/99                              249,896

                  Total U.S. Government and Agency Obligations    3,906,964
                  ( Cost $3,906,964 )

         Finance - 13.19%
300,000  American General Finance Co.
         6.132%, due 02/07/00                              295,157
200,000  General Electric Capital Corp.
         5.161%, due 01/21/00                              197,790
367,000  Goldman Sachs Group LP
         6.028%, due 02/22/00                              360,307
200,000  Merrill Lynch & Co., Inc.
         5.418%, due 11/02/99                              199,970

                                                         1,053,224

         Communication - 8.04%
350,000  AT&T Corp.
         5.802%, due 02/02/00                              344,937
300,000  Bellsouth Telecommunications, Inc.
         5.548%, due 01/18/00                              296,535

                                                           641,472

         Media - 7.46%
300,000  Disney (Walt) Co
         6.055%, due 02/09/00                              295,108
300,000  McGraw Hill Companies
         5.304%, due 11/02/99                              299,957

                                                           595,065

         Technology - 5.94%
300,000  Emerson Electric Co.
         6.131%, due 01/31/00                              295,488
180,000  General Electric Co.
         5.480%, due 12/20/99                              178,692

                                                           474,180

         Consumer Staples - 3.74%
300,000  Procter & Gamble Co.
         5.443%, due 12/03/99                              298,587

         Energy - 3.71%
300,000  Consolidated Natural Gas Corp.
         5.680%, due 01/25/00                              296,140

         Chemicals - 3.71%
300,000  du Pont (E.I.) de Nemours & Co.
         5.996%, due 01/27/00                              295,781

         Utilities - 1.75%
140,000  MDU Resources Group
         5.406%, due 11/10/99                              139,814

         Total Commercial Paper                          3,794,263
         ( Cost $3,794,263 )

         216,740  State Street Eurodollar
                  4.500%, due 11/01/99                              216,740

                  Total Certificate of Deposit                      216,740
                  ( Cost $216,740 )

TOTAL INVESTMENTS - 99.20%.                                       7,917,967
( Cost $7,917,967** )

NET OTHER ASSETS AND LIABILITIES - 0.80%                             63,984

TOTAL NET ASSETS - 100.00%.                               $       7,981,951

                                                               Value
         Par Value                                            (Note 2)

CORPORATE NOTES AND BONDS - 52.97%

                  Finance - 9.64%
$        500,000  Capital One Bank
                  6.760%,  due 07/23/02               $             492,657
         500,000  Ford Motor Credit Co.
                  7.375%,  due 10/28/09                             504,520
         500,000  Pemex Finance, Ltd., 144A (C)
                  9.690%,  due 08/15/09                             497,385

                                                                  1,494,562

                  Energy - 8.92%
         525,000  Occidental Petroleum Co., Senior Note
                  10.125%,  due 11/15/01                            557,004
         500,000  Tosco Corp.
                  8.250%,  due 05/15/03                             515,932
         300,000  YPF Sociedad Anonima, Yankee
                  9.125%,  due 02/24/09                             309,495

                                                                  1,382,431

                  Basic Materials - 6.46%
         500,000  du Pont (E.I.) de Nemours &Co.
                  6.750%,  due 10/15/04                             502,311
         500,000  Rohm & Haas Co., 144A (C)
                  6.950%,  due 07/15/04                             499,032

                                                                  1,001,343

                  Capital Goods - 6.25%
         500,000  Crown Cork & Seal Co., Inc.
                  7.125%,  due 09/01/02                             498,564
         500,000  Owens-Illinois, Inc., Senior Note
                  7.150%,  due 05/15/05                             470,053

                                                                    968,617

                  Retail - 6.08%
         500,000  Autozone, Inc.
                  6.000%,  due 11/01/03                             473,049
         500,000  Great Atlantic & Pacific Tea Co.
                  7.750%,  due 04/15/07                             469,581

                                                                    942,630

                  Industrials - 4.64%
         290,000  Foster Wheeler Corp.
                  6.750%,  due 11/15/05                             247,500
         500,000  Temple-Inland, Inc., MTN
                  6.750%,  due 03/01/09                             471,290

                                                                    718,790

                  Communication - 3.04%
         500,000  Teleglobe, Inc., Yankee
                  7.200%,  due 07/20/09                             470,641

                  Business Services - 2.60%
         415,000  Comdisco, Inc., Senior Note
                  6.000%,  due 01/30/02                             403,356

                  Durable Goods - 1.61%
         250,000  Borg-Warner Automotive, Senior Note
                  8.000%,  due 10/01/19                             249,522

                  Waste Management - 1.51%
         250,000  Waste Management, Inc., Step Coupon (F)
                  7.700%,  due 10/01/02                             234,325

                  Asset-Backed Securities - 1.28%
         200,000  Residential Funding Mortgage Securities II,
                  Series 1998-HI2, Step Coupon, Class A2, ABS (F)
                  6.290%,  due 07/25/13                             198,314

                  Health Services - 0.94%
         150,000  Columbia/HCA Healthcare Corp.
                  6.125%,  due 12/15/00                             146,342

                  Total Corporate Notes and Bonds                 8,210,873
                  ( Cost $8,256,478 )

500,000  10.750%,  due 02/15/03                            569,375
500,000  7.875%,  due 11/15/04                             538,438
500,000  6.500%,  due 08/15/05                             508,906
500,000  7.000%,  due 07/15/06                             522,188
500,000  8.875%,  due 02/15/19                             628,594
500,000  8.125%,  due 08/15/21                             593,125

                                                         3,360,626

         Government National Mortgage Association - 11.06%
390,426  6.250%,  due 07/20/21                             380,673
858,463  6.500%,  due 04/15/26                             823,673
499,359  8.000%,  due 09/20/29                             508,835

                                                         1,713,181

         Federal Home Loan Mortgage Corp. - 6.36%
500,000  6.250%,  due 10/15/02                             499,410
500,000  6.010%,  due 04/26/04                             486,548

                                                           985,958

         Federal National Mortgage Association - 3.89%
375,000  6.520%,  due 03/05/08                             359,147
250,000  7.000%,  due 08/27/12                             243,381

                                                           602,528

         Total U.S. Government and Agency Obligations    6,662,293
         ( Cost $6,643,995 )
                                                      Value
Shares                                               (Note 2)

         768,477  State Street Prime Money Market
                  4.830%                                            768,477

                  Total Investment Company                          768,477
                  ( Cost $768,477 )

                                                               Value
         Par Value                                            (Note 2)

CERTIFICATE OF DEPOSIT - 0.12%

         18,693   State Street Eurodollar
                  4.50%,  due 11/01/99                               18,693

                  Total Certificate of Deposit                       18,693
                  ( Cost $18,693 )

TOTAL INVESTMENTS - 101.04%                                      15,660,336
( Cost $15,687,643** )

NET OTHER ASSETS AND LIABILITIES - (1.04)%                         (161,411)

TOTAL NET ASSETS - 100.00%.                              $       15,498,925

     **   Aggregate cost for Federal tax purposes.

     (C)  Security  sold  within  the  terms of a private  placement  memorandum

         Technology - 13.79%
11,000   3Com Corp.*                              $        319,000
6,700    ADC Telecommunications, Inc.*                     319,506
4,700    Conexant Systems, Inc.*                           438,863
13,800   EMC Corp.*                                      1,007,400
833      Gartner Group, Inc., Class B*                       7,809
10,700   Gateway 2000, Inc.*                               706,869
5,000    Hewlett-Packard Co.                               370,312
11,500   Interim Services, Inc.*                           189,031
6,000    International Business Machines Corp.             590,250
14,200   Keane, Inc.*                                      333,700
3,292    Koninklijke (Royal) Philips Electronics N.V.      342,162
4,000    Micron Technology, Inc.*                          285,250
4,800    Motorola, Inc.                                    467,700
11,600   Seagate Technology, Inc.*                         341,475
7,800    Texas Instruments, Inc.                           700,050

                                                         6,419,377

         Financial Services - 7.64%
12,000   Allstate Corp.                                    345,000
8,196    Bank of America Corp.                             527,617
8,090    Bank One Corp.                                    303,881
10,500   Citigroup, Inc.                                   568,312
8,200    Countrywide Credit Industries, Inc.               278,288
9,400    Household International, Inc.                     419,475
5,900    MBIA, Inc.                                        336,669
2,800    Morgan Stanley Dean Witter & Co.                  308,875
9,800    Wells Fargo Co.                                   469,175

                                                         3,557,292

         Consumer Staples - 6.94%
8,800    Cox Communications, Inc., Class A*                399,850
10,300   CVS Corp.                                         447,406
3,000    General Mills, Inc.                               261,563
7,900    Kimberly-Clark Corp.                              498,687
7,800    MediaOne Group, Inc.*                             554,288
9,100    Nabisco Holdings Corp., Class A                   340,113
7,500    Safeway, Inc.*                                    264,844
10,900   Sara Lee Corp.                                    294,981
11,100   Tyson Foods, Inc., Class A                        169,275

                                                         3,231,007

         Healthcare - 5.49%
6,400    Aetna, Inc.                                       321,600
6,700    ALZA Corp.*                                       286,844
11,700   American Home Products Corp.                      611,325
7,300    Bristol-Myers Squibb Co.                          560,731
3,900    Glaxo Wellcome PLC, ADR                           233,513
2,492    Johnson & Johnson                                 261,037
5,200    Pharmacia & Upjohn, Inc.                          280,475

                                                         2,555,525

         Consumer Cyclical - 4.52%
10,800   Dayton Hudson Corp.                               697,950
7,100    IMS Health, Inc.                                  205,900
16,800   PRIMEDIA, Inc.*                                   187,950
7,500    Sears, Roebuck & Co.                              211,406
9,000    Tiffany & Co.                                     535,500
4,700    Wal-Mart Stores, Inc.                             266,431

                                                         2,105,137

         Energy - 3.72%
5,164    BP Amoco PLC, ADR                                 298,221
3,700    Exxon Corp.                                       274,031
4,500    Kerr-McGee Corp.                                  241,875
6,300    Schlumberger, Ltd.                                381,544
8,000    Unocal Corp.                                      276,000
8,900    USX-Marathon Group                                259,213

                                                         1,730,884

         Communication Services - 3.43%
4,500    AT&T Corp.                                        210,375
4,600    GTE Corp.                                         345,000
5,922    SBC Communications, Inc.                          301,652
3,200    Telefonos de Mexico SA, Class L, ADR              273,600
9,750    Vodafone AirTouch, PLC, ADR                       467,391

                                                         1,598,018

         Capital Goods - 3.40%
2,600    Honeywell, Inc.                                   274,138
3,300    Illinois Tool Works, Inc.                         241,725
10,700   Owens-Illinois, Inc.*                             256,131
10,700   Pall Corp.                                        234,731
4,300    Rockwell International Corp.                      208,281
3,800    United Technologies Corp.                         229,900
7,642    Waste Management, Inc.                            140,422

                                                         1,585,328

         Basic Materials - 2.35%
2,900    Dow Chemical Co.                                  342,925
5,300    Praxair, Inc.                                     247,775
7,300    Rohm and Haas Co.                                 279,225
5,400    Willamette Industries, Inc.                       224,437

                                                         1,094,362

         Transportation - 1.26%
3,500    Delta Air Lines, Inc.                             190,531
6,300    FDX Corp.*                                        271,294
5,100    Norfolk Southern Corp.                            124,631

                                                           586,456

         Utilities - 1.24%
10,000   PG & E Corp.                                      229,375
9,300    Williams Cos., Inc.                               348,750

                                                           578,125

         Total Common Stocks                            25,041,511
         ( Cost $21,058,472 )

         1,500,000 5.500%,  due 08/31/01                          1,491,563
         500,000  5.625%,  due 09/30/01                             498,281
         500,000  6.375%,  due 08/15/02                             506,094
         500,000  10.750%,  due 02/15/03                            569,375
         500,000  6.500%,  due 08/15/05                             508,906
         500,000  7.000%,  due 07/15/06                             522,188
         500,000  8.875%,  due 02/15/19                             628,594
         500,000  8.125%,  due 08/15/21                             593,125

                                                                  5,318,126

                  Federal National Mortgage Association - 5.37%
         1,000,000 6.520%,  due 03/05/08                            957,726
         410,000  6.320%,  due 03/16/09                             390,530
         500,000  7.000%,  due 08/27/12                             486,762
         655,543  8.000%,  due 09/01/29                             667,107

                                                                  2,502,125

                  Government National Mortgage Association - 2.91%
         390,426  6.250%,  due 07/20/21                             380,673
         463,852  7.500%,  due 07/15/26                             465,428
         500,000  8.000%,  due 09/20/29                             509,488

                                                                  1,355,589

                  Federal Home Loan Mortgage Corp. - 1.05%
         500,000  6.010%,  due 04/26/04                             486,548

                  Total U.S. Government and Agency Obligations    9,662,388
                  ( Cost $9,670,755 )

CORPORATE  NOTES AND BONDS - 18.34%

                  Finance - 3.21%
         500,000  Capital One Bank
                  6.760%,  due 07/23/02                             492,656
         500,000  Ford Motor Credit Co.
                  7.375%,  due 10/28/09                             504,520
         500,000  Pemex Finance, Ltd., 144A (C)
                  9.690%,  due 08/15/09                             497,385

                                                                  1,494,561

                  Industrials - 2.97%
         250,000  Foster Wheeler Corp.
                  6.750%,  due 11/15/05                             213,362
         715,000  Temple-Inland, Inc., MTN
                  6.750%,  due 03/01/09                             673,945
         500,000  Tyco International Group SA, 144A (C)
                  6.875%,  due 09/05/02                             497,239

