SECURITIES AND EXCHANGE COMMISSION
c/o MetLife, Inc.
One MetLife Plaza
27-01 Queens Plaza North
Long Island City, NY 11101
(Name and address of agent for service)
Date of reporting period: June 30, 2005
ITEM 1. | REPORT TO STOCKHOLDERS. | |||
The Semi-Annual Report to Stockholders is filed herewith. |
Managed Assets Trust | |
High Yield Bond Trust | |
Capital Appreciation Fund | |
Money Market Portfolio | |
The Travelers Series Trust: | |
U.S. Government Securities Portfolio | |
Pioneer Fund Portfolio | |
Pioneer Mid Cap Value Portfolio |
The Travelers Insurance Company
Semi-Annual Report for Managed Assets Trust, High Yield Bond Trust, Capital Appreciation Fund, Money Market Portfolio and The Travelers Series Trust
Letter from the Chairman | 1 | ||
Managed Assets Trust, High Yield Bond Trust, Capital Appreciation Fund and Money Market Portfolio: | |||
Fund at a Glance: | |||
Managed Assets Trust | 5 | ||
High Yield Bond Trust | 6 | ||
Capital Appreciation Fund | 7 | ||
Money Market Portfolio | 8 | ||
Fund Expenses | 9 | ||
Schedules of Investments | 11 | ||
Statements of Assets and Liabilities | 44 | ||
Statements of Operations | 45 | ||
Statements of Changes in Net Assets | 46 | ||
Financial Highlights | 50 | ||
Notes to Financial Statements | 54 | ||
The Travelers Series Trust – U.S. Government Securities Portfolio, Pioneer Fund Portfolio and Pioneer Mid Cap Value Portfolio: | |||
Fund at a Glance: | |||
U.S. Government Securities Portfolio | 60 | ||
Pioneer Fund Portfolio | 61 | ||
Pioneer Mid Cap Value Portfolio | 62 | ||
Fund Expenses | 63 | ||
Schedules of Investments | 65 | ||
Statements of Assets and Liabilities | 78 | ||
Statements of Operations | 79 | ||
Statements of Changes in Net Assets | 80 | ||
Financial Highlights | 83 | ||
Notes to Financial Statements | 86 | ||
Factors Considered by the Independent Trustees in Approving the Investment Advisory and the Subadvisory Agreements | 92 | ||
Combined Special Shareholder Meeting | 97 |
Dear Shareholder, The U.S. economy overcame a number of obstacles and continued to expand during the reporting period. Rising interest rates, record high oil prices and geopolitical issues threatened to send the economy into a “soft patch.” However, when all was said and done, first quarter 2005 gross domestic product (“GDP”)i growth was 3.8%, mirroring the solid gain that occurred during the fourth quarter of 2004. Given the overall strength of the economy, the Federal Reserve Board (“Fed”)ii continued to raise interest rates over the period in an attempt to ward off inflation. Following five rate hikes from June 2004 through December 2004, the Fed again increased its target for the federal funds rateiii in 0.25% increments four additional times during the reporting period. All told, the Fed’s nine rate hikes brought the target for the federal funds rate from 1.00% to 3.25%. | ![]() R. JAY GERKEN, CFA Chairman, President and Chief Executive Officer |
During the six months covered by this report, the U.S. stock market was relatively flat, with the S&P 500 Indexiv returning -0.81%. Stocks were weak early in the reporting period, as the issues discussed above caused investors to remain on the sidelines. Equities then rallied in the second quarter of 2005, as the economy appeared to be on
solid footing and inflation was largely under control. Looking at the reporting period as a whole, mid-cap stocks generated superior returns, with the Russell Midcapv, Russell 1000vi, and Russell 2000vii Indexes returning 3.92%, 0.11%, and -1.25%, respectively. From a market style perspective, value-oriented stocks outperformed their growth counterparts.
During the reporting period, the fixed income market confounded many investors as short term interest rates rose in concert with the Fed rate tightening, while longer-term rates, surprisingly, declined. When the period began, the federal fund target rate was 2.25% and the yield on the 10-year Treasury was 4.24%. When the reporting period ended, the federal funds rate rose to 3.25% and the 10-year yield fell to 3.92%. Declining long-term rates, mixed economic data and periodic flights to quality all supported bond prices. Looking at the six-month period as a whole, the overall bond market, as measured by the Lehman Brothers Aggregate Bond Indexviii, returned 2.51%.
PERFORMANCE OF THE FUNDS
6 Months | ||||
Managed Assets Trust | -0.20% | |||
S&P 500 Index | -0.81% | |||
Lehman Brothers Government/Credit Bond Index | 2.75% | |||
Lipper Variable Flexible Portfolio Funds Category Average | 0.54% | |||
High Yield Bond Trust | 0.01% | |||
Credit Suisse First Boston High Yield Index | 0.77% | |||
Lipper Variable High Current Yield Funds Category Average | 0.45% | |||
Capital Appreciation Fund | 4.92% | |||
S&P 500 Index | -0.81% | |||
Russell 2000 Index | -1.25% | |||
Lipper Variable Large-Cap Growth Funds Category Average | -1.42% |
1 | The Funds are underlying investment options of various variable annuity and variable life insurance products. The Funds’ performance returns do not reflect the deduction of expenses imposed in connection with investing in variable annuity or variable life insurance contracts, such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the performance of the Funds. Past performance is no guarantee of future results. |
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PERFORMANCE OF THE FUNDS
6 Months | |||||
U.S. Government Securities Portfolio | 5.51% | ||||
Merrill Lynch U.S. Treasury/ Agency Master Index | 2.99% | ||||
Merrill Lynch U.S. Treasuries 15+ Years Index | 9.40% | ||||
Merrill Lynch Mortgage Master Index | 2.21% | ||||
Lipper Variable General U.S. Government Funds Category Average | 2.95% | ||||
Pioneer Fund Portfolio | -1.16% | ||||
S&P 500 Index | -0.81% | ||||
Lipper Variable Large-Cap Core Funds Category Average | -0.76% | ||||
The performance shown represents past performance. Past performance is no guarantee of future results and current performance may be higher or lower than the performance shown above. Principal value and investment returns will fluctuate and investors’ shares, when redeemed, may be worth more or less than their original cost. To obtain performance data current to the most recent month-end, please visit our website at www.citigroupam.com. | |||||
Fund returns assume the reinvestment of all distributions at net asset value and the deduction of all Fund expenses. |
Managed Assets Trust2
For the six months ended June 30, 2005, the Managed Assets Trust returned -0.20%. These shares underperformed the Lipper Variable Flexible Portfolio Funds Category Average3, which increased 0.54%. The Fund’s unmanaged benchmarks, the S&P 500 Index and the Lehman Brothers Government/ Credit Bond Indexix, returned -0.81% and 2.75%, respectively for the same period.
High Yield Bond Trust2
For the six months ended June 30, 2005, the High Yield Bond Trust returned 0.01%. These shares underperformed the Lipper Variable High Current Yield Funds Category Average4, which increased 0.45%. The Fund’s unmanaged benchmark, the Credit Suisse First Boston High Yield Indexx, returned 0.77%, for the same period.
Capital Appreciation Fund2
For the six months ended June 30, 2005, the Capital Appreciation Fund returned 4.92%. These shares outperformed the Lipper Variable Large-Cap Growth Funds Category Average5, which decreased 1.42%. The Fund’s unmanaged benchmarks, the S&P 500 Index and the Russell 2000 Index, returned -0.81% and -1.25%, respectively, for the same period.
U.S. Government Securities Portfolio2
For the six months ended June 30, 2005, the U.S. Government Securities Portfolio returned 5.51%. The Fund’s unmanaged benchmarks, the Merrill Lynch U.S. Treasury/ Agency Master Indexxi, the Merrill Lynch U.S. Treasuries 15+ Years Indexxii, and the Merrill Lynch Mortgage Master Indexxiii, returned 2.99%, 9.40% and 2.21%, respectively, for the same period. The Lipper Variable General U.S. Government Funds Category Average6 increased 2.95%.
2 | The Fund is an underlying investment option of various variable annuity and variable life products. The Fund’s performance returns do not reflect the deduction of sales charges and expenses imposed in connection with investing in variable annuity and variable life contracts, such as administrative fees, account charges, and surrender charges which, if reflected, would reduce the performance of the Fund. Past performance is no guarantee of future results. |
3 | Lipper, Inc. is a major independent mutual-fund tracking organization. Returns are based on the six-month period ended June 30, 2005 including the reinvestment of dividends and capital gains distributions, if any, calculated among the 88 funds in the Fund’s Lipper category. |
4 | Lipper, Inc. is a major independent mutual-fund tracking organization. Returns are based on the six-month period ended June 30, 2005 including the reinvestment of dividends and capital gains distributions, if any, calculated among the 89 funds in the Fund’s Lipper category. |
5 | Lipper, Inc. is a major independent mutual-fund tracking organization. Returns are based on the six-month period ended June 30, 2005 including the reinvestment of dividends and capital gains distributions, if any, calculated among the 172 funds in the Fund’s Lipper category. |
6 | Lipper, Inc. is a major independent mutual-fund tracking organization. Returns are based on the six-month period ended June 30, 2005 including the reinvestment of dividends and capital gains distributions, if any, calculated among the 56 funds in the Fund’s Lipper category. |
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Pioneer Fund Portfolio2
For the six months ended June 30, 2005, the Pioneer Fund Portfolio returned -1.16%. These shares underperformed the Fund’s unmanaged benchmark, the S&P 500 Index, which returned -0.81% for the same period. The Lipper Variable Large-Cap Core Funds Category Average7 decreased 0.76%.
Pioneer Mid Cap Value Portfolio2
The Fund commenced operation on May 2, 2005.
Money Market Portfolio2
As of June 30, 2005, the seven-day current yield for the Money Market Portfolio was 2.77% and its seven-day effective yield, which reflects compounding, was 2.81%8.
Both yields include a voluntary waiver of the management fee. This waiver may be reduced or terminated at any time. If the full management fee had been included, the seven-day current yield would have been 2.75% and the seven-day effective yield would have been 2.79%.
In addition, your investment is neither insured nor guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund.
MONEY MARKET PORTFOLIO
Seven-Day Current Yield | 2.77% | |||
Seven-Day Effective Yield | 2.81% |
The performance shown represents past performance. Past performance is no guarantee of future results and current performance may be higher or lower than the performance shown above. | ||
Current reimbursement and/or fee waivers are voluntary, and may be reduced or terminated at any time. Absent these reimbursements or waivers, the seven-day current yield would have been 2.75% and the seven-day effective yield would have been 2.79%. |
Special Shareholder Notice
On January 31, 2005, Citigroup Inc. (“Citigroup”) announced that it had agreed to sell The Travelers Insurance Company and certain other domestic and international insurance businesses to Metlife, Inc. (“MetLife”), pursuant to an acquisition agreement (“MetLife Transaction”). The sale included Travelers Asset Management International Company LLC (“TAMIC”), which serves as the investment advisor for the Funds. During the spring/summer 2005, the shareholders of the Funds approved the change in control of TAMIC from Citigroup to MetLife, as well as the new advisory agreements with TAMIC. The MetLife Transaction closed on July 1, 2005.
Information About Your Funds
As you may be aware, several issues in the mutual fund and variable annuity product industry have recently come under the scrutiny of federal and state regulators. The Travelers Insurance Company and some of its affiliates have received requests for information from various government regulators regarding market timing, late trading, fees, revenue sharing, producer compensation and other mutual fund and variable annuity product issues in connection with various inquiries and or investigations. The Travelers Insurance Company and its affiliates are responding to those information requests, but are not in a position to predict the outcome of these requests and investigations.
Important information concerning the Funds and their sub-administrator with regard to recent regulatory developments is contained in the “Additional Information” note in the Notes to the Financial Statements included in this report.
7 | Lipper, Inc. is a major independent mutual-fund tracking organization. Returns are based on the six-month period ended June 30, 2005 including the reinvestment of dividends and capital gains distributions, if any, calculated among the 223 funds in the Fund’s Lipper category. |
8 | The seven-day effective yield is calculated similarly to the seven-day current yield but, when annualized, the income earned by an investment in the Fund is assumed to be reinvested. The effective yield typically will be slightly higher than the current yield because of the compounding effect of the assumed reinvestment. |
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As always, thank you for your continued confidence in our stewardship of your assets. We look forward to helping you continue to meet your financial goals.
Sincerely,
R. Jay Gerken, CFA
July 14, 2005
* | Mr. Gerken resigned as Chairman, President and Chief Executive Officer of the Funds when the MetLife Transaction closed on July 1, 2005. |
The information provided is not intended to be a forecast of future events, a guarantee of future results or investment advice. Views expressed may differ from those of the firm as a whole.
All index performance reflects no deduction for fees, expenses or taxes. Please note that an investor cannot invest directly in an index.
i | Gross domestic product is a market value of goods and services produced by labor and property in a given country. |
ii | The Federal Reserve Board is responsible for the formulation of a policy designed to promote economic growth, full employment, stable prices, and a sustainable pattern of international trade and payments. |
iii | The federal funds rate is the interest rate that banks with excess reserves at a Federal Reserve district bank charge other banks that need overnight loans. |
iv | The S&P 500 Index is an unmanaged index of 500 stocks that is generally representative of the performance of larger companies in the U.S. |
v | The Russell Midcap Index measures the performance of the 800 smallest companies in the Russell 1000 Index whose average market capitalization was approximately $4.7 billion as of 6/24/05. |
vi | The Russell 1000 Index measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index. |
vii | The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index. |
viii | The Lehman Brothers Aggregate Bond Index is a broad-based bond index comprised of Government, Corporate, Mortgage and Asset-backed issues, rated investment grade or higher, and having at least one year to maturity. |
ix | The Lehman Brothers Government/ Credit Bond Index is a broad-based index composed of government and corporate debt issues that are investment grade (rated Baa/ BBB or higher). |
x | The Credit Suisse First Boston High Yield Index is a market-weighted index that includes publicly traded bonds rated below BBB by S&P and Baa by Moody’s. Moody’s Investors Service is a nationally recognized credit rating agency. Standard & Poor’s Ratings Service is a nationally recognized credit rating agency. |
xi | The Merrill Lynch U.S. Treasury/Agency Master Index is an index comprised of U.S. Treasury and Agency securities. |
xii | The Merrill Lynch U.S. Treasuries 15+ Years Index tracks the performance of the direct Sovereign debt of the U.S. Government. It includes all U.S. dollar-denominated U.S. Treasury Notes and Bonds having at least 15 years remaining term to maturity and a minimum amount outstanding of $1 billion. |
xiii | The Merrill Lynch Mortgage Master Index (also called the Mortgage Backed Securities Index) tracks the performance of the U.S. dollar-denominated 30-year, 15-year and balloon pass through mortgage securities having at least $150 million outstanding per generic production year (defined as the aggregation of all mortgage pools having a common issuer, type, coupon and production year.) |
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Example
As a shareholder of the Funds, you may incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds.
This example is based on an investment of $1,000 invested on January 1, 2005 and held for the six months ended June 30, 2005.
Actual Expenses
The table below titled “Based on Actual Total Return” provides information about actual account values and actual expenses. You may use the information provided in this table, together with the amount you invested, to estimate the expenses that you paid over the period. To estimate the expenses you paid on your account, divide your ending account value by $1,000 (for example, an $8,600 ending account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During the Period”.
Expenses | ||||||||||||||||||||
Beginning | Ending | Annualized | Paid | |||||||||||||||||
Actual Total | Account | Account | Expense | During the | ||||||||||||||||
Return(2) | Value | Value | Ratio | Period(3) | ||||||||||||||||
Managed Assets Trust | (0.20 | )% | $ | 1,000.00 | $ | 998.00 | 0.61 | % | $ | 3.02 | ||||||||||
High Yield Bond Trust | 0.01 | 1,000.00 | 1,000.10 | 0.61 | 3.03 | |||||||||||||||
Capital Appreciation Fund | 4.92 | 1,000.00 | 1,049.20 | 0.78 | 3.96 | |||||||||||||||
Money Market Portfolio | 1.17 | 1,000.00 | 1,011.70 | 0.40 | 2.00 | |||||||||||||||
(1) | For the six months ended June 30, 2005. |
(2) | Assumes reinvestment of dividends and capital gain distributions, if any, at net asset value. Total return is not annualized, as it may not be representative of the total return for the year. Total returns do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the total returns. Performance figures may reflect fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of fee waivers and/or expense reimbursements, the total return would have been lower. |
(3) | Expenses (net of any fee waiver and/or expense reimbursement) are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year, then divided by 365. |
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Hypothetical Example for Comparison Purposes
The table below titled “Based on Hypothetical Total Return” provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio and an assumed rate of return of 5.00% per year before expenses, which is not the Funds’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use the information provided in this table to compare the ongoing costs of investing in the Funds and other funds. To do so, compare the 5.00% hypothetical example relating to the Funds with the 5.00% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table below are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
Hypothetical | Expenses | |||||||||||||||||||
Annualized | Beginning | Ending | Annualized | Paid | ||||||||||||||||
Total | Account | Account | Expense | During the | ||||||||||||||||
Return | Value | Value | Ratio | Period(2) | ||||||||||||||||
Managed Assets Trust | 5.00 | % | $ | 1,000.00 | $ | 1,021.77 | 0.61 | % | $ | 3.06 | ||||||||||
High Yield Bond Trust | 5.00 | 1,000.00 | 1,021.77 | 0.61 | 3.06 | |||||||||||||||
Capital Appreciation Fund | 5.00 | 1,000.00 | 1,020.93 | 0.78 | 3.91 | |||||||||||||||
Money Market Portfolio | 5.00 | 1,000.00 | 1,022.81 | 0.40 | 2.01 | |||||||||||||||
(1) | For the six months ended June 30, 2005. |
(2) | Expenses (net of any fee waiver and/or expense reimbursement) are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year, then divided by 365. |
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Schedules of Investments (unaudited) | June 30, 2005 |
FACE | |||||||||||
AMOUNT | RATING‡ | SECURITY | VALUE | ||||||||
CORPORATE BONDS & NOTES — 14.3% | |||||||||||
Aerospace/Defense — 0.4% | |||||||||||
$ | 400,000 | BBB+ | Lockheed Martin Corp., Bonds, 8.500% due 12/1/29 | $ | 579,472 | ||||||
500,000 | BBB | Northrop Grumman Corp., Notes, 4.079% due 11/16/06 | 498,720 | ||||||||
1,078,192 | |||||||||||
Agriculture — 0.3% | |||||||||||
700,000 | BBB | Altria Group, Inc., Notes, 5.625% due 11/4/08 | 726,760 | ||||||||
Auto Manufacturers — 0.4% | |||||||||||
600,000 | BBB | DaimlerChrysler North America Holding Corp., Notes, 7.300% due 1/15/12 | 671,340 | ||||||||
400,000 | BB+ | Ford Motor Co., Notes, 7.450% due 7/16/31 | 334,781 | ||||||||
1,006,121 | |||||||||||
Banks — 1.5% | |||||||||||
700,000 | AA- | ABN AMRO Bank NV, Senior Notes, 3.310% due 5/11/07 (a) | 700,989 | ||||||||
500,000 | AA- | Bank of America Corp., Senior Notes, 5.375% due 6/15/14 | 532,216 | ||||||||
300,000 | A+ | HSBC Bank USA, Subordinated Notes, 5.875% due 11/1/34 | 328,111 | ||||||||
300,000 | A- | Huntington National Bank, Senior Notes, 4.650% due 6/30/09 | 303,640 | ||||||||
200,000 | AA | Rabobank Capital Funding Trust III, Subordinated Notes, 5.254% due 12/31/16 (a)(b) | 205,584 | ||||||||
300,000 | A | RBS Capital Trust I, 4.709% due 12/29/49 (a) | 296,462 | ||||||||
300,000 | A+ | Royal Bank of Scotland Group PLC, Subordinated Bonds, 5.050% due 1/8/15 | 310,738 | ||||||||
200,000 | A+ | U.S. Bank North America, Subordinated Notes, 4.950% due 10/30/14 | 205,931 | ||||||||
Wachovia Bank North America, Subordinated Notes: | |||||||||||
200,000 | A+ | 4.800% due 11/1/14 | 202,713 | ||||||||
700,000 | A+ | 3.590% due 11/3/14 (a) | 708,780 | ||||||||
400,000 | A- | Washington Mutual Bank FA, Subordinated Notes, 5.125% due 1/15/15 | 407,066 | ||||||||
219,799 | NR | Willmington Trust, 9.250% due 1/2/07 | 127,484 | ||||||||
4,329,714 | |||||||||||
Beverages — 0.3% | |||||||||||
300,000 | A+ | Bottling Group LLC, 4.625% due 11/15/12 | 304,982 | ||||||||
600,000 | A | PepsiAmericas, Inc., Notes, 4.875% due 1/15/15 | 612,288 | ||||||||
917,270 | |||||||||||
Diversified Financial Services — 3.4% | |||||||||||
400,000 | AA+ | AIG SunAmerica Global Financing VII, Senior Notes, 5.850% due 8/1/08 (b) | 417,275 | ||||||||
800,000 | A+ | American General Finance Corp., Notes, 3.875% due 10/1/09 | 782,114 | ||||||||
520,000 | BBB | Capital One Bank, Notes, 5.000% due 6/15/09 | 531,791 | ||||||||
300,000 | BBB- | Capital One Financial Corp., Notes, 5.500% due 6/1/15 | 307,496 | ||||||||
700,000 | A | Caterpillar Financial Services, Notes, 4.700% due 3/15/12 | 713,881 | ||||||||
500,000 | A | Countrywide Financial Corp., Medium-Term Notes, Series A, 4.500% due 6/15/10 | 499,930 | ||||||||
580,000 | A | Countrywide Home Loans, Inc., Medium-Term Notes, Series L, 4.000% due 3/22/11 | 560,070 | ||||||||
Credit Suisse First Boston USA, Inc.: | |||||||||||
500,000 | A+ | 3.875% due 1/15/09 | 494,524 | ||||||||
300,000 | A+ | Notes, 6.125% due 11/15/11 | 326,764 |
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Schedules of Investments (unaudited) (continued) | June 30, 2005 |
FACE | |||||||||||
AMOUNT | RATING‡ | SECURITY | VALUE | ||||||||
Diversified Financial Services — 3.4% (continued) | |||||||||||
Ford Motor Credit Co.: | |||||||||||
$ | 400,000 | BB+ | Global Landmark SecuritiesTM, 6.500% due 1/25/07 | $ | 403,018 | ||||||
100,000 | BB+ | Notes, 5.700% due 1/15/10 | 92,324 | ||||||||
300,000 | BBB- | Glencore Funding LLC, Notes, 6.000% due 4/15/14 (b) | 288,150 | ||||||||
400,000 | A- | Goldman Sachs Capital I, Capital Securities, 6.345% due 2/15/34 | 434,892 | ||||||||
1,100,000 | A | HSBC Finance Corp., Notes, 6.375% due 10/15/11 | 1,204,237 | ||||||||
400,000 | A | JPMorgan Chase & Co., Subordinated Notes, 5.250% due 5/1/15 | 414,145 | ||||||||
500,000 | A | Lehman Brothers Holdings, Inc., Medium-Term Notes, Series G, 4.800% due 3/13/14 | 506,129 | ||||||||
Merrill Lynch & Co., Inc., Medium-Term Notes, Series C: | |||||||||||
300,000 | A+ | 4.125% due 9/10/09 | 299,011 | ||||||||
300,000 | A+ | 4.250% due 2/8/10 | 299,564 | ||||||||
300,000 | A+ | 5.000% due 1/15/15 | 307,760 | ||||||||
600,000 | AA | Principal Life Global Funding I, Bonds, 6.125% due 10/15/33 (b) | 690,011 | ||||||||
9,573,086 | |||||||||||
Electric — 1.2% | |||||||||||
300,000 | BBB+ | Dominion Resources, Inc., Senior Notes, Series F, 5.250% due 8/1/33 | 307,800 | ||||||||
2,000,000 | BB- | PSEG Energy Holdings LLC, Senior Notes, 8.500% due 6/15/11 | 2,190,000 | ||||||||
700,000 | AA | SP PowerAssets Ltd., Notes, 5.000% due 10/22/13 (b) | 726,709 | ||||||||
200,000 | BBB- | TransAlta Corp., Notes, 5.750% due 12/15/13 | 210,656 | ||||||||
3,435,165 | |||||||||||
Forest Products & Paper — 0.1% | |||||||||||
200,000 | BBB | International Paper Co., Notes, 5.300% due 4/1/15 | 200,965 | ||||||||
Gas — 0.1% | |||||||||||
300,000 | A+ | Southern California Gas Co., First Mortgage Bonds, Series II, 4.375% due 1/15/11 | 300,113 | ||||||||
Health Care – Services — 0.1% | |||||||||||
300,000 | BBB+ | WellPoint, Inc., Bonds, 6.800% due 8/1/12 | 338,998 | ||||||||
Home Builders — 0.1% | |||||||||||
400,000 | BBB- | Pulte Homes, Inc., Notes, 5.200% due 2/15/15 | 396,405 | ||||||||
Insurance — 0.3% | |||||||||||
Berkshire Hathaway Finance Corp.: | |||||||||||
200,000 | AAA | 3.330% due 5/16/08 (a)(b) | 200,071 | ||||||||
400,000 | AAA | 4.750% due 5/15/12 (b) | 404,238 | ||||||||
100,000 | BBB+ | GE Global Insurance Holding Corp., Notes, 7.000% due 2/15/26 | 107,478 | ||||||||
711,787 | |||||||||||
Media — 2.2% | |||||||||||
2,000,000 | BBB+ | Comcast Cable Communications, Inc., Notes, 8.875% due 5/1/17 | 2,645,008 | ||||||||
700,000 | BBB- | COX Communications, Inc., Notes, 7.125% due 10/1/12 | 786,121 | ||||||||
352,000 | BB+ | Liberty Media Corp., Senior Notes, 4.910% due 9/17/06 (a) | 354,256 | ||||||||
2,000,000 | BBB+ | Time Warner, Inc., Debentures, 7.625% due 4/15/31 | 2,505,694 | ||||||||
6,291,079 | |||||||||||
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Schedules of Investments (unaudited) (continued) | June 30, 2005 |
FACE | |||||||||||
AMOUNT | RATING‡ | SECURITY | VALUE | ||||||||
Mining — 0.1% | |||||||||||
$ | 300,000 | BBB | Phelps Dodge Corp., Senior Notes, 8.750% due 6/1/11 | $ | 363,150 | ||||||
Miscellaneous Manufacturing — 0.4% | |||||||||||
1,100,000 | AAA | General Electric Co., Notes, 5.000% due 2/1/13 | 1,137,544 | ||||||||
Oil & Gas — 0.1% | |||||||||||
300,000 | BBB+ | Anadarko Finance Co., Senior Notes, Series B, 6.750% due 5/1/11 | 333,737 | ||||||||
Oil & Gas Services — 0.3% | |||||||||||
200,000 | BBB+ | Cooper Cameron Corp., Senior Notes, 2.650% due 4/15/07 | 194,118 | ||||||||
400,000 | BBB | Devon Financing Corp. ULC, Guaranteed Debentures, 7.875% due 9/30/31 | 521,944 | ||||||||
716,062 | |||||||||||
Pharmaceuticals — 0.2% | |||||||||||
500,000 | A | Wyeth, Notes, 6.500% due 2/1/34 | 586,544 | ||||||||
Pipelines — 0.3% | |||||||||||
200,000 | BBB+ | Consolidated Natural Gas Co., Senior Notes, 5.000% due 12/1/14 | 202,702 | ||||||||
