SECURITIES AND EXCHANGE COMMISSION
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Legg Mason Wood Walker, Incorporated
100 Light Street
Baltimore, MD 21202
Semi-Annual Report to Shareholders |
Legg Mason | |
Income Trust, Inc. |
June 30, 2005 | |
To Our Shareholders,
We are pleased to provide you with Legg Mason Income Trust’s semi-annual report, combining reports for the Legg Mason Core Bond Fund, High Yield Portfolio, Investment Grade Income Portfolio, Limited Duration Bond Portfolio and the U.S. Government Money Market Portfolio.
Net Asset Value | ||||||||||||
SEC YieldA | Average Life | Per Share | ||||||||||
Core Bond | 3.09% | 8.26 years | $ | 9.97 | ||||||||
High Yield | 6.60% | 6.71 years | $ | 9.13 | ||||||||
Investment Grade | 4.35% | 10.12 years | $ | 10.78 | ||||||||
Limited DurationB | 3.27% | 3.03 years | $ | 10.31 | ||||||||
U.S. Government Money MarketC | 2.34% | 21 days | $ | 1.00 |
For the six months ended June 30, 2005, total returns for the Primary Class of shares of the Core Bond, High Yield, Investment Grade and Limited Duration Portfolios were +1.70%, +0.41%, +2.30%, and +0.99%, respectively. Total returns for the Institutional Class of shares of High Yield, Investment Grade and Limited Duration Portfolios were +0.68%, +2.50%, and +1.26%, respectively. (Total return measures investment performance in terms of appreciation or depreciation in a portfolio’s net asset value per share, plus dividends and any capital gain distributions.)
A | SEC yields reported for the Core Bond, High Yield, Investment Grade and Limited Duration Portfolios are for the 30 days ended June 30, 2005. For the U.S. Government Money Market Portfolio, the SEC yield is for the 7 days ended June 30, 2005. |
B | Limited Duration was formerly the U.S. Government Intermediate Portfolio, see page 81 for additional information about the change. |
C | An investment in the U.S. Government Money Market Portfolio is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. |
Many of our shareholders regularly add to their Primary Class Fund holdings by authorizing automatic, monthly transfers from their bank checking or Legg Mason accounts. Your Legg Mason Financial Advisor will be happy to help you make these arrangements if you would like to purchase additional shares in this convenient way.
Sincerely, |
John F. Curley, Jr. Chairman | Mark R. Fetting President |
July 11, 2005
Expense Example
Core Bond Fund
As a shareholder of the Fund, you incur ongoing costs, including management fees, distribution and service (12b-1) fees, and other Fund expenses. These examples are 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. Each example is based on an investment of $1,000 invested on January 1, 2005, and held through June 30, 2005.
Actual Expenses
The first line in the table below provides information about actual account values and actual expenses for the Fund. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line in the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% 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 this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare these 5% hypothetical examples with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Beginning | Ending | Expenses PaidA | ||||||||||
Account | Account | During the | ||||||||||
Value | Value | Period | ||||||||||
1/1/05 | 6/30/05 | 1/1/05 to 6/30/05 | ||||||||||
Actual | $ | 1,000.00 | $ | 1,017.00 | $ | 5.00 | ||||||
Hypothetical (5% return before expenses) | 1,000.00 | 1,019.84 | 5.01 |
A | These calculations are based on expenses incurred in the most recent fiscal half-year. The dollar amounts shown as “Expenses Paid” are equal to the annualized expense ratio of 1.00% multiplied by the average value over the period, multiplied by the number of days in the most recent fiscal half-year (181), and divided by 365. |
Performance Information
Core Bond Fund
The graph on the following page compares the Fund’s total returns to that of a closely matched broad-based securities market index. The graph illustrates the cumulative total return of an initial $10,000 investment in the Fund’s Primary Class shares, for the periods indicated. The line for the Fund represents the total return after deducting all Fund investment management and other administrative expenses and the transaction costs of buying and selling securities. The line representing the securities market index does not include any transaction costs associated with buying and selling securities in the index or other administrative expenses. Both the Fund’s and the index’s results assume reinvestment of all dividends and distributions.
Growth of a $10,000 Investment — Primary Class
Periods Ended June 30, 2005
Cumulative | Average Annual | |||||||||
Total Return | Total Return | |||||||||
One Year | +5.85% | +5.85% | ||||||||
Life of Class* | +3.63% | +2.70% | ||||||||
* Inception date: February 27, 2004 | ||||||||||
The performance data quoted represents past performance and does not guarantee future results. The performance stated may have been due to extraordinary market conditions, which may not be duplicated in the future. Current performance may be lower or higher than the performance data quoted. To obtain the most recent month-end performance information please visit www.leggmasonfunds.com. The investment return and principal value of the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Calculations assume reinvestment of dividends and capital gain distributions. Performance would have been lower if fees had not been waived in various periods.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
A | A market value-weighted index that tracks the daily price, coupon, pay-downs, and total return performance of fixed rate, publicly placed, dollar-denominated, and nonconvertible investment grade debt issues with at least $100 million par amount outstanding and with at least one year to final maturity. |
Standard & Poor’s Debt RatingsB (As a percentage of the portfolio)
Maturity Schedule (As a percentage of the portfolio)
B | Standard & Poor’s Ratings Services provide capital markets with credit ratings for the evaluation and assessment of credit risk. |
Portfolio of Investments
Legg Mason Core Bond Fund
(Amounts in Thousands)
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Long-Term Securities — 124.3% | |||||||||||||||||
Corporate Bonds and Notes — 20.7% | |||||||||||||||||
Aerospace/Defense — 0.1% | |||||||||||||||||
Northrop Grumman Corporation | 4.079% | 11/16/06 | $ | 40 | $ | 40 | |||||||||||
United Technologies Corporation | 5.400% | 5/1/35 | 20 | 21 | |||||||||||||
61 | |||||||||||||||||
Automotive — 1.0% | |||||||||||||||||
Ford Motor Company | 7.450% | 7/16/31 | 720 | 601 | |||||||||||||
General Motors Corporation | 8.375% | 7/15/33 | 150 | 125 | |||||||||||||
726 | |||||||||||||||||
Banking and Finance — 2.9% | |||||||||||||||||
Ford Motor Credit Company | 4.950% | 1/15/08 | 40 | 38 | |||||||||||||
Ford Motor Credit Company | 6.625% | 6/16/08 | 240 | 237 | |||||||||||||
Ford Motor Credit Company | 7.375% | 10/28/09 | 220 | 215 | |||||||||||||
Ford Motor Credit Company | 7.375% | 2/1/11 | 230 | 224 | |||||||||||||
Ford Motor Credit Company | 7.250% | 10/25/11 | 100 | 96 | |||||||||||||
Ford Motor Credit Company | 7.000% | 10/1/13 | 10 | 10 | |||||||||||||
General Motors Acceptance Corporation | 6.125% | 9/15/06 | 30 | 30 | |||||||||||||
General Motors Acceptance Corporation | 6.125% | 2/1/07 | 10 | 10 | |||||||||||||
General Motors Acceptance Corporation | 6.150% | 4/5/07 | 40 | 40 | |||||||||||||
General Motors Acceptance Corporation | 6.125% | 8/28/07 | 230 | 228 | |||||||||||||
General Motors Acceptance Corporation | 5.625% | 5/15/09 | 685 | 641 | |||||||||||||
General Motors Acceptance Corporation | 7.750% | 1/19/10 | 110 | 107 | |||||||||||||
HSBC Finance Corporation | 4.125% | 11/16/09 | 225 | 223 | |||||||||||||
2,099 | |||||||||||||||||
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Corporate Bonds and Notes — Continued | |||||||||||||||||
Banks — 1.1% | |||||||||||||||||
Bank of America Corporation | 3.875% | 1/15/08 | $ | 210 | $ | 209 | |||||||||||
Bank One Corporation | 6.500% | 2/1/06 | 220 | 223 | |||||||||||||
Bank One Corporation | 2.625% | 6/30/08 | 335 | 321 | |||||||||||||
Rabobank Capital Funding Trust II | 5.260% | 12/31/49 | 10 | 10 | A,B | ||||||||||||
Rabobank Capital Funding Trust III | 5.254% | 12/31/49 | 20 | 21 | A,B | ||||||||||||
784 | |||||||||||||||||
Cable — 0.4% | |||||||||||||||||
Comcast Corporation | 6.500% | 1/15/15 | 240 | 267 | |||||||||||||
Cox Communications, Inc. | 3.875% | 10/1/08 | 70 | 69 | |||||||||||||
336 | |||||||||||||||||
Diversified Financial Services — 0.7% | |||||||||||||||||
CIT Group Inc. | 4.000% | 5/8/08 | 5 | 5 | |||||||||||||
Citigroup Inc. | 4.125% | 2/22/10 | 230 | 229 | |||||||||||||
General Electric Capital Corporation | 4.250% | 1/15/08 | 180 | 181 | |||||||||||||
Wells Fargo & Company | 4.200% | 1/15/10 | 105 | 105 | |||||||||||||
520 | |||||||||||||||||
Electric — 0.7% | |||||||||||||||||
Dominion Resources, Inc. | 4.750% | 12/15/10 | 30 | 30 | |||||||||||||
Dominion Resources, Inc. | 5.700% | 9/17/12 | 95 | 100 | |||||||||||||
FirstEnergy Corp. | 7.375% | 11/15/31 | 285 | 349 | |||||||||||||
Oncor Electric Delivery Company | 6.375% | 1/15/15 | 30 | 33 | |||||||||||||
The Cleveland Electric Illuminating Company | 5.650% | 12/15/13 | 20 | 21 | |||||||||||||
533 | |||||||||||||||||
Energy — 2.3% | |||||||||||||||||
Duke Energy Corporation | 5.625% | 11/30/12 | 140 | 148 | |||||||||||||
Pacific Gas and Electric Company | 3.820% | 4/3/06 | 4 | 4 | A |
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Corporate Bonds and Notes — Continued | |||||||||||||||||
Energy — Continued | |||||||||||||||||
Pacific Gas and Electric Company | 6.050% | 3/1/34 | $ | 135 | $ | 149 | |||||||||||
TXU Corp. | 6.550% | 11/15/34 | 800 | 786 | B | ||||||||||||
TXU Energy Co. | 4.360% | 1/17/06 | 15 | 15 | A | ||||||||||||
TXU Energy Co. | 7.000% | 3/15/13 | 500 | 557 | |||||||||||||
1,659 | |||||||||||||||||
Environmental Services — 0.1% | |||||||||||||||||
Waste Management, Inc. | 6.375% | 11/15/12 | 85 | 93 | |||||||||||||
Food, Beverage and Tobacco — 0.7% | |||||||||||||||||
Altria Group, Inc. | 7.000% | 11/4/13 | 155 | 174 | |||||||||||||
Anheuser-Busch Companies, Inc. | 4.950% | 1/15/14 | 165 | 171 | |||||||||||||
Kraft Foods Inc. | 5.625% | 11/1/11 | 135 | 143 | |||||||||||||
488 | |||||||||||||||||
Insurance — 0.1% | |||||||||||||||||
ASIF Global Financing XIX | 4.900% | 1/17/13 | 40 | 40 | B | ||||||||||||
Investment Banking/Brokerage — 0.6% | |||||||||||||||||
Lehman Brothers Holdings Inc. | 4.000% | 1/22/08 | 115 | 115 | |||||||||||||
Morgan Stanley | 3.625% | 4/1/08 | 190 | 187 | |||||||||||||
The Goldman Sachs Group, Inc. | 4.125% | 1/15/08 | 100 | 100 | |||||||||||||
The Goldman Sachs Group, Inc. | 4.500% | 6/15/10 | 60 | 60 | |||||||||||||
462 | |||||||||||||||||
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Corporate Bonds and Notes — Continued | |||||||||||||||||
Media — 0.3% | |||||||||||||||||
Clear Channel Communications, Inc. | 4.250% | 5/15/09 | $ | 50 | $ | 48 | |||||||||||
Time Warner Inc. | 6.875% | 5/1/12 | 75 | 85 | |||||||||||||
Time Warner Inc. | 7.700% | 5/1/32 | 75 | 95 | |||||||||||||
228 | |||||||||||||||||
Medical Care Facilities — 0.9% | |||||||||||||||||
HCA, Inc. | 5.750% | 3/15/14 | 700 | 697 | |||||||||||||
Oil and Gas — 1.7% | |||||||||||||||||
Amerada Hess Corporation | 7.300% | 8/15/31 | 245 | 296 | |||||||||||||
Apache Corporation | 6.250% | 4/15/12 | 65 | 72 | |||||||||||||
Conoco Inc. | 6.950% | 4/15/29 | 225 | 283 | |||||||||||||
ConocoPhillips | 4.750% | 10/15/12 | 30 | 31 | |||||||||||||
Devon Energy Corporation | 7.950% | 4/15/32 | 140 | 184 | |||||||||||||
Kerr-McGee Corporation | 6.875% | 9/15/11 | 300 | 320 | |||||||||||||
XTO Energy, Inc. | 7.500% | 4/15/12 | 15 | 17 | |||||||||||||
XTO Energy, Inc. | 6.250% | 4/15/13 | 20 | 22 | |||||||||||||
1,225 | |||||||||||||||||
Paper and Forest Products — 0.4% | |||||||||||||||||
International Paper Company | 5.500% | 1/15/14 | 70 | 71 | |||||||||||||
Weyerhaeuser Company | 6.750% | 3/15/12 | 235 | 259 | |||||||||||||
330 | |||||||||||||||||
Photo Equipment and Supplies — 0.8% | |||||||||||||||||
Eastman Kodak Company | 7.250% | 11/15/13 | 540 | 568 | |||||||||||||
Retail — 0.5% | |||||||||||||||||
Target Corporation | 5.400% | 10/1/08 | 155 | 161 | |||||||||||||
Wal-Mart Stores, Inc. | 3.375% | 10/1/08 | 190 | 186 | |||||||||||||
347 | |||||||||||||||||
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Corporate Bonds and Notes — Continued | |||||||||||||||||
Special Purpose — 4.5% | |||||||||||||||||
Anadarko Finance Company | 6.750% | 5/1/11 | $ | 125 | $ | 139 | |||||||||||
ChevronTexaco Capital Company | 3.500% | 9/17/07 | 140 | 139 | |||||||||||||
Conoco Funding Company | 6.350% | 10/15/11 | 10 | 11 | |||||||||||||
DaimlerChrysler NA Holding Corporation | 4.050% | 6/4/08 | 95 | 94 | |||||||||||||
DaimlerChrysler NA Holding Corporation | 7.200% | 9/1/09 | 50 | 54 | |||||||||||||
Sprint Capital Corporation | 4.780% | 8/17/06 | 15 | 15 | |||||||||||||
Sprint Capital Corporation | 6.000% | 1/15/07 | 270 | 276 | |||||||||||||
Sprint Capital Corporation | 8.375% | 3/15/12 | 2,040 | 2,454 | |||||||||||||
Verizon Global Funding Corp. | 7.375% | 9/1/12 | 75 | 88 | |||||||||||||
3,270 | |||||||||||||||||
Telecommunications — 0.1% | |||||||||||||||||
BellSouth Corporation | 4.750% | 11/15/12 | 30 | 30 | |||||||||||||
SBC Communications Inc. | 5.100% | 9/15/14 | 70 | 72 | |||||||||||||
102 | |||||||||||||||||
Transportation — 0.8% | |||||||||||||||||
JetBlue Airways Corporation | 3.643% | 8/15/16 | 300 | 296 | A | ||||||||||||
JetBlue Airways Corporation | 3.718% | 11/15/16 | 300 | 294 | A | ||||||||||||
590 | |||||||||||||||||
Total Corporate Bonds and Notes (Identified Cost — $15,071) | 15,158 | ||||||||||||||||
Asset-Backed Securities — 8.6% | |||||||||||||||||
Fixed Rate Securities — 1.5% | |||||||||||||||||
BankAmerica Manufactured Housing Contract 1997-2 | 6.790% | 12/10/22 | 85 | 85 | |||||||||||||
Bank One Issuance Trust 2003-C1 | 4.540% | 9/15/10 | 200 | 201 | |||||||||||||
Citibank Credit Card Issuance Trust 2000-B1 | 7.050% | 9/17/07 | 200 | 201 |
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Asset-Backed Securities — Continued | |||||||||||||||||
Fixed Rate Securities — Continued | |||||||||||||||||
Citibank Credit Card Issuance Trust 2001-C3 | 6.650% | 5/15/08 | $ | 200 | $ | 205 | |||||||||||
Conseco Finance Home Equity Loan Trust 2001-A | 7.440% | 3/15/32 | 200 | 204 | |||||||||||||
Green Tree Home Improvement Loan Trust 1999-E | 9.450% | 10/15/24 | 45 | 45 | |||||||||||||
MMCA Automobile Owner Trust 2002-4 | 3.050% | 11/16/09 | 184 | 183 | |||||||||||||
1,124 | |||||||||||||||||
Indexed SecuritiesA — 7.1% | |||||||||||||||||
AAA Trust 2005-2 | 3.414% | 11/26/35 | 960 | 960 | B | ||||||||||||
Ameriquest Mortgage Securities Inc. 2005-R3 | 3.404% | 5/25/35 | 544 | 544 | |||||||||||||
Bayview Financial Aquisition Trust 2005-B | 3.460% | 4/28/39 | 504 | 505 | |||||||||||||
Bayview Financial Acquisition Trust 2003-BA | 3.794% | 4/25/33 | 217 | 217 | B | ||||||||||||
Bayview Financial Acquisition Trust 2004-C | 3.740% | 5/28/44 | 626 | 628 | |||||||||||||
Carrington Mortgage Loan Trust 2005-OPT2 | 3.404% | 5/25/35 | 659 | 659 | |||||||||||||
Citibank Credit Card Issuance Trust 2000-C2 | 4.250% | 10/15/07 | 200 | 200 | |||||||||||||
Credit Based Asset Servicing and Security 2005-RP1 | 3.494% | 1/25/35 | 274 | 274 | B | ||||||||||||
EQCC Trust 2002-1 | 3.614% | 11/25/31 | 15 | 15 | |||||||||||||
Household Mortgage Loan Trust 2003-HC1 | 3.780% | 2/20/33 | 223 | 223 | |||||||||||||
Morgan Stanley ABS Capital I 2005-WMC2 | 3.394% | 2/25/35 | 601 | 601 |
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Asset-Backed Securities — Continued | |||||||||||||||||
Indexed Securities — Continued | |||||||||||||||||
Residential Asset Mortgage Product, Inc. 2004-RPIA | 3.614% | 11/25/42 | $ | 92 | $ | 93 | |||||||||||
Structured Asset Investment Loan Trust 2003-BC9 | 3.564% | 8/25/33 | 89 | 90 | |||||||||||||
Wachovia Asset Securitization, Inc. 2002-HE1 | 3.684% | 9/27/32 | 163 | 163 | |||||||||||||
5,172 | |||||||||||||||||
Total Asset-Backed Securities (Identified Cost — $6,311) | 6,296 | ||||||||||||||||
Mortgage-Backed Securities — 14.6% | |||||||||||||||||
Fixed Rate Securities — 2.7% | |||||||||||||||||
Asset Securitization Corporation 1996-D2 | 6.920% | 2/14/29 | 64 | 65 | |||||||||||||
Banc of America Commercial Mortgage Incorporated 2005-3 | 4.668% | 7/10/43 | 500 | 502 | |||||||||||||
Countrywide Alternative Loan Trust 2004-2 CB | 4.250% | 3/25/34 | 361 | 359 | |||||||||||||
GS Mortgage Securities Corporation II 2005-GG4 | 4.680% | 7/10/39 | 200 | 202 | |||||||||||||
LB-UBS Commercial Mortgage Trust 2005-C3 A5 | 4.739% | 7/15/30 | 140 | 142 | |||||||||||||
LB-UBS Commercial Mortgage Trust 2005-C3 AAB | 4.664% | 7/15/30 | 200 | 202 | |||||||||||||
MASTR Reperforming Loan Trust 2005-1 | 7.000% | 8/25/34 | 364 | 384 |
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Mortgage-Backed Securities — Continued | |||||||||||||||||
Fixed Rate Securities — Continued | |||||||||||||||||
Washington Mutual MSC Mortgage Pass-Through Certificates, Series 2004-RA1 | 7.000% | 3/25/34 | $ | 128 | $ | 132 | |||||||||||
1,988 | |||||||||||||||||
Indexed SecuritiesA — 10.6% | |||||||||||||||||
ABFS Mortgage Loan Trust 2003-2 | 3.814% | 4/25/34 | 177 | 177 | B | ||||||||||||
Banc of America Funding Corporation 2005-E | 3.950% | 6/20/35 | 700 | 700 | |||||||||||||
Countrywide Alternative Loan Trust 2005-17 | 3.574% | 7/25/35 | 695 | 695 | |||||||||||||
Countrywide Home Loans 2005-11 | 3.614% | 3/25/35 | 543 | 543 | |||||||||||||
Countrywide Home Loans 2005-11 | 4.139% | 4/25/35 | 572 | 578 | |||||||||||||
Countrywide Home Loans 2005-3 | 3.604% | 4/25/35 | 563 | 565 | |||||||||||||
Countrywide Home Loans 2005-9 1A1 | 3.614% | 5/25/35 | 582 | 582 | |||||||||||||
Greenpoint Mortgage Funding Trust 2005-AR1 | 3.534% | 6/25/45 | 648 | 647 | |||||||||||||
Greenpoint Mortgage Funding Trust 2005-AR4 | 3.826% | 10/25/45 | 410 | 410 | |||||||||||||
GSMPS Mortgage Loan Trust 2005-RP2 | 3.664% | 3/25/35 | 413 | 414 | |||||||||||||
Harborview Mortgage Loan Trust 2005-7 | 4.365% | 6/19/45 | 700 | 707 | |||||||||||||
Impac CMB Trust 2003-7 | 3.634% | 8/25/33 | 428 | 429 | |||||||||||||
MSDWCC Heloc Trust 2005-1 | 3.504% | 7/25/17 | 96 | 96 | |||||||||||||
Thornburg Mortgage Securities Trust 2005-2 A1 | 3.460% | 7/25/45 | 300 | 300 |
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Mortgage-Backed Securities — Continued | |||||||||||||||||
Indexed Securities — Continued | |||||||||||||||||
Thornburg Mortgage Securities Trust 2005-2 A2 | 3.470% | 7/25/45 | $ | 300 | $ | 300 | |||||||||||
Washington Mutual Mortgage Securities Corporation 2005-AR6 | 3.355% | 4/25/45 | 600 | 598 | |||||||||||||
7,741 | |||||||||||||||||
Stripped Securities — 0.1% | |||||||||||||||||
Mach One Trust, Commercial Mortgage-Backed Securities 2004-1A | 1.630% | 5/28/40 | 1,294 | 83 | B,C1 | ||||||||||||
Variable Rate SecuritiesD — 1.2% | |||||||||||||||||
Bear Stearns ARM Trust, Mortgage Pass-Through Certificates, Series 2004-4 | 3.515% | 6/25/34 | 200 | 196 | |||||||||||||
Credit-Based Asset Servicing and Securitization 1999-3 | 6.670% | 2/3/29 | 51 | 51 | B | ||||||||||||
Washington Mutual Mortgage Pass Through Certificates 2005-AR8 | 3.650% | 7/25/45 | 600 | 600 | |||||||||||||
847 | |||||||||||||||||
Total Mortgage-Backed Securities (Identified Cost — $10,660) | 10,659 | ||||||||||||||||
U.S. Government and Agency Obligations — 41.1% | |||||||||||||||||
Fixed Rate Securities — 33.0% | |||||||||||||||||
Fannie Mae | 4.610% | 10/10/13 | 360 | 359 | |||||||||||||
Fannie Mae | 3.000% | 4/26/19 | 140 | 139 | |||||||||||||
United States Treasury Bonds | 6.250% | 8/15/23 | 150 | 187 | |||||||||||||
United States Treasury Bonds | 5.250% | 11/15/28 | 20 | 23 | |||||||||||||
United States Treasury Bonds | 5.250% | 2/15/29 | 240 | 274 | |||||||||||||
United States Treasury Bonds | 6.250% | 5/15/30 | 2,020 | 2,631 | |||||||||||||
United States Treasury Bonds | 5.375% | 2/15/31 | 2,040 | 2,407 |
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
U.S. Government and Agency Obligations — Continued | |||||||||||||||||
Fixed Rate Securities — Continued | |||||||||||||||||
United States Treasury Notes | 1.500% | 7/31/05 | $ | 110 | $ | 110 | |||||||||||
United States Treasury Notes | 1.875% | 12/31/05 | 70 | 70 | |||||||||||||
United States Treasury Notes | 1.500% | 3/31/06 | 40 | 39 | |||||||||||||
United States Treasury Notes | 2.750% | 6/30/06 | 4,780 | 4,743 | |||||||||||||
United States Treasury Notes | 2.875% | 11/30/06 | 740 | 733 | |||||||||||||
United States Treasury Notes | 3.000% | 12/31/06 | 6,970 | 6,906 | |||||||||||||
United States Treasury Notes | 3.125% | 1/31/07 | 390 | 387 | |||||||||||||
United States Treasury Notes | 3.625% | 4/30/07 | 150 | 150 | |||||||||||||
United States Treasury Notes | 3.125% | 5/15/07 | 100 | 99 | |||||||||||||
United States Treasury Notes | 3.375% | 2/15/08 | 3,160 | 3,137 | |||||||||||||
United States Treasury Notes | 3.750% | 5/15/08 | 200 | 200 | |||||||||||||
United States Treasury Notes | 3.625% | 6/15/10 | 450 | 448 | |||||||||||||