                                                                  1,384,546

                  Retail - 2.85%
         500,000  Autozone, Inc.
                  6.000%,  due 11/01/03                             473,049
         500,000  Great Atlantic & Pacific Tea Co.
                  7.750%,  due 04/15/07                             469,581
         575,000  Rite Aid Corp.
                  7.125%,  due 01/15/07                             385,250

                                                                  1,327,880

                  Energy - 2.25%
         500,000  Occidental Petroleum Co., Senior Note
                  10.125%,  due 11/15/01                            530,480
         500,000  Tosco Corp.
                  8.250%,  due 05/15/03                             515,932

                                                                  1,046,412

                  Capital Goods - 1.88%
         500,000  Crown Cork & Seal Co., Inc.
                  7.125%,  due 09/01/02                             498,564
         400,000  Owens-Illinois, Inc., Senior Note
                  7.150%,  due 05/15/05                             376,043

                                                                    874,607

                  Business Services - 1.42%
         680,000  Comdisco, Inc., Senior Note
                  6.000%,  due 01/30/02                             660,920

                  Basic Materials - 1.18%
         550,000  Rohm & Haas Co., 144A (C)
                  6.950%,  due 07/15/04                             548,936

                  Communication - 1.01%
         500,000  Teleglobe, Inc., Yankee
                  7.200%,  due 07/20/09                             470,641

                  Durable Goods - 0.54%
         250,000  Borg-Warner Automotive, Senior Note
                  8.000%,  due 10/01/19                             249,522

                  Waste Management - 0.50%
         250,000  Waste Management, Inc., Step Coupon (F)
                  7.700%,  due 10/01/02                             234,325

                  Asset-Backed Securities - 0.43%
         200,000  Residential Funding Mortgage Securities II,
                  Series 1998-HI2, Step Coupon, Class A2, ABS (F)
                  6.290%,  due 07/25/13                             198,314

                  Health Services - 0.10%
         50,000   Columbia/HCA Healthcare Corp.
                  6.125%,  due 12/15/00                              48,781

                  Total Corporate Notes and Bonds                 8,539,445
                  ( Cost $8,594,284 )

                                                               Value
         Shares                                               (Note 2)

INVESTMENT COMPANY - 4.94%

         2,297,570 State Street Prime Money Market
                  4.830%                                 $        2,297,570

                  Total Investment Company                        2,297,570
                  ( Cost $2,297,570 )

                                                               Value
         Par Value                                            (Note 2)

CERTIFICATE OF DEPOSIT - 1.50%

$        696,709  State Street Eurodollar
                  4.830%,  due 11/01/99                             696,709

                  Total Certificate of Deposit                      696,709
                  ( Cost $696,709 )

TOTAL INVESTMENTS - 99.31%.                              $       46,237,623
(Cost $42,317,790**)

NET OTHER ASSETS AND LIABILITIES - 0.69%                            322,495

TOTAL NET ASSETS - 100.00%                               $       46,560,118

                                                               Value
         Par Value                                            (Note 2)

CORPORATE NOTES AND BONDS - 91.50%

                  Communications - 18.28%
$        185,000  Allegiance Telecom, Inc., Step Coupon (B)
                  11.750%, due 02/15/08                     $       125,800
         75,000   Allegiance Telecom, Inc.
                  Senior Note
                  12.875%, due 05/15/08                              81,937
         25,000   American Cellular Corp.
                  Senior Note
                  10.500%, due 05/15/08                              26,938
         130,000  Centennial Cellular Corp.
                  Senior Subordinate Note
                  10.750%, due 12/15/08                             135,525
         100,000  Charter Commercial Holdings LLC
                  Senior Note
                  8.250%, due 04/01/07                               94,500
         260,000  Charter Commercial Holdings LLC, Step Coupon
                  Senior Discount Note (B)
                  9.920%, due 04/01/11                              154,700
         50,000   Crown Castle International Corp.
                  Senior Note
                  9.000%, due 05/15/11                               47,500
         130,000  Dolphin Telecom PLC, Step Coupon, Yankee
                  Senior Discount Note (B)(D)
                  11.500%, due 06/01/08                              55,900
         25,000   Dolphin Telecom PLC, 144A, Step Coupon
                  Senior Discount Note (B)(C)(D)
                  14.000%, due 05/15/09                               9,875
         60,000   Esprit Telecom Group PLC, Yankee
                  Senior Note (D)
                  10.875%, due 06/15/08                              58,800
         90,000   Exodus Communications, Inc.
                  Senior Note
                  11.250%, due 07/01/08                              92,025
         100,000  Hermes Europe Railtel B.V., Yankee
                  Senior Note (D)
                  10.375%, due 01/15/09                              94,500
         160,000  ICG Holdings, Inc.
                  Step Coupon (B)
                  12.500%, due 05/01/06                             120,800
         90,000   Intermedia Communication, Series B
                  Senior Note
                  8.875%,  due 11/01/07                              81,000
         25,000   ITC Deltacom, Inc.
                  Senior Note
                  11.000%, due 06/01/07                              26,250
         40,000   ITC Deltacom, Inc.
                  Senior Note
                  9.750%, due 11/15/08                               40,500
         10,000   Lenfest Communications
                  Senior Note
                  8.375%, due 11/01/05                               10,250
         35,000   Lenfest Communications
                  Senior Subordinate Note
                  10.500%, due 06/15/06                              39,725
         50,000   Lenfest Communications
                  Senior Subordinate Note
                  8.250%, due 02/15/08                               50,250
         80,000   MCI Worldcom, Inc.
                  Senior Note
                  13.500%, due 12/15/02                              90,600
         175,000  Metronet Communications, Yankee, Step Coupon
                  Senior Discount Note (B)(D)
                  9.950%, due 06/15/08                              136,063
         105,000  Millicom International Cellular, Yankee, Step Coupon
                  Senior Discount Note (B)(D)
                  13.500%, due 06/01/06                              75,863
         55,000   MJD Communications, Inc., Series B
                  Senior Subordinate Note
                  9.500%, due 05/01/08                               49,500
         100,000  Nextel Communications, Step Coupon
                  Senior Discount Note (B)
                  9.750%, due 10/31/07                               72,000
         215,000  Nextel Communications, Step Coupon
                  Senior Discount Note (B)
                  9.950%, due 02/15/08                              152,650
         45,000   Nextel International, Inc., Step Coupon
                  Senior Discount Note (B)
                  12.125%, due 04/15/08                              22,950
         25,000   Nextlink Communications
                  Senior Note
                  9.625%, due 10/01/07                               24,000
         190,000  Nextlink Communications
                  Senior Note
                  10.750%, due 06/01/09                             193,800
         30,000   Pagemart Wireless, Inc., Step Coupon
                  Senior Discount Note (B)
                  11.250%, due 02/01/08                               9,000
         140,000  PSINET, Inc., 144A
                  Senior Note (C)
                  11.000%, due 08/01/09                             143,850
         65,000   Rural Cellular Corp., Series B
                  Senior Subordinate Note
                  9.625%, due 05/15/08                               66,625
         31,984   Rural Cellular Corp., Series B, PIK
                  11.375%, due 05/15/10                              31,984
         30,000   Telesystem International Wireless, Yankee, Step Coupon
                  Senior Discount Note (B)(D)
                  13.250%, due 06/30/07                              14,400
         110,000  Telewest Communications PLC, Yankee
                  Debenture (D)
                  9.625%,  due 10/01/06                             111,650
         115,000  Triton PCS, Inc., Step Coupon (B)
                  11.000%, due 05/01/08                              78,775
         220,000  United International Holdings, Series B, Step Coupon
                  Senior Discount Note (B)
                  10.750%, due 02/15/08                             124,850
         35,000   U.S. Unwired, Inc., 144A, Step Coupon
                  Senior Discount Note (B)(C)
                  13.375%, due 11/01/09                              18,725
         175,000  Versatel Telecom BV
                  Senior Note (D)
                  13.250%, due 05/15/08                             175,875
         15,000   Viatel, Inc., Senior Note
                  11.250%, due 04/15/08                              14,100
         160,000  Viatel, Inc., Step Coupon
                  Senior Discount Note (B)
                  12.500%, due 04/15/08                              88,800
         110,000  Western Wireless
                  Senior Subordinate Note
                  10.500%, due 02/01/07                             115,500

                                                                  3,158,335

                  Telecommunications - 17.38%
         125,000  Adelphia Business Solutions
                  Senior Subordinate Note
                  12.000%, due 11/01/07                             129,375
         75,000   Adelphia Communications, Series B
                  Senior Note
                  8.375%, due 02/01/08                               70,500
         45,000   AT&T Canada, Inc., Step Coupon
                  Senior Discount Note (B)
                  10.750%, due 11/01/07                              36,900
         25,000   Avalon Cable Holdings LLC, Step Coupon
                  Senior Discount Note (B)
                  11.875%, due 12/01/08                              15,875
         75,000   Avalon Cable of Michigan
                  Senior Subordinate Note
                  9.375%, due 12/01/08                               75,281
         25,000   Bresnan Communications, Series B, Step Coupon
                  Senior Discount Note (B)
                  9.250%, due 02/01/09                               16,969
         65,000   Bresnan Communications, Series B
                  Senior Note
                  8.000%, due 02/01/09                               64,756
         110,000  Chancellor Media Corp., Series B
                  8.750%, due 06/15/07                              109,450
         90,000   Classic Cable, Inc., 144A
                  Senior Subordinate Note (C)
                  9.875%, due 08/01/08                               90,000
         125,000  Colt Telecom Group PLC, Yankee, Step Coupon
                  Senior Discount Note (B)(D)
                  12.000%, due 12/15/06                             103,750
         100,000  CSC Holdings, Inc.
                  Senior Subordinate Note
                  9.250%, due 11/01/05                              101,250
         85,000   Cumulus Media, Inc.
                  10.375%, due 07/01/08                              87,656
         175,000  Echostar DBS Corp.
                  Senior Note
                  9.375%, due 02/01/09                              173,469
         150,000  Energis PLC, 144A (C)
                  9.750%, due 06/15/09                              153,000
         165,000  Esat Telecom Group PLC, Series B, Yankee
                  Senior Note (D)
                  11.875%, due 12/01/08                             169,125
         100,000  Fox Sports Networks LLC
                  Senior Note
                  8.875%, due 08/15/07                              101,500
         75,000   Frontiervision LP/Capital
                  Senior Subordinate Note
                  11.000%, due 10/15/06                              79,125
         40,000   Frontiervision Holdings LP, Step Coupon
                  Senior Discount Note (B)
                  11.875%, due 09/15/07                              34,600
         60,000   Globenet Communication Group, Ltd. 144A
                  Senior Note (C)
                  13.000%, due 07/15/07                              60,000
         90,000   Granite Broadcasting Corp.
                  Senior Subordinate Note
                  10.375%, due 05/15/05                              91,800
         100,000  Insight Midwest/Insight Capital, Inc., 144A
                  Senior Note (C)
                  9.750%, due 10/01/09                              102,750
         125,000  Jazztel PLC, 144A
                  Senior Note (C)
                  14.000%, due 04/01/09                             125,000
         60,000   LIN Holdings Corp., Step Coupon
                  Senior Discount Note (B)
                  10.000%, due 03/01/08                              39,000
         40,000   Northeast Optic Network
                  Senior Note
                  12.750%, due 08/15/08                              40,900
         150,000  NTL Communications Corp., Series B, Step Coupon
                  Senior Note (B)
                  12.375%, due 10/01/08                              99,750
         80,000   NTL, Inc., Series B, Step Coupon
                  Senior Note (B)
                  9.750%, due 04/01/08                               53,000
         50,000   NTL, Inc., Series B, Step Coupon
                  Senior Note (B)
                  9.750%, due 04/15/09                               46,168
         65,000   Spectrasite Holdings, Inc.
                  Senior Discount Note
                  12.000%, due 07/15/08                              36,563
         175,000  Spectrasite Holdings, Inc., Step Coupon
                  Senior Discount Note (B)
                  11.250%, due 04/15/09                              91,000
         150,000  Telemundo Holdings, Inc., Series B, Step Coupon
                  Senior Discount Note (B)
                  11.500%, due 08/15/08                              85,500
         60,000   Telewest Communication PLC, 144A, Step Coupon
                  Senior Discount Note (B)(C)
                  9.250%, due 04/15/09                               36,900
         110,000  Time Warner Telecom LLC
                  Senior Note
                  9.750%, due 07/15/08                              112,750
         190,000  United Pan-Europ Communications N.V., 144A
                  Senior Note (C)(D)
                  10.875%, due 08/01/09                             185,725
         25,000   Verio, Inc.
                  Senior Note
                  10.375%, due 04/01/05                              25,125
         100,000  Worldwide Fiber, Inc., 144A
                  Senior Note (C)
                  12.000%, due 08/01/09                             100,000
         60,000   Young Broadcasting, Inc., Series B
                  8.750%, due 06/15/07                               58,800

                                                                  3,003,312

                  Finance - 5.76%
         25,000   AMSC Acquisition Co., Inc., Series B
                  12.250%, due 04/01/08                              14,000
         82,406   Crown Castle International Corp., PIK
                  12.750%, due 12/15/10                              83,230
         65,000   DTI Holdings, Inc., Series B, Step Coupon
                  Senior Discount Note (B)
                  12.500%, due 03/01/08                              22,750
         150,000  Global Crossing Holding LTD
                  9.625%, due 05/15/08                              152,250
         150,000  Ono Finance PLC, Series A, 144A (C)(D)
                  13.000%, due 05/01/09                             147,000
         150      Ono Finance PLC, Series A, 144A,
                  Zero Coupon (B)(C)(D)
                  0.000%, due 05/31/09                                7,500
         200,000  P & L Coal Holdings Corp., Series B
                  9.625%, due 05/15/08                              192,500
         90,000   Silgan Holdings, Inc.
                  Senior Subordinate Note
                  9.000%, due 06/01/09                               85,500
         80,000   Thermadyne Manufacturing Corp.
                  9.875%, due 06/01/08                               65,600
         160,000  Thermadyne Holdings Corp., Step Coupon
                  Debenture (B)
                  12.500%, due 06/01/08                              70,400
         175,000  Willis Corroon Corp.
                  9.000%, due 02/01/09                              154,875