300,000 | BBB- | Duke Capital LLC, Senior Notes, 4.331% due 11/16/06 | 300,500 | ||||||||
200,000 | BBB+ | Kinder Morgan Energy Partners LP, Notes, 5.125% due 11/15/14 | 202,658 | ||||||||
705,860 | |||||||||||
Real Estate — 0.1% | |||||||||||
200,000 | BBB- | Colonial Realty LP, Notes, 4.750% due 2/1/10 | 198,631 | ||||||||
REITs — 1.4% | |||||||||||
100,000 | BBB+ | AvalonBay Communities, Inc., Notes, 4.950% due 3/15/13 | 100,920 | ||||||||
200,000 | BBB | HRPT Properties Trust, Senior Notes, 6.250% due 8/15/16 | 216,983 | ||||||||
300,000 | BBB- | iStar Financial, Inc., Senior Notes, 6.000% due 12/15/10 | 312,404 | ||||||||
100,000 | A- | Kimco Realty Corp., Medium-Term Notes, Series C, 3.410% due 8/1/06 (a) | 100,131 | ||||||||
2,400,000 | BBB- | Nationwide Health Properties, Inc., Medium-Term Notes, Series C, 6.900% due 10/1/37 | 2,696,352 | ||||||||
Simon Property Group LP, Notes: | |||||||||||
200,000 | BBB+ | 4.600% due 6/15/10 (b) | 200,330 | ||||||||
200,000 | BBB+ | 5.100% due 6/15/15 (b) | 200,279 | ||||||||
3,827,399 | |||||||||||
Telecommunications — 1.0% | |||||||||||
400,000 | A- | Deutsche Telekom International Finance BV, Bonds, 8.750% due 6/15/30 | 543,274 | ||||||||
1,000,000 | A- | France Telecom SA, Notes, 8.500% due 3/1/31 | 1,398,575 | ||||||||
300,000 | A | SBC Communications, Inc., Bonds, 6.450% due 6/15/34 | 338,470 | ||||||||
500,000 | BBB- | Sprint Capital Corp., Notes, 8.375% due 3/15/12 | 602,204 | ||||||||
2,882,523 | |||||||||||
TOTAL CORPORATE BONDS & NOTES (Cost — $36,126,975) | 40,057,105 | ||||||||||
13
Schedules of Investments (unaudited) (continued) | June 30, 2005 |
FACE | |||||||||||
AMOUNT | RATING‡ | SECURITY | VALUE | ||||||||
CONVERTIBLE BONDS & NOTES — 4.4% | |||||||||||
Auto Parts & Equipment — 0.4% | |||||||||||
$ | 25,000 | BBB | American Axle & Manufacturing Holdings, Inc., Senior Notes, step bond to yield 2.000% due 2/15/24 (b) | $ | 20,062 | ||||||
2,280,000 | BBB- | Lear Corp., Senior Notes, zero coupon bond to yield 3.431% due 2/20/22 | 1,034,550 | ||||||||
1,054,612 | |||||||||||
Computers — 0.3% | |||||||||||
955,000 | BBB- | Electronic Data Systems Corp., Senior Notes, 3.875% due 7/15/23 | 912,025 | ||||||||
Electric — 0.1% | |||||||||||
250,000 | BBB | PPL Energy Supply LLC, Senior Notes, 2.625% due 5/15/23 (b) | 299,063 | ||||||||
Electronics — 0.1% | |||||||||||
440,000 | BBB- | Arrow Electronics, Inc., zero coupon bond to yield 4.000% due 2/21/21 | 238,700 | ||||||||
Health Care – Services — 0.4% | |||||||||||
Health Management Associates, Inc., Senior Subordinated Notes: | |||||||||||
200,000 | BBB+ | 1.500% due 8/1/23 | 217,000 | ||||||||
800,000 | BBB+ | 1.500% due 8/1/23 (b) | 868,000 | ||||||||
1,085,000 | |||||||||||
Insurance — 0.3% | |||||||||||
1,350,000 | AA | American International Group, Inc., Senior Debentures, zero coupon bond to yield 1.525% due 11/9/31 | 906,187 | ||||||||
Leisure Time — 0.5% | |||||||||||
660,000 | BBB- | Four Season Hotels, Inc., Senior Notes, 1.875% due 7/30/24 | 723,525 | ||||||||
1,050,000 | BB+ | Royal Caribbean Cruises Ltd., Senior LYOTMNs, zero coupon bond to yield 4.875% due 2/2/21 | 609,000 | ||||||||
1,332,525 | |||||||||||
Machinery – Construction & Mining — 0.0% | |||||||||||
50,000 | BBB+ | Placer Dome, Inc., Senior Notes, 2.750% due 10/15/23 (b) | 53,188 | ||||||||
Media — 0.9% | |||||||||||
Liberty Media Corp., Senior Exchangeable Debentures: | |||||||||||
500,000 | BB+ | 0.750% due 3/30/23 (b) | 530,000 | ||||||||
650,000 | BB+ | 4.000% due 11/15/29 | 408,688 | ||||||||
750,000 | BB+ | 3.500% due 1/15/31 | 667,500 | ||||||||
850,000 | A- | Walt Disney Co., Senior Notes, 2.125% due 4/15/23 | 876,562 | ||||||||
2,482,750 | |||||||||||
Oil & Gas Services — 1.1% | |||||||||||
175,000 | BBB+ | Cooper Cameron Corp., Senior Debentures, 1.500% due 5/15/24 (b) | 193,375 | ||||||||
915,000 | A- | Diamond Offshore Drilling, Inc., Senior Debentures, 1.500% due 4/15/31 | 1,125,450 | ||||||||
500,000 | BBB | Halliburton Co., Senior Notes, 3.125% due 7/15/23 (b) | 693,750 | ||||||||
900,000 | A+ | Schlumberger Ltd., Senior Notes, Series A, 1.500% due 6/1/23 | 1,037,250 | ||||||||
3,049,825 | |||||||||||
14
Schedules of Investments (unaudited) (continued) | June 30, 2005 |
FACE | |||||||||||
AMOUNT | RATING‡ | SECURITY | VALUE | ||||||||
Pharmaceuticals — 0.2% | |||||||||||
$ | 250,000 | A | Allergan, Inc., Senior Notes, zero coupon bond to yield 1.250% due 11/6/22 (b) | $ | 245,312 | ||||||
Watson Pharmaceuticals, Inc.: | |||||||||||
221,000 | BBB- | Debentures, 1.750% due 3/15/23 | 206,083 | ||||||||
140,000 | BBB- | Senior Debentures, 1.750% due 3/15/23 (b) | 130,550 | ||||||||
581,945 | |||||||||||
Retail — 0.1% | |||||||||||
200,000 | BBB- | Best Buy Co., Inc., 2.250% due 1/15/22 (b) | 224,000 | ||||||||
TOTAL CONVERTIBLE BONDS & NOTES (Cost — $11,389,421) | 12,219,820 | ||||||||||
ASSET-BACKED SECURITIES — 2.0% | |||||||||||
Diversified Financial Services — 1.8% | |||||||||||
5,000,000 | AAA | PP&L Transition Bond LLC, Series 1999-1, Class A7, 7.050% due 6/25/09 | 5,200,452 | ||||||||
Home Equity — 0.2% | |||||||||||
500,000 | AAA | Chase Funding Mortgage Loan Asset-Backed Certificates, Series 2002-2, Class 1A5, 5.833% due 4/25/32 | 514,099 | ||||||||
TOTAL ASSET-BACKED SECURITIES (Cost — $5,521,358) | 5,714,551 | ||||||||||
COLLATERALIZED MORTGAGE OBLIGATIONS — 1.8% | |||||||||||
1,150,000 | AAA | Banc of America Commercial Mortgage, Inc., Series 2004-6, Class AJ, 4.870% due 12/10/42 (a) | 1,169,326 | ||||||||
920,000 | AAA | GE Capital Commercial Mortgage Corp., Series 2005-C1, Class AJ, 4.826% due 6/10/48 (a) | 932,131 | ||||||||
JPMorgan Chase Commercial Mortgage Securities Corp.: | |||||||||||
2,000,000 | Aaa(c) | Series 2004-C3, Class AJ, 4.922% due 1/15/42 (a) | 2,039,880 | ||||||||
375,000 | AAA | Series 2005-LDP1, Class A4, 5.038% due 3/15/46 (a) | 388,560 | ||||||||
520,000 | AAA | Morgan Stanley Capital I, Inc., Series 2005-IQ9, Class A4, 4.660% due 7/15/56 | 524,430 | ||||||||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost — $4,989,070) | 5,054,327 | ||||||||||
MORTGAGE-BACKED SECURITIES — 0.5% | |||||||||||
FNMA — 0.5% | |||||||||||
FNMA: | |||||||||||
964,397 | 6.000% due 1/1/13-8/1/28 | 994,537 | |||||||||
30,779 | 6.500% due 12/1/27 | 31,976 | |||||||||
326,651 | 5.500% due 8/1/28 | 332,271 | |||||||||
1,358,784 | |||||||||||
GNMA — 0.0% | |||||||||||
GNMA: | |||||||||||
22,801 | 9.000% due 11/15/19 | 25,032 | |||||||||
7,129 | 9.500% due 1/15/20 | 7,952 | |||||||||
32,984 | |||||||||||
TOTAL MORTGAGE-BACKED SECURITIES (Cost — $1,328,520) | 1,391,768 | ||||||||||
15
Schedules of Investments (unaudited) (continued) | June 30, 2005 |
FACE | |||||||||||
AMOUNT | RATING‡ | SECURITY | VALUE | ||||||||
SOVEREIGN BOND — 0.2% | |||||||||||
Canada — 0.2% | |||||||||||
$ | 500,000 | AAA | Canada Mortgage & Housing Corp., Local Government Guaranteed, 3.375% due 12/1/08 (Cost — $499,069) | $ | 491,822 | ||||||
U.S. GOVERNMENT & AGENCY OBLIGATIONS — 12.0% | |||||||||||
U.S. Government Agencies — 2.8% | |||||||||||
FHLMC: | |||||||||||
6,000,000 | 2.125% due 11/15/05 | 5,969,982 | |||||||||
500,000 | 4.875% due 11/15/13 | 524,036 | |||||||||
500,000 | step bond to yield 2.900% due 2/27/19 | 497,256 | |||||||||
1,000,000 | FNMA Benchmark Notes, 1.750% due 6/16/06 | 981,379 | |||||||||
7,972,653 | |||||||||||
U.S. Government Obligations — 9.2% | |||||||||||
2,082,000 | U.S. Treasury Bonds, 5.375% due 2/15/31 | 2,457,412 | |||||||||
U.S. Treasury Notes: | |||||||||||
2,080,000 | 5.875% due 11/15/05 | 2,099,989 | |||||||||
2,068,000 | 5.625% due 5/15/08 | 2,177,701 | |||||||||
3,300,000 | 3.250% due 8/15/08 | 3,259,911 | |||||||||
3,300,000 | 3.625% due 7/15/09-6/15/10 | 3,289,972 | |||||||||
6,225,000 | 5.750% due 8/15/10 | 6,805,438 | |||||||||
5,700,000 | 4.125% due 5/15/15 | 5,785,055 | |||||||||
25,875,478 | |||||||||||
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS (Cost — $34,004,034) | 33,848,131 | ||||||||||
SHARES | ||||||||
COMMON STOCK — 60.4% | ||||||||
CONSUMER DISCRETIONARY — 7.8% | ||||||||
Automobiles — 0.2% | ||||||||
8,993 | General Motors Corp. | 305,762 | ||||||
4,682 | Harley-Davidson, Inc. | 232,227 | ||||||
537,989 | ||||||||
Hotels, Restaurants & Leisure — 1.0% | ||||||||
12,759 | Applebee’s International, Inc. | 337,986 | ||||||
12,025 | Marriott International, Inc., Class A Shares | 820,346 | ||||||
33,062 | McDonald’s Corp. | 917,470 | ||||||
6,189 | Starbucks Corp.* | 319,724 | ||||||
2,832 | Starwood Hotels & Resorts Worldwide, Inc. | 165,870 | ||||||
4,404 | Yum! Brands, Inc. | 229,360 | ||||||
2,790,756 | ||||||||
16
Schedules of Investments (unaudited) (continued) | June 30, 2005 |
SHARES | SECURITY | VALUE | ||||||
Household Durables — 0.7% | ||||||||
1,352 | Black & Decker Corp. | $ | 121,477 | |||||
9,018 | Fortune Brands, Inc. | 800,799 | ||||||
7,166 | KB HOME | 546,264 | ||||||
7,756 | Pulte Homes, Inc. | 653,443 | ||||||
2,121,983 | ||||||||
Internet & Catalog Retail — 0.2% | ||||||||
13,939 | eBay, Inc.* | 460,126 | ||||||
Leisure Equipment & Products — 0.3% | ||||||||
15,290 | Eastman Kodak Co. | 410,537 | ||||||
20,411 | Mattel, Inc. | 373,521 | ||||||
784,058 | ||||||||
Media — 2.0% | ||||||||
34,011 | Comcast Corp., Class A Shares* | 1,044,138 | ||||||
7,544 | Gannett Co., Inc. | 536,605 | ||||||
28,494 | News Corp., Class A Shares | 461,033 | ||||||
7,260 | Pixar* | 363,363 | ||||||
97,173 | Time Warner, Inc.* | 1,623,761 | ||||||
12,921 | Viacom, Inc., Class B Shares | 413,730 | ||||||
49,318 | Walt Disney Co. | 1,241,827 | ||||||
5,684,457 | ||||||||
Multi-Line Retail — 1.4% | ||||||||
7,322 | Costco Wholesale Corp. | 328,172 | ||||||
4,198 | Federated Department Stores, Inc. | 307,629 | ||||||
7,773 | Nordstrom, Inc. | 528,331 | ||||||
4,536 | Target Corp. | 246,804 | ||||||
53,021 | Wal-Mart Stores, Inc. | 2,555,612 | ||||||
3,966,548 | ||||||||
Specialty Retail — 1.4% | ||||||||
1,929 | AutoZone, Inc.* | 178,355 | ||||||
15,534 | Borders Group, Inc. | 393,166 | ||||||
5,167 | GameStop Corp., Class B Shares* | 154,493 | ||||||
34,286 | Home Depot, Inc. | 1,333,725 | ||||||
15,717 | Limited Brands, Inc. | 336,658 | ||||||
6,416 | Lowe’s Cos., Inc. | 373,540 | ||||||
19,415 | Office Depot, Inc.* | 443,439 | ||||||
11,949 | Staples, Inc. | 254,753 | ||||||
24,000 | Toys “R” Us, Inc.* | 635,520 | ||||||
4,103,649 | ||||||||
17
Schedules of Investments (unaudited) (continued) | June 30, 2005 |
SHARES | SECURITY | VALUE | ||||||
Textiles, Apparel & Luxury Goods — 0.6% | ||||||||
2,365 | Jones Apparel Group, Inc. | $ | 73,409 | |||||
13,040 | NIKE, Inc., Class B Shares | 1,129,264 | ||||||
9,777 | Reebok International Ltd. | 408,972 | ||||||
1,611,645 | ||||||||
TOTAL CONSUMER DISCRETIONARY | 22,061,211 | |||||||
CONSUMER STAPLES — 4.8% | ||||||||
Beverages — 1.3% | ||||||||
4,150 | Brown-Forman Corp., Class B Shares | 250,909 | ||||||
26,965 | Coca-Cola Co. | 1,125,789 | ||||||
24,287 | Coca-Cola Enterprises, Inc. | 534,557 | ||||||
5,665 | Molson Coors Brewing Co., Class B Shares | 351,230 | ||||||
26,082 | PepsiCo, Inc. | 1,406,602 | ||||||
3,669,087 | ||||||||
Food & Staples Retailing — 0.7% | ||||||||
21,786 | CVS Corp. | 633,319 | ||||||
12,819 | SUPERVALU, Inc. | 418,027 | ||||||
18,619 | Walgreen Co. | 856,288 | ||||||
1,907,634 | ||||||||
Food Products — 0.9% | ||||||||
38,909 | Archer-Daniels-Midland Co. | 831,874 | ||||||
12,638 | General Mills, Inc. | 591,332 | ||||||
5,643 | Hormel Foods Corp. | 165,509 | ||||||
3,323 | Kellogg Co. | 147,674 | ||||||
12,413 | Sara Lee Corp. | 245,902 | ||||||
24,467 | Smithfield Foods, Inc.* | 667,215 | ||||||
2,649,506 | ||||||||
Household Products — 1.0% | ||||||||
5,385 | Colgate-Palmolive Co. | 268,765 | ||||||
8,064 | Kimberly-Clark Corp. | 504,726 | ||||||
39,689 | Procter & Gamble Co. | 2,093,595 | ||||||
2,867,086 | ||||||||
Personal Products — 0.1% | ||||||||
7,877 | Gillette Co. | 398,813 | ||||||
Tobacco — 0.8% | ||||||||
32,372 | Altria Group, Inc. | 2,093,174 | ||||||
TOTAL CONSUMER STAPLES | 13,585,300 | |||||||
18
Schedules of Investments (unaudited) (continued) | June 30, 2005 |
SHARES | SECURITY | VALUE | ||||||
ENERGY — 5.2% | ||||||||
Energy Equipment & Services — 0.7% | ||||||||
7,851 | Baker Hughes, Inc. | $ | 401,657 | |||||
6,627 | Halliburton Co. | 316,903 | ||||||
10,905 | Schlumberger Ltd. | 828,126 | ||||||
7,171 | Transocean, Inc.* | 387,019 | ||||||
1,933,705 | ||||||||
Oil, Gas & Consumable Fuels — 4.5% | ||||||||
4,869 | Anadarko Petroleum Corp. | 399,988 | ||||||
14,047 | Burlington Resources, Inc. | 775,956 | ||||||
31,626 | Chevron Corp. | 1,768,526 | ||||||
22,396 | ConocoPhillips | 1,287,546 | ||||||
5,241 | Devon Energy Corp. | 265,614 | ||||||
101,234 | ExxonMobil Corp. | 5,817,918 | ||||||
6,545 | Kerr-McGee Corp. | 499,449 | ||||||
10,410 | Marathon Oil Corp. | 555,582 | ||||||
6,274 | Occidental Petroleum Corp. | 482,659 | ||||||
2,601 | Sunoco, Inc. | 295,682 | ||||||
6,160 | Valero Energy Corp. | 487,317 | ||||||
12,636,237 | ||||||||
TOTAL ENERGY | 14,569,942 | |||||||
FINANCIALS — 12.3% | ||||||||
Commercial Banks — 3.4% | ||||||||
76,490 | Bank of America Corp. | 3,488,709 | ||||||
10,732 | Comerica, Inc. | 620,310 | ||||||
64 | First Horizon National Corp. | 2,701 | ||||||
7,034 | KeyCorp | 233,177 | ||||||
6,017 | Marshall & Ilsley Corp. | 267,456 | ||||||
21,813 | National City Corp. | 744,259 | ||||||
22,726 | U.S. Bancorp | 663,599 | ||||||
35,543 | Wachovia Corp. | 1,762,933 | ||||||
4,369 | Washington Mutual, Inc. | 177,775 | ||||||
27,175 | Wells Fargo & Co. | 1,673,436 | ||||||
9,634,355 | ||||||||
Diversified Financial Services — 5.1% | ||||||||
23,907 | American Express Co. | 1,272,570 | ||||||
11,875 | Bear Stearns Cos., Inc. | 1,234,287 | ||||||
13,965 | Capital One Financial Corp. | 1,117,340 | ||||||
13,921 | CIT Group, Inc. | 598,185 | ||||||
30,762 | E*TRADE Financial Corp.* | 430,360 | ||||||
17,834 | Fannie Mae | 1,041,506 | ||||||
4,692 | Franklin Resources, Inc. | 361,190 | ||||||
11,808 | Freddie Mac | 770,236 | ||||||
11,198 | Goldman Sachs Group, Inc. | 1,142,420 | ||||||
73,156 | JPMorgan Chase & Co. | 2,583,870 | ||||||
9,878 | Lehman Brothers Holdings, Inc. | 980,688 |
19
Schedules of Investments (unaudited) (continued) | June 30, 2005 |
SHARES | SECURITY | VALUE | ||||||
Diversified Financial Services — 5.1% (continued) | ||||||||
6,661 | MBNA Corp. | $ | 174,252 | |||||
15,637 | Merrill Lynch & Co., Inc. | 860,191 | ||||||
19,664 | Morgan Stanley | 1,031,770 | ||||||
9,910 | Principal Financial Group, Inc. | 415,229 | ||||||
20,490 | Providian Financial Corp.* | 361,239 | ||||||
14,375,333 | ||||||||
Insurance — 3.5% | ||||||||
4,729 | ACE Ltd. | 212,096 | ||||||
8,569 | AFLAC, Inc. | 370,866 | ||||||
21,659 | Allstate Corp. | 1,294,125 | ||||||
9,237 | Ambac Financial Group, Inc. | 644,373 | ||||||
43,485 | American International Group, Inc. | 2,526,479 | ||||||
4,883 | Aon Corp. | 122,270 | ||||||
10,315 | Chubb Corp. | 883,067 | ||||||
3,415 | Hartford Financial Services Group, Inc. | 255,374 | ||||||
2,333 | Jefferson-Pilot Corp. | 117,630 | ||||||
3,117 | Lincoln National Corp. | 146,250 | ||||||
8,352 | Marsh & McLennan Cos., Inc. | 231,350 | ||||||
5,934 | MGIC Investment Corp. | 387,015 | ||||||
9,104 | Progressive Corp. | 899,566 | ||||||
27,092 | Prudential Financial, Inc. | 1,778,861 | ||||||
9,869,322 | ||||||||
Thrifts & Mortgages — 0.3% | ||||||||
17,826 | Countrywide Financial Corp. | 688,262 | ||||||
TOTAL FINANCIALS | 34,567,272 | |||||||
HEALTH CARE — 8.0% | ||||||||
Biotechnology — 1.0% | ||||||||
20,822 | Amgen, Inc.* | 1,258,898 | ||||||
10,512 | Biogen Idec, Inc.* | 362,138 | ||||||
6,606 | Genentech, Inc.* | 530,330 | ||||||
16,677 | Gilead Sciences, Inc.* | 733,621 | ||||||
2,884,987 | ||||||||
Health Care Equipment & Supplies — 0.8% | ||||||||
3,936 | Becton, Dickinson & Co. | 206,522 | ||||||
13,330 | Boston Scientific Corp.* | 359,910 | ||||||
19,145 | Medtronic, Inc. | 991,520 | ||||||
8,265 | Zimmer Holdings, Inc.* | 629,545 | ||||||
2,187,497 | ||||||||
Health Care Providers & Services — 2.0% | ||||||||
8,352 | Aetna, Inc. | 691,713 | ||||||
5,621 | AmerisourceBergen Corp. | 388,692 | ||||||
2,714 | Cardinal Health, Inc. | 156,272 | ||||||
10,134 | Caremark Rx, Inc.* | 451,166 | ||||||
6,162 | CIGNA Corp. | 659,519 |
20
Schedules of Investments (unaudited) (continued) | June 30, 2005 |
SHARES | SECURITY | VALUE | ||||||
Health Care Providers & Services — 2.0% (continued) | ||||||||
20,446 | Humana, Inc.* | $ | 812,524 | |||||
34,908 | UnitedHealth Group, Inc. | 1,820,103 | ||||||
8,918 | WellPoint, Inc.* | 621,049 | ||||||
5,601,038 | ||||||||
Pharmaceuticals — 4.2% | ||||||||
24,521 | Abbott Laboratories | 1,201,774 | ||||||
30,191 | Bristol-Myers Squibb Co. | 754,171 | ||||||
14,279 | Eli Lilly and Co. | 795,483 | ||||||
1,408 | Hospira, Inc.* | 54,912 | ||||||
16,280 | IVAX Corp.* | 350,020 | ||||||
46,625 | Johnson & Johnson | 3,030,625 | ||||||
4,519 | Medco Health Solutions, Inc.* | 241,134 | ||||||
34,546 | Merck & Co., Inc. | 1,064,017 | ||||||
116,843 | Pfizer, Inc. | 3,222,530 | ||||||
22,947 | Schering-Plough Corp. | 437,370 | ||||||
14,856 | Wyeth | 661,092 | ||||||
11,813,128 | ||||||||
TOTAL HEALTH CARE | 22,486,650 | |||||||
INDUSTRIALS — 7.1% | ||||||||
Aerospace & Defense — 1.3% | ||||||||
9,566 | Boeing Co. | 631,356 | ||||||
8,588 | General Dynamics Corp. | 940,730 | ||||||
9,950 | Lockheed Martin Corp. | 645,456 | ||||||
13,073 | Northrop Grumman Corp. | 722,283 | ||||||
16,136 | United Technologies Corp. | 828,584 | ||||||
3,768,409 | ||||||||
Air Freight & Logistics — 0.5% | ||||||||
18,020 | United Parcel Service, Inc., Class B Shares | 1,246,263 | ||||||
Building Products — 0.1% | ||||||||
11,766 | Masco Corp. | 373,688 | ||||||
Commercial Services & Supplies — 0.3% | ||||||||
17,480 | Cendant Corp. | 391,028 | ||||||
4,135 | Fiserv, Inc.* | 177,598 | ||||||
11,174 | Herman Miller, Inc. | 344,606 | ||||||
913,232 | ||||||||
Electrical Equipment — 0.3% | ||||||||
4,270 | Energizer Holdings, Inc.* | 265,466 | ||||||
14,626 | Thomas & Betts Corp.* | 413,038 | ||||||
678,504 | ||||||||
Industrial Conglomerates — 2.8% | ||||||||
8,500 | 3M Co. | 614,550 | ||||||
163,980 | General Electric Co. | 5,681,907 |
21
Schedules of Investments (unaudited) (continued) | June 30, 2005 |
SHARES | SECURITY | VALUE | ||||||
Industrial Conglomerates — 2.8% (continued) | ||||||||
13,410 | Honeywell International, Inc. | $ | 491,208 | |||||
33,463 | Tyco International Ltd. | 977,120 | ||||||
7,764,785 | ||||||||
Machinery — 1.4% | ||||||||
14,624 | Danaher Corp. | 765,420 | ||||||
11,650 | Deere & Co. | 762,959 | ||||||
3,249 | Eaton Corp. | 194,615 | ||||||
9,758 | Ingersoll-Rand Co., Ltd., Class A Shares | 696,233 | ||||||
4,380 | Oshkosh Truck Corp. | 342,867 | ||||||
11,531 | PACCAR, Inc. | 784,108 | ||||||
7,595 | Parker Hannifin Corp. | 470,966 | ||||||
4,017,168 | ||||||||
Road & Rail — 0.4% | ||||||||
13,113 | Burlington Northern Santa Fe Corp. | 617,360 | ||||||
12,041 | CSX Corp. | 513,669 | ||||||
1,131,029 | ||||||||
TOTAL INDUSTRIALS | 19,893,078 | |||||||
INFORMATION TECHNOLOGY — 9.4% | ||||||||
Communications Equipment — 2.2% | ||||||||
106,792 | Cisco Systems, Inc.* | 2,040,795 | ||||||
27,725 | Comverse Technology, Inc.* | 655,696 | ||||||
31,845 | Corning, Inc.* | 529,264 | ||||||
70,005 | Motorola, Inc. | 1,278,291 | ||||||
16,657 | Polycom, Inc.* | 248,356 | ||||||
23,475 | QUALCOMM, Inc. | 774,910 | ||||||
16,788 | Scientific-Atlanta, Inc. | 558,537 | ||||||
6,085,849 | ||||||||
Computers & Peripherals — 2.5% | ||||||||
17,297 | Apple Computer, Inc.* | 636,703 | ||||||
39,528 | Dell, Inc.* | 1,561,751 | ||||||
39,137 | EMC Corp.* | 536,568 | ||||||
48,109 | Hewlett-Packard Co. | 1,131,043 | ||||||
28,323 | International Business Machines Corp. | 2,101,567 | ||||||
2,045 | Lexmark International, Inc., Class A Shares* | 132,577 | ||||||
17,483 | NCR Corp.* | 614,003 | ||||||
55,652 | Sun Microsystems, Inc.* | 207,582 | ||||||
6,921,794 | ||||||||
Electronic Equipment & Instruments — 0.3% | ||||||||
15,466 | Jabil Circuit, Inc.* | 475,270 | ||||||
9,536 | Waters Corp.* | 354,453 | ||||||
829,723 | ||||||||
22
Schedules of Investments (unaudited) (continued) | June 30, 2005 |
SHARES | SECURITY | VALUE | ||||||
Internet Software & Services — 0.2% | ||||||||
20,955 | Yahoo!, Inc.* | $ | 726,091 | |||||
Semiconductors & Semiconductor Equipment — 1.7% | ||||||||
28,441 | Advanced Micro Devices, Inc.* | 493,167 | ||||||
6,075 | Analog Devices, Inc. | 226,658 | ||||||
102,117 | Intel Corp. | 2,661,169 | ||||||
3,210 | KLA-Tencor Corp. | 140,277 | ||||||
5,030 | Maxim Integrated Products, Inc. | 192,196 | ||||||
33,834 | Micron Technology, Inc.* | 345,445 | ||||||
31,784 | Texas Instruments, Inc. | 892,177 | ||||||
4,951,089 | ||||||||
Software — 2.5% | ||||||||
22,244 | Adobe Systems, Inc. | 636,623 | ||||||
22,558 | Autodesk, Inc. | 775,319 | ||||||
149,807 | Microsoft Corp. | 3,721,206 | ||||||
79,366 | Oracle Corp.* | 1,047,631 | ||||||
17,521 | Sybase, Inc.* | 321,510 | ||||||
18,270 | VERITAS Software Corp.* | 445,788 | ||||||
6,948,077 | ||||||||
TOTAL INFORMATION TECHNOLOGY | 26,462,623 | |||||||
MATERIALS — 1.7% | ||||||||
Chemicals — 0.5% | ||||||||
18,551 | Dow Chemical Co. | 826,076 | ||||||
6,923 | E.I. du Pont de Nemours and Co. | 297,758 | ||||||
4,104 | Monsanto Co. | 258,019 | ||||||
1,381,853 | ||||||||
Containers & Packaging — 0.4% | ||||||||
7,225 | Ball Corp. | 259,811 | ||||||
16,819 | Pactiv Corp.* | 362,954 | ||||||
8,955 | Sealed Air Corp.* | 445,869 | ||||||
1,068,634 | ||||||||
Metals & Mining — 0.6% | ||||||||
16,838 | Allegheny Technologies, Inc. | 371,446 | ||||||
6,565 | Newmont Mining Corp. | 256,232 | ||||||
10,583 | Nucor Corp. | 482,796 | ||||||
5,563 | Phelps Dodge Corp. | 514,578 | ||||||
1,625,052 | ||||||||
Paper & Forest Products — 0.2% | ||||||||
5,899 | Georgia-Pacific Corp. | 187,588 | ||||||
7,990 | International Paper Co. | 241,378 | ||||||
3,404 | Weyerhaeuser Co. | 216,665 | ||||||
645,631 | ||||||||
TOTAL MATERIALS | 4,721,170 | |||||||
23
Schedules of Investments (unaudited) (continued) | June 30, 2005 |
SHARES | SECURITY | VALUE | |||||||
TELECOMMUNICATION SERVICES — 2.0% | |||||||||
Diversified Telecommunication Services — 1.9% | |||||||||
50,311 | AT&T Corp. | $ | 957,922 | ||||||
25,199 | BellSouth Corp. | 669,537 | |||||||
18,365 | CenturyTel, Inc. | 635,980 | |||||||
64,824 | SBC Communications, Inc. | 1,539,570 | |||||||
42,976 | Verizon Communications, Inc. | 1,484,821 | |||||||
5,287,830 | |||||||||
Wireless Telecommunication Services — 0.1% | |||||||||
10,082 | Nextel Communications, Inc., Class A Shares* | 325,749 | |||||||
TOTAL TELECOMMUNICATION SERVICES | 5,613,579 | ||||||||
UTILITIES — 2.1% | |||||||||
Electric Utilities — 1.6% | |||||||||
42,990 | AES Corp.* | 704,176 | |||||||
21,191 | American Electric Power Co., Inc. | 781,312 | |||||||
15,790 | Edison International | 640,285 | |||||||
19,117 | Exelon Corp. | 981,276 | |||||||
18,020 | FirstEnergy Corp. | 866,942 | |||||||
4,503 | Public Service Enterprise Group, Inc. | 273,872 | |||||||
9,265 | Southern Co. | 321,218 | |||||||
4,569,081 | |||||||||
Gas Utilities — 0.1% | |||||||||
2,149 | Kinder Morgan, Inc. | 178,797 | |||||||
4,151 | National Fuel Gas Co. | 120,005 | |||||||
298,802 | |||||||||
Independent Power Producers & Energy Traders — 0.4% | |||||||||
15,867 | Constellation Energy Group, Inc. | 915,367 | |||||||
TOTAL UTILITIES | 5,783,250 | ||||||||
TOTAL COMMON STOCK (Cost — $150,386,111) | 169,744,075 | ||||||||
CONVERTIBLE PREFERRED STOCK — 2.0% | |||||||||
CONSUMER DISCRETIONARY — 1.4% | |||||||||
Automobiles — 0.7% | |||||||||
16,000 | Ford Motor Co. Capital Trust II, Cumulative Trust Preferred Securities, 6.500% | 645,280 | |||||||
General Motors Corp., Senior Debentures: | |||||||||
37,000 | Series B, 5.250% | 686,720 | |||||||
33,000 | Series C, 6.250% | 696,300 | |||||||
2,028,300 | |||||||||
Containers & Packaging — 0.1% | |||||||||
4,000 | Amcor Ltd., PRIDESSM, 7.250% | 210,500 | |||||||
Household Durables — 0.3% | |||||||||
21,000 | Newell Financial Trust I, Cumulative QUIPSSM, 5.250% | 913,500 | |||||||
24
Schedules of Investments (unaudited) (continued) | June 30, 2005 |
SHARES | SECURITY | VALUE | |||||||
Media — 0.3% | |||||||||
10,500 | Tribune Co., Subordinated Debentures, PHONESSM, 2.000% | $ | 897,750 | ||||||
TOTAL CONSUMER DISCRETIONARY | 4,050,050 | ||||||||
FINANCIALS — 0.6% | |||||||||
Commercial Banks — 0.3% | |||||||||
Washington Mutual Capital Trust I: | |||||||||
3,000 | Cumulative, 5.375% | 159,000 | |||||||
13,000 | Cumulative, 5.375% (b) | 688,818 | |||||||
847,818 | |||||||||
Diversified Financial Services — 0.2% | |||||||||
10,000 | CalEnergy Capital Trust II, Trust Preferred Securities, 6.250% | 490,000 | |||||||
Real Estate — 0.1% | |||||||||
7,000 | Equity Office Properties Trust, Series B, 5.250% | 358,610 | |||||||
TOTAL FINANCIALS | 1,696,428 | ||||||||
TOTAL CONVERTIBLE PREFERRED STOCK (Cost — $6,028,467) | 5,746,478 | ||||||||
TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENT (Cost — $250,273,025) | 274,268,077 | ||||||||
FACE | ||||||||||
AMOUNT | ||||||||||
SHORT-TERM INVESTMENT — 1.9% | ||||||||||
Repurchase Agreement — 1.9% | ||||||||||
$ | 5,314,000 | State Street Bank & Trust Co., dated 6/30/05, 2.550% due 7/1/05; Proceeds at maturity — $5,314,376; (Fully collateralized by U.S. Treasury Bond, 7.125% due 2/15/23; Market value — $5,425,112) (Cost — $5,314,000) | 5,314,000 | |||||||
TOTAL INVESTMENTS — 99.5% (Cost — $255,587,025#) | 279,582,077 | |||||||||
Other Assets in Excess of Liabilities — 0.5% | 1,504,696 | |||||||||
TOTAL NET ASSETS — 100.0% | $ | 281,086,773 | ||||||||
25
Schedules of Investments (unaudited) (continued) | June 30, 2005 |
‡ | All ratings are by Standard & Poor’s Ratings Service, unless otherwise footnoted. | |
* | Non-income producing security. | |
(a) | Variable rate securities. Coupon rates disclosed are those which are in effect at June 30, 2005. Maturity date shown is the date of the next coupon rate reset or actual maturity. | |
(b) | Security is exempt from registration under Rule 144A of the Securities Act of 1933. This security may be resold in transactions that are exempt from registration, normally to qualified institutional buyers. This security has been deemed liquid pursuant to guidelines approved by the Board of Trustees. | |
(c) | Rating by Moody’s Investors Service. | |
# | Aggregate cost for Federal income tax purposes is substantially the same. |
Abbreviations used in this schedule: |
FHLMC | — | Federal Home Loan Mortgage Corporation | ||||
FNMA | — | Federal National Mortgage Association | ||||
GNMA | — | Government National Mortgage Association | ||||
LYOTM Ns | — | Liquid Yield OptionTM Notes — Trademark of Merrill Lynch & Co. Inc. | ||||
PHONES SM | — | Participation Hybrid Option Note Exchangeable Securities SM — Service Mark of Merrill Lynch & Co. Inc. | ||||
PRIDES SM | — | Perpetual Redeemable Income Debt, Exchangeable for Stock SM — Service Mark of Merrill Lynch & Co. Inc. | ||||
QUIPSSM | — | Quarterly Income Preferred SecuritiesSM — Service Mark of Goldman Sachs & Co. |
See pages 42 and 43 for definitions of ratings.