United States Treasury Notes | 4.000% | 2/15/15 | 120 | 120 | |||||||||||||
United States Treasury Notes | 4.125% | 5/15/15 | 930 | 944 | |||||||||||||
24,106 | |||||||||||||||||
Indexed SecuritiesE — 7.7% | |||||||||||||||||
United States Treasury Inflation-Protected Security | 3.375% | 1/15/07 | 2,517 | 2,597 | |||||||||||||
United States Treasury Inflation-Protected Security | 3.625% | 1/15/08 | 217 | 229 | |||||||||||||
United States Treasury Inflation-Protected Security | 3.875% | 1/15/09 | 261 | 284 | |||||||||||||
United States Treasury Inflation-Protected Security | 0.875% | 4/15/10 | 1,941 | 1,893 | |||||||||||||
United States Treasury Inflation-Protected Security | 3.375% | 1/15/12 | 77 | 86 | |||||||||||||
United States Treasury Inflation-Protected Security | 2.000% | 1/15/14 | 68 | 71 | |||||||||||||
United States Treasury Inflation-Protected Security | 1.625% | 1/15/15 | 20 | 20 |
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
U.S. Government and Agency Obligations — Continued | |||||||||||||||||
Indexed Securities — Continued | |||||||||||||||||
United States Treasury Inflation-Protected Security | 2.375% | 1/15/25 | $ | 382 | $ | 418 | |||||||||||
United States Treasury Inflation-Protected Security | 3.875% | 4/15/29 | 47 | 67 | |||||||||||||
5,665 | |||||||||||||||||
Stripped Securities — 0.4% | |||||||||||||||||
United States Treasury Bonds | 0.000% | 11/15/21 | 480 | 237 | C2 | ||||||||||||
United States Treasury Bonds | 0.000% | 2/15/23 | 50 | 23 | C2 | ||||||||||||
United States Treasury Bonds | 0.000% | 11/15/27 | 100 | 38 | C2 | ||||||||||||
298 | |||||||||||||||||
Total U.S. Government and Agency Obligations (Identified Cost — $29,745) | 30,069 | ||||||||||||||||
U.S. Government Agency Mortgage-Backed Securities — 32.2% | |||||||||||||||||
Fixed Rate Securities — 32.2% | |||||||||||||||||
Fannie Mae | 5.500% | 7/1/15 to 7/1/35 | 4,400 | 4,418 | F | ||||||||||||
Fannie Mae | 6.000% | 8/1/17 to 5/1/34 | 767 | 789 | |||||||||||||
Fannie Mae | 5.500% | 12/1/17 to 5/1/34 | 597 | 607 | |||||||||||||
Fannie Mae | 5.500% | 7/1/35 | 3,950 | 4,003 | F | ||||||||||||
Fannie Mae | 6.000% | 7/1/35 | 6,100 | 6,252 | F | ||||||||||||
Fannie Mae | 6.500% | 7/1/35 | 3,050 | 3,156 | F | ||||||||||||
Freddie Mac | 4.500% | 4/1/19 | 352 | 350 | |||||||||||||
Freddie Mac | 5.000% | 7/1/15 | 1,300 | 1,314 | F | ||||||||||||
Government National Mortgage Association | 6.000% | 11/15/28 to 12/15/33 | 1,099 | 1,134 | |||||||||||||
Government National Mortgage Association | 6.500% | 2/15/32 | 473 | 495 | |||||||||||||
Government National Mortgage Association | 5.000% | 8/15/33 to 5/15/34 | 1,014 | 1,023 | |||||||||||||
23,541 | |||||||||||||||||
Total U.S. Government Agency Mortgage-Backed Securities (Identified Cost — $23,558) | 23,541 | ||||||||||||||||
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Yankee BondsG — 5.8% | |||||||||||||||||
Cable — 0.1% | |||||||||||||||||
Rogers Cable Inc. | 5.500% | 3/15/14 | $ | 90 | $ | 85 | |||||||||||
Foreign Governments — 2.7% | |||||||||||||||||
Russian Federation | 5.000% | 3/31/30 | 860 | 960 | H | ||||||||||||
United Mexican States | 8.375% | 1/14/11 | 170 | 198 | |||||||||||||
United Mexican States | 8.300% | 8/15/31 | 120 | 149 | |||||||||||||
United Mexican States | 7.500% | 4/8/33 | 588 | 675 | |||||||||||||
1,982 | |||||||||||||||||
Investment Banking/Brokerage — 0.2% | |||||||||||||||||
BNP Paribas SA | 6.875% | 3/1/09 | 110 | 120 | |||||||||||||
Manufacturing (Diversified) — 2.2% | |||||||||||||||||
Tyco International Group SA | 6.375% | 10/15/11 | 45 | 49 | |||||||||||||
Tyco International Group SA | 6.000% | 11/15/13 | 100 | 109 | |||||||||||||
Tyco International Group SA | 6.875% | 1/15/29 | 1,195 | 1,426 | |||||||||||||
1,584 | |||||||||||||||||
Special Purpose — 0.3% | |||||||||||||||||
Apache Finance Canada Corporation | 4.375% | 5/15/15 | 60 | 60 | |||||||||||||
Banagricola DPR Funding Ltd. | 4.440% | 3/15/10 | 159 | 159 | A,B | ||||||||||||
Deutsche Telekom International Finance BV | 5.250% | 7/22/13 | 40 | 41 | |||||||||||||
260 | |||||||||||||||||
Telecommunications — 0.3% | |||||||||||||||||
British Telecommunications plc | 8.380% | 12/15/10 | 100 | 119 | |||||||||||||
INTELSAT | 6.500% | 11/1/13 | 10 | 8 | |||||||||||||
Telecom Italia Capital S.p.A. | 4.950% | 9/30/14 | 70 | 69 | B | ||||||||||||
196 | |||||||||||||||||
Total Yankee Bonds (Identified Cost — $3,927) | 4,227 | ||||||||||||||||
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Municipal Bonds — 0.5% | |||||||||||||||||
Brazos Texas Higher Education Authority, Inc. 2005-1 VRDN | 3.033% | 6/15/42 | $ | 400 | $ | 400A | |||||||||||
Preferred Stocks — 0.8% | |||||||||||||||||
Fannie Mae | 5.380% | 1 | shs | 290 | I | ||||||||||||
Fannie Mae | 7.000% | 3 | 164 | A | |||||||||||||
General Motors Corporation | 5.250% | 8 | 154 | I | |||||||||||||
Total Preferred Stocks (Identified Cost — $584) | 608 | ||||||||||||||||
Total Long-Term Securities (Identified Cost — $90,256) | 90,958 | ||||||||||||||||
Short-Term Securities — 3.7% | |||||||||||||||||
U.S. Government and Agency Obligations — 0.5% | |||||||||||||||||
Fannie Mae | 0.000% | 12/5/05 | $ | 342 | 337 | J,K | |||||||||||
Options PurchasedL — 0.1% | |||||||||||||||||
Eurodollar Futures Call, October 2005, Strike Price $95.50 | 5 | M | 8 | ||||||||||||||
Eurodollar Futures Call, October 2005, Strike Price $95.75 | 4 | M | 4 | ||||||||||||||
Eurodollar Futures Call, October 2005, Strike Price $96.00 | 51 | M | 22 | ||||||||||||||
Eurodollar Futures Call, October 2005, Strike Price $96.25 | 1 | M | 0.1 | ||||||||||||||
Eurodollar Futures Call, October 2005, Strike Price $96.25 | 5 | M | 0.8 | ||||||||||||||
Eurodollar Futures Call, October 2005, Strike Price $96.50 | 5 | M | 0.1 | ||||||||||||||
Eurodollar Futures Call, April 2006, Strike Price $95.00 | 15 | M | 38 | ||||||||||||||
Eurodollar Futures Call, April 2006, Strike Price $96.25 | 11 | M | 3 | ||||||||||||||
Eurodollar Futures Put, October 2005, Strike Price $95.00 | 65 | M | — | ||||||||||||||
Eurodollar Futures Put, October 2005, Strike Price $96.50 | 1 | M | 1 | ||||||||||||||
Eurodollar Futures Put, April 2006, Strike Price $96.00 | 11 | M | 5 | ||||||||||||||
Eurodollar Futures Put, July 2006, Strike Price $94.00 | 4 | M | — | ||||||||||||||
Federal fund Futures Call, August 2006, Strike Price $96.75 | 7 | M | 0.1 | ||||||||||||||
U.S. Treasury Bond Futures Call, September 2005, Strike Price $116.00 | 1 | M | 3 | ||||||||||||||
U.S. Treasury Bond Futures Call, September 2005, Strike Price $118.00 | 2 | M | 4 |
Par/ | ||||||||||||||||
Shares | Value | |||||||||||||||
Options Purchased — Continued | ||||||||||||||||
U.S. Treasury Note Futures Call, July 2005, Strike Price $101.45 | 180,000 | M | $ | 0.5 | ||||||||||||
U.S. Treasury Note Futures Put, September 2005, Strike Price $104.00 | 59 | M | 0.9 | |||||||||||||
U.S. Treasury Note Futures Put, September 2005, Strike Price $113.00 | 14 | M | 10 | |||||||||||||
101 | ||||||||||||||||
Repurchase Agreements — 3.1% | ||||||||||||||||
Merrill Lynch Government Securities, Inc. 3.2%, dated 6/30/05, to be repurchased at $1,132 on 7/1/05 (Collateral: $1,035 Freddie Mac notes, 6.625%, due 9/15/09, value $1,179) | $ | 1,132 | 1,132 | |||||||||||||
Nomura Securities International, Inc. 3.33%, dated 6/30/05, to be repurchased at $1,132 on 7/1/05 (Collateral: $895 Fannie Mae mortgage-backed securities, 6.625%, due 11/15/30, value $1,141) | 1,132 | 1,132 | ||||||||||||||
2,264 | ||||||||||||||||
Total Short-Term Securities (Identified Cost — $2,757) | 2,702 | |||||||||||||||
Total Investments — 128.0% (Identified Cost — $93,013) | 93,660 | |||||||||||||||
Other Assets Less Liabilities — (28.0)% | (20,504 | ) | ||||||||||||||
Net Assets — 100.0% | $ | 73,156 | ||||||||||||||
Actual | Appreciation/ | ||||||||||||
Expiration | Contracts | (Depreciation) | |||||||||||
Futures Contracts PurchasedL | |||||||||||||
Eurodollar Futures | September 2005 | 76 | $ | (48 | ) | ||||||||
Eurodollar Futures | December 2005 | 7 | (5 | ) | |||||||||
Eurodollar Futures | March 2006 | 2 | 1 | ||||||||||
Eurodollar Futures | June 2006 | 47 | 42 | ||||||||||
U.S. Treasury Note Futures | September 2005 | 91 | 29 | ||||||||||
19 | |||||||||||||
Futures Contracts WrittenL | |||||||||||||
U.S. Treasury Bond Futures | September 2005 | 52 | (19 | ) | |||||||||
U.S. Treasury Note Futures | September 2005 | 29 | (42 | ) | |||||||||
(61 | ) | ||||||||||||
Option WrittenL | |||||||||||||
Federal Fund Futures Call, Strike Price $101.41 | July 2005 | 600,000 | 1 | ||||||||||
U.S. Treasury Bond Futures Call, Strike Price $112.00 | September 2005 | 2 | (10 | ) | |||||||||
U.S. Treasury Bond Futures Call, Strike Price $115.00 | September 2005 | 7 | (24 | ) | |||||||||
U.S. Treasury Bond Futures Call, Strike Price $120.00 | September 2005 | 8 | 1 | ||||||||||
U.S. Treasury Bond Futures Put, Strike Price $110.00 | September 2005 | 6 | 6 | ||||||||||
U.S. Treasury Bond Futures Put, Strike Price $111.00 | September 2005 | 14 | 11 | ||||||||||
U.S. Treasury Bond Futures Put, Strike Price $113.00 | September 2005 | 8 | 5 | ||||||||||
U.S. Treasury Bond Futures Put, Strike Price $113.00 | September 2005 | 4 | N.M. | ||||||||||
U.S. Treasury Bond Futures Put, Strike Price $115.00 | September 2005 | 13 | 5 | ||||||||||
U.S. Treasury Bond Futures Put, Strike Price $117.00 | September 2005 | 4 | 1 | ||||||||||
U.S. Treasury Note Futures Call, Strike Price $114.00 | August 2005 | 9 | 2 | ||||||||||
U.S. Treasury Note Futures Call, Strike Price $111.00 | September 2005 | 37 | (70 | ) | |||||||||
U.S. Treasury Note Futures Call, Strike Price $112.00 | September 2005 | 26 | (22 | ) | |||||||||
U.S. Treasury Note Futures Call, Strike Price $113.00 | September 2005 | 14 | (4 | ) |
Actual | Appreciation/ | ||||||||||||
Expiration | Contracts | (Depreciation) | |||||||||||
Option Written — Continued | |||||||||||||
U.S. Treasury Note Futures Call, Strike Price $114.00 | September 2005 | 22 | $ | 1 | |||||||||
U.S. Treasury Note Futures Call, Strike Price $115.00 | September 2005 | 25 | 4 | ||||||||||
U.S. Treasury Note Futures Put, Strike Price $106.00 | September 2005 | 2 | 1 | ||||||||||
U.S. Treasury Note Futures Put, Strike Price $107.00 | September 2005 | 7 | 3 | ||||||||||
U.S. Treasury Note Futures Put, Strike Price $107.50 | September 2005 | 10 | 4 | ||||||||||
U.S. Treasury Note Futures Put, Strike Price $108.50 | September 2005 | 21 | 4 | ||||||||||
U.S. Treasury Note Futures Put, Strike Price $109.00 | September 2005 | 4 | 2 | ||||||||||
U.S. Treasury Note Futures Put, Strike Price $111.00 | December 2005 | 6 | N.M. | ||||||||||
$ | (79 | ) | |||||||||||
A | Indexed Security — The rates of interest earned on these securities are tied to the London Interbank Offered Rate (“LIBOR”) or the one year Treasury Bill Constant Maturity Rate. The coupon rates are the rates as of June 30, 2005. |
B | Rule 144a Security — A security purchased pursuant to Rule 144a under the Securities Act of 1933 which may not be resold subject to that rule except to qualified institutional buyers. These securities represent 3.9% of net assets. |
C | Stripped security — Security with interest-only or principal-only payment streams, denoted by a 1 or 2 respectively. For interest-only securities, the amount shown as principal is the notional balance used to calculate the amount of interest due. |
D | The coupon rates shown on variable rate securities are the rates at June 30, 2005. These rates vary with the weighted average coupon of the underlying loans. |
E | Inflation-Protected Securities — Security whose principal value is adjusted daily or monthly in accordance with changes to the Consumer Price Index for All Urban Consumers. Interest is calculated on the basis of the current adjusted principal value. |
F | When-issued security — Security purchased on a delayed delivery basis. Final settlement amount and maturity have not yet been announced. |
G | Yankee Bond — A dollar-denominated bond issued in the U.S. by foreign entities. |
H | Stepped coupon security — A security with a predetermined schedule of interest or dividend rate changes, at which time it begins to accrue interest or pay dividends. |
I | Convertible Security — Security may be converted into issuer’s common stock. |
J | Zero coupon bond — A bond with no periodic interest payments which is sold at such a discount as to produce a current yield to maturity. |
K | Collateral to cover options and futures contracts. |
L | Options and futures are described in more detail in the notes to financial statements. |
M | Par represents actual number of contracts. |
N.M. — Not meaningful.
See notes to financial statements.
Statement of Assets and Liabilities
Core Bond Fund
Assets: | |||||||
Investment securities at market value (Identified Cost – $90,256) | $90,958 | ||||||
Short-term securities at value (Identified Cost – $2,757) | 2,702 | ||||||
Cash | 372 | ||||||
Receivable for securities sold | 285 | ||||||
Receivable for fund shares sold | 321 | ||||||
Interest and dividends receivable | 566 | ||||||
Other assets | 7 | ||||||
Total assets | 95,211 | ||||||
Liabilities: | |||||||
Proceeds from options written (Identified Cost – $183) | $ | 262 | |||||
Payable for fund shares repurchased | 430 | ||||||
Payable for securities purchased | 21,172 | ||||||
Income distribution payable | 109 | ||||||
Futures variation margin payable | 19 | ||||||
Accrued management fee | — | A | |||||
Accrued distribution and service fees | 30 | ||||||
Accrued expenses | 33 | ||||||
Total liabilities | 22,055 | ||||||
Net Assets | $73,156 | ||||||
Net assets consist of: | |||||||
Accumulated paid-in capital applicable to: | |||||||
7,337 Primary Class shares outstanding | $72,779 | ||||||
Under/(over) distributed net investment income | (30) | ||||||
Accumulated net realized loss on investments, options, and futures | (119) | ||||||
Unrealized appreciation of investments, options and futures | 526 | ||||||
Net Assets | $73,156 | ||||||
Net Asset Value Per Share: | |||||||
Primary Class | $9.97 | ||||||
A | Amounts less than $1. |
Statement of Operations
Core Bond Fund
Investment Income: | |||||||||||
Interest | $ | 1,347 | |||||||||
Dividends | 11 | ||||||||||
Total income | $ | 1,358 | |||||||||
Expenses: | |||||||||||
Management fees | 156 | ||||||||||
Distribution and service fees | 174 | ||||||||||
Audit and legal fees | 24 | ||||||||||
Custodian fees | 49 | ||||||||||
Directors’ fees and expenses | 7 | ||||||||||
Registration fees | 8 | ||||||||||
Reports to shareholders | 13 | ||||||||||
Transfer agent and shareholder servicing expense | 23 | ||||||||||
Other expenses | 2 | ||||||||||
456 | |||||||||||
Less: Fees waived | (108 | ) | |||||||||
Compensating balance credits | — | A | |||||||||
Total expenses, net of waivers and compensating balance credits | 348 | ||||||||||
Net Investment Income | 1,010 | ||||||||||
Net Realized and Unrealized Gain/(Loss) on Investments: | |||||||||||
Realized gain/(loss) on: | |||||||||||
Investments | 103 | ||||||||||
Options | 41 | ||||||||||
Futures | (258 | ) | |||||||||
(114 | ) | ||||||||||
Change in unrealized appreciation/(depreciation) of investments, options and futures | 293 | ||||||||||
Net Realized and Unrealized Gain/(Loss) on Investments | 179 | ||||||||||
Change in Net Assets Resulting From Operations | $ | 1,189 | |||||||||
A | Amounts less than $1. |
See notes to financial statements.
Statement of Changes in Net Assets
Core Bond Fund
For the Six | For the | |||||||||
Months Ended | Period Ended | |||||||||
6/30/05 | 12/31/04A | |||||||||
(Unaudited) | ||||||||||
Change in Net Assets: | ||||||||||
Net investment income | $ | 1,010 | $ | 951 | ||||||
Net realized gain/(loss) on investments, options and futures | (114 | ) | 238 | |||||||
Change in unrealized appreciation/(depreciation) of investments, options, and futures | 293 | 233 | ||||||||
Change in net assets resulting from operations | 1,189 | 1,422 | ||||||||
Distributions to shareholders: | ||||||||||
From net investment income: | ||||||||||
Primary Class | (1,040 | ) | (1,051 | ) | ||||||
From net realized gain on investments: | ||||||||||
Primary Class | (11 | ) | (132 | ) | ||||||
Change in net assets from Fund share transactions: | ||||||||||
Primary Class | 9,245 | 63,534 | ||||||||
Change in net assets | 9,383 | 63,773 | ||||||||
Net Assets: | ||||||||||
Beginning of period | 63,773 | — | ||||||||
End of period | $ | 73,156 | $ | 63,773 | ||||||
Under/(over) distributed net investment income | $ | (30 | ) | $ | — | |||||
A | February 27, 2004 (commencement of operations) to December 31, 2004. |
See notes to financial statements.
Financial Highlights
Core Bond Fund
Contained below is per share operating performance data for a share of common stock outstanding, total investment return, ratios to average net assets and other supplemental data. This information has been derived from information provided in the financial statements.
Primary Class:
Six Months Ended | Period Ended | ||||||||
June 30, 2005 | December 31, 2004A | ||||||||
(Unaudited) | |||||||||
Net asset value, beginning of period | $ | 9.95 | $ | 10.00 | |||||
Investment operations: | |||||||||
Net investment income | .14 | .21 | B | ||||||
Net realized and unrealized gain/(loss) on investments | .03 | (.03 | ) | ||||||
Total from investment operations | .17 | .18 | |||||||
Distributions: | |||||||||
From net investment income | (.15 | ) | (.21 | ) | |||||
From net realized gain on investments | (.002 | ) | (.02 | ) | |||||
Total distributions | (.152 | ) | (.23 | ) | |||||
Net asset value, end of period | $ | 9.97 | $ | 9.95 | |||||
Ratios/supplemental data: | |||||||||
Total return | 1.70% | C | 1.90% | C | |||||
Expenses to average net assets | 1.00% | B,D | 1.00% | B,D | |||||
Net investment income to average net assets | 2.91% | B,D | 2.50% | B,D | |||||
Portfolio turnover rate | 193.9% | C | 233.8% | C | |||||
Net assets, end of period (in thousands) | $ | 73,156 | $63,773 | ||||||
A | February 27, 2004 (commencement of operations) to December 31, 2004. |
B | Net of fees waived by LMFA for expenses in excess of the voluntary expense limitation of 1.00% until April 30, 2006. If no fees had been waived by LMFA, the annualized ratio of expenses to daily average net assets would have been as follows: for the six months ended June 30, 2005, 1.31%; and for the period ended December 31, 2004, 1.56%. |
C | Not annualized. |
D | Annualized. |
See notes to financial statements.
High Yield Portfolio
As a shareholder of the Fund, you incur ongoing costs, including management fees, distribution and service (12b-1) fees on Primary Class shares; and other Fund expenses. These examples are 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. Each example is based on an investment of $1,000 invested on January 1, 2005, and held through June 30, 2005.
Actual Expenses
The first line for each class in the table below provides information about actual account values and actual expenses for each class. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each class in the table below provides information about hypothetical account values and hypothetical expenses based on the relevant class’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the class’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 this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare these 5% hypothetical examples with the 5% hypothetical examples for the relevant class that appear in the shareholder reports of other funds.
Beginning | Ending | Expenses PaidA | |||||||||||
Account | Account | During the | |||||||||||
Value | Value | Period | |||||||||||
1/1/05 | 6/30/05 | 1/1/05 to 6/30/05 | |||||||||||
Primary Class: | |||||||||||||
Actual | $ | 1,000.00 | $ | 1,004.10 | $ | 6.81 | |||||||
Hypothetical (5% return before expenses) | 1,000.00 | 1,018.00 | 6.85 | ||||||||||
Institutional Class: | |||||||||||||
Actual | $ | 1,000.00 | $ | 1,006.80 | $ | 4.03 | |||||||
Hypothetical (5% return before expenses) | 1,000.00 | 1,020.78 | 4.06 |
A | These calculations are based on expenses incurred in the most recent fiscal half-year. The dollar amounts shown as “Expenses Paid” are equal to the annualized expense ratios of 1.37% and 0.81% for the Primary Class and Institutional Class, respectively, multiplied by the average value over the period, multiplied by the number of days in the most recent fiscal half-year (181), and divided by 365. |
Performance Information
High Yield Portfolio
The graphs on the following pages compare the Fund’s total returns to that of a closely matched broad-based securities market index. The graphs illustrate the cumulative total return of an initial $10,000 investment in the Primary Class and an initial $1,000,000 investment in the Institutional Class of the Fund, for the periods indicated. The lines for the Fund represent the total return after deducting all Fund investment management and other administrative expenses and the transaction costs of buying and selling securities. The line representing the securities market index does not include any transaction costs associated with buying and selling securities in the index or other administrative expenses. Both the Fund’s and the index’s results assume reinvestment of all dividends and distributions.