                                                                    995,605

                  Technology - 5.13%
         110,000  Argo-Tech Corp.
                  8.625%, due 10/01/07                               93,087
         50,000   Argo-Tech Corp., Series D
                  8.625%, due 10/01/07                               42,313
         95,000   Be Aerospace, Inc., Series B
                  Senior Subordinate Note
                  8.000%, due 03/01/08                               82,175
         25,000   Be Aerospace, Inc.
                  Senior Subordinate Note
                  9.500%, due 11/01/08                               23,625
         75,000   Completel Europe N.V., 144A, Step Coupon
                  Senior Discount Note (B)(C)(D)
                  14.000%, due 02/15/09                              37,687
         175,000  K & F Industries, Series B
                  Senior Subordinate Note
                  9.250%, due 10/15/07                              166,688
         225,000  Level 3 Communications, Inc.
                  Senior Note
                  9.125%, due 05/01/08                              209,813
         115,000  Metromedia Fiber Network, Series B
                  Senior Note
                  10.000%, due 11/15/08                             112,988
         80,000   Unisys Corp., Series B
                  Senior Note
                  12.000%, due 04/15/03                              85,400
         35,000   Unisys Corp.
                  Senior Note
                  7.875%, due 04/01/08                               33,250

                                                                    887,026

                  Energy - 3.94%
         110,000  Anacomp, Inc., Series B
                  Senior Subordinate Note
                  10.875%, due 04/01/04                             107,800
         130,000  Chesapeake Energy Corp., Series B
                  9.625%, due 05/01/05                              122,850
         75,000   Clark R&M, Inc.
                  Senior Note
                  8.625%, due 08/15/08                               63,750
         45,000   Continental Resources
                  10.250%, due 08/01/08                              37,575
         100,000  Forest Oil Corp.
                  10.500%, due 01/15/06                             102,000
         100,000  HS Resources, Inc.
                  9.250%, due 11/15/06                               97,750
         125,000  Ocean Energy, Inc., Series B
                  8.875%, due 07/15/07                              124,062
         10,000   Pool Energy Services Co., Series B
                  8.625%, due 04/01/08                                9,900
         15,000   Pride International, Inc.
                  Senior Note
                  10.000%, due 06/01/09                              15,000

                                                                    680,687

                  Retail - 3.74%
         45,000   Cole National Group, Inc.
                  Senior Subordinate Note
                  8.625%, due 08/15/07                               33,300
         75,000   Duane Reade, Inc.
                  9.250%, due 02/15/08                               73,125
         15,000   J Crew Group, Series B, Step Coupon
                  Debenture (B)
                  13.125%, due 10/15/08                               7,050
         85,000   J Crew Operating Corp.
                  Senior Subordinate Note
                  10.375%, due 10/15/07                              73,950
         40,000   Jitney-Jungle Stores (E)
                  12.000%, due 03/01/06                              11,200
         10,000   Jitney-Jungle Stores (E)
                  10.375%, due 09/15/07                                 100
         100,000  Musicland Group, Inc., Series B
                  9.875%, due 03/15/08                               83,500
         50,000   Pathmark Stores
                  Subordinate Note
                  11.625%, due 06/15/02                              48,500
         35,000   Pathmark Stores
                  Senior Subordinate Note
                  9.625%, due 05/01/03                               33,950
         100,000  Red Roof Inns, Senior Note
                  9.625%, due 12/15/03                              102,250
         75,000   Southland Corp.
                  Senior Subordinate Debenture
                  5.000%, due 12/15/03                               63,562
         125,000  Williams Scotsman, Inc.
                  9.875%, due 06/01/07                              116,250

                                                                    646,737

                  Metals and Mining - 3.72%
         70,000   AK Steel Corp., Senior Note
                  9.125%, due 12/15/06                               69,475
         65,000   Algoma Steel, Inc., Yankee (D)
                  12.375%, due 07/15/05                              55,900
         100,000  Commonwealth Industries
                  Senior Subordinate Note
                  10.750%, due 10/01/06                              99,500
         60,000   Doe Run Resources Corp., Series B
                  11.250%, due 03/15/05                              55,200
         75,000   Fairfield Manufacturing Co., Inc.
                  Senior Subordinate Note
                  9.625%, due 10/15/08                               72,094
         60,000   Kaiser Aluminum & Chemical Co.
                  Senior Note
                  9.875%, due 02/15/02                               60,000
         50,000   Metal Management, Inc.
                  10.000%, due 05/15/08                              32,500
         50,000   Russel Metals, Inc., Yankee (D)
                  10.000%, due 06/01/09                              50,938
         150,000  WCI Steel, Inc., Series B
                  Senior Note
                  10.000%, due 12/01/04                             146,625

                                                                    642,232

                  Building and Construction - 3.64%
         100,000  American Standard, Inc.
                  7.375%, due 02/01/08                               89,250
         25,000   American Standard, Inc.
                  7.625%, due 02/15/10                               22,250
         50,000   Building Materials Corp., Series B
                  Senior Note
                  7.750%, due 07/15/05                               45,375
         150,000  Building Materials Corp., Series B
                  Senior Note
                  8.625%, due 12/15/06                              141,375
         50,000   Building Materials Corp., Series B
                  Senior Note
                  8.000%, due 10/15/07                               45,375
         125,000  Formica Corp., Series B
                  Senior Subordinate Note
                  10.875%, due 03/01/09                             112,500
         65,000   MMI Products, Inc., Series B
                  Senior Subordinate Note
                  11.250%, due 04/15/07                              65,975
         110,000  Nortek, Inc., Series B
                  Senior Note
                  9.250%, due 03/15/07                              106,425

                                                                    628,525

                  Containers / Packaging - 3.60%
         65,000   Ball Corp.
                  8.250%, due 08/01/08                               62,725
         105,000  Gaylord Container Corp.
                  Senior Note
                  9.750%, due 06/15/07                               97,912
         135,000  Gaylord Container Corp., Series B
                  Senior Subordinate Note
                  9.875%, due 02/15/08                              116,775
         50,000   Graham Packaging/GPC Capital, Series B
                  8.750%, due 01/15/08                               46,000
         220,000  Packaging Corp. of America
                  9.625%, due 04/01/09                              220,000
         80,000   Riverwood International
                  10.250%, due 04/01/06                              79,200

                                                                    622,612

                  Consumer Staples - 3.46%
         90,000   Finlay Enterprises, Inc.
                  9.000%, due 05/01/08                               79,200
         50,000   International Utility Structures, Yankee
                  Senior Subordinate Note (D)
                  10.750%, due 02/01/08                              44,500
         115,000  Pierce Leahy Corp.
                  Senior Subordinate Note
                  11.125%, due 07/15/06                             121,900
         30,000   Remington Products Co. LLC, Series B
                  Senior Subordinate Note
                  11.000%, due 05/15/06                              22,500
         115,000  Revlon Consumer Products
                  Senior Note
                  8.125%, due 02/01/06                               89,987
         115,000  Samsonite Corp.
                  Senior Subordinate Note
                  10.750%, due 06/15/08                              95,450
         100,000  Simmons Co., Series B
                  Senior Subordinate Note
                  10.250%, due 03/15/09                              98,250
         50,000   Vlasic Foods International, Inc., Series B
                  Senior Subordinate Note
                  10.250%, due 07/01/09                              47,000

                                                                    598,787

                  Recreation - 3.26%
         150,000  Boyd Gaming Corp.
                  Senior Subordinate Note
                  9.500%, due 07/15/07                              145,312
         160,000  Coast Hotels & Casino
                  9.500%, due 04/01/09                              149,000
         50,000   Hollywood Park, Inc., Series B
                  9.250%, due 02/15/07                               48,375
         75,000   Isle of Capri Casinos
                  8.750%, due 04/15/09                               67,687
         80,000   Lady Luck Gaming, Series QTR
                  11.875%, due 03/01/01                              80,000
         75,000   Station Casinos
                  Senior Subordinate Note
                  8.875%, due 12/01/08                               72,375

                                                                    562,749

                  Basic Materials - 3.05%
         100,000  Applied Extrusion Technology, Series B
                  Senior Note
                  11.500%, due 04/01/02                             102,500
         90,000   Buckeye Technologies, Inc.
                  Senior Subordinate Note
                  9.250%, due 09/15/08                               88,425
         20,000   Keystone Consolidated Industries
                  Senior Note
                  9.625%, due 08/01/07                               18,500
         50,000   Fibermark, Inc.
                  Senior Note
                  9.375%, due 10/15/06                               50,125
         5,000    Galey & Lord, Inc.
                  9.125%, due 03/01/08                                1,225
         100,000  Polymer Group, Inc., Series B
                  9.000%, due 07/01/07                               96,000
         35,000   Repap New Brunswick, Yankee
                  Senior Note (D)
                  9.000%, due 06/01/04                               33,250
         50,000   Synthetic Industries, Inc., Series B
                  Senior Subordinate Note
                  9.250%, due 02/15/07                               49,500
         95,000   US Timberlands Klam/Fin
                  Senior Note
                  9.625%, due 11/15/07                               87,400

                                                                    526,925

                  Durable Goods - 2.44%
         50,000   Dura Operating Corp., Series B
                  9.000%, due 05/01/09                               46,125
         110,000  Hayes Lemmerz International, Inc.
                  11.000%, due 07/15/06                             113,850
         50,000   International Knife & Saw, Inc.
                  Senior Subordinate Note
                  11.375%, due 11/15/06                              37,500
         85,000   Motors and Gears, Inc., Series D
                  Senior Note
                  10.750%, due 11/15/06                              79,900
         100,000  Oxford Automotive, Inc., Series D
                  10.125%,  due 06/15/07                             90,000
         65,000   Simonds Industries
                  10.250%, due 07/01/08                              50,700
         5,000    Talon Automotive Group, Series B
                  Senior Subordinate Note
                  9.625%, due 05/01/08                                4,050

                                                                    422,125

                  Chemicals and Drugs - 2.43%
         75,000   Huntsman ICI Chemicals, 144A
                  Senior Subordinate Note (C)
                  10.125%, due 07/01/09                              74,625
         55,000   Lyondell Chemical Co., Series A
                  9.625%, due 05/01/07                               54,450
         90,000   Lyondell Chemical Co., Series B
                  9.875%, due 05/01/07                               89,550
         75,000   NL Industries
                  Senior Note
                  11.750%, due 10/15/03                              77,250
         25,000   PCI Chemicals Canada, Inc., Yankee (D)
                  9.250%, due 10/15/07                               19,000
         90,000   Sterling Chemicals, Inc., Series A
                  Senior Subordinate Note
                  11.250%, due 04/01/07                              55,800
         50,000   Sterling Chemicals, Inc., 144A (C)
                  12.375%, due 07/15/06                              50,000

                                                                    420,675

                  Printing - 2.37%
         110,000  Big Flower Press, Inc.
                  Senior Subordinate Note
                  8.875%, due 07/01/07                              110,275
         150,000  Hollinger International Publishing
                  9.250%, due 03/15/07                              147,000
         75,000   Mail-Well I Corp., Series B
                  8.750%, due 12/15/08                               70,313
         35,000   Quebecor World (USA), Inc.
                  Senior Subordinate Note
                  7.750%, due 02/15/09                               33,206
         50,000   World Color Press, Inc.
                  Senior Subordinate Note
                  8.375%, due 11/15/08                               48,750

                                                                    409,544

                  Industrial - 2.02%
         100,000  Blount, Inc., 144A
                  Senior Subordinate Note (C)
                  13.000%, due 08/01/09                             102,250
         65,000   GCI, Inc., Senior Note
                  9.750%, due 08/01/07                               62,075
         50,000   General Binding Corp.
                  9.375%, due 06/01/08                               40,000
         100,000  Moog, Inc., Series B
                  Senior Subordinate Note
                  10.000%, due 05/01/06                             101,694
         55,000   Numatics, Inc., Series B
                  Senior Subordinate Note
                  9.625%, due 04/01/08                               42,350

                                                                    348,369

                  Media - 1.69%
         50,000   Albritton Communications, Series B
                  Senior Subordinate Debenture
                  9.750%, due 11/30/07                               50,000
         50,000   AMC Entertainment, Inc.
                  Senior Subordinate Note
                  9.500%, due 03/15/09                               44,000
         50,000   AMFM, Inc.
                  8.000%, due 11/01/08                               49,375
         75,000   Cinemark USA, Inc., Series B
                  Senior Subordinate Note
                  9.625%, due 08/01/08                               66,750
         50,000   Regal Cinemas, Inc.
                  Senior Subordinate Note
                  9.500%, due 06/01/08                               37,500
         60,000   Satelites Mexicanos SA, Series B (D)
                  10.125%, due 11/01/04                              43,875

                                                                    291,500

                  Consumer Services - 1.54%
         75,000   Eldorado Resorts LLC, 144A
                  Senior Subordinate Note (C)
                  10.500%, due 08/15/06                              76,500
         40,000   Iron Mountain, Inc.
                  10.125%, due 10/01/06                              41,000
         85,000   Iron Mountain, Inc.
                  8.750%, due 09/30/09                               80,113
         75,000   Prime Hospitality Corp., Series B
                  Senior Subordinate Note
                  9.750%, due 04/01/07                               68,250