26
Schedules of Investments (unaudited) (continued) | June 30, 2005 |
FACE | ||||||||||
AMOUNT† | RATING‡ | SECURITY | VALUE | |||||||
CORPORATE BONDS & NOTES — 85.3% | ||||||||||
Aerospace/Defense — 0.5% | ||||||||||
$ | 75,000 | B | Argo-Tech Corp., Senior Notes, 9.250% due 6/1/11 | $ | 81,750 | |||||
475,000 | B- | BE Aerospace, Inc., Senior Subordinated Notes, Series B, 8.875% due 5/1/11 | 498,750 | |||||||
580,500 | ||||||||||
Airlines — 0.1% | ||||||||||
150,000 | BB+ | JetBlue Airways Corp., Pass Through Certificates, Series 2004-2C, 6.368% due 11/15/08 (a) | 150,308 | |||||||
Apparel — 0.2% | ||||||||||
225,000 | B- | Broder Brothers, Senior Notes, Series B, 11.250% due 10/15/10 | 228,375 | |||||||
Auto Parts & Equipment — 1.9% | ||||||||||
475,000 | B- | Accuride Corp., 8.500% due 2/1/15 | 466,687 | |||||||
175,000 | B | Cooper-Standard Automotive Inc., 7.000% due 12/15/12 | 159,250 | |||||||
550,000 | B- | Dura Operating Corp., Series B, 8.625% due 4/15/12 | 497,750 | |||||||
925,000 | B- | Goodyear Tire & Rubber Co., Notes, 7.857% due 8/15/11 | 904,187 | |||||||
275,000 | CCC+ | Metaldyne Corp., 11.000% due 6/15/12 | 179,438 | |||||||
2,207,312 | ||||||||||
Building Materials — 0.9% | ||||||||||
250,000 | NR | Armstrong World Industries, Inc., Senior Notes, 6.500% due 8/15/05 (b) | 192,500 | |||||||
Goodman Global Holding Co., Inc.: | ||||||||||
125,000 | B- | Senior Notes, 6.410% due 6/15/12 (a)(c) | 123,750 | |||||||
290,000 | B- | Senior Subordinated Notes, 7.875% due 12/15/12 (c) | 269,700 | |||||||
275,000 | CCC+ | Nortek, Inc., Senior Subordinated Notes, 8.500% due 9/1/14 | 257,125 | |||||||
225,000 | B- | Ply Gem Industries, Inc., Senior Subordinated Notes, 9.000% due 2/15/12 | 191,250 | |||||||
1,034,325 | ||||||||||
Chemicals — 7.0% | ||||||||||
163,000 | B- | Crystal U.S. Holdings 3 LLC, Senior Discount Notes, Series B, step bond to yield 10.235% due 10/1/14 | 114,100 | |||||||
1,090,000 | BBB- | Georgia Gulf Corp., Secured Notes, 7.625% due 11/15/05 | 1,106,350 | |||||||
Huntsman International LLC: | ||||||||||
450,000 | B+ | Senior Notes, 9.875% due 3/1/09 | 483,750 | |||||||
289,000 | B | Senior Subordinated Notes, 10.125% due 7/1/09 | 298,754 | |||||||
53,000 | BB | IMC Global, Inc., Series B, 10.875% due 6/1/08 | 59,890 | |||||||
100,000 | CCC+ | Innophos, Inc., Senior Subordinated Notes, 8.875% due 8/15/14 (c) | 102,500 | |||||||
Lyondell Chemical Co.: | ||||||||||
90,000 | BB- | Senior Secured Notes, Series B, 9.875% due 5/1/07 | 92,700 | |||||||
1,325,000 | B | Senior Subordinated Notes, 10.875% due 5/1/09 | 1,381,312 | |||||||
Millennium America, Inc., Senior Notes: | ||||||||||
1,175,000 | BB- | 7.000% due 11/15/06 | 1,207,312 | |||||||
603,000 | BB- | 9.250% due 6/15/08 | 655,762 | |||||||
Nalco Co.: | ||||||||||
75,000 | B- | Senior Notes, 7.750% due 11/15/11 | 80,250 | |||||||
125,000 | B- | Senior Subordinated Notes, 8.875% due 11/15/13 | 134,688 | |||||||
125,000 | BB+ | NOVA Chemicals Corp., Senior Notes, 6.500% due 1/15/12 | 121,875 |
27
Schedules of Investments (unaudited) (continued) | June 30, 2005 |
FACE | ||||||||||
AMOUNT† | RATING‡ | SECURITY | VALUE | |||||||
Chemicals — 7.0% (continued) | ||||||||||
PolyOne Corp., Senior Notes: | ||||||||||
$ | 200,000 | B+ | 10.625% due 5/15/10 | $ | 212,500 | |||||
175,000 | B+ | 8.875% due 5/1/12 | 173,687 | |||||||
325,000 | B+ | Resolution Performance Products LLC, Secured Notes, 8.000% due 12/15/09 | 339,625 | |||||||
325,000 | B- | Resolution Performance Products LLC/ RPP Capital Corp., Secured Notes, 9.500% due 4/15/10 | 336,375 | |||||||
Rhodia SA: | ||||||||||
950,000 | CCC+ | Senior Notes, 7.625% due 6/1/10 | 926,250 | |||||||
175,000 | CCC+ | Senior Subordinated Notes, 8.875% due 6/1/11 | 169,313 | |||||||
50,000 | EUR | B- | Rockwood Specialties Group, Inc., Subordinated Notes, 7.625% due 11/15/14 (c) | 61,249 | ||||||
8,058,242 | ||||||||||
Commercial Services — 3.5% | ||||||||||
850,000 | B | Alderwoods Group, Inc., Senior Notes, 7.750% due 9/15/12 (c) | 906,312 | |||||||
125,000 | B- | Carriage Services, Inc., Notes, 7.875% due 1/15/15 (c) | 132,500 | |||||||
150,000 | BB- | NationsRent, Inc., Secured Notes, 9.500% due 10/15/10 | 164,250 | |||||||
1,500,000 | BB- | United Rentals North America, Inc., Senior Notes, 6.500% due 2/15/12 | 1,483,125 | |||||||
Williams Scotsman, Inc.: | ||||||||||
1,075,000 | B- | Senior Notes, 9.875% due 6/1/07 | 1,080,375 | |||||||
200,000 | B | Senior Secured Notes, 10.000% due 8/15/08 | 221,026 | |||||||
3,987,588 | ||||||||||
Computers — 0.5% | ||||||||||
525,000 | BB+ | Unisys Corp., Senior Notes, 8.125% due 6/1/06 | 539,438 | |||||||
Diversified Financial Services — 5.2% | ||||||||||
50,000 | B- | AAC Group Holding Corp., Senior Discount Notes, step bond to yield 11.167% due 10/1/12 (c) | 34,000 | |||||||
574,000 | CCC+ | Alamosa Delaware, Inc., Senior Discount Notes, step bond to yield 11.101% due 7/31/09 | 635,705 | |||||||
439,000 | B- | Crystal U.S. Holdings Corp., Senior Subordinated Notes, 9.625% due 6/15/14 | 493,875 | |||||||
350,000 | B- | Harvest Operations Corp., Senior Notes, 7.875% due 10/15/11 | 335,125 | |||||||
4,196,231 | BB- | Targeted Return Index Sector, TRAINS HY-2004-1, Senior Secured Notes, 8.211% due 8/1/15 (a)(c) | 4,439,898 | |||||||
5,938,603 | ||||||||||
Electric — 1.3% | ||||||||||
Allegheny Energy Supply Statutory Trust: | ||||||||||
158,293 | BB | Secured Notes, Series A, 10.250% due 11/15/07 (c) | 174,914 | |||||||
16,706 | BB | Secured Notes, Series B, 13.000% due 11/15/07 (c) | 18,523 | |||||||
375,000 | B | Calpine Generating Co. LLC, Secured Notes, 7.090% due 4/1/09 (a) | 380,625 | |||||||
Reliant Energy, Inc.: | ||||||||||
Secured Notes: | ||||||||||
150,000 | B+ | 9.250% due 7/15/10 | 164,250 | |||||||
425,000 | B+ | 9.500% due 7/15/13 | 473,875 | |||||||
300,000 | B+ | Senior Secured Notes, 6.750% due 12/15/14 | 294,750 | |||||||
1,506,937 | ||||||||||
28
Schedules of Investments (unaudited) (continued) | June 30, 2005 |
FACE | ||||||||||
AMOUNT† | RATING‡ | SECURITY | VALUE | |||||||
Electronics — 0.3% | ||||||||||
$ | 150,000 | B | Sanmina-SCI Corp., 6.750% due 3/1/13 | $ | 143,625 | |||||
175,000 | BBB- | Thomas & Betts Corp., Senior Notes, 7.250% due 6/1/13 | 192,765 | |||||||
336,390 | ||||||||||
Entertainment — 2.0% | ||||||||||
AMC Entertainment, Inc.: | ||||||||||
225,000 | B- | 7.518% due 8/15/10 (a) | 233,719 | |||||||
Senior Subordinated Notes: | ||||||||||
360,000 | CCC+ | 9.500% due 2/1/11 | 355,050 | |||||||
250,000 | CCC+ | 8.000% due 3/1/14 | 223,125 | |||||||
175,000 | B- | Series B, 8.625% due 8/15/12 | 180,250 | |||||||
250,000 | B+ | Argosy Gaming Co., Senior Subordinated Notes, 7.000% due 1/15/14 | 276,562 | |||||||
325,000 | B- | Cinemark, Inc., Senior Discount Notes, step bond to yield 9.739% due 3/15/14 | 217,750 | |||||||
550,000 | B | Isle of Capri Casinos, Inc., Senior Subordinated Notes, 7.000% due 3/1/14 | 555,500 | |||||||
175,000 | B+ | Mohegan Tribal Gaming Authority, Senior Subordinated Notes, 7.125% due 8/15/14 | 184,188 | |||||||
100,000 | B+ | Steinway Musical Instruments, Inc., Senior Notes, 8.750% due 4/15/11 | 105,250 | |||||||
2,331,394 | ||||||||||
Environmental Control — 1.0% | ||||||||||
25,000 | B- | Aleris International, Inc., Senior Secured Notes, 9.000% due 11/15/14 | 26,000 | |||||||
Allied Waste North America, Inc.: | ||||||||||
Secured Notes: | ||||||||||
825,000 | BB- | 6.500% due 11/15/10 | 816,750 | |||||||
225,000 | BB- | 6.125% due 2/15/14 | 210,094 | |||||||
83,000 | BB- | Series B, Senior Secured Notes, 9.250% due 9/1/12 | 90,055 | |||||||
1,142,899 | ||||||||||
Food — 3.0% | ||||||||||
300,000 | B | B&G Foods, Inc., Senior Notes, 8.000% due 10/1/11 | 311,625 | |||||||
125,000 | B | Del Monte Corp., Senior Subordinated Notes, 6.750% due 2/15/15 (c) | 128,125 | |||||||
425,000 | BB+ | Delhaize America, Inc., 9.000% due 4/15/31 | 532,729 | |||||||
19,000 | B+ | Dole Food Co., Inc., Senior Notes, 8.875% due 3/15/11 | 20,378 | |||||||
Great Atlantic & Pacific Tea Company, Inc.: | ||||||||||
725,000 | B- | Notes, 7.750% due 4/15/07 | 744,937 | |||||||
250,000 | B- | Senior Notes, 9.125% due 12/15/11 | 264,375 | |||||||
50,000 | B | Land O’ Lakes, Inc., Senior Secured Notes, 9.000% due 12/15/10 | 54,125 | |||||||
375,000 | B | Roundy’s, Inc., Senior Subordinated Notes, Series B, 8.875% due 6/15/12 | 388,125 | |||||||
475,000 | BB | Smithfield Foods, Inc., Senior Notes, 7.000% due 8/1/11 | 502,312 | |||||||
275,000 | BB- | Stater Brothers Holdings, Inc., Senior Notes, 8.125% due 6/15/12 | 269,500 | |||||||
50,000 | B+ | Swift & Co., Senior Notes, 10.125% due 10/1/09 | 54,750 | |||||||
150,000 | B+ | Wornick Co., Secured Notes, 10.875% due 7/15/11 | 153,000 | |||||||
3,423,981 | ||||||||||
Forest Products & Paper — 2.3% | ||||||||||
50,000 | B+ | Boise Cascade LLC, Senior Notes, 6.016% due 10/15/12 (a)(c) | 50,750 | |||||||
750,000 | BB+ | Fort James Corp., Senior Notes, 6.875% due 9/15/07 | 783,750 | |||||||
300,000 | BB+ | Georgia-Pacific Corp., Senior Notes, 9.375% due 2/1/13 | 340,875 | |||||||
50,000 | B+ | Neenah Paper, Inc., Senior Notes, 7.375% due 11/15/14 (c) | 48,750 |
29
Schedules of Investments (unaudited) (continued) | June 30, 2005 |
FACE | ||||||||||
AMOUNT† | RATING‡ | SECURITY | VALUE | |||||||
Forest Products & Paper — 2.3% (continued) | ||||||||||
$ | 75,000 | BB- | Norske Skog Canada Ltd., Senior Notes, 7.375% due 3/1/14 | $ | 73,875 | |||||
175,000 | BB- | Sino-Forest Corp., Senior Notes, 9.125% due 8/17/11 (c) | 192,062 | |||||||
1,600,000 | B | Tembec Industries, Inc., Senior Notes, 7.750% due 3/15/12 | 1,184,000 | |||||||
2,674,062 | ||||||||||
Health Care – Services — 3.0% | ||||||||||
150,000 | B | Community Health Systems, Inc., Senior Subordinated Notes, 6.500% due 12/15/12 | 153,375 | |||||||
HEALTHSOUTH Corp.: | ||||||||||
550,000 | NR | Notes, 7.625% due 6/1/12 | 536,250 | |||||||
100,000 | NR | Senior Notes, 7.000% due 6/15/08 | 101,000 | |||||||
525,000 | B | Radiologix, Inc., Senior Notes, Series B, 10.500% due 12/15/08 | 553,875 | |||||||
425,000 | B- | Select Medical Corp., Senior Subordinated Notes, 7.625% due 2/1/15 (c) | 422,875 | |||||||
Tenet Healthcare Corp., Senior Notes: | ||||||||||
275,000 | B | 7.375% due 2/1/13 | 272,937 | |||||||
1,650,000 | B | 6.875% due 11/15/31 | 1,394,250 | |||||||
3,434,562 | ||||||||||
Home Builders — 3.5% | ||||||||||
1,175,000 | BB+ | D.R. Horton, Inc., Notes, 6.125% due 1/15/14 | 1,221,092 | |||||||
1,150,000 | B+ | K Hovnanian Enterprises, Inc., 6.000% due 1/15/10 | 1,137,062 | |||||||
KB HOME, Senior Subordinated Notes: | ||||||||||
125,000 | BB- | 8.625% due 12/15/08 | 136,140 | |||||||
325,000 | BB- | 9.500% due 2/15/11 | 349,213 | |||||||
425,000 | BB+ | 6.375% due 8/15/11 | 444,403 | |||||||
William Lyon Homes, Inc., Senior Notes: | ||||||||||
300,000 | B | 7.625% due 12/15/12 | 288,000 | |||||||
350,000 | B | 10.750% due 4/1/13 | 381,500 | |||||||
3,957,410 | ||||||||||
Home Furnishings — 0.5% | ||||||||||
75,000 | B- | Norcraft Holdings LP/ Norcraft Capital Corp., Senior Discount Notes, step bond to yield 9.740% due 9/1/12 | 52,125 | |||||||
475,000 | B- | Sealy Mattress Co., Senior Subordinated Notes, 8.250% due 6/15/14 | 482,125 | |||||||
534,250 | ||||||||||
Household Products/Wares — 1.4% | ||||||||||
75,000 | B- | American Achievement Corp., Senior Subordinated Notes, 8.250% due 4/1/12 | 75,750 | |||||||
125,000 | B+ | Church & Dwight Co., Inc., Senior Subordinated Notes, 6.000% due 12/15/12 (c) | 126,875 | |||||||
150,000 | CCC- | Home Products International, Inc., Senior Subordinated Notes, 9.625% due 5/15/08 | 132,000 | |||||||
525,000 | CCC+ | Playtex Products, Inc., Senior Subordinated Notes, 9.375% due 6/1/11 | 555,188 | |||||||
775,000 | B- | Spectrum Brands, Inc., Senior Subordinated Notes, 7.375% due 2/1/15 (c) | 753,687 | |||||||
1,643,500 | ||||||||||
Iron-Steel — 2.0% | ||||||||||
1,475,000 | B+ | AK Steel Corp., Senior Notes, 7.750% due 6/15/12 (d) | 1,253,750 | |||||||
300,000 | BB | IPSCO, Inc., Senior Notes, 8.750% due 6/1/13 | 336,375 |
30
Schedules of Investments (unaudited) (continued) | June 30, 2005 |
FACE | ||||||||||
AMOUNT† | RATING‡ | SECURITY | VALUE | |||||||
Iron-Steel — 2.0% (continued) | ||||||||||
$ | 175,000 | BB | Steel Dynamics, Inc., Secured Notes, 9.500% due 3/15/09 | $ | 186,812 | |||||
504,000 | BB | United States Steel LLC, Senior Notes, 10.750% due 8/1/08 | 561,960 | |||||||
2,338,897 | ||||||||||
Leisure Time — 1.4% | ||||||||||
450,000 | CCC | Bally Total Fitness Holding Corp., Senior Notes, 10.500% due 7/15/11 | 451,687 | |||||||
1,050,000 | BB+ | Royal Caribbean Cruises Ltd., Senior Debentures, 7.500% due 10/15/27 | 1,155,000 | |||||||
1,606,687 | ||||||||||
Lodging — 6.4% | ||||||||||
250,000 | B+ | Aztar Corp., Senior Subordinated Notes, 7.875% due 6/15/14 | 265,625 | |||||||
725,000 | B+ | Boyd Gaming Corp., Senior Subordinated Notes, 6.750% due 4/15/14 | 746,750 | |||||||
Caesars Entertainment, Inc., Senior Subordinated Notes: | ||||||||||
800,000 | BB+ | 7.875% due 3/15/10 | 900,000 | |||||||
325,000 | BB+ | Series A, 7.875% due 12/15/05 | 330,687 | |||||||
550,000 | BB+ | Harrah’s Operating Co., Inc., Senior Subordinated Notes, 7.875% due 12/15/05 | 559,625 | |||||||
71,000 | B+ | HMH Properties, Inc., Senior Secured Notes, Series B, 7.875% due 8/1/08 | 72,420 | |||||||
650,000 | BB+ | ITT Corp., Notes, 6.750% due 11/15/05 | 657,312 | |||||||
100,000 | B | Kerzner International Ltd., Senior Subordinated Notes, 8.875% due 8/15/11 | 107,500 | |||||||
53,197 | B+ | Mandalay Resort Group, Senior Subordinated Notes, 9.375% due 2/15/10 | 59,714 | |||||||
MGM MIRAGE, Inc.: | ||||||||||
750,000 | BB | Senior Notes, 6.750% due 9/1/12 | 776,250 | |||||||
375,000 | B+ | Senior Subordinated Notes, 8.375% due 2/1/11 | 410,625 | |||||||
525,000 | B | Resorts International Hotel & Casino, Inc., Senior Notes, 11.500% due 3/15/09 | 600,469 | |||||||
Station Casinos, Inc.: | ||||||||||
850,000 | BB- | Senior Notes, 6.000% due 4/1/12 | 867,000 | |||||||
175,000 | B+ | Senior Subordinated Notes, 6.500% due 2/1/14 | 179,375 | |||||||
800,000 | B+ | Wynn Las Vegas LLC/ Wynn Las Vegas Capital Corp., First Mortgage, 6.625% due 12/1/14 (c) | 782,000 | |||||||
7,315,352 | ||||||||||
Machinery – Diversified — 0.6% | ||||||||||
375,000 | BB- | Case New Holland, Inc., Senior Notes, 9.250% due 8/1/11 | 395,625 | |||||||
225,000 | B- | Dresser-Rand Group, Inc., Senior Subordinated Notes, 7.375% due 11/1/14 (c) | 235,125 | |||||||
630,750 | ||||||||||
Media — 8.1% | ||||||||||
725,000 | NR | Adelphia Communications Corp., Senior Notes, Series B, 8.375% due 2/1/08 (b) | 634,375 | |||||||
200,000 | BBB- | AMFM, Inc., Senior Notes, 8.000% due 11/1/08 | 215,190 | |||||||
CCO Holdings LLC/ CCO Holdings Capital Corp., Senior Notes: | ||||||||||
300,000 | CCC- | 7.535% due 12/15/10 (a)(c) | 293,250 | |||||||
75,000 | CCC- | 8.750% due 11/15/13 | 74,250 | |||||||
75,000 | NR | Century Communications Corp., Senior Notes, 9.500% due 3/1/49 | 77,625 | |||||||
500,000 | CCC- | Charter Communications Holdings LLC, Senior Discount Notes, 9.920% due 4/1/11 | 367,500 | |||||||
300,000 | B- | Charter Communications Holdings LLC/ Charter Communications Holdings Capital Corp., Senior Notes, 8.375% due 4/30/14 (c) | 300,000 | |||||||
1,200,000 | BB- | CSC Holdings, Inc., Senior Notes, Series B, 7.625% due 4/1/11 | 1,191,000 |
31
Schedules of Investments (unaudited) (continued) | June 30, 2005 |
FACE | ||||||||||
AMOUNT† | RATING‡ | SECURITY | VALUE | |||||||
Media — 8.1% (continued) | ||||||||||
Dex Media, Inc.: | ||||||||||
$ | 575,000 | B | Discount Notes, step bond to yield 8.628% due 11/15/13 | $ | 465,750 | |||||
625,000 | B | Notes, 8.000% due 11/15/13 | 667,187 | |||||||
81,000 | BB- | DirecTV Holdings LLC/ DirecTV Financing Co., Senior Notes, 8.375% due 3/15/13 | 90,113 | |||||||
100,000 | NR | Frontiervision Holdings LP, Senior Discount Notes, 11.875% due 9/15/07 (b) | 138,000 | |||||||
Houghton Mifflin Co.: | ||||||||||
1,125,000 | BB- | Notes, 7.200% due 3/15/11 | 1,154,531 | |||||||
175,000 | B- | Senior Notes, 8.250% due 2/1/11 | 182,438 | |||||||
1,025,000 | B | Mediacom LLC/ Mediacom Capital Corp., Senior Notes, 9.500% due 1/15/13 | 1,027,562 | |||||||
550,000 | B | PRIMEDIA, Inc., Senior Notes, 8.875% due 5/15/11 | 578,875 | |||||||
75,000 | BB+ | Rogers Cable, Inc., Senior Secured Second Priority Notes, 6.750% due 3/15/15 | 76,875 | |||||||
375,000 | BB+ | Shaw Communications, Inc., Senior Notes, 7.250% due 4/6/11 | 409,688 | |||||||
1,000,000 | B | Sinclair Broadcast Group, Inc., Senior Subordinated Notes, 8.000% due 3/15/12 | 1,030,000 | |||||||
175,000 | EUR | B- | Telenet Communications NV, Senior Notes, 9.000% due 12/15/13 (c) | 240,836 | ||||||
9,215,045 | ||||||||||
Metal Fabricate – Hardware — 0.2% | ||||||||||
75,000 | B | Hawk Corp., Senior Notes, 8.750% due 11/1/14 | 76,500 | |||||||
125,000 | NR | Intermet Corp., 9.750% due 6/15/09 (b) | 54,688 | |||||||
100,000 | B | Wolverine Tube, Inc., Senior Notes, 10.500% due 4/1/09 | 95,500 | |||||||
226,688 | ||||||||||
Mining — 0.7% | ||||||||||
775,000 | B | USEC, Inc., Senior Notes, 6.625% due 1/20/06 | 771,125 | |||||||
Miscellaneous Manufacturing — 1.1% | ||||||||||
275,000 | CCC- | BGF Industries, Inc., Senior Subordinated Notes, Series B, 10.250% due 1/15/09 | 281,188 | |||||||
250,000 | CCC+ | Foamex LP, Senior Subordinated Notes, 13.500% due 8/15/05 | 213,750 | |||||||
350,000 | B- | Hexcel Corp., Senior Subordinated Notes, 6.750% due 2/1/15 | 351,750 | |||||||
325,000 | CCC+ | MAXX Corp., Senior Subordinated Notes, 9.750% due 6/15/12 | 288,437 | |||||||
175,000 | CCC+ | MAXX Holdings, Inc., Senior Discount Notes, step bond to yield 11.254% due 12/15/12 (c) | 77,000 | |||||||
1,212,125 | ||||||||||
Office/Business Equipment — 0.4% | ||||||||||
525,000 | B | Danka Business Systems PLC, Senior Notes, 11.000% due 6/15/10 | 422,625 | |||||||
Oil & Gas — 2.1% | ||||||||||
275,000 | B- | Belden & Blake Corp., Secured Notes, 8.750% due 7/15/12 | 270,875 | |||||||
62,930 | B- | El Paso CGP Co., Senior Debentures, 6.700% due 2/15/27 | 63,765 | |||||||
650,000 | B | El Paso Production Holding Co., Senior Notes, 7.750% due 6/1/13 | 697,125 | |||||||
50,000 | BBB- | Evergreen Resources, Inc., Senior Notes, 5.875% due 3/15/12 | 49,746 | |||||||
150,000 | BB- | Forest Oil Corp., Senior Notes, 8.000% due 12/15/11 | 166,125 | |||||||
225,000 | BB- | Newfield Exploration Co., Senior Subordinated Notes, 6.625% due 9/1/14 | 236,813 | |||||||
325,000 | BB | Pogo Producing Co., Senior Subordinated Notes, Series B, 8.250% due 4/15/11 | 346,937 | |||||||
125,000 | BB- | Pride International, Inc., Senior Notes, 7.375% due 7/15/14 | 137,813 |
32
Schedules of Investments (unaudited) (continued) | June 30, 2005 |
FACE | ||||||||||
AMOUNT† | RATING‡ | SECURITY | VALUE | |||||||
Oil & Gas — 2.1% (continued) | ||||||||||
Tesoro Corp.: | ||||||||||
$ | 125,000 | BBB- | Secured Notes, 8.000% due 4/15/08 | $ | 132,500 | |||||
225,000 | BB- | Senior Subordinated Notes, 9.625% due 4/1/12 | 250,031 | |||||||
2,351,730 | ||||||||||
Oil & Gas Services — 0.5% | ||||||||||
Key Energy Services, Inc.: | ||||||||||
100,000 | B- | Senior Notes, 6.375% due 5/1/13 | 101,000 | |||||||
300,000 | B- | Senior Notes, Series C, 8.375% due 3/1/08 | 311,250 | |||||||
175,000 | B- | Seitel, Inc., Senior Notes, 11.750% due 7/15/11 | 192,500 | |||||||
604,750 | ||||||||||
Packaging & Containers — 3.8% | ||||||||||
850,000 | B | Crown Cork & Seal Co., Inc., Debentures, 7.375% due 12/15/26 | 784,125 | |||||||
75,000 | B | Crown Cork & Seal Finance PLC, 7.000% due 12/15/06 | 77,250 | |||||||
Crown European Holdings SA: | ||||||||||
300,000 | EUR | BB | 6.250% due 9/1/11 | 383,825 | ||||||
150,000 | B | Senior Secured Notes, 10.875% due 3/1/13 | 177,000 | |||||||
350,000 | B | Jefferson Smurfit Corp., Senior Notes, 8.250% due 10/1/12 | 353,500 | |||||||
Owens-Brockway Glass Container, Inc.: | ||||||||||
225,000 | B | 6.750% due 12/1/14 | 228,656 | |||||||
575,000 | BB- | Secured Notes, 8.875% due 2/15/09 | 613,813 | |||||||
300,000 | BB- | Senior Secured Notes, 7.750% due 5/15/11 | 320,250 | |||||||
1,000,000 | B | Smurfit-Stone Container Enterprises, Inc., Senior Notes, 8.375% due 7/1/12 | 1,015,000 | |||||||
400,000 | B- | Solo Cup Co., Senior Subordinated Notes, 8.500% due 2/15/14 | 376,000 | |||||||
4,329,419 | ||||||||||
Pharmaceuticals — 0.1% | ||||||||||
175,000 | CCC+ | Warner Chilcott Corp., 8.750% due 2/1/15 (c) | 171,063 | |||||||
Pipelines — 2.6% | ||||||||||
Dynegy Holdings, Inc.: | ||||||||||
400,000 | CCC+ | Senior Debentures, 7.125% due 5/15/18 | 383,000 | |||||||
325,000 | B- | Senior Secured Notes, 10.125% due 7/15/13 (c) | 368,875 | |||||||
275,000 | B- | Sonat, Inc., Notes, 6.625% due 2/1/08 | 272,250 | |||||||
575,000 | B | Southern Natural Gas Co., Notes, 7.350% due 2/15/31 | 614,550 | |||||||
375,000 | B+ | Transcontinental Gas Pipe Line Corp., Senior Notes, Series B, 8.875% due 7/15/12 | 448,125 | |||||||
850,000 | B+ | Williams Cos., Inc., Notes, 7.125% due 9/1/11 | 922,250 | |||||||
3,009,050 | ||||||||||
REITs — 1.2% | ||||||||||
200,000 | B- | Felcor Lodging LP, Senior Notes, 9.000% due 6/1/11 | 219,500 | |||||||
Host Marriott LP: | ||||||||||
100,000 | B+ | Senior Notes, 7.125% due 11/1/13 | 104,750 | |||||||
100,000 | B+ | Senior Notes, Series M, 7.000% due 8/15/12 | 104,250 | |||||||
75,000 | BB- | La Quinta Properties, Inc., Senior Notes, 7.000% due 8/15/12 | 77,906 |
33
Schedules of Investments (unaudited) (continued) | June 30, 2005 |
FACE | ||||||||||
AMOUNT† | RATING‡ | SECURITY | VALUE | |||||||
REITs — 1.2% (continued) | ||||||||||
MeriStar Hospitality Corp., Senior Notes: | ||||||||||
$ | 125,000 | CCC+ | 9.000% due 1/15/08 | $ | 131,250 | |||||
725,000 | CCC+ | 9.125% due 1/15/11 | 764,875 | |||||||
1,402,531 | ||||||||||
Retail — 2.9% | ||||||||||
100,000 | B | Blockbuster, Inc., Senior Subordinated Notes, 9.000% due 9/1/12 (c) | 94,000 | |||||||
500,000 | CCC+ | Denny’s Corp., Senior Notes, 1.000% due 9/21/10 (c) | 515,000 | |||||||
175,000 | CCC+ | Duane Reade, Inc., Secured Notes, 7.910% due 12/15/10 (a)(c) | 171,500 | |||||||
175,000 | B- | El Pollo Loco, Inc., Secured Notes, 9.250% due 12/15/09 | 183,750 | |||||||
325,000 | B- | Friendly Ice Cream Corp., Senior Notes, 8.375% due 6/15/12 | 316,875 | |||||||
380,000 | BB+ | J.C. Penney Co., Inc., Debentures, 8.125% due 4/1/27 | 402,800 | |||||||
100,000 | B | Jean Coutu Group (PJC) Inc., Senior Notes, 7.625% due 8/1/12 | 103,750 | |||||||
275,000 | B | Jean Coutu Group (PJC) Inc., Senior Subordinated Notes, 8.500% due 8/1/14 | 272,937 | |||||||
250,000 | B- | Pantry, Inc., Senior Subordinated Notes, 7.750% due 2/15/14 | 256,250 | |||||||
250,000 | B+ | Rite Aid Corp., Senior Secured Second Lien Notes, 8.125% due 5/1/10 | 258,750 | |||||||
700,000 | CCC+ | Saks, Inc., Senior Notes, 7.500% due 12/1/10 | 703,500 | |||||||
3,279,112 | ||||||||||
Semiconductors — 0.8% | ||||||||||
Amkor Technology, Inc., Senior Notes: | ||||||||||
500,000 | B- | 7.125% due 3/15/11 | 435,000 | |||||||
100,000 | B- | 7.750% due 5/15/13 | 86,500 | |||||||
375,000 | BB+ | Freescale Semiconductor, Inc., Senior Notes, 5.891% due 7/15/09 (a) | 391,406 | |||||||
912,906 | ||||||||||
Telecommunications — 11.1% | ||||||||||
300,000 | CCC+ | American Tower Escrow Corp., Discount Notes, zero coupon bond to yield 10.240% due 8/1/08 | 231,750 | |||||||
402,000 | BB+ | AT&T Corp., Senior Notes, 8.050% due 11/15/11 | 465,315 | |||||||
87,879 | Caa2 (e) | Calpoint Receivable Structured Trust, Notes, 7.440% due 12/10/06 (c) | 88,758 | |||||||
700,000 | CCC | Centennial Communications Corp./ Cellular Operating Co. LLC, Senior Notes, 10.125% due 6/15/13 | 794,500 | |||||||
Cincinnati Bell, Inc.: | ||||||||||
650,000 | B- | Senior Notes, 7.000% due 2/15/15 (c) | 638,625 | |||||||
Senior Subordinated Notes: | ||||||||||
650,000 | B- | 8.375% due 1/15/14 | 669,500 | |||||||
375,000 | B- | 8.375% due 1/15/14 (c) | 386,250 | |||||||
500,000 | BB+ | Citizens Communications Co., Senior Notes, 6.250% due 1/15/13 | 486,250 | |||||||
275,000 | B- | Dobson Cellular Systems, Secured Notes, 8.375% due 11/1/11 (c) | 290,125 | |||||||
100,000 | CCC+ | Inmarsat Finance II PLC, step bond to yield 10.372% due 11/15/12 | 79,000 | |||||||
725,000 | B | Insight Midwest LP/ Insight Capital, Inc., Senior Notes, 9.750% due 10/1/09 | 754,782 | |||||||
Intelsat Bermuda Ltd., Senior Notes: | ||||||||||
175,000 | B+ | 7.805% due 1/15/12 (a)(c) | 178,938 | |||||||
675,000 | B+ | 8.250% due 1/15/13 (c) | 700,312 | |||||||
IWO Holdings, Inc.: | ||||||||||
100,000 | CCC+ | Secured Notes, 6.891% due 1/15/12 (a)(c) | 99,750 | |||||||
400,000 | CCC- | Senior Discount Notes, step bond to yield 10.265% due 1/15/15 (c) | 264,000 |
34
Schedules of Investments (unaudited) (continued) | June 30, 2005 |
FACE | ||||||||||
AMOUNT† | RATING‡ | SECURITY | VALUE | |||||||
Telecommunications — 11.1% (continued) | ||||||||||
$ | 1,325,000 | B | Lucent Technologies, Inc., Debentures, 6.450% due 3/15/29 | $ | 1,192,500 | |||||
MCI, Inc., Senior Notes: | ||||||||||
951,000 | B+ | 6.908% due 5/1/07 (a) | 966,454 | |||||||
176,000 | B+ | 7.688% due 5/1/09 (a) | 183,700 | |||||||
225,000 | B+ | 8.735% due 5/1/14 (a) | 252,844 | |||||||
650,000 | BB | Nextel Communications, Inc., Senior Notes, 5.950% due 3/15/14 | 678,437 | |||||||
175,000 | EUR | B- | NTL Cable PLC, 8.750% due 4/15/14 | 223,898 | ||||||
325,000 | B+ | PanAmSat Corp., Senior Notes, 9.000% due 8/15/14 | 356,281 | |||||||
125,000 | B | Qwest Capital Funding, Inc., 6.250% due 7/15/05 | 125,000 | |||||||
550,000 | BB- | Qwest Corp., Senior Notes, 7.875% due 9/1/11 (c) | 576,125 | |||||||
150,000 | B | Qwest Services Corp., Secured Notes, 13.500% due 12/15/10 | 174,000 | |||||||
Rogers Wireless Communications, Inc.: | ||||||||||
475,000 | BB | Secured Notes, 7.250% due 12/15/12 | 515,375 | |||||||
450,000 | B+ | Senior Subordinated Notes, 8.000% due 12/15/12 | 487,125 | |||||||
700,000 | B- | Rural Cellular Corp., Secured Notes, 8.250% due 3/15/12 | 735,000 | |||||||
124,000 | B- | Syniverse Technologies, Inc., Senior Subordinated Notes, Series B, 12.750% due 2/1/09 | 138,105 | |||||||
12,732,699 | ||||||||||
Textiles — 0.5% | ||||||||||
275,000 | B+ | INVISTA, Notes, 9.250% due 5/1/12 (c) | 301,813 | |||||||
Simmons Co.: | ||||||||||
175,000 | B- | Senior Discount Notes, step bond to yield 10.002% due 12/15/14 (c) | 79,625 | |||||||
250,000 | B- | Senior Subordinated Notes, 7.875% due 1/15/14 | 216,250 | |||||||
597,688 | ||||||||||
Transportation — 0.7% | ||||||||||
200,000 | B | CHC Helicopter Corp., Senior Subordinated Notes, 7.375% due 5/1/14 | 200,500 | |||||||
475,000 | B+ | Grupo Transportacion Ferroviaria Mexicana, SA de CV, Senior Notes, 12.500% due 6/15/12 | 558,125 | |||||||
758,625 | ||||||||||
TOTAL CORPORATE BONDS & NOTES (Cost — $94,229,949) | 97,598,943 | |||||||||
SHARES | ||||||||||
COMMON STOCK — 0.7% | ||||||||||
CONSUMER DISCRETIONARY — 0.0% | ||||||||||
Media — 0.0% | ||||||||||
1,057 | Classic Holdco LLC (f)(g)* | 34,500 | ||||||||
INDUSTRIALS — 0.0% | ||||||||||
Air Freight & Logistics — 0.0% | ||||||||||
41 | Atlas Air Worldwide Holdings Inc.* | 1,332 | ||||||||
35
Schedules of Investments (unaudited) (continued) | June 30, 2005 |
SHARES | SECURITY | VALUE | ||||||||
TELECOMMUNICATION SERVICES — 0.2% | ||||||||||
Diversified Telecommunication Services — 0.1% | ||||||||||
5,159 | MCI, Inc. | $ | 132,638 | |||||||
Wireless Telecommunication Services — 0.1% | ||||||||||
19,195 | Dobson Communications Corp., Class A Shares* | 81,771 | ||||||||
1,240 | Horizon PCS Inc., Class A Shares* | 31,620 | ||||||||
113,391 | ||||||||||
TOTAL TELECOMMUNICATION SERVICES | 246,029 | |||||||||
UTILITIES — 0.5% | ||||||||||
Electric Utilities — 0.5% | ||||||||||
17,382 | NorthWestern Corp. | 547,881 | ||||||||
TOTAL COMMON STOCK (Cost — $986,159) | 829,742 | |||||||||
PREFERRED STOCK — 0.1% | ||||||||||
CONSUMER DISCRETIONARY — 0.1% | ||||||||||