Growth of a $10,000 Investment — Primary Class
Periods Ended June 30, 2005
Cumulative | Average Annual | |||||||||
Total Return | Total Return | |||||||||
One Year | +10.04% | +10.04% | ||||||||
Five Years | +11.54% | +2.21% | ||||||||
Ten Years | +65.84% | +5.19% | ||||||||
The performance data quoted represents past performance and does not guarantee future results. The performance stated may have been due to extraordinary market conditions, which may not be duplicated in the future. Current performance may be lower or higher than the performance data quoted. To obtain the most recent month-end performance information please visit www.leggmasonfunds.com. The investment return and principal value of the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Calculations assume reinvestment of dividends and capital gain distributions. Performance would have been lower if fees had not been waived in various periods.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
A | A market value-weighted index that tracks the daily price-only, coupon, and total return performance of non-investment grade, fixed rate, publicly placed, dollar-denominated, and non-convertible debt registered with the U.S. Securities and Exchange Commission. |
Growth of a $1,000,000 Investment — Institutional Class
Periods Ended June 30, 2005
Cumulative | Average Annual | |||||||||
Total Return | Total Return | |||||||||
One Year | +10.65% | +10.65% | ||||||||
Five Years | +13.64% | +2.59% | ||||||||
Life of Class* | +11.91% | +1.59% | ||||||||
*Inception date: May 5, 1998 | ||||||||||
The performance data quoted represents past performance and does not guarantee future results. The performance stated may have been due to extraordinary market conditions, which may not be duplicated in the future. Current performance may be lower or higher than the performance data quoted. To obtain the most recent month-end performance information please call 1-888-425-6432. The investment return and principal value of the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Calculations assume reinvestment of dividends and capital gain distributions. Performance would have been lower if fees had not been waived in various periods.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
B | Index returns are for periods beginning April 30, 1998. |
Standard & Poor’s Debt RatingsC (As a percentage of the portfolio)
Maturity Schedule (As a percentage of the portfolio)
C | Standard & Poor’s Ratings Services provides capital markets with credit ratings for the evaluation and assessment of credit risk. |
Portfolio of Investments
High Yield Portfolio
June 30, 2005 (Unaudited)
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Long-Term Securities — 98.7% | |||||||||||||||||
Corporate Bonds and Notes — 87.7% | |||||||||||||||||
Advertising — 0.7% | |||||||||||||||||
WDAC Subsidiary Corp. | 8.375% | 12/1/14 | $ | 1,350 | $ | 1,289 | A | ||||||||||
Apparel — 1.4% | |||||||||||||||||
Levi Strauss & Co. | 9.750% | 1/15/15 | 900 | 893 | |||||||||||||
Oxford Industries, Inc. | 8.875% | 6/1/11 | 891 | 954 | |||||||||||||
Russell Corporation | 9.250% | 5/1/10 | 858 | 905 | |||||||||||||
2,752 | |||||||||||||||||
Auto and Automotive Parts — 2.7% | |||||||||||||||||
Commercial Vehicle Group, Inc. | 8.000% | 7/1/13 | 530 | 539 | A | ||||||||||||
Delphi Corporation | 6.550% | 6/15/06 | 590 | 574 | |||||||||||||
Keystone Automotive Operations Inc. | 9.750% | 11/1/13 | 1,880 | 1,861 | |||||||||||||
Visteon Corporation | 8.250% | 8/1/10 | 2,410 | 2,229 | |||||||||||||
5,203 | |||||||||||||||||
Automotive Retailers — 1.0% | |||||||||||||||||
Asbury Automotive Group Inc. | 9.000% | 6/15/12 | 1,896 | 1,939 | |||||||||||||
Banking and Finance — 3.4% | |||||||||||||||||
General Motors Acceptance Corporation | 7.750% | 1/19/10 | 1,090 | 1,066 | |||||||||||||
General Motors Acceptance Corporation | 6.875% | 8/28/12 | 980 | 897 | |||||||||||||
General Motors Acceptance Corporation | 8.000% | 11/1/31 | 3,100 | 2,766 | |||||||||||||
Refco Finance Holdings | 9.000% | 8/1/12 | 1,660 | 1,759 | |||||||||||||
6,488 | |||||||||||||||||
Building Materials — 2.6% | |||||||||||||||||
Associated Materials Incorporated | 0.000% | 3/1/14 | 2,420 | 1,537 | B | ||||||||||||
Compression Polymers Holdings LLC | 10.500% | 7/1/13 | 120 | 121 | |||||||||||||
Interface, Inc. | 7.300% | 4/1/08 | 402 | 410 | |||||||||||||
Interface, Inc. | 10.375% | 2/1/10 | 1,333 | 1,467 | |||||||||||||
Nortek, Inc. | 8.500% | 9/1/14 | 370 | 344 | |||||||||||||
NTK Holdings Inc. | 0.000% | 3/1/14 | 2,560 | 1,203 | A,B | ||||||||||||
5,082 | |||||||||||||||||
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Corporate Bonds and Notes — Continued | |||||||||||||||||
Cable — 3.9% | |||||||||||||||||
Charter Communications Holdings, LLC | 9.625% | 11/15/09 | $ | 1,400 | $ | 1,047 | |||||||||||
Charter Communications Holdings, LLC | 10.250% | 9/15/10 | 1,455 | 1,471 | |||||||||||||
Charter Communications Holdings, LLC | 0.000% | 5/15/11 | 1,250 | 828 | B | ||||||||||||
CSC Holdings Inc. | 8.125% | 8/15/09 | 430 | 435 | |||||||||||||
CSC Holdings Inc. | 7.625% | 4/1/11 | 165 | 163 | |||||||||||||
CSC Holdings Inc. | 7.000% | 4/15/12 | 170 | 160 | A | ||||||||||||
CSC Holdings Inc. | 7.625% | 7/15/18 | 946 | 913 | |||||||||||||
EchoStar DBS Corporation | 6.754% | 10/1/08 | 450 | 460 | C | ||||||||||||
EchoStar DBS Corporation | 6.625% | 10/1/14 | 1,200 | 1,185 | |||||||||||||
LodgeNet Entertainment Corporation | 9.500% | 6/15/13 | 882 | 961 | |||||||||||||
7,623 | |||||||||||||||||
Casino Resorts — 2.3% | |||||||||||||||||
Inn of The Mountain Gods Resort and Casino | 12.000% | 11/15/10 | 1,950 | 2,252 | |||||||||||||
Premier Entertainment Biloxi LLC | 10.750% | 2/1/12 | 2,091 | 2,028 | |||||||||||||
Station Casinos, Inc. | 6.875% | 3/1/16 | 90 | 93 | |||||||||||||
4,373 | |||||||||||||||||
Chemicals — 1.2% | |||||||||||||||||
Georgia Gulf Corporation | 7.625% | 11/15/05 | 6 | 6 | |||||||||||||
Innophos, Inc. | 8.875% | 8/15/14 | 540 | 551 | A | ||||||||||||
MacDermid, Incorporated | 9.125% | 7/15/11 | 22 | 24 | |||||||||||||
PQ Corporation | 7.500% | 2/15/13 | 710 | 697 | A | ||||||||||||
Westlake Chemical Corporation | 8.750% | 7/15/11 | 1,032 | 1,122 | |||||||||||||
2,400 | |||||||||||||||||
Coal — 0.8% | |||||||||||||||||
Alpha Natural Resources LLC | 10.250% | 6/1/12 | 1,360 | 1,503 | A | ||||||||||||
Computer Services and Systems — 0.4% | |||||||||||||||||
Activant Solutions, Inc. | 9.504% | 4/1/10 | 580 | 600 | A,C | ||||||||||||
Activant Solutions, Inc. | 10.500% | 6/15/11 | 200 | 217 | |||||||||||||
817 | |||||||||||||||||
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Corporate Bonds and Notes — Continued | |||||||||||||||||
Containers and Packaging — 1.9% | |||||||||||||||||
Graham Packaging Company, Inc. | 9.875% | 10/15/14 | $ | 1,520 | $ | 1,524 | A | ||||||||||
Graphic Packaging International Corp. | 9.500% | 8/15/13 | 1,160 | 1,169 | |||||||||||||
Portola Packaging, Inc. | 8.250% | 2/1/12 | 740 | 503 | |||||||||||||
Solo Cup Company | 8.500% | 2/15/14 | 550 | 514 | |||||||||||||
3,710 | |||||||||||||||||
Electric — 1.1% | |||||||||||||||||
The AES Corporation | 7.750% | 3/1/14 | 940 | 1,020 | |||||||||||||
The AES Corporation | 9.000% | 5/15/15 | 943 | 1,058 | A | ||||||||||||
2,078 | |||||||||||||||||
Electronics — 0.7% | |||||||||||||||||
Rayovac Corporation | 8.500% | 10/1/13 | 960 | 1,003 | |||||||||||||
Rayovac Corporation | 7.375% | 2/1/15 | 370 | 358 | A | ||||||||||||
1,361 | |||||||||||||||||
Energy — 3.1% | |||||||||||||||||
Calpine Generating Co., LLC | 11.500% | 4/1/11 | 270 | 242 | |||||||||||||
Calpine Generating Co., LLC | 12.390% | 4/1/11 | 60 | 54 | C | ||||||||||||
Elwood Energy LLC | 8.159% | 7/5/26 | 1,780 | 2,007 | |||||||||||||
Midwest Generation LLC | 8.560% | 1/2/16 | 1,639 | 1,807 | |||||||||||||
NRG Energy, Inc. | 8.000% | 12/15/13 | 317 | 335 | A | ||||||||||||
Reliant Energy Inc. | 6.750% | 12/15/14 | 1,670 | 1,632 | |||||||||||||
6,077 | |||||||||||||||||
Entertainment — 0.4% | |||||||||||||||||
Cinemark, Inc. | 0.000% | 3/15/14 | 780 | 519 | B | ||||||||||||
Warner Music Group | 7.375% | 4/15/14 | 350 | 353 | |||||||||||||
872 | |||||||||||||||||
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Corporate Bonds and Notes — Continued | |||||||||||||||||
Environmental Services — 1.2% | |||||||||||||||||
Allied Waste North America Incorporated | 8.500% | 12/1/08 | $ | 864 | $ | 906 | |||||||||||
Browning-Ferris Industries, Inc. | 9.250% | 5/1/21 | 440 | 446 | |||||||||||||
Capital Environment Resource, Inc. | 9.500% | 4/15/14 | 1,010 | 1,000 | A | ||||||||||||
2,352 | |||||||||||||||||
Food, Beverage and Tobacco — 1.2% | |||||||||||||||||
Alliance One International, Inc. | 11.000% | 5/15/12 | 130 | 134 | A | ||||||||||||
Domino’s, Inc. | 8.250% | 7/1/11 | 974 | 1,037 | |||||||||||||
R.J. Reynolds Tobacco Holdings, Inc. | 6.500% | 7/15/10 | 580 | 578 | A | ||||||||||||
Stater Bros. Holdings Inc. | 6.910% | 6/15/10 | 640 | 634 | C | ||||||||||||
2,383 | |||||||||||||||||
Gaming — 0.9% | |||||||||||||||||
River Rock Entertainment Authority | 9.750% | 11/1/11 | 1,510 | 1,657 | |||||||||||||
Gas and Pipeline Utilities — 3.5% | |||||||||||||||||
ANR Pipeline, Inc. | 9.625% | 11/1/21 | 477 | 605 | |||||||||||||
Dynegy Holdings Inc. | 8.750% | 2/15/12 | 600 | 654 | |||||||||||||
Dynegy Holdings Inc. | 10.125% | 7/15/13 | 1,470 | 1,661 | A | ||||||||||||
Southern Natural Gas Company | 8.875% | 3/15/10 | 678 | 744 | |||||||||||||
The Williams Companies, Inc. | 7.500% | 1/15/31 | 440 | 476 | |||||||||||||
The Williams Companies, Inc. | 8.750% | 3/15/32 | 2,141 | 2,572 | |||||||||||||
6,712 | |||||||||||||||||
Health Care — 3.2% | |||||||||||||||||
Ardent Health Services | 10.000% | 8/15/13 | 2,000 | 2,418 | |||||||||||||
Tenet Healthcare Corporation | 9.875% | 7/1/14 | 2,417 | 2,592 | |||||||||||||
Tenet Healthcare Corporation | 9.250% | 2/1/15 | 1,170 | 1,214 | A | ||||||||||||
6,224 | |||||||||||||||||
Machinery — 2.0% | |||||||||||||||||
Case New Holland Incorporated | 9.250% | 8/1/11 | 1,508 | 1,583 | A | ||||||||||||
Case New Holland Incorporated | 9.250% | 8/1/11 | 152 | 160 | A |
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Corporate Bonds and Notes — Continued | |||||||||||||||||
Machinery — Continued | |||||||||||||||||
Grant Prideco, Inc. | 9.000% | 12/15/09 | $ | 1,057 | $ | 1,158 | |||||||||||
Terex Corporation | 7.375% | 1/15/14 | 890 | 921 | |||||||||||||
3,822 | |||||||||||||||||
Manufacturing (Diversified) — 2.3% | |||||||||||||||||
Jacuzzi Brands Incorporated | 9.625% | 7/1/10 | 1,644 | 1,800 | |||||||||||||
Ki Holdings Inc. | 0.000% | 11/15/14 | 1,160 | 673 | B | ||||||||||||
Koppers Inc. | 9.875% | 10/15/13 | 690 | 745 | |||||||||||||
MMI Products, Inc. | 11.250% | 4/15/07 | 230 | 227 | |||||||||||||
Samsonite Corporation | 8.875% | 6/1/11 | 960 | 1,020 | |||||||||||||
4,465 | |||||||||||||||||
Media — 1.7% | |||||||||||||||||
Emmis Operating Company | 6.875% | 5/15/12 | 450 | 445 | |||||||||||||
Paxson Communications Corporation | 10.750% | 7/15/08 | 245 | 241 | |||||||||||||
Paxson Communications Corporation | 0.000% | 1/15/09 | 25 | 24 | B | ||||||||||||
PRIMEDIA Inc. | 8.638% | 5/15/10 | 1,155 | 1,207 | C | ||||||||||||
PRIMEDIA Inc. | 8.875% | 5/15/11 | 140 | 147 | |||||||||||||
Sinclair Broadcast Group, Inc. | 8.750% | 12/15/11 | 940 | 987 | |||||||||||||
Sinclair Broadcast Group, Inc. | 8.000% | 3/15/12 | 210 | 215 | |||||||||||||
3,266 | |||||||||||||||||
Medical Care Facilities — 2.6% | |||||||||||||||||
Community Health Systems Inc. | 6.500% | 12/15/12 | 590 | 600 | |||||||||||||
DaVita, Inc. | 6.625% | 3/15/13 | 140 | 145 | A | ||||||||||||
DaVita, Inc. | 7.250% | 3/15/15 | 1,250 | 1,284 | A | ||||||||||||
HCA, Inc. | 9.000% | 12/15/14 | 470 | 563 | |||||||||||||
HCA, Inc. | 7.690% | 6/15/25 | 480 | 515 | |||||||||||||
HCA, Inc. | 7.500% | 11/6/33 | 120 | 129 | |||||||||||||
HEALTHSOUTH Corporation | 10.750% | 10/1/08 | 740 | 770 | |||||||||||||
Select Medical Corporation | 7.625% | 2/1/15 | 950 | 940 | A | ||||||||||||
4,946 | |||||||||||||||||
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Corporate Bonds and Notes — Continued | |||||||||||||||||
Medical Products — 0.4% | |||||||||||||||||
Fresenius Medical Care Capital Trust II | 7.875% | 2/1/08 | $ | 515 | $ | 538 | D | ||||||||||
Fresenius Medical Care Capital Trust IV | 7.875% | 6/15/11 | 170 | 183 | |||||||||||||
721 | |||||||||||||||||
Oil and Gas — 9.0% | |||||||||||||||||
AmeriGas Partners, L.P. | 7.250% | 5/20/15 | 1,000 | 1,040 | A | ||||||||||||
Belden & Blake Corporation | 8.750% | 7/15/12 | 1,945 | 1,906 | |||||||||||||
Chesapeake Energy Corporation | 7.500% | 9/15/13 | 40 | 43 | |||||||||||||
Chesapeake Energy Corporation | 6.375% | 6/15/15 | 130 | 133 | A | ||||||||||||
El Paso CGP Co. | 7.750% | 6/15/10 | 1,180 | 1,204 | |||||||||||||
El Paso Corporation | 7.625% | 8/16/07 | 340 | 349 | A | ||||||||||||
El Paso Corporation | 7.800% | 8/1/31 | 870 | 846 | |||||||||||||
El Paso Corporation | 7.750% | 1/15/32 | 1,110 | 1,082 | |||||||||||||
El Paso Production Holding Company | 7.750% | 6/1/13 | 1,210 | 1,292 | |||||||||||||
Encore Acquisition Company | 8.375% | 6/15/12 | 320 | 347 | |||||||||||||
Encore Acquisition Company | 6.250% | 4/15/14 | 160 | 162 | |||||||||||||
KCS Energy, Inc. | 7.125% | 4/1/12 | 930 | 948 | |||||||||||||
KCS Energy, Inc. | 7.125% | 4/1/12 | 40 | 41 | A | ||||||||||||
Kerr-McGee Corporation | 6.875% | 9/15/11 | 940 | 1,004 | |||||||||||||
Pacific Energy Partners | 7.125% | 6/15/14 | 460 | 479 | |||||||||||||
Parker Drilling Company | 9.625% | 10/1/13 | 1,500 | 1,691 | |||||||||||||
Plains Exploration & Production Company | 7.125% | 6/15/14 | 810 | 867 | |||||||||||||
Pride International, Inc. | 7.375% | 7/15/14 | 940 | 1,032 | |||||||||||||
SESI, LLC | 8.875% | 5/15/11 | 630 | 672 | |||||||||||||
Suburban Propane Partners LP | 6.875% | 12/15/13 | 1,610 | 1,529 | |||||||||||||
Vintage Petroleum, Inc. | 7.875% | 5/15/11 | 722 | 762 | |||||||||||||
17,429 | |||||||||||||||||
Paper and Forest Products — 0.7% | |||||||||||||||||
Abitibi-Consolidated Inc. | 7.750% | 6/15/11 | 180 | 181 | |||||||||||||
Georgia-Pacific Corp. | 9.500% | 12/1/11 | 10 | 12 | |||||||||||||
NewPage Corporation | 12.000% | 5/1/13 | 1,120 | 1,109 | A | ||||||||||||
1,302 | |||||||||||||||||
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Corporate Bonds and Notes — Continued | |||||||||||||||||
Pharmaceuticals — 0.5% | |||||||||||||||||
Leiner Health Products Inc. | 11.000% | 6/1/12 | $ | 1,020 | $ | 1,000 | |||||||||||
Real Estate — 1.1% | |||||||||||||||||
Forest City Enterprises, Inc. | 7.625% | 6/1/15 | 40 | 43 | |||||||||||||
Forest City Enterprises, Inc. | 6.500% | 2/1/17 | 910 | 907 | |||||||||||||
Ventas Realty, Limited Partnership | 8.750% | 5/1/09 | 475 | 525 | |||||||||||||
Ventas Realty, Limited Partnership | 6.750% | 6/1/10 | 200 | 208 | A | ||||||||||||
Ventas Realty, Limited Partnership | 9.000% | 5/1/12 | 408 | 469 | |||||||||||||
2,152 | |||||||||||||||||
Rental and Lease Services (Commercial) — 0.9% | |||||||||||||||||
NationsRent Inc. | 9.500% | 10/15/10 | 1,390 | 1,515 | |||||||||||||
NationsRent Inc. | 9.500% | 5/1/15 | 300 | 297 | A | ||||||||||||
1,812 | |||||||||||||||||
Retail — 3.3% | |||||||||||||||||
Ames True Temper | 7.599% | 1/15/12 | 930 | 883 | C | ||||||||||||
J.C. Penney Company, Inc. | 6.875% | 10/15/15 | 860 | 925 | |||||||||||||
J.C. Penney Company, Inc. | 7.400% | 4/1/37 | 990 | 1,069 | |||||||||||||
Norcraft Companies | 9.000% | 11/1/11 | 970 | 999 | |||||||||||||
Toys “R” Us, Inc. | 7.875% | 4/15/13 | 610 | 546 | |||||||||||||
Toys “R” Us, Inc. | 7.375% | 10/15/18 | 2,390 | 1,936 | |||||||||||||
6,358 | |||||||||||||||||
Special Purpose — 13.3% | |||||||||||||||||
AAC Group Holding Corporation | 0.000% | 10/1/12 | 2,860 | 1,931 | A,B | ||||||||||||
Alamosa Incorporated | 11.000% | 7/31/10 | 294 | 330 | |||||||||||||
Alamosa Incorporated | 8.500% | 1/31/12 | 640 | 671 | |||||||||||||
American Commercial Lines/ACL Finance | 9.500% | 2/15/15 | 770 | 812 | A | ||||||||||||
Denny’s Holdings, Inc. | 10.000% | 10/1/12 | 950 | 988 | |||||||||||||
Di Finance Corporation | 9.500% | 2/15/13 | 2,460 | 2,288 | A | ||||||||||||
Goodman Global Holding Company, Inc. | 6.410% | 6/15/12 | 70 | 69 | A,C | ||||||||||||
Goodman Global Holding Company, Inc. | 7.875% | 12/15/12 | 1,060 | 981 | A | ||||||||||||
H & E Equipment Services LLC | 11.125% | 6/15/12 | 1,314 | 1,449 | |||||||||||||
H Lines Finance Holding Corporation | 0.000% | 4/1/13 | 1,530 | 1,178 | A,B |
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Corporate Bonds and Notes — Continued | |||||||||||||||||
Special Purpose — Continued | |||||||||||||||||
K&F Parent Inc. | 11.500% | 2/1/15 | $ | 310 | $ | 328 | A,E | ||||||||||
Milacron Escrow Corporation | 11.500% | 5/15/11 | 2,265 | 2,378 | |||||||||||||
Norcraft Holdings LP | 0.000% | 9/1/12 | 670 | 462 | B | ||||||||||||
Qwest Capital Funding, Inc. | 7.900% | 8/15/10 | 623 | 620 | |||||||||||||
Qwest Capital Funding, Inc. | 7.250% | 2/15/11 | 440 | 421 | |||||||||||||
Rainbow National Services LLC | 8.750% | 9/1/12 | 510 | 557 | A | ||||||||||||
Rainbow National Services LLC | 10.375% | 9/1/14 | 360 | 414 | A | ||||||||||||
Sensus Metering Systems Inc. | 8.625% | 12/15/13 | 1,121 | 1,043 | |||||||||||||
Sithe Independence Funding Corporation | 9.000% | 12/30/13 | 450 | 484 | |||||||||||||
Texas Genco LLC | 6.875% | 12/15/14 | 883 | 929 | A | ||||||||||||
The Williams Companies, Inc. Credit Certificate Trust | 6.750% | 4/15/09 | 910 | 942 | A | ||||||||||||
TransDigm Funding Corp. | 8.375% | 7/15/11 | 1,027 | 1,089 | |||||||||||||
UCAR Finance Inc. | 10.250% | 2/15/12 | 1,415 | 1,489 | |||||||||||||
UGS Corporation | 10.000% | 6/1/12 | 900 | 999 | |||||||||||||
Valor Telecommunications | 7.750% | 2/15/15 | 1,000 | 983 | A | ||||||||||||
Vanguard Health Holding Company II | 9.000% | 10/1/14 | 580 | 626 | |||||||||||||
Visant Corp. | 7.625% | 10/1/12 | 860 | 849 | |||||||||||||
WMG Holdings Corporation | 0.000% | 12/15/14 | 657 | 453 | A,B | ||||||||||||
25,763 | |||||||||||||||||
Steel Products — 1.2% | |||||||||||||||||
Allegheny Technologies, Inc. | 8.375% | 12/15/11 | 1,280 | 1,325 | |||||||||||||
Chaparrel Steel Company | 10.000% | 7/15/13 | 970 | 975 | A | ||||||||||||
2,300 | |||||||||||||||||
Storage Facilities — 0.3% | |||||||||||||||||
Mobile Mini, Inc. | 9.500% | 7/1/13 | 490 | 542 | |||||||||||||
Telecommunications — 4.8% | |||||||||||||||||
Cincinnati Bell Inc. | 8.375% | 1/15/14 | 1,950 | 1,999 | |||||||||||||
Cincinnati Bell Inc. | 8.375% | 1/15/14 | 130 | 133 | A | ||||||||||||
Hawaiian Telcom Communications, Inc. | 12.500% | 5/1/15 | 1,140 | 1,214 | A | ||||||||||||
Qwest Communications International Inc. | 7.250% | 2/15/11 | 1,080 | 1,045 | |||||||||||||
Qwest Communications International Inc. | 7.500% | 2/15/14 | 200 | 189 | A |
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Corporate Bonds and Notes — Continued | |||||||||||||||||
Telecommunications — Continued | |||||||||||||||||
Qwest Corporation | 7.875% | 9/1/11 | $ | 830 | $ | 865 | A | ||||||||||
Qwest Corporation | 6.671% | 6/15/13 | 1,240 | 1,270 | A,C | ||||||||||||
Qwest Services Corporation | 13.500% | 12/15/10 | 1,229 | 1,419 | |||||||||||||
Telcordia Technologies Inc. | 10.000% | 3/15/13 | 1,130 | 1,057 | A | ||||||||||||
9,191 | |||||||||||||||||
Telecommunications (Cellular/ Wireless) — 1.6% | |||||||||||||||||
Centennial Communications Corporation | 8.125% | 2/1/14 | 1,440 | 1,534 | |||||||||||||
Nextel Communications, Inc. | 5.950% | 3/15/14 | 42 | 44 | |||||||||||||
Ubiquitel Operating Company | 9.875% | 3/1/11 | 610 | 669 | |||||||||||||
US Unwired Inc. | 10.000% | 6/15/12 | 800 | 890 | |||||||||||||
3,137 | |||||||||||||||||
Transportation — 3.7% | |||||||||||||||||
American Airlines, Inc. | 7.800% | 4/1/08 | 1,130 | 1,074 | |||||||||||||
Continental Airlines, Inc. | 7.033% | 6/15/11 | 1,083 | 909 | |||||||||||||
Continental Airlines, Inc. | 7.373% | 12/15/15 | 855 | 714 | |||||||||||||
Continental Airlines, Inc. | 6.748% | 3/15/17 | 757 | 622 | |||||||||||||
Gulfmark Offshore, Inc. | 7.750% | 7/15/14 | 930 | 979 | |||||||||||||
Horizon Lines, LLC | 9.000% | 11/1/12 | 730 | 765 | A | ||||||||||||
Kansas City Southern Railway | 9.500% | 10/1/08 | 121 | 132 | |||||||||||||
OMI Corporation | 7.625% | 12/1/13 | 966 | 962 | |||||||||||||
Progress Rail Corp. | 7.750% | 4/1/12 | 900 | 911 | A | ||||||||||||
7,068 | |||||||||||||||||
Water Utilities — 0.7% | |||||||||||||||||
National Waterworks, Inc. | 10.500% | 12/1/12 | 1,247 | 1,403 | |||||||||||||
Total Corporate Bonds and Notes (Identified Cost — $167,694) | 169,572 | ||||||||||||||||
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Mortgage-Backed Securities — 0.4% | |||||||||||||||||
Blackrock Capital Finance L.P. 1996-R1 | 9.471% | 9/25/26 | $ | 741 | $ | 497 | |||||||||||
Blackrock Capital Finance L.P. 1997-R1 | 7.750% | 3/25/37 | 537 | 241 | A | ||||||||||||
Ocwen Residential Mortgage Corporation 1998-R1 | 7.000% | 10/25/40 | 259 | 47 | |||||||||||||
Total Mortgage-Backed Securities (Identified Cost — $855) | 785 | ||||||||||||||||
Yankee BondsF — 9.6% | |||||||||||||||||
Aluminum — 0.4% | |||||||||||||||||
Novelis, Inc. | 7.250% | 2/15/15 | 850 | 853 | A | ||||||||||||
Cable — 0.4% | |||||||||||||||||
Rogers Cable Inc. | 5.500% | 3/15/14 | 790 | 744 | |||||||||||||
Chemicals — 1.4% | |||||||||||||||||
Rhodia SA | 10.250% | 6/1/10 | 2,470 | 2,649 | |||||||||||||
Foreign Governments — 0.7% | |||||||||||||||||
Federative Republic of Brazil | 14.500% | 10/15/09 | 1,070 | 1,391 | |||||||||||||
Media — 0.8% | |||||||||||||||||
Kabel Deutschland GmbH | 10.625% | 7/1/14 | 1,340 | 1,454 | A | ||||||||||||
Oil and Gas — 0.8% | |||||||||||||||||
Western Oil Sands Inc. | 8.375% | 5/1/12 | 1,425 | 1,623 | |||||||||||||
Paper and Forest Products — 1.0% | |||||||||||||||||
Abitibi Consolidated Inc. | 6.910% | 6/15/11 | 536 | 532 | C | ||||||||||||
Abitibi Consolidated Inc. | 8.375% | 4/1/15 | 990 | 1,010 | |||||||||||||
Domtar Inc. | 7.875% | 10/15/11 | 450 | 476 | |||||||||||||
2,018 | |||||||||||||||||
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Yankee Bonds — Continued | |||||||||||||||||
Services — 0.4% | |||||||||||||||||
Compagnie Generale De Geophysique | 7.500% | 5/15/15 | $ | 780 | $ | 813 | A | ||||||||||
Special Purpose — 0.5% | |||||||||||||||||
MDP Acquisitions PLC | 9.625% | 10/1/12 | 930 | 930 | |||||||||||||
Steel (Producers) — 0.5% | |||||||||||||||||
Ispat Inland Ulc | 9.750% | 4/1/14 | 750 | 874 | |||||||||||||
Telecommunications — 1.0% | |||||||||||||||||
INTELSAT | 7.625% | 4/15/12 | 2,200 | 1,936 | |||||||||||||
Telecommunications (Cellular/ Wireless) — 0.8% | |||||||||||||||||
Rogers Wireless Communications Inc. | 9.625% | 5/1/11 | 1,088 | 1,277 | |||||||||||||
Rogers Wireless Communications Inc. | 8.000% | 12/15/12 | 330 | 356 | |||||||||||||
1,633 | |||||||||||||||||
Transportation — 0.4% | |||||||||||||||||
Teekay Shipping Corporation | 8.875% | 7/15/11 | 586 | 669 | |||||||||||||
Exploration and Production — 0.5% | |||||||||||||||||
Ocean Rig Norway AS | 8.375% | 7/1/13 | 920 | 931 | A | ||||||||||||
Total Yankee Bonds (Identified Cost — $18,147) | 18,518 | ||||||||||||||||
Common Stocks — 0.2% | |||||||||||||||||
Engineering and Construction — 0.2% | |||||||||||||||||
Washington Group International, Inc. | 8 | shs | 434 | G | |||||||||||||
Total Common Stocks (Identified Cost — $55) | 434 | ||||||||||||||||
Preferred Stocks — 0.5% | |||||||||||||||||
Paxson Communications Corporation | 14.250% | 0.1 | 1,083 | E,H | |||||||||||||
Total Preferred Stocks (Identified Cost — $1,332) | 1,083 | ||||||||||||||||
Par/ | |||||||||||||||||
Shares | Value | ||||||||||||||||
Warrants — 0.3% | |||||||||||||||||
American Tower Corporation | 1 | wts | $ | 246 | A,G | ||||||||||||
Next Generation Network, Inc. | 16 | 0.1 | G | ||||||||||||||
Washington Group International, Series A | 5 | 120 | G | ||||||||||||||
Washington Group International, Series B | 6 | 119 | G | ||||||||||||||
Washington Group International, Series C | 3 | 58 | G | ||||||||||||||
Total Warrants (Identified Cost — $291) | 543 | ||||||||||||||||
Total Long-Term Securities (Identified Cost — $188,374) | 190,935 | ||||||||||||||||
Total Investments — 98.7% (Identified Cost — $188,374) | 190,935 | ||||||||||||||||
Other Assets Less Liabilities — 1.3% | 2,503 | ||||||||||||||||
Net Assets — 100.0% | $ | 193,438 | |||||||||||||||
A | Rule 144a Security — A security purchased pursuant to Rule 144a under the Securities Act of 1933 which may not be resold subject to that rule except to qualified institutional buyers. These securities represent 23.5% of net assets. |
B | Stepped coupon security — A security with a predetermined schedule of interest or dividend rate changes, at which time it begins to accrue interest or pay dividends. |
C | Indexed security — The rates of interest earned on these securities are tied to the London Interbank Offered Rate (“LIBOR”). The coupon rates are the rates as of June 30, 2005. |
D | Unit — A security which consists of a bond and warrants to purchase the common stock of the issuer. |
E | Pay-in-Kind (“PIK”) security — A bond in which interest or dividends during the initial few years is paid in additional PIK securities rather than in cash. |
F | Yankee Bond — A dollar-denominated bond issued in the U.S. by foreign entities. |
G | Non-income producing. |
H | Private placement. |
See notes to financial statements.