                                                                    265,863

                  Capital Goods - 0.79%
         65,000   Transportation Tech Industries, Series C
                  11.750%, due 08/15/05                              66,137
         20,000   Transportation Tech Industries
                  Senior Subordinate Note
                  11.750%, due 08/15/05                              20,350
         90,000   Newcor, Inc., Series B
                  Senior Subordinate Note
                  9.875%, due 03/01/08                               49,500

                                                                    135,987

                  Defense Electronics - 0.75%
         125,000  L-3 Communications Corp., Series B
                  Senior Subordinate Note
                  10.375%, due 05/01/07                             129,063

                  Waste Disposal - 0.61%
         125,000  Allied Waste North America, 144A
                  Senior Subordinate Note (C)
                  10.000%, due 08/01/09                             105,781

                  Schools - 0.59%
         110,000  Kindercare Learning Centers, Series B
                  Senior Subordinate Note
                  9.500%, due 02/15/09                              102,850

                  Transportation - 0.57%
         110,000  Mark IV Industries, Inc.
                  Senior Subordinate Note
                  7.500%, due 09/01/07                               98,406

                  Machinery - 0.49%
         100,000  Columbus McKinnon Corp.
                  8.500%, due 04/01/08                               84,000

                  Health Care Services - 0.25%
         35,000   Alaris Medical, Inc., Step Coupon
                  Senior Discount Note (B)
                  11.125%, due 08/01/08                              14,875
         30,000   Prime Medical Services, Inc.
                  8.750%, due 04/01/08                               28,200

                                                                     43,075

                  Total Corporate Notes and Bonds                15,810,770
                  ( Cost $16,904,821 )

COMMON STOCK - 0.14%

                  Technology - 0.00%
         750      Completel Holdings LLC, 144A (C)*              $        0

                  Communication - 0.14%
         719      Viatel, Inc.*                                      23,997

                  Total Common Stock                                 23,997
                  ( Cost $0 )

WARRANTS AND RIGHTS - 0.13%

                  Communication - 0.13%
         185      Allegiance Telecom, Inc.                               42
         25       American Mobile SAT                                   450
         25       Convergent Communications, Inc., 144A (C)             225
         375      Jazztel PLC, 144A (C)                              15,000
         50       Versatel Telecom BV                                 7,481

                                                                     23,198

                  Finance - 0.00%#
         325      DTI Holdings, Inc., 144A (C)                            3

                  Total Warrants and Rights                          23,201
                  ( Cost $0 )

         Media - 0.13%
250      Primedia, Inc., Series H                           21,875

         Total Preferred Stock                              21,875
         ( Cost $24,850 )

$        1,076,025 State Street Eurodollar
                  4.500%, due 11/01/99                    $       1,076,025

                  Total Certificate of Deposit                    1,076,025
                  ( Cost $1,076,025 )

TOTAL INVESTMENTS - 98.13%.                                      16,955,868
( Cost $18,005,696** )

NET OTHER ASSETS AND LIABILITIES - 1.87%                            322,441

TOTAL NET ASSETS 100.00%                                 $       17,278,309

         Technology - 22.03%
34,300   Computer Associates International, Inc. $       1,937,950
14,800   Computer Sciences Corp.*                        1,016,575
30,600   EMC Corp.*                                      2,233,800
26,600   Harris Corp.                                      596,837
18,400   Hewlett-Packard Co.                             1,362,750
20,200   International Business Machines Corp.           1,987,175
13,844   Koninklijke (Royal) Philips Electronics N.V.    1,438,911
19,100   Motorola, Inc.                                  1,861,056
34,900   Nortel Networks Corp.                           2,161,619
29,600   Texas Instruments, Inc.                         2,656,600
25,200   Xerox Corp.                                       705,600

                                                        17,958,873

         Consumer Staples - 15.75%
30,700   ConAgra, Inc.                                     800,119
30,100   CVS Corp.                                       1,307,469
57,800   Disney (Walt) Co.                               1,524,475
9,400    General Mills, Inc.                               819,563
32,500   Kimberly-Clark Corp.                            2,051,562
75,300   Kroger Co.*                                     1,567,181
23,500   MediaOne Group, Inc.*                           1,669,969
27,100   Nabisco Holdings Corp., Class A                 1,012,862
30,800   PepsiCo, Inc.                                   1,068,375
37,600   Sara Lee Corp.                                  1,017,550

                                                        12,839,125

         Financial Services - 13.42%
56,000   Allstate Corp.                                  1,610,000
26,092   Bank of America Corp.                           1,679,672
31,870   Bank One Corp.                                  1,197,117
34,500   Citigroup, Inc.                                 1,867,313
18,400   First Union Corp.                                 785,450
41,000   Household International, Inc.                   1,829,625
9,000    Morgan Stanley Dean Witter & Co.                  992,813
11,300   Wachovia Corp.                                    974,625

                                                        10,936,615

         Healthcare - 10.42%
19,100   Aetna, Inc.                                       959,775
22,900   ALZA Corp.*                                       980,406
41,900   American Home Products Corp.                    2,189,275
26,800   Bristol-Myers Squibb Co.                        2,058,575
16,200   Glaxo Wellcome PLC, ADR                           969,975
12,700   Johnson & Johnson                               1,330,325

                                                         8,488,331

         Communication Services - 7.65%
13,978   AT&T Corp.                                        653,471
19,300   GTE Corp.                                       1,447,500
33,042   SBC Communications, Inc.                        1,683,077
33,000   Sprint Corp. (FON Group)                        2,452,312

                                                         6,236,360

         Energy - 7.01%
19,206   BP Amoco PLC, ADR                               1,109,146
11,800   Exxon Corp.                                       873,938
19,800   Schlumberger, Ltd.                              1,199,138
14,300   Texaco, Inc.                                      877,663
21,100   Unocal Corp.                                      727,950
31,900   USX-Marathon Group                                929,088

                                                         5,716,923

         Capital Goods - 5.72%
14,000   Emerson Electric Co.                              840,875
10,000   Honeywell, Inc.                                 1,054,375
15,000   Rockwell International Corp.                      726,563
22,000   United Technologies Corp.                       1,331,000
38,662   Waste Management, Inc.                            710,414

                                                         4,663,227

         Basic Materials - 3.49%
8,700    Dow Chemical Co.                                1,028,775
18,000   Georgia-Pacific Group                             714,375
18,100   PPG Industries, Inc.                            1,097,312

                                                         2,840,462

         Consumer Cyclical - 3.43%
22,338   Dana Corp.                                        660,367
23,500   Sears, Roebuck & Co.                              662,406
26,000   Wal-Mart Stores, Inc.                           1,473,875

                                                         2,796,648

         Utilities - 3.38%.
14,500   Duke Energy Corp.                                 819,250
28,500   PG & E Corp.                                      653,719
34,100   Williams Cos., Inc.                             1,278,750

                                                         2,751,719

         Miscellaneous - 2.34%
16,500   AlliedSignal, Inc.                                939,469
10,200   Minnesota Mining and Manufacturing Co.            969,637

                                                         1,909,106

         Transportation - 1.90%
16,200   Burlington Northern Santa Fe Corp.                516,375
11,900   Delta Air Lines, Inc.                             647,806
15,600   Norfolk Southern Corp.                            381,225

                                                         1,545,406

         Total Common Stocks                            78,682,795
         ( Cost $72,774,850 )

                  4.830%                                 $        3,325,870

                  Total Investment Company                        3,325,870
                  (Cost $3,325,870)

TOTAL INVESTMENTS - 100.62%                             $        82,008,665
( Cost $76,100,720** )

NET OTHER ASSETS AND LIABILITIES - (0.62)%                         (506,668)

TOTAL NET ASSETS - 100.00%                              $        81,501,997

         Technology - 23.19%
18,000   3Com Corp.*                              $        522,000
18,700   Autodesk, Inc.                                    350,625
29,000   Cadence Design Systems, Inc.*                     440,437
6,700    Conexant Systems, Inc.*                           625,612
12,300   Dallas Semiconductor Corp.                        724,163
19,500   EMC Corp.*                                      1,423,500
1,406    Gartner Group, Inc., Class B*                      13,181
20,600   Gateway, Inc.*                                  1,360,888
28,000   Keane, Inc.*                                      658,000
5,700    Micron Technology, Inc.*                          406,481
33,700   PeopleSoft, Inc.*                                 505,500
20,800   Seagate Technology, Inc.*                         612,300
10,000   Texas Instruments, Inc.                           897,500

                                                         8,540,187

         Financial Services - 14.40%
29,000   Ace, Ltd.                                         563,687
17,600   Associates First Capital Corp., Class A           642,400
23,850   Citigroup, Inc.                                 1,290,881
12,000   Countrywide Credit Industries, Inc.               407,250
17,300   First Security Corp.                              443,313
8,500    MBIA, Inc.                                        485,031
9,600    SunTrust Banks, Inc.                              702,600
16,000   Wells Fargo Co.*                                  766,000

                                                         5,301,162

         Consumer Cyclical - 11.77%
19,300   Dayton Hudson Corp.                             1,247,263
14,800   IMS Health, Inc.                                  429,200
10,600   Lowe's Cos., Inc.                                 583,000
40,400   PRIMEDIA, Inc.*                                   451,975
22,000   Sherwin-Williams Co.                              492,250
9,600    Tiffany & Co.                                     571,200
20,600   TJX Cos., Inc.                                    558,775

                                                         4,333,663

         Consumer Staples - 10.03%
18,100   Cox Communications, Inc., Class A*                822,419
13,900   MediaOne Group, Inc.*                             987,769
12,700   Nabisco Holdings Corp., Class A                   474,662
18,900   Safeway, Inc.*                                    667,406
12,800   Sara Lee Corp.                                    346,400
25,900   Tyson Foods, Inc., Class A                        394,975

                                                         3,693,631

         Communication Services - 8.40%
12,100   ADC Telecommunications, Inc.*                     577,019
10,200   CenturyTel, Inc.                                  412,462
3,500    Sprint Corp. (PCS Group)                          290,281
10,000   Telefonos de Mexico SA, Class L, ADR              855,000
20,000   Vodafone AirTouch, PLC, ADR                       958,750

                                                         3,093,512

         Capital Goods - 6.46%
8,700    Grainger (W.W.), Inc.                             368,663
11,500   Illinois Tool Works, Inc.                         842,375
30,000   Owens-Illinois, Inc.*                             718,125
20,500   Pall Corp.                                        449,719

                                                         2,378,882

         Energy - 6.26%
5,600    El Paso Energy Corp.                              229,600
7,500    Kerr-McGee Corp.                                  403,125
14,800   Unocal Corp.                                      510,600
18,900   USX-Marathon Group                                550,462
18,000   Weatherford International, Inc.*                  609,750

                                                         2,303,537

         Healthcare - 5.70%
10,300   Aetna, Inc.                                       517,575
20,800   Boston Scientific Corp.*                          418,600
22,800   Elan Corp., PLC, ADR*                             587,100
10,700   Pharmacia & Upjohn, Inc.                          577,131

                                                         2,100,406

         Basic Materials - 4.35%
3,300    Dexter Corp.                                      115,706
11,300   Praxair, Inc.                                     528,275
14,300   Rohm and Haas Co.                                 546,975
9,900    Willamette Industries, Inc.                       411,469

                                                         1,602,425

         Utilities - 2.73%
13,600   MidAmerican Energy Holdings Co.*                  457,300
14,600   Williams Cos., Inc.                               547,500

                                                         1,004,800

         Transportation - 2.23%
12,900   FDX Corp.*                                        555,506
9,000    Midwest Express Holdings, Inc.*                   263,813

                                                           819,319

         Miscellaneous - 1.29%
29,000   Interim Services, Inc.*                           476,688

         Total Common Stocks                            35,648,212
         ( Cost $30,364,823 )

                  4.830%                                 $        1,192,798

                  Total Investment Company                        1,192,798
                  ( Cost $1,192,798 )

TOTAL INVESTMENTS - 100.05%                             $        36,841,010
( Cost $31,557,621** )

NET OTHER ASSETS AND LIABILITIES - (0.05)%                          (16,516)

TOTAL NET ASSETS - 100.00%                              $        36,824,494

         Argentina - 0.45%
11,100   Quilmes Industrial, S.A., ADR            $        115,856
1,900    Telefonica de Argentina, S.A., ADR                 48,687

                                                           164,543

         Australia - 4.07%
36,590   Australia & New Zealand Banking Group, Ltd.       241,516
280,110  Boral, Ltd.                                       421,624
62,851   Broken Hill Proprietary Co., Ltd.                 649,680
16,100   Cochlear, Ltd.                                    175,593

                                                         1,488,413

         Austria - 2.10%
405      Best Water Tech AG                                 73,180
748,980  Goodman Fielder, Ltd.                             692,664

                                                           765,844

         Belgium - 1.69%
25,730   Agfa Gevaert N.V.*                                515,252
2,020    Compagnie Maritime Belge, S.A.                    104,102

                                                           619,354

         Brazil - 1.72%
5,200    Companhia Brasileira de Distribuicao
           Grupo Pao de Acucar, GDR                        113,750
9,100    Companhia Cervejaria Brahma, ADR                  113,750
3,358    Companhia Energetica de Minas Gerais,
           S.A., ADR                                        47,995
10,000   Companhia Paranaense de Energia-Copel,
           ADR*                                             66,250
3,300    Embratel Participacoes, S.A.                       42,487
13,300   Souza Cruz, S.A.*                                  75,971
3,800    Tele Norte Leste Participacoes, S.A., ADR          64,125
3,900    Telesp Participacoes, S.A., ADR*                   63,131
2,100    Tele Sudeste Celular Participacoes, S.A.,
         ADR*                                               42,000

