UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number | 811-07185 | |||||||
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Morgan Stanley Select Dimensions Investment Series | ||||||||
(Exact name of registrant as specified in charter) | ||||||||
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1221 Avenue of the Americas, New York, New York |
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(Address of principal executive offices) |
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Ronald E. Robison | ||||||||
(Name and address of agent for service) | ||||||||
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Registrant’s telephone number, including area code: | 212-762-4000 |
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Date of fiscal year end: | December 31, 2006 |
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Date of reporting period: | December 31, 2006 |
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Item 1 - Report to Shareholders
MORGAN STANLEY
SELECT DIMENSIONS INVESTMENT SERIES
Annual Report
DECEMBER 31, 2006
Morgan Stanley Select Dimensions Investment Series
Table of Contents
Letter to the Shareholders | 1 | ||||||
Expense Example | 23 | ||||||
Portfolio of Investments: | |||||||
Money Market | 28 | ||||||
Flexible Income | 31 | ||||||
Balanced Growth | 50 | ||||||
Utilities | 63 | ||||||
Dividend Growth | 65 | ||||||
Equally-Weighted S&P 500 | 69 | ||||||
Growth | 82 | ||||||
Focus Growth | 85 | ||||||
Capital Opportunities | 88 | ||||||
Global Equity | 92 | ||||||
Developing Growth | 97 | ||||||
Financial Statements: | |||||||
Statements of Assets and Liabilities | 102 | ||||||
Statements of Operations | 104 | ||||||
Statements of Changes in Net Assets | 106 | ||||||
Notes to Financial Statements | 114 | ||||||
Financial Highlights | 128 | ||||||
Report of Independent Registered Public Accounting Firm | 136 | ||||||
Results of Special Shareholder Meeting | 137 | ||||||
Trustee and Officer Information | 142 | ||||||
Federal Tax Notice | 148 | ||||||
Morgan Stanley Select Dimensions Investment Series
Letter to the Shareholders n December 31, 2006
Dear Shareholders,
In 2006, the global capital markets provided strong returns in an environment of low volatility relative to historical measures. Although concerns about a U.S.-led global economic slowdown prompted a worldwide market correction in the second quarter, investors grew more comfortable with the pace of economic moderation in the U.S. in the second half of the year. For the year overall, stocks outperformed bonds, with international stock markets leading the way.
Domestic Equity Overview
In the 12 months ended December 31, 2006, the U.S. stock market completed its fourth consecutive year of positive performance. As measured by the S&P 500® Index, the broad market was up 15.79 percent for the year, with stocks advancing in each month except May.
During roughly the first half of the year, slowing economic growth, rising inflation, and the policy actions of the Federal Open Market Committee (the "Fed") received the lion's share of investors' attention and concern. Speculation that the Fed would pause its series of increases to the target federal funds rate helped support the stock market early in the year, as did encouraging labor market data and improved consumer confidence. However, in May, a backdrop of sharply rising commodity prices and an uptick in long-term interest rates reignited inflation concerns, and the Fed raised the target rate for the 16th consecutive time — a move that was not well received by stock markets both in the U.S. and abroad. Although the Fed raised rates again at its June 29th meeting, its language suggested that additional rate increases might soon become unnecessary. July proved challenging as well, as investors dealt with record high oi l prices, escalating geopolitical tensions in the Middle East, a disappointing second quarter gross domestic product (GDP) report, and declining retail sales and housing data.
Early in the third quarter, however, many of the uncertainties that had been overhanging the market began to ease, and investor sentiment became more positive. The Fed discontinued its rate increases for the remainder of 2006. Oil prices declined from their recent record levels as the Israeli-Hezbollah conflict reached a peaceful accord and the U.S. hurricane season appeared to be relatively quiet. Gasoline prices also fell, providing some relief to consumers and buoying retail sales. Corporate earnings reports, on the whole, had continued to be solid throughout the year, and merger-and-acquisition and corporate restructuring activity continued at a very robust pace. Yet, evidence of a slowing economy persisted: housing trends continued to show weakness, and third quarter GDP growth came in below expectations. Nonetheless, in the final months of the period, stabilizing economic data bolstered the belief that a "soft landing" had taken place — in other words, the Fed was able to moderate the pace of economic growth without causing a recession.
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Letter to the Shareholders n December 31, 2006 continued
For the year, within the S&P 500 Index, the telecommunication services sector was the best performing group. Rising from their multi-year slump, telecom stocks benefited from a wave of industry consolidation, healthier balance sheets, and improved investor confidence. The energy sector, which had dominated in 2005, slipped into second place as declining oil prices in the second half of the year brought a turn in sentiment. Nonetheless, the record profits reported by some energy companies still captured investors' favor throughout 2006. Rounding out the top three performers was the utilities sector. The surprising strength of the group could be attributed to a number of factors. As bond yields became less compelling, investors turned to stocks that they believed offered more attractive dividend yields, and utilities stocks were beneficiaries of this trend. Regulatory changes were also perceived as favorable for the overall bu siness environment. Finally, investors demonstrated a preference for utilities stocks' "defensive" characteristics (that is, they are perceived as less sensitive to economic cycles) given the slowing economic environment.
While no sector had a negative return for the year, the health care sector gained the least. Although expectations that the mid-term Congressional elections would result in a turnover to a Democratic majority hurt the outlook for many pharmaceuticals companies, the pharmaceuticals stocks generally held up relatively well. Rather, weakness in the sector appeared to come more from individual companies across a diverse group of health care industries, including biotechnology, medical devices, and health care equipment and services. Performance of the technology and industrials sectors also lagged that of the broad market, though to a lesser extent.
Despite some observers' expectations that large-capitalization stocks would lead in 2006, small-cap stocks again outperformed large- and mid-cap stocks, although performance returns were double-digit for all three segments. Moreover, value stocks performed better than growth stocks by a wide margin, also defying some predictions.
Fixed Income Overview
The first half of 2006 provided few surprises in the bond market. The Fed continued to pursue its monetary tightening policy, raising the target federal funds rate at each of its meetings to 5.25 percent by the end of June. In the second half of the year, as economic growth moderated, the housing sector weakened, and inflation concerns eased, the Fed finally took a widely anticipated respite from its record cycle of 17 consecutive rate increases, electing to keep the target fed funds rate unchanged for the remainder of the year. Despite the pause in its tightening campaign, the Fed continued to acknowledge the potential for inflation risks and reiterated previous statements that further actions regarding interest rates would be data dependent.
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Letter to the Shareholders n December 31, 2006 continued
Inflation, as measured by the core PCE (Personal Consumption Expenditures) deflator — the Fed's preferred inflation gauge — remained elevated, rising 2.4 percent for the year ended in October, notably above the Fed's comfort zone of 1-2 percent. During the last week of December, the financial markets were surprised by stronger than expected data from the Chicago Purchasing Managers Index, new home sales and existing home sales, and consumer confidence reports. This data quelled much of the ongoing speculation that the soft housing and auto markets would translate into moderating economic growth and inflation, and perhaps an ease in Fed policy.
Yields rose across the U.S. Treasury curve during the first six months, though more so on the short end of the curve which tends to more closely track changes in interest rates. Around mid-year, as expectations of a pause in Fed tightening grew, yields peaked and then drifted lower throughout most of the last half of the year, and the bond market rallied. On a net basis, however, Treasury yields moved across the curve ended 2006 at higher levels than when the year began.
Within the government sector, agency issues posted the highest returns for the year while the Treasury sector underperformed due to its high sensitivity to interest rate changes. Mortgage-backed securities also outperformed Treasuries. Early in the period when yields were rising, higher coupon mortgages performed well as mortgage prepayments slowed. However, in response to a decline in yields in the last months of the year, lower coupon mortgages outperformed.
While the overall environment appeared to be good for corporate credit issues and defaults were near historic lows, much of the good news had already been priced into the market. Because interest rates remained at relatively low levels throughout the year, investors turned to the riskier segments of the market in an attempt to capture higher yields. The increased appetite for risk helped provide support to the high-yield market, causing yield spreads to compress to near record low levels. In this environment, the lowest credit tiers of the high-yield market — namely CCC rated securities — turned in the best performance. High demand for high-yield bonds was met by an equally high supply, which was fueled in part by an unprecedented amount of leveraged buyout and private equity activity during the year. In fact, more than $150 billion in new high-yield issues came to market in 2006, breaking the previous issuance record set in 2004.
International Equity Overview
International equity markets turned in another year of strong performance, handily outpacing the U.S. market in the 12 months ended December 31, 2006. The slowdown in the U.S. economy and its potential global impact proved to be a difficult but surmountable hurdle for international investors. In May, markets worldwide declined sharply in response to the Fed's ongoing monetary tightening stance. However, following one more increase to the target federal funds rate in June, the central bank ceased its tightening
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Letter to the Shareholders n December 31, 2006 continued
for the second half of 2006. Global economic growth remained intact, and the threat of a U.S. recession subsided. International stocks, with the exception of Japan, rallied strongly going into year end.
Europe's economic picture continued to be stable in 2006, providing a positive backdrop for European stock markets. Growth in European services industries, the largest part of the economy, unexpectedly accelerated in November. Eurozone retail-sales growth and German exports gained momentum toward year end. Meanwhile, inflation in the Eurozone began to rise as companies passed on costs from oil prices doubling in the past three years. The European Central Bank raised interest rates during the period to keep inflation under control, but many investors viewed the central bank's actions positively, as evidence that the economy was on strong ground.
On the whole, improving corporate profits and robust European domestic demand contributed to a generally positive environment for European stocks. Corporate earnings have risen but valuations have not yet expanded, providing a relatively attractive opportunity for investors in European stocks. The best performing sectors in the MSCI Europe Index were real estate, utilities, and automobiles. The weakest performers were the pharmaceuticals, software, and energy sectors.
In Japan, investors lost much of the optimism that drove the market's gains in 2005, and Japanese stocks were volatile during the period, especially in the small- and mid-cap segments. In January, an investigation of regulatory fraud at an internet company drove markets lower as speculation spread that other start-up companies might face a similar fate. Although markets turned around in March, supported by the Bank of Japan's decision to lift its zero interest rate monetary policy and a well-received Tankan survey of corporate sentiment, gains were short lived. Stocks fluctuated in the second and third quarters, given the uncertainties of U.S. economic deceleration, escalating geopolitical tensions, rapid yen appreciation and rising oil prices, despite evidence of economic strength. However, conditions improved in the fourth quarter, with better-than-expected Tankan surveys, a worldwide stock market rally and depreciation in the yen relative to the U.S. dollar. Nonetheless, the central bank kept interest rates steady in the second half of the year, due to concerns about the strength of the economy's rebound.
Elsewhere in Asia, the markets faced the same challenges as all global investors: concerns about energy prices, global liquidity, inflation, political uncertainty and the prospect of an economic slowdown in the U.S. As with the other global markets, Asian markets experienced a correction in the second quarter but rebounded in the second half of the year, especially in the fourth quarter. Despite political noise in Taiwan and ill-received central bank policy announcements in Thailand, most markets in the region closed the year in positive territory, buoyed in no small part by strong fourth quarter returns. China outpaced its peers, followed by Indonesia and the Philippines. Pakistan had a strong start but lagged its regional peers to post only a modest gain for the year overall.
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Letter to the Shareholders n December 31, 2006 continued
Emerging markets equities posted their fourth consecutive calendar year of double-digit returns in 2006. Moreover, the emerging markets continued their outperformance over the developed markets for the sixth consecutive year. During the year, the asset class benefited from strong macroeconomic growth, a healthy consumer and supportive commodity prices. On a regional basis, Latin America was the star performer, followed by Asia and the Europe, Middle East and Africa (EMEA) region.
Performance data quoted represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown. For the most recent month-end performance figures, please visit www.morganstanley.com or speak with your Financial Advisor. Investment returns and principal value will fluctuate and portfolio shares, when redeemed, may be worth more or less than their original cost.
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Balanced Growth Portfolio
For the 12-month period ended December 31, 2006, Balanced Growth Portfolio Class X shares produced a total return of 12.67 percent versus 22.25 percent for the Russell 1000® Value Index and 3.78 percent for the Lehman Brothers U.S. Government/Credit Index. For the same period, the Portfolio's Class Y shares returned 12.37 percent. Past performance is no guarantee of future results.
The performance of the Portfolio's two share classes varies because each has different expenses. The Portfolio's total returns assume the reinvestment of all distributions but do not reflect the deduction of any charges by your insurance company. Such costs would lower performance.
In the stock portion of the Portfolio, the primary area of undeperformance for the Portfolio relative to the Russell 1000 Value Index was in the health care sector. A surprise negative announcement by a health care equipment and services company early in the reporting period was responsible for most of the Portfolio's weak performance in this sector. In addition, the Portfolio's health care sector overweight is largely composed of pharmaceutical stocks, which proved to be a negative influence during this time period. With the Democrats gaining a majority in Congress, investors and drug companies were concerned about potential Medicare reform that would ultimately enable the government to negotiate drug prices. The telecommunications sector was another drag on performance relative to the Russell 1000 Value Index, primarily due to stock selection. The Portfolio had no exposure to some of the market's
Past performance is not predictive of future returns. Investment return and principal value will fluctuate. When you sell fund shares, they may be worth less than their original cost. Performance for Class Y shares will vary from the performance of Class X shares shown above due to differences in expenses.
Average Annual Total Returns as of December 31, 2006 | |||||||||||||||||||
1 Year | 5 Years | 10 Years | Since Inception* | ||||||||||||||||
Class X | 12.67 | %(1) | 7.48 | %(1) | 7.99 | %(1) | 9.55 | %(1) | |||||||||||
Class Y | 12.37 | %(1) | 7.22 | %(1) | — | 7.36 | %(1) |
(1) Figure assumes reinvestment of all distributions for the underlying portfolio based on net asset value (NAV). It does not reflect the deduction of insurance expenses, an annual contract maintenance fee, or surrender charges.
(2) Ending value on December 31, 2006 for the underlying portfolio. This figure does not reflect the deduction of any account fees or sales charges.
(3) The Russell 1000® Value Index measures the performance of those companies in the Russell 1000® Index with lower price-to-book ratios and lower forecasted growth values. The index is unmanaged and its returns do not include any sales charges or fees. Such costs would lower performance. It is not possible to invest directly in an index.
(4) The Lehman Brothers U.S. Government/Credit Index tracks the performance of government and corporate obligations, including U.S. government agency and Treasury securities and corporate and Yankee bonds. The index is unmanaged and its returns do not include any sales charges or fees. Such costs would lower performance. It is not possible to invest directly in an index.
* Inception dates of November 9, 1994 for Class X and July 24, 2000 for Class Y.
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Letter to the Shareholders n December 31, 2006 continued
best performing telecom stocks, and one of the Portfolio's larger telecom holdings provided lackluster returns during the period. The consumer staples sector further dampened performance due to stock selection.
Nonetheless, the Portfolio did outperform the Russell 1000 Value Index in other areas. In the consumer discretionary sector, our stock selection among retailers and autos served the Portfolio well. The financial services sector also contributed positively to performance, particularly in the Portfolio's diversified financial holdings. These companies had strong exposure to the capital markets through their investment banking and trading operations, and benefited from the robust merger and acquisition activity and rising markets during the period. The Portfolio owned some of the utility sector's best performing stocks, which offset the negative impact of an underweight in the sector. Moreover, on an absolute basis, the Portfolio achieved positive results from all of its represented sectors.
As of the end of the reporting period, the Portfolio held 69 percent in stocks and 29 in bonds. With regard to bonds, we kept the Portfolio's overall duration** well below that of the Lehman Brothers U.S. Government/Credit Index during the period. This posture was beneficial as interest rates rose across the market, but detracted from relative performance during periods of sharp yield increases. An underweight to the agency sector detracted slightly from relative performance as this sector posted solid returns. Given aggressive bond valuations at the start of the year and concerns regarding increasing leverage trends, we chose to maintain a defensive posture in credit over the course of 2006. This positioning had a small negative effect on the performance of the Portfolio relative to the Lehman Brothers U.S. Government/Credit Index over the period, as spreads (or the extra return required by investors for assuming credit risk) g enerally narrowed. However, good security selection helped offset a portion of this weakness.