Media — 0.1% | ||||||||||
100 | Granite Broadcasting Corp., Cumulative Exchangeable*, 12.750% | 30,750 | ||||||||
11 | Paxson Communications Corp., Cumulative Jr. Exchangeable*, 14.250% | 70,978 | ||||||||
TOTAL PREFERRED STOCK (Cost — $179,706) | 101,728 | |||||||||
CONVERTIBLE PREFERRED STOCK — 0.3% | ||||||||||
CONSUMER DISCRETIONARY — 0.0% | ||||||||||
Auto Components — 0.0% | ||||||||||
40 | HLI Operating Co., Inc., Cumulative Exchangeable, Series A, 8.000% | 1,940 | ||||||||
TELECOMMUNICATION SERVICES — 0.3% | ||||||||||
Communications Equipment — 0.0% | ||||||||||
400 | Dobson Communications Corp., Cumulative Exchangeable, Series F, 6.000% (c)(g) | 50,200 | ||||||||
Wireless Telecommunication Services — 0.3% | ||||||||||
284 | Alamosa Holdings, Inc., Cumulative Exchangeable, Series B, 7.500% | 293,194 | ||||||||
TOTAL TELECOMMUNICATION SERVICES | 343,394 | |||||||||
TOTAL CONVERTIBLE PREFERRED STOCK (Cost — $163,181) | 345,334 | |||||||||
WARRANTS | ||||||||||
WARRANTS — 0.0% (e)(g) | ||||||||||
Diversified Telecommunication Services — 0.0% | ||||||||||
275 | Horizon PCS, Inc., expires 10/1/10* | 0 | ||||||||
Electronic Equipment & Instruments — 0.0% | ||||||||||
9,411 | Viasystems Group, Inc., expires 1/31/10* | 0 | ||||||||
TOTAL WARRANTS (Cost — $147,600) | 0 | |||||||||
TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENT (Cost — $95,706,595) | 98,875,747 | |||||||||
36
Schedules of Investments (unaudited) (continued) | June 30, 2005 |
FACE | ||||||||||
AMOUNT | SECURITY | VALUE | ||||||||
SHORT-TERM INVESTMENT — 12.1% | ||||||||||
Repurchase Agreement — 12.1% | ||||||||||
$ | 13,803,000 | State Street Bank & Trust Co., dated 6/30/05, 2.550% due 7/1/05; Proceeds at maturity — $13,803,978; (Fully collateralized by U.S. Treasury Bond, 7.125% due 2/15/23; Market value — $14,084,689) (Cost — $13,803,000) | $ | 13,803,000 | ||||||
TOTAL INVESTMENTS — 98.5% (Cost — $109,509,595#) | 112,678,747 | |||||||||
Other Assets in Excess of Liabilities — 1.5% | 1,754,396 | |||||||||
TOTAL NET ASSETS — 100.0% | $ | 114,433,143 | ||||||||
† | Face amount denominated in U.S. dollars, unless otherwise indicated. |
‡ | All ratings are by Standard & Poor’s Ratings Service, unless otherwise footnoted. |
* | Non-income producing security. |
(a) | Variable rate securities. Coupon rates disclosed are those which are in effect at June 30, 2005. Maturity date shown is the date of the next coupon rate reset or actual maturity. |
(b) | Security is currently in default. |
(c) | Security is exempt from registration under Rule 144A of the Securities Act of 1933. This security may be resold in transactions that are exempt from registration, normally to qualified institutional buyers. This security has been deemed liquid pursuant to guidelines approved by the Board of Trustees. |
(d) | All or a portion of this security is held as collateral for open forward foreign currency contracts. |
(e) | Rating by Moody’s Investors Service. |
(f) | Security is valued in good faith at fair value by or under the direction of the Board of Trustees. |
(g) | Illiquid security. |
# | Aggregate cost for Federal income tax purposes is substantially the same. |
See pages 42 and 43 for definitions of ratings.
37
Schedules of Investments (unaudited) (continued) | June 30, 2005 |
SHARES | SECURITY | VALUE | ||||
COMMON STOCK — 90.4% | ||||||
CONSUMER DISCRETIONARY — 21.2% | ||||||
Internet & Catalog Retail — 3.4% | ||||||
1,077,870 | eBay, Inc.* | $ | 35,580,488 | |||
Media — 5.0% | ||||||
1,568,785 | XM Satellite Radio Holdings, Inc., Class A Shares* | 52,805,303 | ||||
Multi-Line Retail — 2.5% | ||||||
232,800 | J.C. Penney Co., Inc. | 12,240,624 | ||||
241,580 | Kohl’s Corp.* | 13,506,738 | ||||
25,747,362 | ||||||
Specialty Retail — 5.4% | ||||||
549,945 | Advance Auto Parts* | 35,498,950 | ||||
266,285 | Lowe’s Cos., Inc. | 15,503,113 | ||||
236,670 | Staples, Inc. | 5,045,804 | ||||
56,047,867 | ||||||
Textiles, Apparel & Luxury Goods — 4.9% | ||||||
590,325 | NIKE, Inc., Class B Shares | 51,122,145 | ||||
TOTAL CONSUMER DISCRETIONARY | 221,303,165 | |||||
ENERGY — 6.8% | ||||||
Oil, Gas & Consumable Fuels — 6.8% | ||||||
1,004,130 | Murphy Oil Corp. | 52,445,710 | ||||
397,580 | Suncor Energy, Inc. | 18,813,485 | ||||
TOTAL ENERGY | 71,259,195 | |||||
FINANCIALS — 13.5% | ||||||
Commercial Banks — 7.8% | ||||||
824,390 | Bank of America Corp. | 37,600,428 | ||||
709,220 | Wells Fargo & Co. | 43,673,767 | ||||
81,274,195 | ||||||
Diversified Financial Services — 4.1% | ||||||
285,470 | American Express Co. | 15,195,568 | ||||
172,875 | Goldman Sachs Group, Inc. | 17,636,708 | ||||
183,095 | SLM Corp. | 9,301,226 | ||||
42,133,502 | ||||||
Insurance — 1.6% | ||||||
100,000 | Allstate Corp. | 5,975,000 | ||||
3,901 | Berkshire Hathaway, Inc., Class B Shares* | 10,858,434 | ||||
16,833,434 | ||||||
TOTAL FINANCIALS | 140,241,131 | |||||
38
Schedules of Investments (unaudited) (continued) | June 30, 2005 |
SHARES | SECURITY | VALUE | ||||
HEALTH CARE — 26.4% | ||||||
Biotechnology — 12.7% | ||||||
1,024,775 | Genentech, Inc.* | $ | 82,268,937 | |||
714,505 | Gilead Sciences, Inc.* | 31,431,075 | ||||
224,045 | Invitrogen Corp.* | 18,660,708 | ||||
132,360,720 | ||||||
Health Care Providers & Services — 11.2% | ||||||
2,245,345 | UnitedHealth Group, Inc. | 117,072,288 | ||||
Pharmaceuticals — 2.5% | ||||||
203,785 | Roche Holding AG | 25,769,024 | ||||
TOTAL HEALTH CARE | 275,202,032 | |||||
INDUSTRIALS — 5.8% | ||||||
Aerospace & Defense — 3.3% | ||||||
532,790 | Lockheed Martin Corp. | 34,562,087 | ||||
Electrical Equipment — 2.5% | ||||||
422,060 | Energizer Holdings, Inc.* | 26,239,470 | ||||
TOTAL INDUSTRIALS | 60,801,557 | |||||
INFORMATION TECHNOLOGY — 15.7% | ||||||
Communications Equipment — 0.9% | ||||||
287,440 | QUALCOMM, Inc. | 9,488,394 | ||||
Computers & Peripherals — 6.6% | ||||||
1,882,840 | Apple Computer, Inc.* | 69,307,341 | ||||
Internet Software & Services — 2.2% | ||||||
646,300 | Yahoo!, Inc.* | 22,394,295 | ||||
Semiconductors & Semiconductor Equipment — 1.1% | ||||||
403,450 | Texas Instruments, Inc. | 11,324,842 | ||||
Software — 4.9% | ||||||
904,725 | Electronic Arts, Inc.* | 51,216,482 | ||||
TOTAL INFORMATION TECHNOLOGY | 163,731,354 | |||||
UTILITIES — 1.0% | ||||||
Independent Power Producers & Energy Traders — 1.0% | ||||||
643,070 | AES Corp.* | 10,533,487 | ||||
TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENT (Cost — $570,015,884) | 943,071,921 | |||||
39
Schedules of Investments (unaudited) (continued) | June 30, 2005 |
FACE | ||||||
AMOUNT | SECURITY | VALUE | ||||
SHORT-TERM INVESTMENT — 9.5% | ||||||
Repurchase Agreement — 9.5% | ||||||
$99,695,000 | State Street Bank & Trust Co., dated 6/30/05, 2.550% due 7/1/05; Proceeds at maturity — $99,702,062; (Fully collateralized by U.S. Treasury Bonds, 8.000% to 8.875% due 2/15/19 to 11/15/21; Market value — $101,690,852) (Cost — $99,695,000) | $ | 99,695,000 | |||
TOTAL INVESTMENTS — 99.9% (Cost — $669,710,884#) | 1,042,766,921 | |||||
Other Assets in Excess of Liabilities — 0.1% | 683,070 | |||||
TOTAL NET ASSETS — 100.0% | $ | 1,043,449,991 | ||||
* | Non-income producing security. | |
# | Aggregate cost for Federal income tax purposes is substantially the same. |
40
Schedules of Investments (unaudited) (continued) | June 30, 2005 |
FACE | ||||||
AMOUNT | SECURITY | VALUE | ||||
SHORT-TERM INVESTMENTS — 100.1% | ||||||
CERTIFICATES OF DEPOSIT — 5.0% | ||||||
$16,200,000 | Wells Fargo Bank NA, 4.650% due 7/12/05 (Cost — $16,200,000) | $ | 16,200,000 | |||
COMMERCIAL PAPER — 95.1% | ||||||
15,000,000 | Atomium Funding Corp., Credit Enhanced by KBC Bank N.V., 3.150% due 7/5/05 (a) | 14,994,833 | ||||
15,000,000 | Canadian Imperial Bank of Commerce, 4.180% due 7/13/05 | 14,984,600 | ||||
15,000,000 | Caterpillar Financial Services Corp., 3.140% due 7/7/05 | 14,992,275 | ||||
16,000,000 | Cobbler Funding LLC, 3.330% due 7/25/05 (a) | 15,964,587 | ||||
16,100,000 | Coca-Cola Co., 3.310% due 7/26/05 | 16,063,551 | ||||
16,422,000 | Coca-Cola Enterprises, Inc., 3.100% due 7/11/05 (a) | 16,408,087 | ||||
6,000,000 | Gannett Co., Inc., 3.250% due 7/22/05 | 5,988,800 | ||||
16,100,000 | General Electric Capital Corp., 3.300% due 7/19/05 | 16,073,837 | ||||
16,500,000 | Goldman Sachs Group, Inc., 4.280% due 7/14/05 | 16,481,529 | ||||
10,293,000 | HSBC Finance Corp., 3.160% due 7/15/05 | 10,280,551 | ||||
16,300,000 | ING U.S. Funding LLC, 3.110% due 7/6/05 | 16,293,072 | ||||
15,900,000 | Nestle Capital Corp., 4.960% due 7/20/05 (a) | 15,873,315 | ||||
16,305,000 | Park Avenue Receivables Corp., Credit Enhanced By JPMorgan Chase Bank, 3.120% due 7/8/05 (a) | 16,295,267 | ||||
15,000,000 | Polonius, Inc., Credit Enhanced by Danske Bank A/S, 3.270% due 7/18/05 (a) | 14,977,192 | ||||
15,900,000 | Royal Bank of Scotland PLC, 4.780% due 7/15/05 | 15,880,090 | ||||
12,000,000 | Societe Generale NA, 4.080% due 7/15/05 | 11,985,347 | ||||
16,400,000 | Toronto Dominion Holdings USA, 5.480% due 7/6/05 | 16,393,076 | ||||
15,976,000 | Toyota Motor Credit Corp., 3.090% due 7/7/05 (a) | 15,967,905 | ||||
11,124,000 | UBS Finance Delaware LLC, 4.740% due 7/1/05 | 11,124,000 | ||||
16,100,000 | USAA Capital Corp., 3.290% due 7/13/05 | 16,082,612 | ||||
15,900,000 | Victory Receivable Corp., Credit Enhanced by Banks Rated A-1/ P-1, 5.290% due 7/21/05 (a) | 15,871,027 | ||||
TOTAL COMMERCIAL PAPER (Cost — $308,975,553) | 308,975,553 | |||||
TOTAL INVESTMENTS — 100.1% (Cost — $325,175,553#) | 325,175,553 | |||||
Liabilities in Excess of Other Assets — (0.1)% | (367,384) | |||||
TOTAL NET ASSETS — 100.0% | $ | 324,808,169 | ||||
(a) | Security is exempt from registration under Rule 144A of the Securities Act of 1933. This security may be resold in transactions that are exempt from registration, normally to qualified institutional buyers. This security has been deemed liquid pursuant to guidelines approved by the Board of Trustees. | |
# | Aggregate cost for Federal income tax purposes is substantially the same. |
41
The definitions of the applicable rating symbols are set forth below:
Standard & Poor’s Ratings Service (“Standard & Poor’s”) — Ratings from “AA” to “CCC” may be modified by the addition of a plus (+) or minus (–) sign to show relative standings within the major rating categories.
AAA | — | Bonds rated “AAA” have the highest rating assigned by Standard & Poor’s. Capacity to pay interest and repay principal is extremely strong. | ||
AA | — | Bonds rated “AA” have a very strong capacity to pay interest and repay principal and differ from the highest rated issues only in a small degree. | ||
A | — | Bonds rated “A” have a strong capacity to pay interest and repay principal although they are somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories. | ||
BBB | — | Bonds rated “BBB” are regarded as having an adequate capacity to pay interest and repay principal. Whereas they normally exhibit adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for bonds in this category than in higher rated categories. | ||
BB, B, CCC and CC | — | Bonds rated “BB”, “B”, “CCC” and “CC” are regarded, on balance, as predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. “BB” represents a lower degree of speculation than “B”, and “CC” the highest degree of speculation. While such bonds will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions. | ||
D | — | Bonds rated “D” are in default and payment of interest and/or repayment of principal is in arrears. |
Moody’s Investors Service (“Moody’s”) — Numerical modifiers 1, 2 and 3 may be applied to each generic rating from “Aa” to “Ca,” where 1 is the highest and 3 the lowest ranking within its generic category.
Aaa | — | Bonds rated “Aaa” are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as “gilt edge.” Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. | ||
Aa | — | Bonds rated “Aa” are judged to be of high quality by all standards. Together with the “Aaa” group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in “Aaa” securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in “Aaa” securities. | ||
A | — | Bonds rated “A” possess many favorable investment attributes and are to be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate but elements may be present which suggest a susceptibility to impairment some time in the future. | ||
Baa | — | Bonds rated “Baa” are considered as medium grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. | ||
Ba | — | Bonds rated “Ba” are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and therefore not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. | ||
B | — | Bonds rated “B” are generally lack characteristics of desirable investments. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. | ||
Caa | — | Bonds rated “Caa” are of poor standing. These may be in default, or present elements of danger may exist with respect to principal or interest. | ||
Ca | — | Bonds rated “Ca” represent obligations which are speculative in a high degree. Such issues are often in default or have other marked short-comings. |
42
Fitch Rating Service (“Fitch”) — Ratings from “AAA” to “CC” may be modified by the addition of a plus (+) or minus (-) sign to show relative standings within the major rating categories
AAA | — | Bonds rated “AAA” have the highest rating assigned by Fitch. Capacity to pay interest and repay principal is extremely strong. | ||
AA | — | Bonds rated “AA” have a very strong capacity to pay interest and repay principal and differ from the highest rated issues only in a small degree. | ||
A | — | Bonds rated “A” have a strong capacity to pay interest and repay principal although they are somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories. | ||
BBB | — | Bonds rated “BBB” are regarded as having an adequate capacity to pay interest and repay principal. Whereas they normally exhibit adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for bonds in this category than in higher rated categories. | ||
BB, B, CCC and CC | — | Bonds rated “BB”, “B”, “CCC” and “CC” are regarded, on balance, as predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. “BB” represents a lower degree of speculation than “B”, and “CC” the highest degree of speculation. While such bonds will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions. | ||
NR | — | Indicates that the bond is not rated by Standard & Poor’s, Moody’s, or Fitch. |
SP-1 | — | Standard & Poor’s highest rating indicating very strong or strong capacity to pay principal and interest; those issues determined to possess overwhelming safety characteristics are denoted with a plus (+) sign. | ||
A-1 | — | Standard & Poor’s highest commercial paper and variable-rate demand obligation (VRDO) rating indicating that the degree of safety regarding timely payment is either overwhelming or very strong; those issues determined to possess overwhelming safety characteristics are denoted with a plus (+) sign. | ||
VMIG 1 | — | Moody’s highest rating for issues having a demand feature — VRDO. | ||
P-1 | — | Moody’s highest rating for commercial paper and for VRDO prior to the advent of the VMIG 1 rating. | ||
F-1 | — | Fitch’s highest rating indicating the strongest capacity for timely payment of financial commitments; those issues determined to possess overwhelming strong credit feature are denoted with a plus (+) sign. |
43
Statements of Assets and Liabilities (unaudited) | June 30, 2005 |
Managed | High Yield | Capital | Money | ||||||||||||||
Assets | Bond | Appreciation | Market | ||||||||||||||
Trust | Trust | Fund | Portfolio | ||||||||||||||
ASSETS: | |||||||||||||||||
Investments, at cost | $ | 250,273,025 | $ | 95,706,595 | $ | 570,015,884 | — | ||||||||||
Short-term investments, at cost | 5,314,000 | 13,803,000 | 99,695,000 | $ | 325,175,553 | ||||||||||||
Foreign currency, at cost | 9 | — | — | — | |||||||||||||
Investments, at value | $ | 274,268,077 | $ | 98,875,747 | $ | 943,071,921 | — | ||||||||||
Short-term investments, at value | 5,314,000 | 13,803,000 | 99,695,000 | $ | 325,175,553 | ||||||||||||
Foreign currency, at value | 11 | — | — | — | |||||||||||||
Dividends and interest receivable | 1,198,195 | 1,850,544 | 340,172 | 33,372 | |||||||||||||
Receivable for securities sold | 566,326 | 153,534 | 2,523,003 | — | |||||||||||||
Receivable for Fund shares sold | 1,364 | 6,699 | 46,371 | 167,241 | |||||||||||||
Unrealized appreciation on forward foreign currency contracts (Notes 1 and 3) | — | 11,920 | — | — | |||||||||||||
Prepaid expenses | 1,295 | — | — | — | |||||||||||||
Total Assets | 281,349,268 | 114,701,444 | 1,045,676,467 | 325,376,166 | |||||||||||||
LIABILITIES: | |||||||||||||||||
Investment advisory fees payable | 116,768 | 41,405 | 603,581 | 79,673 | |||||||||||||
Payable for Fund shares repurchased | 66,268 | 24,547 | 1,434,622 | 63,162 | |||||||||||||
Administration fees payable | 14,012 | 5,594 | 51,261 | 15,972 | |||||||||||||
Due to custodian | 10,530 | 5,811 | 10,107 | 9,798 | |||||||||||||
Payable for securities purchased | — | 153,534 | — | — | |||||||||||||
Dividends payable | — | — | — | 337,907 | |||||||||||||
Accrued expenses | 54,917 | 37,410 | 126,905 | 61,485 | |||||||||||||
Total Liabilities | 262,495 | 268,301 | 2,226,476 | 567,997 | |||||||||||||
Total Net Assets | $ | 281,086,773 | $ | 114,433,143 | $ | 1,043,449,991 | $ | 324,808,169 | |||||||||
NET ASSETS: | |||||||||||||||||
Par value (Note 4) | — | — | — | $ | 32,480,803 | ||||||||||||
Paid-in capital | $ | 251,446,945 | $ | 107,126,178 | $ | 1,037,062,151 | 292,327,225 | ||||||||||
Undistributed net investment income | 3,017,571 | 3,671,522 | 343,991 | 7,965 | |||||||||||||
Accumulated net realized gain (loss) on investments, futures contracts and foreign currency transactions | 2,627,203 | 454,715 | (367,007,317 | ) | (7,824 | ) | |||||||||||
Net unrealized appreciation on investments and foreign currencies | 23,995,054 | 3,180,728 | 373,051,166 | — | |||||||||||||
Total Net Assets | $ | 281,086,773 | $ | 114,433,143 | $ | 1,043,449,991 | $ | 324,808,169 | |||||||||
Shares Outstanding | 17,009,471 | 11,542,636 | 15,015,184 | 324,808,028 | |||||||||||||
Net Asset Value | $ | 16.53 | $ | 9.91 | $ | 69.49 | $ | 1.00 | |||||||||
44
Statements of Operations (unaudited) | For the Six Months Ended June 30, 2005 |
Managed | High Yield | Capital | Money | |||||||||||||||
Assets | Bond | Appreciation | Market | |||||||||||||||
Trust | Trust | Fund | Portfolio | |||||||||||||||
INVESTMENT INCOME: | ||||||||||||||||||
Interest | $ | 2,253,899 | $ | 4,023,894 | $ | 1,067,842 | $ | 4,394,933 | ||||||||||
Dividends | 1,628,849 | 15,814 | 3,303,120 | — | ||||||||||||||
Less: Foreign taxes withheld | — | — | (59,012 | ) | — | |||||||||||||
Total Investment Income | 3,882,748 | 4,039,708 | 4,311,950 | 4,394,933 | ||||||||||||||
EXPENSES: | ||||||||||||||||||
Investment advisory fees (Note 2) | 709,727 | 243,172 | 3,539,726 | 517,236 | ||||||||||||||
Administration fees (Note 2) | 85,167 | 32,757 | 303,405 | 95,992 | ||||||||||||||
Custody | 23,243 | 25,505 | 29,438 | 14,183 | ||||||||||||||
Shareholder reports | 15,472 | 6,934 | 60,076 | 21,741 | ||||||||||||||
Legal fees | 12,462 | 11,332 | 11,155 | 13,258 | ||||||||||||||
Audit and tax | 12,743 | 8,972 | 15,050 | 8,980 | ||||||||||||||
Trustees’ fees | 5,598 | 4,284 | 2,500 | 2,700 | ||||||||||||||
Insurance | 2,595 | 737 | 4,806 | 876 | ||||||||||||||
Miscellaneous expenses | 1,221 | 381 | 1,803 | 354 | ||||||||||||||
Total Expenses | 868,228 | 334,074 | 3,967,959 | 675,320 | ||||||||||||||
Less: Expense reimbursement (Note 2) | — | — | — | (35,435 | ) | |||||||||||||
Net Expenses | 868,228 | 334,074 | 3,967,959 | 639,885 | ||||||||||||||
Net Investment Income | 3,014,520 | 3,705,634 | 343,991 | 3,755,048 | ||||||||||||||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS (NOTES 1 AND 3): | ||||||||||||||||||
Net Realized Gain (Loss) From: | ||||||||||||||||||
Investment transactions | 2,965,759 | 755,538 | 62,048,188 | (19 | ) | |||||||||||||
Futures contracts | (94,393 | ) | — | — | — | |||||||||||||
Foreign currency transactions | — | 78,918 | (6,867 | ) | — | |||||||||||||
Net Realized Gain (Loss) | 2,871,366 | 834,456 | 62,041,321 | (19 | ) | |||||||||||||
Change in Net Unrealized Appreciation/ Depreciation From: | ||||||||||||||||||
Investments | (6,727,037 | ) | (4,444,574 | ) | (13,427,738 | ) | — | |||||||||||
Futures contracts | 2,680 | — | — | — | ||||||||||||||
Foreign currencies | — | 11,591 | (12,406 | ) | — | |||||||||||||
Change in Net Unrealized Appreciation/ Depreciation | (6,724,357 | ) | (4,432,983 | ) | (13,440,144 | ) | — | |||||||||||
Net Gain (Loss) on Investments, Futures Contracts and Foreign Currency Transactions | (3,852,991 | ) | (3,598,527 | ) | 48,601,177 | (19 | ) | |||||||||||
Increase (Decrease) in Net Assets From Operations | $ | (838,471 | ) | $ | 107,107 | $ | 48,945,168 | $ | 3,755,029 | |||||||||
45
MANAGED ASSETS TRUST | 2005 | 2004 | |||||||
OPERATIONS: | |||||||||
Net investment income | $ | 3,014,520 | $ | 6,677,914 | |||||
Net realized gain | 2,871,366 | 11,807,350 | |||||||
Change in net unrealized appreciation/depreciation | (6,724,357 | ) | 7,564,971 | ||||||
Increase (Decrease) in Net Assets From Operations | (838,471 | ) | 26,050,235 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 1): | |||||||||
Net investment income | (45,070 | ) | (6,765,497 | ) | |||||
Net realized gains | (1,756,536 | ) | (2,452,309 | ) | |||||
Decrease in Net Assets From Distributions to Shareholders | (1,801,606 | ) | (9,217,806 | ) | |||||
FUND SHARE TRANSACTIONS (NOTE 4): | |||||||||
Net proceeds from sale of shares | 3,024,022 | 7,924,859 | |||||||
Reinvestment of distributions | 1,801,606 | 9,217,806 | |||||||
Cost of shares repurchased | (18,347,729 | ) | (26,600,443 | ) | |||||
Decrease in Net Assets From Fund Share Transactions | (13,522,101 | ) | (9,457,778 | ) | |||||
Increase (Decrease) in Net Assets | (16,162,178 | ) | 7,374,651 | ||||||
NET ASSETS: | |||||||||
Beginning of period | 297,248,951 | 289,874,300 | |||||||
End of period* | $ | 281,086,773 | $ | 297,248,951 | |||||
* Includes undistributed net investment income of: | $3,017,571 | $48,121 | |||||||
46
HIGH YIELD BOND TRUST | 2005 | 2004 | |||||||
OPERATIONS: | |||||||||
Net investment income | $ | 3,705,634 | $ | 6,907,148 | |||||
Net realized gain (loss) | 834,456 | (362,305 | ) | ||||||
Change in net unrealized appreciation/depreciation | (4,432,983 | ) | 1,617,958 | ||||||
Net increase from payment by affiliates (Note 2) | — | 75,068 | |||||||
Increase in Net Assets From Operations | 107,107 | 8,237,869 | |||||||
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 1): | |||||||||
Net investment income | (5,879 | ) | (6,987,891 | ) | |||||
Net realized gains | — | (65,843 | ) | ||||||
Decrease in Net Assets From Distributions to Shareholders | (5,879 | ) | (7,053,734 | ) | |||||
FUND SHARE TRANSACTIONS (NOTE 4): | |||||||||
Net proceeds from sale of shares | 13,175,243 | 19,629,157 | |||||||
Reinvestment of distributions | 5,879 | 7,053,734 | |||||||
Cost of shares repurchased | (5,388,166 | ) | (17,180,397 | ) | |||||
Increase in Net Assets From Fund Share Transactions | 7,792,956 | 9,502,494 | |||||||
Increase in Net Assets | 7,894,184 | 10,686,629 | |||||||
NET ASSETS: | |||||||||
Beginning of period | 106,538,959 | 95,852,330 | |||||||
End of period* | $ | 114,433,143 | $ | 106,538,959 | |||||
* Includes undistributed net investment income and overdistributed net investment income, respectively, of: | $ | 3,671,522 | $ | (28,233 | ) | ||||
47
CAPITAL APPRECIATION FUND | 2005 | 2004 | |||||||
OPERATIONS: | |||||||||
Net investment income (loss) | $ | 343,991 | $ | (1,463,757 | ) | ||||
Net realized gain (loss) | 62,041,321 | (47,038,979 | ) | ||||||
Change in net unrealized appreciation/depreciation | (13,440,144 | ) | 223,220,300 | ||||||
Increase in Net Assets From Operations | 48,945,168 | 174,717,564 | |||||||
FUND SHARE TRANSACTIONS (NOTE 4): | |||||||||
Net proceeds from sale of shares | 5,643,308 | 4,387,734 | |||||||
Cost of shares repurchased | (53,482,158 | ) | (122,503,664 | ) | |||||
Decrease in Net Assets From Fund Share Transactions | (47,838,850 | ) | (118,115,930 | ) | |||||
Increase in Net Assets | 1,106,318 | 56,601,634 | |||||||
NET ASSETS: | |||||||||
Beginning of period | 1,042,343,673 | 985,742,039 | |||||||
End of period* | $ | 1,043,449,991 | $ | 1,042,343,673 | |||||
* Includes undistributed net investment income of: | $ | 343,991 | — | ||||||
48
MONEY MARKET PORTFOLIO | 2005 | 2004 | |||||||
OPERATIONS: | |||||||||
Net investment income | $ | 3,755,048 | $ | 3,375,116 | |||||
Net realized gain (loss) | (19 | ) | 16 | ||||||
Increase in Net Assets From Operations | 3,755,029 | 3,375,132 | |||||||
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 1): | |||||||||
Net investment income | (3,755,048 | ) | (3,375,116 | ) | |||||
Decrease in Net Assets From Distributions to Shareholders | (3,755,048 | ) | (3,375,116 | ) | |||||
FUND SHARE TRANSACTIONS (NOTE 4): | |||||||||
Net proceeds from sale of shares | 106,374,346 | 183,076,228 | |||||||
Reinvestment of distributions | 3,651,372 | 3,223,605 | |||||||
Cost of shares repurchased | (88,164,226 | ) | (229,178,505 | ) | |||||
Increase (Decrease) in Net Assets From Fund Share Transactions | 21,861,492 | (42,878,672 | ) | ||||||
Increase (Decrease) in Net Assets | 21,861,473 | (42,878,656 | ) | ||||||
NET ASSETS: | |||||||||
Beginning of period | 302,946,696 | 345,825,352 | |||||||
End of period* | $ | 324,808,169 | $ | 302,946,696 | |||||
* Includes undistributed net investment income of: | $ | 7,965 | $ | 7,965 | |||||
49
MANAGED ASSETS TRUST | 2005(1) | 2004(2) | 2003 | 2002 | 2001(2) | 2000(2) | |||||||||||||||||||
Net Asset Value, Beginning of Period | $16.67 | $15.72 | $13.20 | $15.55 | $17.94 | $21.12 | |||||||||||||||||||
Income (Loss) From Operations: | |||||||||||||||||||||||||
Net investment income | 0.18 | 0.37 | 0.39 | 0.45 | 0.49 | 0.48 | |||||||||||||||||||
Net realized and unrealized gain (loss) | (0.22 | ) | 1.11 | 2.51 | (1.79 | ) | (1.40 | ) | (0.71 | ) | |||||||||||||||
Total Income (Loss) From Operations | (0.04 | ) | 1.48 | 2.90 | (1.34 | ) | (0.91 | ) | (0.23 | ) | |||||||||||||||
Less Distributions From: | |||||||||||||||||||||||||
Net investment income | (0.00 | )(3) | (0.39 | ) | (0.38 | ) | (0.92 | ) | (0.46 | ) | (0.41 | ) | |||||||||||||
Net realized gains(4) | (0.10 | ) | (0.14 | ) | — | (0.09 | ) | (1.02 | ) | (2.54 | ) | ||||||||||||||
Total Distributions | (0.10 | ) | (0.53 | ) | (0.38 | ) | (1.01 | ) | (1.48 | ) | (2.95 | ) | |||||||||||||
Net Asset Value, End of Period | $16.53 | $16.67 | $15.72 | $13.20 | $15.55 | $17.94 | |||||||||||||||||||
Total Return(5) | (0.20 | )% | 9.44 | % | 21.98 | % | (8.60 | )% | (5.08 | )% | (1.62 | )% | |||||||||||||
Net Assets, End of Period (000s) | $281,087 | $297,249 | $289,874 | $250,910 | $307,520 | $342,834 | |||||||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||
Gross expenses | 0.61 | %(6) | 0.61 | % | 0.59 | % | 0.61 | % | 0.59 | % | 0.59 | % | |||||||||||||
Net expenses(7) | 0.61 | (6) | 0.60 | (8) | 0.59 | 0.61 | 0.59 | 0.59 | |||||||||||||||||
Net investment income | 2.12 | (6) | 2.31 | 2.64 | 2.80 | 2.95 | 2.47 | ||||||||||||||||||
Portfolio Turnover Rate | 21 | % | 64 | % | 84 | % | 39 | % | 59 | % | 56 | % | |||||||||||||
(1) | For the six months ended June 30, 2005 (unaudited). |
(2) | Per share amounts have been calculated using the average shares method. |
(3) | Amount is less than $0.01. |
(4) | Distributions from realized gains include both net realized short-term and long-term capital gains. |
(5) | Performance figures may reflect fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of fee waivers and/or expense reimbursements, the total return would be lower. Total returns do not reflect expenses associated with the separate accounts such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown. Total returns for periods of less than one year are not annualized. |