                                                           629,459

         Chile - 0.58%
6,400    Administradora de Fondos de Pensiones
         Provida, ADR                                      110,400
7,500    Quinenco, S.A., ADR                                69,844
3,900    Santa Isabel, S.A., ADR*                           31,200

                                                           211,444

         China - 0.22%
1,343    China Steel Corp., GDR                             22,865
156,000  Jiangsu Expressway Co., Ltd., Class H              23,896
220,000  Shenzhen Expressway Co., Ltd., Class H             32,850

                                                            79,611
         Denmark - 0.38%
4,100    Carli Gry International A/S                        74,841
700      Falck A/S                                          64,384

                                                           139,225

         Finland - 4.57%
7,700    Amer Group, Ltd.                                  146,582
101,150  Fortum Corp., IVO - Neste Group*                  489,369
17,020   Orion-Yhtyma Oyj, Class B                         404,558
2,400    Sampo Insurance Co., Class A*                      83,299
15,860   UPM-Kymmene Oyj                                   500,423
600      Vaisala Oyj                                        44,174

                                                         1,668,405

         France - 9.70%
1,600    Carbone-Lorraine, S.A.                             68,843
21,897   CNP Assurances                                    644,845
2,750    Credit Lyonnais, S.A.*                             83,154
4,567    Dexia France                                      643,648
4,569    Eridania Beghin-Say, S.A.                         518,988
2,552    Groupe Danone                                     650,886
470      Havas Advertising, S.A.                           131,737
3,800    Neopost, S.A.*                                    131,490
900      Scor, ADR                                          44,325
3,873    Suez Lyonnaise des Eaux, S.A.                     625,271

                                                         3,543,187

         Germany - 4.59%
8,130    BASF AG                                           365,544
11,387   Bayer AG                                          465,877
6,152    Deutsche Bank AG                                  441,279
600      Hawesko Holding AG                                 18,932
1,900    Marseille-Kliniken AG                              24,679
6,645    Veba AG                                           359,228

                                                         1,675,539

         Greece - 0.24%
3,811    Hellenic Telecommunications Organization,
           S.A.                                             80,734
500      Hellenic Telecommunications Organization,
           S.A., ADR                                         5,313

                                                            86,047

         Hong Kong - 3.12%
6,000    77 Bank, Ltd.                                      71,238
358,000  Axa China Region, Ltd.                            308,752
132,000  CDL Hotels International, Ltd.                     44,602
1,500    China Telecom (Hong Kong), Ltd., ADR*             101,250
345,081  Dairy Farm International Holdings, Ltd.           270,888
154,000  Esprit Holdings, Ltd.*                            145,700
5,300    Guangshen Railway Co., Ltd., ADR                   30,475
2,000    Hachijuni Bank, Ltd.                               14,597
30,000   Shaw Brothers (Hong Kong), Ltd.                    27,032
49,000   Yue Yuen Industrial Holdings                      124,255

                                                         1,138,789

         Hungary - 0.40%
2,500    Magyar Tavkozlesi Rt., ADR, Class B                72,031
3,700    MOL Magyar Olaj-es Gazipari Rt.                    74,545

                                                           146,576

         India - 1.47%
4,609    Bharat Heavy Electricals, Ltd.                     28,455
4,400    Hindalco Industries, Ltd., GDR                     92,950
3,250    Hindalco Industries, Ltd.                          54,129
4,300    Larsen & Toubro, Ltd., GDR, 144A (C)               78,904
11,200   Mahanagar Telephone Nigam, Ltd., GDR,
           144A* (C)                                        92,400
27,500   PT Hanjaya Mandala Sampoerna Tbk*                  63,786
9,400    State Bank of India, GDR, 144A (C)                125,114

                                                           535,738

         Indonesia - 0.18%
150,000  PT Indah Kiat Pulp & Paper Corp. Tbk*              64,551

         Ireland - 0.50%
19,100   Anglo Irish Bank Corp. PLC                         44,797
130,900  Waterford Wedgwood PLC                            139,052

                                                           183,849

         Israel - 0.88%
25,500   Bank Hapoalim, Ltd.                                60,641
3,700    ECI Telecom, Ltd.*                                107,763
4,100    Partner Communications Co., Ltd, ADR*              64,575
6,200    Supersol, Ltd., ADR*                               87,575

                                                           320,554

         Italy - 3.24%
3,000    Bipop SpA*                                        126,999
43,000   ENI SpA*.                                         251,452
5,300    Industrie Natuzzi SpA, ADR                         96,725
14,700   Interpump Group SpA                                71,738
14,100   Manuli Rubber Industries SpA                       33,812
123,011  Telecom Italia SpA                                604,190

                                                         1,184,916
         Japan - 16.34%
1,200    ADERANS Co., Ltd.                                  60,075
34,000   Eisai Co., Ltd.                                   934,209
2,990    H.I.S. Co., Ltd.                                  119,004
48,000   Hitachi, Ltd.                                     518,807
6,000    Hitachi Medical Corp.                              73,770
700      Hokuto Corp.                                       41,287
3,400    IMPACT 21 Co., Ltd.                                71,574
201,000  Japan Airlines Co., Ltd.                          674,691
1,000    Kawasumi Laboratories, Inc.                        15,153
4,000    Maruichi Steel Tube, Ltd.                          55,126
1,500    Meitec Corp.                                       56,248
93,000   Minolta Co., Ltd.                                 380,848
162,000  Mitsubishi Heavy Industries, Ltd.                 635,446
113,000  Nippon Mitsubishi Oil Corp.                       498,513
187,000  Nippon Yusen Kabushiki Kaisha                     807,039
191,360  Sekisui Chemical Co., Ltd.                        941,476
2,900    Torii Pharmaceutical Co., Ltd.                     88,722

                                                         5,971,988

         Korea - 2.50%
7,200    Hanvit Bank, GDR*                                  54,000
6,200    Kookmin Bank                                       96,657
4,300    Korea Electric Power Corp.                        125,827
1,800    Korea Telecom Corp., ADR*                          63,450
600      Pohang Iron & Steel Co., Ltd.                      72,030
900      Pohang Iron & Steel Co., Ltd., ADR                 30,038
3,162    Samsung Electronics, GDR, 144A (C)                268,770
15,639   SK Telecom Co., Ltd., ADR*                        204,284

                                                           915,056

         Malaysia - 0.15%
31,000   Jaya Tiasa Holdings Berhad                         56,697

         Mexico - 2.75%
17,000   Carso Global Telecom*                             113,192
5,776    Cemex S.A. de C.V., ADR*                          129,960
3,020    Fomento Economico Mexicano,
           S.A. de C.V., ADR                                99,094
56,000   Grupo Financiero Banamex Accival,
           S.A. de C.V., Class O*                          140,117
33,000   Grupo Financiero Banorte, S.A. de
           C.V., Class O*                                   41,199
10,600   Grupo Industrial Maseca, S.A., de C.V., ADR        72,875
3,300    Grupo Televisa, S.A., GDR*                        140,250
12,800   Kimberly-Clark de Mexico, S.A. de C.V.,
           Class A                                          41,015
5,900    Nuevo Grupo Iusacell, S.A. de C.V.,
           Series L*                                        61,950
3,200    Panamerican Beverages, Inc., Class A               51,400
8,500    Pepsi-Gemex, S.A., GDR*                            39,312
6,700    Tubos de Acero de Mexico, S.A., ADR                73,281

                                                         1,003,645

         Netherlands - 2.28%
2,000    Avalix Groep N.V.*                                 10,517
2,800    Beter Bed Holding N.V.                             80,101
2,600    Fugro N.V.                                         87,506
2,000    Hunter Douglas N.V.                                54,165
18,975   Koninklijke Luchtvaart Maatschappij N.V.          516,885
3,000    N.V. Holdingmaatschappij De Telegraaf              55,217
1,100    PinkRoccade N.V.*                                  27,766

                                                           832,157

         New Zealand - 1.37%
394,167  Carter Holt Harvey, Ltd.                          499,508


         Norway - 0.56%
6,300    Ekornes ASA                                        46,545
7,800    Merkantildata ASA                                  66,072
19,000   P4 Radio Hele Norge ASA                            91,364

                                                           203,981

         Peru - 0.24%
3,000    Credicorp, Ltd.                                    31,875
4,700    Telefonica del Peru S.A.A., ADR                    54,344

                                                            86,219

         Philippines - 0.62%
596,000  Benpres Holdings Corp.*                           104,040
16,600   Manila Electric Co., Class B                       45,536
3,800    Philippine Long Distance Telephone Co.,
           ADR                                              78,138

                                                           227,714

         Poland - 0.26%
6,600    Bank Handlowy W. Warszawie, GDR,
           144A (C)                                         93,390

         Portugal - 4.33%
33,132   Banco Pinto & Sotto Mayor, S.A.                   689,963
4        Banco Totta & Acores, S.A., Registered                 91
1,278    Brisa-Auto Estradas de Portugal, S.A.,
           Registered                                       48,819
18,060   Brisa-Auto Estradas de Portugal,
           S.A., Private Placement                         711,348
2,900    Companhia de Seguros Mundial Confianca,
           S.A.*                                           130,848

                                                         1,581,069

         Singapore - 1.26%
280,000  Neptune Orient Lines, Ltd.                        405,846
41,000   Want Want Holdings, Ltd.                           54,940

                                                           460,786

         South Africa - 1.96%
17,600   ABSA Group, Ltd.                                   71,775
7,971    Barlow, Ltd.                                       38,866
3,100    Impala Platinum Holdings, Ltd                     107,396
9,834    JD Group, Ltd.                                     63,078
3,800    Liberty Life Association of Africa, Ltd.           35,263
12,300   Naspers, Ltd., Class N                             76,593
12,200   Rembrandt Group, Ltd.                              91,264
57,100   Sanlam, Ltd.*                                      65,536
4,000    Sasol, Ltd.                                        27,350
3,100    South African Breweries PLC                        27,432
11,200   South African Breweries PLC*                       98,097
4,457    Standard Bank Investment Corp. Ltd.*               15,236

                                                           717,886

         Spain - 2.19%
1,400    Banco Pastor, S.A.                                 60,267
19,316   Endesa, S.A.*                                     386,615
24,278   Iberdrola, S.A.                                   353,907

                                                           800,789

         Sweden - 0.83%
5,400    Celsius AB, Class B                                84,693
3,100    Elanders AB, Class B                               55,593
3,600    Getinge Industrier AB, Class B                     39,392
6,200    Industrial & Financial Systems, IFS AB,
           Class B*                                         72,742
3,700    Nobel Biocare AB                                   51,283

                                                           303,703

         Switzerland - 1.05%
65       Bank Sarasin & Cie, Registered, Class B           120,710
340      Edipresse, S.A.                                   139,891
980      Gretag Imaging Group, Registered*                 124,116

                                                           384,717

         Thailand - 0.05%
43,000   Bangkok Expressway Public Co., Ltd.,
           Foreign Registered*                              20,049

         United Kingdom - 13.32%
28,200   AMEC PLC.                                          99,170
38,100   Ashtead Group PLC                                 108,628
14,540   Britannic PLC                                     259,245
78,200   Corporate Services Group PLC                      134,931
1,947    Euromoney Institutional Investor PLC               52,392
3,700    Games Workshop Group PLC                           28,273
57,674   Greenalls Group PLC                               291,434
20,600   Hogg Robinson PLC                                  94,278
48,430   Hyder PLC                                         434,534
24,100   Man (E D & F) Group PLC                           140,196
12,500   Northgate PLC                                     106,609
31,400   Old Mutual PLC*                                    66,370
155,205  Rank Group PLC                                    483,316
175,322  Rolls-Royce PLC*                                  623,030
66,020   Royal & Sun Alliance Insurance Group PLC          449,694
145,180  Safeway PLC                                       456,869
5,700    Signet Group PLC, ADR                             144,637
13,088   SSL International PLC                             139,261
142,682  Tomkins PLC                                       480,076
66,795   United Biscuits (Holdings) PLC                    234,895
15,900   Victrex PLC                                        40,107

                                                         4,867,945

         Venezuela - 0.19%
1,600    Compania Anonima Nacional Telefonos
           de Venezuela, ADR                                41,300
9,200    Mavesa, S.A., ADR                                  29,325

                                                            70,625

         Total Common Stocks                            33,743,968
         (Cost $32,587,913)

         Brazil - 0.28%
1,800,000 Banco Itau, S.A.                                 103,279

         Columbia - 0.11%
5,900    Banco Ganadero, S.A., ADR                          38,567

         Germany - 1.66%
1,700    Fielmann AG                                        64,367
13,235   ProSieben Media AG                                542,877

                                                           607,244

         Total Preferred Stocks                            749,090
         (Cost $833,091)

         Korea - 0.00%#
370      Kookmin Bank                                        2,252

         Singapore - 0.00%#
41,000   Want Want Holdings, Ltd.                                0

         Total Warrants and Rights                           2,252
         (Cost $0)

$        2,227,081 State Street Eurodollar
                  4.500%, due 11/01/99                    $       2,227,081

                  Total Certificate of Deposit                    2,227,081
                  (Cost $2,227,081)

TOTAL INVESTMENTS - 100.50%                             $        36,722,391
(Cost $35,648,085**)

NET OTHER ASSETS AND LIABILITIES - (0.50)%                         (182,299)