Statement of Assets and Liabilities
High Yield Portfolio
Assets: | |||||||||
Investment securities at market value (Identified Cost – $188,374) | $ | 190,935 | |||||||
Cash | 352 | ||||||||
Receivable for securities sold | 4,009 | ||||||||
Receivable for fund shares sold | 133 | ||||||||
Interest and dividends receivable | 3,802 | ||||||||
Other assets | 149 | ||||||||
Total assets | 199,380 | ||||||||
Liabilities: | |||||||||
Payable for fund shares repurchased | $ | 352 | |||||||
Payable for securities purchased | 5,349 | ||||||||
Accrued management fee | 103 | ||||||||
Accrued distribution and service fees | 76 | ||||||||
Accrued expenses | 62 | ||||||||
Total liabilities | 5,942 | ||||||||
Net Assets | $ | 193,438 | |||||||
Net assets consist of: | |||||||||
Accumulated paid-in capital applicable to: | |||||||||
19,865 Primary Class shares outstanding | $ | 333,966 | |||||||
1,311 Institutional Class shares outstanding | 12,040 | ||||||||
Under/(over) distributed net investment income | 620 | ||||||||
Accumulated net realized loss on investments | (155,749 | ) | |||||||
Unrealized appreciation of investments | 2,561 | ||||||||
Net Assets | $ | 193,438 | |||||||
Net Asset Value Per Share: | |||||||||
Primary Class | $ | 9.13 | |||||||
Institutional Class | $ | 9.16 | |||||||
See notes to financial statements.
Statement of Operations
High Yield Portfolio
Investment Income: | |||||||||||
Interest | $ | 8,430 | |||||||||
Dividends | 80 | ||||||||||
Total income | $ | 8,510 | |||||||||
Expenses: | |||||||||||
Management fees | 651 | ||||||||||
Distribution and service fees | 478 | ||||||||||
Audit and legal fees | 35 | ||||||||||
Custodian fees | 53 | ||||||||||
Directors’ fees and expenses | 8 | ||||||||||
Registration fees | 13 | ||||||||||
Reports to shareholders | 19 | ||||||||||
Transfer agent and shareholder servicing expense: | |||||||||||
Primary Class | 90 | ||||||||||
Institutional Class | 1 | ||||||||||
Other expenses | 6 | ||||||||||
1,354 | |||||||||||
Less compensating balance credits | (4 | ) | |||||||||
Total expenses, net of compensating balance credits | 1,350 | ||||||||||
Net Investment Income | 7,160 | ||||||||||
Net Realized and Unrealized Gain/(Loss) on Investments: | |||||||||||
Realized gain/(loss) on investments | (70 | ) | |||||||||
Change in unrealized appreciation/(depreciation) of investments | (6,380 | ) | |||||||||
Net Realized and Unrealized Gain/(Loss) on Investments | (6,450 | ) | |||||||||
Change in Net Assets Resulting From Operations | $ | 710 | |||||||||
See notes to financial statements.
Statement of Changes in Net Assets
High Yield Portfolio
For the Six | For the | ||||||||
Months Ended | Year Ended | ||||||||
6/30/05 | 12/31/04 | ||||||||
(Unaudited) | |||||||||
Change in Net Assets: | |||||||||
Net investment income | $ | 7,160 | $ | 14,774 | |||||
Net realized gain/(loss) on investments | (70 | ) | 2,146 | ||||||
Change in unrealized appreciation/(depreciation) on investments | (6,380 | ) | 4,056 | ||||||
Change in net assets resulting from operations | 710 | 20,976 | |||||||
Distributions to shareholders from net investment income: | |||||||||
Primary Class | (6,135 | ) | (14,195 | ) | |||||
Institutional Class | (313 | ) | (565 | ) | |||||
Change in net assets from Fund share transactions: | |||||||||
Primary Class | (18,393 | ) | (24,402 | ) | |||||
Institutional Class | 3,508 | 2,040 | |||||||
Change in net assets | (20,623 | ) | (16,146 | ) | |||||
Net Assets: | |||||||||
Beginning of period | 214,061 | 230,207 | |||||||
End of period | $ | 193,438 | $ | 214,061 | |||||
Under/(over) distributed net investment income | $ | 620 | $ | (92 | ) | ||||
See notes to financial statements.
Financial Highlights
High Yield Portfolio
Contained below is per share operating performance data for a share of common stock outstanding, total investment return, ratios to average net assets and other supplemental data. This information has been derived from information provided in the financial statements.
Primary Class:
Six Months | |||||||||||||||||||||||||
Ended | Years Ended December 31, | ||||||||||||||||||||||||
June 30, | |||||||||||||||||||||||||
2005 | 2004 | 2003 | 2002 | 2001 | 2000 | ||||||||||||||||||||
(Unaudited | |||||||||||||||||||||||||
Net asset value, beginning of period | $ | 9.39 | $ | 9.10 | $ | 7.96 | $ | 9.22 | $ | 10.18 | $ | 14.97 | |||||||||||||
Investment operations: | |||||||||||||||||||||||||
Net investment income | .32 | .62 | .63 | .77 | .94 | 1.32 | |||||||||||||||||||
Net realized and unrealized gain/(loss) on investments | (.28 | ) | .29 | 1.15 | (1.26 | ) | (.94 | ) | (3.45 | ) | |||||||||||||||
Total from investment operations | .04 | .91 | 1.78 | (.49 | ) | — | (2.13 | ) | |||||||||||||||||
Distributions: | |||||||||||||||||||||||||
From net investment income | (.30 | ) | (.62 | ) | (.64 | ) | (.77 | ) | (.96 | ) | (1.27 | ) | |||||||||||||
From net realized gain on investments | — | — | — | — | — | (1.39 | ) | ||||||||||||||||||
Total distributions | (.30 | ) | (.62 | ) | (.64 | ) | (.77 | ) | (.96 | ) | (2.66 | ) | |||||||||||||
Net asset value, end of period | $ | 9.13 | $ | 9.39 | $ | 9.10 | $ | 7.96 | $ | 9.22 | $ | 10.18 | |||||||||||||
Ratios/supplemental data: | |||||||||||||||||||||||||
Total return | .41 | %A | 10.51 | % | 23.03 | % | (5.28 | )% | (.13 | )% | (16.43 | )% | |||||||||||||
Expenses to average net assets | 1.37 | %B | 1.36 | % | 1.41 | % | 1.36 | % | 1.51 | % | 1.51 | % | |||||||||||||
Net investment income to average net assets | 7.11 | %B | 6.79 | % | 7.26 | % | 9.06 | % | 9.59 | % | 9.98 | % | |||||||||||||
Portfolio turnover rate | 57.4 | %A | 109.1 | % | 122.3 | % | 96.6 | % | 130.0 | % | 45.0 | % | |||||||||||||
Net assets, end of period (in thousands) | $ | 181,425 | $ | 205,314 | $ | 223,773 | $ | 162,175 | $ | 199,214 | $ | 217,769 | |||||||||||||
A | Not annualized. |
B | Annualized. |
See notes to financial statements.
Institutional Class:
Six Months | |||||||||||||||||||||||||
Ended | Years Ended December 31, | ||||||||||||||||||||||||
June 30, | |||||||||||||||||||||||||
2005 | 2004 | 2003 | 2002 | 2001 | 2000 | ||||||||||||||||||||
(Unaudited | |||||||||||||||||||||||||
Net asset value, beginning of period | $9.41 | $ | 9.11 | $ | 7.96 | $ | 9.20 | $ | 10.18 | $ | 14.97 | ||||||||||||||
Investment operations: | |||||||||||||||||||||||||
Net investment income | .34 | .66 | .66 | .78 | 1.01 | 1.41 | |||||||||||||||||||
Net realized and unrealized gain/(loss) on investments | (.28 | ) | .31 | 1.15 | (1.24 | ) | (1.00 | ) | (3.47 | ) | |||||||||||||||
Total from investment operations | .06 | .97 | 1.81 | (.46 | ) | .01 | (2.06 | ) | |||||||||||||||||
Distributions: | |||||||||||||||||||||||||
From net investment income | (.31 | ) | (.67 | ) | (.66 | ) | (.78 | ) | (.99 | ) | (1.34 | ) | |||||||||||||
From net realized gain on investments | — | — | — | — | — | (1.39 | ) | ||||||||||||||||||
Total distributions | (.31 | ) | (.67 | ) | (.66 | ) | (.78 | ) | (.99 | ) | (2.73 | ) | |||||||||||||
Net asset value, end of period | $9.16 | $ | 9.41 | $ | 9.11 | $ | 7.96 | $ | 9.20 | $ | 10.18 | ||||||||||||||
Ratios/supplemental data: | |||||||||||||||||||||||||
Total return | .68 | %A | 11.15 | % | 23.54 | % | (5.00 | )% | (.06 | )% | (15.99 | )% | |||||||||||||
Expenses to average net assets | .81 | %B | .80 | % | .85 | % | .82 | % | .97 | % | 1.03 | % | |||||||||||||
Net investment income to average net assets | 7.76 | %B | 7.38 | % | 7.78 | % | 9.63 | % | 10.20 | % | 10.98 | % | |||||||||||||
Portfolio turnover rate | 57.4 | %A | 109.1 | % | 122.3 | % | 96.6 | % | 130.0 | % | 45.0 | % | |||||||||||||
Net assets, end of period (in thousands) | $ | 12,013 | $ | 8,747 | $ | 6,434 | $ | 2,704 | $ | 1,331 | $ | 673 | |||||||||||||
See notes to financial statements.
Investment Grade Income Portfolio
As a shareholder of the Fund, you incur ongoing costs, including management fees, distribution and service (12b-1) fees on Primary Class shares; and other Fund expenses. These examples are 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. Each example is based on an investment of $1,000 invested on January 1, 2005, and held through June 30, 2005.
Actual Expenses
The first line for each class in the table below provides information about actual account values and actual expenses for each class. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each class in the table below provides information about hypothetical account values and hypothetical expenses based on the relevant class’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the class’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 this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare these 5% hypothetical examples with the 5% hypothetical examples for the relevant class that appear in the shareholder reports of other funds.
Beginning | Ending | Expenses PaidA | |||||||||||
Account | Account | During the | |||||||||||
Value | Value | Period | |||||||||||
1/1/05 | 6/30/05 | 1/1/05 to 6/30/05 | |||||||||||
Primary Class: | |||||||||||||
Actual | $ | 1,000.00 | $ | 1,023.00 | $ | 5.02 | |||||||
Hypothetical (5% return before expenses) | 1,000.00 | 1,019.84 | 5.01 | ||||||||||
Institutional Class: | |||||||||||||
Actual | $ | 1,000.00 | $ | 1,025.00 | $ | 2.11 | |||||||
Hypothetical (5% return before expenses) | 1,000.00 | 1,022.71 | 2.11 |
A | These calculations are based on expenses incurred in the most recent fiscal half-year. The dollar amounts shown as “Expenses Paid” are equal to the annualized expense ratios of 1.00% and 0.42% for the Primary Class and Institutional Class, respectively, multiplied by the average value over the period, multiplied by the number of days in the most recent fiscal half-year (181), and divided by 365. |
Performance Information
Investment Grade Income Portfolio
The graphs on the following pages compare the Fund’s total returns to that of a closely matched broad-based securities market index. The graphs illustrate the cumulative total return of an initial $10,000 investment in Primary Class shares and an initial $1,000,000 investment in Institutional Class shares of the Fund, for the periods indicated. The lines for the Fund represent the total return after deducting all Fund investment management and other administrative expenses and the transaction costs of buying and selling securities. The line representing the securities market index does not include any transaction costs associated with buying and selling securities in the index or other administrative expenses. Both the Fund’s and the index’s results assume reinvestment of all dividends and distributions.
Growth of a $10,000 Investment — Primary Class
Cumulative | Average Annual | |||||||||
Total Return | Total Return | |||||||||
One Year | +9.22% | +9.22% | ||||||||
Five Years | +49.05% | +8.31% | ||||||||
Ten Years | +98.91% | +7.12% | ||||||||
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
A | This index includes all publicly issued, fixed rate, non-convertible, investment grade, domestic corporate debt. It also includes Yankee bonds, which are dollar-denominated, SEC-registered public, non-convertible debt issued or guaranteed by foreign sovereign governments, municipalities, governmental agencies, and international agencies. |
B | A market value-weighted index that tracks the daily price, coupon, pay-downs, and total return performance of fixed rate, publicly placed, dollar-denominated, and nonconvertible investment grade debt issues with at least $100 million par amount outstanding and with at least one year to final maturity. |
Growth of a $1,000,000 Investment — Institutional Class
Periods Ended June 30, 2005
Cumulative | Average Annual | |||||||||
Total Return | Total Return | |||||||||
One Year | +9.84% | +9.84% | ||||||||
Five Years | +52.96% | +8.87% | ||||||||
Life of Class* | +97.82% | +7.38% | ||||||||
*Inception date: December 1, 1995 | ||||||||||
The performance data quoted represents past performance and does not guarantee future results. The performance stated may have been due to extraordinary market conditions, which may not be duplicated in the future. Current performance may be lower or higher than the performance data quoted. To obtain the most recent month-end performance information please call 1-888-425-6432. The investment return and principal value of the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Calculations assume reinvestment of dividends and capital gain distributions. Performance would have been lower if fees had not been waived in various periods.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
C | Index returns are for periods beginning November 30, 1995. |
Portfolio Composition (As of June 30, 2005)
Standard & Poor’s Debt RatingsD (As a percentage of the portfolio)
Maturity Schedule (As a percentage of the portfolio)
D | Standard & Poor’s Ratings Services provides capital markets with credit ratings for the evaluation and assessment of credit risk. |
Portfolio of Investments
Investment Grade Income Portfolio
(Amounts in Thousands)
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Long-Term Securities — 98.7% | |||||||||||||||||
Corporate Bonds and Notes — 73.8% | |||||||||||||||||
Aerospace/ Defense — 1.0% | |||||||||||||||||
L-3 Communications Corp. | 7.625% | 6/15/12 | $ | 1,000 | $ | 1,065 | |||||||||||
Lockheed Martin Corporation | 8.500% | 12/1/29 | 760 | 1,098 | |||||||||||||
Northrop Grumman Corporation | 7.750% | 2/15/31 | 170 | 230 | |||||||||||||
Raytheon Company | 6.150% | 11/1/08 | 489 | 516 | |||||||||||||
Raytheon Company | 5.375% | 4/1/13 | 1,240 | 1,291 | |||||||||||||
4,200 | |||||||||||||||||
Auto Parts and Equipment — 0.2% | |||||||||||||||||
American Axle & Manufacturing Inc. | 5.250% | 2/11/14 | 800 | 704 | |||||||||||||
Automotive — 1.0% | |||||||||||||||||
Ford Motor Company | 7.450% | 7/16/31 | 1,975 | 1,649 | |||||||||||||
Ford Motor Company | 8.900% | 1/15/32 | 370 | 337 | |||||||||||||
General Motors Corporation | 8.250% | 7/15/23 | 650 | 538 | |||||||||||||
General Motors Corporation | 8.375% | 7/15/33 | 1,990 | 1,662 | |||||||||||||
4,186 | |||||||||||||||||
Banking and Finance — 8.8% | |||||||||||||||||
AIFUL Corporation | 4.450% | 2/16/10 | 1,235 | 1,221 | A | ||||||||||||
Boeing Capital Corporation | 6.500% | 2/15/12 | 1,000 | 1,119 | |||||||||||||
Boeing Capital Corporation | 5.800% | 1/15/13 | 530 | 577 | |||||||||||||
Countrywide Home Loans, Inc. | 2.875% | 2/15/07 | 1,320 | 1,292 | |||||||||||||
Countrywide Home Loans, Inc. | 3.250% | 5/21/08 | 1,200 | 1,165 | |||||||||||||
Countrywide Home Loans, Inc. | 4.125% | 9/15/09 | 340 | 336 | |||||||||||||
Ford Motor Credit Company | 4.950% | 1/15/08 | 250 | 238 | |||||||||||||
Ford Motor Credit Company | 6.625% | 6/16/08 | 8,210 | 8,109 | |||||||||||||
Ford Motor Credit Company | 7.375% | 10/28/09 | 2,970 | 2,902 | |||||||||||||
Ford Motor Credit Company | 7.375% | 2/1/11 | 2,390 | 2,328 | |||||||||||||
Ford Motor Credit Company | 7.250% | 10/25/11 | 2,070 | 1,992 | |||||||||||||
Ford Motor Credit Company | 7.000% | 10/1/13 | 340 | 326 | |||||||||||||
General Motors Acceptance Corporation | 4.145% | 5/18/06 | 1,725 | 1,717 | B | ||||||||||||
General Motors Acceptance Corporation | 6.125% | 2/1/07 | 1,570 | 1,559 | |||||||||||||
General Motors Acceptance Corporation | 6.125% | 8/28/07 | 2,680 | 2,652 |
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Corporate Bonds and Notes — Continued | |||||||||||||||||
Banking and Finance — Continued | |||||||||||||||||
General Motors Acceptance Corporation | 6.311% | 11/30/07 | $ | 320 | $ | 310 | |||||||||||
General Motors Acceptance Corporation | 5.625% | 5/15/09 | 590 | 553 | |||||||||||||
General Motors Acceptance Corporation | 6.875% | 9/15/11 | 750 | 692 | |||||||||||||
General Motors Acceptance Corporation | 0.000% | 6/15/15 | 2,700 | 1,222 | C | ||||||||||||
HSBC Finance Corporation | 4.750% | 4/15/10 | 1,325 | 1,344 | |||||||||||||
International Lease Finance Corporation | 6.375% | 3/15/09 | 890 | 942 | |||||||||||||
John Deere Capital Corporation | 4.500% | 8/22/07 | 5 | 5 | |||||||||||||
MBNA America Bank | 5.375% | 1/15/08 | 1,200 | 1,233 | |||||||||||||
National Rural Utilities Cooperative Finance Corporation | 7.250% | 3/1/12 | 1,700 | 1,971 | |||||||||||||
SB Treasury Company LLC | 9.400% | 12/29/49 | 840 | 942 | A | ||||||||||||
36,747 | |||||||||||||||||
Banks — 5.3% | |||||||||||||||||
Bank of America Corporation | 3.375% | 2/17/09 | 1,500 | 1,462 | |||||||||||||
Bank of America Corporation | 7.400% | 1/15/11 | 1,785 | 2,043 | |||||||||||||
Bank of America Corporation | 4.750% | 8/15/13 | 470 | 478 | |||||||||||||
Bank One Corporation | 4.125% | 9/1/07 | 2,130 | 2,139 | |||||||||||||
BankAmerica Capital | 4.169% | 1/15/27 | 585 | 561 | B | ||||||||||||
CBA Capital Trust I | 5.805% | 12/31/49 | 3,510 | 3,719 | A | ||||||||||||
Chase Capital II | 3.710% | 2/1/27 | 1,980 | 1,849 | B | ||||||||||||
Key Bank NA | 5.800% | 7/1/14 | 535 | 576 | |||||||||||||
Rabobank Capital Funding Trust II | 5.260% | 12/31/49 | 320 | 329 | A, B | ||||||||||||
Rabobank Capital Funding Trust III | 5.254% | 12/29/49 | 3,120 | 3,200 | A, B | ||||||||||||
UnionBanCal Corporation | 5.250% | 12/16/13 | 785 | 811 | |||||||||||||
Wachovia Bank NA | 7.800% | 8/18/10 | 2,640 | 3,066 | |||||||||||||
Washington Mutual, Inc. | 4.200% | 1/15/10 | 700 | 694 | |||||||||||||
Washington Mutual, Inc. | 4.625% | 4/1/14 | 1,000 | 974 | |||||||||||||
21,901 | |||||||||||||||||
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Corporate Bonds and Notes — Continued | |||||||||||||||||
Building Materials — N.M. | |||||||||||||||||
American Standard, Inc. | 8.250% | 6/1/09 | $ | 37 | $ | 42 | |||||||||||
American Standard, Inc. | 7.625% | 2/15/10 | 5 | 5 | |||||||||||||
47 | |||||||||||||||||
Cable — 1.6% | |||||||||||||||||
Comcast Cable Communications, Inc. | 6.750% | 1/30/11 | 960 | 1,059 | |||||||||||||
Comcast Corporation | 7.050% | 3/15/33 | 1,800 | 2,125 | |||||||||||||
Cox Communications, Inc. | 4.625% | 1/15/10 | 1,410 | 1,406 | |||||||||||||
CSC Holdings Inc. | 7.625% | 7/15/18 | 1,500 | 1,448 | |||||||||||||
EchoStar DBS Corporation | 6.754% | 10/1/08 | 500 | 511 | B | ||||||||||||
Tele-Communications, Inc. | 7.125% | 2/15/28 | 180 | 210 | |||||||||||||
6,759 | |||||||||||||||||
Casino Resorts — 0.2% | |||||||||||||||||
Harrah’s Operating Company, Inc. | 7.875% | 12/15/05 | 500 | 508 | |||||||||||||
Harrah’s Operating Company, Inc. | 5.500% | 7/1/10 | 410 | 423 | |||||||||||||
931 | |||||||||||||||||
Chemicals — 0.7% | |||||||||||||||||
E. I. du Pont de Nemours and Company | 4.875% | 4/30/14 | 1,100 | 1,138 | |||||||||||||
The Dow Chemical Company | 6.000% | 10/1/12 | 750 | 822 | |||||||||||||
The Dow Chemical Company | 7.375% | 11/1/29 | 800 | 1,033 | |||||||||||||
2,993 | |||||||||||||||||
Computer Services and Systems — 0.8% | |||||||||||||||||
Electronic Data Systems Corporation | 7.125% | 10/15/09 | 530 | 571 | |||||||||||||
Electronic Data Systems Corporation | 6.500% | 8/1/13 | 500 | 511 | |||||||||||||
Electronic Data Systems Corporation | 7.450% | 10/15/29 | 570 | 607 | |||||||||||||
International Business Machines Corporation | 4.750% | 11/29/12 | 1,750 | 1,788 | |||||||||||||
3,477 | |||||||||||||||||
Consumer Products — 0.2% | |||||||||||||||||
The Clorox Company | 5.000% | 1/15/15 | 350 | 363 | |||||||||||||
The Procter & Gamble Company | 4.300% | 8/15/08 | 350 | 353 | |||||||||||||
716 | |||||||||||||||||
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Corporate Bonds and Notes — Continued | |||||||||||||||||
Diversified Financial Services — 7.3% | |||||||||||||||||
AIG SunAmerica Global Financing VI | 6.300% | 5/10/11 | $ | 5,170 | $ | 5,635 | A | ||||||||||
Associates Corporation of North America | 8.150% | 8/1/09 | 775 | 887 | |||||||||||||
Beaver Valley Funding Corp. | 9.000% | 6/1/17 | 1,100 | 1,305 | |||||||||||||
Capital One Bank | 4.875% | 5/15/08 | 150 | 152 | |||||||||||||
Capital One Bank | 5.750% | 9/15/10 | 870 | 918 | |||||||||||||
Capital One Bank | 6.500% | 6/13/13 | 690 | 759 | |||||||||||||
Capital One Financial Corporation | 7.250% | 5/1/06 | 1,700 | 1,743 | |||||||||||||
Capital One Financial Corporation | 8.750% | 2/1/07 | 400 | 427 | |||||||||||||
Capital One Financial Corporation | 7.125% | 8/1/08 | 340 | 365 | |||||||||||||
Citigroup Inc. | 5.000% | 3/6/07 | 300 | 305 | |||||||||||||
Citigroup Inc. | 5.000% | 9/15/14 | 1,600 | 1,637 | |||||||||||||
General Electric Capital Corporation | 4.000% | 6/15/09 | 3,640 | 3,614 | |||||||||||||
General Electric Capital Corporation | 3.750% | 12/15/09 | 4,900 | 4,812 | |||||||||||||
General Electric Capital Corporation | 5.450% | 1/15/13 | 2,000 | 2,122 | |||||||||||||
General Electric Capital Corporation | 6.750% | 3/15/32 | 5 | 6 | |||||||||||||
iStar Financial Inc. | 5.375% | 4/15/10 | 3,180 | 3,217 | |||||||||||||
iStar Financial Inc. | 6.000% | 12/15/10 | 580 | 603 | |||||||||||||
Mizuho Preferred Capital Corp. LLC | 8.790% | 12/29/49 | 1,520 | 1,677 | A | ||||||||||||
Wells Fargo & Company | 5.000% | 11/15/14 | 90 | 93 | |||||||||||||
30,277 | |||||||||||||||||
Drug and Grocery Store Chains — 0.5% | |||||||||||||||||
Kroger Company | 8.000% | 9/15/29 | 1,000 | 1,258 | |||||||||||||
Safeway Inc. | 5.800% | 8/15/12 | 750 | 788 | |||||||||||||
2,046 | |||||||||||||||||
Electric — 4.2% | |||||||||||||||||
AEP Texas Central Company | 5.500% | 2/15/13 | 1,060 | 1,111 | |||||||||||||
American Electric Power Company, Inc. | 6.125% | 5/15/06 | 404 | 411 | |||||||||||||
American Electric Power Company, Inc. | 5.250% | 6/1/15 | 350 | 362 | |||||||||||||
Commonwealth Edison Company | 6.150% | 3/15/12 | 560 | 619 | |||||||||||||