(6) | Annualized. |
(7) | As a result of an expense limitation, the ratio of expenses to average net assets of the Fund will not exceed 1.25%. |
(8) | The sub-administrator waived a portion of its fees. |
50
HIGH YIELD BOND TRUST(1) | 2005(2) | 2004 | 2003 | 2002 | 2001 | 2000 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $9.91 | $9.76 | $8.11 | $9.04 | $8.77 | $9.47 | |||||||||||||||||||
Income (Loss) From Operations: | |||||||||||||||||||||||||
Net investment income | 0.32 | 0.70 | 0.77 | 0.78 | 0.80 | 0.79 | |||||||||||||||||||
Net realized and unrealized gain (loss) | (0.32 | ) | 0.16 | 1.59 | (0.40 | ) | 0.04 | (0.70 | ) | ||||||||||||||||
Total Income From Operations | 0.00 | (3) | 0.86 | 2.36 | 0.38 | 0.84 | 0.09 | ||||||||||||||||||
Less Distributions From: | |||||||||||||||||||||||||
Net investment income | (0.00 | )(3) | (0.70 | ) | (0.71 | ) | (1.31 | ) | (0.57 | ) | (0.79 | ) | |||||||||||||
Net realized gains(4) | — | (0.01 | ) | — | — | — | — | ||||||||||||||||||
Total Distributions | (0.00 | )(3) | (0.71 | ) | (0.71 | ) | (1.31 | ) | (0.57 | ) | (0.79 | ) | |||||||||||||
Net Asset Value, End of Period | $9.91 | $9.91 | $9.76 | $8.11 | $9.04 | $8.77 | |||||||||||||||||||
Total Return(5) | 0.01 | % | 8.75 | % (6) | 29.15 | % | 4.57 | % | 9.55 | % | 0.97 | % | |||||||||||||
Net Assets, End of Period (000s) | $114,433 | $106,539 | $95,852 | $60,818 | $50,016 | $34,678 | |||||||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||
Gross expenses | 0.61 | %(7) | 0.63 | % | 0.65 | % | 0.71 | % | 0.73 | % | 0.83 | % | |||||||||||||
Net expenses(8) | 0.61 | (7) | 0.60 | (9) | 0.65 | 0.71 | 0.73 | 0.83 | |||||||||||||||||
Net investment income | 6.79 | (7) | 7.08 | 8.28 | 8.81 | 8.79 | 8.74 | ||||||||||||||||||
Portfolio Turnover Rate | 31 | % | 79 | % | 80 | % | 100 | % | 110 | % | 80 | % | |||||||||||||
(1) | Per share amounts have been calculated using the average shares method. |
(2) | For the six months ended June 30, 2005 (unaudited). |
(3) | Amount is less than $0.01. |
(4) | Distributions from realized gains include both net realized short-term and long-term capital gains. |
(5) | Performance figures may reflect fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of fee waivers and/or expense reimbursements, the total return would be lower. Total returns do not reflect expenses associated with the separate accounts such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown. Total returns for periods of less than one year are not annualized. |
(6) | The adviser fully reimbursed the Fund for losses incurred resulting from violations of the Fund’s investment restrictions. Without this reimbursement, the Fund’s total return would have been 8.64%. |
(7) | Annualized. |
(8) | As a result of an expense limitation, the ratio of expenses to average net assets of the Fund will not exceed 1.25%. |
(9) | The sub-administrator waived a portion of its fees. |
51
CAPITAL APPRECIATION FUND | 2005(1) | 2004(2) | 2003(2) | 2002(2) | |||||||||||||
Net Asset Value, Beginning of Period | $66.23 | $55.41 | $44.38 | $60.30 | |||||||||||||
Income (Loss) From Operations: | |||||||||||||||||
Net investment income (loss) | 0.02 | (0.09 | ) | 0.07 | 0.14 | ||||||||||||
Net realized and unrealized gain (loss) | 3.24 | 10.91 | 10.99 | (15.24 | ) | ||||||||||||
Total Income (Loss) From Operations | 3.26 | 10.82 | 11.06 | (15.10 | ) | ||||||||||||
Less Distributions From: | |||||||||||||||||
Net investment income | — | — | (0.03 | ) | (0.81 | ) | |||||||||||
Net realized gains(3) | — | — | — | — | |||||||||||||
Return of capital | — | — | (0.00 | )(4) | (0.01 | ) | |||||||||||
Total Distributions | — | — | (0.03 | ) | (0.82 | ) | |||||||||||
Net Asset Value, End of Period | $69.49 | $66.23 | $55.41 | $44.38 | |||||||||||||
Total Return(5) | 4.92 | % | 19.53 | % | 24.91 | % | (25.09 | )% | |||||||||
Net Assets, End of Period (millions) | $1,043 | $1,042 | $986 | $864 | |||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||
Gross expenses | 0.78 | %(6) | 0.82 | % | 0.82 | % | 0.84 | % | |||||||||
Net expenses(7) | 0.78 | (6) | 0.81 | (8) | 0.82 | 0.84 | |||||||||||
Net investment income (loss) | 0.07 | (6) | (0.15 | ) | 0.14 | 0.27 | |||||||||||
Portfolio Turnover Rate | 12 | % | 16 | % | 59 | % | 52 | % | |||||||||
[Additional columns below]
[Continued from above table, first column(s) repeated]
CAPITAL APPRECIATION FUND | 2001(2) | 2000 | |||||||
Net Asset Value, Beginning of Period | $82.01 | $108.80 | |||||||
Income (Loss) From Operations: | |||||||||
Net investment income (loss) | 0.61 | 0.29 | |||||||
Net realized and unrealized gain (loss) | (22.01 | ) | (23.29 | ) | |||||
Total Income (Loss) From Operations | (21.40 | ) | (23.00 | ) | |||||
Less Distributions From: | |||||||||
Net investment income | (0.31 | ) | (0.04 | ) | |||||
Net realized gains(3) | — | (3.75 | ) | ||||||
Return of capital | — | — | |||||||
Total Distributions | (0.31 | ) | (3.79 | ) | |||||
Net Asset Value, End of Period | $60.30 | $82.01 | |||||||
Total Return(5) | (26.09 | )% | (21.88 | )% | |||||
Net Assets, End of Period (millions) | $1,300 | $1,797 | |||||||
Ratios to Average Net Assets: | |||||||||
Gross expenses | 0.84 | % | 0.83 | % | |||||
Net expenses(7) | 0.84 | 0.83 | |||||||
Net investment income (loss) | 0.91 | 0.30 | |||||||
Portfolio Turnover Rate | 47 | % | 30 | % | |||||
(1) | For the six months ended June 30, 2005 (unaudited). |
(2) | Per share amounts have been calculated using the average shares method. |
(3) | Distributions from realized gains include both net realized short-term and long-term capital gains. |
(4) | Amount is less than $0.01. |
(5) | Performance figures may reflect fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of fee waivers and/or expense reimbursements, the total return would be lower. Total returns do not reflect expenses associated with the separate accounts such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown. Total returns for periods of less than one year are not annualized. |
(6) | Annualized. |
(7) | As a result of an expense limitation, the ratio of expenses to average net assets of the Fund will not exceed 1.25%. |
(8) | The sub-administrator waived a portion of its fees. |
52
MONEY MARKET PORTFOLIO | 2005(1) | 2004 | 2003 | 2002 | 2001 | 2000 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $1.00 | $1.00 | $1.00 | $1.00 | $1.00 | $1.00 | |||||||||||||||||||
Income (Loss) From Operations: | |||||||||||||||||||||||||
Net investment income | 0.012 | 0.01 | 0.008 | 0.014 | 0.036 | 0.06 | |||||||||||||||||||
Distributions from net investment income | (0.012 | ) | (0.01 | ) | (0.008 | ) | (0.014 | ) | (0.036 | ) | (0.06 | ) | |||||||||||||
Net Asset Value, End of Period | $1.00 | $1.00 | $1.00 | $1.00 | $1.00 | $1.00 | |||||||||||||||||||
Total Return(2) | 1.17 | % | 1.01 | % | 0.78 | % | 1.39 | % | 3.71 | % | 6.18 | % | |||||||||||||
Net Assets, End of Period (000s) | $324,808 | $302,947 | $345,825 | $393,244 | $353,269 | $147,117 | |||||||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||
Gross expenses | 0.42 | %(5) | 0.42 | % | 0.42 | % | 0.42 | % | 0.42 | % | 0.44 | % | |||||||||||||
Net expenses(3)(4) | 0.40 | (5) | 0.40 | 0.40 | 0.40 | 0.40 | 0.40 | ||||||||||||||||||
Net investment income | 2.35 | (5) | 1.00 | 0.78 | 1.38 | 3.46 | 6.04 | ||||||||||||||||||
(1) | For the six months ended June 30, 2005 (unaudited). |
(2) | Performance figures may reflect voluntary fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would be lower. Total returns do not reflect expenses associated with the separate accounts such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown. Total returns for periods of less than one year are not annualized. |
(3) | The administrator waived its fees and reimbursed the Fund for certain expenses for the six months ended June 30, 2005 and the years ended December 31, 2004, 2003, 2002, 2001 and 2000. In addition, the sub-administrator waived a portion of its fees for the year ended December 31, 2004. |
(4) | As a result of an expense limitation, the ratio of expenses to average net assets of the Fund will not exceed 0.40%. |
(5) | Annualized. |
53
1. Organization and Significant Accounting Policies
The Managed Assets Trust (“MAT”), High Yield Bond Trust (“HYBT”), Capital Appreciation Fund (“CAF”) and Money Market Portfolio (“MMP”) (collectively, “Funds”) are each a Massachusetts business trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as diversified, open-end management investment companies. Shares of the Funds are offered exclusively for use with certain variable annuity and variable life insurance contracts offered through the separate accounts of various affiliated life insurance companies.
The following are significant accounting policies consistently followed by the Funds. These policies are in conformity with U.S. generally accepted accounting principles (“GAAP”). Estimates and assumptions are required to be made regarding assets, liabilities and changes in net assets resulting from operations when financial statements are prepared. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ.
(a) Investment Valuation. Equity securities for which market quotations are available are valued at the last sale price or official closing price on the primary market or exchange on which they trade. Debt securities are valued at the mean between the bid and asked prices provided by an independent pricing service that are based on transactions in debt obligations, quotations from bond dealers, market transactions in comparable securities and various relationships between securities. When prices are not readily available, or are determined not to reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before the Funds calculate their net asset value, the Funds may value these investments at fair value as determined in accordance with the procedures approved by the Funds’ Board of Trustees. For MAT, HYBT and CAF, short-term obligations with maturities of 60 days or less are valued at amortized cost, which approximates market value. For MMP, money market instruments are valued at amortized cost, in accordance with Rule 2a-7 under the 1940 Act, which approximates market value. This method involves valuing a portfolio security at its cost and thereafter assuming a constant amortization to maturity of any discount or premium. MMP’s use of amortized cost is subject to its compliance with certain conditions as specified under Rule 2a-7 of the 1940 Act.
(b) Repurchase Agreements. When entering into repurchase agreements, it is the Funds’ policy that their custodian or a third party custodian takes possession of the underlying collateral securities, the market value of which at least equals the principal amount of the repurchase transaction, including accrued interest. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market to ensure the adequacy of the collateral. If the seller defaults and the market value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Funds may be delayed or limited.
(c) Financial Futures Contracts. The Funds may enter into financial futures contracts typically to hedge a portion of the portfolios. Upon entering into a financial futures contract, the Funds are required to deposit cash or securities as initial margin. Additional securities are also segregated up to the current market value of the financial futures contracts. Subsequent payments, known as variation margin, are made or received by the Funds each day, depending on the daily fluctuation in the value of the underlying financial instruments. The Funds recognize an unrealized gain or loss equal to the daily variation margin. When the financial futures contracts are closed, a realized gain or loss is recognized equal to the difference between the proceeds from (or cost of) the closing transactions and the Funds’ basis in the contracts.
The risks associated with entering into financial futures contracts include the possibility that a change in the value of the contract may not correlate with the changes in the value of the underlying instruments. In addition, investing in financial futures contracts involves the risk that the Funds could lose more than the original margin deposit and subsequent payments required for a futures transaction. Risks may also arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts.
(d) Forward Foreign Currency Contracts. Certain Funds may enter into forward foreign currency contracts to hedge against foreign currency exchange rate risk on its non-US dollar denominated securities or to facilitate settlement of foreign currency denominated portfolio transactions. A forward foreign currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The contract is marked-to-market daily and the change in value is recorded by the Funds as an unrealized gain or loss. When a forward foreign currency contract is extinguished, through either delivery or offset by entering into another forward foreign currency contract, the Funds record a realized gain
54
or loss equal to the difference between the value of the contract at the time it was opened and the value of the contract at the time it was extinguished.
Forward foreign currency contracts involve elements of market risk in excess of the amounts reflected in the Statements of Assets and Liabilities. The Funds bear the risk of an unfavorable change in the foreign exchange rate underlying the forward foreign currency contract. Risks may also arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts.
(e) Credit and Market Risk. HYBT invests in high-yield instruments that are subject to certain credit and market risks. The yields of high-yield instruments reflect, among other things, perceived credit risk. The Fund’s investment in securities rated below investment grade typically involve risks not associated with higher rated securities including, among others, greater risk related to timely and ultimate payment of interest and principal, greater market price volatility and less liquid secondary market trading.
(f) Security Transactions and Investment Income. Security transactions are accounted for on a trade date basis. Interest income, adjusted for amortization of premium and accretion of discount, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. Foreign dividend income is recorded on the ex-dividend date or as soon as practical after the Funds determine the existence of a dividend declaration after exercising reasonable due diligence. The cost of investments sold is determined by use of the specific identification method.
(g) Foreign Currency Translation. Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts based upon prevailing exchange rates on the date of valuation. Purchases and sales of investment securities and income and expense items denominated in foreign currencies are translated into U.S. dollar amounts based upon prevailing exchange rates on the respective dates of such transactions.
The Funds do not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.
Net realized foreign exchange gains or losses arise from sales of foreign currencies, including gains and losses on forward foreign currency contracts, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Funds’ books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities, at the date of valuation, resulting from changes in exchange rates.
Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of U.S. dollar denominated transactions as a result of, among other factors, the possibility of lower levels of governmental supervision and regulation of foreign securities markets and the possibility of political or economic instability.
(h) Distributions to Shareholders. Distributions from net investment income for MAT , HYBT and CAF , if any, are declared at least annually. Distributions from net investment income on shares of MMP are declared each business day to shareholders of record that day, and are paid on the last business day of the month. Distributions of net realized gains to shareholders of the Funds, if any, are declared at least annually. Distributions to shareholders of the Funds are recorded on the ex-dividend date and are determined in accordance with income tax regulations, which may differ from GAAP.
(i) Federal and Other Taxes. It is the Funds’ policy to comply with the federal income and excise tax requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. Accordingly, the Funds intend to distribute substantially all of their taxable income and net realized gains on investments, if any, to shareholders each year. Therefore, no federal income tax provision is required in the Funds’ financial statements. Under the applicable foreign tax laws, a withholding tax may be imposed on interest, dividends and capital gains at various rates.
(j) Reclassification. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share.
55
2. Investment Advisory Agreement, Administration Agreement and Other Transactions with Affiliates
Travelers Asset Management International Company LLC (“TAMIC”), an indirect wholly-owned subsidiary of Citigroup Inc. (“Citigroup”), acts as investment adviser to the Funds. MAT and MMP pay TAMIC an investment advisory fee calculated at the annual rate of 0.50% and 0.3233%, respectively, of their average daily net assets of the respective Fund. HYBT and CAF pay TAMIC an investment advisory fee calculated daily and paid monthly at the annual rate of their respective Fund’s average daily net assets as follows:
Investment | ||||
Average Daily Net Assets | Advisory Fee | |||
HYBT | ||||
First $50.0 million | 0.500% | |||
Next $100.0 million | 0.400% | |||
Next $100.0 million | 0.300% | |||
Over $250.0 million | 0.250% | |||
CAF | ||||
First $1.5 billion | 0.700% | |||
Over $1.5 billion | 0.650% | |||
TAMIC has entered into a sub-advisory agreement with TIMCO Asset Management, Inc. (“TIMCO”) (formerly The Travelers Investment Management Company), another indirect wholly-owned subsidiary of Citigroup. Pursuant to the sub-advisory agreement, TIMCO is responsible for the day-to-day portfolio operations and investment decisions for MAT and is compensated for such services by TAMIC at an annual rate of 0.25% of the average daily net assets of MAT.
TAMIC has also entered into a sub-advisory agreement with Janus Capital Management LLC (“Janus”). Pursuant to the sub-advisory agreement, Janus is responsible for the day-to-day portfolio operations and investment decisions for CAF and is compensated for such services by TAMIC at an annual rate of the Fund’s average daily net assets as follows:
Sub Advisory | ||||
Average Daily Net Assets | Fee | |||
First $100 million | 0.500% | |||
Next $400 million | 0.450% | |||
Next $1 billion | 0.400% | |||
Over $1.5 billion | 0.350% | |||
The Travelers Insurance Company (“TIC”), another indirect wholly-owned subsidiary of Citigroup, acts as the Funds’ administrator. As compensation for its services, the Funds pays TIC an administration fee calculated at the annual rate of 0.06% of each respective Fund’s average daily net assets. This fee is calculated daily and paid monthly.
TIC has entered into a sub-administrative services agreement with Smith Barney Fund Management LLC (“SBFM”), another indirect wholly-owned subsidiary of Citigroup. TIC pays SBFM, as sub-administrator, a fee calculated at an annual rate of 0.02% of the respective average daily net assets of each Fund, plus $30,000 per Fund, subject to a maximum of 0.06% of each respective Fund’s average daily net assets.
During the six months ended June 30, 2005, the Funds had a contractual expense limitation in place of 1.25% for MAT, HYBT and CAF and 0.40% for MMP. As a result, TIC has agreed to reimburse MMP for certain expenses in the amount of $35,435. This expense limitation is renewed annually and can be terminated at any time by TIC with 60 days’ notice.
During the year ended December 31, 2004, TAMIC reimbursed HYBT in the amount of $75,068 for losses incurred resulting from violations of the Fund’s investment restrictions.
Citigroup Trust Bank, fsb. (“CTB”), another subsidiary of Citigroup, acts as the Funds’ transfer agent. For the six months ended June 30, 2005, the Funds did not pay transfer agent fees to CTB.
56
All officers and one Trustee of the Funds are employees of Citigroup or its affiliates and do not receive compensation from the Funds.
3. Investments
During the six months ended June 30, 2005, the aggregate cost of purchases and proceeds from sales of investments (excluding short-term investments) and U.S. Government & Agency Obligations were as follows:
MAT | HYBT | CAF | ||||||||||
Investments | ||||||||||||
Purchases | $58,610,994 | $ | 34,872,830 | $ | 116,564,744 | |||||||
Sales | 70,920,832 | 30,058,092 | 220,341,275 | |||||||||
U.S. Government & Agency Obligations | ||||||||||||
Purchases | 20,415,553 | — | — | |||||||||
Sales | 14,477,044 | — | — | |||||||||
At June 30, 2005, the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were substantially as follows:
MAT | HYBT | CAF | ||||||||||
Gross unrealized appreciation | $ | 36,675,455 | $ | 5,216,101 | $ | 374,049,340 | ||||||
Gross unrealized depreciation | (12,680,403 | ) | (2,046,949 | ) | (993,303 | ) | ||||||
Net unrealized appreciation | $ | 23,995,052 | $ | 3,169,152 | $ | 373,056,037 | ||||||
At June 30, 2005, HYBT had open forward foreign currency contracts as described below. The unrealized gain on the open contracts reflected in the accompanying financial statements were as follows:
Local | Market | Settlement | Unrealized | |||||||||||||
Foreign Currency | Currency | Value | Date | Gain | ||||||||||||
Contracts to Sell: | ||||||||||||||||
Euro | 712,650 | $ | 864,497 | 9/9/05 | $ | 11,920 | ||||||||||
4. Shares of Beneficial Interest
The Declaration of Trust authorizes the issuance of an unlimited number of shares of beneficial interest. The shares of the Funds, with the exception of MMP, are authorized and issued without par value. MMP shares are authorized and issued with a par value of $0.10 per share. Transactions in shares of each Fund were as follows:
Six Months Ended | Year Ended | |||||||
June 30, 2005 | December 31, 2004 | |||||||
Managed Assets Trust | ||||||||
Shares sold | 183,372 | 494,356 | ||||||
Shares issued on reinvestment | 108,990 | 553,631 | ||||||
Shares repurchased | (1,115,451 | ) | (1,652,149 | ) | ||||
Net Decrease | (823,089 | ) | (604,162 | ) | ||||
High Yield Bond Trust | ||||||||
Shares sold | 1,339,370 | 1,945,067 | ||||||
Shares issued on reinvestment | 595 | 712,609 | ||||||
Shares repurchased | (548,877 | ) | (1,725,432 | ) | ||||
Net Increase | 791,088 | 932,244 | ||||||
57
Six Months Ended | Year Ended | |||||||
June 30, 2005 | December 31, 2004 | |||||||
Capital Appreciation Fund | ||||||||
Shares sold | 84,882 | 76,603 | ||||||
Shares repurchased | (808,131 | ) | (2,128,640 | ) | ||||
Net Decrease | (723,249 | ) | (2,052,037 | ) | ||||
Money Market Portfolio | ||||||||
Shares sold | 106,374,346 | 183,076,228 | ||||||
Shares issued on reinvestment | 3,651,372 | 3,223,605 | ||||||
Shares repurchased | (88,164,226 | ) | (229,178,505 | ) | ||||
Net Increase (Decrease) | 21,861,492 | (42,878,672 | ) | |||||
5. Capital Loss Carryforward
As of December 31, 2004 the Funds had net capital loss carryforwards as follows:
Year of Expiration | HYBT | CAF | MMP | |||||||||
12/31/2008 | — | $ | 41,615,373 | — | ||||||||
12/31/2009 | — | 151,852,985 | — | |||||||||
12/31/2010 | — | 74,123,366 | $ | 7,645 | ||||||||
12/31/2011 | — | 104,924,615 | 146 | |||||||||
12/31/2012 | $ | 306,393 | 52,569,301 | — | ||||||||
$ | 306,393 | $ | 425,085,640 | $ | 7,791 | |||||||
These amounts will be available to offset any future taxable capital gains.
6. Additional Information
On May 31, 2005, the U.S. Securities and Exchange Commission (“SEC”) issued an order in connection with the settlement of an administrative proceeding against Smith Barney Fund Management LLC (“SBFM”) and Citigroup Global Markets Inc. (“CGMI”) relating to the appointment of an affiliated transfer agent for the Smith Barney family of mutual funds (the “Funds”), which includes the Funds (“TL&A Funds”).
The SEC order finds that SBFM and CGMI willfully violated Section 206(1) of the Investment Advisers Act of 1940 (“Advisers Act”). Specifically, the order finds that SBFM and CGMI knowingly or recklessly failed to disclose to the boards of the Funds in 1999 when proposing a new transfer agent arrangement with an affiliated transfer agent that First Data Investors Services Group (“First Data”), the Funds’ then-existing transfer agent, had offered to continue as transfer agent and do the same work for substantially less money than before. Additionally, the SEC order finds that Citigroup Asset Management (“CAM”), the Citigroup business unit that includes each Fund’s sub-administrator, SBFM, had entered into a side letter with First Data under which CAM agreed to recommend the appointment of First Data as sub-transfer agent to the affiliated transfer agent in exchange, among other things, for a guarantee by First Data of specified amounts of asset management and investment banking fees to CAM and CGMI. The order also finds that SBFM and CGMI willfully violated Section 206(2) of the Advisers Act by virtue of the omissions discussed above and other misrepresentations and omissions in the materials provided to the Funds’ boards, including the failure to make clear that the affiliated transfer agent would earn a high profit for performing limited functions while First Data continued to perform almost all of the transfer agent functions, and the suggestion that the proposed arrangement was in the Funds’ best interests and that no viable alternatives existed. SBFM and CGMI do not admit or deny any wrongdoing or liability. The settlement does not establish wrongdoing or liability for purposes of any other proceeding.
The SEC censured SBFM and CGMI and ordered them to cease and desist from violations of Sections 206(1) and 206(2) of the Advisers Act. The order requires Citigroup to pay $208.1 million, including $109 million in disgorgement of profits, $19.1 million in interest, and a civil money penalty of $80 million. Approximately $24.4 million has already been
58
paid to the Funds, primarily through fee waivers. In addition, Travelers Life & Annuity and CAM reviewed the adequacy and accuracy of the disclosure provided to the TL&A Fund boards at the time the revised transfer agency arrangement was discussed with the boards and concluded that the transfer agency fees paid to CTB, for the period from June 1, 1999 to August 23, 2004, by the TL&A Funds that did not have expense caps in effect should be reimbursed with interest to the TL&A Funds. The reimbursement occurred on November 1, 2004.
The remaining $183.7 million to be paid under the SEC order, including the penalty, has been paid to the U.S. Treasury and will be distributed pursuant to a plan to be prepared by Citigroup and submitted within 90 days of the entry of the order for approval by the SEC. The order also requires that transfer agency fees received from the Funds since December 1, 2004 less certain expenses be placed in escrow and provides that a portion of such fees may be subsequently distributed in accordance with the terms of the order.
The order requires SBFM to recommend a new transfer agent contract to the Fund boards within 180 days of the entry of the order.
At this time, there is no certainty as to how the proceeds of the settlement will be distributed, to whom such distributions will be made, the methodology by which such distributions will be allocated, and when such distributions will be made. Although there can be no assurance, Citigroup does not believe that this matter will have a material adverse effect on the Funds.
7. Other Matters
On June 24, 2005, Citigroup announced that it has signed a definitive agreement under which Citigroup will sell substantially all of its worldwide asset management business to Legg Mason, Inc. (“Legg Mason”).