** A measure of the sensitivity of a bond's price to changes in interest rates, expressed in years. Each year of duration represents an expected 1 percent change in the price of a bond for every 1 percent change in interest rates. The longer a bond's duration, the greater the effect of interest-rate movements on its price. Typically, portfolios with shorter durations perform better in rising interest-rate environments, while portfolios with longer durations perform better when rates decline.
There is no guarantee that any sectors mentioned will continue to perform as discussed above or that securities in such sectors will be held by the Portfolio in the future.
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Letter to the Shareholders n December 31, 2006 continued
Capital Opportunities Portfolio
For the 12-month period ended December 31, 2006, Capital Opportunities Portfolio Class X shares produced a total return of 7.86 percent versus 9.46 percent for the Russell 3000® Growth Index. For the same period, the Portfolio's Class Y shares returned 7.53 percent. Past performance is no guarantee of future results.
The performance of the Portfolio's two share classes varies because each has different expenses. The Portfolio's total returns assume the reinvestment of all distributions but do not reflect the deduction of any charges by your insurance company. Such costs would lower performance.
The Portfolio underperformed the Russell 3000 Growth Index due to stock selection, although sector allocations did contribute positively to overall performance. Among those areas that hindered performance was the consumer discretionary sector, where a large sector overweight relative to the Russell 3000 Growth Index served as the main detractor to returns, and stock selection in household furnishing, consumer products and textiles apparel manufacturing companies further weakened returns. Holdings of select crude oil producers within the other energy sector also proved disadvantageous to performance, as did an underweight position in the consumer staples sector.
Despite these negative influences on performance, there were several areas of strength for the Portfolio, including the multi-industry sector. This sector, which includes conglomerates, significantly benefited from strong stock selection. Stock
Past performance is not predictive of future returns. Investment return and principal value will fluctuate. When you sell fund shares, they may be worth less than their original cost. Performance for Class Y shares will vary from the performance of Class X shares shown above due to differences in expenses.
Average Annual Total Returns as of December 31, 2006 | |||||||||||||||||||
1 Year | 5 Years | 10 Years | Since Inception* | ||||||||||||||||
Class X | 7.86 | %(1) | 5.23 | %(1) | — | 3.43 | %(1) | ||||||||||||
Class Y | 7.53 | %(1) | 4.96 | %(1) | — | (9.92 | )%(1) |
(1) Figure assumes reinvestment of all distributions for the underlying portfolio based on net asset value (NAV). It does not reflect the deduction of insurance expenses, an annual contract maintenance fee, or surrender charges.
(2) Ending value on December 31, 2006 for the underlying portfolio. This figure does not reflect the deduction of any account fees or sales charges.
(3) The Russell 3000® Growth Index measures the performance of those companies in the Russell 3000® Index with higher price-to-book ratios and higher forecasted growth values. The index is unmanaged and its returns do not include any sales charges or fees. Such costs would lower performance. It is not possible to invest directly in an index.
* Inception dates of January 21, 1997 for Class X and July 24, 2000 for Class Y.
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Letter to the Shareholders n December 31, 2006 continued
selection in semiconductor companies in the technology sector also enhanced performance, although an underweight position did slightly offset the gains achieved. Within the utilities sector, an overweight allocation and selection in wireless companies also added to relative returns.
At the close of the period, consumer discretionary represented the largest sector weight and overweight in the Portfolio, followed by the financial services and other energy sectors. The other energy sector was overweight relative to the Russell 3000 Growth Index, while the financial services sector was underweight relative to the Russell 3000 Growth Index.
There is no guarantee that any sectors mentioned will continue to perform as discussed above or that securities in such sectors will be held by the Portfolio in the future.
Developing Growth Portfolio
For the 12-month period ended December 31, 2006, Developing Growth Portfolio Class X shares produced a total return of 10.69 percent versus 10.66 percent for the Russell Midcap® Growth Index. For the same period, the Portfolio's Class Y shares returned 10.42 percent. Past performance is no guarantee of future results.
The performance of the Portfolio's two share classes varies because each has different expenses. The Portfolio's total returns assume the reinvestment of all distributions but do not reflect the deduction of any charges by your insurance company. Such costs would lower performance.
Past performance is not predictive of future returns. Investment return and principal value will fluctuate. When you sell fund shares, they may be worth less than their original cost. Performance for Class Y shares will vary from the performance of Class X shares shown above due to differences in expenses.
Average Annual Total Returns as of December 31, 2006 | |||||||||||||||||||
1 Year | 5 Years | 10 Years | Since Inception* | ||||||||||||||||
Class X | 10.69 | %(1) | 10.43 | %(1) | 8.64 | %(1) | 12.04 | %(1) | |||||||||||
Class Y | 10.42 | %(1) | 10.15 | %(1) | — | 0.73 | %(1) |
(1) Figure assumes reinvestment of all distributions for the underlying portfolio based on net asset value (NAV). It does not reflect the deduction of insurance expenses, an annual contract maintenance fee, or surrender charges.
(2) Ending value on December 31, 2006 for the underlying portfolio. This figure does not reflect the deduction of any account fees or sales charges.
(3) The Russell Midcap® Growth Index measures the performance of those Russell Midcap® Index companies with higher price-to-book ratios and higher forecasted growth values. The stocks are also members of the Russell 1000® Growth Index. The index is unmanaged and its returns do not include any sales charges or fees. Such costs would lower performance. It is not possible to invest directly in an index.
* Inception dates of November 9, 1994 for Class X and July 24, 2000 for Class Y.
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Letter to the Shareholders n December 31, 2006 continued
For the year, the Portfolio slightly outperformed the Russell MidCap Growth Index due to sector allocation decisions, although stock selection modestly detracted from overall returns. Relative to the Russell MidCap Growth Index, areas of strength for the Portfolio included the multi-industry, consumer staples and technology sectors. In the multi-industry sector, which includes conglomerates, stock selection benefited performance, as did the Portfolio's single tobacco holding within the consumer staples sector. Stock section in the technology sector, particularly in semiconductor companies and computer software and services firms, also added to relative returns. Rounding out the notable contributors for the Portfolio this period was the producer durables sector, which bolstered performance through strong stock selection.
Among the few sectors that negatively impacted the Portfolio relative to the Russell MidCap Growth Index was consumer discretionary, where an overweight allocation significantly detracted from performance, offsetting the positive influence provided by holdings in radio and TV broadcasters and textiles apparel manufacturing companies. Furthermore, stock selection in commercial services and education services within this sector also served to weaken returns, albeit more modestly. An underweight position in the materials and processing sector proved disadvantageous, as did stock selection in building materials companies and an avoidance of the copper industry. Within the financial services sector, an underweight allocation and stock selection in investment management companies and an avoidance of real estate investment trusts (REITs) hindered returns.
At the close of the period, consumer discretionary represented the largest sector weight and overweight in the Portfolio, followed by the financial services and health care sectors. The financial services and health care sectors were both underweighted versus the Russell MidCap Growth Index.
There is no guarantee that any sectors mentioned will continue to perform as discussed above or that securities in such sectors will be held by the Portfolio in the future.
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Letter to the Shareholders n December 31, 2006 continued
Dividend Growth Portfolio
For the 12-month period ended December 31, 2006, Dividend Growth Portfolio Class X shares produced a total return of 11.25 percent versus 15.79 percent for the S&P 500® Index. For the same period, the Portfolio's Class Y shares returned 10.98 percent. Past performance is no guarantee of future results.
The performance of the Portfolio's two share classes varies because each has different expenses. The Portfolio's total returns assume the reinvestment of all distributions but do not reflect the deduction of any charges by your insurance company. Such costs would lower performance.
On a sector basis, the Portfolio's underperformance relative to the S&P 500 Index was primarily attributable to stock selection in the health care, technology and energy sectors. Within the health care sector, the negative influence was widespread across a variety of holdings, including pharmaceuticals, biotechnology, medical devices, and health care equipment and services, and was primarily driven by individual company-specific factors. Weakness in the Portfolio's technology holdings was focused mainly in two industry groups: computer hardware and peripherals, and communications equipment. Stock selection within the energy sector also proved detrimental, due largely to negative company-specific events within certain oil services and exploration and production holdings.
In addition, in the first half of the year, we had positioned the Portfolio with a slight tilt toward
Past performance is not predictive of future returns. Investment return and principal value will fluctuate. When you sell fund shares, they may be worth less than their original cost. Performance for Class Y shares will vary from the performance of Class X shares shown above due to differences in expenses.
Average Annual Total Returns as of December 31, 2006 | |||||||||||||||||||
1 Year | 5 Years | 10 Years | Since Inception* | ||||||||||||||||
Class X | 11.25 | %(1) | 5.92 | %(1) | 7.26 | %(1) | 10.91 | %(1) | |||||||||||
Class Y | 10.98 | %(1) | 5.67 | %(1) | — | 5.41 | %(1) |
(1) Figure assumes reinvestment of all distributions for the underlying portfolio based on net asset value (NAV). It does not reflect the deduction of insurance expenses, an annual contract maintenance fee, or surrender charges.
(2) Ending value on December 31, 2006 for the underlying portfolio. This figure does not reflect the deduction of any account fees or sales charges.
(3) The Standard & Poor's 500® Index (S&P 500®) is a broad-based index, the performance of which is based on the performance of 500 widely-held common stocks chosen for market size, liquidity and industry group representation. The index is unmanaged and its returns do not include any sales charges or fees. Such costs would lower performance. It is not possible to invest directly in an index.
* Inception dates of November 9, 1994 for Class X and July 24, 2000 for Class Y.
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growth-style stocks, given that economic growth began to slow and growth stocks have historically performed better than their value counterparts in this environment. However, in 2006, value stocks strongly outpaced growth stocks for the year overall. Although we shifted the Portfolio's positioning in the second half of the year and performance subsequently improved, the value-oriented market climate proved challenging early in the period.
However, the Portfolio achieved good gains elsewhere. Relative to the S&P 500 Index, the Portfolio's stock selection in the financials sector added to results, with very strong performance in its capital markets holdings and a smaller contribution from insurance holdings. The Portfolio's weak stock selection in the energy sector was partially offset by an overweight allocation there. Two holdings in the materials sector also buoyed returns, driven by company-specific factors.
There is no guarantee that any sectors mentioned will continue to perform as discussed above or that securities in such sectors will be held by the Portfolio in the future.
Equally-Weighted S&P 500 Portfolio
For the 12-month period ended December 31, 2006, Equally-Weighted S&P 500 Portfolio Class X shares produced a total return of 15.69 percent versus 15.80 percent for the Standard & Poor's Equal Weight Index. For the same period, the Portfolio's Class Y shares returned 15.34 percent. Past performance is no guarantee of future results.
The performance of the Portfolio's two share classes varies because each has different expenses. The
Past performance is not predictive of future returns. Investment return and principal value will fluctuate. When you sell fund shares, they may be worth less than their original cost. Performance for Class Y shares will vary from the performance of Class X shares shown above due to differences in expenses.
Average Annual Total Returns as of December 31, 2006 | |||||||||||||||||||
1 Year | 5 Years | 10 Years | Since Inception* | ||||||||||||||||
Class X | 15.69 | %(1) | 10.89 | %(1) | 11.33 | %(1) | 12.86 | %(1) | |||||||||||
Class Y | 15.34 | %(1) | 10.60 | %(1) | — | 9.49 | %(1) |
(1) Figure assumes reinvestment of all distributions for the underlying portfolio based on net asset value (NAV). It does not reflect the deduction of insurance expenses, an annual contract maintenance fee, or surrender charges.
(2) Ending value on December 31, 2006 for the underlying portfolio. This figure does not reflect the deduction of any account fees or sales charges.
(3) The Standard & Poor's Equal Weight Index (S&P EWI) is the equal-weighted version of the widely regarded S&P 500® Index, which measures 500 leading companies in leading U.S. industries. The S&P EWI has the same constituents as the capitalization weighted S&P 500® Index, but each company in the S&P EWI is allocated a fixed weight, rebalancing quarterly. The index is unmanaged and its returns do not include any sales charges or fees. Such costs would lower performance. It is not possible to invest directly in an index.
* Inception dates of November 9, 1994 for Class X and July 24, 2000 for Class Y.
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Portfolio's total returns assume the reinvestment of all distributions but do not reflect the deduction of any charges by your insurance company. Such costs would lower performance.
The Portfolio's best performing sector for the 12-month period was telecommunication services. A wave of industry consolidation helped revive the sector after its multi-year period of sluggishness. Investor confidence was buoyed by improved earnings and the proliferation of acquisition announcements. The materials sector produced the second highest return during the period, driven by the very strong performance of a few materials stocks. Notable performance also came from the utilities sector, which benefited from merger and acquisition announcements and stronger balance sheets.
All sectors had positive returns for the year, but the health care, technology and energy sectors had the smallest gains. Within the health care sector, pharmaceuticals companies with poor performance and declining outlooks and a health care equipment and services holding with a disappointing earnings report muted the broad sector's advance. Weakness in the technology sector stemmed from difficulties in the semiconductor and semiconductor capital equipment group. Intensifying competition created a price war between two of the industry's largest players and, although unit sales were up, profit margins were down. Despite weaker performance in the second half of the year, the energy sector had advanced considerably on the back of rising oil prices in the first half of the year and record profits at some energy companies.
There is no guarantee that any sectors mentioned will continue to perform as discussed above or that securities in such sectors will be held by the Portfolio in the future.
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Letter to the Shareholders n December 31, 2006 continued
Flexible Income Portfolio
For the 12-month period ended December 31, 2006, Flexible Income Portfolio Class X shares produced a total return of 5.76 percent versus 4.08 percent for the Lehman Brothers Intermediate U.S. Government/Credit Index. For the same period, the Portfolio's Class Y shares returned 5.68 percent. Past performance is no guarantee of future results.
The performance of the Portfolio's two share classes varies because each has different expenses. The Portfolio's total returns assume the reinvestment of all distributions but do not reflect the deduction of any charges by your insurance company. Such costs would lower performance.
During the reporting year, we kept the Portfolio's overall duration (a measure of interest-rate sensitivity) relatively low. This posture proved beneficial to performance as interest rates rose across much of the curve. However, when rates declined later in the year, this defensive positioning detracted from relative performance.
In terms of credit risk, the portfolio was also positioned defensively with a focus on higher-quality securities. This conservative posture dampened performance as the lowest-rated segments of the credit market outperformed. On a more positive note, however, strong security selection in several sectors, especially autos and retail, was additive to performance.
The Portfolio's emphasis on higher coupon mortgages benefited performance during the first half of the year when these issues outperformed their lower coupon counterparts. Higher coupon mortgages typically have slower prepayment rates
Past performance is not predictive of future returns. Investment return and principal value will fluctuate. When you sell fund shares, they may be worth less than their original cost. Performance for Class Y shares will vary from the performance of Class X shares shown above due to differences in expenses.
Average Annual Total Returns as of December 31, 2006 | |||||||||||||||||||
1 Year | 5 Years | 10 Years | Since Inception* | ||||||||||||||||
Class X | 5.76 | %(1) | 7.51 | %(1) | 3.82 | %(1) | 4.56 | %(1) | |||||||||||
Class Y | 5.68 | %(1) | 7.28 | %(1) | — | 4.09 | %(1) |
(1) Figure assumes reinvestment of all distributions for the underlying portfolio based on net asset value (NAV). It does not reflect the deduction of insurance expenses, an annual contract maintenance fee, or surrender charges.
(2) Ending value on December 31, 2006 for the underlying portfolio. This figure does not reflect the deduction of any account fees or sales charges.
(3) The Lehman Brothers Intermediate U.S. Government/Credit Index tracks the performance of U.S. government and corporate obligations, including U.S. government agency and Treasury securities, and corporate and Yankee bonds with maturities of 1 to 10 years. The index is unmanaged and its returns do not include any sales charges or fees. Such costs would lower performance. It is not possible to invest directly in an index.
* Inception dates of November 9, 1994 for Class X and July 24, 2000 for Class Y.
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Letter to the Shareholders n December 31, 2006 continued
and as such, tend to be less sensitive to rising interest rates. In the last months of the year, as rates began to fall, this emphasis kept the Portfolio from more fully participating in the comparatively better performance of lower-coupon mortgages.