Dominion Resources, Inc. | 5.125% | 12/15/09 | 490 | 503 | |||||||||||||
Dominion Resources, Inc. | 4.750% | 12/15/10 | 140 | 141 | |||||||||||||
Dominion Resources, Inc. | 5.700% | 9/17/12 | 510 | 537 |
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Corporate Bonds and Notes — Continued | |||||||||||||||||
Electric — Continued | |||||||||||||||||
FirstEnergy Corp. | 6.450% | 11/15/11 | $ | 2,285 | $ | 2,497 | |||||||||||
FirstEnergy Corp. | 7.375% | 11/15/31 | 4,440 | 5,427 | |||||||||||||
Niagara Mohawk Power Corporation | 7.750% | 10/1/08 | 1,010 | 1,110 | |||||||||||||
System Energy Resources, Inc. | 4.875% | 10/1/07 | 1,020 | 1,030 | |||||||||||||
Tampa Electric Company | 6.375% | 8/15/12 | 380 | 419 | |||||||||||||
The Cleveland Electric Illuminating Company | 5.650% | 12/15/13 | 940 | 989 | |||||||||||||
The Cleveland Electric Illuminating Company | 7.880% | 11/1/17 | 850 | 1,064 | |||||||||||||
The Detroit Edison Company | 5.200% | 10/15/12 | 1,260 | 1,311 | |||||||||||||
17,531 | |||||||||||||||||
Energy — 4.0% | |||||||||||||||||
Alabama Power Company | 3.125% | 5/1/08 | 920 | 896 | |||||||||||||
DTE Energy Company | 6.375% | 4/15/33 | 350 | 383 | |||||||||||||
Duke Energy Corporation | 5.625% | 11/30/12 | 270 | 286 | |||||||||||||
Exelon Corporation | 6.750% | 5/1/11 | 2,000 | 2,221 | |||||||||||||
MidAmerican Energy Holdings Company | 5.875% | 10/1/12 | 750 | 797 | |||||||||||||
Pacific Gas and Electric Company | 3.820% | 4/3/06 | 151 | 151 | B | ||||||||||||
Pacific Gas and Electric Company | 6.050% | 3/1/34 | 4,610 | 5,080 | |||||||||||||
Sempra Energy | 3.754% | 5/21/08 | 1,685 | 1,688 | B | ||||||||||||
TXU Corp. | 6.375% | 6/15/06 | 100 | 102 | |||||||||||||
TXU Corp. | 6.550% | 11/15/34 | 2,730 | 2,681 | A | ||||||||||||
TXU Energy Co. | 4.360% | 1/17/06 | 325 | 325 | B | ||||||||||||
TXU Energy Co. | 7.000% | 3/15/13 | 930 | 1,037 | |||||||||||||
Xcel Energy, Inc. | 7.000% | 12/1/10 | 900 | 1,001 | |||||||||||||
16,648 | |||||||||||||||||
Environmental Services — 0.6% | |||||||||||||||||
Republic Services, Inc. | 6.750% | 8/15/11 | 1,340 | 1,489 | |||||||||||||
Waste Management, Inc. | 6.375% | 11/15/12 | 310 | 339 | |||||||||||||
Waste Management, Inc. | 7.375% | 5/15/29 | 690 | 830 | |||||||||||||
2,658 | |||||||||||||||||
Food, Beverage and Tobacco — 3.1% | |||||||||||||||||
Altria Group, Inc. | 7.000% | 11/4/13 | 1,385 | 1,550 | |||||||||||||
Coca-Cola Enterprises Inc. | 5.250% | 5/15/07 | 680 | 695 |
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Corporate Bonds and Notes — Continued | |||||||||||||||||
Food, Beverage and Tobacco — Continued | |||||||||||||||||
Kellogg Company | 6.600% | 4/1/11 | $ | 1,000 | $ | 1,108 | |||||||||||
Kellogg Company | 7.450% | 4/1/31 | 650 | 862 | |||||||||||||
Kraft Foods Inc. | 4.125% | 11/12/09 | 3,850 | 3,818 | |||||||||||||
Kraft Foods Inc. | 6.250% | 6/1/12 | 210 | 231 | |||||||||||||
Kraft Foods Inc. | 6.500% | 11/1/31 | 1,050 | 1,234 | |||||||||||||
R.J. Reynolds Tobacco Holdings, Inc. | 7.750% | 5/15/06 | 1,280 | 1,315 | |||||||||||||
R.J. Reynolds Tobacco Holdings, Inc. | 7.875% | 5/15/09 | 860 | 899 | |||||||||||||
The Pepsi Bottling Group, Inc. | 7.000% | 3/1/29 | 340 | 431 | |||||||||||||
Tyson Foods, Inc. | 7.000% | 1/15/28 | 800 | 912 | |||||||||||||
13,055 | |||||||||||||||||
Gas and Pipeline Utilities — 1.6% | |||||||||||||||||
CenterPoint Energy Resources Corp. | 7.875% | 4/1/13 | 1,010 | 1,200 | |||||||||||||
Dynegy Holdings Inc. | 8.750% | 2/15/12 | 1,690 | 1,842 | |||||||||||||
Tennessee Gas Pipeline Company | 8.375% | 6/15/32 | 1,000 | 1,177 | |||||||||||||
The Williams Companies, Inc. | 7.625% | 7/15/19 | 2,000 | 2,250 | |||||||||||||
6,469 | |||||||||||||||||
Health Care — 1.0% | |||||||||||||||||
Tenet Healthcare Corporation | 7.375% | 2/1/13 | 2,310 | 2,281 | |||||||||||||
Tenet Healthcare Corporation | 6.875% | 11/15/31 | 750 | 630 | |||||||||||||
WellPoint Inc. | 5.000% | 12/15/14 | 1,330 | 1,358 | |||||||||||||
4,269 | |||||||||||||||||
Homebuilding — 0.5% | |||||||||||||||||
Centex Corporation | 5.125% | 10/1/13 | 420 | 420 | |||||||||||||
D.R. Horton, Inc. | 5.250% | 2/15/15 | 1,110 | 1,075 | |||||||||||||
Pulte Homes, Inc. | 6.250% | 2/15/13 | 385 | 411 | |||||||||||||
1,906 | |||||||||||||||||
Insurance — 0.5% | |||||||||||||||||
ASIF Global Financing XIX | 4.900% | 1/17/13 | 1,120 | 1,137 | A | ||||||||||||
Willis Group North America | 5.125% | 7/15/10 | 760 | 764 | |||||||||||||
1,901 | |||||||||||||||||
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Corporate Bonds and Notes — Continued | |||||||||||||||||
Investment Banking/ Brokerage — 5.0% | |||||||||||||||||
J.P. Morgan Chase & Co. | 5.125% | 9/15/14 | $ | 6,175 | $ | 6,317 | |||||||||||
Merrill Lynch & Co., Inc. | 3.375% | 9/14/07 | 1,345 | 1,331 | |||||||||||||
Merrill Lynch & Co., Inc. | 6.000% | 2/17/09 | 800 | 844 | |||||||||||||
Merrill Lynch & Co., Inc. | 5.000% | 1/15/15 | 65 | 67 | |||||||||||||
Morgan Stanley | 5.800% | 4/1/07 | 2,600 | 2,672 | |||||||||||||
Morgan Stanley | 4.750% | 4/1/14 | 2,860 | 2,818 | |||||||||||||
The Bear Stearns Companies Inc. | 4.000% | 1/31/08 | 1,600 | 1,593 | |||||||||||||
The Goldman Sachs Group, Inc. | 4.750% | 7/15/13 | 3,100 | 3,097 | |||||||||||||
The Goldman Sachs Group, Inc. | 6.345% | 2/15/34 | 2,025 | 2,194 | |||||||||||||
20,933 | |||||||||||||||||
Machinery — 0.3% | |||||||||||||||||
Case New Holland Incorporated | 9.250% | 8/1/11 | 1,000 | 1,050 | A | ||||||||||||
Media — 3.1% | |||||||||||||||||
Clear Channel Communications, Inc. | 4.400% | 5/15/11 | 1,210 | 1,138 | |||||||||||||
Clear Channel Communications, Inc. | 5.500% | 9/15/14 | 940 | 891 | |||||||||||||
Liberty Media Corporation | 4.910% | 9/17/06 | 1,026 | 1,032 | B | ||||||||||||
Liberty Media Corporation | 8.500% | 7/15/29 | 340 | 344 | |||||||||||||
Liberty Media Corporation | 8.250% | 2/1/30 | 120 | 119 | |||||||||||||
News America, Inc. | 6.550% | 3/15/33 | 1,495 | 1,622 | |||||||||||||
News America, Inc. | 6.200% | 12/15/34 | 530 | 556 | |||||||||||||
Time Warner Entertainment Company, L.P. | 8.375% | 7/15/33 | 855 | 1,135 | |||||||||||||
Time Warner Inc. | 6.150% | 5/1/07 | 1,390 | 1,438 | |||||||||||||
Time Warner Inc. | 6.875% | 5/1/12 | 1,260 | 1,422 | |||||||||||||
Time Warner Inc. | 7.700% | 5/1/32 | 1,210 | 1,531 | |||||||||||||
Viacom Inc. | 7.700% | 7/30/10 | 90 | 100 | |||||||||||||
Viacom Inc. | 5.625% | 8/15/12 | 1,315 | 1,345 | |||||||||||||
12,673 | |||||||||||||||||
Media and Entertainment — 0.3% | |||||||||||||||||
The Walt Disney Company | 6.200% | 6/20/14 | 1,280 | 1,421 | |||||||||||||
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Corporate Bonds and Notes — Continued | |||||||||||||||||
Medical Care Facilities — 1.3% | |||||||||||||||||
Coventry Health Care, Inc. | 5.875% | 1/15/12 | $ | 1,050 | $ | 1,069 | |||||||||||
HCA, Inc. | 6.300% | 10/1/12 | 1,790 | 1,837 | |||||||||||||
HCA, Inc. | 6.250% | 2/15/13 | 1,580 | 1,615 | |||||||||||||
HCA, Inc. | 5.750% | 3/15/14 | 700 | 697 | |||||||||||||
5,218 | |||||||||||||||||
Metals and Mining — 0.5% | |||||||||||||||||
Alcoa Inc. | 5.375% | 1/15/13 | 1,800 | 1,899 | |||||||||||||
Oil and Gas — 5.3% | |||||||||||||||||
Amerada Hess Corporation | 7.300% | 8/15/31 | 3,740 | 4,513 | |||||||||||||
Apache Corporation | 6.250% | 4/15/12 | 1,150 | 1,284 | |||||||||||||
Conoco Inc. | 6.950% | 4/15/29 | 600 | 754 | |||||||||||||
ConocoPhillips | 4.750% | 10/15/12 | 2,290 | 2,343 | |||||||||||||
Devon Energy Corporation | 7.950% | 4/15/32 | 1,080 | 1,421 | |||||||||||||
El Paso Corporation | 7.800% | 8/1/31 | 1,660 | 1,614 | |||||||||||||
El Paso Corporation | 7.750% | 1/15/32 | 340 | 332 | |||||||||||||
Kerr-McGee Corporation | 7.875% | 9/15/31 | 4,700 | 5,352 | |||||||||||||
Ocean Energy Inc. | 4.375% | 10/1/07 | 965 | 965 | |||||||||||||
Panhandle Eastern Pipe Line Company | 4.800% | 8/15/08 | 1,170 | 1,184 | |||||||||||||
Pemex Project Funding Master Trust | 8.500% | 2/15/08 | 100 | 110 | |||||||||||||
Pride International, Inc. | 7.375% | 7/15/14 | 800 | 878 | |||||||||||||
Valero Energy Corporation | 6.875% | 4/15/12 | 565 | 631 | |||||||||||||
XTO Energy, Inc. | 6.250% | 4/15/13 | 745 | 806 | |||||||||||||
22,187 | |||||||||||||||||
Paper and Forest Products — 1.4% | |||||||||||||||||
International Paper Company | 5.500% | 1/15/14 | 1,000 | 1,021 | |||||||||||||
Weyerhaeuser Company | 6.125% | 3/15/07 | 331 | 340 | |||||||||||||
Weyerhaeuser Company | 6.750% | 3/15/12 | 2,150 | 2,366 | |||||||||||||
Weyerhaeuser Company | 7.375% | 3/15/32 | 1,785 | 2,105 | |||||||||||||
5,832 | |||||||||||||||||
Pharmaceuticals — 0.3% | |||||||||||||||||
Bristol-Myers Squibb Company | 5.750% | 10/1/11 | 1,160 | 1,241 | |||||||||||||
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Corporate Bonds and Notes — Continued | |||||||||||||||||
Photo Equipment and Supplies — 0.4% | |||||||||||||||||
Eastman Kodak Company | 3.625% | 5/15/08 | $ | 975 | $ | 938 | |||||||||||
Eastman Kodak Company | 7.250% | 11/15/13 | 500 | 526 | |||||||||||||
1,464 | |||||||||||||||||
Real Estate — 0.4% | |||||||||||||||||
EOP Operating Limited Partnership | 6.750% | 2/15/12 | 1,500 | 1,651 | |||||||||||||
Retail — 0.6% | |||||||||||||||||
Target Corporation | 5.875% | 3/1/12 | 860 | 934 | |||||||||||||
Toys “R” Us, Inc. | 7.875% | 4/15/13 | 1,000 | 895 | |||||||||||||
Wal-Mart Stores, Inc. | 6.875% | 8/10/09 | 475 | 523 | |||||||||||||
2,352 | |||||||||||||||||
Special Purpose — 7.3% | |||||||||||||||||
Ahold Finance USA, Inc. | 8.250% | 7/15/10 | 960 | 1,056 | |||||||||||||
Anadarko Finance Company | 6.750% | 5/1/11 | 970 | 1,078 | |||||||||||||
Arch Western Finance, LLC | 6.750% | 7/1/13 | 1,000 | 1,033 | |||||||||||||
Caterpillar Financial Services Corporation | 4.500% | 6/15/09 | 1,040 | 1,050 | |||||||||||||
ChevronTexaco Capital Company | 3.500% | 9/17/07 | 1,000 | 990 | |||||||||||||
Conoco Funding Company | 6.350% | 10/15/11 | 520 | 576 | |||||||||||||
DaimlerChrysler NA Holding Corporation | 6.400% | 5/15/06 | 800 | 816 | |||||||||||||
DaimlerChrysler NA Holding Corporation | 3.859% | 9/10/07 | 1,520 | 1,520 | B | ||||||||||||
DaimlerChrysler NA Holding Corporation | 4.050% | 6/4/08 | 470 | 463 | |||||||||||||
DaimlerChrysler NA Holding Corporation | 7.200% | 9/1/09 | 260 | 283 | |||||||||||||
DaimlerChrysler NA Holding Corporation | 7.300% | 1/15/12 | 735 | 821 | |||||||||||||
DaimlerChrysler NA Holding Corporation | 6.500% | 11/15/13 | 290 | 314 | |||||||||||||
DaimlerChrysler NA Holding Corporation | 8.500% | 1/18/31 | 1,800 | 2,280 | |||||||||||||
Duke Capital Corporation | 6.250% | 2/15/13 | 340 | 367 | |||||||||||||
Fosters Finance Corporation | 4.875% | 10/1/14 | 840 | 832 | A |
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Corporate Bonds and Notes — Continued | |||||||||||||||||
Special Purpose — Continued | |||||||||||||||||
NiSource Finance Corp. | 3.200% | 11/1/06 | $ | 985 | $ | 974 | |||||||||||
Reed Elsevier Capital Inc. | 4.625% | 6/15/12 | 2,300 | 2,289 | |||||||||||||
Sprint Capital Corporation | 6.000% | 1/15/07 | 700 | 717 | |||||||||||||
Sprint Capital Corporation | 8.375% | 3/15/12 | 1,860 | 2,237 | |||||||||||||
Sprint Capital Corporation | 8.750% | 3/15/32 | 2,170 | 3,019 | |||||||||||||
TCI Communications Financing III | 9.650% | 3/31/27 | 3,350 | 3,796 | |||||||||||||
Unilever Capital Corporation | 7.125% | 11/1/10 | 480 | 543 | |||||||||||||
Verizon Global Funding Corp. | 6.125% | 6/15/07 | 2,065 | 2,141 | |||||||||||||
Verizon Global Funding Corp. | 7.750% | 6/15/32 | 375 | 487 | |||||||||||||
Verizon Wireless Capital LLC | 5.375% | 12/15/06 | 800 | 815 | |||||||||||||
30,497 | |||||||||||||||||
Telecommunications — 1.5% | |||||||||||||||||
BellSouth Corporation | 4.750% | 11/15/12 | 830 | 834 | |||||||||||||
GTE Hawaiian Telephone Company, Inc. | 7.000% | 2/1/06 | 750 | 758 | |||||||||||||
Qwest Corporation | 5.625% | 11/15/08 | 550 | 540 | |||||||||||||
SBC Communications Inc. | 5.100% | 9/15/14 | 1,910 | 1,953 | |||||||||||||
Verizon New York Inc. | 6.875% | 4/1/12 | 1,820 | 2,012 | |||||||||||||
6,097 | |||||||||||||||||
Telecommunications (Cellular/ Wireless) — 1.8% | |||||||||||||||||
AT&T Wireless Services Inc. | 7.500% | 5/1/07 | 1,500 | 1,589 | |||||||||||||
AT&T Wireless Services Inc. | 8.125% | 5/1/12 | 570 | 683 | |||||||||||||
AT&T Wireless Services Inc. | 8.750% | 3/1/31 | 980 | 1,373 | |||||||||||||
Cingular Wireless LLC | 5.625% | 12/15/06 | 800 | 813 | |||||||||||||
Motorola, Inc. | 7.625% | 11/15/10 | 850 | 973 | |||||||||||||
Nextel Communications, Inc. | 5.950% | 3/15/14 | 469 | 487 | |||||||||||||
Nextel Communications, Inc. | 7.375% | 8/1/15 | 1,600 | 1,728 | |||||||||||||
7,646 | |||||||||||||||||
Transportation — 1.2% | |||||||||||||||||
Burlington Northern Railroad Company | 6.960% | 3/22/09 | 207 | 218 | |||||||||||||
Burlington Northern Railroad Company | 7.330% | 6/23/10 | 152 | 164 | |||||||||||||
Continental Airlines, Inc. | 6.545% | 2/2/19 | 165 | 165 | |||||||||||||
Continental Airlines, Inc. | 7.256% | 3/15/20 | 558 | 563 |
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Corporate Bonds and Notes — Continued | |||||||||||||||||
Transportation — Continued | |||||||||||||||||
CSX Transportation, Inc. | 7.875% | 5/15/43 | $ | 252 | $ | 343 | |||||||||||
Delta Air Lines, Inc. | 7.570% | 11/18/10 | 300 | 282 | |||||||||||||
Delta Air Lines, Inc. | 6.718% | 1/2/23 | 698 | 733 | |||||||||||||
Norfolk Southern Corporation | 7.875% | 5/15/43 | 348 | 478 | |||||||||||||
Northwest Airlines Corporation | 7.575% | 3/1/19 | 193 | 195 | |||||||||||||
Union Pacific Corporation | 4.875% | 1/15/15 | 1,740 | 1,749 | |||||||||||||
United Airlines, Inc. | 7.783% | 1/1/14 | 245 | 227 | |||||||||||||
5,117 | |||||||||||||||||
Total Corporate Bonds and Notes (Identified Cost — $298,050) | 306,699 | ||||||||||||||||
U.S. Government and Agency Obligations — 3.0% | |||||||||||||||||
Fixed Rate Securities — 0.2% | |||||||||||||||||
Tennessee Valley Authority | 5.375% | 11/13/08 | 150 | 157 | |||||||||||||
United States Treasury Notes | 4.125% | 5/15/15 | 700 | 710 | |||||||||||||
867 | |||||||||||||||||
Indexed Securities — 2.8% | |||||||||||||||||
United States Treasury Inflation-Protected Security | 0.875% | 4/15/10 | 11,923 | 11,629 | D | ||||||||||||
Total U.S. Government and Agency Obligations (Identified Cost — $12,665) | 12,496 | ||||||||||||||||
U.S. Government Agency Mortgage-Backed Securities — N.M. | |||||||||||||||||
Fixed Rate Securities — N.M. | |||||||||||||||||
Fannie Mae | 8.000% | 4/25/06 | 6 | 6 | |||||||||||||
Indexed Securities — N.M. | |||||||||||||||||
Freddie Mac | 4.508% | 9/1/24 | 95 | 98 | B | ||||||||||||
Total U.S. Government Agency Mortgage-Backed Securities (Identified Cost — $102) | 104 | ||||||||||||||||
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Yankee BondsE — 21.7% | |||||||||||||||||
Banking and Finance — 1.9% | |||||||||||||||||
Corporacion Andina de Fomento | 4.000% | 1/26/07 | $ | 1,260 | $ | 1,261 | B | ||||||||||
HBOS Capital Funding LP | 6.071% | 6/30/49 | 1,490 | 1,608 | A | ||||||||||||
HBOS Treasury Services plc | 4.000% | 9/15/09 | 1,080 | 1,072 | A | ||||||||||||
Mizuho Financial Group, Inc. | 5.790% | 4/15/14 | 3,565 | 3,750 | A | ||||||||||||
7,691 | |||||||||||||||||
Banks — 0.4% | |||||||||||||||||
ABN Amro Bank Nv | 4.650% | 6/4/18 | 1,530 | 1,508 | |||||||||||||
Cable — 0.2% | |||||||||||||||||
British Sky Broadcasting Group plc | 6.875% | 2/23/09 | 870 | 936 | |||||||||||||
Containers and Packaging — 0.2% | |||||||||||||||||
Cascades Inc. | 7.250% | 2/15/13 | 1,000 | 978 | |||||||||||||
Diversified Financial Services — 0.7% | |||||||||||||||||
Encana Holdings Finance Corp | 5.800% | 5/1/14 | 2,725 | 2,924 | |||||||||||||
Electric — 1.0% | |||||||||||||||||
Empresa Nacional de Electricidad S.A. | 8.500% | 4/1/09 | 1,805 | 2,007 | |||||||||||||
Hydro-Quebec | 7.500% | 4/1/16 | 1,625 | 2,015 | |||||||||||||
4,022 | |||||||||||||||||
Foreign Governments — 7.2% | |||||||||||||||||
Federative Republic of Brazil | 14.500% | 10/15/09 | 280 | 364 | |||||||||||||
Federative Republic of Brazil | 12.000% | 4/15/10 | 580 | 705 | |||||||||||||
Federative Republic of Brazil | 4.313% | 4/15/12 | 354 | 340 | B | ||||||||||||
Federative Republic of Brazil | 4.313% | 4/15/12 | 544 | 523 | B | ||||||||||||
Federative Republic of Brazil | 8.000% | 4/15/14 | 1,362 | 1,395 | |||||||||||||
Federative Republic of Brazil | 10.125% | 5/15/27 | 430 | 498 | |||||||||||||
Federative Republic of Brazil | 11.000% | 8/17/40 | 410 | 493 | |||||||||||||
Province of Nova Scotia | 5.750% | 2/27/12 | 1,000 | 1,089 | |||||||||||||
Province of Ontario | 4.500% | 2/3/15 | 460 | 467 | |||||||||||||
Republic of Chile | 3.587% | 1/28/08 | 120 | 121 | B | ||||||||||||
Republic of Colombia | 10.500% | 7/9/10 | 300 | 357 |
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Yankee Bonds — Continued | |||||||||||||||||
Foreign Governments — Continued | |||||||||||||||||
Republic of Colombia | 11.750% | 2/25/20 | $ | 570 | $ | 750 | |||||||||||
Republic of Panama | 9.625% | 2/8/11 | 90 | 108 | |||||||||||||
Republic of Panama | 10.750% | 5/15/20 | 480 | 650 | |||||||||||||
Republic of Panama | 9.375% | 1/16/23 | 270 | 334 | |||||||||||||
Republic of Peru | 5.000% | 3/7/17 | 578 | 550 | F | ||||||||||||
Republic of Peru | 5.000% | 3/7/17 | 213 | 202 | A,F | ||||||||||||
Republic of Peru | 8.750% | 11/21/33 | 500 | 564 | |||||||||||||
Republic of South Africa | 7.375% | 4/25/12 | 650 | 748 | |||||||||||||
Republic of South Africa | 6.500% | 6/2/14 | 700 | 781 | |||||||||||||
Russian Federation | 8.250% | 3/31/10 | 80 | 87 | |||||||||||||
Russian Federation | 5.000% | 3/31/30 | 5,120 | 5,716 | F | ||||||||||||
United Mexican States | 8.375% | 1/14/11 | 4,965 | 5,779 | |||||||||||||
United Mexican States | 11.500% | 5/15/26 | 1,100 | 1,766 | |||||||||||||
United Mexican States | 8.300% | 8/15/31 | 820 | 1,021 | |||||||||||||
United Mexican States | 7.500% | 4/8/33 | 3,942 | 4,523 | |||||||||||||
29,931 | |||||||||||||||||
Insurance — 0.8% | |||||||||||||||||
Axa | 8.600% | 12/15/30 | 1,630 | 2,220 | |||||||||||||
Oil Insurance Ltd | 5.150% | 8/15/33 | 585 | 589 | A | ||||||||||||
XL Capital Ltd. | 5.250% | 9/15/14 | 700 | 710 | |||||||||||||
3,519 | |||||||||||||||||
Manufacturing (Diversified) — 1.0% | |||||||||||||||||
Tyco International Group SA | 6.375% | 2/15/06 | 1,900 | 1,925 | |||||||||||||
Tyco International Group SA | 6.375% | 10/15/11 | 250 | 275 | |||||||||||||
Tyco International Group SA | 7.000% | 6/15/28 | 554 | 668 | |||||||||||||
Tyco International Group SA | 6.875% | 1/15/29 | 1,051 | 1,255 | |||||||||||||
4,123 | |||||||||||||||||
Oil and Gas — 1.5% | |||||||||||||||||
Gazprom | 9.625% | 3/1/13 | 150 | 184 | A | ||||||||||||
Gazprom | 9.625% | 3/1/13 | 50 | 61 | A |
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Yankee Bonds — Continued | |||||||||||||||||
Oil and Gas — Continued | |||||||||||||||||
Petrobras International Finance Company (PIFCO) | 9.750% | 7/6/11 | $ | 905 | $ | 1,072 | |||||||||||
Petroliam Nasional Berhad | 7.625% | 10/15/26 | 610 | 776 | A | ||||||||||||
YPF Sociedad Anonima | 10.000% | 11/2/28 | 3,500 | 4,165 | |||||||||||||
6,258 | |||||||||||||||||
Special Purpose — 2.9% | |||||||||||||||||
Deutsche Telekom International Finance BV | 8.750% | 6/15/30 | 1,400 | 1,896 | |||||||||||||
Deutsche Telekom International Finance BV | 9.250% | 6/1/32 | 670 | 1,000 | |||||||||||||
General Motors Nova Scotia Finance Company | 6.850% | 10/15/08 | 1,160 | 1,093 | |||||||||||||
HSBC Capital Funding LP | 4.610% | 12/29/49 | 760 | 742 | A | ||||||||||||
HSBC Holdings plc | 5.250% | 12/12/12 | 3,850 | 4,007 | |||||||||||||
Petronas Capital Ltd. | 7.875% | 5/22/22 | 770 | 983 | A | ||||||||||||
Telefonica Europe BV | 8.250% | 9/15/30 | 800 | 1,116 | |||||||||||||
UFJ Finance Aruba AEC | 6.750% | 7/15/13 | 920 | 1,026 | |||||||||||||
11,863 | |||||||||||||||||
Telecommunications — 3.3% | |||||||||||||||||
British Telecommunications plc | 8.375% | 12/15/10 | 900 | 1,066 | |||||||||||||
British Telecommunications plc | 8.875% | 12/15/30 | 420 | 593 | |||||||||||||
France Telecom SA | 7.750% | 3/1/11 | 3,000 | 3,481 | |||||||||||||
France Telecom SA | 8.500% | 3/1/31 | 340 | 474 | |||||||||||||
INTELSAT | 7.625% | 4/15/12 | 32 | 28 | |||||||||||||
INTELSAT | 6.500% | 11/1/13 | 1,333 | 1,080 | |||||||||||||
Koninklijke (Royal) KPN NV | 8.000% | 10/1/10 | 990 | 1,146 | |||||||||||||
Tele Norte Leste Participacoes S.A. | 8.000% | 12/18/13 | 1,080 | 1,112 | |||||||||||||
Telecom Italia Capital S.p.A. | 5.250% | 11/15/13 | 2,025 | 2,056 | |||||||||||||
Telecom Italia Capital S.p.A. | 4.950% | 9/30/14 | 1,860 | 1,842 | A | ||||||||||||
Telus Corporation | 7.500% | 6/1/07 | 700 | 741 | |||||||||||||
13,619 | |||||||||||||||||
Telecommunications (Cellular/ Wireless) — 0.2% | |||||||||||||||||
Rogers Wireless Communications Inc. | 6.375% | 3/1/14 | 1,000 | 1,018 | |||||||||||||
Maturity | Par/ | |||||||||||||||||
Rate | Date | Shares | Value | |||||||||||||||
Yankee Bonds — Continued | ||||||||||||||||||
Utilities — 0.4% | ||||||||||||||||||
United Utilities plc | 5.375% | �� | 2/1/19 | $ | 1,550 | $ | 1,570 | |||||||||||
Total Yankee Bonds (Identified Cost — $83,575) | 89,960 | |||||||||||||||||
Preferred Stocks — 0.2% | ||||||||||||||||||
Fannie Mae | 7.000% | 16 | shs | 899 | B | |||||||||||||
Total Preferred Stocks (Identified Cost — $810) | 899 | |||||||||||||||||
Total Long-Term Securities (Identified Cost — $395,202) | 410,158 | |||||||||||||||||
Short-Term Securities — 0.4% | ||||||||||||||||||
U.S. Government and Agency Obligations — 0.1% | ||||||||||||||||||