TOTAL NET ASSETS - 100.00%                              $        36,540,092

Industry Concentration as a Percentage of Net Assets:            % of Net Assets
                  Finance                                             15.74%
                  Transportation                                      10.43%
                  Chemicals & Drugs                                    8.87%
                  Industrial                                           7.69%
                  Energy                                               7.46%
                  Communication                                        7.36%
                  Consumer Staples                                     6.26%
                  Technology                                           6.19%
                  Certificate of Deposit                               6.10%
                  Retail                                               4.42%
                  Business Services                                    3.20%
                  Metals & Mining                                      3.17%
                  Basic Materials                                      3.12%
                  Consumer Cyclical                                    3.02%
                  Building & Construction                              2.22%
                  Agriculture                                          1.73%
                  Health                                               1.42%
                  Media                                                1.36%
                  Consumer Services                                    0.74%
                  Net Other Assets and Liabilities                    -0.50%

                                                                     100.00%

                      Statements of Assets and Liabilities

                                                                        Cash Reserves                Bond
                                                                             Fund                    Fund

ASSETS:
         Investments (Note 2):
         Investments at cost                                              $ 7,917,967              $ 15,687,643
         Net unrealized appreciation (depreciation)                                --                   (27,307)
                                                                          -----------              ------------
                  Total investments at value                                7,917,967                15,660,336
         Cash                                                                  29,929                    32,258
         Foreign currency (Cost $2)(Note 2)                                        --                        --
Receivables:
         Investments sold                                                          --                   406,087
         Fund shares sold                                                      39,793                    30,125
         Dividends and interest                                                 1,371                   244,451
         Due from Adviser, net                                                 31,826                    16,000
Deferred organization and offering costs                                       26,567                    26,567
Prepaid insurance                                                                 381                       551
Other assets                                                                      237                     1,635
                                                                          -----------              ------------
                  Total Assets                                              8,048,071                16,418,010
                                                                          -----------              ------------
LIABILITIES:
Payable to custodian                                                               --                        --
Payables:
         Investments purchased                                                     --                   819,332
         Due to Adviser, net                                                       --                        --
         Fund shares repurchased                                                  768                    39,296
         Administration and transfer agent fees                                 7,730                     8,455
         Trustees' fees                                                           143                       286
         Distribution fees - Class B                                            2,055                     4,603
         Shareholder servicing fees                                                --                     3,203
Accrued expenses and other payables                                            55,424                    43,910
                                                                          -----------              ------------
                  Total Liabilities                                            66,120                   919,085
                                                                          -----------              ------------
NET ASSETS                                                                $ 7,981,951              $ 15,498,925
                                                                          ===========              ============
NET ASSETS consist of:
         Paid-in capital                                                  $ 7,952,187              $ 15,863,363
         Accumulated undistributed net investment income                       29,722                    12,355
         Accumulated net realized gain (loss) on investments sold
           and foreign currency related transactions                               42                  (349,486)
         Net unrealized appreciation (depreciation) of investments
           (including depreciation of foreign currency related
            transactions of $2,133 in the International Stock Fund)                --                   (27,307)
                                                                          -----------              ------------
TOTAL NET ASSETS                                                          $ 7,981,951              $ 15,498,925
                                                                          ===========              ============
Class A Shares:
         Net Assets                                                       $ 4,481,207              $  7,990,871
         Shares of beneficial interest outstanding                          4,481,245                   820,259
         NET ASSET VALUE and redemption price per share                   $      1.00              $       9.74
         Sales charge of offering price*                                         0.06                      0.44
                                                                          -----------              ------------
         Maximum offering price per share                                 $      1.06              $      10.18
                                                                          ===========              ============
Class B Shares:
         Net Assets                                                       $ 3,500,744              $  7,508,054
         Shares of beneficial interest outstanding                          3,500,744                   770,447
         NET ASSET VALUE and offering price per share**                   $      1.00              $       9.75
                                                                          ===========              ============

   Balanced        High Income     Growth and Income  Capital Appreciation      International Stock
     Fund             Fund               Fund                Fund                      Fund

$ 42,317,790        $ 18,005,696        $ 76,100,720        $ 31,557,621        $ 35,648,085
   3,919,833          (1,049,828)          5,907,945           5,283,389           1,074,306
------------        ------------        ------------        ------------        ------------
  46,237,623          16,955,868          82,008,665          36,841,010          36,722,391
      62,339                  --             115,242              75,312              15,319
          --                  --                  --                  --                   2

   1,116,739               1,450                  --                  --             423,952
     198,808              53,588             395,383             143,202              47,269
     295,278             410,456              47,040              24,378             118,667
          --              20,938                  --                  --                  --
      26,567              26,567              26,567              26,567              26,567
       2,391                 762               2,035               1,616               2,225
          --               7,967              25,387              18,233               2,005
------------        ------------        ------------        ------------        ------------
  47,939,745          17,477,596          82,620,319          37,130,318          37,358,397
------------        ------------        ------------        ------------        ------------

          --               8,385                  --                  --                  --

   1,243,468             101,624             944,537             218,270             702,365
      41,410                  --              63,400              19,491              37,633
      45,410              14,590              41,293               7,984                 180
      10,914               9,458              13,915              10,341              10,578
         841                 326               1,428                 652                 701
      18,801               5,937              33,080              14,049               2,045
       9,548               3,641              16,185               7,351               7,772
       9,235              55,326               4,484              27,686              57,031
------------        ------------        ------------        ------------        ------------
   1,379,627             199,287           1,118,322             305,824             818,305
------------        ------------        ------------        ------------        ------------
$ 46,560,118        $ 17,278,309        $ 81,501,997        $ 36,824,494        $ 36,540,092
============        ============        ============        ============        ============

$ 42,509,207        $ 18,684,149        $ 75,778,037        $ 32,086,676        $ 32,566,323
       1,966              39,187                   1                  35             267,089

     129,112            (395,199)           (183,986)           (545,606)          2,634,507

   3,919,833          (1,049,828)          5,907,945           5,283,389           1,072,173
------------        ------------        ------------        ------------        ------------
$ 46,560,118        $ 17,278,309        $ 81,501,997        $ 36,824,494        $ 36,540,092
============        ============        ============        ============        ============


$ 15,297,134        $  7,879,164        $ 25,645,501        $ 13,261,505        $ 33,214,095
   1,269,936             887,219           1,941,134             967,933           2,900,940
$      12.05        $       8.88        $      13.21        $      13.70        $      11.45
        0.67                0.40                0.74                0.77                0.64
------------        ------------        ------------        ------------        ------------
$      12.72        $       9.28        $      13.95        $      14.47        $      12.09
============        ============        ============        ============        ============


$ 31,262,984        $  9,399,145        $ 55,856,496        $ 23,562,989        $  3,325,997
   2,593,958           1,055,517           4,236,737           1,739,637             292,287
$      12.05        $       8.90        $      13.18        $      13.54        $      11.38
============        ============        ============        ============        ============

                                                                         Cash Reserves               Bond
                                                                             Fund                    Fund

INVESTMENT INCOME:
         Dividends                                                        $        --              $         --
         Interest                                                             310,554                   721,978
                  Less: Foreign taxes withheld                                     --                        --
                                                                          -----------              ------------
                  Total investment income                                     310,554                   721,978
                                                                          -----------              ------------

EXPENSES:
         Management fees (Note 3)                                              24,668                    58,724
         Administration and transfer agent fees (Note 3)                       89,911                    94,948
         Registration expenses                                                 10,945                    13,205
         Custodian fees                                                        12,224                     9,594
         Professional fees                                                      9,630                    10,661
         Reports to shareholder expense                                           982                     2,200
         Trustees' fees (Note 3)                                                  753                     1,481
         Distribution fees -  Class B (Note 3)                                 13,919                    38,119
         Shareholder servicing fees - Class A (Note 3)                             --                    16,655
         Shareholder servicing fees - Class B (Note 3)                             --                    12,706
         Amortization of organization and offering costs (Note 2)              12,493                    12,493
         Other expenses                                                           325                     4,442
                                                                          -----------              ------------
                  Total expenses before reimbursement                         175,850                   275,228
                  Less reimbursement (Note 3)                                (128,007)                 (131,403)
                                                                          -----------              ------------
                  Total expenses net of reimbursement                          47,843                   143,825
                                                                          -----------              ------------
Net Investment Income (Loss)                                                  262,711                   578,153
                                                                          -----------              ------------
Net Realized and Unrealized Gain (Loss) on Investments (Note 2):
         Net realized gain (loss) on investments (including a net
           realized loss on foreign currency transactions of $15,076 in
           the International Stock Fund)                                           42                  (341,357)
         Net change in unrealized appreciation (depreciation) on
           investments (including a net unrealized depreciation on
           foreign currency related transactions of $33,634 in the
           International Stock Fund)                                               --                   (89,553)
                                                                          -----------              ------------
         NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS                    42                  (430,910)
                                                                          -----------              ------------
NET INCREASE IN NET ASSETS FROM OPERATIONS                                $   262,753              $    147,243
                                                                          ===========              ============
                See accompanying Notes to Financial Statements.

   Balanced        High Income     Growth and Income  Capital Appreciation      International Stock
     Fund             Fund               Fund                Fund                      Fund

 $   239,701         $     2,248         $   678,893         $   202,879         $   993,102
   1,017,001           1,389,325             117,043              54,341              66,910
          --                  --                  --                  --             (92,387)
------------        ------------        ------------        ------------        ------------
   1,256,702           1,391,573             795,936             257,220             967,625
------------        ------------        ------------        ------------        ------------


     235,956              78,156             273,436             189,945             350,091
     117,206              97,634             128,260             106,012             114,161
      22,124              12,550              35,687              20,851              16,072
      17,031              14,402              13,126              13,762              97,394
      17,426              11,291              17,668              13,648              16,112
       8,037               2,496               9,676               4,380               5,572
       4,086               1,647               5,558               3,109               3,830
     135,123              51,591             242,696             112,363              17,191
      45,712              18,328              43,391              25,861              77,626
      45,041              17,196              80,898              37,454               5,730
      12,493              12,493              12,493              12,493              12,493
       7,209              13,764               1,660               5,761              28,495
------------        ------------        ------------        ------------        ------------
     667,444             331,548             864,549             545,639             744,767
    (133,221)           (138,215)           (124,700)           (129,364)           (193,962)
------------        ------------        ------------        ------------        ------------
     534,223             193,333             739,849             416,275             550,805
------------        ------------        ------------        ------------        ------------
     722,479           1,198,240              56,087            (159,055)            416,820
------------        ------------        ------------        ------------        ------------



     129,310            (327,673)           (118,122)           (390,468)          2,602,484


   3,512,277              38,689           5,867,753           4,901,372           1,996,743
------------        ------------        ------------        ------------        ------------
   3,641,587            (288,984)          5,749,631           4,510,904           4,599,227
------------        ------------        ------------        ------------        ------------

 $ 4,364,066          $  909,256         $ 5,805,718         $ 4,351,849         $ 5,016,047
============        ============        ============        ============        ============

See accompanying Notes to Financial Statements.

     Statements of Changes in Net Assets For the Year Ended October 31, 1999

                                                                        Cash Reserves                 Bond
                                                                            Fund                      Fund

NET ASSETS at beginning period                                            $ 5,233,081              $  7,022,297
                                                                          -----------              ------------
Increase in net assets from operations:
         Net investment income (loss)                                         262,711                   578,153
         Net realized gain (loss)                                                  42                  (341,357)
         Net change in unrealized appreciation (depreciation)                      --                   (89,553)
                                                                          -----------              ------------
         Net increase in net assets from operations                           262,753                   147,243
                                                                          -----------              ------------

Distributions to shareholders from:
         Net investment income
                  Class A                                                    (193,602)                 (345,079)
                  Class B                                                     (69,068)                 (233,074)
         Net realized gains
                  Class A                                                          --                   (28,262)
                  Class B                                                          --                    (9,835)
                                                                          -----------              ------------
                  Total distributions                                        (262,670)                 (616,250)
                                                                          -----------              ------------

Capital Stock Transactions:
         Class A Shares
                  Shares sold                                               1,463,270                 3,599,208
                  Issued to shareholders in reinvestment of distributions     192,249                   372,980
                  Shares redeemed                                          (1,513,071)                 (514,328)
                                                                          -----------              ------------
                  Net increase (decrease) from capital stock transactions     142,448                 3,457,860
                                                                          -----------              ------------
         Class B Shares
                  Shares sold                                               4,494,991                 6,343,163
                  Issued to shareholders in reinvestment of distributions      68,769                   228,798
                  Shares redeemed                                          (1,957,421)               (1,084,186)
                                                                          -----------              ------------
                  Net increase from capital stock transactions              2,606,339                 5,487,775
                                                                          -----------              ------------
Total increase in net assets                                                2,748,870                 8,476,628
                                                                          -----------              ------------
NET ASSETS at end of period (including line A)                            $ 7,981,951              $ 15,498,925
                                                                          ===========              ============
(A) Undistributed net investment income                                   $    29,722              $     12,355
                                                                          ===========              ============
OTHER INFORMATION:
Capital Share Transactions:
         Class A Shares
                  Shares sold                                               1,467,709                   361,356
                  Issued to shareholders in reinvestment of distributions     193,165                    37,674
                  Shares redeemed                                          (1,517,727)                  (51,766)
                                                                          -----------              ------------
                  Net increase (decrease) in shares outstanding               143,147                   347,264
                                                                          -----------              ------------
         Class B Shares
                  Shares sold                                               4,542,489                   637,845
                  Issued to shareholders in reinvestment of distributions      68,511                    23,198
                  Shares redeemed                                          (2,004,599)                 (109,947)
                                                                          -----------              ------------
                  Net increase in shares outstanding                        2,606,401                   551,096
                                                                          -----------              ------------

                See accompanying Notes to Financial Statements.