Currency positioning led to underperformance of the Portfolio's non-U.S. dollar holdings versus the benchmark while the Portfolio's emerging markets debt holdings outperformed due to strong security selection and a neutral sector exposure.
There is no guarantee that any sectors mentioned will continue to perform as discussed above or that securities in such sectors will be held by the Portfolio in the future.
Focus Growth Portfolio
For the 12-month period ended December 31, 2006, Focus Growth Portfolio Class X shares produced a total return of 0.37 percent versus 9.07 percent for the Russell 1000® Growth Index. For the same period, the Portfolio's Class Y shares returned 0.12 percent. Past performance is no guarantee of future results.
The performance of the Portfolio's two share classes varies because each has different expenses. The Portfolio's total returns assume the reinvestment of all distributions but do not reflect the deduction of any charges by your insurance company. Such costs would lower performance.
For the period, the Portfolio underperformed the Russell 1000 Growth Index due to stock selection and sector allocation decisions. An overweight allocation in the consumer discretionary sector was the largest detractor to relative returns, with stock selection in commercial services, education services and miscellaneous publishing firms further
Past performance is not predictive of future returns. Investment return and principal value will fluctuate. When you sell fund shares, they may be worth less than their original cost. Performance for Class Y shares will vary from the performance of Class X shares shown above due to differences in expenses.
Average Annual Total Returns as of December 31, 2006 | |||||||||||||||||||
1 Year | 5 Years | 10 Years | Since Inception* | ||||||||||||||||
Class X | 0.37 | %(1) | 3.29 | %(1) | 7.86 | %(1) | 10.52 | %(1) | |||||||||||
Class Y | 0.12 | %(1) | 3.04 | %(1) | — | (3.78 | )%(1) |
(1) Figure assumes reinvestment of all distributions for the underlying portfolio based on net asset value (NAV). It does not reflect the deduction of insurance expenses, an annual contract maintenance fee, or surrender charges.
(2) Ending value on December 31, 2006 for the underlying portfolio. This figure does not reflect the deduction of any account fees or sales charges.
(3) The Russell 1000® Growth Index measures the performance of those companies in the Russell 1000® Index with higher price-to-book ratios and higher forecasted growth values. The index is unmanaged and its returns do not include any sales charges or fees. Such costs would lower performance. It is not possible to invest directly in an index.
* Inception dates of November 9, 1994 for Class X and July 24, 2000 for Class Y.
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Letter to the Shareholders n December 31, 2006 continued
weakening performance, offsetting the gains made by selection in radio and TV broadcasters and textile apparel manufacturers. Within the health care sector, selection in medical and dental instruments suppliers and pharmaceutical companies proved detrimental, although a sector underweight did slightly boost returns. An underweight allocation in the technology sector, along with stock selection in computer technology, computer services and software, and communications technology, also hampered overall performance.
Relative to the Russell 1000 Growth Index, there were several areas of strength for the Portfolio. Among these was the financial services sector, which benefited both from stock selection in financial information services and diversified financial services firms and from an overweight allocation. Security selection in the multi-industry sector, which includes conglomerates, also boosted performance. In the utilities sector, an overweight allocation as well as selection in wireless companies added to relative returns.
At the close of the period, consumer discretionary represented the largest sector weight and overweight in the Portfolio, followed by the financial services and other energy sectors. The financial services and other energy sectors were overweight versus the Russell 1000 Growth Index.
There is no guarantee that any sectors mentioned will continue to perform as discussed above or that securities in such sectors will be held by the Portfolio in the future.
Global Equity Portfolio
For the 12-month period ended December 31, 2006, Global Equity Portfolio Class X shares produced a total return of 21.59 percent versus 20.07 percent for
Past performance is not predictive of future returns. Investment return and principal value will fluctuate. When you sell fund shares, they may be worth less than their original cost. Performance for Class Y shares will vary from the performance of Class X shares shown above due to differences in expenses.
Average Annual Total Returns as of December 31, 2006 | |||||||||||||||||||
1 Year | 5 Years | 10 Years | Since Inception* | ||||||||||||||||
Class X | 21.59 | %(1) | 10.13 | %(1) | 7.79 | %(1) | 8.44 | %(1) | |||||||||||
Class Y | 21.35 | %(1) | 9.85 | %(1) | — | 2.99 | %(1) |
(1) Figure assumes reinvestment of all distributions for the underlying portfolio based on net asset value (NAV). It does not reflect the deduction of insurance expenses, an annual contract maintenance fee, or surrender charges.
(2) Ending value on December 31, 2006 for the underlying portfolio. This figure does not reflect the deduction of any account fees or sales charges.
(3) The Morgan Stanley Capital International (MSCI) World Index measures performance from a diverse range of global stock markets including the U.S., Canada, Europe, Australia, New Zealand, and the Far East. The performance of the Index is listed in U.S. dollars and assumes reinvestment of net dividends. "Net dividends" reflects a reduction in dividends after taking into account withholding of taxes by certain foreign countries represented in the Index. The index is unmanaged and its returns do not include any sales charges or fees. Such costs would lower performance. It is not possible to invest directly in an index.
* Inception dates of November 9, 1994 for Class X and July 24, 2000 for Class Y.
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Letter to the Shareholders n December 31, 2006 continued
the MSCI World Index. For the same period, the Portfolio's Class Y shares returned 21.35 percent. Past performance is no guarantee of future results.
The performance of the Portfolio's two share classes varies because each has different expenses. The Portfolio's total returns assume the reinvestment of all distributions but do not reflect the deduction of any charges by your insurance company. Such costs would lower performance.
Although the Portfolio's country and sector allocations may provide a useful basis for performance discussions, these allocations are not based on top-down positioning decisions. Given our bottom-up approach to stock selection, the Portfolio's weightings in countries or sectors are indicative of where we found the most attractive investment opportunities (or, conversely, a lack of opportunities) on an individual stock basis.
In the 12-month period, the Portfolio achieved positive performance relative to the MSCI World Index in a number of areas. The largest country-level contributors were an overweight in Spain, an underweight in Japan and an overweight in Singapore. These exposures proved advantageous during the period because Spain was the MSCI World Index's top performing market, Singapore was within the top five best performers, and Japan was among the worst performing markets. Moreover, of the 19 major world markets represented in the MSCI World Index, only two countries underperformed the U.S.: Japan and New Zealand. Because international markets had stronger performance, the Portfolio's underweight exposure to U.S. stocks served the Portfolio well. In addition, the Portfolio benefited from stock selection in Singapore, the U.S. and the U.K.
On a sector basis, an underweight in the energy sector boosted returns relative to the MSCI World Index. Because the earnings growth of energy companies is dependent on commodity prices, we have tended to avoid investment in energy stocks. The Portfolio's limited exposure to energy stocks was additive to performance as the price of crude oil began to retreat in the second half of the year. An underweight in the consumer staples sector and an overweight in the financials sector also had a positive influence on returns. Additionally, stock selection was strong in the financials, consumer discretionary and industrials sectors.
Relative to the MSCI World Index, an overweight position in South Africa and an underweight in France detracted from performance. Stock selection in Spain, Germany and Japan also had a detrimental effect. In terms of sectors, the Portfolio was hampered by an overweight in information technology and an underweight in utilities. Within the health care sector, both an overweight exposure and stock selection detracted from the Portfolio's results relative to the MSCI World Index.
There is no guarantee that any sectors mentioned will continue to perform as discussed above or that securities in such sectors will be held by the Portfolio in the future.
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Morgan Stanley Select Dimensions Investment Series
Letter to the Shareholders n December 31, 2006 continued
Growth Portfolio
For the 12-month period ended December 31, 2006, Growth Portfolio Class X shares produced a total return of 3.94 percent versus 9.07 percent for the Russell 1000® Growth Index. For the same period, the Portfolio's Class Y shares returned 3.75 percent. Past performance is no guarantee of future results.
The performance of the Portfolio's two share classes varies because each has different expenses. The Portfolio's total returns assume the reinvestment of all distributions but do not reflect the deduction of any charges by your insurance company. Such costs would lower performance.
The Portfolio's underperformance against the Russell 1000 Growth Index was due to stock selection, although sector allocations did add modestly to returns. The largest detractor to performance was caused by an overweight position in the consumer discretionary sector. Stock selection in commercial services, education services and leisure time companies further weakened returns within this sector, and offset gains achieved through holdings in retail companies and radio and TV broadcasters. An overweight position in the producer durables sector also hampered performance, as did stock selection in homebuilding companies and an avoidance of aerospace securities. Within the health care sector, stock selection in pharmaceutical companies and medical and dental instruments firms proved disadvantageous and minimized the positive effect of the sector's underweight allocation.
Past performance is not predictive of future returns. Investment return and principal value will fluctuate. When you sell fund shares, they may be worth less than their original cost. Performance for Class Y shares will vary from the performance of Class X shares shown above due to differences in expenses.
Average Annual Total Returns as of December 31, 2006 | |||||||||||||||||||
1 Year | 5 Years | 10 Years | Since Inception* | ||||||||||||||||
Class X | 3.94 | %(1) | 3.43 | %(1) | 5.56 | %(1) | 7.55 | %(1) | |||||||||||
Class Y | 3.75 | %(1) | 3.18 | %(1) | — | (3.36 | )%(1) |
(1) Figure assumes reinvestment of all distributions for the underlying portfolio based on net asset value (NAV). It does not reflect the deduction of insurance expenses, an annual contract maintenance fee, or surrender charges.
(2) Ending value on December 31, 2006 for the underlying portfolio. This figure does not reflect the deduction of any account fees or sales charges.
(3) The Russell 1000® Growth Index measures the performance of those companies in the Russell 1000® Index with higher price-to-book ratios and higher forecasted growth values. The index is unmanaged and its returns do not include any sales charges or fees. Such costs would lower performance. It is not possible to invest directly in an index.
* Inception dates of November 9, 1994 for Class X and July 24, 2000 for Class Y.
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Morgan Stanley Select Dimensions Investment Series
Letter to the Shareholders n December 31, 2006 continued
Despite these detractors from overall performance, there were several positive contributors to the Portfolio. Among these was the multi-industry sector, which includes conglomerates. Within this sector, stock selection added to relative returns and helped to offset the detrimental effect of the sector's overweight allocation. In the materials and processing sector, the Portfolio's single holding in the agriculture, fishing and ranching industry also helped performance. In the utilities sector, an overweight position and selection in wireless companies strongly benefited returns.
At the close of the period, consumer discretionary represented the largest sector weight in the Portfolio, followed by the financial services and the multi-industry sectors. The consumer discretionary and the multi-industry sectors were overweight relative to the Index, while the financial services sector was weighted in-line with the Russell 1000 Growth Index.
There is no guarantee that any sectors mentioned will continue to perform as discussed above or that securities in such sectors will be held by the Portfolio in the future.
Money Market Portfolio
An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of an investment at $1.00 per share, it is possible to lose money by investing in such funds.
As of December 31, 2006, Money Market Portfolio had net assets of more than $120 million with an average portfolio maturity of 36 days. For the seven-day period ended December 31, 2006, the Portfolio's Class X shares provided an effective annualized yield of 4.71 percent and a current yield of 4.61 percent, while its 30-day moving average yield for December was 4.82 percent. For the 12-month period ended December 31, 2006, the Portfolio's Class X shares returned 4.59 percent. Past performance is no guarantee of future results.
For the seven-day period ended December 31, 2006, the Portfolio's Class Y shares provided an effective annualized yield of 4.46 percent and a current yield of 4.36 percent, while its 30-day moving average yield for December was 4.50 percent. For the 12-month period ended December 31, 2006, the Portfolio's Class Y shares returned 4.34 percent. Past performance is no guarantee of future results.
The performance of the Portfolio's two share classes varies because each has different expenses. The Portfolio's total returns assume the reinvestment of all distributions but do not reflect the deduction of any charges by your insurance company. Such costs would lower performance.
Our strategy in managing the Portfolio remained consistent with its long-term focus on maintaining preservation of capital and liquidity. We adhered to a conservative approach that emphasized purchasing
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Morgan Stanley Select Dimensions Investment Series
Letter to the Shareholders n December 31, 2006 continued
high-quality money market obligations and avoiding the use of derivatives or structured notes that might fluctuate excessively with changing interest rates.
There is no guarantee that any sectors mentioned will continue to perform as discussed above or that securities in such sectors will be held by the Portfolio in the future.
Utilities Portfolio
For the 12-month period ended December 31, 2006, Utilities Portfolio Class X shares produced a total return of 20.50 percent versus 20.99 percent for the S&P 500® Utilities Index and 15.79 percent for the S&P 500® Index. For the same period, the Portfolio's Class Y shares returned 20.17 percent. Past performance is no guarantee of future results.
The performance of the Portfolio's two share classes varies because each has different expenses. The Portfolio's total returns assume the reinvestment of all distributions but do not reflect the deduction of any charges by your insurance company. Such costs would lower performance.
For the 12-month period ended December 31, 2006, all sub-sectors within the utilities sector provided strong returns relative to the broad market as defined by the S&P 500 Index. The Portfolio's underperformance relative to the S&P 500 Utilities Index was caused by an underweight allocation within the electric utilities segment; however, many of the European and Latin American telecom operators held in the Portfolio contributed favorably to total returns.
Past performance is not predictive of future returns. Investment return and principal value will fluctuate. When you sell fund shares, they may be worth less than their original cost. Performance for Class Y shares will vary from the performance of Class X shares shown above due to differences in expenses.
Average Annual Total Returns as of December 31, 2006 | |||||||||||||||||||
1 Year | 5 Years | 10 Years | Since Inception* | ||||||||||||||||
Class X | 20.50 | %(1) | 10.84 | %(1) | 10.50 | %(1) | 11.61 | %(1) | |||||||||||
Class Y | 20.17 | %(1) | 10.56 | %(1) | — | 2.03 | %(1) |
(1) Figure assumes reinvestment of all distributions for the underlying portfolio based on net asset value (NAV). It does not reflect the deduction of insurance expenses, an annual contract maintenance fee, or surrender charges.
(2) Ending value on December 31, 2006 for the underlying portfolio. This figure does not reflect the deduction of any account fees or sales charges.
(3) The Standard & Poor's 500® Utilities Index (S&P 500® Utilities Index) is an unmanaged, market capitalization weighted index consisting of utilities companies in the S&P 500® Index and is designed to measure the performance of the utilities sector. It includes reinvested dividends. The index is unmanaged and its returns do not include any sales charges or fees. Such costs would lower pe rformance. It is not possible to invest directly in an index. The Portfolio's primary benchmark is being changed from the S&P 500® Index to the S&P 500® Utilities Index to more accurately reflect the Portfolio's investible universe. The S&P 500® Index will continue to be listed in addition to the S&P 500® Utilities Index.
(4) The Standard & Poor's 500® Index (S&P 500®) is a broad-based index, the performance of which is based on the performance of 500 widely-held common stocks chosen for market size, liquidity and industry group representation. The index is unmanaged and its returns do not include any sales charges or fees. Such costs would lower performance. It is not possible to invest directly in an index.
* Inception dates of November 9, 1994 for Class X and July 24, 2000 for Class Y.
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Letter to the Shareholders n December 31, 2006 continued
Given the attractive opportunities within the broad utility markets, at the close of the period the Portfolio was fully invested and held an average cash balance in the range of 1 to 2 percent. The Portfolio provided shareholders with diversified exposure to the utilities sector through a 61 percent allocation to electric utilities, a 20 percent allocation to telecommunications services and a 19 percent allocation in natural gas/energy. Within the telecommunications services segment, 6 percent was allocated to European and Latin American telecommunication operators. We note that the Portfolio's holdings and allocations may be modified at any time, in response to our analysis of broader trends or company specific fundamentals.
There is no guarantee that any sectors mentioned will continue to perform as discussed above or that securities in such sectors will be held by the Portfolio in the future.
We appreciate your ongoing support of Morgan Stanley Select Dimensions Investment Series and look forward to continuing to serve your investment needs.