Fannie Mae | 0.000% | 12/5/05 | $ | 323 | 318 | C,G | ||||||||||||
Repurchase Agreements — 0.3% | ||||||||||||||||||
Merrill Lynch Government Securities, Inc. | ||||||||||||||||||
3.2%, dated 6/30/05, to be repurchased at $602 on 7/1/05 (Collateral: $585 Tennessee Valley Authority bonds, 4.875%, due 12/15/16, value $619) | 602 | 602 | ||||||||||||||||
Lehman Brothers, Inc. | ||||||||||||||||||
3.25%, dated 6/30/05, to be repurchased at $601 on 7/1/05 (Collateral: $605 Fannie Mae mortgage-backed securities, 4.72%, due 3/15/10, value $621) | 601 | 601 | ||||||||||||||||
1,203 | ||||||||||||||||||
Total Short-Term Securities (Identified Cost — $1,521) | 1,521 | |||||||||||||||||
Total Investments — 99.1% (Identified Cost — $396,723) | 411,679 | |||||||||||||||||
Other Assets Less Liabilities — 0.9% | 3,792 | |||||||||||||||||
Net Assets — 100.0% | $ | 415,471 | ||||||||||||||||
Actual | Appreciation/ | ||||||||||
Expiration | Contracts | (Depreciation) | |||||||||
Futures Contracts PurchasedH | |||||||||||
Eurodollar Futures | September 2005 | 505 | $ | (356 | ) | ||||||
U.S. Treasury Note Futures | September 2005 | 145 | 13 | ||||||||
$ | (343 | ) | |||||||||
Futures Contracts WrittenH | |||||||||||
U.S. Treasury Bond Futures | September 2005 | 253 | $ | (120 | ) | ||||||
U.S. Treasury Note Futures | September 2005 | 15 | (13 | ) | |||||||
$ | (133 | ) | |||||||||
A | Rule 144a Security — A security purchased pursuant to Rule 144a under the Securities Act of 1933 which may not be resold subject to that rule except to qualified institutional buyers. These securities represent 8.2% of net assets. |
B | Indexed Security — The rates of interest earned on these securities are tied to the London Interbank Offered Rate (“LIBOR”). The coupon rates are the rates as of June 30, 2005. |
C | Zero coupon bond — A bond with no periodic interest payments which is sold at such a discount as to produce a current yield to maturity. |
D | Inflation-Protected Securities — Security whose principal value is adjusted daily or monthly in accordance with changes to the Consumer Price Index for All Urban Consumers. Interest is calculated on the basis of the current adjusted principal value. |
E | Yankee Bond — A dollar-denominated bond issued in the U.S. by foreign entities. |
F | Stepped coupon security — A security with a predetermined schedule of interest or dividend rate changes. |
G | Collateral to cover futures contracts. |
H | Futures are described in more detail in the notes to financial statements. |
Statement of Assets and Liabilities
Investment Grade Income Portfolio
Assets: | |||||||||
Investment securities at market value (Identified Cost — $395,202) | $ | 410,158 | |||||||
Short-term securities at value (Identified Cost — $1,521) | 1,521 | ||||||||
Cash | 1 | ||||||||
Receivable for securities sold | 853 | ||||||||
Receivable for fund shares sold | 639 | ||||||||
Interest and dividends receivable | 5,980 | ||||||||
Other assets | 21 | ||||||||
Total assets | 419,173 | ||||||||
Liabilities: | |||||||||
Payable for fund shares repurchased | $ | 1,699 | |||||||
Payable for securities purchased | 788 | ||||||||
Income distribution payable | 813 | ||||||||
Futures variation margin payable | 76 | ||||||||
Accrued management fee | 89 | ||||||||
Accrued distribution and service fees | 165 | ||||||||
Accrued expenses | 72 | ||||||||
Total liabilities | 3,702 | ||||||||
Net Assets | $ | 415,471 | |||||||
Net assets consist of: | |||||||||
Accumulated paid-in capital applicable to: | |||||||||
36,813 Primary Class shares outstanding | $ | 380,970 | |||||||
1,733 Institutional Class shares outstanding | 18,491 | ||||||||
Under/(over) distributed net investment income | (118 | ) | |||||||
Accumulated net realized gain on investments, options and futures | 1,648 | ||||||||
Unrealized appreciation of investments, options and futures | 14,480 | ||||||||
Net Assets | $ | 415,471 | |||||||
Net Asset Value Per Share: | |||||||||
Primary Class | $ | 10.78 | |||||||
Institutional Class | $ | 10.78 | |||||||
Statement of Operations
Investment Grade Income Portfolio
Investment Income: | ||||||||||||
Interest | $ | 11,319 | ||||||||||
Dividends | 29 | |||||||||||
Total income | $ | 11,348 | ||||||||||
Expenses: | ||||||||||||
Management fees | 1,227 | |||||||||||
Distribution and service fees | 994 | |||||||||||
Audit and legal fees | 36 | |||||||||||
Custodian fees | 65 | |||||||||||
Directors’ fees and expenses | 17 | |||||||||||
Registration fees | 25 | |||||||||||
Reports to shareholders | 20 | |||||||||||
Transfer agent and shareholder servicing expense: | ||||||||||||
Primary Class | 180 | |||||||||||
Institutional Class | 1 | |||||||||||
Other expenses | 12 | |||||||||||
2,577 | ||||||||||||
Less: Fees waived | (564 | ) | ||||||||||
Compensating balance credits | (1 | ) | ||||||||||
Total expenses, net of waivers and compensating balance credits | 2,012 | |||||||||||
Net Investment Income | 9,336 | |||||||||||
Net Realized and Unrealized Gain/(Loss) on Investments: | ||||||||||||
Realized gain/(loss) on: | ||||||||||||
Investments | 1,812 | |||||||||||
Futures | 9 | |||||||||||
1,821 | ||||||||||||
Change in unrealized appreciation/(depreciation) of investments, options and futures | (1,721 | ) | ||||||||||
Net Realized and Unrealized Gain/(Loss) on Investments | 100 | |||||||||||
Change in Net Assets Resulting From Operations | $ | 9,436 | ||||||||||
See notes to financial statements.
Statement of Changes in Net Assets
Investment Grade Income Portfolio
For the Six | For the | |||||||||
Months Ended | Year Ended | |||||||||
6/30/05 | 12/31/04 | |||||||||
(Unaudited) | ||||||||||
Change in Net Assets: | ||||||||||
Net investment income | $ | 9,336 | $ | 18,372 | ||||||
Net realized gain/(loss) on investments, options and futures | 1,821 | 9,812 | ||||||||
Change in unrealized appreciation/(depreciation) of investments, options, and futures | (1,721 | ) | (3,555 | ) | ||||||
Change in net assets resulting from operations | 9,436 | 24,629 | ||||||||
Distributions to shareholders: | ||||||||||
From net investment income: | ||||||||||
Primary Class | (9,036 | ) | (17,963 | ) | ||||||
Institutional Class | (301 | ) | (411 | ) | ||||||
From net realized gain on investments: | ||||||||||
Primary Class | (1,248 | ) | (9,054 | ) | ||||||
Institutional Class | (39 | ) | (220 | ) | ||||||
Change in net assets from Fund share transactions: | ||||||||||
Primary Class | (5,398 | ) | (2,354 | ) | ||||||
Institutional Class | 8,480 | 4,370 | ||||||||
Change in net assets | 1,894 | (1,003 | ) | |||||||
Net Assets: | ||||||||||
Beginning of period | 413,577 | 414,580 | ||||||||
End of period | $ | 415,471 | $ | 413,577 | ||||||
Under/(over) distributed net investment income | $ | (118 | ) | $ | (117 | ) | ||||
See notes to financial statements.
Financial Highlights
Investment Grade Income Portfolio
Contained below is per share operating performance data for a share of common stock outstanding, total investment return, ratios to average net assets and other supplemental data. This information has been derived from information provided in the financial statements.
Primary Class:
Six Months | |||||||||||||||||||||||||
Ended | Years Ended December 31, | ||||||||||||||||||||||||
June 30, | |||||||||||||||||||||||||
2005 | 2004 | 2003 | 2002 | 2001 | 2000 | ||||||||||||||||||||
(Unaudited | |||||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.81 | $ | 10.88 | $ | 10.42 | $ | 10.10 | $ | 9.97 | $ | 9.78 | |||||||||||||
Investment operations: | |||||||||||||||||||||||||
Net investment income | .24 | A | .49 | A | .50 | A | .54 | A | .60 | A | .67 | A | |||||||||||||
Net realized and unrealized gain/(loss) on investments, options and futures | (.01 | ) | .18 | .53 | .32 | .14 | .19 | ||||||||||||||||||
Total from investment operations | .23 | .67 | 1.03 | .86 | .74 | .86 | |||||||||||||||||||
Distributions: | |||||||||||||||||||||||||
From net investment income | (.24 | ) | (.49 | ) | (.50 | ) | (.54 | ) | (.61 | ) | (.67 | ) | |||||||||||||
From net realized gain on investments | (.02 | ) | (.25 | ) | (.07 | ) | — | — | — | ||||||||||||||||
Total distributions | (.26 | ) | (.74 | ) | (.57 | ) | (.54 | ) | (.61 | ) | (.67 | ) | |||||||||||||
Net asset value, end of period | $ | 10.78 | $ | 10.81 | $ | 10.88 | $ | 10.42 | $10.10 | $ | 9.97 | ||||||||||||||
Ratios/supplemental data: | |||||||||||||||||||||||||
Total return | 2.30 | %B | 6.29 | % | 10.16 | % | 8.82 | % | 7.52 | % | 9.16 | % | |||||||||||||
Expenses to average net assets | 1.00 | %A,C | 1.00 | %A | 1.00 | %A | 1.00 | %A | 1.00 | %A | 1.00 | %A | |||||||||||||
Net investment income to average net assets | 4.55 | %A,C | 4.47 | % A | 4.62 | %A | 5.32 | %A | 5.90 | %A | 6.82 | %A | |||||||||||||
Portfolio turnover rate | 25.3 | %B | 74.9 | % | 78.2 | % | 131.0 | % | 131.3 | % | 93.6 | % | |||||||||||||
Net assets, end of period (in thousands) | $ | 396,776 | $ | 403,361 | $ | 408,685 | $ | 334,763 | $ | 255,298 | $ | 194,987 | |||||||||||||
A | Net of fees waived by LMFA for expenses in excess of a voluntary expense limitation of 1.00% until April 30, 2006. If no fees had been waived by LMFA, the annualized ratio of expenses to average daily net assets would have been as follows: for the six months ended June 30, 2005, 1.28%; and for the years ended December 31, 2004, 1.27%; 2003, 1.28%; 2002, 1.30%; 2001, 1.27%; and 2000, 1.31%. |
B | Not annualized. |
C | Annualized. |
See notes to financial statements.
Institutional Class:
Six Months | |||||||||||||||||||||||||
Ended | Years Ended December 31, | ||||||||||||||||||||||||
June 30, | |||||||||||||||||||||||||
2005 | 2004 | 2003 | 2002 | 2001 | 2000 | ||||||||||||||||||||
(Unaudited | |||||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.82 | $ | 10.89 | $ | 10.43 | $ | 10.11 | $9.97 | $ | 9.79 | ||||||||||||||
Investment operations: | |||||||||||||||||||||||||
Net investment income | .27 | D | .54 | D | .55 | D | .59 | D | .66 | D | .71 | D | |||||||||||||
Net realized and unrealized gain/(loss) on investments, options and futures | (.03 | ) | .17 | .53 | .31 | .14 | .19 | ||||||||||||||||||
Total from investment operations | .24 | .71 | 1.08 | .90 | .80 | .90 | |||||||||||||||||||
Distributions: | |||||||||||||||||||||||||
From net investment income | (.26 | ) | (.53 | ) | (.55 | ) | (.58 | ) | (.66 | ) | (.72 | ) | |||||||||||||
From net realized gain on investments | (.02 | ) | (.25 | ) | (.07 | ) | — | — | — | ||||||||||||||||
Total distributions | (.28 | ) | (.78 | ) | (.62 | ) | (.58 | ) | (.66 | ) | (.72 | ) | |||||||||||||
Net asset value, end of period | $ | 10.78 | $ | 10.82 | $ | 10.89 | $ | 10.43 | $ | 10.11 | $ | 9.97 | |||||||||||||
Ratios/supplemental data: | |||||||||||||||||||||||||
Total return | 2.50 | %B | 6.85 | % | 10.71 | % | 9.38 | % | 8.16 | % | 9.63 | % | |||||||||||||
Expenses to average net assets | .42 | %C,D | .47 | % D | .50 | % D | .48 | % D | .47 | % D | .48 | % D | |||||||||||||
Net investment income to average net assets | 5.20 | %C,D | 5.02 | % D | 5.13 | % D | 5.85 | % D | 6.50 | % D | 7.32 | % D | |||||||||||||
Portfolio turnover rate | 25.3 | %B | 74.9 | % | 78.2 | % | 131.0 | % | 131.3 | % | 93.6 | % | |||||||||||||
Net assets, end of period (in thousands) | $ | 18,695 | $ | 10,216 | $ | 5,895 | $ | 2,836 | $ | 1,424 | $ | 839 | |||||||||||||
D | Net of fees waived by LMFA for expenses in excess of a voluntary expense limitation of 0.50% until April 30, 2006. If no fees had been waived by LMFA, the annualized ratio of expenses to average daily net assets would have been as follows: for the six months ended June 30, 2005, 0.69%; and for the years ended December 31, 2004, 0.73%; 2003, 0.78%; 2002, 0.78%; 2001, 0.74%; and 2000, 0.79%. |
See notes to financial statements.
Limited Duration Bond Portfolio
As a shareholder of the Fund, you incur ongoing costs, including management fees, distribution and service (12b-1) fees on Primary Class shares; and other Fund expenses. These examples are 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. Each example is based on an investment of $1,000 invested on January 1, 2005, and held through June 30, 2005.
Actual Expenses
The first line for each class in the table below provides information about actual account values and actual expenses for each class. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each class in the table below provides information about hypothetical account values and hypothetical expenses based on the relevant class’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the class’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 this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare these 5% hypothetical examples with the 5% hypothetical examples for the relevant class that appear in the shareholder reports of other funds.
Beginning | Ending | Expenses PaidA | |||||||||||
Account | Account | During the | |||||||||||
Value | Value | Period | |||||||||||
1/1/05 | 6/30/05 | 1/1/05 to 6/30/05 | |||||||||||
Primary Class: | |||||||||||||
Actual | $ | 1,000.00 | $ | 1,009.90 | $ | 4.98 | |||||||
Hypothetical (5% return before expenses) | 1,000.00 | 1,019.84 | 5.01 | ||||||||||
Institutional Class: | |||||||||||||
Actual | $ | 1,000.00 | $ | 1,012.60 | $ | 2.30 | |||||||
Hypothetical (5% return before expenses) | 1,000.00 | 1,022.51 | 2.31 |
A | These calculations are based on expenses incurred in the most recent fiscal half-year. The dollar amounts shown as “Expenses Paid” are equal to the annualized expense ratios of 1.00% and 0.46% for the Primary Class and Institutional, Class respectively, multiplied by the average value over the period, multiplied by the number of days in the most recent fiscal half-year (181), and divided by 365. |
Performance Information
Limited Duration Bond Portfolio
The graphs on the following pages compare the Fund’s total returns to those of closely matched broad-based securities market indices. The lines illustrate the cumulative total return of an initial $10,000 investment in Primary Class shares and an initial $1,000,000 investment in Institutional Class shares of the Fund, for the periods indicated. The lines for the Fund represent the total return after deducting all Fund investment management and other administrative expenses and the transaction costs of buying and selling securities. The lines representing each securities market index do not include any transaction costs associated with buying and selling securities in the index or other administrative expenses. Both the Fund’s and the indices’ results assume reinvestment of all dividends and distributions.
Growth of a $10,000 Investment — Primary Class
Periods Ended June 30, 2005
Cumulative | Average Annual | |||||||||
Total Return | Total Return | |||||||||
One Year | +3.40% | +3.40% | ||||||||
Five Years | +25.67% | +4.68% | ||||||||
Ten Years | +61.82% | +4.93% | ||||||||
The performance data quoted represents past performance and does not guarantee future results. The performance stated may have been due to extraordinary market conditions, which may not be duplicated in the future. Current performance may be lower or higher than the performance data quoted. To obtain the most recent month-end performance information please visit www.leggmasonfunds.com. The investment return and principal value of the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Calculations assume reinvestment of dividends and capital gain distributions. Performance would have been lower if fees had not been waived in various periods.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
A | A subset of the Merrill Lynch Treasury Master Index, consisting of bonds with an outstanding par that is greater than or equal to $25 million and fixed rate coupons greater than 4.25%. The maturity range on these securities is from 1 to 3 years. |
Growth of a $1,000,000 Investment — Institutional Class
Periods Ended June 30, 2005
Cumulative | Average Annual | |||||||||
Total Return | Total Return | |||||||||
One Year | +4.05% | +4.05% | ||||||||
Five Years | +28.99% | +5.22% | ||||||||
Ten Years | +70.65% | +5.49% | ||||||||
The performance data quoted represents past performance and does not guarantee future results. The performance stated may have been due to extraordinary market conditions, which may not be duplicated in the future. Current performance may be lower or higher than the performance data quoted. To obtain the most recent month-end performance information please call 1-888-425-6432. The investment return and principal value of the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Calculations assume reinvestment of dividends and capital gain distributions. Performance would have been lower if fees had not been waived in various periods.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
Portfolio Composition (As of June 30, 2005)
Standard & Poor’s Debt RatingsB (As a percentage of the portfolio)
Maturity Schedule (As a percentage of the portfolio)
B | Standard & Poor’s Ratings Services provides capital markets with credit ratings for the evaluation and assessment of credit risk. |
Portfolio of Investments
Limited Duration Bond Portfolio
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Long-Term Securities — 99.0% | |||||||||||||||||
Corporate Bonds and Notes — 29.8% | |||||||||||||||||
Aerospace/ Defense — 0.3% | |||||||||||||||||
Northrop Grumman Corporation | 4.079% | 11/16/06 | $ | 840 | $ | 838 | |||||||||||
Banking and Finance — 5.9% | |||||||||||||||||
American General Finance Corporation (AGFC) | 3.730% | 1/18/08 | 330 | 330 | A | ||||||||||||
Countrywide Financial Corporation | 3.469% | 5/5/08 | 850 | 851 | A | ||||||||||||
Ford Motor Credit Company | 4.308% | 9/28/07 | 4,020 | 3,885 | A | ||||||||||||
Ford Motor Credit Company | 6.625% | 6/16/08 | 2,050 | 2,024 | |||||||||||||
General Motors Acceptance Corporation | 4.510% | 1/16/07 | 1,400 | 1,369 | A | ||||||||||||
General Motors Acceptance Corporation | 4.130% | 3/20/07 | 70 | 68 | A | ||||||||||||
General Motors Acceptance Corporation | 4.560% | 7/16/07 | 350 | 338 | A | ||||||||||||
General Motors Acceptance Corporation | 4.602% | 9/23/08 | 4,250 | 3,929 | A | ||||||||||||
HSBC Finance Corporation | 3.480% | 5/10/10 | 500 | 500 | A | ||||||||||||
iStar Financial Inc. | 3.740% | 3/3/08 | 1,050 | 1,038 | A | ||||||||||||
John Deere Capital Corporation | 3.900% | 1/15/08 | 1,000 | 994 | |||||||||||||
Nissan Motor Acceptance Corporation | 4.625% | 3/8/10 | 660 | 661 | B | ||||||||||||
SLM Corporation | 3.850% | 1/26/09 | 100 | 100 | A | ||||||||||||
16,087 | |||||||||||||||||
Cable — 1.2% | |||||||||||||||||
Comcast Cable Communications, Inc. | 6.375% | 1/30/06 | 2,000 | 2,028 | |||||||||||||
Comcast Cable Communications, Inc. | 8.375% | 5/1/07 | 230 | 247 | |||||||||||||
Cox Communications, Inc. | 3.950% | 12/14/07 | 1,050 | 1,055 | A | ||||||||||||
3,330 | |||||||||||||||||
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Corporate Bonds and Notes — Continued | |||||||||||||||||
Cable — Continued | |||||||||||||||||
Chemicals — 0.2% | |||||||||||||||||
The Dow Chemical Company | 5.750% | 12/15/08 | $ | 560 | $ | 587 | |||||||||||
Computer Services and Systems — 0.4% | |||||||||||||||||
Electronic Data Systems Corporation | 7.125% | 10/15/09 | 1,000 | 1,076 | |||||||||||||
Diversified Financial Services — 1.0% | |||||||||||||||||
Capital One Financial Corporation | 4.738% | 5/17/07 | 690 | 695 | |||||||||||||
CIT Group Inc. | 3.504% | 5/23/08 | 690 | 690 | A | ||||||||||||
General Electric Capital Corporation | 3.450% | 6/15/09 | 1,470 | 1,471 | A | ||||||||||||
2,856 | |||||||||||||||||
Electric — 2.4% | |||||||||||||||||
Appalachian Power Company | 3.600% | 5/15/08 | 1,700 | 1,669 | |||||||||||||
Dominion Resources, Inc. | 3.568% | 5/15/06 | 2,000 | 2,004 | A | ||||||||||||
DTE Energy Company | 4.280% | 6/1/07 | 1,050 | 1,053 | A | ||||||||||||
FirstEnergy Corp. | 5.500% | 11/15/06 | 1,610 | 1,637 | |||||||||||||
Ohio Edison Company | 4.000% | 5/1/08 | 310 | 307 | |||||||||||||
6,670 | |||||||||||||||||
Energy — 2.0% | |||||||||||||||||
Alabama Power Company | 3.484% | 8/25/09 | 1,000 | 1,001 | A | ||||||||||||
Duke Energy Corporation | 3.750% | 3/5/08 | 1,500 | 1,481 | |||||||||||||
Pacific Gas and Electric Company | 3.600% | 3/1/09 | 1,000 | 977 | |||||||||||||
Sempra Energy | 3.754% | 5/21/08 | 2,000 | 2,003 | A | ||||||||||||
5,462 | |||||||||||||||||
Environmental Services — 0.4% | |||||||||||||||||
Waste Management, Inc. | 7.375% | 8/1/10 | 1,090 | 1,219 | |||||||||||||
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Corporate Bonds and Notes — Continued | |||||||||||||||||
Environmental Services — Continued | |||||||||||||||||
Food, Beverage and Tobacco — 1.6% | |||||||||||||||||
Altria Group, Inc. | 5.625% | 11/4/08 | $ | 3,000 | $ | 3,112 | |||||||||||
General Mills, Inc. | 6.449% | 10/15/06 | 1,000 | 1,027 | |||||||||||||
Sara Lee Corporation | 6.250% | 9/15/11 | 230 | 247 | |||||||||||||
4,386 | |||||||||||||||||
Investment Banking/ Brokerage — 1.7% | |||||||||||||||||
J.P. Morgan Chase & Co. | 3.720% | 10/2/09 | 1,730 | 1,733 | A | ||||||||||||
Lehman Brothers Holdings Inc. | 3.480% | 11/10/09 | 1,120 | 1,123 | A | ||||||||||||
Morgan Stanley | 3.890% | 1/15/10 | 700 | 701 | A | ||||||||||||
The Bear Stearns Companies Inc. | 3.640% | 9/9/09 | 1,000 | 1,003 | A | ||||||||||||
4,560 | |||||||||||||||||
Media — 3.0% | |||||||||||||||||
Clear Channel Communications, Inc. | 4.625% | 1/15/08 | 200 | 198 | |||||||||||||
Clear Channel Communications, Inc. | 7.650% | 9/15/10 | 610 | 660 | |||||||||||||
Liberty Media Corporation | 7.875% | 7/15/09 | 3,360 | 3,586 | |||||||||||||