As part of this transaction, Salomon Brothers Asset Management, Inc., (“Salomon”) a subadviser effective July 1, 2005, for MAT, HYBT, MMP, and TIMCO, a subadviser of MAT, both currently indirect wholly owned subsidiaries of Citigroup, would become indirect wholly owned subsidiaries of Legg Mason.
The transaction is subject to certain regulatory approvals, as well as other customary conditions to closing. Subject to such approvals and the satisfaction of the other conditions, Citigroup expects the transaction to be completed later this year.
8. Subsequent Events
On July 1, 2005, MetLife, Inc., a Delaware corporation (“MetLife”), acquired all of the outstanding shares of capital stock of certain indirect subsidiaries held by Citigroup, including TIC, The Travelers Life and Annuity Company, a wholly owned subsidiary of TIC and certain other domestic insurance companies of Citigroup and substantially all of Citigroup’s international insurance businesses for $11.8 billion. The sale also included TIC’s affiliated investment adviser, TAMIC, which serves as the investment adviser to the Funds.
TIC filed a Form 8-K Current Report with The United States Securities and Exchange Commission on July 8, 2005, with additional information about the transaction.
On July 1, 2005, Salomon began to perform subadvisory services under a Subadvisory Agreement between TAMIC and Salomon for MAT, HYBT and MMP.
Also effective July 1, 2005, PFPC Inc. replaced CTB as transfer agent for the Funds; and State Street Bank and Trust Company replaced SBFM as sub-administrator for the Funds.
9. Change in Independent Registered Public Accounting Firm
KPMG LLP was previously the independent registered public accounting firm for the Funds. In connection with the transaction described in Note 8, the decision to change the independent registered public accounting firm was approved by the Audit Committee and by the Board of Trustees, resulting in Deloitte and Touche LLP’s appointment as independent registered public accounting firm.
The reports on the financial statements of the Funds audited by KPMG LLP through the year ended December 31, 2004 did not contain an adverse opinion or disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principles. There were no disagreements between the Funds and KPMG LLP on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedures.
59
60
61
62
Example
As a shareholder of the Funds, you may incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
This example is based on an investment of $1,000 invested on January 1, 2005 and held for the six months ended June 30, 2005, unless otherwise noted.
Actual Expenses
The table below titled “Based on Actual Total Return” provides information about actual account values and actual expenses. You may use the information provided in this table, together with the amount you invested, to estimate the expenses that you paid over the period. To estimate the expenses you paid on your account, divide your ending account value by $1,000 (for example, an $8,600 ending account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During the Period”.
Expenses | ||||||||||||||||||||
Beginning | Ending | Annualized | Paid | |||||||||||||||||
Actual Total | Account | Account | Expense | During the | ||||||||||||||||
Return(2) | Value | Value | Ratio | Period(3) | ||||||||||||||||
U.S. Government Securities Portfolio | 5.51 | % | $ | 1,000.00 | $ | 1,055.10 | 0.43 | % | $ | 2.19 | ||||||||||
Pioneer Fund Portfolio | (1.16 | ) | 1,000.00 | 988.40 | 1.01 | 4.98 | ||||||||||||||
Pioneer Mid Cap Value Portfolio(4) | 6.20 | 1,000.00 | 1,062.00 | 1.00 | 1.69 | |||||||||||||||
(1) | For the six months ended June 30, 2005. |
(2) | Assumes reinvestment of dividends and capital gain distributions, if any, at net asset value. Total return is not annualized, as it may not be representative of the total return for the year. Total returns do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the total returns. Performance figures may reflect fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of fee waivers and/or expense reimbursements, the total return would have been lower. |
(3) | Expenses (net of any fee waiver and/or expense reimbursements) are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal period, then divided by 365. |
(4) | From the period May 2, 2005 (inception date) to June 30, 2005. |
63
Hypothetical Example for Comparison Purposes
The table below titled “Based on Hypothetical Total Return” provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio and an assumed rate of return of 5.00% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use the information provided in this table to compare the ongoing costs of investing in the Fund and other funds. To do so, compare the 5.00% hypothetical example relating to the Fund with the 5.00% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table below are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
Hypothetical | Expenses | |||||||||||||||||||
Annualized | Beginning | Ending | Annualized | Paid | ||||||||||||||||
Total | Account | Account | Expense | During the | ||||||||||||||||
Return | Value | Value | Ratio | Period(2) | ||||||||||||||||
U.S. Government Securities Portfolio | 5.00 | % | $ | 1,000.00 | $ | 1,022.66 | 0.43 | % | $ | 2.16 | ||||||||||
Pioneer Fund Portfolio | 5.00 | 1,000.00 | 1,019.79 | 1.01 | 5.06 | |||||||||||||||
Pioneer Mid Cap Value Portfolio(3) | 5.00 | 1,000.00 | 1,006.58 | 1.00 | 1.65 | |||||||||||||||
(1) | For the six months ended June 30, 2005. |
(2) | Expenses (net of any fee waiver and/or expense reimbursements) are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal period, then divided by 365. |
(3) | From the period May 2, 2005 (inception date) to June 30, 2005. |
64
Schedules of Investments (unaudited) | June 30, 2005 |
FACE | |||||||||
AMOUNT | SECURITY | VALUE | |||||||
MORTGAGE-BACKED SECURITIES — 38.4% | |||||||||
FHLMC — 3.3% | |||||||||
FHLMC: | |||||||||
$ | 217,076 | 4.000% due 5/1/19 (a) | $ | 212,421 | |||||
3,402,597 | 5.000% due 8/1/19 (a) | 3,443,680 | |||||||
44,903 | 8.000% due 9/1/30 (a) | 48,368 | |||||||
458,189 | 7.500% due 5/1/32 (a) | 490,754 | |||||||
4,440,770 | 4.500% due 4/1/33-4/1/35 (a) | 4,345,924 | |||||||
8,541,147 | |||||||||
FNMA — 31.0% | |||||||||
FNMA: | |||||||||
3,948,653 | 4.000% due 8/1/13-5/1/33 (a) | 3,880,742 | |||||||
358,199 | 7.500% due 2/1/16-11/1/29 (a) | 380,852 | |||||||
5,539,233 | 4.500% due 5/1/19-9/1/19 (a) | 5,520,085 | |||||||
1,476,494 | 4.000% due 7/1/20 (b)(c) | 1,446,503 | |||||||
650,000 | 4.500% due 7/1/20 (b)(c) | 647,156 | |||||||
29,976,378 | 5.000% due 7/1/20 (b)(c) | 30,017,998 | |||||||
5,317,504 | 5.500% due 9/1/24 (a) | 5,428,173 | |||||||
879,612 | 6.500% due 12/1/27-5/1/32 (a) | 912,050 | |||||||
19,748,956 | 5.500% due 7/1/35 (b)(c) | 20,020,504 | |||||||
12,400,000 | 6.000% due 7/1/35 (b)(c) | 12,713,869 | |||||||
80,967,932 | |||||||||
GNMA — 4.1% | |||||||||
GNMA: | |||||||||
254,054 | 9.000% due 8/15/08-9/15/09 (a) | 268,134 | |||||||
57,116 | 8.500% due 3/15/18-5/15/18 | 62,527 | |||||||
10,000,000 | 5.500% due 7/1/35 (b)(c) | 10,212,500 | |||||||
10,543,161 | |||||||||
TOTAL MORTGAGE-BACKED SECURITIES (Cost — $99,600,576) | 100,052,240 | ||||||||
COLLATERALIZED MORTGAGE OBLIGATIONS — 8.3% | |||||||||
2,680,000 | Credit Suisse First Boston Mortgage Securities Corp., Series 2004-C5, Class AJ, 4.889% due 11/15/37 (a) | 2,728,745 | |||||||
360,881 | FHLMC, Series 1103, Class J, 8.500% due 6/15/21 (a) | 361,696 | |||||||
6,350,000 | GE Capital Commercial Mortgage Corp., Series 2005-C1, Class AJ, 4.826% due 6/10/48 | 6,433,730 | |||||||
4,950,000 | JPMorgan Chase Commercial Mortgage Securities Corp., Series 2004-CBX, Class AJ, 4.951% due 1/12/37 | 5,062,096 | |||||||
5,500,000 | LB-UBS Commercial Mortgage Trust, Series 2004-C8, Class AJ, 4.858% due 12/15/39 | 5,591,037 | |||||||
1,530,000 | Morgan Stanley Capital I, Inc., Series 2005-IQ9, Class A4, 4.660% due 7/15/56 | 1,543,034 | |||||||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost — $21,472,761) | 21,720,338 | ||||||||
65
Schedules of Investments (unaudited) (continued) | June 30, 2005 |
FACE | |||||||||
AMOUNT | SECURITY | VALUE | |||||||
U.S. GOVERNMENT & AGENCY OBLIGATIONS — 50.0% | |||||||||
U.S. GOVERNMENT AGENCIES — 14.9% | |||||||||
$ | 3,000,000 | FNMA, 6.250% due 5/15/29 (a) | $ | 3,725,106 | |||||
13,949,000 | Financing Corp. (FICO) Strips, Series 13, zero coupon bond to yield 6.373% due 6/27/11 (a) | 10,963,189 | |||||||
5,542,881 | National Archives Facility Trust, COP, 8.500% due 9/1/19 | 6,842,287 | |||||||
10,000,000 | Resolution Funding Corp. Strips, zero coupon bond to yield 5.030% due 1/15/21 | 5,000,640 | |||||||
9,000,000 | Tennessee Valley Authority, Global Power Bonds 2000, Series G, 7.125% due 5/1/30 | 12,384,891 | |||||||
38,916,113 | |||||||||
U.S. GOVERNMENT OBLIGATIONS — 35.1% | |||||||||
U.S. Treasury Bonds: | |||||||||
8,000,000 | 8.875% due 8/15/17 | 11,629,688 | |||||||
7,500,000 | 6.000% due 2/15/26 | 9,243,165 | |||||||
13,000,000 | 6.375% due 8/15/27 (a) | 16,858,868 | |||||||
1,000,000 | 5.250% due 2/15/29 | 1,144,024 | |||||||
33,650,000 | U.S. Treasury Notes, 4.125% due 5/15/15 (a) | 34,152,125 | |||||||
U.S. Treasury Strips: | |||||||||
7,500,000 | zero coupon bond to yield 4.137% due 11/15/09 | 6,366,615 | |||||||
28,000,000 | zero coupon bond to yield 5.660% due 2/15/27 | 10,995,516 | |||||||
3,000,000 | zero coupon bond to yield 4.920% due 11/15/27 | 1,143,009 | |||||||
91,533,010 | |||||||||
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS (Cost — $118,454,374) | 130,449,123 | ||||||||
TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENT (Cost — $239,527,711) | 252,221,701 | ||||||||
SHORT-TERM INVESTMENT — 31.5% | |||||||||
Repurchase Agreement — 31.5% | |||||||||
82,172,000 | State Street Bank & Trust Co., dated 6/30/05, 2.550% due 7/1/05; Proceeds at maturity — $82,177,821; (Fully collateralized by U.S. Treasury Bonds, 7.125% to 7.250% due 8/15/22; Market value — $83,819,170) (Cost — $82,172,000) | 82,172,000 | |||||||
TOTAL INVESTMENTS — 128.2% (Cost — $321,699,711#) | 334,393,701 | ||||||||
Liabilities in Excess of Other Assets — (28.2)% | (73,507,408 | ) | |||||||
TOTAL NET ASSETS — 100.0% | $ | 260,886,293 | |||||||
(a) | All or a portion of this security is segregated for “to be announced” securities. | |
(b) | This security is traded on a “to-be-announced” basis. | |
(c) | All or a portion of this security is acquired under mortgage dollar roll agreement. | |
# | Aggregate cost for Federal income tax purposes is substantially the same. | |
Abbreviations used in this schedule: COP — Certificate of Participation FHLMC — Federal Home Loan Mortgage Corporation FNMA — Federal National Mortgage Association GNMA — Government National Mortgage Association |
66
Schedules of Investments (unaudited) (continued) | June 30, 2005 |
SHARES | SECURITY | VALUE | ||||
COMMON STOCK — 94.3% | ||||||
CONSUMER DISCRETIONARY — 14.1% | ||||||
Auto Components — 0.9% | ||||||
6,078 | Johnson Controls, Inc. | $ | 342,374 | |||
Automobiles — 0.8% | ||||||
30,225 | Ford Motor Co. | 309,504 | ||||
Media — 6.0% | ||||||
5,423 | Gannett Co., Inc. | 385,738 | ||||
16,390 | McGraw-Hill Cos., Inc. | 725,258 | ||||
4,802 | Omnicom Group, Inc. | 383,488 | ||||
20,881 | Reed Elsevier NV, Sponsored ADR | 582,371 | ||||
5,741 | Walt Disney Co. | 144,558 | ||||
2,221,413 | ||||||
Multi-Line Retail — 4.1% | ||||||
1,597 | Costco Wholesale Corp. | 71,578 | ||||
3,774 | Family Dollar Stores, Inc. | 98,501 | ||||
9,938 | May Department Stores Co. | 399,110 | ||||
2,144 | Nordstrom, Inc. | 145,728 | ||||
14,747 | Target Corp. | 802,384 | ||||
1,517,301 | ||||||
Specialty Retail — 2.0% | ||||||
3,277 | Barnes & Noble, Inc.* | 127,148 | ||||
1,391 | GameStop Corp., Class B Shares* | 41,591 | ||||
6,524 | Gap, Inc. | 128,849 | ||||
1,916 | Home Depot, Inc. | 74,532 | ||||
5,428 | Lowe’s Cos., Inc. | 316,018 | ||||
3,194 | Staples, Inc. | 68,096 | ||||
756,234 | ||||||
Textiles, Apparel & Luxury Goods — 0.3% | ||||||
2,661 | Liz Claiborne, Inc. | 105,801 | ||||
TOTAL CONSUMER DISCRETIONARY | 5,252,627 | |||||
CONSUMER STAPLES — 9.4% | ||||||
Beverages — 1.2% | ||||||
8,300 | PepsiCo, Inc. | 447,619 | ||||
Food & Staples Retailing — 3.0% | ||||||
4,556 | CVS Corp. | 132,443 | ||||
9,376 | Sysco Corp. | 339,317 | ||||
14,523 | Walgreen Co. | 667,913 | ||||
1,139,673 | ||||||
67
Schedules of Investments (unaudited) (continued) | June 30, 2005 |
SHARES | SECURITY | VALUE | ||||
Food Products — 3.7% | ||||||
9,514 | Campbell Soup Co. | $ | 292,746 | |||
5,158 | General Mills, Inc. | 241,343 | ||||
8,105 | H.J. Heinz Co. | 287,079 | ||||
5,916 | Hershey Co. | 367,384 | ||||
857 | Kellogg Co. | 38,085 | ||||
8,483 | Sara Lee Corp. | 168,048 | ||||
1,394,685 | ||||||
Household Products — 1.2% | ||||||
1,586 | Clorox Co. | 88,372 | ||||
7,352 | Colgate-Palmolive Co. | 366,938 | ||||
455,310 | ||||||
Personal Products — 0.3% | ||||||
2,442 | Estee Lauder Cos., Inc., Class A Shares | 95,555 | ||||
TOTAL CONSUMER STAPLES | 3,532,842 | |||||
ENERGY — 8.2% | ||||||
Energy Equipment & Services — 0.5% | ||||||
1,602 | Schlumberger Ltd. | 121,656 | ||||
1,384 | Weatherford International Ltd.* | 80,244 | ||||
201,900 | ||||||
Oil, Gas & Consumable Fuels — 7.7% | ||||||
3,176 | Apache Corp. | 205,170 | ||||
13,634 | Chevron Corp. | 762,413 | ||||
7,218 | ConocoPhillips | 414,963 | ||||
14,373 | ExxonMobil Corp. | 826,016 | ||||
4,699 | Occidental Petroleum Corp. | 361,494 | ||||
6,914 | Pioneer Natural Resources Co. | 290,941 | ||||
2,860,997 | ||||||
TOTAL ENERGY | 3,062,897 | |||||
FINANCIALS — 16.3% | ||||||
Commercial Banks — 7.8% | ||||||
7,771 | Bank of America Corp. | 354,435 | ||||
4,090 | First Horizon National Corp. | 172,598 | ||||
15,507 | National City Corp. | 529,099 | ||||
6,205 | SunTrust Banks, Inc. | 448,249 | ||||
11,931 | U.S. Bancorp | 348,385 | ||||
4,017 | Wachovia Corp. | 199,243 | ||||
8,394 | Washington Mutual, Inc. | 341,552 | ||||
5,749 | Wells Fargo & Co. | 354,024 | ||||
2,390 | Zions Bancorp | 175,737 | ||||
2,923,322 | ||||||
68
Schedules of Investments (unaudited) (continued) | June 30, 2005 |
SHARES | SECURITY | VALUE | ||||
Diversified Financial Services — 5.7% | ||||||
5,790 | American Express Co. | $ | 308,202 | |||
4,552 | Bank of New York Co., Inc. | 131,007 | ||||
5,507 | Federated Investors, Inc., Class B Shares | 165,265 | ||||
6,758 | Merrill Lynch & Co., Inc. | 371,758 | ||||
8,765 | State Street Corp. | 422,911 | ||||
11,344 | T. Rowe Price Group, Inc. | 710,134 | ||||
2,109,277 | ||||||
Insurance — 2.8% | ||||||
1,544 | ACE Ltd. | 69,248 | ||||
3,076 | Axis Capital Holdings Ltd. | 87,051 | ||||
6,379 | Chubb Corp. | 546,106 | ||||
992 | Hartford Financial Services Group, Inc. | 74,182 | ||||
2,075 | Montpelier Re Holdings Ltd. | 71,753 | ||||
3,561 | SAFECO Corp. | 193,505 | ||||
1,041,845 | ||||||
TOTAL FINANCIALS | 6,074,444 | |||||
HEALTH CARE — 11.5% | ||||||
Biotechnology — 0.2% | ||||||
891 | Amgen, Inc.* | 53,870 | ||||
Health Care Equipment & Supplies — 2.8% | ||||||
8,317 | Becton, Dickinson, & Co. | 436,393 | ||||
4,090 | Biomet, Inc. | 141,678 | ||||
3,472 | Guidant Corp. | 233,666 | ||||
2,555 | Medtronic, Inc. | 132,323 | ||||
2,476 | Stryker Corp. | 117,758 | ||||
1,061,818 | ||||||
Pharmaceuticals — 8.5% | ||||||
7,992 | Abbott Laboratories | 391,688 | ||||
6,111 | Barr Pharmaceuticals, Inc.* | 297,850 | ||||
6,068 | Bristol-Myers Squibb Co. | 151,579 | ||||
5,190 | Eli Lilly & Co. | 289,135 | ||||
10,319 | Johnson & Johnson | 670,735 | ||||
7,057 | Merck & Co., Inc. | 217,356 | ||||
9,209 | Mylan Laboratories, Inc. | 177,181 | ||||
6,510 | Novartis AG, ADR | 308,834 | ||||
4,148 | Roche Holding AG, Sponsored ADR | 262,589 | ||||
20,579 | Schering-Plough Corp. | 392,236 | ||||
661 | Teva Pharmaceutical Industries Ltd., Sponsored ADR | 20,583 | ||||
3,179,766 | ||||||
TOTAL HEALTH CARE | 4,295,454 | |||||
69
Schedules of Investments (unaudited) (continued) | June 30, 2005 |
SHARES | SECURITY | VALUE | ||||
INDUSTRIALS — 10.7% | ||||||
Aerospace & Defense — 2.2% | ||||||
3,421 | General Dynamics Corp. | $ | 374,736 | |||
8,605 | United Technologies Corp. | 441,867 | ||||
816,603 | ||||||
Airlines — 0.4% | ||||||
12,377 | Southwest Airlines Co. | 172,412 | ||||
Commercial Services & Supplies — 0.9% | ||||||
5,478 | Automatic Data Processing, Inc. | 229,912 | ||||
2,970 | Fiserv, Inc.* | 127,561 | ||||
357,473 | ||||||
Electrical Equipment — 0.6% | ||||||
2,426 | Emerson Electric Co. | 151,940 | ||||
1,300 | Rockwell Automation, Inc. | 63,323 | ||||
215,263 | ||||||
Industrial Conglomerates — 0.9% | ||||||
9,581 | General Electric Co. | 331,982 | ||||
Machinery — 3.4% | ||||||
3,554 | Caterpillar, Inc. | 338,732 | ||||
7,057 | Deere & Co. | 462,163 | ||||
6,708 | PACCAR, Inc. | 456,144 | ||||
1,257,039 | ||||||
Road & Rail — 2.3% | ||||||
5,753 | Burlington Northern Santa Fe Corp. | 270,851 | ||||
19,105 | Norfolk Southern Corp. | 591,491 | ||||
862,342 | ||||||
TOTAL INDUSTRIALS | 4,013,114 | |||||
INFORMATION TECHNOLOGY — 12.5% | ||||||
Communications Equipment — 2.0% | ||||||
23,915 | Motorola, Inc. | 436,688 | ||||
19,611 | Nokia Oyj, Sponsored ADR | 326,327 | ||||
763,015 | ||||||
Computers & Peripherals — 2.4% | ||||||
9,855 | Dell, Inc.* | 389,371 | ||||
2,981 | EMC Corp.* | 40,870 | ||||
13,599 | Hewlett-Packard Co. | 319,712 | ||||
35,160 | Sun Microsystems, Inc.* | 131,147 | ||||
881,100 | ||||||
Electronic Equipment & Instruments — 0.4% | ||||||
2,960 | Diebold, Inc. | 133,526 | ||||
70
Schedules of Investments (unaudited) (continued) | June 30, 2005 |
SHARES | SECURITY | VALUE | ||||
IT Services — 1.3% | ||||||
3,057 | Computer Sciences Corp.* | $ | 133,591 | |||
3,057 | DST Systems, Inc.* | 143,068 | ||||
5,407 | SunGard Data Systems, Inc.* | 190,164 | ||||
466,823 | ||||||
Office Electronics — 0.9% | ||||||
6,731 | Canon, Inc., Sponsored ADR | 354,252 | ||||
Semiconductors & Semiconductor Equipment — 2.9% | ||||||
9,301 | Applied Materials, Inc. | 150,490 | ||||
2,639 | Freescale Semiconductor, Inc., Class B Shares* | 55,894 | ||||
17,568 | Intel Corp. | 457,822 | ||||
15,561 | Texas Instruments, Inc. | 436,798 | ||||
1,101,004 | ||||||
Software — 2.6% | ||||||
9,954 | Adobe Systems, Inc. | 284,883 | ||||
16,684 | Microsoft Corp. | 414,431 | ||||
7,523 | Symantec Corp.* | 163,550 | ||||
5,176 | VERITAS Software Corp.* | 126,294 | ||||
989,158 | ||||||
TOTAL INFORMATION TECHNOLOGY | 4,688,878 | |||||
MATERIALS — 6.5% | ||||||
Chemicals — 1.9% | ||||||
2,669 | Air Products & Chemicals, Inc. | 160,941 | ||||
5,009 | E.I. du Pont de Nemours & Co. | 215,437 | ||||
3,541 | Ecolab, Inc. | 114,587 | ||||
2,167 | PPG Industries, Inc. | 136,001 | ||||
1,595 | Praxair, Inc. | 74,327 | ||||
701,293 | ||||||
Metals & Mining — 4.2% | ||||||
5,729 | Alcoa, Inc. | 149,699 | ||||
2,746 | BHP Billiton Ltd., Sponsored ADR | 74,966 | ||||
6,584 | Inco Ltd. | 248,546 | ||||
1,304 | Newmont Mining Corp. | 50,895 | ||||
4,254 | Phelps Dodge Corp. | 393,495 | ||||
5,393 | Rio Tinto PLC, Sponsored ADR | 657,514 | ||||
1,575,115 | ||||||
Paper & Forest Products — 0.4% | ||||||
4,880 | MeadWestvaco Corp. | 136,835 | ||||
TOTAL MATERIALS | 2,413,243 | |||||
71
Schedules of Investments (unaudited) (continued) | June 30, 2005 |
SHARES | SECURITY | VALUE | ||||
TELECOMMUNICATION SERVICES — 3.4% | ||||||
Diversified Telecommunication Services — 3.4% | ||||||
2,738 | ALLTEL Corp. | $ | 170,523 | |||
16,566 | BellSouth Corp. | 440,158 | ||||
24,444 | SBC Communications, Inc. | 580,545 | ||||
2,038 | Verizon Communications, Inc. | 70,413 | ||||
TOTAL TELECOMMUNICATION SERVICES | 1,261,639 | |||||
UTILITIES — 1.7% | ||||||
Electric Utilities — 1.2% | ||||||
4,034 | Consolidated Edison, Inc. | 188,953 | ||||
797 | Exelon Corp. | 40,910 | ||||
6,450 | Southern Co. | 223,621 | ||||
453,484 | ||||||
Gas Utilities — 0.3% | ||||||
3,001 | KeySpan Corp. | 122,141 | ||||
Water Utilities — 0.2% | ||||||
1,997 | Aqua America, Inc. | 59,391 | ||||
TOTAL UTILITIES | 635,016 | |||||
TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENT (Cost — $29,031,212) | 35,230,154 | |||||
FACE | ||||||
AMOUNT | ||||||
SHORT-TERM INVESTMENT — 5.7% | ||||||
Repurchase Agreement — 5.7% | ||||||
$2,104,000 | State Street Bank & Trust Co., dated 6/30/05, 2.550% due 7/1/05; Proceeds at maturity — $2,104,149; (Fully collateralized by U.S. Treasury Bond, 7.125% due 2/15/23; Market value — $2,149,443) (Cost — $2,104,000) | 2,104,000 | ||||
TOTAL INVESTMENTS — 100.0% (Cost — $31,135,212#) | 37,334,154 | |||||
Other Assets in Excess of Liabilities — 0.0% | 12,342 | |||||
TOTAL NET ASSETS — 100.0% | $ | 37,346,496 | ||||
* | Non-income producing security. | |
# | Aggregate cost for Federal income tax purposes is substantially the same. | |
Abbreviation used in this schedule: ADR — American Depositary Receipt |
72
Schedules of Investments (unaudited) (continued) | June 30, 2005 |
SHARES | SECURITY | VALUE | ||||||
COMMON STOCK — 94.5% | ||||||||
CONSUMER DISCRETIONARY — 17.1% | ||||||||
Hotels, Restaurants & Leisure — 0.9% | ||||||||
1,280 | Ruby Tuesday, Inc. | $ | 33,152 | |||||
Household Durables — 2.3% | ||||||||
850 | American Greetings Corp., Class A Shares | 22,525 | ||||||
530 | Whirlpool Corp. | 37,158 | ||||||
750 | Yankee Candle Co., Inc. | 24,075 | ||||||
83,758 | ||||||||
Leisure Equipment & Products — 2.7% | ||||||||
1,490 | Eastman Kodak Co. | 40,006 | ||||||
3,190 | Mattel, Inc. | 58,377 | ||||||
98,383 | ||||||||
Media — 4.2% | ||||||||
1,405 | Entercom Communications Corp.* | 46,773 | ||||||
3,600 | Interpublic Group of Cos., Inc.* | 43,848 | ||||||
1,540 | Regal Entertainment Group, Class A Shares | 29,075 | ||||||
890 | Tribune Co. | 31,310 | ||||||
151,006 | ||||||||
Multi-Line Retail — 1.7% | ||||||||
850 | Federated Department Stores, Inc. | 62,288 | ||||||
Specialty Retail — 4.2% | ||||||||
4,170 | Blockbuster, Inc. | 38,030 | ||||||
2,945 | Foot Locker, Inc. | 80,163 | ||||||
1,060 | Tiffany & Co. | 34,726 | ||||||
152,919 | ||||||||
Textiles, Apparel & Luxury Goods — 1.1% | ||||||||
960 | Liz Claiborne, Inc. | 38,170 | ||||||
TOTAL CONSUMER DISCRETIONARY | 619,676 | |||||||
CONSUMER STAPLES — 4.8% | ||||||||
Beverages — 0.7% | ||||||||
400 | Molson Coors Brewing Co., Class B Shares | 24,800 | ||||||
Food & Staples Retailing — 3.2% | ||||||||
2,020 | BJ’s Wholesale Club, Inc.* | 65,630 | ||||||
1,755 | CVS Corp. | 51,018 | ||||||
116,648 | ||||||||
Food Products — 0.9% | ||||||||
70 | ConAgra Foods, Inc. | 1,621 | ||||||
850 | Dean Foods Co.* | 29,954 | ||||||
31,575 | ||||||||
TOTAL CONSUMER STAPLES | 173,023 | |||||||
73
Schedules of Investments (unaudited) (continued) | June 30, 2005 |
SHARES | SECURITY | VALUE | ||||||
ENERGY — 6.5% | ||||||||
Energy Equipment & Services — 2.3% | ||||||||
625 | ENSCO International, Inc. | $ | 22,344 | |||||
345 | Nabors Industries Ltd.* | 20,914 | ||||||
405 | Transocean, Inc.* | 21,858 | ||||||
340 | Weatherford International Ltd.* | 19,713 | ||||||
84,829 | ||||||||
Oil, Gas & Consumable Fuels — 4.2% | ||||||||
420 | Ashland, Inc.* | 30,185 | ||||||
750 | Devon Energy Corp. | 38,010 | ||||||
630 | Occidental Petroleum Corp. | 48,466 | ||||||
850 | Pioneer Natural Resources Co. | 35,768 | ||||||
152,429 | ||||||||
TOTAL ENERGY | 237,258 | |||||||
FINANCIALS — 17.6% | ||||||||
Commercial Banks — 5.5% | ||||||||
530 | City National Corp. | 38,006 | ||||||
1,830 | Hudson City Bancorp, Inc. | 20,880 | ||||||
880 | KeyCorp | 29,172 | ||||||
750 | Marshall & Ilsley Corp. | 33,338 | ||||||
755 | North Fork Bancorporation, Inc. | 21,208 | ||||||
825 | Sovereign Bancorp, Inc. | 18,431 | ||||||
530 | Zions Bancorporation | 38,971 | ||||||
200,006 | ||||||||
Diversified Financial Services — 5.4% | ||||||||
1,180 | A.G. Edwards, Inc. | 53,277 | ||||||
1,950 | Federated Investors, Inc., Class B Shares | 58,519 | ||||||
1,200 | Investment Technology Group, Inc.* | 25,224 | ||||||
3,230 | Providian Financial Corp.* | 56,945 | ||||||
193,965 | ||||||||
Insurance — 6.7% | ||||||||
735 | Assurant, Inc. | 26,534 | ||||||
1,180 | Platinum Underwriters Holdings Ltd. | 37,548 | ||||||
630 | SAFECO Corp. | 34,234 | ||||||
2,450 | UnumProvident Corp. | 44,884 | ||||||
100 | White Mountains Insurance Group Ltd. | 63,090 | ||||||
1,120 | Willis Group Holdings Ltd. | 36,646 | ||||||
242,936 | ||||||||
TOTAL FINANCIALS | 636,907 | |||||||
74
Schedules of Investments (unaudited) (continued) | June 30, 2005 |
SHARES | SECURITY | VALUE | ||||||
HEALTH CARE — 9.8% | ||||||||
Health Care Equipment & Supplies — 1.0% | ||||||||
1,375 | Boston Scientific Corp.* | $ | 37,125 | |||||
Health Care Providers & Services — 5.4% | ||||||||
415 | CIGNA Corp. | 44,417 | ||||||
430 | Laboratory Corp. of America Holdings* | 21,457 | ||||||
530 | McKesson Corp. | 23,739 | ||||||
4,260 | Tenet Healthcare Corp.* | 52,142 | ||||||
975 | Triad Hospitals, Inc.* | 53,274 | ||||||
195,029 | ||||||||
Pharmaceuticals — 3.4% | ||||||||
2,770 | IVAX Corp.* | 59,555 | ||||||
1,155 | Mylan Laboratories, Inc. | 22,222 | ||||||
670 | Par Pharmaceutical Cos., Inc.* | 21,313 | ||||||
1,400 | Perrigo Co. | 19,516 | ||||||
122,606 | ||||||||
TOTAL HEALTH CARE | 354,760 | |||||||
INDUSTRIALS — 13.5% | ||||||||
Airlines — 0.5% | ||||||||
1,280 | Southwest Airlines Co. | 17,830 | ||||||
Building Products — 1.0% | ||||||||
925 | American Standard Cos., Inc. | 38,776 | ||||||
Commercial Services & Supplies — 6.6% | ||||||||
2,800 | BISYS Group, Inc.* | 41,832 | ||||||
530 | Dun & Bradstreet Corp.* | 32,675 | ||||||
765 | H&R Block, Inc. | 44,638 | ||||||
1,595 | R.R. Donnelley & Sons Co. | 55,043 | ||||||
1,810 | Republic Services, Inc. | 65,178 | ||||||
239,366 | ||||||||
Industrial Conglomerates — 1.8% | ||||||||
2,900 | Safeway, Inc. | 65,511 | ||||||
Machinery — 1.9% | ||||||||
1,110 | Flowserve Corp.* | 33,589 | ||||||
370 | ITT Industries, Inc. | 36,123 | ||||||
69,712 | ||||||||
Road & Rail — 0.7% | ||||||||
430 | Canadian National Railway Co. | 24,790 | ||||||
Trading Companies & Distributors — 1.0% | ||||||||
655 | W. W. Grainger, Inc. | 35,887 | ||||||
TOTAL INDUSTRIALS | 491,872 | |||||||
75
Schedules of Investments (unaudited) (continued) | June 30, 2005 |
SHARES | SECURITY | VALUE | ||||||
INFORMATION TECHNOLOGY — 8.1% | ||||||||
Communications Equipment — 1.3% | ||||||||
775 | Scientific-Atlanta, Inc. | $ | 25,784 | |||||
2,550 | Tellabs, Inc.* | 22,185 | ||||||
47,969 | ||||||||
Computers & Peripherals — 2.4% | ||||||||
1,180 | Imation Corp. | 45,772 | ||||||
1,175 | Storage Technology Corp.* | 42,641 | ||||||
88,413 | ||||||||
Electronic Equipment & Instruments — 1.0% | ||||||||
3,475 | Symbol Technologies, Inc. | 34,298 | ||||||
Internet Software & Services — 1.5% | ||||||||
2,240 | IAC/InterActiveCorp* | 53,872 | ||||||
IT Services — 0.5% | ||||||||
2,650 | Unisys Corp.* | 16,775 | ||||||
Software — 1.4% | ||||||||
960 | Symantec Corp.* | 20,870 | ||||||
1,280 | VERITAS Software Corp.* | 31,232 | ||||||
52,102 | ||||||||
TOTAL INFORMATION TECHNOLOGY | 293,429 | |||||||
MATERIALS — 7.0% | ||||||||
Chemicals — 3.0% | ||||||||
900 | Air Products & Chemicals, Inc. | 54,270 | ||||||
850 | PPG Industries, Inc. | 53,346 | ||||||
107,616 | ||||||||
Containers & Packaging — 1.5% | ||||||||
1,550 | Ball Corp. | 55,738 | ||||||
Metals & Mining — 1.3% | ||||||||
750 | Freeport-McMoRan Copper & Gold, Inc., Class B Shares | 28,080 | ||||||
210 | Phelps Dodge Corp. | 19,425 | ||||||
47,505 | ||||||||
Paper & Forest Products — 1.2% | ||||||||
1,490 | MeadWestvaco Corp. | 41,780 | ||||||
TOTAL MATERIALS | 252,639 | |||||||
TELECOMMUNICATION SERVICES — 1.7% | ||||||||
Diversified Telecommunication Services — 1.7% | ||||||||
1,440 | CenturyTel, Inc. | 49,867 | ||||||
2,700 | Cincinnati Bell, Inc.* | 11,610 | ||||||
TOTAL TELECOMMUNICATION SERVICES | 61,477 | |||||||
76
Schedules of Investments (unaudited) (continued) | June 30, 2005 |
SHARES | SECURITY | VALUE | ||||||
UTILITIES — 8.4% | ||||||||