   Balanced        High Income     Growth and Income  Capital Appreciation      International Stock
     Fund             Fund               Fund                Fund                      Fund

$ 23,109,847        $  9,677,254        $ 25,577,029        $ 20,435,388        $ 29,005,768
------------        ------------        ------------        ------------        ------------

     722,479           1,198,240              56,087            (159,055)            416,820
     129,310           (327,673)            (118,122)           (390,468)          2,602,484
   3,512,277              38,689           5,867,753           4,901,372           1,996,743
------------        ------------        ------------        ------------        ------------
   4,364,066             909,256           5,805,718           4,351,849           5,016,047
------------        ------------        ------------        ------------        ------------



    (431,006)           (639,267)           (104,915)                 --            (402,357)
    (291,473)           (558,973)                 --                  --             (10,711)

     (11,733)            (18,678)            (10,773)            (10,034)         (1,172,577)
     (20,814)             (6,615)            (29,659)                 --             (66,391)
------------        ------------        ------------        ------------        ------------
    (755,026)         (1,223,533)           (145,347)            (10,034)         (1,652,036)
------------        ------------        ------------        ------------        ------------



  22,621,347           2,118,956          17,647,334           8,326,212           1,024,723
     439,832             645,554             114,550              10,009           1,575,095
 (25,576,825)           (871,164)         (5,460,361)        (10,439,625)           (192,494)
------------        ------------        ------------        ------------        ------------
  (2,515,646)          1,893,346          12,301,523          (2,103,404)          2,407,324
------------        ------------        ------------        ------------        ------------

  23,989,683           7,053,287          40,923,793          15,597,190           1,965,892
     304,240             462,448              29,580                  --              76,883
  (1,937,046)         (1,493,749)         (2,990,299)         (1,446,495)           (279,786)
------------        ------------        ------------        ------------        ------------
  22,356,877           6,021,986          37,963,074          14,150,695           1,762,989
------------        ------------        ------------        ------------        ------------
  23,450,271           7,601,055          55,924,968          16,389,106           7,534,324
------------        ------------        ------------        ------------        ------------
$ 46,560,118        $ 17,278,309        $ 81,501,997        $ 36,824,494        $ 36,540,092
============        ============        ============        ============        ============
$      1,966        $     39,187        $          1        $         35        $    267,089
============        ============        ============        ============        ============



   2,004,630             227,759           1,367,430             645,448              93,829
      38,008              69,992               9,102                 815             151,888
  (2,240,465)            (93,192)           (461,584)           (893,051)            (18,840)
------------        ------------        ------------        ------------        ------------
    (197,827)            204,559             914,948            (246,788)            226,877
------------        ------------        ------------        ------------        ------------

   2,031,097             753,638           3,142,758           1,219,845             180,336
      25,453              50,649               2,458                  --               7,421
    (159,197)           (159,042)           (233,327)           (120,110)            (26,738)
------------        ------------        ------------        ------------        ------------
   1,897,353             645,245           2,911,889           1,099,735             161,019
------------        ------------        ------------        ------------        ------------


See accompanying Notes to Financial Statements.

   Statements of Changes in Net Assets For the Period Ended October 31, 1998

                                                                        Cash Reserves                 Bond
                                                                           Fund (1)                  Fund (1)

NET ASSETS at beginning period(1)                                         $    50,000              $     50,000
                                                                          -----------              ------------
Increase in net assets from operations:
         Net investment income (loss)                                         167,773                   194,052
         Net realized gain (loss)                                                 420                    10,498
         Net change in unrealized appreciation (depreciation)                      --                    62,246
                                                                          -----------              ------------
         Net increase (decrease) in net assets from operations                168,193                   266,796
                                                                          -----------              ------------

Distributions to shareholders from:
         Net investment income
                  Class A                                                    (157,807)                 (163,646)
                  Class B                                                      (9,966)                  (30,406)
         Distribution in excess of net investment income
                  Class A                                                          --                        --
                  Class B                                                          --                        --
                                                                          -----------              ------------
                  Total distributions                                        (167,773)                 (194,052)
                                                                          -----------              ------------

Capital Stock Transactions:
         Class A Shares
                  Shares sold                                               5,496,824                 4,702,204
                  Issued to shareholders in reinvestment of distributions     157,329                   163,461
                  Shares redeemed                                          (1,364,778)                 (174,114)
                                                                          -----------              ------------
                  Net increase from capital stock transactions              4,289,375                 4,691,551
                                                                          -----------              ------------
         Class B Shares
                  Shares sold                                               1,315,996                 2,223,002
                  Issued to shareholders in reinvestment of distributions       9,489                    28,634
                  Shares redeemed                                            (432,199)                  (43,634)
                                                                          -----------              ------------
                  Net increase from capital stock transactions                893,286                 2,208,002
                                                                          -----------              ------------
Total increase in net assets                                                5,183,081                 6,972,297
                                                                          -----------              ------------
NET ASSETS at end of period (including line A)                            $ 5,233,081              $  7,022,297
                                                                          ===========              ============
(A) Undistributed net investment income                                   $    23,338              $     23,446
                                                                          ===========              ============
OTHER INFORMATION:
Capital Share Transactions:
         Class A Shares
                  Shares sold                                               5,496,384                   469,093
                  Issued to shareholders in reinvestment of distributions     157,376                    16,269
                  Shares redeemed                                          (1,364,662)                  (17,267)
                                                                          -----------              ------------
                  Net increase in shares outstanding                        4,289,098                   468,095
                                                                          -----------              ------------
         Class B Shares
                  Shares sold                                               1,314,093                   220,718
                  Issued to shareholders in reinvestment of distributions       9,643                     2,834
                  Shares redeemed                                            (430,393)                   (4,301)
                                                                          -----------              ------------
                  Net increase in shares outstanding                          893,343                   219,251
                                                                          -----------              ------------


(1) Fund commenced investment operations on December 29, 1997.
(2) Represents less than 1/2 of a share.


                See accompanying Notes to Financial Statements.

   Balanced        High Income     Growth and Income  Capital Appreciation      International Stock
     Fund(1)          Fund(1)            Fund(1)             Fund(1)                   Fund(1)

$     50,000         $    50,000        $     50,000        $     50,000        $     50,000
------------        ------------        ------------        ------------        ------------

     151,971             457,306              51,697             (10,945)            218,074
       2,595             (67,321)             (1,828)             (2,007)          1,306,953
     407,556          (1,088,517)             40,191             382,017            (924,570)
------------        ------------        ------------        ------------        ------------
     562,122            (698,532)             90,060             369,065             600,457
------------        ------------        ------------        ------------        ------------



    (114,070)           (352,444)            (48,609)                 --             (19,999)
     (37,901)           (104,862)             (3,088)                 --                  (1)

        (590)                 --              (3,054)             (2,999)                 --
        (306)                 --              (2,653)                 (1)                 --
------------        ------------        ------------        ------------        ------------
    (152,867)           (457,306)            (57,404)             (3,000)            (20,000)
------------        ------------        ------------        ------------        ------------



  15,586,877           6,528,079          11,287,655          13,061,416          26,957,663
     114,515             350,011              51,706               2,999              19,999
    (458,280)           (149,760)           (439,612)           (198,712)            (66,752)
------------        ------------        ------------        ------------        ------------
  15,243,112           6,728,330          10,899,749          12,865,703          26,910,910
------------        ------------        ------------        ------------        ------------

   7,559,659           4,060,617          15,004,465           7,326,656           1,487,111
      37,560              92,006               5,698                   1                   1
    (189,739)            (97,861)           (415,539)           (173,037)            (22,711)
------------        ------------        ------------        ------------        ------------
   7,407,480           4,054,762          14,594,624           7,153,620           1,464,401
------------        ------------        ------------        ------------        ------------
  23,059,847           9,627,254          25,527,029          20,385,388          28,955,768
------------        ------------        ------------        ------------        ------------
$ 23,109,847         $ 9,677,254        $ 25,577,029        $ 20,435,388        $ 29,005,768
============        ============        ============        ============        ============
$     22,711         $    23,986        $     19,303        $     10,070        $    321,481
============        ============        ============        ============        ============



   1,494,109             657,540           1,057,206           1,227,548           2,672,922
      10,884              36,216               4,825                 293               1,949
     (42,130)            (15,996)            (40,745)            (18,020)             (5,708)
------------        ------------        ------------        ------------        ------------
   1,462,863             677,760           1,021,286           1,209,821           2,669,163
------------        ------------        ------------        ------------        ------------

     710,854             410,828           1,363,973             656,474             133,396
       3,588               9,755                 557                  --(2)               --(2)
     (17,937)            (10,411)            (39,782)            (16,672)             (2,228)
------------        ------------        ------------        ------------        ------------
     696,505             410,172           1,324,728             639,802             131,168
------------        ------------        ------------        ------------        ------------


See accompanying Notes to Financial Statements.

 Financial Highlights for a Share of Beneficial Interest Outstanding Throughout each Period

                                                                                          Cash Reserves Fund

                                                                   Class A          Class B         Class A            Class B
                                                                  Year Ended       Year Ended     Inception (a) to  Inception (a) to
                                                                  10/31/1999       10/31/1999       10/31/1998        10/31/1998
                                                               -------------     ------------     ------------     ------------
Net Asset Value, Beginning of Period                           $        1.00     $       1.00     $       1.00     $       1.00
                                                               -------------     ------------     ------------     ------------
      Income from Investment Operations:
           Net investment income                                        0.05             0.04             0.04             0.03
                                                               -------------     ------------     ------------     ------------
                Total from investment operations                        0.05             0.04             0.04             0.03
                                                               -------------     ------------     ------------     ------------

      Less Distributions:
           Distributions from net investment income                    (0.05)           (0.04)           (0.04)           (0.03)
                                                               -------------     ------------     ------------     ------------
                Total distributions                                    (0.05)           (0.04)           (0.04)           (0.03)
                                                               -------------     ------------     ------------     ------------
Net increase in net asset value                                           --               --               --               --
                                                               -------------     ------------     ------------     ------------
Net Asset Value, End of Period                                 $        1.00     $       1.00     $       1.00     $       1.00
                                                               =============     ============     ============     ============


Total Return+                                                           4.60%            3.81%            4.21%(2)         3.50%(2)

Ratios/Supplemental Data:
Net Assets, End of Period (in 000's)                           $       4,481     $      3,501     $      4,339     $        894
Ratios of expenses to average net assets:
      Before reimbursement of expenses by Adviser                       2.63%            3.38%            4.76%(1)         5.51% (1)
      After reimbursement of expenses by Adviser                        0.55%            1.30%            0.55%(1)         1.30% (1)
Ratios of net investment income (loss) to average net assets:
      Before reimbursement of expenses by Adviser                       2.33%            1.84%            0.67%(1)        (0.08)%(1)
      After reimbursement of expenses by Adviser                        4.41%            3.92%            4.88%(1)         4.13% (1)

 Financial Highlights for a Share of Beneficial Interest Outstanding Throughout each Period

                                                                                               Bond Fund

                                                                   Class A          Class B         Class A            Class B
                                                                  Year Ended       Year Ended     Inception (a) to  Inception (a) to
                                                                  10/31/1999       10/31/1999       10/31/1998        10/31/1998
                                                               -------------     ------------     ------------     ------------

Net Asset Value, Beginning of Period                           $       10.14     $      10.14     $      10.00     $      10.00
                                                               -------------     ------------     ------------     ------------
      Income from Investment Operations:
           Net investment income                                        0.51             0.44             0.45             0.39
                                                               -------------     ------------     ------------     ------------
           Net realized and unrealized gain(loss)on investments        (0.35)           (0.35)            0.14             0.14
                                                               -------------     ------------     ------------     ------------
                Total from investment operations                        0.16             0.09             0.59             0.53
                                                               -------------     ------------     ------------     ------------

      Less Distributions:
           Distributions from net investment income                    (0.51)           (0.44)           (0.45)           (0.39)
                                                               -------------     ------------     ------------     ------------
           Distributions from capital gains                            (0.05)           (0.04)              --               --
                                                               -------------     ------------     ------------     ------------
                Total distributions                                    (0.56)           (0.48)           (0.45)           (0.39)
                                                               -------------     ------------     ------------     ------------
Net increase (decrease) in net asset value                             (0.40)           (0.39)            0.14             0.14
                                                               -------------     ------------     ------------     ------------
Net Asset Value, End of Period                                 $        9.74     $       9.75     $      10.14     $      10.14
                                                               =============     ============     ============     ============



Total Return+                                                           1.60%            0.94%            6.08%(2)         5.36%(2)

Ratios/Supplemental Data:
Net Assets, End of Period (in 000's)                           $        7,991    $      7,508     $      4,797     $      2,225
Ratios of expenses to average net assets:
      Before reimbursement of expenses by Adviser                       2.02%            2.77%            4.83%(1)         5.58%(1)
      After reimbursement of expenses by Adviser                        0.90%            1.65%            0.60%(1)         1.35%(1)
Ratios of net investment income to average net assets:
      Before reimbursement of expenses by Adviser                       4.06%            3.46%            1.14%(1)         0.39%(1)
      After reimbursement of expenses by Adviser                        5.18%            4.58%            5.37%(1)         4.62%(1)
Portfolio Turnover        .                                              725%             725%              95%              95%

 Financial Highlights for a Share of Beneficial Interest Outstanding Throughout each Period

                                                                                            Balanced Fund

                                                                   Class A          Class B         Class A            Class B
                                                                  Year Ended       Year Ended     Inception (a) to  Inception (a) to
                                                                  10/31/1999       10/31/1999       10/31/1998        10/31/1998
                                                               -------------     ------------     ------------     ------------
Net Asset Value, Beginning of Period                           $       10.68     $      10.68     $      10.00     $      10.00
                                                               -------------     ------------     ------------     ------------
      Income from Investment Operations:
           Net investment income                                        0.27             0.18             0.21             0.14
                                                               -------------     ------------     ------------     ------------
           Net realized and unrealized gain on investments              1.38             1.38             0.68             0.68
                                                               -------------     ------------     ------------     ------------
                Total from investment operations                        1.65             1.56             0.89             0.82
                                                               -------------     ------------     ------------     ------------