News America Incorporated | 6.625% | 1/9/08 | 2,000 | 2,110 | |||||||||||||
Time Warner Inc. | 6.125% | 4/15/06 | 550 | 559 | |||||||||||||
Viacom Inc. | 5.625% | 5/1/07 | 1,000 | 1,021 | |||||||||||||
8,134 | |||||||||||||||||
Oil and Gas — 3.0% | |||||||||||||||||
Amerada Hess Corporation | 7.375% | 10/1/09 | 1,500 | 1,663 | |||||||||||||
Anadarko Petroleum Corporation | 3.250% | 5/1/08 | 1,440 | 1,402 | |||||||||||||
Occidental Petroleum Corporation | 7.375% | 11/15/08 | 750 | 825 | |||||||||||||
Ocean Energy Inc. | 4.375% | 10/1/07 | 580 | 580 | |||||||||||||
Pemex Project Funding Master Trust | 8.500% | 2/15/08 | 3,300 | 3,614 | |||||||||||||
8,084 | |||||||||||||||||
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Corporate Bonds and Notes — Continued | |||||||||||||||||
Oil and Gas — Continued | |||||||||||||||||
Paper and Forest Products — 0.5% | |||||||||||||||||
International Paper Company | 3.800% | 4/1/08 | $ | 790 | $ | 776 | |||||||||||
Weyerhaeuser Company | 6.125% | 3/15/07 | 580 | 596 | |||||||||||||
1,372 | |||||||||||||||||
Photo Equipment and Supplies — N.M. | |||||||||||||||||
Eastman Kodak Company | 7.250% | 11/15/13 | 110 | 116 | |||||||||||||
Retail — 0.6% | |||||||||||||||||
Wal-Mart Stores, Inc. | 5.450% | 8/1/06 | 1,500 | 1,523 | |||||||||||||
Special Purpose — 3.4% | |||||||||||||||||
American Honda Finance Corporation | 3.330% | 5/12/08 | 900 | 900 | A,B | ||||||||||||
ChevronTexaco Capital Company | 3.500% | 9/17/07 | 120 | 119 | |||||||||||||
DaimlerChrysler NA Holding Corporation | 3.610% | 3/7/07 | 230 | 229 | A | ||||||||||||
DaimlerChrysler NA Holding Corporation | 3.859% | 9/10/07 | 3,000 | 3,000 | A | ||||||||||||
International Lease Finance Corporation | 4.625% | 6/2/08 | 670 | 675 | |||||||||||||
International Lease Finance Corporation | 5.000% | 4/15/10 | 410 | 418 | |||||||||||||
Sprint Capital Corporation | 4.780% | 8/17/06 | 3,000 | 3,022 | C | ||||||||||||
Verizon Wireless Capital LLC | 5.375% | 12/15/06 | 1,000 | 1,019 | |||||||||||||
9,382 | |||||||||||||||||
Telecommunications (Cellular/ Wireless) — 2.2% | |||||||||||||||||
ALLTEL Corporation | 4.656% | 5/17/07 | 2,310 | 2,328 | |||||||||||||
AT&T Wireless Services Inc. | 7.350% | 3/1/06 | 2,000 | 2,044 |
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Corporate Bonds and Notes — Continued | |||||||||||||||||
Telecommunications (Cellular/ Wireless) — Continued | |||||||||||||||||
Motorola, Inc. | 4.608% | 11/16/07 | $ | 1,500 | $ | 1,511 | |||||||||||
5,883 | |||||||||||||||||
Total Corporate Bonds and Notes (Identified Cost — $82,065) | 81,565 | ||||||||||||||||
Asset-Backed Securities — 17.1% | |||||||||||||||||
Fixed Rate Securities — 3.9% | |||||||||||||||||
AmeriCredit Automobile Receivables Trust 2003-BX | 2.720% | 1/6/10 | 3,000 | 2,962 | |||||||||||||
MBNA Practice Solutions Owners Trust 2005-2 | 4.100% | 5/15/09 | 2,700 | 2,700 | B | ||||||||||||
Prestige Auto Receivables Trust 2005-1A | 4.370% | 6/15/12 | 1,300 | 1,304 | B | ||||||||||||
Structured Asset Securities Corporation 2003-AL1 | 3.356% | 4/25/31 | 859 | 788 | B | ||||||||||||
UPFC Auto Receivables Trust 2004-A | 3.270% | 9/15/10 | 3,000 | 2,966 | |||||||||||||
10,720 | |||||||||||||||||
Indexed SecuritiesA — 13.2% | |||||||||||||||||
Asset Backed Funding Certificates 2002-WF2 | 4.064% | 5/25/32 | 770 | 776 | |||||||||||||
Bear Stearns Asset Backed Securities, Inc. 2004-1 | 3.834% | 6/25/34 | 3,000 | 3,026 | |||||||||||||
CHEC Loan Trust 2004-2 | 3.644% | 2/25/31 | 3,500 | 3,511 | |||||||||||||
Citibank Credit Card Issuance Trust 2002-B1 | 3.800% | 6/25/09 | 1,675 | 1,681 | |||||||||||||
Countrywide Home Equity Loan Trust 2002-G | �� | 3.760% | 12/15/28 | 2,560 | 2,575 | ||||||||||||
Countrywide Home Equity Loan Trust 2004-J | 3.680% | 12/15/33 | 4,134 | 4,141 | |||||||||||||
Countrywide Home Equity Loan Trust 2004-O | 3.670% | 2/15/34 | 2,031 | 2,035 | |||||||||||||
Fremont Home Loan Trust 2004-C | 3.584% | 1/25/32 | 1,792 | 1,794 |
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Asset-Backed Securities — Continued | |||||||||||||||||
Indexed Securities — Continued | |||||||||||||||||
GSAA Home Equity Trust 2004-9 | 3.694% | 9/25/34 | $ | 2,295 | $ | 2,298 | |||||||||||
Providian Gateway Master Trust 2002-B | 4.090% | 6/15/09 | 3,000 | 3,010 | B | ||||||||||||
RAAC Series 2005-RP1 | 3.65% | 7/25/37 | 2,274 | 2,274 | B | ||||||||||||
Rental Car Finance Corp. 2003-1A | 3.714% | 5/25/08 | 3,000 | 3,014 | B | ||||||||||||
Rental Car Finance Corp. 2004-1A | 3.514% | 6/25/09 | 3,000 | 3,000 | B | ||||||||||||
Superior Wholesale Inventory Financing Trust 2004-A10 | 3.490% | 9/15/11 | 3,000 | 3,001 | |||||||||||||
36,136 | |||||||||||||||||
Total Asset-Backed Securities (Identified Cost — $46,899) | 46,856 | ||||||||||||||||
Mortgage-Backed Securities — 22.9% | |||||||||||||||||
Fixed Rate Securities — 7.9% | |||||||||||||||||
Blackrock Capital Finance L.P. 1997-R3 | 7.220% | 11/25/28 | 370 | 372 | B | ||||||||||||
Prime Mortgage Trust 2005-2 | 7.600% | 10/25/32 | 2,470 | 2,571 | |||||||||||||
Residential Asset Mortgage Products, Inc. 2005-SL1 A7 | 8.000% | 5/25/32 | 2,419 | 2,527 | |||||||||||||
Residential Asset Securitization Trust 2003-A14 | 4.750% | 2/25/19 | 11,753 | 11,690 | |||||||||||||
Washington Mutual MSC Mortgage Pass-Through Certificates, Series 2004-RA1 | 7.000% | 3/25/34 | 4,260 | 4,394 | |||||||||||||
21,554 | |||||||||||||||||
Indexed SecuritiesA — 11.2% | |||||||||||||||||
Bear Stearns Arm Trust 2004-10 | 4.634% | 1/25/35 | 1,335 | 1,340 | |||||||||||||
Harborview Mortgage Loan Trust 2004-8 | 3.820% | 11/29/34 | 2,421 | 2,424 |
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Mortgage-Backed Securities — Continued | |||||||||||||||||
Indexed Securities — Continued | |||||||||||||||||
HomeBanc Mortgage Trust 2004-2 | 3.684% | 12/25/34 | $ | 2,710 | $ | 2,715 | |||||||||||
HomeBanc Mortgage Trust 2005-1 | 3.564% | 3/25/35 | 2,969 | 2,972 | |||||||||||||
Impac CMB Trust 2004-2 | 3.574% | 4/25/34 | 1,613 | 1,615 | |||||||||||||
Impac CMB Trust 2004-6 | 3.704% | 10/25/34 | 1,525 | 1,528 | |||||||||||||
Impac Secured Assets Corp. 2004-3 | 3.514% | 11/25/34 | 2,451 | 2,451 | |||||||||||||
J.P. Morgan Mortgage Trust 2003-A1 | 4.380% | 10/25/33 | 2,688 | 2,600 | |||||||||||||
Provident Funding Mortgage Loan Trust 2005-1 1A1 | 4.200% | 5/25/35 | 2,730 | 2,726 | |||||||||||||
Sequoia Mortgage Trust 2003-2 A2 | 3.668% | 6/20/33 | 1,698 | 1,692 | |||||||||||||
Sequoia Mortgage Trust 2003-7 A1 | 3.750% | 1/20/34 | 1,853 | 1,856 | |||||||||||||
Thornburg Mortgage Securities Trust 2004-2 | 3.464% | 6/25/44 | 2,124 | 2,123 | |||||||||||||
Washington Mutual 2004-AR8 | 3.545% | 6/25/44 | 2,489 | 2,491 | |||||||||||||
Washington Mutual Mortgage Pass-Through Certificates 2003-AR10 | 4.075% | 10/25/33 | 2,100 | 2,106 | |||||||||||||
30,639 | |||||||||||||||||
Variable Rate SecuritiesD — 3.8% | |||||||||||||||||
Banc of America Funding Corporation 2004-B | 4.250% | 12/20/34 | 2,243 | 2,272 | |||||||||||||
Countrywide Alternative Loan Trust 2004-33 | 4.980% | 12/25/34 | 699 | 704 | |||||||||||||
Countrywide Alternative Loan Trust 2004-33 | 5.084% | 12/25/34 | 1,482 | 1,495 | |||||||||||||
MASTR Adjustable Rate Mortgages Trust 2004-13 | 3.787% | 11/21/34 | 3,000 | 2,914 |
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Mortgage-Backed Securities — Continued | |||||||||||||||||
Variable Rate Securities — Continued | |||||||||||||||||
MLCC Mortgage Investors, Inc. 2005-1 2A2 | 4.975% | 4/25/35 | $ | 3,169 | $ | 3,196 | |||||||||||
10,581 | |||||||||||||||||
Total Mortgage-Backed Securities (Identified Cost — $63,007) | 62,774 | ||||||||||||||||
U.S. Government and Agency Obligations — 6.7% | |||||||||||||||||
Fixed Rate Securities — 3.8% | |||||||||||||||||
Federal Home Loan Bank | 3.125% | 9/15/06 | 1,900 | 1,885 | |||||||||||||
Freddie Mac | 3.800% | 12/27/06 | 5,000 | 5,000 | |||||||||||||
United States Treasury Notes | 3.375% | 10/15/09 | 550 | 542 | |||||||||||||
United States Treasury Notes | 3.625% | 1/15/10 | 690 | 687 | |||||||||||||
United States Treasury Notes | 3.500% | 2/15/10 | 1,875 | 1,856 | |||||||||||||
United States Treasury Notes | 4.250% | 11/15/14 | 350 | 358 | |||||||||||||
10,328 | |||||||||||||||||
Indexed SecuritiesE — 2.9% | |||||||||||||||||
United States Treasury Inflation-Protected Security | 0.875% | 4/15/10 | 2,249 | 2,194 | |||||||||||||
United States Treasury Inflation-Protected Security | 3.000% | 7/15/12 | 5,410 | 5,942 | |||||||||||||
8,136 | |||||||||||||||||
Total U.S. Government and Agency Obligations (Identified Cost — $18,486) | 18,464 | ||||||||||||||||
U.S. Government Agency Mortgage-Backed Securities — 16.6% | |||||||||||||||||
Fixed Rate Securities — 5.9% | |||||||||||||||||
Fannie Mae | 8.500% | 6/1/10 to 8/1/11 | 63 | 66 | |||||||||||||
Fannie Mae | 6.500% | 11/1/10 to 10/1/32 | 3,887 | 4,033 | |||||||||||||
Fannie Mae | 7.000% | 1/1/13 to 1/1/33 | 6,616 | 6,980 | |||||||||||||
Fannie Mae | 9.500% | 7/1/14 | 89 | 96 | |||||||||||||
Fannie Mae | 11.000% | 12/1/15 | 73 | 78 | |||||||||||||
Fannie Mae | 12.500% | 1/1/18 to 4/1/18 | 46 | 52 | |||||||||||||
Fannie Mae | 9.000% | 11/1/21 | 186 | 201 | |||||||||||||
Fannie Mae | 6.000% | 11/1/27 | N.M. | N.M. | |||||||||||||
Freddie Mac | 8.250% | 2/1/08 | 20 | 21 |
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
U.S. Government Agency Mortgage-Backed Securities — Continued | |||||||||||||||||
Fixed Rate Securities — Continued | |||||||||||||||||
Freddie Mac | 8.500% | 12/1/08 to 6/1/21 | $ | 86 | $ | 89 | |||||||||||
Freddie Mac | 9.750% | 11/1/09 to 11/1/14 | 39 | 41 | |||||||||||||
Freddie Mac | 9.000% | 1/1/17 to 1/1/21 | 216 | 228 | |||||||||||||
Freddie Mac | 7.000% | 1/25/21 to 4/1/32 | 3,020 | 3,174 | |||||||||||||
Freddie Mac | 8.000% | 2/1/31 | 508 | 547 | |||||||||||||
Government National Mortgage Association | 9.000% | 6/15/06 to 9/15/22 | 239 | 245 | |||||||||||||
Government National Mortgage Association | 6.000% | 5/15/14 to 11/15/28 | 329 | 341 | |||||||||||||
16,192 | |||||||||||||||||
Indexed SecuritiesA — 10.7% | |||||||||||||||||
Fannie Mae | 4.320% | 11/1/34 | 1,620 | 1,621 | |||||||||||||
Fannie Mae | 4.199% | 12/1/34 | 1,651 | 1,643 | |||||||||||||
Fannie Mae | 4.333% | 1/1/35 | 1,351 | 1,345 | |||||||||||||
Fannie Mae | 4.882% | 1/1/35 | 2,717 | 2,754 | |||||||||||||
Fannie Mae | 4.833% | 2/1/35 | 6,306 | 6,357 | |||||||||||||
Fannie Mae | 4.550% | 3/1/35 | 3,083 | 3,092 | |||||||||||||
Fannie Mae | 4.976% | 3/1/35 | 6,161 | 6,226 | |||||||||||||
Freddie Mac | 4.361% | 12/1/34 | 672 | 671 | |||||||||||||
Freddie Mac | 4.490% | 12/1/34 | 3,426 | 3,435 | |||||||||||||
Freddie Mac | 4.091% | 1/1/35 | 602 | 595 | |||||||||||||
Freddie Mac | 4.101% | 1/1/35 | 1,102 | 1,089 | |||||||||||||
Government National Mortgage Association | 5.060% | 6/16/26 | 2,650 | 252 | |||||||||||||
Government National Mortgage Association | 5.110% | 8/16/26 | 2,200 | 270 | |||||||||||||
29,350 | |||||||||||||||||
Total U.S. Government Agency Mortgage-Backed Securities (Identified Cost — $46,723) | 45,542 | ||||||||||||||||
Yankee BondsF — 3.5% | |||||||||||||||||
Banks — 0.4% | |||||||||||||||||
The Korea Development Bank | 4.750% | 7/20/09 | 1,000 | 1,013 | |||||||||||||
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Yankee Bonds — Continued | |||||||||||||||||
Banks — Continued | |||||||||||||||||
Energy — 0.4% | |||||||||||||||||
SP Powerassests Limited Global | 3.800% | 10/22/08 | $ | 1,000 | $ | 989 | B | ||||||||||
Foreign Governments — 0.5% | |||||||||||||||||
Russian Federation | 8.250% | 3/31/10 | 1,360 | 1,483 | |||||||||||||
Manufacturing (Diversified) — 1.1% | |||||||||||||||||
Tyco International Group SA | 4.436% | 6/15/07 | 3,000 | 3,006 | B | ||||||||||||
Telecommunications — 1.1% | |||||||||||||||||
British Telecommunications plc | 7.875% | 12/1505 | 1,500 | 1,526 | |||||||||||||
Telecom Italia Capital | 4.000% | 1/15/10 | 1,500 | 1,458 | B | ||||||||||||
2,984 | |||||||||||||||||
Total Yankee Bonds (Identified Cost — $9,578) | 9,475 | ||||||||||||||||
Preferred Stocks — 2.4% | |||||||||||||||||
Fannie Mae | 7.000% | 105 | shs | 5,844 | A | ||||||||||||
Home Ownership Funding Corporation | 13.331% | 5 | 170 | B,C | |||||||||||||
Home Ownership Funding Corporation II | 13.338% | 14 | 475 | B,C | |||||||||||||
Total Preferred Stocks (Identified Cost — $7,407) | 6,489 | ||||||||||||||||
Total Long-Term Securities (Identified Cost — $274,165) | 271,165 | ||||||||||||||||
Maturity | Par/ | ||||||||||||||||
Rate | Date | Shares | Value | ||||||||||||||
Short-Term Securities — 0.4% | |||||||||||||||||
U.S. Government and Agency Obligations — 0.4% | |||||||||||||||||
Fannie Mae | 0.000% | 12/5/05 | $ | 135 | $ | 133 | G,H | ||||||||||
Fannie Mae | 0.000% | 9/16/05 | 1,000 | 995 | H | ||||||||||||
Total Short-Term Securities (Identified Cost — $1,128) | 1,128 | ||||||||||||||||
Total Investments — 99.4% (Identified Cost — $275,293) | 272,293 | ||||||||||||||||
Other Assets Less Liabilities — 0.6% | 1,641 | ||||||||||||||||
Net Assets — 100.0% | $ | 273,934 | |||||||||||||||
Actual | Appreciation/ | ||||||||||
Expiration | Contracts | (Depreciation) | |||||||||
Futures Contracts PurchasedI | |||||||||||
U.S. Treasury Note Futures | September 2005 | 276 | $ | 65 | |||||||
Futures Contracts WrittenI | |||||||||||
U.S. Treasury Note Futures | September 2005 | 39 | (3 | ) | |||||||
A | Indexed security — The rates of interest earned on these securities are tied to the London Interbank Offered Rate (“LIBOR”) or the one-year Treasury bill rate. The coupon rates are the rates as of June 30, 2005. |
B | Rule 144a Security — A security purchased pursuant to Rule 144a under the Securities Act of 1933 which may not be resold subject to that rule except to qualified institutional buyers. These securities represent 8.8% of net assets. |
C | Stepped coupon security — A security with a predetermined schedule of interest or dividend rate changes, at which time it begins to accrue interest or pay dividends. |
D | The coupon rates shown on variable rate securities are the rates at June 30, 2005. These rates vary with the weighted average coupon of the underlying loans. |
E | Treasury Inflation-Protected Security — Treasury security whose principal value is adjusted daily in accordance with changes to the Consumer Price Index for All Urban Consumers. Interest is calculated on the basis of the current adjusted principal value. |
F | Yankee Bonds — A dollar denominated bond issued in the U.S. by foreign entities. |
G | Collateral to cover futures. |
H | Zero coupon bond — A bond with no periodic interest payments which is sold at such a discount as to produce a current yield to maturity. |
I | Futures are described in more detail in the notes to financial statements. |
See notes to financial statements.
Statement of Assets and Liabilities
Limited Duration Bond Portfolio
Assets: | |||||||||
Investment securities at market value (Identified Cost – $274,165) | $ | 271,165 | |||||||
Short-term securities at value (Identified Cost – $1,128) | 1,128 | ||||||||
Cash | 425 | ||||||||
Receivable for fund shares sold | 904 | ||||||||
Interest and dividends receivable | 1,629 | ||||||||
Other assets | 19 | ||||||||
Total assets | 275,270 | ||||||||
Liabilities: | |||||||||
Payable for fund shares repurchased | $ | 647 | |||||||
Income distribution payable | 424 | ||||||||
Futures variation margin payable | 6 | ||||||||
Accrued management fee | 63 | ||||||||
Accrued distribution and service fees | 108 | ||||||||
Accrued expenses | 88 | ||||||||
Total liabilities | 1,336 | ||||||||
Net Assets | $ | 273,934 | |||||||
Net assets consist of: | |||||||||
Accumulated paid-in capital applicable to: | |||||||||
25,145 Primary Class shares outstanding | $ | 271,007 | |||||||
1,414 Institutional Class shares outstanding | 14,595 | ||||||||
Under/(over) distributed net investment income | (252 | ) | |||||||
Accumulated net realized loss on investments, options, and futures | (8,478 | ) | |||||||
Unrealized depreciation of investments, options and futures | (2,938 | ) | |||||||
Net Assets | $ | 273,934 | |||||||
Net Asset Value Per Share: | |||||||||
Primary Class | $ | 10.31 | |||||||
Institutional Class | $ | 10.32 | |||||||
See notes to financial statements.
Statement of Operations
Limited Duration Bond Portfolio
Investment Income: | |||||||||||
Interest | $ | 5,082 | |||||||||
Dividends | 254 | ||||||||||
Total income | $ | 5,336 | |||||||||
Expenses: | |||||||||||
Management fees | 621 | ||||||||||
Distribution and service fees | 665 | ||||||||||
Audit and legal fees | 45 | ||||||||||
Custodian fees | 53 | ||||||||||
Directors’ fees and expenses | 14 | ||||||||||
Registration fees | 15 | ||||||||||
Reports to shareholders | 20 | ||||||||||
Transfer agent and shareholder servicing expense: | |||||||||||
Primary Class | 116 | ||||||||||
Institutional Class | 2 | ||||||||||
Other expenses | 12 | ||||||||||
1,563 | |||||||||||
Less: Fees waived | (209 | ) | |||||||||
Compensating balance credits | (1 | ) | |||||||||
Total expenses, net of waivers and compensating balance credits | 1,353 | ||||||||||
Net Investment Income | 3,983 | ||||||||||
Net Realized and Unrealized Gain/(Loss) on Investments: | |||||||||||
Realized gain/(loss) on: | |||||||||||
Investments | (47 | ) | |||||||||
Futures | (102 | ) | |||||||||
(149 | ) | ||||||||||
Change in unrealized appreciation/(depreciation) of investments, options and futures | (1,005 | ) | |||||||||
Net Realized and Unrealized Gain/(Loss) on Investments | (1,154 | ) | |||||||||
Change in Net Assets Resulting From Operations | $ | 2,829 | |||||||||
See notes to financial statements.
Statement of Changes in Net Assets
Limited Duration Bond Portfolio
For the Six | For the | ||||||||
Months Ended | Year Ended | ||||||||
6/30/05 | 12/31/04 | ||||||||
(Unaudited) | |||||||||
Change in Net Assets: | |||||||||
Net investment income | $ | 3,983 | $ | 8,628 | |||||
Net realized gain/(loss) on investments, options and futures | (149 | ) | (4,077 | ) | |||||
Change in unrealized appreciation/(depreciation) of investments, options and futures | (1,005 | ) | 1,121 | ||||||
Change in net assets resulting from operations | 2,829 | 5,672 | |||||||
Distributions to shareholders from net investment income: | |||||||||
Primary Class | (3,949 | ) | (10,465 | ) | |||||
Institutional Class | (180 | ) | (348 | ) | |||||
Distributions to shareholders from net realized gain on investments: | |||||||||
Primary Class | — | (186 | ) | ||||||
Institutional Class | — | (7 | ) | ||||||
Change in net assets from Fund share transactions: | |||||||||
Primary Class | (14,006 | ) | (47,055 | ) | |||||
Institutional Class | 5,088 | 1,957 | |||||||
Change in net assets | (10,218 | ) | (50,432 | ) | |||||
Net Assets: | |||||||||
Beginning of period | 284,152 | 334,584 | |||||||
End of period | $ | 273,934 | $ | 284,152 | |||||
Under/(over) distributed net investment income | $ | (252 | ) | $ | (106 | ) | |||
See notes to financial statements.
Financial Highlights
Limited Duration Bond Portfolio
Contained below is per share operating performance data for a share of common stock outstanding, total investment return, ratios to average net assets and other supplemental data. This information has been derived from information provided in the financial statements.
Primary Class:
Six Months | |||||||||||||||||||||||||
Ended | |||||||||||||||||||||||||
Years Ended December 31, | |||||||||||||||||||||||||
June 30, | |||||||||||||||||||||||||
2005 | 2004 | 2003 | 2002 | 2001 | 2000 | ||||||||||||||||||||
(Unaudited | |||||||||||||||||||||||||
Net asset value, beginning of period | $10.36 | $ | 10.54 | $ | 10.70 | $ | 10.32 | $ | 10.26 | $ | 9.92 | ||||||||||||||
Investment operations: | |||||||||||||||||||||||||
Net investment income | .15 | A | .29 | A | .26 | A | .41 | A | .53 | A | .62 | A | |||||||||||||
Net realized and unrealized gain/(loss) on investments, options and futures | (.05 | ) | (.09 | ) | (.14 | ) | .38 | .06 | .33 | ||||||||||||||||
Total from investment operations | .10 | .20 | .12 | .79 | .59 | .95 | |||||||||||||||||||
Distributions: | |||||||||||||||||||||||||
From net investment income | (.15 | ) | (.37 | ) | (.28 | ) | (.41 | ) | (.53 | ) | (.61 | ) | |||||||||||||
From net realized gain on investments | — | (.01 | ) | — | — | — | — | ||||||||||||||||||
Total distributions | (.15 | ) | (.38 | ) | (.28 | ) | (.41 | ) | (.53 | ) | (.61 | ) | |||||||||||||
Net asset value, end of period | $10.31 | $ | 10.36 | $ | 10.54 | $ | 10.70 | $ | 10.32 | $ | 10.26 | ||||||||||||||
Ratios/supplemental data: | |||||||||||||||||||||||||
Total return | 0.99 | %B | 1.89 | % | 1.11 | % | 7.79 | % | 5.83 | % | 9.95 | % | |||||||||||||
Expenses to average net assets | 1.00 | %A,C | 1.00 | %A | 1.00 | %A | 1.00 | %A | 1.00 | %A | 1.00 | %A | |||||||||||||
Net investment income to average net assets | 2.87 | %A,C | 2.81 | %A | 2.48 | %A | 3.85 | %A | 5.08 | %A | 6.14 | %A | |||||||||||||
Portfolio turnover rate | 37.7 | %B | 238.0 | % | 487.3 | % | 204.1 | % | 535.2 | % | 247.8 | % | |||||||||||||
Net assets, end of period (in thousands) | $ | 259,343 | $ | 274,606 | $ | 326,844 | $ | 379,793 | $ | 300,597 | $ | 272,668 | |||||||||||||
A | Net of fees waived by LMFA for expenses in excess of a voluntary expense limitation of 1.00% until April 30, 2006. If no fees had been waived by LMFA, the annualized ratio of expenses to average daily net assets would have been as follows: for the six months ended June 30, 2005, 1.15%; and for the years ended December 31, 2004, 1.21%; 2003, 1.21%; 2002, 1.19%; 2001, 1.17%; and 2000, 1.19%. |
B | Not annualized. |
C | Annualized. |
See notes to financial statements.