Electric Utilities — 6.2% | ||||||||
705 | Edison International | $ | 28,588 | |||||
530 | Entergy Corp. | 40,041 | ||||||
490 | NRG Energy, Inc.* | 18,424 | ||||||
1,270 | NSTAR | 39,154 | ||||||
1,280 | PG&E Corp. | 48,051 | ||||||
4,100 | Reliant Energy, Inc.* | 50,758 | ||||||
225,016 | ||||||||
Gas Utilities — 0.4% | ||||||||
530 | Atmos Energy Corp. | 15,264 | ||||||
Independent Power Producers & Energy Traders — 1.8% | ||||||||
750 | Constellation Energy Group, Inc. | 43,268 | ||||||
270 | TXU Corp. | 22,434 | ||||||
65,702 | ||||||||
TOTAL UTILITIES | 305,982 | |||||||
TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENT (Cost — $3,243,557) | 3,427,023 | |||||||
FACE | ||||||||
AMOUNT | ||||||||
SHORT-TERM INVESTMENT — 6.0% | ||||||||
Repurchase Agreement — 6.0% | ||||||||
$ | 218,000 | State Street Bank & Trust Co., dated 6/30/05, 2.550% due 7/1/05; Proceeds at maturity — $218,015; (Fully collateralized by U.S. Treasury Bonds, 7.125% due 2/15/23; Market value — $226,619) (Cost — $218,000) | 218,000 | |||||
TOTAL INVESTMENTS — 100.5% (Cost — $3,461,557#) | 3,645,023 | |||||||
Liabilities in Excess of Other Assets — (0.5)% | (19,541 | ) | ||||||
TOTAL NET ASSETS — 100.0% | $ | 3,625,482 | ||||||
* | Non-income producing security. |
# | Aggregate cost for Federal income tax purposes is substantially the same. |
77
Statements of Assets and Liabilities (unaudited) | June 30, 2005 |
Pioneer | |||||||||||||
U.S. Government | Pioneer | Mid Cap | |||||||||||
Securities | Fund | Value | |||||||||||
Portfolio | Portfolio | Portfolio | |||||||||||
ASSETS: | |||||||||||||
Investments, at cost | $ | 239,527,711 | $ | 29,031,212 | $ | 3,243,557 | |||||||
Short-term investment, at cost | 82,172,000 | 2,104,000 | 218,000 | ||||||||||
Investments, at value | $ | 252,221,701 | $ | 35,230,154 | $ | 3,427,023 | |||||||
Short-term investment, at value | 82,172,000 | 2,104,000 | 218,000 | ||||||||||
Dividends and interest receivable | 1,576,206 | 43,338 | 3,276 | ||||||||||
Receivable for Fund shares sold | 316,149 | 28,722 | 2,604 | ||||||||||
Receivable for securities sold | — | — | 46,001 | ||||||||||
Prepaid expenses | 724 | 83 | — | ||||||||||
Receivable from investment adviser | — | — | 5,698 | ||||||||||
Total Assets | 336,286,780 | 37,406,297 | 3,702,602 | ||||||||||
LIABILITIES: | |||||||||||||
Payable for securities purchased | 75,039,609 | — | 61,037 | ||||||||||
Payable for Fund shares repurchased | 146,033 | — | — | ||||||||||
Deferred dollar roll income | 75,929 | — | — | ||||||||||
Investment advisory fees payable | 68,417 | 22,743 | — | ||||||||||
Administration fees payable | 12,702 | 1,819 | 170 | ||||||||||
Audit fees | 12,315 | 14,834 | 4,898 | ||||||||||
Due to custodian | 9,898 | 9,731 | 1,362 | ||||||||||
Trustees’ fees payable | — | — | 1,633 | ||||||||||
Accrued expenses | 35,584 | 10,674 | 8,020 | ||||||||||
Total Liabilities | 75,400,487 | 59,801 | 77,120 | ||||||||||
Total Net Assets | $ | 260,886,293 | $ | 37,346,496 | $ | 3,625,482 | |||||||
NET ASSETS: | |||||||||||||
Paid-in capital (Note 4) | $ | 241,602,176 | $ | 44,831,128 | $ | 3,430,778 | |||||||
Undistributed net investment income | 5,044,645 | 173,512 | 3,837 | ||||||||||
Accumulated net realized gain (loss) on investment transactions | 1,545,482 | (13,857,086 | ) | 7,401 | |||||||||
Net unrealized appreciation on investments | 12,693,990 | 6,198,942 | 183,466 | ||||||||||
Total Net Assets | $ | 260,886,293 | $ | 37,346,496 | $ | 3,625,482 | |||||||
Shares Outstanding | 19,414,041 | 3,141,865 | 341,468 | ||||||||||
Net Asset Value | $13.44 | $11.89 | $10.62 | ||||||||||
78
Statements of Operations (unaudited) | For the Six Months or Period Ended June 30, 2005 |
Pioneer | |||||||||||||
U.S. Government | Pioneer | Mid Cap | |||||||||||
Securities | Fund | Value | |||||||||||
Portfolio | Portfolio | Portfolio* | |||||||||||
INVESTMENT INCOME: | |||||||||||||
Interest | $ | 5,554,018 | $ | 15,609 | $ | 1,385 | |||||||
Dividends | — | 333,800 | 7,868 | ||||||||||
Less: Foreign taxes withheld | — | (5,586 | ) | (13 | ) | ||||||||
Total Investment Income | 5,554,018 | 343,823 | 9,240 | ||||||||||
EXPENSES: | |||||||||||||
Investment advisory fees (Note 2) | 386,184 | 125,852 | 4,052 | ||||||||||
Administration fees (Note 2) | 71,671 | 10,068 | 324 | ||||||||||
Legal fees | 14,180 | 9,995 | 3,698 | ||||||||||
Custody | 13,976 | 8,470 | 2,939 | ||||||||||
Audit and tax | 10,215 | 9,743 | 4,898 | ||||||||||
Shareholder reports | 8,412 | 1,518 | 2,939 | ||||||||||
Trustees’ fees | 2,300 | 4,060 | 1,633 | ||||||||||
Insurance | 1,507 | 230 | — | ||||||||||
Miscellaneous expenses | 920 | 375 | 612 | ||||||||||
Total Expenses | 509,365 | 170,311 | 21,095 | ||||||||||
Less: Investment advisory fee waiver/expense reimbursement (Note 2) | — | — | (15,692 | ) | |||||||||
Net Expenses | 509,365 | 170,311 | 5,403 | ||||||||||
Net Investment Income | 5,044,653 | 173,512 | 3,837 | ||||||||||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTES 1 AND 3): | |||||||||||||
Net Realized Gain | 1,545,642 | 188,409 | 7,401 | ||||||||||
Change in Net Unrealized Appreciation/ Depreciation | 6,371,311 | (745,286 | ) | 183,466 | |||||||||
Net Gain (Loss) on Investments | 7,916,953 | (556,877 | ) | 190,867 | |||||||||
Increase (Decrease) in Net Assets From Operations | $ | 12,961,606 | $ | (383,365 | ) | $ | 194,704 | ||||||
* For the period May 2, 2005 (inception date) to June 30, 2005.
79
U.S. GOVERNMENT SECURITIES PORTFOLIO | 2005 | 2004 | |||||||
OPERATIONS: | |||||||||
Net investment income | $ | 5,044,653 | $ | 9,421,050 | |||||
Net realized gain | 1,545,642 | 409,444 | |||||||
Change in net unrealized appreciation/depreciation | 6,371,311 | 3,571,197 | |||||||
Increase in Net Assets From Operations | 12,961,606 | 13,401,691 | |||||||
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 1): | |||||||||
Net investment income | (194 | ) | (9,496,007 | ) | |||||
Net realized gains | (239,219 | ) | (413,800 | ) | |||||
Decrease in Net Assets From Distributions to Shareholders | (239,413 | ) | (9,909,807 | ) | |||||
FUND SHARE TRANSACTIONS (NOTE 4): | |||||||||
Net proceeds from sale of shares | 44,231,173 | 33,869,285 | |||||||
Reinvestment of distributions | 239,413 | 9,909,807 | |||||||
Cost of shares repurchased | (12,627,405 | ) | (40,832,013 | ) | |||||
Increase in Net Assets From Fund Share Transactions | 31,843,181 | 2,947,079 | |||||||
Increase in Net Assets | 44,565,374 | 6,438,963 | |||||||
NET ASSETS: | |||||||||
Beginning of period | 216,320,919 | 209,881,956 | |||||||
End of period* | $ | 260,886,293 | $ | 216,320,919 | |||||
* Includes undistributed net investment income of: | $5,044,645 | $186 | |||||||
80
PIONEER FUND PORTFOLIO | 2005 | 2004 | |||||||
OPERATIONS: | |||||||||
Net investment income | $ | 173,512 | $ | 284,182 | |||||
Net realized gain | 188,409 | 655,645 | |||||||
Change in net unrealized appreciation/depreciation | (745,286 | ) | 2,315,841 | ||||||
Increase (Decrease) in Net Assets From Operations | (383,365 | ) | 3,255,668 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 1): | |||||||||
Net investment income | — | (285,115 | ) | ||||||
Decrease in Net Assets From Distributions to Shareholders | — | (285,115 | ) | ||||||
FUND SHARE TRANSACTIONS (NOTE 4): | |||||||||
Net proceeds from sale of shares | 6,286,251 | 5,455,069 | |||||||
Reinvestment of distributions | — | 285,115 | |||||||
Cost of shares repurchased | (1,189,645 | ) | (3,478,475 | ) | |||||
Increase in Net Assets From Fund Share Transactions | 5,096,606 | 2,261,709 | |||||||
Increase in Net Assets | 4,713,241 | 5,232,262 | |||||||
NET ASSETS: | |||||||||
Beginning of period | 32,633,255 | 27,400,993 | |||||||
End of period* | $ | 37,346,496 | $ | 32,633,255 | |||||
* Includes undistributed net investment income of: | $ | 173,512 | — | ||||||
81
PIONEER MID CAP VALUE PORTFOLIO | 2005 | ||||
OPERATIONS: | |||||
Net investment income | $ | 3,837 | |||
Net realized gain | 7,401 | ||||
Change in net unrealized appreciation/depreciation | 183,466 | ||||
Increase in Net Assets From Operations | 194,704 | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | |||||
Net proceeds from sale of shares | 3,458,829 | ||||
Cost of shares repurchased | (28,051 | ) | |||
Increase in Net Assets From Fund Share Transactions | 3,430,778 | ||||
Increase in Net Assets | 3,625,482 | ||||
NET ASSETS: | |||||
Beginning of period | — | ||||
End of period* | $ | 3,625,482 | |||
* Includes undistributed net investment income of: | $3,837 | ||||
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U.S. GOVERNMENT SECURITIES | |||||||||||||||||||||||||
PORTFOLIO | 2005(1)(2) | 2004 | 2003(2) | 2002(2) | 2001(2) | 2000(2) | |||||||||||||||||||
Net Asset Value, Beginning of Period | $12.75 | $12.59 | $13.14 | $12.44 | $12.22 | $11.30 | |||||||||||||||||||
Income (Loss) From Operations: | |||||||||||||||||||||||||
Net investment income | 0.29 | 0.58 | 0.56 | 0.63 | 0.69 | 0.74 | |||||||||||||||||||
Net realized and unrealized gain (loss) | 0.41 | 0.18 | (0.20 | ) | 1.05 | 0.02 | 0.84 | ||||||||||||||||||
Total Income From Operations | 0.70 | 0.76 | 0.36 | 1.68 | 0.71 | 1.58 | |||||||||||||||||||
Less Distributions From: | |||||||||||||||||||||||||
Net investment income | (0.00 | )(3) | (0.58 | ) | (0.68 | ) | (0.89 | ) | (0.49 | ) | (0.66 | ) | |||||||||||||
Net realized gains(4) | (0.01 | ) | (0.02 | ) | (0.23 | ) | (0.09 | ) | — | — | |||||||||||||||
Total Distributions | (0.01 | ) | (0.60 | ) | (0.91 | ) | (0.98 | ) | (0.49 | ) | (0.66 | ) | |||||||||||||
Net Asset Value, End of Period | $13.44 | $12.75 | $12.59 | $13.14 | $12.44 | $12.22 | |||||||||||||||||||
Total Return(5) | 5.51 | % | 6.13 | % | 2.75 | % | 13.63 | % | 5.82 | % | 14.53 | % | |||||||||||||
Net Assets, End of Period (000s) | $260,886 | $216,321 | $209,882 | $243,871 | $126,491 | $90,970 | |||||||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||
Gross expenses | 0.43 | %(6) | 0.43 | % | 0.42 | % | 0.44 | % | 0.45 | % | 0.48 | % | |||||||||||||
Net expenses(7) | 0.43 | (6) | 0.42 | (8) | 0.42 | 0.44 | 0.45 | 0.48 | |||||||||||||||||
Net investment income | 4.22 | (6) | 4.47 | 4.23 | 4.82 | 5.55 | 6.46 | ||||||||||||||||||
Portfolio Turnover Rate | 75 | %(9) | 150 | % (9) | 143 | %(9) | 165 | % | 327 | % | 289 | % | |||||||||||||
(1) | For the six months ended June 30, 2005 (unaudited). |
(2) | Per share amounts have been calculated using the average shares method. |
(3) | Amount is less than $0.01. |
(4) | Distributions from net realized gains include both net realized short-term and long-term capital gains. |
(5) | Performance figures may reflect fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of fee waivers and/or expense reimbursements, the total return would be lower. Total returns do not reflect expenses associated with the separate accounts such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown. Total returns for periods of less than one year are not annualized. |
(6) | Annualized. |
(7) | As a result of an expense limitation, the ratio of expenses to average net assets of the Fund will not exceed 1.25%. |
(8) | The sub-administrator waived a portion of its fees. |
(9) | Excluding mortgage dollar roll transactions. If mortgage dollar roll transactions had been included, the portfolio turnover rate would have been 185%, 276% and 168% for the six months ended June 30, 2005, and the years ended December 31, 2004 and 2003, respectively. |
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PIONEER FUND PORTFOLIO | 2005(1) | 2004(2) | 2003(2) | 2002(2) | 2001(2) | 2000(2) | |||||||||||||||||||
Net Asset Value, Beginning of Period | $12.03 | $10.92 | $8.94 | $13.87 | $19.22 | $15.91 | |||||||||||||||||||
Income (Loss) From Operations: | |||||||||||||||||||||||||
Net investment income | 0.06 | 0.11 | 0.15 | 0.32 | 0.37 | 0.43 | |||||||||||||||||||
Net realized and unrealized gain (loss) | (0.20 | ) | 1.11 | 1.98 | (4.47 | ) | (4.65 | ) | 3.36 | ||||||||||||||||
Total Income (Loss) From Operations | (0.14 | ) | 1.22 | 2.13 | (4.15 | ) | (4.28 | ) | 3.79 | ||||||||||||||||
Less Distributions From: | |||||||||||||||||||||||||
Net investment income | — | (0.11 | ) | (0.15 | ) | (0.78 | ) | (0.30 | ) | (0.45 | ) | ||||||||||||||
Net realized gains(3) | — | — | — | — | (0.77 | ) | (0.03 | ) | |||||||||||||||||
Total Distributions | — | (0.11 | ) | (0.15 | ) | (0.78 | ) | (1.07 | ) | (0.48 | ) | ||||||||||||||
Net Asset Value, End of Period | $11.89 | $12.03 | $10.92 | $8.94 | $13.87 | $19.22 | |||||||||||||||||||
Total Return(4) | (1.16 | )% | 11.13 | % | 23.78 | % | (30.21 | )% | (23.00 | )% | 24.26 | % | |||||||||||||
Net Assets, End of Period (000s) | $37,346 | $32,633 | $27,401 | $21,561 | $39,433 | $48,456 | |||||||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||
Gross expenses | 1.01 | %(5) | 1.12 | % | 1.12 | % | 0.90 | % | 0.81 | % | 0.84 | % | |||||||||||||
Net expenses(6) | 1.01 | (5) | 0.99 | (7) | 1.12 | 0.90 | 0.81 | 0.84 | |||||||||||||||||
Net investment income | 1.03 | (5) | 0.98 | 1.56 | 2.88 | 2.18 | 2.47 | ||||||||||||||||||
Portfolio Turnover Rate | 9 | % | 19 | % | 98 | % | 25 | % | 20 | % | 22 | % | |||||||||||||
(1) | For the six months ended June 30, 2005 (unaudited). |
(2) | Per share amounts have been calculated using the monthly average shares method. |
(3) | Distributions from net realized gains include both net realized short-term and long-term capital gains. |
(4) | Performance figures may reflect fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of fee waivers and/or expense reimbursements, the total return would be lower. Total returns do not reflect expenses associated with the separate accounts such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown. Total returns for periods of less than one year are not annualized. |
(5) | Annualized. |
(6) | As a result of an expense limitation, the ratio of expenses to average net assets of the Fund will not exceed 1.25%. |
(7) | The sub-administrator waived a portion of its fees. |
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PIONEER MID CAP VALUE PORTFOLIO(1) | 2005 | ||||
Net Asset Value, Beginning of Period | $10.00 | ||||
Income From Operations: | |||||
Net investment income | 0.01 | ||||
Net realized and unrealized gain | 0.61 | ||||
Total Income From Operations | 0.62 | ||||
Net Asset Value, End of Period | $10.62 | ||||
Total Return(2) | 6.20 | % | |||
Net Assets, End of Period (000s) | $3,625 | ||||
Ratios to Average Net Assets(3): | |||||
Gross expenses | 3.90 | % | |||
Net expenses(4)(5) | 1.00 | ||||
Net investment income | 0.71 | ||||
Portfolio Turnover Rate | 4 | % | |||
(1) | For the period May 2, 2005 (inception date) to June 30, 2005 (unaudited). |
(2) | Performance figures may reflect fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of fee waivers and/or expense reimbursements, the total return would be lower. Total returns do not reflect expenses associated with the separate accounts such as administrative fees, account charges and surrender charges which, if reflected, would reduce the total return for all periods shown. Total returns for periods of less than one year are not annualized. |
(3) | Annualized. |
(4) | The investment adviser waived its fees and reimbursed certain expenses. |
(5) | As a result of an expense limitation, the ratio of expenses to average net assets of the Fund will not exceed 1.00%. (Expense limitation is contractual through May 1, 2006.) |
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1. Organization and Significant Accounting Policies
The U.S. Government Securities Portfolio (“USGS”), Pioneer Fund Portfolio (“PFP”) and Pioneer Mid Cap Value Portfolio (“PMCV”) (collectively, “Funds”) are separate diversified investment funds of The Travelers Series Trust (“Trust”). The Trust is a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. Shares of the Trust are offered exclusively for use with certain variable annuity and variable life insurance contracts offered through the separate accounts of various affiliated life insurance companies.
The following are significant accounting policies consistently followed by the Funds. These policies are in conformity with U.S. generally accepted accounting principles (“GAAP”). Estimates and assumptions are required to be made regarding assets, liabilities and changes in net assets resulting from operations when financial statements are prepared. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ.
(a) Investment Valuation. Equity securities for which market quotations are available are valued at the last sale price or official closing price on the primary market or exchange on which they trade. Debt securities are valued at the mean between the bid and asked prices provided by an independent pricing service that are based on transactions in debt obligations, quotations from bond dealers, market transactions in comparable securities and various relationships between securities. When prices are not readily available, or are determined not to reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before the Funds calculate their net asset value, the Funds may value these investments at fair value as determined in accordance with the procedures approved by the Funds’ Board of Trustees. Short-term obligations with maturities of 60 days or less are valued at amortized cost, which approximates market value.
(b) Repurchase Agreements. When entering into repurchase agreements, it is the Funds’ policy that their custodian or a third party custodian takes possession of the underlying collateral securities, the market value of which at least equals the principal amount of the repurchase transaction, including accrued interest. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market to ensure the adequacy of the collateral. If the seller defaults and the market value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Funds may be delayed or limited.
(c) Securities Traded on a To-Be-Announced Basis. The Funds may trade securities on a to-be-announced (“TBA”) basis. In a TBA transaction, the Funds commit to purchasing or selling securities, which have not yet been issued by the issuer and for which specific information is not known, such as the face amount and maturity date and the underlying pool of investments in U.S. government agency mortgage pass-through transactions. Securities purchased on a TBA basis are not settled until they are delivered to the Funds, normally 15 to 45 days later. Beginning on the date the Funds enter into a TBA transaction, cash, U.S. government securities or other liquid high-grade debt obligations are segregated in an amount equal in value to the purchase price of the TBA security. These transactions are subject to market fluctuations and their current value is determined in the same manner as for other securities.
(d) Mortgage Dollar Rolls. The Funds may enter into dollar rolls in which the Funds sell mortgage-backed securities for delivery in the current month and simultaneously contract to repurchase substantially similar (same type, coupon and maturity) securities to settle on a specified future date. During the roll period, the Funds forgo principal and interest paid on the securities. The Funds are compensated by a fee paid by the counterparty, often in the form of a drop in the repurchase price of the securities. Dollar rolls are accounted for as financing arrangements; the fee is accrued into interest income ratably over the term of the dollar roll and any gain or loss on the roll is deferred and realized upon disposition of the rolled security.
The risk of entering into a mortgage dollar roll is that the market value of the securities the Funds are obligated to repurchase under the agreement may decline below the repurchase price. In the event the buyer of securities under a mortgage dollar roll files for bankruptcy or becomes insolvent, the Funds’ use of proceeds of the dollar roll may be restricted pending a determination by the other party, or its trustee or receiver, whether to enforce the Funds’ obligation to repurchase the securities.
(e) Security Transactions and Investment Income. Security transactions are accounted for on a trade date basis. Interest income, adjusted for amortization of premium and accretion of discount, is recorded on the accrual basis. Dividend
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income is recorded on the ex-dividend date. Foreign dividend income is recorded on the ex-dividend date or as soon as practical after the Funds determine the existence of a dividend declaration after exercising reasonable due diligence. The cost of investments sold is determined by use of the specific identification method.
(f) Distributions to Shareholders. Distributions from net investment income and net realized gains, if any, are declared at least annually. Distributions to shareholders of the Funds are recorded on the ex-dividend date and are determined in accordance with income tax regulations, which may differ from GAAP.
(g) Federal and Other Taxes. It is the Funds’ policy to comply with the federal income and excise tax requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. Accordingly, the Funds intend to distribute substantially all of their taxable income and net realized gains on investments, if any, to shareholders each year. Therefore, no federal income tax provision is required in the Funds’ financial statements. Under the applicable foreign tax laws, a withholding tax may be imposed on interest, dividends and capital gains at various rates.
(h) Reclassification. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share.
2. Investment Advisory Agreement, Administration Agreement and Other Transactions with Affiliates
Travelers Asset Management International Company, (“TAMIC”), an indirect wholly-owned subsidiary of Citigroup Inc. (“Citigroup”), acts as investment adviser to the Funds. USGS pays TAMIC an investment advisory fee calculated at the annual rate of 0.3233% of its average daily net assets. This fee is calculated daily and paid monthly. PFP and PMCV pay TAMIC an investment advisory fee calculated daily and paid monthly at the annual rate of the Fund’s average daily net assets as follows:
Investment | ||||
Average Daily Net Assets | Advisory Fee | |||
First $250 million | 0.750% | |||
Next $250 million | 0.700% | |||
Next $500 million | 0.675% | |||
Next $1 billion | 0.650% | |||
Over $2 billion | 0.600% | |||
TAMIC has entered into a sub-advisory agreement with Pioneer Investment Management, Inc. (“Pioneer”). Pursuant to the sub-advisory agreement, Pioneer is responsible for the day-to-day fund operations and investment decisions for PFP and PMCV and is compensated by TAMIC for such service at the following annual rates:
Sub-Advisory | ||||
Average Daily Net Assets | Fee | |||
First $250 million | 0.375% | |||
Next $250 million | 0.325% | |||
Next $500 million | 0.300% | |||
Next $1 billion | 0.275% | |||
Over $2 billion | 0.225% | |||
The Travelers Insurance Company (“TIC”), another indirect wholly-owned subsidiary of Citigroup, acts as the Funds’ administrator. As compensation for its services, the Funds pay TIC an administration fee calculated at the annual rate of 0.06% of each respective Fund’s average daily net assets. This fee is calculated daily and paid monthly.
TIC has entered into a sub-administrative services agreement with Smith Barney Fund Management LLC (“SBFM”), another indirect wholly-owned subsidiary of Citigroup. TIC pays SBFM, as sub-administrator, a fee calculated at an annual
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rate of 0.02% of the respective average daily net assets of each Fund, plus $30,000 per Fund, subject to a maximum of 0.06% of each respective Fund’s average daily net assets.
During the six months ended June 30, 2005, the Funds had contractual expense limitations in place of 1.25% for USGS and PFP, and 1.00% contractual through May 1, 2006 for PMCV. The expense limitation for USGS is renewed annually and can be terminated at any time by TIC with 60 days’ notice.
For the period ended June 30, 2005, TAMIC waived all of its investment advisory fee in the amount of $4,052 for PMCV. In addition, TAMIC reimbursed a portion of PMCV’s expenses in the amount of $11,640.
Citicorp Trust Bank, fsb. (“CTB”), another subsidiary of Citigroup, acts as the Funds’ transfer agent. For the six months ended June 30, 2005, the Funds did not pay transfer agent fees to CTB.
During the period ended June 30, 2005, Citigroup Global Markets Inc., another wholly-owned subsidiary of Citigroup, and its affiliate received brokerage commissions in the amount of $16 from PMCV.
One Trustee and all officers of the Trust are employees of Citigroup or its affiliates and do not receive compensation from the Trust.
3. Investments
During the period ended June 30, 2005, the aggregate cost of purchases and proceeds from sales of investments (excluding short-term investments) and U.S. Government & Agency Obligations were as follows:
USGS | PFP | PMCV | ||||||||||
Investments | ||||||||||||
Purchases | $ | — | $ | 6,974,696 | $ | 3,370,329 | ||||||
Sales | 10,200,781 | 2,884,308 | 134,172 | |||||||||
U.S. Government & Agency Obligations | ||||||||||||
Purchases | 213,067,711 | — | — | |||||||||
Sales | 161,155,912 | — | — | |||||||||
At June 30, 2005, the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were substantially as follows:
USGS | PFP | PMCV | ||||||||||
Gross unrealized appreciation | $ | 13,127,588 | $ | 6,726,145 | $ | 224,915 | ||||||
Gross unrealized depreciation | (433,598 | ) | (527,203 | ) | (41,449 | ) | ||||||
Net unrealized appreciation | $ | 12,693,990 | $ | 6,198,942 | $ | 183,466 | ||||||
During the six months ended June 30, 2005, USGS entered into mortgage dollar roll transactions in the aggregate amount of $251,629,718. For the six months ended June 30, 2005, USGS recorded interest income of $523,184 related to such transactions. PFP and PMCV did not have any outstanding mortgage dollar rolls.
At June 30, 2005, USGS had outstanding mortgage dollar rolls with a total cost of $74,788,237 for scheduled settlements on July 14, 2005, July 19, 2005 and July 21, 2005.
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4. Shares of Beneficial Interest
The Declaration of Trust authorizes the issuance of an unlimited number of shares of beneficial interest without par value. Transactions in shares of each Fund were as follows:
Six Months Ended | Year Ended | |||||||
June 30, 2005 | December 31, 2004 | |||||||
USGS | ||||||||
Shares sold | 3,406,503 | 2,694,130 | ||||||
Shares issued in reinvestment | 17,800 | 782,509 | ||||||
Shares repurchased | (971,496 | ) | (3,182,023 | ) | ||||
Net Increase | 2,452,807 | 294,616 | ||||||
PFP | ||||||||
Shares sold | 529,138 | 490,843 | ||||||
Shares issued in reinvestment | — | 23,720 | ||||||
Shares repurchased | (100,507 | ) | (309,976 | ) | ||||
Net Increase | 428,631 | 204,587 | ||||||
PMCV† | ||||||||
Shares sold | 344,163 | — | ||||||
Shares repurchased | (2,695 | ) | — | |||||
Net Increase | 341,468 | — | ||||||
† | For the period May 2, 2005 (inception date) to June 30, 2005. |
5. Capital Loss Carryforward
As of December 31, 2004 the Funds had net capital loss carryforwards as follows:
Year of Expiration | SAS | PFP | ||||||
12/31/2009 | $ | 1,710,995 | $ | 389,670 | ||||
12/31/2010 | 8,136,777 | 12,362,910 | ||||||
12/31/2011 | 1,560,614 | 1,284,282 | ||||||
$ | 11,408,386 | $ | 14,036,862 | |||||
These amounts will be available to offset any future taxable capital gains.
6. Additional Information
On May 31, 2005, the U.S. Securities and Exchange Commission (“SEC”) issued an order in connection with the settlement of an administrative proceeding against Smith Barney Fund Management LLC (“SBFM”) and Citigroup Global Markets Inc. (“CGMI”) relating to the appointment of an affiliated transfer agent for the Smith Barney family of mutual funds (the “Funds”), which includes the Funds (“TL&A Funds”).