Very truly yours,
Ronald E. Robison
President and Principal Executive Officer
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Morgan Stanley Select Dimensions Investment Series
Letter to the Shareholders n December 31, 2006 continued
Proxy Voting Policy and Procedures and Proxy Voting Record
You may obtain a copy of the Portfolios' Proxy Voting Policy and Procedures without charge, upon request, by calling toll free (800) 869-NEWS or by visiting the Mutual Fund Center on our Web site at www.morganstanley.com. It is also available on the Securities and Exchange Commission's Web site at http://www.sec.gov.
You may obtain information regarding how the Portfolios voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 without charge by visiting the Mutual Fund Center on our Web site at www.morganstanley.com. This information is also available on the Securities and Exchange Commission's Web site at http://www.sec.gov.
For More Information About Portfolio Holdings
Each Morgan Stanley fund provides a complete schedule of portfolio holdings in its semiannual and annual reports within 60 days of the end of the fund's second and fourth fiscal quarters. The semiannual reports and the annual reports are filed electronically with the Securities and Exchange Commission (SEC) on Form N-CSRS and Form N-CSR, respectively. Morgan Stanley also delivers the semiannual and annual reports to fund shareholders and makes these reports available on its public web site, www.morganstanley.com. Each Morgan Stanley fund also files a complete schedule of portfolio holdings with the SEC for the fund's first and third fiscal quarters on Form N-Q. Morgan Stanley does not deliver the reports for the first and third fiscal quarters to shareholders, nor are the reports posted to the Morgan Stanley public web site. You may, however, obtain the Form N-Q filings (as well as the Form N-CSR and N-CSRS filings) by accessing the SEC's web site, http://www.sec.gov. You may also review and copy them at the SEC's public reference room in Washington, DC. Information on the operation of the SEC's public reference room may be obtained by calling the SEC at (800) SEC-0330. You can also request copies of these materials, upon payment of a duplicating fee, by electronic request at the SEC's e-mail address (publicinfo@sec.gov) or by writing the public reference section of the SEC, Washington, DC 20549-0102.
22
Morgan Stanley Select Dimensions Investment Series
Expense Example n December 31, 2006
As a shareholder of the Portfolio, you incur two types of costs: (1) insurance company charges; and (2) ongoing costs, including advisory fees; distribution and service (12b-1) fees; and other Portfolio expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period 07/01/06–12/31/06.
Actual Expenses
The first line of the table below provides information about actual account values and actual expenses. 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 Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio'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 cost of investing in the Portfolio and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any insurance company charges. Therefore, the second line of the table is useful in comparing ongoing costs, and will not help you determine the relative total cost of owning different funds. In addition, if these insurance company charges were included, your costs would have been higher.
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Morgan Stanley Select Dimensions Investment Series
Expense Example n December 31, 2006 continued
Money Market
Beginning Account Value | Ending Account Value | Expenses Paid During Period* | |||||||||||||
07/01/06 | 12/31/06 | 07/01/06 – 12/31/06 | |||||||||||||
Class X | |||||||||||||||
Actual (2.43% return) | $ | 1,000.00 | $ | 1,024.30 | $ | 2.98 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,021.99 | $ | 2.97 | |||||||||
Class Y | |||||||||||||||
Actual (2.31% return) | $ | 1,000.00 | $ | 1,023.10 | $ | 4.24 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,020.74 | $ | 4.23 |
* Expenses are equal to the Portfolio's annualized expense ratios of 0.59% and 0.84% for Class X and Class Y shares, respectively, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period).
Flexible Income
Beginning Account Value | Ending Account Value | Expenses Paid During Period* | |||||||||||||
07/01/06 | 12/31/06 | 07/01/06 – 12/31/06 | |||||||||||||
Class X | |||||||||||||||
Actual (5.05% return) | $ | 1,000.00 | $ | 1,050.50 | $ | 2.84 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,022.43 | $ | 2.80 | |||||||||
Class Y | |||||||||||||||
Actual (4.96% return) | $ | 1,000.00 | $ | 1,049.60 | $ | 4.13 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,021.17 | $ | 4.08 |
* Expenses are equal to the Portfolio's annualized expense ratios of 0.55% and 0.80% for Class X and Class Y shares, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
Balanced Growth
Beginning Account Value | Ending Account Value | Expenses Paid During Period* | |||||||||||||
07/01/06 | 12/31/06 | 07/01/06 – 12/31/06 | |||||||||||||
Class X | |||||||||||||||
Actual (10.56% return) | $ | 1,000.00 | $ | 1,105.60 | $ | 4.09 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,021.32 | $ | 3.92 | |||||||||
Class Y | |||||||||||||||
Actual (10.39% return) | $ | 1,000.00 | $ | 1,103.90 | $ | 5.41 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,020.06 | $ | 5.19 |
* Expenses are equal to the Portfolio's annualized expense ratios of 0.77% and 1.02% for Class X and Class Y shares, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
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Morgan Stanley Select Dimensions Investment Series
Expense Example n December 31, 2006 continued
Utilities
Beginning Account Value | Ending Account Value | Expenses Paid During Period* | |||||||||||||
07/01/06 | 12/31/06 | 07/01/06 – 12/31/06 | |||||||||||||
Class X | |||||||||||||||
Actual (15.55% return) | $ | 1,000.00 | $ | 1,155.50 | $ | 4.07 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,021.42 | $ | 3.82 | |||||||||
Class Y | |||||||||||||||
Actual (15.42% return) | $ | 1,000.00 | $ | 1,154.20 | $ | 5.43 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,020.16 | $ | 5.09 |
* Expenses are equal to the Portfolio's annualized expense ratios of 0.75% and 1.00% for Class X and Class Y shares, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
Dividend Growth
Beginning Account Value | Ending Account Value | Expenses Paid During Period* | |||||||||||||
07/01/06 | 12/31/06 | 07/01/06 – 12/31/06 | |||||||||||||
Class X | |||||||||||||||
Actual (11.41% return) | $ | 1,000.00 | $ | 1,114.10 | $ | 3.68 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,021.73 | $ | 3.52 | |||||||||
Class Y | |||||||||||||||
Actual (11.29% return) | $ | 1,000.00 | $ | 1,112.90 | $ | 5.01 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,020.47 | $ | 4.79 |
* Expenses are equal to the Portfolio's annualized expense ratios of 0.69% and 0.94% for Class X and Class Y shares, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
Equally-Weighted S&P 500
Beginning Account Value | Ending Account Value | Expenses Paid During Period* | |||||||||||||
07/01/06 | 12/31/06 | 07/01/06 – 12/31/06 | |||||||||||||
Class X | |||||||||||||||
Actual (11.22% return) | $ | 1,000.00 | $ | 1,112.20 | $ | 1.49 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,023.79 | $ | 1.43 | |||||||||
Class Y | |||||||||||||||
Actual (11.08% return) | $ | 1,000.00 | $ | 1,110.80 | $ | 2.82 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,022.53 | $ | 2.70 |
* Expenses are equal to the Portfolio's annualized expense ratios of 0.28% and 0.53% for Class X and Class Y shares, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
25
Morgan Stanley Select Dimensions Investment Series
Expense Example n December 31, 2006 continued
Growth
Beginning Account Value | Ending Account Value | Expenses Paid During Period* | |||||||||||||
07/01/06 | 12/31/06 | 07/01/06 – 12/31/06 | |||||||||||||
Class X | |||||||||||||||
Actual (7.25% return) | $ | 1,000.00 | $ | 1,072.50 | $ | 3.81 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,021.53 | $ | 3.72 | |||||||||
Class Y | |||||||||||||||
Actual (7.15% return) | $ | 1,000.00 | $ | 1,071.50 | $ | 5.12 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,020.27 | $ | 4.99 |
* Expenses are equal to the Portfolio's annualized expense ratios of 0.73% and 0.98% for Class X and Class Y shares, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
Focus Growth
Beginning Account Value | Ending Account Value | Expenses Paid During Period* | |||||||||||||
07/01/06 | 12/31/06 | 07/01/06 – 12/31/06 | |||||||||||||
Class X | |||||||||||||||
Actual (4.80% return) | $ | 1,000.00 | $ | 1,048.00 | $ | 3.61 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,021.68 | $ | 3.57 | |||||||||
Class Y | |||||||||||||||
Actual (4.65% return) | $ | 1,000.00 | $ | 1,046.50 | $ | 4.90 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,020.42 | $ | 4.84 |
* Expenses are equal to the Portfolio's annualized expense ratios of 0.70% and 0.95% for Class X and Class Y shares, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
Capital Opportunities
Beginning Account Value | Ending Account Value | Expenses Paid During Period* | |||||||||||||
07/01/06 | 12/31/06 | 07/01/06 – 12/31/06 | |||||||||||||
Class X | |||||||||||||||
Actual (5.25% return) | $ | 1,000.00 | $ | 1,052.50 | $ | 4.91 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,020.42 | $ | 4.84 | |||||||||
Class Y | |||||||||||||||
Actual (5.08% return) | $ | 1,000.00 | $ | 1,050.80 | $ | 6.20 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,019.16 | $ | 6.11 |
* Expenses are equal to the Portfolio's annualized expense ratios of 0.95% and 1.20% for Class X and Class Y shares, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
26
Morgan Stanley Select Dimensions Investment Series
Expense Example n December 31, 2006 continued
Global Equity
Beginning Account Value | Ending Account Value | Expenses Paid During Period* | |||||||||||||
07/01/06 | 12/31/06 | 07/01/06 – 12/31/06 | |||||||||||||
Class X | |||||||||||||||
Actual (14.80% return) | $ | 1,000.00 | $ | 1,148.00 | $ | 5.47 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,020.11 | $ | 5.14 | |||||||||
Class Y | |||||||||||||||
Actual (14.72% return) | $ | 1,000.00 | $ | 1,147.20 | $ | 6.82 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,018.85 | $ | 6.41 |
* Expenses are equal to the Portfolio's annualized expense ratios of 1.01% and 1.26% for Class X and Class Y shares, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
Developing Growth
Beginning Account Value | Ending Account Value | Expenses Paid During Period* | |||||||||||||
07/01/06 | 12/31/06 | 07/01/06 – 12/31/06 | |||||||||||||
Class X | |||||||||||||||
Actual (6.22% return) | $ | 1,000.00 | $ | 1,062.20 | $ | 3.43 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,021.88 | $ | 3.36 | |||||||||
Class Y | |||||||||||||||
Actual (6.07% return) | $ | 1,000.00 | $ | 1,060.70 | $ | 4.73 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,020.62 | $ | 4.63 |
* Expenses are equal to the Portfolio's annualized expense ratios of 0.66% and 0.91% for Class X and Class Y shares, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
27
Money Market
Portfolio of Investments n December 31, 2006
PRINCIPAL AMOUNT IN THOUSANDS | ANNUALIZED YIELD ON DATE OF PURCHASE | MATURITY | VALUE | ||||||||||||||||
Commercial Paper (85.2%) | |||||||||||||||||||
Asset-Backed - Auto (4.8%) | |||||||||||||||||||
$ | 1,795 | DaimlerChrysler Revolving Auto Conduit LLC A-1 (Series I) | 5.34 | % | 01/05/07 - 02/05/07 | $ | 1,789,266 | ||||||||||||
3,968 | DaimlerChrysler Revolving Auto Conduit LLC A-1 (Series II) | 5.32 - 5.33 | 01/10/07 - 01/18/07 | 3,960,099 | |||||||||||||||
5,749,365 | |||||||||||||||||||
Asset-Backed - Consumer (16.2%) | |||||||||||||||||||
2,554 | Barton Capital LLC* | 5.30 - 5.32 | 01/16/07 - 02/09/07 | 2,540,774 | |||||||||||||||
3,384 | Bryant Park Funding LLC* | 5.31 - 5.35 | 01/03/07 - 01/19/07 | 3,378,212 | |||||||||||||||
954 | Kitty Hawk Funding Corp. | 5.37 | 03/20/07 | 942,764 | |||||||||||||||
458 | Mont Blanc Capital Corp. | 5.34 | 02/14/07 | 454,898 | |||||||||||||||