Institutional Class:
Six Months | |||||||||||||||||||||||||
Ended | |||||||||||||||||||||||||
Years Ended December 31, | |||||||||||||||||||||||||
June 30, | |||||||||||||||||||||||||
2005 | 2004 | 2003 | 2002 | 2001 | 2000 | ||||||||||||||||||||
(Unaudited | |||||||||||||||||||||||||
Net asset value, beginning of period | $10.37 | $ | 10.55 | $ | 10.70 | $ | 10.32 | $ | 10.27 | $9.92 | |||||||||||||||
Investment operations: | |||||||||||||||||||||||||
Net investment income | .19 | D | .35 | D | .32 | D | .46 | D | .58 | D | .67 | D | |||||||||||||
Net realized and unrealized gain/(loss) on investments, options and futures | (.06 | ) | (.10 | ) | (.14 | ) | .38 | .05 | .35 | ||||||||||||||||
Total from investment operations | .13 | .25 | .18 | .84 | .63 | 1.02 | |||||||||||||||||||
Distributions: | |||||||||||||||||||||||||
From net investment income | (.18 | ) | (.42 | ) | (.33 | ) | (.46 | ) | (.58 | ) | (.67 | ) | |||||||||||||
From net realized gain on investments | — | (.01 | ) | — | — | — | — | ||||||||||||||||||
Total distributions | (.18 | ) | (.43 | ) | (.33 | ) | (.46 | ) | (.58 | ) | (.67 | ) | |||||||||||||
Net asset value, end of period | $10.32 | $ | 10.37 | $ | 10.55 | $ | 10.70 | $ | 10.32 | $ | 10.27 | ||||||||||||||
Ratios/supplemental data: | |||||||||||||||||||||||||
Total return | 1.26 | %B | 2.41 | % | 1.71 | % | 8.35 | % | 6.30 | % | 10.64 | % | |||||||||||||
Expenses to average net assets | 0.46 | %C,D | 0.48 | % D | .46 | %D | .47 | %D | .46 | %D | .46 | %D | |||||||||||||
Net investment income to average net assets | 3.42 | %C,D | 3.22 | % D | 3.03 | % D | 4.38 | % D | 5.63 | % D | 6.66 | % D | |||||||||||||
Portfolio turnover rate | 37.7 | %B | 238.0 | % | 487.3 | % | 204.1 | % | 535.2 | % | 247.8 | % | |||||||||||||
Net assets, end of period (in thousands) | $ | 14,591 | $ | 9,546 | $ | 7,740 | $ | 9,485 | $ | 7,221 | $ | 6,723 | |||||||||||||
D | Net of fees waived by LMFA for expenses in excess of a voluntary expense limitation of 0.50% until April 30, 2006. If no fees had been waived by LMFA, the annualized ratio of expenses to average daily net assets would have been as follows: for the six months ended June 30, 2005, 0.61%; for the years ended December 31, 2004, 0.70%; 2003, 0.68%; 2002, 0.66%; 2001, 0.63%; and 2000, 0.65%. |
See notes to financial statements.
U.S. Government Money Market Portfolio
As a shareholder of the Fund, you incur ongoing costs, including management fees, distribution and service (12b-1) fees, and other Fund expenses. These examples are 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. Each example is based on an investment of $1,000 invested on January 1, 2005, and held through June 30, 2005.
Actual Expenses
The first line in the table below provides information about actual account values and actual expenses for the Fund. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line in the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% 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 this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare these 5% hypothetical examples with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Beginning | Ending | Expenses PaidA | ||||||||||
Account | Account | During the | ||||||||||
Value | Value | Period | ||||||||||
1/1/05 | 6/30/05 | 1/1/05 to 6/30/05 | ||||||||||
Actual | $ | 1,000.00 | $ | 1,009.30 | $ | 3.54 | ||||||
Hypothetical (5% return before expenses) | 1,000.00 | $ | 1,021.27 | $ | 3.56 |
A | These calculations are based on expenses incurred in the most recent fiscal half-year. The dollar amounts shown as “Expenses Paid” are equal to the annualized expense ratio of 0.71% multiplied by the average value over the period, multiplied by the number of days in the most recent fiscal half-year (181), and divided by 365. |
Performance Information
U.S. Government Money Market Portfolio
Maturity Schedule (As a percentage of the portfolio)
Portfolio of Investments
U.S. Government Money Market Portfolio
Maturity | |||||||||||||
Rate | Date | Par | Value | ||||||||||
U.S. Government and Agency Obligations — 71.5% | |||||||||||||
Fannie Mae | 2.57% to 3.35% | 7/1/05 to 9/27/05 | $ | 53,265 | $ | 53,203 | |||||||
Fannie Mae | 2.73% to 2.95% | 8/17/05 to 12/9/05 | 15,250 | 15,248 | A | ||||||||
Federal Farm Credit Bank | 2.56% to 2.61% | 7/6/05 to 7/7/05 | 7,052 | 7,049 | |||||||||
Federal Home Loan Bank | 2.30% to 3.21% | 7/5/05 to 11/4/05 | 110,608 | 110,474 | |||||||||
Federal Home Loan Bank | 2.66% to 2.98% | 3/28/06 to 5/10/06 | 9,000 | 8,996 | A | ||||||||
Freddie Mac | 2.30% to 3.17% | 7/1/05 to 9/26/05 | 69,392 | 69,278 | |||||||||
Inter-American Development Bank | 2.694% | 7/8/05 | 6,800 | 6,796 | |||||||||
Total U.S. Government and Agency Obligations (Identified Cost — $271,044) | $ | 271,044 | |||||||||||
Repurchase Agreements — 28.5% | |||||||||||||
Lehman Brothers, Inc. 3.25%, dated 6/30/05, to be repurchased at $37,844 on 7/1/05 (Collateral: $37,935 Fannie Mae mortgage-backed securities, 1.875%, due 9/15/05, value $38,805) | 37,841 | 37,841 | |||||||||||
Merrill Lynch Government Securities, Inc. 3.2%, dated 6/30/05, to be repurchased at $70,006 on 7/1/05 (Collateral: $63,750 Freddie Mac notes, 6.625%, due 9/15/09, value $72,632) | 70,000 | 70,000 | |||||||||||
Total Repurchase Agreements (Identified Cost — $107,841) | 107,841 | ||||||||||||
Total Investments, at Amortized Cost and Value — 100.0% | 378,885 | B | |||||||||||
Other Assets Less Liabilities — N.M. | 182 | ||||||||||||
Net Assets Applicable to 379,069 Shares Outstanding — 100.0% | $ | 379,067 | |||||||||||
Net Asset Value Per Share | $ | 1.00 | |||||||||||
A | Indexed security — The rates of interest earned on these securities are tied to the London Interbank Offered Rate (“LIBOR”). The coupon rates are the rates as of June 30, 2005. |
B | Also represents cost for income tax purposes. |
N.M.— Not meaningful. |
See notes to financial statements.
Statement of Operations
U.S. Government Money Market Portfolio
Investment Income: | |||||||||||
Interest | $ | 5,086 | |||||||||
Expenses: | |||||||||||
Management fees | $ | 988 | |||||||||
Distribution and service fees | 198 | ||||||||||
Audit and legal fees | 17 | ||||||||||
Custodian fees | 45 | ||||||||||
Directors’ fees and expenses | 11 | ||||||||||
Registration fees | 27 | ||||||||||
Reports to shareholders | 17 | ||||||||||
Transfer agent and shareholder servicing expense | 89 | ||||||||||
Other expenses | 8 | ||||||||||
1,400 | |||||||||||
Less compensating balance credits | (1 | ) | |||||||||
Total expenses, net of compensating balance credits | 1,399 | ||||||||||
Net Investment Income | 3,687 | ||||||||||
Net Realized and Unrealized Gain/(Loss) on Investments: | |||||||||||
Realized gain/(loss) on investments | (1 | ) | |||||||||
Change in Net Assets Resulting From Operations | $ | 3,686 | |||||||||
See notes to financial statements.
Statement of Changes in Net Assets
U.S. Government Money Market Portfolio
For the Six | For the | |||||||
Months Ended | Year Ended | |||||||
6/30/05 | 12/31/04 | |||||||
(Unaudited) | ||||||||
Change in Net Assets: | ||||||||
Net investment income | $ | 3,687 | $ | 2,864 | ||||
Net realized gain/(loss) on investments | (1 | ) | (1 | ) | ||||
Change in net assets resulting from operations | 3,686 | 2,863 | ||||||
Distributions to shareholders from net investment income | (3,687 | ) | (2,864 | ) | ||||
Change in net assets from Fund share transactions | (13,615 | ) | (51,197 | ) | ||||
Change in net assets | (13,616 | ) | (51,198 | ) | ||||
Net Assets: | ||||||||
Beginning of period | $ | 392,683 | $ | 443,881 | ||||
End of period | $ | 379,067 | $ | 392,683 | ||||
See notes to financial statements.
Financial Highlights
U.S. Government Money Market Portfolio
Contained below is per share operating performance data for a share of common stock outstanding, total investment return, ratios to average net assets and other supplemental data. This information has been derived from information provided in the financial statements.
Six Months | |||||||||||||||||||||||||
Ended | Years Ended December 31, | ||||||||||||||||||||||||
June 30, | |||||||||||||||||||||||||
2005 | 2004 | 2003 | 2002 | 2001 | 2000 | ||||||||||||||||||||
(Unaudited | |||||||||||||||||||||||||
Net asset value, beginning of period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | |||||||||||||
Investment operations: | |||||||||||||||||||||||||
Net investment income | .01 | .01 | .0049 | A | .01 | A | .04 | A | .06 | A | |||||||||||||||
Total from investment operations | .01 | .01 | .0049 | .01 | .04 | .06 | |||||||||||||||||||
Distributions: | |||||||||||||||||||||||||
From net investment income | (.01 | ) | (.01 | ) | ( | .0049 | ) | (.01 | ) | (.04 | ) | (.06 | ) | ||||||||||||
Total distributions | (.01 | ) | (.01 | ) | ( | .0049 | ) | (.01 | ) | (.04 | ) | (.06 | ) | ||||||||||||
Net asset value, end of period | $1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||||||
Ratios/supplemental data: | |||||||||||||||||||||||||
Total return | .93 | %B | .67 | % | .51 | % | 1.13 | % | 3.57 | % | 5.66 | % | |||||||||||||
Expenses to average net assets | .71 | %C | .71 | % | .71 | %A | .72 | %A | .71 | %A | .73 | %A | |||||||||||||
Net investment income to average net assets | 1.87 | %C | .65 | % | .49 | %A | 1.11 | %A | 3.46 | %A | 5.53 | %A | |||||||||||||
Net assets, end of period (in thousands) | $ | 379,067 | $ | 392,683 | $ | 443,881 | $ | 541,873 | $ | 501,070 | $ | 426,988 | |||||||||||||
A | Net of 12b-1 service fees waived by Legg Mason Wood Walker, Inc. of 0.10% of average daily net assets. If no fees had been waived by Legg Mason, the annualized ratio of expenses to average daily net assets would have been as follows for the year ended December 31, 2003: 0.81%; 2002, 0.82%; 2001, 0.81% and 2000, 0.83%. |
B | Not annualized. |
C | Annualized. |
See notes to financial statements.
Notes to Financial Statements
Legg Mason Income Trust, Inc.
1. Organization and Significant Accounting Policies:
Security Valuation
Security Transactions
Purchases | Proceeds From Sales | |||||||||||||||
U.S. Gov’t. | U.S. Gov’t. | |||||||||||||||
Securities | Other | Securities | Other | |||||||||||||
Core Bond | $ | 160,341 | $ | 26,962 | $ | 139,922 | $ | 4,432 | ||||||||
High Yield | — | 114,100 | — | 124,696 | ||||||||||||
Investment Grade | 24,987 | 85,779 | 18,875 | 83,706 | ||||||||||||
Limited Duration | 43,436 | 63,098 | 56,819 | 43,892 |
Repurchase Agreements
Investment Income and Distributions to Shareholders
Compensating Balance Credits
Other
2. Federal Income Taxes:
3. Financial Instruments:
Purchased option: | Impact on the Fund: | |
The option expires | Realize a loss in the amount of the cost of the option. | |
The option is closed through a closing sale transaction | Realize a gain or loss depending on whether the proceeds from the closing sale transaction are greater or less than the cost of the option. | |
The Fund exercises a call option | The cost of the security purchased through the exercise of the option will be increased by the premium originally paid to purchase the option. | |
The Fund exercises a put option | Realize a gain or loss from the sale of the underlying security. The proceeds of that sale will be reduced by the premium originally paid to purchase the put option. | |
Written option: | Impact on the Fund: | |
The option expires | Realize a gain equal to the amount of the premium received. | |
The option is closed through a closing purchase transaction | Realize a gain or loss without regard to any unrealized gain or loss on the underlying security and eliminate the option liability. The Fund will realize a loss in this transaction if the cost of the closing purchase exceeds the premium received when the option was written. | |
A written call option is exercised by the option purchaser | Realize a gain or loss from the sale of the underlying security. The proceeds of that sale will be increased by the premium originally received when the option was written. | |
A written put option is exercised by the option purchaser | The amount of the premium originally received will reduce the cost of the security that the Fund purchased when the option was exercised. | |
The risk associated with purchasing options is limited to the premium originally paid. Options written by a Fund involve, to varying degrees, risk of loss in excess of the option value reflected in the statement of net assets. The risk in writing a covered call option is that a Fund may forgo the opportunity of profit if the market price of the underlying security increases and the option is exercised. The risk in writing a put option is that a Fund may incur a loss if the market price of the underlying security decreases and the option is exercised. In addition, there is the risk a Fund may not be able to enter into a closing transaction because of an illiquid secondary market or, for over-the-counter options, because of the counterparty’s inability to perform.
Core Bond Fund:
Calls | Puts | |||||||||||||||
Actual | Actual | |||||||||||||||
Contracts | Premiums | Contracts | Premiums | |||||||||||||
Options outstanding at December 31, 2004 | 76 | $ | 57 | 105 | $ | 97 | ||||||||||
Options written | 600,270 | 192 | 205 | 142 | ||||||||||||
Options closed | (105 | ) | (74 | ) | (51 | ) | (47 | ) | ||||||||
Options expired | (83 | ) | (57 | ) | (160 | ) | (123 | ) | ||||||||
Options exercised | (8 | ) | (4 | ) | — | — | ||||||||||
Options outstanding at June 30, 2005 | 600,150 | $ | 114 | 99 | $ | 69 | ||||||||||
Upon entering into a futures contract, the Fund is required to deposit with the broker cash or cash equivalents in an amount equal to a certain percentage of the contract amount. This is known as the “initial margin.” Subsequent payments (“variation margin”) are made or received by the Fund each day, depending on the daily fluctuation in the value of the contract. The daily changes in contract value are recorded as unrealized gains or losses and the Fund recognizes a realized gain or loss when the contract is closed. Futures contracts are valued daily at the settlement price established by the board of trade or exchange on which they are traded.
Forward Currency Exchange Contracts
Swap Agreements
4. Transactions With Affiliates:
Six Months | |||||||||||||
Ended | |||||||||||||
June 30, 2005 | |||||||||||||
Expense | Management | ||||||||||||
Fund | Management Fee | Limitation | Fees Waived | ||||||||||
Core Bond | 0.45% | 1.00% | $ | (108 | ) | ||||||||
High Yield | |||||||||||||
— Primary Class | 0.65% | None | — | ||||||||||
— Institutional Class | 0.65% | None | — | ||||||||||
Investment Grade | |||||||||||||
— Primary Class | 0.60% | 1.00% | (547 | ) | |||||||||
— Institutional Class | 0.60% | 0.50% | (17 | ) | |||||||||
Limited Duration | |||||||||||||
— Primary Class | 0.45% | 1.00% | (202 | ) | |||||||||
— Institutional Class | 0.45% | 0.50% | (7 | ) | |||||||||
Government Money Market | 0.50% – 0.40% A | None | — |
A | Government Money Market’s management fee varies with the level of the Fund’s average daily net assets. The management fee is calculated as follows: |
Average Net Assets | Advisory Fee Rate | |||
$0 – $500 million | 0.50% | |||
next $500 million | 0.475% | |||
next $500 million | 0.45% | |||
next $500 million | 0.425% | |||
thereafter | 0.40% |
Western Asset Management Company (“Adviser”) serves as investment adviser to the Funds. The Adviser is responsible for the actual investment activity of each Fund. LMFA pays the Adviser a fee, computed daily and payable monthly, at an annual rate of 40% of the management fee received by LMFA for Core Bond; 77% of the management fee received by LMFA for High Yield; 40% of the management fee received for Investment Grade; and 30% for Government Money Market. For Limited Duration, LMFA pays the Adviser a fee, computed daily and payable monthly, of 0.20% of its average daily net assets, not to exceed the fee received by LMFA.
Legg Mason Wood Walker, Incorporated (“Legg Mason”), a member of the New York Stock Exchange, serves as distributor of the Funds. Legg Mason receives an annual distribution fee and an annual service fee based on each Fund’s Primary Class’s average daily net assets, computed daily and payable monthly as shown in the table below.
Distribution | Service | |||||||
Fee | Fee | |||||||
Core Bond | 0.25% | 0.25% | ||||||
High Yield | 0.25% | 0.25% | ||||||
Investment Grade | 0.25% | 0.25% | ||||||
Limited Duration | 0.25% | 0.25% | ||||||
Government Money Market | N/A | 0.10% |
LM Fund Services, Inc. (“LMFS”), a registered transfer agent, has an agreement with the Funds’ transfer agent to assist it with some of its duties. For this assistance, the transfer agent paid LMFS the following amounts for the period ended June 30, 2005: Core Bond, $9; High Yield, $27; Investment Grade, $40; Limited Duration, $26; and Government Money Market, $42.
5. Line of Credit:
6. Fund Share Transactions:
Core Bond | |||||||||||||||||
Six Months | Period | ||||||||||||||||
Ended | Ended | ||||||||||||||||
6/30/05 | 12/31/04A | ||||||||||||||||
Shares | |||||||||||||||||
Sold | 2,124 | 7,274 | |||||||||||||||
Reinvestment of Distributions | 87 | 111 | |||||||||||||||
Repurchased | (1,282 | ) | (977 | ) | |||||||||||||
Net Change | 929 | 6,408 | |||||||||||||||
Amount | |||||||||||||||||
Sold | $ | 21,053 | $ | 72,052 | |||||||||||||
Reinvestment of Distributions | 865 | 1,103 | |||||||||||||||
Repurchased | (12,673 | ) | (9,621 | ) | |||||||||||||
Net Change | $ | 9,245 | $ | 63,534 | |||||||||||||
A | For the period February 27, 2004 (commencement of operations) to December 31, 2004. |
High Yield | |||||||||||||||||
Primary Class | Institutional Class | ||||||||||||||||
Six Months | Year | Six Months | Year | ||||||||||||||
Ended | Ended | Ended | Ended | ||||||||||||||
6/30/05 | 12/31/04 | 6/30/05 | 12/31/04 | ||||||||||||||
Shares | |||||||||||||||||
Sold | 1,478 | 4,287 | 592 | 608 | |||||||||||||
Reinvestment of Distributions | 507 | 1,211 | 34 | 61 | |||||||||||||
Repurchased | (3,982 | ) | (8,220 | ) | (244 | ) | (446 | ) | |||||||||
Net Change | (1,997 | ) | (2,722 | ) | 382 | 223 | |||||||||||
Amount | |||||||||||||||||
Sold | $ | 13,664 | $ | 39,099 | $ | 5,461 | $ | 5,538 | |||||||||
Reinvestment of Distributions | 4,643 | 10,986 | 310 | 558 | |||||||||||||
Repurchased | (36,700 | ) | (74,487 | ) | (2,263 | ) | (4,056 | ) | |||||||||
Net Change | $ | (18,393 | ) | $ | (24,402 | ) | $ | 3,508 | $ | 2,040 | |||||||
Investment Grade | |||||||||||||||||
Primary Class | Institutional Class | ||||||||||||||||
Six Months | Year | Six Months | Year | ||||||||||||||
Ended | Ended | Ended | Ended | ||||||||||||||
6/30/05 | 12/31/04 | 6/30/05 | 12/31/04 | ||||||||||||||
Shares | |||||||||||||||||
Sold | 3,486 | 7,793 | 830 | 557 | |||||||||||||
Reinvestment of Distributions | 797 | 2,253 | 29 | 58 | |||||||||||||
Repurchased | (4,786 | ) | (10,301 | ) | (70 | ) | (213 | ) | |||||||||
Net Change | (503 | ) | (255 | ) | 789 | 402 | |||||||||||
Amount | |||||||||||||||||
Sold | $ | 37,398 | $ | 84,747 | $ | 8,929 | $ | 6,057 | |||||||||
Reinvestment of Distributions | 8,524 | 24,367 | 307 | 631 | |||||||||||||
Repurchased | (51,320 | ) | (111,468 | ) | (756 | ) | (2,318 | ) | |||||||||
Net Change | $ | (5,398 | ) | $ | (2,354 | ) | $ | 8,480 | $ | 4,370 | |||||||
Limited Duration | |||||||||||||||||
Primary Class | Institutional Class | ||||||||||||||||
Six Months | Year | Six Months | Year | ||||||||||||||
Ended | Ended | Ended | Ended | ||||||||||||||
6/30/05 | 12/31/04 | 6/30/05 | 12/31/04 | ||||||||||||||
Shares | |||||||||||||||||
Sold | 2,043 | 5,553 | 612 | 499 | |||||||||||||
Reinvestment of Distributions | 310 | 910 | 15 | 33 | |||||||||||||
Repurchased | (3,713 | ) | (10,970 | ) | (134 | ) | (345 | ) | |||||||||
Net Change | (1,360 | ) | (4,507 | ) | 493 | 187 | |||||||||||
Amount | |||||||||||||||||
Sold | $ | 21,086 | $ | 58,022 | $ | 6,318 | $ | 5,222 | |||||||||
Reinvestment of Distributions | 3,193 | 9,486 | 156 | 346 | |||||||||||||
Repurchased | (38,285 | ) | (114,563 | ) | (1,386 | ) | (3,611 | ) | |||||||||
Net Change | $ | (14,006 | ) | $ | (47,055 | ) | $ | 5,088 | $ | 1,957 | |||||||
U.S. Government | |||||||||
Money Market | |||||||||
Six Months | Year | ||||||||
Ended | Ended | ||||||||
6/30/05 | 12/31/04 | ||||||||
Shares | |||||||||
Sold | 667,438 | 1,461,762 | |||||||
Reinvestment of Distributions | 2,464 | 2,616 | |||||||
Repurchased | (683,517 | ) | (1,515,575 | ) | |||||
Net Change | (13,615 | ) | (51,197 | ) | |||||
Amount | |||||||||
Sold | $ | 667,438 | $ | 1,461,762 | |||||
Reinvestment of Distributions | 2,464 | 2,616 | |||||||
Repurchased | (683,517 | ) | (1,515,575 | ) | |||||
Net Change | $ | (13,615 | ) | $ | (51,197 | ) | |||
Investment Manager
Legg Mason Fund Adviser, Inc. Baltimore, MD |
Investment Adviser
Western Asset Management Company Pasadena, CA |
Board of Directors
John F. Curley, Jr., Chairman Mark R. Fetting, President Dr. Ruby P. Hearn Arnold L. Lehman Robin J.W. Masters Dr. Jill E. McGovern Arthur S. Mehlman G. Peter O’Brien S. Ford Rowan Robert M. Tarola |
Officers
Marie K. Karpinski, Vice President and Treasurer Gregory T. Merz, Vice President and Chief Legal Officer Amy M. Olmert, Vice President and Chief Compliance Officer Richard M. Wachterman, Secretary Erin K. Morris, Assistant Treasurer |
Transfer and Shareholder Servicing Agent
Boston Financial Data Services Braintree, MA |
Custodian
State Street Bank & Trust Company Boston, MA |
Counsel
Kirkpatrick & Lockhart Nicholson Graham LLP Washington, DC |
Independent Registered Public Accounting Firm
PricewaterhouseCoopers LLP Baltimore, MD |
Equity Funds American Leading Companies Trust Classic Valuation Fund Growth Trust Special Investment Trust U.S. Small-Capitalization Value Trust Value Trust Specialty Funds Balanced Trust Financial Services Fund Opportunity Trust Global Funds Emerging Markets Trust Global Income Trust International Equity Trust Taxable Bond Funds Core Bond Fund High Yield Portfolio Investment Grade Income Portfolio Limited Duration Bond Portfolio Tax-Free Bond Funds Maryland Tax-Free Income Trust Pennsylvania Tax-Free Income Trust Tax-Free Intermediate-Term Income Trust Money Market Funds Cash Reserve Trust Tax-Exempt Trust U.S. Government Money Market Portfolio | Legg Mason, Inc., based in Baltimore, Maryland, has built its reputation, at least in part, on the success of the Legg Mason Funds, introduced in 1979. The primary purpose of our funds is to enable investors to diversify their portfolios across various asset classes and, consequently, enjoy the stability and growth prospects generally associated with diversification. The success of our funds is contingent on the experience, discipline, and acumen of our fund managers. We believe the quality of our managers is crucial to investment success. Unlike many firms, which focus on a particular asset class or the fluctuations of the market, at Legg Mason we focus on providing a collection of top-notch managers in all the major asset classes. Information about the policies and procedures that each Fund uses to determine how to vote proxies relating to its portfolio securities is contained in the Statement of Additional Information, available without charge upon request by calling 1-800-822-5544 or on the Securities and Exchange Commission (“SEC”) website (http://www.sec.gov). Information regarding how each Fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is also available on the SEC’s website or through the Funds’ website at www.leggmasonfunds.com/aboutlmf. Each Fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Each Fund’s Form N-Q is available on the SEC’s website or may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information about the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. For more information about the differences between the fund share classes included in this report, contact a Legg Mason Financial Advisor. |
You should consider a fund’s investment objectives, risks, charges, and expenses carefully before investing. For a prospectus, which contains this and other information on any Legg Mason fund, call your Legg Mason Financial Advisor, call 1-800-577-8589, or visit www.leggmasonfunds.com. Please read the prospectus carefully before investing.
Legg Mason Funds For Primary Class Shareholders 800-822-5544 www.leggmasonfunds.com | Legg Mason Institutional Funds For FI and I Class Shareholders 888-425-6432 www.lminstitutionalfunds.com |
Legg Mason Wood Walker, Incorporated
LMF-056
Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. |
Item 9. | Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers. |
(b) | Separate certifications for the Registrant’s principal executive officer and principal financial officer are attached. |
By: /s/ Mark R. Fetting
Mark R. Fetting
President, Legg Mason Income Trust, Inc.
Date: August 24, 2005
Mark R. Fetting
President, Legg Mason Income Trust, Inc.
Date: August 24, 2005
By: /s/ Marie K. Karpinski
Marie K. Karpinski
Treasurer, Legg Mason Income Trust, Inc.
Date: August 24, 2005