The SEC order finds that SBFM and CGMI willfully violated Section 206(1) of the Investment Advisers Act of 1940 (“Advisers Act”). Specifically, the order finds that SBFM and CGMI knowingly or recklessly failed to disclose to the boards of the Funds in 1999 when proposing a new transfer agent arrangement with an affiliated transfer agent that First Data Investors Services Group (“First Data”), the Funds’ then-existing transfer agent, had offered to continue as transfer agent and do the same work for substantially less money than before. Additionally, the SEC order finds that Citigroup Asset Management (“CAM”), the Citigroup business unit that includes each Fund’s sub-administrator, SBFM, had entered into a side letter with First Data under which CAM agreed to recommend the appointment of First Data as sub-transfer agent to the affiliated transfer agent in exchange, among other things, for a guarantee by First Data of specified amounts of asset
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management and investment banking fees to CAM and CGMI. The order also finds that SBFM and CGMI willfully violated Section 206(2) of the Advisers Act by virtue of the omissions discussed above and other misrepresentations and omissions in the materials provided to the Funds’ boards, including the failure to make clear that the affiliated transfer agent would earn a high profit for performing limited functions while First Data continued to perform almost all of the transfer agent functions, and the suggestion that the proposed arrangement was in the Funds’ best interests and that no viable alternatives existed. SBFM and CGMI do not admit or deny any wrongdoing or liability. The settlement does not establish wrongdoing or liability for purposes of any other proceeding.
The SEC censured SBFM and CGMI and ordered them to cease and desist from violations of Sections 206(1) and 206(2) of the Advisers Act. The order requires Citigroup to pay $208.1 million, including $109 million in disgorgement of profits, $19.1 million in interest, and a civil money penalty of $80 million. Approximately $24.4 million has already been paid to the Funds, primarily through fee waivers. In addition, Travelers Life & Annuity and CAM reviewed the adequacy and accuracy of the disclosure provided to the TL&A Fund boards at the time the revised transfer agency arrangement was discussed with the boards and concluded that the transfer agency fees paid to CTB, for the period from June 1, 1999 to August 23, 2004, by the TL&A Funds that did not have expense caps in effect should be reimbursed with interest to the TL&A Funds. The reimbursement occurred on November 1, 2004.
The remaining $183.7 million to be paid under the SEC order, including the penalty, has been paid to the U.S. Treasury and will be distributed pursuant to a plan to be prepared by Citigroup and submitted within 90 days of the entry of the order for approval by the SEC. The order also requires that transfer agency fees received from the Funds since December 1, 2004 less certain expenses be placed in escrow and provides that a portion of such fees may be subsequently distributed in accordance with the terms of the order.
The order requires SBFM to recommend a new transfer agent contract to the Fund boards within 180 days of the entry of the order.
At this time, there is no certainty as to how the proceeds of the settlement will be distributed, to whom such distributions will be made, the methodology by which such distributions will be allocated, and when such distributions will be made. Although there can be no assurance, Citigroup does not believe that this matter will have a material adverse effect on the Funds.
7. Other Matters
On June 24, 2005, Citigroup announced that it has signed a definitive agreement under which Citigroup will sell substantially all of its worldwide asset management business to Legg Mason, Inc. (“Legg Mason”).
As part of this transaction, Salomon Brothers Asset Management, Inc. (“Salomon”) the sub-adviser for USGS effective July 1, 2005, currently an indirect wholly owned subsidiary of Citigroup, would become an indirect wholly owned subsidiary of Legg Mason.
The transaction is subject to certain regulatory approvals, as well as other customary conditions to closing. Subject to such approvals and the satisfaction of the other conditions, Citigroup expects the transaction to be completed later this year.
8. Subsequent Events
On July 1, 2005, MetLife, Inc., a Delaware corporation (“MetLife”), acquired all of the outstanding shares of capital stock of certain indirect subsidiaries held by Citigroup, including TIC, The Travelers Life and Annuity Company, a wholly owned subsidiary of TIC and certain other domestic insurance companies of Citigroup and substantially all of Citigroup’s international insurance businesses for $11.8 billion. The sale also included TIC’s affiliated investment adviser, TAMIC, which serves as the investment adviser to the Funds.
TIC filed a Form 8-K Current Report with The United States Securities and Exchange Commission on July 8, 2005, with additional information about the transaction.
On July 1, 2005, Salomon began to perform subadvisory services under a Subadvisory Agreement between TAMIC and Salomon for USGS.
Also effective July 1, 2005, PFPC Inc. replaced CTB as transfer agent for the Funds and State Street Bank and Trust Company replaced SBFM as sub-administrator for the Funds.
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9. Change in Independent Registered Public Accounting Firm
KPMG LLP was previously the independent registered public accounting firm for the Funds. In connection with the transaction described in Note 8, the decision to change the independent registered public accounting firm was approved by the Audit Committee and by the Board of Trustees, resulting in Deloitte and Touche LLP’s appointment as independent registered public accounting firm.
The reports on the financial statements of the Funds audited by KPMG LLP through the year ended December 31, 2004 did not contain an adverse opinion or disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principles. There were no disagreements between the Funds and KPMG LLP on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedures.
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Factors Considered by the Independent Trustees in Approving The Investment Advisory and
The Subadvisory Agreements (unaudited)
Beginning at a telephonic meeting on March 17, 2005 and in person meetings on March 29 and 30, 2005, the Independent Trustees for the Managed Assets Trust, the High Yield Bond Trust, the Capital Appreciation Fund, the Money Market Portfolio and the Travelers Series Trust: U.S. Government Securities Portfolio, the Pioneer Fund Portfolio, and the Pioneer Mid Cap Value Portfolio (together the “Portfolios”) approved the investment advisory Agreements (the “Agreements”) between TAMIC and the Portfolios. In addition, at the in-person meetings on March 29 and 30, 2005 and April 27 and 28, 2005, the Independent Trustees approved investment subadvisory agreements (“Subadvisory Agreements”) between TAMIC and Salomon Brothers Asset Management Inc. (“Salomon”) for the Managed Assets Trust, the High Yield Bond Trust, the Money Market Portfolio and the Travelers Series Trust: U.S. Government Securities Portfolio, between TAMIC and TIMCO for the Managed Assets Trust, between TAMIC and Janus for the Capital Appreciation Fund, and between TAMIC and Pioneer for the Travelers Series Trust: the Pioneer Fund Portfolio. At an in-person meeting on January 19, 2005, and on March 29 and 30, 2005 the Independent Trustees approved the Agreements and the Subadvisory Agreements for the Pioneer Mid Cap Value Portfolio. In voting to approve the Agreements and the Subadvisory Agreements, the Independent Trustees considered whether the approval of the Agreements and the Subadvisory Agreements would be in the best interests of the Portfolios and their shareholders, an evaluation largely based on the nature and quality of the services provided under the Agreements and the Subadvisory Agreements and the overall fairness of the Agreements and the Subadvisory Agreements to the shareholders.
The Independent Trustees did not identify any one factor, piece of information or written document as all important or controlling, and each Independent Trustee attributed different weight to different factors. Prior to voting, the Independent Trustees reviewed the proposed continuance of the Agreements and the Subadvisory Agreements with management and with experienced independent and fund counsel and received materials from counsel discussing the legal standards for their consideration of the proposed continuation of the Agreements and the Subadvisory Agreements. The Independent Trustees also reviewed the proposed continuation of the Agreements and the Subadvisory Agreements in private sessions alone and with their independent counsel at which no representatives of management were present. Based on an evaluation of all material factors including those described below, the Independent Trustees concluded that the Agreements and the Subadvisory Agreements were reasonable and fair and in the best interest of the Portfolios and their shareholders.
As background, MetLife Inc. (“MetLife”) and Citigroup Inc. (“Citigroup”) announced an agreement for the sale of The Travelers Insurance Company and certain affiliates by Citigroup to MetLife (the “MetLife Transaction”). The MetLife Transaction included the acquisition of TAMIC, a subsidiary of The Travelers Insurance Company and the investment adviser to the Portfolios, by MetLife. The MetLife Transaction closed on July 1, 2005. The approval of the Agreements and the TIMCO, Janus and Pioneer Subadvisory Agreements was necessary because under the 1940 Act, the change in control of TAMIC resulted in the termination of the then current investment advisory and subadvisory agreements for the Portfolios on the closing of the MetLife Transaction. The approval of the Salomon Subadvisory Agreements was necessary because there were no Salomon Subadvisory Agreements in place prior to the closing of the MetLife Transaction. The Agreements and the Subadvisory Agreements for the Portfolios were approved by the Independent Trustees and the Agreements were submitted to a vote of the shareholders.
The Independent Trustees met in executive session and considered: (a) the nature, extent and quality of the services to be provided by TAMIC and by Salomon, TIMCO, Pioneer, and Janus (the “subadvisors”) under the Agreements and the Subadvisory Agreements; (b) the investment performance of the Portfolio, TAMIC and the subadvisors; (c) the cost of services to be provided and the profit realized by TAMIC and the subadvisors and their affiliates, which information was to be reviewed in depth at the July, 2005 Board meeting; (d) the extent to which TAMIC realizes economies of scale as each Portfolio grows; and (e) whether the fee levels reflect these economies of scale for the benefit of the shareholders.
The Agreements (except the Agreement for the Pioneer Mid Cap Value Portfolio) |
As part of the process, legal counsel to the Portfolios requested certain information from MetLife and in response MetLife provided certain written and oral information that addressed certain factors designed to inform the Independent Trustees regarding their consideration of the Agreements. In making their determination, the Independent Trustees were provided with information about MetLife and its purchase of The Travelers Insurance Company from Citigroup. At the various meetings, MetLife representatives discussed MetLife’s intentions regarding the preservation and strengthening of TAMIC’s business and MetLife’s intentions regarding staffing changes and executive leadership changes at TAMIC. The MetLife representatives also discussed and provided certain written information on MetLife’s business and products,
92
The Subadvisory Agreements (unaudited) (continued)
including MetLife’s advisory subsidiaries and their experience in overseeing subadvised mutual funds. The Independent Trustees also discussed the plans and anticipated role and responsibilities of certain of the employees and officers after the MetLife Transaction.
With respect to the nature, scope and quality of the services to be provided by TAMIC after the MetLife Transaction, the Board considered the experience of MetLife’s advisory subsidiaries and the mutual funds advised by them and also MetLife’s efforts to build and maintain a strong investment team in TAMIC. The Board also considered the level and depth of knowledge of TAMIC, including the professional experience and qualifications of its personnel as well as current staffing levels. The Independent Trustees also considered:
• | the ability of TAMIC to continue the oversight of both the investment and compliance operations of the subadvisers after the MetLife transaction, | |
• | the intention of MetLife to integrate The Travelers Insurance Company and its affiliates, including TAMIC, into MetLife’s current businesses to create a single business operation, | |
• | MetLife’s compliance with certain conditions set forth in Section 15(f) of the 1940 Act regarding placing unfair burdens on the Portfolios, | |
• | anticipated changes to back office operations to the Portfolios, including the provision of administrative and transfer agency services, after the MetLife Transaction, and | |
• | the fact that the Agreements including the investment advisory fees would be identical to the current Agreements, except for the inception date and the express authority for TAMIC to retain subadvisers. |
In addition, the Independent Trustees noted that the performance of the Portfolios, which the Independent Trustees receive and review on a quarterly basis, had generally been satisfactory. As to the profits realized by TAMIC from its relationship with the Portfolios, the Board noted that it was satisfied that TAMIC’s profits were not excessive in the past, and that it was not possible to predict how the MetLife Transaction would affect such profits at this time, but would reconsider this factor in connection with its annual review of the Agreements under Section 15(c) of the 1940 Act in July 2005. As to whether economies of scale would be realized as the Portfolios grow and whether fee levels reflect any such economies of scale, the Board noted that investment advisory fees for certain Portfolios included breakpoints that reduced fees payable at the higher asset levels and noted its intention to explore the possibility of instituting breakpoints for the other Portfolios. Finally, the Independent Trustees considered the level of service expected to be provided by TAMIC after the MetLife Transaction.
The Independent Trustees considered their plans to perform the annual review of the Agreements pursuant to Section 15(c) of the 1940 Act at their regularly scheduled Board meeting which was scheduled to occur three weeks after the closing of the MetLife Transaction. In light of the continuity of investment management under the Agreements, the short period between the effective date of those Agreements and the upcoming annual review, the information provided by MetLife, and MetLife’s plans to conduct a search for a subadviser for the Portfolios for which Salomon would serve as subadviser, the Board considered the information provided to it sufficient for their consideration of the Agreements at this time.
The Subadvisory Agreements |
a. Managed Assets Trust, High Yield Bond Trust, Money Market Portfolio and U.S. Government Securities Portfolio
MetLife recommended and the Independent Trustees approved the retention of Salomon, which was an affiliate of TAMIC before the MetLife Transaction, as a subadviser for the Portfolios that had been managed directly by TAMIC without a subadviser, effective on or about the date of the MetLife Transaction. For the Managed Assets Trust, Money Market Portfolio and the Travelers Series Trust: U.S. Government Securities Portfolio, the portfolio manager employed by Salomon was also an employee of TAMIC and the then current portfolio manager. With respect to these Portfolios, there would be no change in the day-to-day portfolio management. For the High Yield Bond Trust, the retention of Salomon would result in a change in portfolio manager responsible for the day-to-day management of the High Yield Bond Trust after the closing of the MetLife Transaction. The new Salomon manager made a presentation to the Independent Trustees and answered their questions about his experience and qualifications to manage the High Yield Bond Trust. The Independent Trustees noted that
93
The Subadvisory Agreements (unaudited) (continued)
MetLife may in the future recommend to the Independent Trustees such additional changes to any Portfolios, including changes to the investment objectives, policies and restrictions of the Portfolios or merging one or more Portfolios into other MetLife-sponsored funds, as it determines are appropriate and as permitted by applicable law.
As part of the process, legal counsel to the Portfolios requested certain information from Salomon and in response Salomon provided certain written and oral information that addressed certain factors designed to inform the Independent Trustees regarding their consideration of the Subadvisory Agreements. With respect to the nature, scope and quality of the services to be provided by Salomon after the MetLife Transaction, the Board considered the experience and commitment of Salomon’s personnel and its nature and quality of its investment process. The Independent Trustees noted that the performance of the Portfolios had been satisfactory. In determining whether the terms of the Subadvisory Agreements are reasonable and fair the Board considered the terms and structure of the Agreements. The Board reviewed information about the fee schedule for the Subadvisory Agreements. In evaluating the subadvisory fees, the Independent Trustees considered that the investment subadvisory fees were paid by TAMIC out of the investment advisory fees it received under the Agreements. So, the cost of the services to be provided by Salomon, the profitability to Salomon with regard to the Portfolios along with the economies of scale in its management of the Portfolios were not material to the consideration of the Subadvisory Agreement by the Independent Trustees. The Independent Trustees noted that the overall investment advisory fee was not changing. The Independent Trustees considered their plans to perform the annual review of the Subadvisory Agreements pursuant to Section 15(c) of the 1940 Act at their regularly scheduled Board meeting which was scheduled to occur three weeks after the MetLife Transaction. In light of the continuity of portfolio management under the Subadvisory Agreements (except for the High Yield Bond Trust) and with respect to the High Yield Bond Trust, the Independent Trustees opportunity to interview the new Salomon portfolio manager, the short period between the effective date of those Agreements and the upcoming annual review, the information provided by Salomon, and MetLife’s plans to conduct a search for a sub advisor for the Portfolios for which Salomon would serve as temporary sub adviser, the Board considered the information provided to it sufficient for their consideration of the Subadvisory Agreements at this time.
b. Managed Assets Trust, Capital Appreciation Fund, and the Pioneer Fund Portfolio |
MetLife recommended and the Independent Trustees approved the Subadvisory Agreements for the Portfolios. As discussed above, the change in control of TAMIC resulted in the termination of TAMIC’s previous subadvisory agreements with the subadvisers on the closing of the MetLife Transaction. With respect to the nature, scope and quality of the services to be provided by the subadvisers after the MetLife Transaction, the Board considered that the MetLife Transaction was not expected to affect the subadvisers or their services. The Independent Trustees also noted that the subadvisory fees would not change under the Subadvisory Agreement. In evaluating the subadvisory fees, the Independent Trustees considered that the investment subadvisory fees were paid by TAMIC out of the investment advisory fees it received under the Agreements. So, the cost of services to be provided by the subadvisers the profitability of the subadvisers with regard to the Portfolios along with the economies of scale in their management of the Portfolios were not material to the consideration of the Subadvisory Agreement by the Independent Trustees. The Board also considered that it had received quarterly performance information regarding the Portfolio. The Independent Trustees considered their plans to perform the annual review of the Subadvisory Agreement pursuant to Section 15(c) of the 1940 Act at its regularly scheduled Board meeting which was scheduled to occur three weeks after the closing of the MetLife Transaction. In light of the continuity of portfolio management under the Subadvisory Agreement, the performance of the Portfolio, the short period between the effective date of the Subadvisory Agreement and the upcoming annual review, the Board considered the information provided to it sufficient for its consideration of the Subadvisory Agreement at that time.
The Agreements and Subadvisory Agreements for the Pioneer Mid Cap Value Portfolio |
The Portfolio became operational on May 2, 2005.
As stated above, on July 1, 2005, Citigroup sold The Travelers Insurance Company and certain of its affiliates, including TAMIC, to MetLife. The change in control of TAMIC resulted in the termination of the Agreement and Subadvisory Agreement on the closing of the MetLife Transaction. Therefore, it was necessary for the Independent Trustees to consider and approve the Agreement and Subadvisory Agreement for the Portfolio dated May 2, 2005 (the “Initial Agreements” and “Initial Subadvisory Agreements”), as well as substantially identical Agreements and Subadvisory Agreements to be dated July 1, 2005 (the “New Agreements” and “New Subadvisory Agreements”).
94
The Subadvisory Agreements (unaudited) (continued)
The Initial Agreement |
As part of the process, legal counsel to the Portfolio requested certain information from TAMIC and in response TAMIC provided certain written and oral information that addressed certain factors designed to inform the Independent Trustees regarding their consideration of the Initial Agreements. In making their determination, the Independent Trustees were provided with information about the Portfolios and their proposed investment objectives and policies and the proposed fees and expenses of the Portfolios.
The Independent Trustees considered TAMIC’s substantial experience in overseeing subadvised portfolios and TAMIC’s representations about the expected demand for the new Portfolio. Because the Portfolio had not commenced operations, the Independent Trustees could not consider the performance of the Portfolio. They also could not consider information regarding the profit realized by TAMIC from its relationship with the Portfolios in the past, but noted that it was satisfied that TAMIC’s profits were not excessive generally. The Independent Trustees were provided with information as to the advisory fees and total expenses of other comparable funds, and concluded that the proposed advisory fees for the Portfolio were reasonable and below the average for the group of comparable funds. As to whether economies of scale would be realized as the Portfolio grows and whether fee levels reflect any such economies of scale, the Board noted that proposed investment advisory fees for the Portfolio included breakpoints that reduced fees payable at the higher asset levels.
The New Agreement |
With respect to the New Agreement, legal counsel to the Portfolio requested certain information from MetLife and in response MetLife provided certain written and oral information that addressed certain factors designed to inform the Independent Trustees regarding their consideration of the Agreements. In making their determination, the Independent Trustees were provided with information about MetLife and its purchase of The Travelers Insurance Company from Citigroup. At the various meetings, MetLife representatives discussed MetLife’s intentions regarding the preservation and strengthening of TAMIC’s business and MetLife’s intentions regarding staffing changes and executive leadership changes at TAMIC. The MetLife representatives also discussed and provided certain written information on MetLife’s business and products, including MetLife’s advisory subsidiaries and their experience in overseeing subadvised mutual funds. The Independent Trustees also discussed the plans and anticipated role and responsibilities of certain of the employees and officers after the MetLife Transaction.
With respect to the nature, scope and quality of the services to be provided by TAMIC after the MetLife Transaction, the Board considered the experience of MetLife’s advisory subsidiaries and the mutual funds advised by them and also MetLife’s efforts to build and maintain a strong investment team in TAMIC. The Board also considered the level and depth of knowledge of TAMIC, including the professional experience and qualifications of its personnel as well as current staffing levels. The Independent Trustees also considered
• | the ability of TAMIC to continue the oversight of both the investment and compliance operations of Pioneer after the MetLife Transaction, | |
• | the intention of MetLife to integrate The Travelers Insurance Company and its affiliates, including TAMIC, into MetLife’s current businesses to create a single business operation, | |
• | MetLife’s compliance with certain conditions set forth in Section 15(f) of the 1940 Act regarding placing unfair burdens on the Portfolios, | |
• | anticipated changes to back office operations to the Portfolios, including the provision of administrative and transfer agency services, after the MetLife Transaction, and | |
• | the fact that the Agreement including the investment advisory fees would be identical to the current Agreements, except for the inception date. |
The Independent Trustees’ consideration of the New Agreements in terms of Portfolio performance and fees, TAMIC’s profitability, and the realization of economies of scale was substantially the same as its consideration of the Initial Agreements. In addition, as to TAMIC’s profitability, the Board noted that it was not possible to predict how the MetLife Transaction would affect such profits at this time, but that it would reconsider this factor in connection with future reviews. The Independent Trustees considered the level of service expected to be provided by TAMIC after the MetLife Transaction.
95
The Subadvisory Agreements (unaudited) (continued)
The Initial Subadvisory Agreement |
TAMIC recommended and the Independent Trustees approved the retention of Pioneer as the subadviser for the Portfolio under the Initial Subadvisory Agreement. The Independent Trustees considered the substantial experience of the Subadviser in managing portfolios comparable to the Portfolio, and their favorable experience with Pioneer as an adviser of another portfolio overseen by the Independent Trustees. Because the Portfolio had not commenced operations, the Independent Trustees could not consider the performance of the Portfolio or the profits realized by Pioneer from its relationship with the Portfolio, although they considered the performance that Pioneer has generated as an adviser to comparable funds. The Independent Trustees were provided with information as to the subadvisory fees of a limited number of other comparable funds, and concluded that the proposed subadvisory fees appeared to be reasonable. As to whether economies of scale would be realized as the Portfolio grows and whether fee levels reflect any such economies of scale, the Board noted that the proposed subadvisory fees for the Portfolios included breakpoints that reduced fees payable at the higher asset levels. The Board also noted that the investment subadvisory fees were paid by TAMIC out of its investment advisory fees.
The New Subadvisory Agreement |
Also, MetLife recommended and the Independent Trustees approved the New Subadvisory Agreement for the Portfolio. As discussed above, a change in control of TAMIC resulted in the termination of TAMIC’s previous subadvisory contracts with the subadvisers on the closing of the MetLife Transaction. The Board considered that, notwithstanding the termination of the Initial Subadvisory Agreement as a legal matter, the MetLife Transaction was not expected to affect Pioneer or its services including its day-to-day management of the Portfolios. Therefore, the Independent Trustees considered the same factors in approving the New Subadvisory Agreement as it did in approving the Initial Subadvisory Agreement. The Independent Trustees also noted that the subadvisory fees would not change as a result of the MetLife Transaction.
Other Business Relationships |
The Independent Trustees considered other business relationships that MetLife and TAMIC would enter into with Citigroup, including its affiliate Salomon. In connection with the closing of the MetLife Transaction, MetLife, Citigroup and certain of their affiliates entered into a Distribution Agreements under which Citigroup-affiliated broker-dealers will continue to offer certain TIC and MetLife insurance contracts until July 1, 2015. In addition, MetLife, Citigroup and certain of their affiliates entered into an Investment Products Agreements under which certain TIC and MetLife insurance products will include certain Citigroup-sponsored funds as investment options including Salomon advised mutual funds until July 1, 2010.
Conclusion |
Based on the deliberations of the Independent Trustees and their evaluation of the information described above, the Independent Trustees unanimously concluded that (a) the terms of the Agreements and the Subadvisory Agreements are fair and reasonable; (b) the fees are reasonable in light of the services TAMIC and the subadvisors provided to the Portfolios and their shareholders; (d) TAMIC and the subadvisors possess the capabilities to perform the duties required of them under the Agreements and the Subadvisory Agreements; (e) the investment performance of the Portfolios is satisfactory; and (f) the Agreements and the Subadvisory Agreements are approved.
96
Combined Special Meeting of the Funds were held on June 23 and adjourned to June 30, 2005.
There were three proposals submitted to shareholders. Proposal 1 was the approval of the investment advisory contracts between the Funds and TAMIC. The agreements terminated as a matter of law at the closing of the MetLife Transaction. Proposal 2 was the approval of future subadvisory agreements without a shareholder vote. Proposal 3 was the election of a new member of the Board of Trustees, Elizabeth Forget, who is affiliated with MetLife.
The shareholders approved all proposals.
The following table sets forth the number of shares voted for, against and withheld as to each Proposal.
Proposal 1
Number | ||||
Managed Assets Trust | of Shares | |||
For | 15,133,968.018 | |||
Against | 773,140.578 | |||
Withhold | 1,397,718.404 | |||
Total | 17,304,827.000 | |||
High Yield Bond Trust | ||||
For | 9,795,164.247 | |||
Against | 477,645.694 | |||
Withhold | 1,040,717.059 | |||
Total | 11,313,527.000 | |||
Capital Appreciation Fund | ||||
For | 13,080,368.710 | |||
Against | 1,078,649.438 | |||
Withhold | 1,196,266.852 | |||
Total | 15,355,285.000 | |||
Money Market Portfolio | ||||
For | 273,344,976.606 | |||
Against | 15,694,479.591 | |||
Withhold | 35,059,438.803 | |||
Total | 324,098,895.000 | |||
U.S. Government Securities Portfolio | ||||
For | 16,215,832.073 | |||
Against | 1,201,142.186 | |||
Withhold | 1,667,585.741 | |||
Total | 19,084,560.000 | |||
97
Number | ||||
Pioneer Fund Portfolio | of Shares | |||
For | 2,569,641.486 | |||
Against | 81,401.508 | |||
Withhold | 190,170.006 | |||
Total | 2,841,213.000 | |||
Proposal 2 | ||||
Managed Assets Trust | ||||
For | 13,798,361.759 | |||
Against | 2,007,286.196 | |||
Withhold | 1,499,179.045 | |||
Total | 17,304,827.000 | |||
High Yield Bond Trust | ||||
For | 9,225,479.118 | |||
Against | 1,278,770.819 | |||
Withhold | 809,277.063 | |||
Total | 11,313,527.000 | |||
Capital Appreciation Fund | ||||
For | 11,904,217.758 | |||
Against | 2,350,946.878 | |||
Withhold | 1,100,120.364 | |||
Total | 15,355,285.000 | |||
Money Market Portfolio | ||||
For | 244,010,811.224 | |||
Against | 39,303,627.915 | |||
Withhold | 40,784,455.861 | |||
Total | 324,098,895.000 | |||
U.S. Government Securities Portfolio | ||||
For | 14,776,618.761 | |||
Against | 2,448,236.500 | |||
Withhold | 1,859,704.739 | |||
Total | 19,084,560.000 | |||
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Number | ||||
Pioneer Fund Portfolio | of Shares | |||
For | 2,407,828.582 | |||
Against | 237,505.637 | |||
Withhold | 195,878.781 | |||
Total | 2,841,213.000 | |||
Proposal 3 | ||||
Managed Assets Trust | ||||
For | 16,380,162.951 | |||
Against | 924,664.049 | |||
Total | 17,304,827.000 | |||
High Yield Bond Trust | ||||
For | 11,001,074.515 | |||
Against | 312,452.485 | |||
Total | 11,313,527.000 | |||
Capital Appreciation Fund | ||||
For | 14,126,980.221 | |||
Against | 1,228,304.779 | |||
Total | 15,355,285.000 | |||
Money Market Portfolio | ||||
For | 289,179,058.880 | |||
Against | 34,919,836.120 | |||
Total | 324,098,895.000 | |||
U.S. Government Securities Portfolio | ||||
For | 17,844,635.488 | |||
Against | 1,239,924.512 | |||
Total | 19,084,560.000 | |||
Pioneer Fund Portfolio | ||||
For | 2,755,950.755 | |||
Against | 85,262.245 | |||
Total | 2,841,213.000 | |||
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Managed Assets Trust, High Yield Bond Trust, Capital Appreciation Fund, Money Market Portfolio and The Travelers Series Trust
TRUSTEES* Elizabeth M. Forget Chairperson Frances M. Hawk, CFA, CFP Lewis Mandell Robert E. McGill, III OFFICERS* Elizabeth M. Forget President and Chief Executive Officer Peter H. Duffy Chief Financial Officer and Treasurer Leonard M. Bakal Chief Compliance Officer and Chief Anti-Money Laundering Compliance Officer Paul G. Cellupica Secretary Jack P. Huntington Assistant Secretary * As of July 1, 2005 | INVESTMENT MANAGER* AND ADVISERS Travelers Asset Management International Company LLC ADMINISTRATOR* The Travelers Insurance Company CUSTODIAN* State Street Bank and Trust Company TRANSFER AGENT* PFPC Inc. |
Managed Assets Trust, High Yield Bond Trust, Capital Appreciation Fund and Money Market Portfolio are each a Massachusetts business trust. U.S. Government Securities Portfolio, Pioneer Fund Portfolio and Pioneer Mid Cap Value Portfolio are separate investment funds of The Travelers Series Trust, a Massachusetts business trust.
This report is prepared for the general information of variable annuity or life contract owners and is not an offer of shares of Managed Assets Trust, High Yield Bond Trust, Capital Appreciation Fund, Money Market Portfolio, The Travelers Series Trust: U.S. Government Securities Portfolio, Pioneer Fund Portfolio and Pioneer Mid Cap Value Portfolio and is not for use with the general public. All the funds contained in this report may not be available under your variable annuity or life contract.
This report must be preceded or accompanied by a free prospectus. Investors should consider the Funds’ investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other information about the Funds. Please read the prospectus carefully before investing.
The Funds file their complete schedules of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the Commission’s website at www.sec.gov. The Funds’ Forms N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. To obtain information on Form N-Q from the Funds, shareholders can call 1-800-842-9406.
Information on how the Funds voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 and a description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available (1) without charge, upon request, by calling 1-800-842-9406 and (2) on the SEC’s website at www.sec.gov.
VG-181 (Semi-Annual) (8-05) Printed in U.S.A.
ITEM 2. | CODE OF ETHICS. | |||
Not applicable. | ||||
ITEM 3. | AUDIT COMMITTEE FINANCIAL EXPERT. | |||
Not applicable. | ||||
ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. | |||
Not applicable. | ||||
ITEM 5. | AUDIT COMMITTEE OF LISTED REGISTRANTS. | |||
Not applicable. | ||||
ITEM 6. | SCHEDULE OF INVESTMENTS. | |||
Included in reports to stockholders under Item 1. | ||||
ITEM 7. | DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. | |||
Not applicable. | ||||
ITEM 8. | PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT COMPANIES. | |||
Not applicable. | ||||
ITEM 9. | PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. | |||
Not applicable. | ||||
ITEM 10. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. | |||
Not applicable. | ||||
ITEM 11. | CONTROLS AND PROCEDURES. |
(a) | The registrant’s principal executive officer and principal financial officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a- 3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing date of this report that includes the disclosure required by this paragraph, based on their evaluation of the disclosure controls and procedures required by Rule 30a-3(b) under the 1940 Act and 15d-15(b) under the Securities Exchange Act of 1934. | |||||
(b) | There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the registrant’s second fiscal quarter of the period covered by this report that have materially affected, or are likely to materially affect the registrant’s internal control over financial reporting. | |||||
Effective July 1, 2005, certain changes were made to the registrant’s internal controls over financial reporting in connection with the acquisition of the registrant’s investment adviser by MetLife, Inc. Such changes will be reported in the registrant’s Form N-Q for the fiscal quarter ending September 30, 2005 to be filed, which covers the effective date of such changes. |
ITEM 12. | EXHIBITS. | |||||
(a)(1) | Not applicable. | |||||
(2) | Certifications pursuant to section 302 of the Sarbanes-Oxley Act of 2002. | |||||
(3) | Not applicable. | |||||
(b) | Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
Capital Appreciation Fund | ||
By: | /s/ Elizabeth M. Forget | |
Elizabeth M. Forget | ||
Chief Executive Officer of | ||
Capital Appreciation Fund | ||
Date: September 7, 2005 |
By: | /s/ Elizabeth M. Forget | |
Elizabeth M. Forget | ||
Chief Executive Officer of | ||
Capital Appreciation Fund | ||
Date: September 7, 2005 |
By: | /s/ Peter H. Duffy | |
(Peter H. Duffy) Chief Financial Officer of | ||
Capital Appreciation Fund | ||
Date: September 7, 2005 |