623 | Old Line Funding, LLC* | 5.32 | 01/04/07 | 622,541 | |||||||||||||||
990 | Ranger Funding Co., LLC | 5.34 | 02/12/07 | 983,587 | |||||||||||||||
325 | Regency Markets No 1 LLC* | 5.36 | 01/05/07 | 324,710 | |||||||||||||||
600 | Sheffield Receivables Corp. | 5.36 | 01/08/07 | 599,198 | |||||||||||||||
4,162 | Thames Asset Global Securitization | 5.31 - 5.36 | 01/05/07 - 02/07/07 | 4,150,706 | |||||||||||||||
3,916 | Three Rivers Funding Corp. | 5.32 - 5.38 | 01/02/07 - 01/11/07 | 3,911,110 | |||||||||||||||
1,711 | Thunder Bay Funding, LLC* | 5.41 - 5.46 | 01/05/07 | 1,709,451 | |||||||||||||||
19,617,951 | |||||||||||||||||||
Asset-Backed - Corporate (15.1%) | |||||||||||||||||||
2,700 | Amsterdam Funding Corp. | 5.32 - 5.34 | 01/05/07 - 01/12/07 | 2,697,224 | |||||||||||||||
1,487 | Atlantis One Funding | 5.31 - 5.37 | 01/25/07 - 02/01/07 | 1,480,176 | |||||||||||||||
1,500 | Eureka Securitization, Inc. | 5.31 | 01/08/07 | 1,498,024 | |||||||||||||||
5,321 | Kaiserplatz Funding (Delaware) LLC* | 5.34 - 5.35 | 01/12/07 - 04/04/07 | 5,289,934 | |||||||||||||||
3,581 | Nieuw Amsterdam Receivables Corp. | 5.31 - 5.34 | 01/09/07 - 02/15/07 | 3,565,417 | |||||||||||||||
3,750 | Simba Funding Corp. | 5.33 - 5.36 | 01/22/07 - 03/21/07 | 3,717,408 | |||||||||||||||
18,248,183 | |||||||||||||||||||
Asset-Backed - Diversified (5.0%) | |||||||||||||||||||
1,221 | CRC Funding LLC.* | 5.33 - 5.36 | 01/23/07 - 01/25/07 | 1,216,634 | |||||||||||||||
4,559 | Fairway Finance Co. LLC* | 5.31 - 5.38 | 01/02/07 - 01/22/07 | 4,552,298 | |||||||||||||||
303 | Yorktown Capital, LLC | 5.32 | 01/10/07 | 302,509 | |||||||||||||||
6,071,441 | |||||||||||||||||||
Asset-Backed - Mortgage (3.9%) | |||||||||||||||||||
4,775 | Sydney Capital Corp.* | 5.33 - 5.36 | 01/17/07 - 03/07/07 | 4,745,563 | |||||||||||||||
Asset-Backed - Securities (9.9%) | |||||||||||||||||||
1,705 | Cancara Asset Securitisation LLC | 5.33 | 01/09/07 | 1,702,485 | |||||||||||||||
590 | Clipper Receivables Co., LLC* | 5.34 | 02/06/07 | 586,699 | |||||||||||||||
350 | Curzon Funding LLC | 5.34 | 03/20/07 | 345,909 |
See Notes to Financial Statements
28
Money Market
Portfolio of Investments n December 31, 2006 continued
PRINCIPAL AMOUNT IN THOUSANDS | ANNUALIZED YIELD ON DATE OF PURCHASE | MATURITY | VALUE | ||||||||||||||||
$ | 550 | Galleon Capital, LLC* | 5.38 | % | 01/18/07 | $ | 548,444 | ||||||||||||
3,824 | Golden Fish LLC* | 5.34 - 5.37 | 01/04/07 - 01/24/07 | 3,812,827 | |||||||||||||||
1,500 | Grampian Funding LLC* | 5.33 | 02/15/07 - 03/22/07 | 1,486,665 | |||||||||||||||
989 | Scaldis Capital LLC* | 5.33 | 01/22/07 - 01/26/07 | 985,501 | |||||||||||||||
2,500 | Solitaire Funding LLC | 5.33 - 5.39 | 01/12/07 - 02/22/07 | 2,489,310 | |||||||||||||||
11,957,840 | |||||||||||||||||||
Banking (1.9%) | |||||||||||||||||||
2,319 | Bank of America Corp. | 5.33 - 5.35 | 03/01/07 - 03/09/07 | 2,297,292 | |||||||||||||||
Financial Conglomerates (0.2% ) | |||||||||||||||||||
250 | General Electric Capital Corp. | 5.38 | 02/20/07 | 248,104 | |||||||||||||||
Insurance (3.1%) | |||||||||||||||||||
3,740 | Irish Life & Permanent PLC* | 5.32 - 5.36 | 01/08/07 - 04/04/07 | 3,727,132 | |||||||||||||||
International Banks (25.1%) | |||||||||||||||||||
4,450 | Abbey National North America LLC | 5.36 | 01/08/07 | 4,444,137 | |||||||||||||||
1,300 | ABN AMRO N.A. Finance, Inc. | 5.33 | 04/05/07 | 1,281,973 | |||||||||||||||
2,750 | BNP Paribas Finance, Inc. | 5.33 - 5.34 | 03/07/07 - 05/10/07 | 2,712,086 | |||||||||||||||
550 | Bank of Ireland* | 5.49 - 5.50 | 04/10/07 | 541,822 | |||||||||||||||
779 | CBA (Delaware) Finance Inc. | 5.34 | 01/08/07 | 777,972 | |||||||||||||||
3,854 | DEPFA Bank PLC* | 5.31 - 5.36 | 01/04/07 - 05/01/07 | 3,809,679 | |||||||||||||||
1,350 | DnB NOR Bank ASA | 5.34 | 01/08/07 | 1,348,228 | |||||||||||||||
962 | HBOS Treasury Services PLC | 5.34 | 03/05/07 | 952,824 | |||||||||||||||
1,050 | ING (U.S.) Funding LLC | 5.31 | 01/03/07 | 1,049,385 | |||||||||||||||
1,400 | IXIS Commercial Paper Corp. | 5.31 - 5.35 | 01/12/07 - 02/16/07 | 1,395,267 | |||||||||||||||
1,000 | KBC Financial Products International Ltd* | 5.29 | 04/05/07 | 986,133 | |||||||||||||||
600 | Nordea North America Inc. | 5.35 | 02/02/07 | 597,008 | |||||||||||||||
255 | Royal Bank of Canada | 5.32 | 02/02/07 | 253,731 | |||||||||||||||
974 | Santander Central Hispano Finance (Del) Inc. | 5.35 | 02/08/07 | 968,265 | |||||||||||||||
1,200 | Skandinaviska Enskkilda Banken AB | 5.33 | 01/26/07 | 1,195,239 | |||||||||||||||
2,283 | Societe General N.A., Inc. | 5.30 - 5.34 | 01/19/07 - 05/01/07 | 2,263,530 | |||||||||||||||
1,410 | Swedbank | 5.33 - 5.41 | 01/03/07 - 02/12/07 | 1,404,979 | |||||||||||||||
3,580 | Swedbank Mortgage AB | 5.33 - 5.38 | 01/29/07 - 02/02/07 | 3,562,760 | |||||||||||||||
800 | Westpac Banking Corp. | 5.31 | 01/24/07 | 797,067 | |||||||||||||||
30,342,085 | |||||||||||||||||||
Total Commercial Paper (Cost $103,004,956) | 103,004,956 | ||||||||||||||||||
Floating Rate Notes (2.9%) | |||||||||||||||||||
Domestic Banks | |||||||||||||||||||
1,000 | American Express Centurion Bank | 5.44 | † | 01/19/07‡ | 1,000,551 | ||||||||||||||
1,000 | SunTrust Banks, Inc. | 5.45 | † | 01/15/07‡ | 1,000,838 |
See Notes to Financial Statements
29
Money Market
Portfolio of Investments n December 31, 2006 continued
PRINCIPAL AMOUNT IN THOUSANDS | ANNUALIZED YIELD ON DATE OF PURCHASE | MATURITY | VALUE | ||||||||||||||||
$ | 1,000 | Wachovia Corp. | 5.44 | † % | 01/22/07‡ | $ | 1,000,498 | ||||||||||||
500 | World Savings Bank, FSB | 5.43 | † | 03/01/07‡ | 500,176 | ||||||||||||||
Total Floating Rate Notes (Cost $3,502,063) | 3,502,063 | ||||||||||||||||||
Bankers' Acceptance (4.5%) | |||||||||||||||||||
5,489 | J.P. Morgan Chase & Co. (Cost $5,444,298) | 5.32 - 5.41 | 01/02/07 - 04/09/07 | 5,444,298 | |||||||||||||||
Certificate of Deposit (7.3%) | |||||||||||||||||||
International Banks (5.2%) | |||||||||||||||||||
345 | Australia & New Zealand Bkg. Group | 5.36 | 01/29/07 | 344,797 | |||||||||||||||
1,000 | Fortis Bank | 5.35 | 04/27/07 | 999,538 | |||||||||||||||
500 | HBOS Treasury Services PLC (New York) | 5.35 | 03/05/07 | 499,522 | |||||||||||||||
3,000 | Natixis | 5.34 - 5.40 | 01/02/07 - 01/31/07 | 2,999,018 | |||||||||||||||
375 | Rabobank Nederland | 5.48 | 03/13/07 | 374,649 | |||||||||||||||
250 | Royal Bank of Scotland PLC | 5.38 | 01/18/07 | 249,901 | |||||||||||||||
885 | Societe General | 5.35 | 01/17/07 | 884,664 | |||||||||||||||
6,352,089 | |||||||||||||||||||
Domestic Banks (2.1%) | |||||||||||||||||||
2,500 | Well Fargo Bank, N.A. | 5.38 - 5.40 | 01/31/07 - 02/28/07 | 2,498,173 | |||||||||||||||
Total Certificate of Deposit (Cost $8,850,262) | 8,850,262 | ||||||||||||||||||
Total Investments (Cost $120,801,579) (a) | 99.9 | % | 120,801,579 | ||||||||||||||||
Other Assets in Excess of Liabilities | 0.1 | 168,555 | |||||||||||||||||
Net Assets | 100.0 | % | $ | 120,970,134 |
* Resale is restricted to qualified institutional investors
† Rate shown is the rate in effect at December 31, 2006.
‡ Date of next interest rate reset.
(a) Cost is the same for federal income tax purposes.
MATURITY SCHEDULE*
1-30 Days | 59 | % | |||||
31-60 Days | 21 | ||||||
61-90 Days | 10 | ||||||
91-120 Days | 7 | ||||||
121-180 Days | 3 | ||||||
100 | % |
* As a percentage of total market value.
See Notes to Financial Statements
30
Flexible Income
Portfolio of Investments n December 31, 2006
PRINCIPAL AMOUNT IN THOUSANDS | COUPON RATE | MATURITY DATE | VALUE | ||||||||||||||||
Government & Corporate Bonds (95.6%) | |||||||||||||||||||
Foreign (15.8%) | |||||||||||||||||||
Argentina (0.4%) | |||||||||||||||||||
Government Obligations | |||||||||||||||||||
ARS | 682 | Republic of Argentina | 0.00 | **% | 12/15/35 | $ | 26,514 | ||||||||||||
340 | Republic of Argentina++++ | 5.83 | 12/31/33 | 165,750 | |||||||||||||||
$ | 15 | Republic of Argentina (i) | 0.00 | ** | 12/15/35 | 2,031 | |||||||||||||
6 | Republic of Argentina (d) (i) ++++ | 8.28 | 12/31/33 | 6,217 | |||||||||||||||
60 | Republic of Argentina (c) | 13.97 | 04/10/49 | 26,700 | |||||||||||||||
Total Argentina | 227,212 | ||||||||||||||||||
Australia (0.5%) | |||||||||||||||||||
Beverages: Alcoholic (0.2%) | |||||||||||||||||||
100 | FBG Finance Ltd. - 144A* | 5.125 | 06/15/15 | 94,690 | |||||||||||||||
Other Metals/Minerals (0.0%) | |||||||||||||||||||
70 | Murrin Holdings Property Ltd. (c) (i) | 9.375 | 08/31/07 | 0 | |||||||||||||||
Property - Casualty Insurers (0.3%) | |||||||||||||||||||
200 | Mantis Reef Ltd. - 144A* | 4.692 | 11/14/08 | 197,518 | |||||||||||||||
Total Australia | 292,208 | ||||||||||||||||||
Bermuda (0.1%) | |||||||||||||||||||
Cable/Satellite TV | |||||||||||||||||||
75 | Intelsat Bermuda Ltd. | 10.484 | ** | 01/15/12 | 76,031 | ||||||||||||||
Brazil (1.3%) | |||||||||||||||||||
Government Obligations | |||||||||||||||||||
171 | Federal Republic of Brazil | 8.00 | 01/15/18 | 190,579 | |||||||||||||||
77 | Federal Republic of Brazil | 8.875 | 10/14/19 | 94,132 | |||||||||||||||
70 | Federal Republic of Brazil | 11.00 | 08/17/40 | 92,837 | |||||||||||||||
280 | Federal Republic of Brazil | 14.50 | 10/15/09 | 348,600 | |||||||||||||||
Total Brazil | 726,148 | ||||||||||||||||||
Canada (2.2%) | |||||||||||||||||||
Commercial Printing/Forms (0.5%) | |||||||||||||||||||
255 | Quebecor World Capital Corp. - 144A* | 8.75 | 03/15/16 | 245,438 | |||||||||||||||
Media Conglomerates (0.0%) | |||||||||||||||||||
1 | Canwest Media Inc. | 8.00 | 09/15/12 | 627 | |||||||||||||||
Oil & Gas Pipelines (0.5%) | |||||||||||||||||||
315 | Kinder Morgan Finance Co. | 5.70 | 01/05/16 | 289,512 | |||||||||||||||
Oil & Gas Production (0.3%) | |||||||||||||||||||
170 | Husky Oil Ltd. | 8.90 | 08/15/28 | 178,646 |
See Notes to Financial Statements
31
Flexible Income
Portfolio of Investments n December 31, 2006 continued
PRINCIPAL AMOUNT IN THOUSANDS | COUPON RATE | MATURITY DATE | VALUE | ||||||||||||||||
Other Metals/Minerals (0.2%) | |||||||||||||||||||
$ | 90 | Brascan Corp. | 7.125 | % | 06/15/12 | $ | 96,000 | ||||||||||||
Other Transportation (0.2%) | |||||||||||||||||||
140 | CHC Helicopter Corp. | 7.375 | 05/01/14 | 135,625 | |||||||||||||||
Pulp & Paper (0.5%) | |||||||||||||||||||
25 | Abitibi-Consolidated Inc. | 8.85 | 08/01/30 | 20,625 | |||||||||||||||
265 | Bowater Canada Finance | 7.95 | 11/15/11 | 261,025 | |||||||||||||||
281,650 | |||||||||||||||||||
Total Canada | 1,227,498 | ||||||||||||||||||
Denmark (0.3%) | |||||||||||||||||||
Telecommunications | |||||||||||||||||||
80 | Nordic Telecommunications Holdings - 144A* | 8.875 | 05/01/16 | 86,000 | |||||||||||||||
EUR | 60 | TDC AS | 6.50 | 04/19/12 | 83,517 | ||||||||||||||
Total Denmark | 169,517 | ||||||||||||||||||
Ecuador (0.1%) | |||||||||||||||||||
Government Obligation | |||||||||||||||||||
$ | 50 | Republic of Ecuador - 144A* | 10.00 | ** | 08/15/30 | 37,125 | |||||||||||||
France (0.3%) | |||||||||||||||||||
Oilfield Services/Equipments (0.1%) | |||||||||||||||||||
25 | Compagnie Generale de Geophysique S.A. | 7.50 | 05/15/15 | 25,250 | |||||||||||||||
Telecommunications (0.2%) | |||||||||||||||||||
95 | France Telecom S.A. | 8.50 | ** | 03/01/31 | 125,079 | ||||||||||||||
Total France | 150,329 | ||||||||||||||||||
Indonesia (0.4%) | |||||||||||||||||||
Pulp & Paper | |||||||||||||||||||
264 | Tjiwi Kimia Finance BV | 0.00 | ** | 04/28/27 | 46,134 | ||||||||||||||
64 | Tjiwi Kimia Finance BV - 144A* | 6.00 | ** | 04/28/15 | 51,398 | ||||||||||||||
213 | Tjiwi Kimia Finance BV - 144A* | 6.00 | ** | 04/28/18 | 116,329 | ||||||||||||||
Total Indonesia | 213,861 | ||||||||||||||||||
Israel (0.3%) | |||||||||||||||||||
Electrical Products | |||||||||||||||||||
160 | Ormat Funding Corp. | 8.25 | 12/30/20 | 163,879 | |||||||||||||||
Japan (4.0%) | |||||||||||||||||||
Government Obligations | |||||||||||||||||||
JPY | 170,000 | Japan (Government of) | 0.50 | 03/20/07 | 1,428,027 |
See Notes to Financial Statements
32
Flexible Income
Portfolio of Investments n December 31, 2006 continued
PRINCIPAL AMOUNT IN THOUSANDS | COUPON RATE | MATURITY DATE | VALUE | ||||||||||||||||
JPY | 90,000 | Japan (Government of) | 0.30 | % | 02/15/08 | $ | 753,157 | ||||||||||||
Total Japan | 2,181,184 | ||||||||||||||||||
Luxembourg (0.7%) | |||||||||||||||||||