      Less Distributions:
           Distributions from net investment income                    (0.27)           (0.18)           (0.21)           (0.14)
                                                               -------------     ------------     ------------     ------------
           Distributions from capital gains                            (0.01)           (0.01)              --               --
                                                               -------------     ------------     ------------     ------------
                Total distributions                                    (0.28)           (0.19)           (0.21)           (0.14)
                                                               -------------     ------------     ------------     ------------
Net increase in net asset value                                         1.37             1.37             0.68             0.68
                                                               -------------     ------------     ------------     ------------
Net Asset Value, End of Period                                 $       12.05     $      12.05     $      10.68     $      10.68
                                                               =============     ============     ============     ============


Total Return+                                                          15.58%           14.72%            8.92%(2)         8.24% (2)

Ratios/Supplemental Data:
Net Assets, End of Period (in 000's)                           $      15,297     $     31,263     $     15,670     $      7,440
Ratios of expenses to average net assets:
      Before reimbursement of expense  by Adviser                       1.47%            2.22%            3.40%(1)         4.15% (1)
      After reimbursement of expenses by Adviser                        1.10%            1.85%            1.10%(1)         1.85% (1)
Ratios of net investment income (loss) to average net assets:
      Before reimbursement of expenses by Adviser                       1.99%            1.25%            0.23%(1)        (0.52)%(1)
      After reimbursement of expenses by Adviser                        2.36%            1.62%            2.53%(1)         1.78% (1)
Portfolio Turnover                                                       349%             349%              60%              60%

 Financial Highlights for a Share of Beneficial Interest Outstanding Throughout each Period

                                                                                           High Income Fund

                                                                   Class A          Class B         Class A            Class B
                                                                  Year Ended       Year Ended     Inception (a) to  Inception (a) to
                                                                  10/31/1999       10/31/1999       10/31/1998        10/31/1998
                                                               -------------     ------------     ------------     ------------
Net Asset Value, Beginning of Period                           $        8.85     $       8.85     $      10.00     $      10.00
                                                               -------------     ------------     ------------     ------------
      Income from Investment Operations:
           Net investment income                                        0.80             0.74             0.61             0.55
                                                               -------------     ------------     ------------     ------------
           Net realized and unrealized gain (loss) on investments       0.06             0.06            (1.15)           (1.15)
                                                               -------------     ------------     ------------     ------------
                Total from investment operations                        0.86             0.80            (0.54)           (0.60)
                                                               -------------     ------------     ------------     ------------

      Less Distributions:
           Distributions from net investment income                    (0.80)           (0.74)           (0.61)           (0.55)
                                                               -------------     ------------     ------------     ------------
           Distributions from capital gains                            (0.03)           (0.01)              --               --
                                                               -------------     ------------     ------------     ------------
                Total distributions                                    (0.83)           (0.75)           (0.61)           (0.55)
                                                               -------------     ------------     ------------     ------------
Net increase (decrease) in net asset value                              0.03             0.05            (1.15)           (1.15)
                                                               -------------     ------------     ------------     ------------
Net Asset Value, End of Period                                 $        8.88     $       8.90     $       8.85     $       8.85
                                                               =============     ============     ============     ============


Total Return+                                                           9.69%            9.02%           (5.78)%(2)       (6.39)%(2)

Ratios/Supplemental Data:
Net Assets, End of Period (in 000's)                           $       7,879     $      9,399     $      6,045     $      3,632
Ratios of expenses to average net assets:
      Before reimbursement of expenses by Adviser                       1.97%            2.72%            3.52% (1)        4.27% (1)
      After reimbursement of expenses by Adviser                        1.00%            1.75%            1.00% (1)        1.75% (1)
Ratios of net investment income to average net assets:
      Before reimbursement of expenses by Adviser                       7.75%            7.16%            4.95% (1)        4.20% (1)
      After reimbursement of expenses by Adviser                        8.72%            8.13%            7.47% (1)        6.72% (1)
Portfolio Turnover                                                        48%              48%              56%              56%

 Financial Highlights for a Share of Beneficial Interest Outstanding Throughout each Period

                                                                                        Growth and Income Fund

                                                                   Class A          Class B         Class A            Class B
                                                                  Year Ended       Year Ended     Inception (a) to  Inception (a) to
                                                                  10/31/1999       10/31/1999       10/31/1998        10/31/1998
                                                               -------------     ------------     ------------     ------------
Net Asset Value, Beginning of Period                           $       10.88     $      10.88     $      10.00     $      10.00
                                                               -------------     ------------     ------------     ------------
      Income from Investment Operations:
           Net investment income (loss)                                 0.09            (0.01)            0.07             0.01
                                                               -------------     ------------     ------------     ------------
           Net realized and unrealized gain on investments              2.33             2.33             0.89             0.89
                                                               -------------     ------------     ------------     ------------
                Total from investment operations                        2.42             2.32             0.96             0.90
                                                               -------------     ------------     ------------     ------------

      Less Distributions:
           Distributions from net investment income                    (0.09)              --            (0.07)           (0.01)
                                                               -------------     ------------     ------------     ------------
           Distributions from capital gains                               --            (0.02)              --               --
                                                               -------------     ------------     ------------     ------------
           Distributions in excess of net investment income               --               --            (0.01)           (0.01)
                                                               -------------     ------------     ------------     ------------
                Total distributions                                    (0.09)           (0.02)           (0.08)           (0.02)
                                                               -------------     ------------     ------------     ------------
Net increase in net asset value                                         2.33             2.30             0.88             0.88
                                                               -------------     ------------     ------------     ------------
Net Asset Value, End of Period                                 $       13.21     $      13.18     $      10.88     $      10.88
                                                               =============     ============     ============     ============


Total Return+                                                          22.33%           21.32%            9.57% (2)        8.97% (2)

Ratios/Supplemental Data:
Net Assets, End of Period (in 000's)                           $      25,646     $     55,856     $     11,169     $     14,408
Ratios of expenses to average net assets:
      Before reimbursement of expenses by Adviser                       1.25%            2.00%            2.41% (1)        3.16% (1)
      After reimbursement of expenses by Adviser                        1.00%            1.75%            1.00% (1)        1.75% (1)
Ratios of net investment income (loss) to average net assets:
      Before reimbursement of expenses by Adviser                       0.35%           (0.40)%          (0.60)%(1)       (1.35)%(1)
      After reimbursement of expenses by Adviser                        0.60%            (0.15)%           0.81%  (1)      0.06% (1)
Portfolio Turnover                                                        19%              19%               5%               5%

 Financial Highlights for a Share of Beneficial Interest Outstanding Throughout each Period

                                                                                     Capital Appreciation Fund

                                                                   Class A          Class B         Class A            Class B
                                                                  Year Ended       Year Ended     Inception (a) to  Inception (a) to
                                                                  10/31/1999       10/31/1999       10/31/1998        10/31/1998
                                                               -------------     ------------     ------------     ------------
Net Asset Value, Beginning of Period                           $       11.04     $      10.98     $      10.00     $      10.00
                                                               -------------     ------------     ------------     ------------
      Income from Investment Operations:
           Net investment income (loss)                                (0.00)*          (0.12)            0.01            (0.02)
                                                               -------------     ------------     ------------     ------------
           Net realized and unrealized gain on investments              2.68             2.68             1.04             1.01
                                                               -------------     ------------     ------------     ------------
                Total from investment operations                        2.68             2.56             1.05             0.99
                                                               -------------     ------------     ------------     ------------

      Less Distributions:
           Distributions from net investment income                       --               --               --               --
                                                               -------------     ------------     ------------     ------------
           Distributions from capital gains                            (0.02)              --               --               --
                                                               -------------     ------------     ------------     ------------
           Distributions in excess of net investment income               --               --            (0.01)           (0.01)
                                                               -------------     ------------     ------------     ------------
                Total distributions                                    (0.02)              --            (0.01)           (0.01)
                                                               -------------     ------------     ------------     ------------
Net increase in net asset value                                         2.66             2.56             1.04             0.98
                                                               -------------     ------------     ------------     ------------
Net Asset Value, End of Period                                 $       13.70     $      13.54     $      11.04     $      10.98
                                                               =============     ============     ============     ============


Total Return+                                                          24.29%           23.32%           10.51% (2)        9.91% (2)

Ratios/Supplemental Data:
Net Assets, End of Period (in 000's)                           $      13,262     $     23,563     $     13,410     $      7,025
Ratios of expenses to average net assets:
      Before reimbursement of expenses by Adviser                       1.71%            2.46%            3.28% (1)        4.03% (1)
      After reimbursement of expenses by Adviser                        1.20%            1.95%            1.20% (1)        1.95% (1)
Ratios of net investment income (loss) to average net assets:
      Before reimbursement of expenses by Adviser                      (0.68)%          (1.46)%          (1.97)%(1)       (2.72)%(1)
      After reimbursement of expenses by Adviser                       (0.05)%          (1.03)%           0.11% (1)       (0.64)%(1)
Portfolio Turnover                                                        68%              68%              10%              10%

Financial Highlights for a Share of Beneficial Interest Outstanding Throughout each Period

                                                                                       International Stock Fund

                                                                   Class A          Class B         Class A            Class B
                                                                  Year Ended       Year Ended     Inception (a) to  Inception (a) to
                                                                  10/31/1999       10/31/1999       10/31/1998        10/31/1998
                                                               -------------     ------------     ------------     ------------
Net Asset Value, Beginning of Period                           $       10.34     $      10.28     $      10.00     $      10.00
                                                               -------------     ------------     ------------     ------------
      Income from Investment Operations:
           Net investment income                                        0.14             0.05             0.08             0.03
                                                               -------------     ------------     ------------     ------------
           Net realized and unrealized gain on investments              1.56             1.56             0.27             0.26
                                                               -------------     ------------     ------------     ------------
                Total from investment operations                        1.70             1.61             0.35             0.29
                                                               -------------     ------------     ------------     ------------

      Less Distributions:
           Distributions from net investment income                    (0.14)           (0.05)           (0.01)           (0.01)
                                                               -------------     ------------     ------------     ------------
           Distributions from capital gains                            (0.45)           (0.46)              --               --
                                                               -------------     ------------     ------------     ------------
                Total distributions                                    (0.59)           (0.51)           (0.01)           (0.01)
                                                               -------------     ------------     ------------     ------------
Net increase in net asset value                                         1.11             1.10             0.34             0.28
                                                               -------------     ------------     ------------     ------------
Net Asset Value, End of Period                                 $       11.45     $      11.38     $      10.34     $      10.28
                                                               =============     ============     ============     ============


Total Return+                                                          17.00%           16.09%            3.60% (2)        2.90% (2)

Ratios/Supplemental Data:
Net Assets, End of Period (in 000's)                           $      33,214     $      3,326     $     27,656     $      1,350
Ratios of expenses to average net assets:
      Before reimbursement of expenses by Adviser                       2.18%            2.93%            2.76% (1)        3.51% (1)
      After reimbursement of expenses by Adviser                        1.60%            2.35%            1.60% (1)        2.35% (1)
Ratios of net investment income (loss) to average net assets:
      Before reimbursement of expenses by Adviser                       0.72%            0.05%           (0.01)%(1)       (0.76)%(1)
      After reimbursement of expenses by Adviser                        1.30%            0.63%            1.15% (1)        0.40% (1)
Portfolio Turnover                                                        57%              57%              60%              60%

      Fund                       Class A            Class B

Cash Reserves Fund               0.55%              1.30%
Bond Fund                        0.90%              1.65%
Balanced Fund                    1.10%              1.85%
High Income Fund                 1.00%              1.75%
Growth and Income Fund           1.00%              1.75%
Capital Appreciation Fund        1.20%              1.95%
International Stock Fund         1.60%              2.35%

Cash Reserves              $  187,750
Bond                          357,271
Balanced                    1,375,103
High Income                   352,685
Growth and Income           2,346,872
Capital Appreciation          939,589
International Stock           119,846

    Fund                  Purchases       Sales         Purchases      Sales
Bond                   $ 57,092,486   $ 52,174,182    $ 32,302,833 $ 28,384,111
Balanced                 74,502,120     69,110,789      62,308,404   49,604,889
High Income                      --             --      13,498,216    6,366,046
Growth and Income                --             --      57,896,368    9,050,087
Capital Appreciation             --             --      28,056,052   16,583,066
International Stock              --             --      21,113,848   17,551,889

    Fund                              Appreciation   (Depreciation)         Net
Bond                                   $    63,532    $    (90,839) $   (27,307)
Balanced                                 4,892,041      (1,187,578)   3,704,463
High Income                                108,803      (1,159,516)  (1,050,713)
Growth and Income                       10,864,467      (5,269,434)   5,595,033
Capital Appreciation                     6,238,980      (1,541,963)   4,697,017
International Stock                      3,769,381      (2,885,623)     883,758

                                   Losses Deferred   Losses Deferred
Fund                               Expiring in 2006  Expiring in 2007
Bond Fund                                       --  $      349,486
High Income Fund                   $        66,186         328,128

                               CUNA MUTUAL      CUNA MUTUAL       CUMIS
                             LIFE INSURANCE     INSURANCE       INSURANCE
FUND                 CLASS      COMPANY          SOCIETY       SOCIETY, INC.
CASH RESERVES          A       $1,635,342      $1,634,252      $        --
BOND                   A        1,617,059       1,615,982               --
HIGH INCOME            A        5,169,216              --               --
INTERNATIONAL STOCK    A        3,632,779       6,053,420       21,626,406