Telecommunications | |||||||||||||||||||
$ | 30 | Telecom Italia Capital SpA | 4.00 | 11/15/08 | 29,228 | ||||||||||||||
80 | Telecom Italia Capital SpA | 4.00 | 01/15/10 | 76,445 | |||||||||||||||
265 | Wind Acquisition Finance SA - 144A* | 10.75 | 12/01/15 | 302,763 | |||||||||||||||
Total Luxembourg | 408,436 | ||||||||||||||||||
Mexico (2.0%) | |||||||||||||||||||
Government Obligations (1.4%) | |||||||||||||||||||
MXN | 1,000 | Mexican Fixed Rate Bonds | 8.00 | 12/17/15 | 95,877 | ||||||||||||||
3,390 | Mexican Fixed Rate Bonds | 10.00 | 12/05/24 | 389,465 | |||||||||||||||
$ | 250 | United Mexican States Corp. | 8.375 | 01/14/11 | 278,750 | ||||||||||||||
764,092 | |||||||||||||||||||
Oil & Gas Production (0.5%) | |||||||||||||||||||
80 | Pemex Project Funding Master Trust | 9.50 | 09/15/27 | 107,720 | |||||||||||||||
170 | Pemex Project Funding Master Trust - 144A* | 6.66 | ** | 06/15/10 | 174,930 | ||||||||||||||
282,650 | |||||||||||||||||||
Telecommunications (0.1%) | |||||||||||||||||||
66 | Axtel SA | 11.00 | 12/15/13 | 73,788 | |||||||||||||||
Total Mexico | 1,120,530 | ||||||||||||||||||
Netherlands (0.2%) | |||||||||||||||||||
Telecommunications | |||||||||||||||||||
70 | Telefonica Europe BV | 8.25 | 09/15/30 | 83,636 | |||||||||||||||
Russia (1.7%) | |||||||||||||||||||
Government Obligations (1.5%) | |||||||||||||||||||
50 | Federal Republic of Russia | 8.25 | 03/31/10 | 52,143 | |||||||||||||||
15 | Federal Republic of Russia | 5.00 | ** | 03/31/30 | 17,006 | ||||||||||||||
201 | Federal Republic of Russia | 11.00 | 07/24/18 | 291,701 | |||||||||||||||
190 | Federal Republic of Russia | 12.75 | 06/24/28 | 344,375 | |||||||||||||||
100 | Russian Agricultural Bank - 144A* | 7.175 | 05/16/13 | 105,625 | |||||||||||||||
810,850 | |||||||||||||||||||
Oil & Gas Pipelines (0.2%) | |||||||||||||||||||
75 | Gaz Capital | 8.625 | 04/28/34 | 97,125 | |||||||||||||||
Total Russia | 907,975 |
See Notes to Financial Statements
33
Flexible Income
Portfolio of Investments n December 31, 2006 continued
PRINCIPAL AMOUNT IN THOUSANDS | COUPON RATE | MATURITY DATE | VALUE | ||||||||||||||||
Turkey (0.4%) | |||||||||||||||||||
Government Obligations | |||||||||||||||||||
$ | 80 | Citigroup, Inc. - 144A* +++ | 0.00 | % | 08/14/08 | $ | 83,030 | ||||||||||||
100 | JP Morgan Chase - 144A*+++ | 0.00 | 08/15/08 | 74,750 | |||||||||||||||
55 | Republic of Turkey | 11.875 | 01/15/30 | 85,112 | |||||||||||||||
Total Turkey | 242,892 | ||||||||||||||||||
Ukraine (0.1%) | |||||||||||||||||||
Government Obligation | |||||||||||||||||||
40 | Ukraine Ministry of Finance - 144A* | 6.58 | 11/21/16 | 40,100 | |||||||||||||||
United Kingdom (0.1%) | |||||||||||||||||||
Cable/Satellite TV | |||||||||||||||||||
40 | NTL Cable PLC | 8.75 | 04/15/14 | 42,050 | |||||||||||||||
Venezuela (0.7%) | |||||||||||||||||||
Government Obligations | |||||||||||||||||||
70 | Republic of Venezuela | 8.50 | 10/08/14 | 79,380 | |||||||||||||||
160 | Republic of Venezuela | 9.375 | 01/13/34 | 211,600 | |||||||||||||||
80 | Republic of Venezuela | 10.75 | 09/19/13 | 99,600 | |||||||||||||||
Total Venezuela | 390,580 | ||||||||||||||||||
Total Foreign (Cost $8,445,528) | 8,701,191 | ||||||||||||||||||
United States (79.8%) | |||||||||||||||||||
Corporate Bonds (31.3%) | |||||||||||||||||||
Advertising/Marketing Services (0.4%) | |||||||||||||||||||
65 | Idears, Inc. - 144A* | 8.00 | 11/15/16 | 66,300 | |||||||||||||||
85 | Interpublic Group of Companies, Inc. (The) | 5.40 | 11/15/09 | 83,725 | |||||||||||||||
65 | Interpublic Group of Companies, Inc. (The) | 6.25 | 11/15/14 | 60,775 | |||||||||||||||
210,800 | |||||||||||||||||||
Aerospace & Defense (0.5%) | |||||||||||||||||||
165 | K&F Acquisition Inc. | 7.75 | 11/15/14 | 170,775 | |||||||||||||||
76 | Systems 2001 Asset Trust - 144A* | 6.664 | 09/15/13 | 79,158 | |||||||||||||||
249,933 | |||||||||||||||||||
Air Freight/Couriers (0.1%) | |||||||||||||||||||
40 | Fedex Corp. | 7.25 | 02/15/11 | 42,656 | |||||||||||||||
Apparel/Footwear (0.6%) | |||||||||||||||||||
125 | Levi Strauss & Co. | 10.122 | ** | 04/01/12 | 128,906 | ||||||||||||||
200 | Phillips-Van Heusen Corp. | 7.25 | 02/15/11 | 205,000 | |||||||||||||||
333,906 |
See Notes to Financial Statements
34
Flexible Income
Portfolio of Investments n December 31, 2006 continued
PRINCIPAL AMOUNT IN THOUSANDS | COUPON RATE | MATURITY DATE | VALUE | ||||||||||||||||
Auto Parts: O.E.M. (0.6%) | |||||||||||||||||||
$ | 330 | ArvinMeritor, Inc. | 8.75 | % | 03/01/12 | $ | 340,725 | ||||||||||||
Building Products (0.1%) | |||||||||||||||||||
35 | Interface Inc. | 7.30 | 04/01/08 | 35,788 | |||||||||||||||
Cable/Satellite TV (1.2%) | |||||||||||||||||||
170 | Cablevision Systems Corp. (Series B) | 9.87 | ** | 04/01/09 | 180,200 | ||||||||||||||
101 | CCH I LLC/CCH I Cap Co. | 11.00 | 10/01/15 | 104,156 | |||||||||||||||
140 | Comcast Cable Communications Inc. | 6.75 | 01/30/11 | 146,821 | |||||||||||||||
140 | Echostar DBS Corp. | 6.375 | 10/01/11 | 139,475 | |||||||||||||||
65 | Echostar DBS Corp. | 6.625 | 10/01/14 | 63,538 | |||||||||||||||
634,190 | |||||||||||||||||||
Casino/Gaming (1.3%) | |||||||||||||||||||
840 | Aladdin Gaming Holdings/Capital Corp. LLC (Series B) (a) (c) (i) | 13.50 | 03/01/10 | 0 | |||||||||||||||
200 | Isle of Capri Casinos | 7.00 | 03/01/14 | 200,000 | |||||||||||||||
335 | MGM Mirage Inc. | 6.00 | 10/01/09 | 335,838 | |||||||||||||||
299 | Resort At Summerlin LP/Ras Co. (Series B) (a) (c) (i) | 13.00 | † | 12/15/07 | 0 | ||||||||||||||
165 | Station Casinos, Inc. | 6.00 | 04/01/12 | 157,369 | |||||||||||||||
30 | Station Casinos, Inc. | 6.875 | 03/01/16 | 27,075 | |||||||||||||||
720,282 | |||||||||||||||||||
Chemicals: Major Diversified (0.5%) | |||||||||||||||||||
45 | ICI Wilmington Inc. | 4.375 | 12/01/08 | 44,173 | |||||||||||||||
255 | Westlake Chemical Corp. | 6.625 | 01/15/16 | 247,988 | |||||||||||||||
292,161 | |||||||||||||||||||
Chemicals: Specialty (1.2%) | |||||||||||||||||||
161 | Equistar Chemical Funding | 10.125 | 09/01/08 | 171,868 | |||||||||||||||
35 | Equistar Chemical Funding | 10.625 | 05/01/11 | 37,450 | |||||||||||||||
280 | Innophos, Inc. | 8.875 | ** | 08/15/14 | 285,600 | ||||||||||||||
32 | Innophos, Inc. | 13.38 | ** † | 02/15/15 | 33,911 | ||||||||||||||
120 | Koppers Holdings, Inc. | 9.875 | # | 11/15/14 | 96,600 | ||||||||||||||
26 | Koppers Industry Inc. | 9.875 | 10/15/13 | 28,405 | |||||||||||||||
653,834 | |||||||||||||||||||
Coal (0.1%) | |||||||||||||||||||
35 | Foundation PA Coal Co. | 7.25 | 08/01/14 | 35,788 | |||||||||||||||
Computer Processing Hardware (0.2%) | |||||||||||||||||||
85 | Hewlett-Packard Co. | 5.496 | 05/22/09 | 85,191 | |||||||||||||||
Containers/Packaging (1.6%) | |||||||||||||||||||
220 | Berry Plastics Holding Corp. - 144A* | 8.875 | 09/15/14 | 224,400 | |||||||||||||||
100 | Graham Packaging Company Inc. | 8.50 | 10/15/12 | 101,500 |
See Notes to Financial Statements
35
Flexible Income
Portfolio of Investments n December 31, 2006 continued
PRINCIPAL AMOUNT IN THOUSANDS | COUPON RATE | MATURITY DATE | VALUE | ||||||||||||||||
$ | 150 | Graphic Packaging International Corp. | 9.50 | %08/15/13 | $ | 159,000 | |||||||||||||
390 | Owens-Illinois, Inc. | 7.50 | 05/15/10 | 393,413 | |||||||||||||||
878,313 | |||||||||||||||||||
Data Processing Services (0.2%) | |||||||||||||||||||
105 | Sungard Data Systems Inc. | 9.125 | 08/15/13 | 110,775 | |||||||||||||||
Department Stores (0.2%) | |||||||||||||||||||
85 | May Department Stores Co. | 6.70 | 07/15/34 | 84,102 | |||||||||||||||
Drugstore Chains (0.2%) | |||||||||||||||||||
20 | CVS Corp. | 5.75 | 08/15/11 | 20,261 | |||||||||||||||
85 | CVS Corp. - 144A* | 6.036 | 12/10/28 | 84,905 | |||||||||||||||
105,166 | |||||||||||||||||||
Electric Utilities (2.4%) | |||||||||||||||||||
80 | AES Corp. (The) | 7.75 | 03/01/14 | 84,800 | |||||||||||||||
11 | AES Corp. (The) | 8.875 | 02/15/11 | 11,852 | |||||||||||||||
16 | AES Corp. (The) | 9.375 | 09/15/10 | 17,460 | |||||||||||||||
60 | AES Corp. (The) - 144A* | 9.00 | 05/15/15 | 64,800 | |||||||||||||||
140 | Arizona Public Service Co. | 5.80 | 06/30/14 | 139,889 | |||||||||||||||
55 | CC Funding Trust I | 6.90 | 02/16/07 | 55,068 | |||||||||||||||
70 | Consumers Energy Co. | 4.80 | 02/17/09 | 69,117 | |||||||||||||||
50 | Detroit Edison Co. (The) | 6.125 | 10/01/10 | 51,158 | |||||||||||||||
45 | Entergy Gulf States, Inc. | 3.60 | 06/01/08 | 43,826 | |||||||||||||||
100 | Entergy Gulf States, Inc. | 5.769 | ** | 12/01/09 | 99,864 | ||||||||||||||
205 | IPALCO Enterprises, Inc. | 8.375 | 11/14/08 | 213,713 | |||||||||||||||
30 | IPALCO Enterprises, Inc. | 8.625 | 11/14/11 | 32,775 | |||||||||||||||
115 | MSW Energy Holdings/Finance | 7.375 | 09/01/10 | 117,875 | |||||||||||||||
25 | MSW Energy Holdings/Finance | 8.50 | 09/01/10 | 26,125 | |||||||||||||||
70 | Ohio Power Company - IBC (Series K) | 6.00 | 06/01/16 | 72,006 | |||||||||||||||
30 | Panhandle Eastern Pipe Line Co. (Series B) | 2.75 | 03/15/07 | 29,824 | |||||||||||||||
49 | PSEG Energy Holdings Inc. | 8.625 | 02/15/08 | 50,470 | |||||||||||||||
50 | Texas Eastern Transmission, LP | 7.00 | 07/15/32 | 56,312 | |||||||||||||||
25 | TXU Energy Co. | 7.00 | 03/15/13 | 26,192 | |||||||||||||||
35 | Wisconsin Electric Power Co. | 3.50 | 12/01/07 | 34,434 | |||||||||||||||
1,297,560 | |||||||||||||||||||
Electrical Products (0.2%) | |||||||||||||||||||
35 | Cooper Industries, Inc. | 5.25 | 07/01/07 | 34,897 | |||||||||||||||
65 | Cooper Industries, Inc. | 5.25 | 11/15/12 | 64,423 | |||||||||||||||
99,320 | |||||||||||||||||||
Environmental Services (0.1%) | |||||||||||||||||||
42 | Allied Waste North America, Inc. | 9.25 | 09/01/12 | 44,835 |
See Notes to Financial Statements
36
Flexible Income
Portfolio of Investments n December 31, 2006 continued
PRINCIPAL AMOUNT IN THOUSANDS | COUPON RATE | MATURITY DATE | VALUE | ||||||||||||||||
Finance/Rental/Leasing (1.0%) | |||||||||||||||||||
$ | 30 | CIT Group, Inc. | 3.65 | % | 11/23/07 | $ | 29,579 | ||||||||||||
225 | Ford Motor Credit Co. | 7.25 | 10/25/11 | 220,556 | |||||||||||||||
125 | MBNA Corp. | 5.798 | ** | 05/05/08 | 125,815 | ||||||||||||||
150 | Residential Capital Corp. | 6.375 | 06/30/10 | 151,863 | |||||||||||||||
527,813 | |||||||||||||||||||
Financial Conglomerates (1.4%) | |||||||||||||||||||
120 | Chase Manhattan Corp. | 6.00 | 02/15/09 | 121,409 | |||||||||||||||
10 | Chase Manhattan Corp. | 7.00 | 11/15/09 | 10,475 | |||||||||||||||
20 | General Electric Capital Corp. | 4.25 | 12/01/10 | 19,368 | |||||||||||||||
615 | General Motors Acceptance Corp. | 6.875 | 09/15/11 | 631,432 | |||||||||||||||
782,684 | |||||||||||||||||||
Food Retail (0.3%) | |||||||||||||||||||
35 | CA FM Lease Trust - 144A* | 8.50 | 07/15/17 | 37,599 | |||||||||||||||
145 | Delhaize America, Inc. | 8.125 | 04/15/11 | 157,145 | |||||||||||||||
194,744 | |||||||||||||||||||
Food: Major Diversified (0.3%) | |||||||||||||||||||
60 | ConAgra Foods, Inc. | 7.00 | 10/01/28 | 65,190 | |||||||||||||||
25 | ConAgra Foods, Inc. | 8.25 | 09/15/30 | 30,794 | |||||||||||||||
25 | General Mills Inc. | 3.875 | 11/30/07 | 24,631 | |||||||||||||||
50 | Sara Lee Corp. | 6.125 | 11/01/32 | 45,380 | |||||||||||||||
165,995 | |||||||||||||||||||
Food: Meat/Fish/Dairy (0.9%) | |||||||||||||||||||
85 | Michael Foods Inc. (Series B) | 8.00 | 11/15/13 | 88,613 | |||||||||||||||
60 | Pilgrim's Pride Corp. | 9.25 | 11/15/13 | 62,850 | |||||||||||||||
115 | Pilgrim's Pride Corp. | 9.625 | 09/15/11 | 120,750 | |||||||||||||||
125 | Smithfield Foods Inc. | 7.00 | 08/01/11 | 126,875 | |||||||||||||||
70 | Smithfield Foods Inc. | 7.625 | 02/15/08 | 71,400 | |||||||||||||||
20 | Smithfield Foods Inc. (Series B) | 8.00 | 10/15/09 | 21,000 | |||||||||||||||
491,488 | |||||||||||||||||||
Gas Distributors (0.3%) | |||||||||||||||||||
120 | NiSource Finance Corp. | 5.94 | ** | 11/23/09 | 120,131 | ||||||||||||||
45 | Sempra Energy | 4.621 | 05/17/07 | 44,832 | |||||||||||||||
164,963 | |||||||||||||||||||
Home Building (0.1%) | |||||||||||||||||||
45 | Tech Olympic USA, Inc. | 9.00 | 07/01/10 | 44,550 | |||||||||||||||
Home Furnishings (0.1%) | |||||||||||||||||||
50 | Mohawk Industries, Inc. (Series D) | 7.20 | 04/15/12 | 51,990 |
See Notes to Financial Statements
37
Flexible Income
Portfolio of Investments n December 31, 2006 continued
PRINCIPAL AMOUNT IN THOUSANDS | COUPON RATE | MATURITY DATE | VALUE | ||||||||||||||||
Home Improvement Chains (0.1%) | |||||||||||||||||||
$ | 40 | Home Depot Inc. | 5.49 | % | 12/16/09 | $ | 40,030 | ||||||||||||
Hospital/Nursing Management (1.0%) | |||||||||||||||||||
125 | Columbia/HCA Healthcare Corp. | 7.69 | 06/15/25 | 104,088 | |||||||||||||||
95 | HCA, Inc. | 5.75 | 03/15/14 | 79,088 | |||||||||||||||
75 | HCA, Inc. - 144A* | 9.125 | 11/15/14 | 80,344 | |||||||||||||||
115 | Tenet Healthcare Corp. | 7.375 | 02/01/13 | 106,231 | |||||||||||||||
170 | Tenet Healthcare Corp. | 9.875 | 07/01/14 | 173,825 | |||||||||||||||
543,576 | |||||||||||||||||||
Hotels/Resorts/Cruiselines (0.2%) | |||||||||||||||||||
120 | Hyatt Equities LLC - 144A* | 6.875 | 06/15/07 | 120,512 | |||||||||||||||
Household/Personal Care (0.1%) | |||||||||||||||||||
75 | Clorox Co. (The) | 5.485 | ** | 12/14/07 | 75,102 | ||||||||||||||
Industrial Machinery (0.1%) | |||||||||||||||||||
32 | Goodman Global Holding Company, Inc. (Series B) | 8.36 | ** | 06/15/12 | 32,560 | ||||||||||||||
Industrial Specialties (0.3%) | |||||||||||||||||||
165 | Johnsondiversy, Inc. | 9.625 | 05/15/12 | 173,663 | |||||||||||||||
Insurance Brokers/Services (0.5%) | |||||||||||||||||||
290 | Farmers Exchange Capital - 144A* | 7.05 | 07/15/28 | 303,476 | |||||||||||||||
Major Banks (1.1%) | |||||||||||||||||||
150 | USB Capital IX | 6.189 | ** | *** | 153,336 | ||||||||||||||
440 | Wachovia Capital Trust III | 5.80 | ** | *** | 444,041 | ||||||||||||||
597,377 | |||||||||||||||||||
Media Conglomerates (0.6%) | |||||||||||||||||||
55 | News America Holdings, Inc. | 7.75 | 02/01/24 | 61,535 | |||||||||||||||
30 | News America Inc. | 7.125 | 04/08/28 | 31,742 | |||||||||||||||
150 | Time Warner, Inc. | 5.606 | 11/13/09 | 150,216 | |||||||||||||||
85 | Viacom, Inc. | 6.875 | 04/30/36 | 84,300 | |||||||||||||||
327,793 | |||||||||||||||||||
Medical Distributors (0.1%) | |||||||||||||||||||
70 | AmerisourceBergen Corp. | 5.625 | 09/15/12 | 69,165 | |||||||||||||||
Medical/Nursing Services (0.4%) | |||||||||||||||||||
181 | Fresenius Medical Care Capital Trust | 7.875 | 06/15/11 | 190,503 | |||||||||||||||
25 | Fresenius Medical Care Capital Trust II | 7.875 | 02/01/08 | 25,500 | |||||||||||||||
216,003 | |||||||||||||||||||
Metal Fabrications (0.1%) | |||||||||||||||||||
60 | General Cable Corp. | 9.50 | 11/15/10 | 63,900 |
See Notes to Financial Statements
38
Flexible Income
Portfolio of Investments n December 31, 2006 continued
PRINCIPAL AMOUNT IN THOUSANDS | COUPON RATE | MATURITY DATE | VALUE | ||||||||||||||||
Miscellaneous Commercial Services (0.4%) | |||||||||||||||||||
$ | 55 | Iron Mountain Inc. | 7.75 | % | 01/15/15 | $ | 56,375 | ||||||||||||
140 | Iron Mountain Inc. | 8.625 | 04/01/13 | 145,250 | |||||||||||||||
201,625 | |||||||||||||||||||
Miscellaneous Manufacturing (0.3%) | |||||||||||||||||||
195 | Propex Fabrics Inc. | 10.00 | 12/01/12 | 173,550 | |||||||||||||||
Motor Vehicles (0.8%) | |||||||||||||||||||
55 | DaimlerChrysler North American Holdings Co. | 8.50 | 01/18/31 | 65,658 | |||||||||||||||
420 | General Motors Corp. | 8.375 | 07/15/33 | 390,600 | |||||||||||||||
456,258 | |||||||||||||||||||
Multi-Line Insurance (0.4%) | |||||||||||||||||||
160 | AIG Sun America Global Finance VI - 144A* | 6.30 | 05/10/11 | 166,663 | |||||||||||||||
30 | American General Finance Corp. (Series H) | 4.625 | 09/01/10 | 29,301 | |||||||||||||||
35 | Equitable Cos Inc. | 6.50 | 04/01/08 | 35,431 | |||||||||||||||
231,395 | |||||||||||||||||||
Oil & Gas Pipelines (1.2%) | |||||||||||||||||||
85 | Colorado Interstate Gas Co. | 6.80 | 11/15/15 | 88,806 | |||||||||||||||
140 | El Paso Production Holdings | 7.75 | 06/01/13 | 147,175 | |||||||||||||||
50 | GAZ Capital - 144A* | 6.212 | 11/22/16 | 50,475 | |||||||||||||||
95 | Pacific Energy Partners/Finance | 7.125 | 06/15/14 | 97,599 | |||||||||||||||
70 | Plains All American Pipeline L.P. | 6.70 | 05/15/36 | 72,238 | |||||||||||||||
175 | Williams Companies, Inc. (The) | 7.875 | 09/01/21 | 188,563 | |||||||||||||||
644,856 | |||||||||||||||||||
Oil & Gas Production (1.7%) | |||||||||||||||||||
375 | Chesapeake Energy Corp. | 7.50 | 09/15/13 | 392,344 | |||||||||||||||
90 | Chesapeake Energy Corp. | 7.625 | 07/15/13 | 95,288 | |||||||||||||||
75 | Hilcorp Energy/Finance - 144A* | 7.75 | 11/01/15 | 74,063 | |||||||||||||||
78 | Hilcorp Energy/Finance - 144A* | 10.50 | 09/01/10 | 83,850 | |||||||||||||||
40 | Magnum Hunter Resources, Inc. | 9.60 | 03/15/12 | 42,150 | |||||||||||||||
270 | Pogo Producing Co. | 6.875 | 10/01/17 | 259,200 | |||||||||||||||
946,895 | |||||||||||||||||||
Oilfield Services/Equipment (0.3%) | |||||||||||||||||||
50 | Hanover Compressor Co. | 9.00 | 06/01/14 | 54,250 | |||||||||||||||
62 | Hanover Equipment Trust 2001 A (Series A) | 8.50 | 09/01/08 | 63,085 | |||||||||||||||
60 | Hanover Equipment Trust 2001 B (Series B) | 8.75 | 09/01/11 | 62,850 | |||||||||||||||
180,185 | |||||||||||||||||||
Pharmaceuticals: Major (0.1%) | |||||||||||||||||||
58 | Warner Chilcott Corp. | 8.75 | 02/01/15 | 59,740 |
See Notes to Financial Statements
39
Flexible Income
Portfolio of Investments n December 31, 2006 continued
PRINCIPAL AMOUNT IN THOUSANDS | COUPON RATE | MATURITY DATE | VALUE | ||||||||||||||||
Property - Casualty Insurers (0.1%) | |||||||||||||||||||
$ | 85 | St. Paul Travelers Companies, Inc. (The) | 5.01 | % | 08/16/07 | $ | 84,687 | ||||||||||||
Publishing: Books/Magazines (0.2%) | |||||||||||||||||||
95 | Dex Media West/Finance | 9.875 | 08/15/13 | 104,025 | |||||||||||||||
Pulp & Paper (0.1%) | |||||||||||||||||||
35 | Glatfelter P.H. | 7.125 | 05/01/16 | 35,350 | |||||||||||||||
Railroads (0.2%) | |||||||||||||||||||
70 | Norfolk Southern Corp. | 7.35 | 05/15/07 | 70,491 | |||||||||||||||
30 | Union Pacific Corp. (Series E) | 6.79 | 11/09/07 | 30,295 | |||||||||||||||
100,786 | |||||||||||||||||||
Real Estate Investment Trusts (0.5%) | |||||||||||||||||||
85 | Host Marriott LP | 6.375 | 03/15/15 | 84,256 | |||||||||||||||
210 | Host Marriott LP | 7.125 | 11/01/13 | 215,775 | |||||||||||||||
300,031 | |||||||||||||||||||
Restaurants (0.0%) | |||||||||||||||||||
15 | Tricon Global Restaurants, Inc. | 8.875 | 04/15/11 | 16,842 | |||||||||||||||
Savings Banks (0.0%) | |||||||||||||||||||
25 | Household Finance Corp. | 4.125 | 12/15/08 | 24,515 | |||||||||||||||
Semiconductors (0.5%) | |||||||||||||||||||
275 | Freescale Semiconductor - 144A* | 8.875 | 12/15/14 | 275,344 | |||||||||||||||
Specialty Stores (1.2%) | |||||||||||||||||||
290 | Linens' n Things, Inc. | 10.999 | 01/15/14 | 282,750 | |||||||||||||||
365 | Sonic Automotive, Inc. | 8.625 | 08/15/13 | 377,775 | |||||||||||||||
660,525 | |||||||||||||||||||
Specialty Telecommunications (0.6%) | |||||||||||||||||||
85 | American Tower Corp. | 7.125 | 10/15/12 | 87,762 | |||||||||||||||
90 | American Tower Corp. | 7.50 | 05/01/12 | 93,600 | |||||||||||||||
125 | Qwest Communications International | 8.874 | ** | 02/15/09 | 127,188 | ||||||||||||||
20 | U.S. West Communications Corp. | 5.625 | 11/15/08 | 20,125 | |||||||||||||||
328,675 | |||||||||||||||||||
Telecommunications (0.5%) | |||||||||||||||||||
130 | AT&T Corp. | 8.00 | 11/15/31 | 161,776 | |||||||||||||||
181 | Exodus Communications, Inc. (a) (c) (i) | 11.625 | 07/15/10 | 0 | |||||||||||||||
433 | Rhythms Netconnections, Inc. (a) (c) (i) | 12.75 | 04/15/09 | 0 | |||||||||||||||
60 | SBC Communications, Inc. | 6.15 | 09/15/34 | 59,208 | |||||||||||||||
55 | Sprint Capital Corp. | 8.75 | 03/15/32 | 66,386 | |||||||||||||||
287,370 |
See Notes to Financial Statements
40
Flexible Income
Portfolio of Investments n December 31, 2006 continued
PRINCIPAL AMOUNT IN THOUSANDS | COUPON RATE | MATURITY DATE | VALUE | ||||||||||||||||
Tobacco (0.5%) | |||||||||||||||||||
$ | 200 | Reynolds American Inc. | 7.25 | % | 06/01/13 | $ | 208,899 | ||||||||||||
75 | RJ Reynolds Tobacco Holdings | 6.50 | 07/15/10 | 76,452 | |||||||||||||||
285,351 | |||||||||||||||||||
Trucks/Construction/Farm Machinery (0.6%) | |||||||||||||||||||
175 | Caterpillar Financial Services Corp. (Series F) | 5.445 | ** | 08/20/07 | 175,181 | ||||||||||||||
122 | Manitowoc Inc. (The) | 10.50 | 08/01/12 | 131,608 | |||||||||||||||
306,789 | |||||||||||||||||||
Water Utilities (0.2%) | |||||||||||||||||||
100 | Nalco Co. | 7.75 | 11/15/11 | 102,750 | |||||||||||||||
Wireless Telecommunications (0.2%) | |||||||||||||||||||
110 | Ubiquitel Operating Co. | 9.875 | 03/01/11 | 119,350 | |||||||||||||||
Total Corporate Bonds (Cost $18,827,088) | 17,169,603 | ||||||||||||||||||
Asset-Backed Securities** (7.4%) | |||||||||||||||||||
Finance/Rental/Leasing | |||||||||||||||||||
76 | Ace Securities Corp. 2005-HE4 A2A | 5.46 | 07/25/35 | 75,896 | |||||||||||||||
61 | Aegis Asset Backed Securities Trust 2005-4 1A1 | 5.46 | 10/25/35 | 61,423 | |||||||||||||||
650 | American Express Credit Account Master Trust | 5.46 | 12/15/09 | 650,739 | |||||||||||||||
70 | Bear Stearns Asset Backed 2005-HE8 A1 | 5.47 | 08/25/35 | 70,368 | |||||||||||||||
156 | Bear Stearns Asset Backed 2005-AQ1 2A1 | 5.57 | 03/25/35 | 155,785 | |||||||||||||||
68 | Capital Auto Receivables Asset Trust 2005-1 A3 | 5.41 | 04/15/08 | 68,257 | |||||||||||||||
425 | Capital Auto Receivables Asset Trust 2006-2 A3B | 5.41 | 05/15/11 | 425,000 | |||||||||||||||
85 | Carrington Mortgage Loan Trust 2005-NC4 A1 | 5.50 | 09/25/35 | 84,765 | |||||||||||||||
11 | Countrywide Asset-Backed Certificates 2004-3 3A2 | 5.55 | 12/25/32 | 11,330 | |||||||||||||||
269 | Countrywide Asset-Backed Certificates 2005-16 2AF1 | 5.50 | 05/25/36 | 268,958 | |||||||||||||||
90 | Credit-Based Asset Servicing & Securities 2005-CB4 AV1 | 5.45 | 08/25/35 | 90,183 | |||||||||||||||
64 | Credit-Based Asset Servicing & Securities 2005-CB5 AV1 | 5.46 | 08/25/35 | 64,463 | |||||||||||||||
104 | First Franklin Mortgage Series 2005-FF7 A2 | 5.45 | 07/25/35 | 103,667 | |||||||||||||||
525 | GE Capital Credit Card Master Note Trust 2004-1 A | 5.40 | 06/15/10 | 525,511 | |||||||||||||||
43 | GSAMP Trust 2005-HE4 A2A | 5.47 | 08/25/35 | 42,855 | |||||||||||||||
116 | Impac CMB Trust 2004-3 1A | 5.60 | 06/25/34 | 115,886 | |||||||||||||||
600 | MBNA Master Credit Card Trust | 5.49 | 02/16/10 | 601,079 | |||||||||||||||
33 | Merrill Auto Trust Securitization 2005-1 A2B | 5.36 | 04/25/08 | 32,623 | |||||||||||||||
15 | Option One Mtge Loan Trust 2004-3 A3 | 5.65 | 11/25/34 | 15,466 | |||||||||||||||
156 | RAAC Series 2006-SP1 A1 | 5.45 | 09/25/45 | 156,486 | |||||||||||||||
61 | Specialty Underwriting & Residential Finance 2004-BC2 A2 | 5.62 | 05/25/35 | 61,012 | |||||||||||||||
7 | Structured Asset Investment Loan Trust 2003-BC13 3A | 5.69 | 11/25/33 | 7,144 |
See Notes to Financial Statements
41
Flexible Income
Portfolio of Investments n December 31, 2006 continued
PRINCIPAL AMOUNT IN THOUSANDS | COUPON RATE | MATURITY DATE | VALUE | ||||||||||||||||
$ | 138 | Structured Asset Securities 2005-GEL1 A | 5.70 | % | 12/25/34 | $ | 138,545 | ||||||||||||
230 | Structured Asset Securities Corp. 2005-S2 A2 | 5.55 | 06/25/35 | 230,706 | |||||||||||||||
19 | Terwin Mortgage Trust 2005-8HE A1-144A* | 5.47 | 07/25/35 | 18,945 | |||||||||||||||
Total Asset-Backed Securities (Cost $4,077,155) | 4,077,092 | ||||||||||||||||||
U.S. Government Obligations (12.0%) | |||||||||||||||||||
U. S. Treasury Bonds (8.5%) | |||||||||||||||||||
2,050 | 6.125 | 08/15/29 | 2,396,579 | ||||||||||||||||
565 | 6.375 | 08/15/27 | 672,483 | ||||||||||||||||
460 | 8.75 | 05/15/17 | 608,710 | ||||||||||||||||
705 | (b) | 8.75 | 08/15/20 | 974,883 | |||||||||||||||
4,652,655 | |||||||||||||||||||
U. S. Treasury Strips (3.5%) | |||||||||||||||||||
1,900 | 0.00 | 08/15/22 | 883,772 | ||||||||||||||||
1,750 | 0.00 | 08/15/17 | 1,054,070 | ||||||||||||||||
1,937,842 | |||||||||||||||||||
Total U.S. Government Obligations (Cost $6,565,945) | 6,590,497 | ||||||||||||||||||
Collateralized Mortgage Obligations (19.3%) | |||||||||||||||||||
U.S Government Agencies (0.8%) | |||||||||||||||||||
326 | Freddie Mac Whole Loan 2005-S001-2A2 (0.6%) | 5.50 | ** | 09/25/45 | 327,531 | ||||||||||||||
Federal National Mortgage Assoc.(0.2%) | |||||||||||||||||||
172 | IO | 6.50 | 12/01/29 | 21,940 | |||||||||||||||
143 | IO | 7.00 | 11/01/19 | 19,860 | |||||||||||||||
161 | IO | 7.00 | 12/01/34 | 27,872 | |||||||||||||||
233 | IO | 8.00 | 06/01/35 | 37,279 | |||||||||||||||
106,951 | |||||||||||||||||||
Total U.S. Government Agencies | 434,482 | ||||||||||||||||||
Private Issues (18.5%) | |||||||||||||||||||
Bear Stearns Mortgage Funding Trust | |||||||||||||||||||
350 | 2006-AR2 1A2 | 5.56 | ** | 12/25/36 | 350,070 | ||||||||||||||
394 | 2006-AR4 A2 | 5.73 | ** | 07/25/36 | 393,451 | ||||||||||||||
Countrywide Alternative Loan Trust | |||||||||||||||||||
3,600 | 2006-OA22 (IO) | 0.00 | ** | 02/25/47 | 195,476 | ||||||||||||||
1,624 | 2005-81 XI (IO) | 1.85 | ** | 02/25/37 | 89,308 | ||||||||||||||
6,580 | 2005-41 IX (IO) | 1.508 | ** | 09/25/35 | 147,019 | ||||||||||||||
1,640 | 2006-OA1 2X (IO) | 1.39 | ** | 03/20/46 | 77,901 |
See Notes to Financial Statements
42
Flexible Income
Portfolio of Investments n December 31, 2006 continued
PRINCIPAL AMOUNT IN THOUSANDS | COUPON RATE | MATURITY DATE | VALUE | ||||||||||||||||
$ | 1,391 | 2004-2O X (IO) | 0.00 | **% | 10/25/34 | $ | 28,043 | ||||||||||||
2,289 | 2005-59R A (IO) | 1.13 | ** | 12/20/35 | 73,308 | ||||||||||||||
354 | 2006-OA5 1A2 | 5.65 | ** | 04/25/46 | 354,265 | ||||||||||||||
2,255 | 2005-58R A (IO) | 3.30 | ** | 12/20/35 | 111,756 | ||||||||||||||
240 | 2006-OA6 IA4B | 5.51 | ** | 07/25/46 | 240,181 | ||||||||||||||
4,949 | 2006-OA17 IXP (IO) | 1.46 | ** | 12/20/46 | 260,404 | ||||||||||||||
395 | 2005-76 2A2 | 6.53 | ** | 02/25/36 | 398,843 | ||||||||||||||
288 | 2005-56 2A2 | 6.87 | ** | 11/25/35 | 291,599 | ||||||||||||||
385 | 2006-0A16A3 | 5.60 | ** | 10/25/46 | 385,224 | ||||||||||||||
DSLA Mortgage Loan Trust | |||||||||||||||||||
374 | 2006-AR1 2A1A | 5.77 | ** | 04/19/47 | 374,705 | ||||||||||||||
379 | 2006-AR2 2A1A | 5.55 | ** | 11/19/37 | 380,243 | ||||||||||||||
Greenpoint Mortgage Fund | |||||||||||||||||||
371 | 2006-AR2 3A2 | 5.67 | ** | 03/25/36 | 371,373 | ||||||||||||||
919 | 2005-AR3 X1 (IO) | 2.24 | ** | 08/25/45 | 28,125 | ||||||||||||||
1,278 | 2005-AR4 X4 (IO) | 2.144 | ** | 10/25/45 | 39,497 | ||||||||||||||
GS Mortgage Securities Corp. | |||||||||||||||||||
856 | 2006-OA1R A (IO) | 3.14 | ** | 08/25/35 | 34,655 | ||||||||||||||
Harborview Mortgage Loan Trust | |||||||||||||||||||
398 | 2006-10 2A1A | 5.53 | ** | 11/19/36 | 397,772 | ||||||||||||||
391 | 2006-9 2AB2 | 5.63 | ** | 11/19/36 | 392,498 | ||||||||||||||
263 | 2006-9 NIM 144A* | 0.00 | 12/15/36 | 171,189 | |||||||||||||||
1 | 2006-1 PO1 (PO) | 0.00 | 03/19/37 | 538 | |||||||||||||||
1,631 | 2006-1 X1 (IO) | 1.73 | ** | 03/19/37 | 75,181 | ||||||||||||||
2,088 | 2005-2 X (IO) | 1.38 | ** | 05/19/35 | 51,549 | ||||||||||||||
358 | 2006-7 2A1B | 5.60 | ** | 10/19/37 | 358,825 | ||||||||||||||
369 | 2006-8 2A1B | 5.60 | ** | 08/21/46 | 368,793 | ||||||||||||||
1,348 | 2005-3 X2 (IO) | 1.08 | ** | 06/19/35 | 32,004 | ||||||||||||||
285 | 2006-1 2A1A | 5.59 | ** | 03/19/37 | 285,617 | ||||||||||||||
Indymac Index Mortgage Loan Trust | |||||||||||||||||||
1,180 | 2005-AR12 AX2 (IO) | 1.20 | ** | 07/25/35 | 38,356 | ||||||||||||||
333 | 2005-AR4 2A1A | 5.63 | ** | 03/25/35 | 334,588 | ||||||||||||||
Luminent Mortgage Trust | |||||||||||||||||||
276 | 2006-1 A1 | 5.59 | ** | 04/25/36 | 277,207 | ||||||||||||||
Residential Accredit Loans, Inc. | |||||||||||||||||||
137 | 2006-Q01 1A1 | 5.62 | ** | 02/25/46 | 136,491 | ||||||||||||||
388 | 2006-Q06 A2 | 5.58 | ** | 06/25/46 | 387,220 | ||||||||||||||
126 | 2006-Q01 A1A | 5.61 | ** | 02/25/46 | 125,817 | ||||||||||||||
358 | 2005-Q03 A2 | 5.75 | ** | 10/25/45 | 360,029 | ||||||||||||||
Structured Asset Mortgage Investments, Inc. | |||||||||||||||||||
193 | 2006-AR3 3A1 | 5.54 | ** | 02/25/36 | 193,183 | ||||||||||||||
434 | 2006-AR7 A2A | 5.58 | ** | 08/25/36 | 435,687 | ||||||||||||||
396 | 2006-AR8 A1A | 5.55 | ** | 10/25/36 | 396,922 |
See Notes to Financial Statements
43
Flexible Income
Portfolio of Investments n December 31, 2006 continued
PRINCIPAL AMOUNT IN THOUSANDS | COUPON RATE | MATURITY DATE | VALUE | ||||||||||||||||
Washington Mutual | |||||||||||||||||||
$ | 170 | 2005-AR15 A1B1 | 5.60 | **% | 11/25/45 | $ | 170,655 | ||||||||||||
138 | 2005-AR19 A1B1 | 5.57 | ** | 12/25/45 | 137,903 | ||||||||||||||
145 | 2005-AR17 A1B1 | 5.57 | ** | 12/25/45 | 145,208 | ||||||||||||||
Wmalt Mortgage Pass-Through | |||||||||||||||||||
292 | 2006-AR2 A1A | 5.77 | ** | 04/25/46 | 293,368 | ||||||||||||||
Total Private Issues | 10,192,046 | ||||||||||||||||||
Total Collateralized Mortgage Obligations (Cost $10,735,297) | 10,626,528 | ||||||||||||||||||
U.S. Government Agencies-Mortgage-Backed Securities (9.8%) | |||||||||||||||||||
Federal Home Loan Mortgage Corp. (Gold) (0.4%) | |||||||||||||||||||
192 | 7.50 | 12/01/31 - 06/01/32 | 199,436 | ||||||||||||||||
Federal National Mortgage Assoc. (6.9%) | |||||||||||||||||||
525 | 6.50 | 07/01/29 - 11/01/33 | 537,888 | ||||||||||||||||
1,852 | 7.00 | 04/01/31 - 05/01/35 | 1,906,031 | ||||||||||||||||
100 | 7.00 | †† | 102,656 | ||||||||||||||||
577 | 7.219 | 05/01/36 | 590,314 | ||||||||||||||||
146 | 7.50 | 02/01/31 - 03/01/32 | 151,413 | ||||||||||||||||
370 | 8.00 | 02/01/12 - 06/01/31 | 389,808 | ||||||||||||||||
111 | 8.50 | 06/01/30 | 119,844 | ||||||||||||||||
3,797,954 | |||||||||||||||||||
Federal National Mortgage Assoc. (ARM) (2.3%) | |||||||||||||||||||
377 | 7.237 | 07/01/36 | 385,070 | ||||||||||||||||
320 | 7.245 | 08/01/36 | 327,052 | ||||||||||||||||
545 | 7.246 | 07/01/36 | 557,705 | ||||||||||||||||
1,269,827 | |||||||||||||||||||
Government National Mortgage Assoc. (0.2%) | |||||||||||||||||||
67 | 7.50 | 04/15/26 - 08/15/29 | 70,257 | ||||||||||||||||
36 | 8.00 | 02/15/26 - 06/15/26 | 37,842 | ||||||||||||||||
108,099 | |||||||||||||||||||
Total U.S. Government Agencies-Mortgage-Backed Securities (Cost $5,217,867) | 5,375,316 | ||||||||||||||||||
Total United States (Cost $45,423,352) | 43,839,036 | ||||||||||||||||||
Total Government & Corporate Bonds (Cost $53,868,880) | 52,540,227 | ||||||||||||||||||
Convertible Bond (0.2%) | |||||||||||||||||||
Telecommunication Equipment | |||||||||||||||||||
105 | Nortel Networks Corp. (Canada) (Cost $102,132) | 4.25 | 09/01/08 | 102,112 |
See Notes to Financial Statements
44
Flexible Income
Portfolio of Investments n December 31, 2006 continued
NUMBER OF SHARES | VALUE | ||||||||||
Common Stocks (0.0%) | |||||||||||
Casino/Gaming (0.0%) | |||||||||||
787 | Fitzgeralds Gaming Corp.+ (e) (i)* | $ | 0 | ||||||||
Electric Utilities (0.0%) | |||||||||||
13 | PNM Resources Inc. (d) | 405 | |||||||||
1 | SW Acquisition LP (0.004% Ownership interest acquired 09/25/05) (d) (e) (f) (i) | 0 | |||||||||
405 | |||||||||||
Food: Specialty/Candy (d) (e) (i) (0.0%) | |||||||||||
100 | SFAC New Holdings Inc.++ | 0 | |||||||||
18 | SFFB Holdings Inc. | 0 | |||||||||
0 | |||||||||||
Restaurants (0.0%) | |||||||||||
10,137 | Catalina Restaurant Group (Escrow) (d) (e) (i) | 101 | |||||||||
Specialty Telecommunications (d) (e) (0.0%) | |||||||||||
1,171 | Birch Telecom Inc.## (i) | 12 | |||||||||
16,679 | PFB Telecom NV (Series B) (i) | 0 | |||||||||
109 | XO Holdings, Inc. | 469 | |||||||||
481 | |||||||||||
Telecommunications (0.0%) | |||||||||||
352 | Viatel Holdings Bermuda Ltd. (d) (e) | 2 | |||||||||
Textiles (0.0%) | |||||||||||
11,192 | U.S. Leather, Inc. (d) (e) (i) | 0 | |||||||||
Wireless Telecommunications (d) (0.0%) | |||||||||||
46 | USA Mobility, Inc. | 1,029 | |||||||||
4,516 | Vast Solutions, Inc. (Class B1) (e) (i) | 0 | |||||||||
4,516 | Vast Solutions, Inc. (Class B2) (e) (i) | 0 | |||||||||
4,516 | Vast Solutions, Inc. (Class B3) (e) (i) | 0 | |||||||||
1,029 | |||||||||||
Total Common Stocks (Cost $1,904,847) | 2,018 |
See Notes to Financial Statements
45
Flexible Income
Portfolio of Investments n December 31, 2006 continued
NUMBER OF WARRANTS | EXPIRATION DATE | VALUE | |||||||||||||
Warrants (e) (0.0%) | |||||||||||||||
Casino/Gaming (i) (0.0%) | |||||||||||||||
9,000 | Aladdin Gaming Enterprises, Inc. - 144A* | 03/01/10 | $ | 0 | |||||||||||
250 | Resort At Summerlin LP - 144A* | 12/15/07 | 0 | ||||||||||||
0 | |||||||||||||||
Specialty Telecommunications (d) (0.0%) | |||||||||||||||
219 | XO Holdings, Inc. (Series A) | 01/16/10 | 153 | ||||||||||||
164 | XO Holdings, Inc. (Series B) | 01/16/10 | 71 | ||||||||||||
164 | XO Holdings, Inc. (Series C) | 01/16/10 | 36 | ||||||||||||
260 | |||||||||||||||
Total Warrants (Cost $251) | 260 |
NUMBER OF CONTRACTS | |||||||||||
Put Options Purchased (0.1%) | |||||||||||
145 | 90 day Euro $ June/2007 @ $94.25 | 2,900 | |||||||||
31 | 90 day Euro $ June/2007 @ $94.50 | 2,945 | |||||||||
24 | 90 day Euro $ June/2007 @ $94.75 | 7,800 | |||||||||
40 | 90 day Euro $ September/2007 @ $94.75 | 14,500 | |||||||||
75,000 | TRY February/2007 @ $1.492 | 153 | |||||||||
Total Put Options Purchased (Cost $76,481) | 28,298 |
PRINCIPAL AMOUNT IN THOUSANDS | COUPON RATE | MATURITY DATE | |||||||||||||||||
Short-Term Investments (3.2%) | |||||||||||||||||||
Repurchase Agreement | |||||||||||||||||||
$ | 1,766 | Joint repurchase agreement account (dated 12/29/06; proceeds $1,767,033) (g) (Cost $1,766,000) | 5.265 | % | 01/02/07 | 1,766,000 | |||||||||||||
Total Investments (Cost $57,718,591) (h) (j) | 99.1 | % | 54,438,915 | ||||||||||||||||
Other Assets in Excess of Liabilities | 0.9 | 491,672 | |||||||||||||||||
Net Assets | 100.0 | % | $ | 54,930,587 |
See Notes to Financial Statements
46
Flexible Income
Portfolio of Investments n December 31, 2006 continued
IO Interest Only security.
PO Principal Only security.
ARM Adjustable Rate Mortgage. Interest rate in effect as of December 31, 2006.
* Resale is restricted to qualified institutional investors.
** Floating rate security, rate shown is the rate in effect at December 31, 2006.
*** Securities represent beneficial interest in trusts. The corresponding assets of the trusts are Junior Subordinated notes due 2042 and a stock purchase contract to purchase preferred stock on or about March 18, 2011 for Wachovia Capital Trust III and on or about April 15, 2011 for USB Capital IX. Securities have a perpetual maturity and the trusts will redeem them only to the extent the preferred stock is redeemed.
† Payment-in-kind security.
†† Security was purchased on a forward commitment basis with an approximate principal amount and no definite maturity date; the actual principal amount and maturity date will be determined upon settlement.
# Currently a zero coupon bond and will pay interest at the rate shown at a future date.
## Resale is restricted; acquired (between 06/18/98 and 08/15/99) at a cost basis of $573,998.
+ Resale is restricted; acquired (12/22/98) at a cost basis of $3,549.
++ Resale is restricted; acquired (06/10/99) at a cost basis of $1.
+++ Turkish currency index credit linked unsecured note.
++++ Capital appreciation bond.
(a) Issuer in bankruptcy.
(b) A portion of this security has been physically segregated in connection with open futures contracts in the amount of $22,494.
(c) Non-income producing security; bond in default.
(d) Acquired through exchange offer.
(e) Non-income producing securities.
(f) Resale is restricted. No transaction activity during the year.
(g) Collateralized by federal agency and U.S. Treasury obligations.
(h) Securities have been designated as collateral in amount equal to $26,598,823 in connection with securities purchased on a forward commitment basis, forward foreign currency contracts, open futures contracts and open credit default swap contracts.
(i) Securities with a total market value equal to $8,361 have been valued at their fair value as determined in good faith under procedures established by and under the general supervision of the Fund's Trustees.
(j) The aggregate cost for federal income tax purposes is $57,894,432. The aggregate gross unrealized appreciation is $920,439 and the aggregate gross unrealized depreciation is $4,375,956, resulting in net unrealized depreciation of $3,455,517.
Currency Abbreviations:
ARS Argentina Peso.
EUR Euro.
JPY Japanese Yen.
MXN Mexican New Peso.
TRY Turkish Lira.
See Notes to Financial Statements
47
Flexible Income
Portfolio of Investments n December 31, 2006 continued
FUTURES CONTRACTS OPEN AT DECEMBER 31, 2006:
NUMBER OF CONTRACTS | LONG/SHORT | DESCRIPTION, DELIVERY MONTH AND YEAR | UNDERLYING FACE AMOUNT AT VALUE | UNREALIZED APPRECIATION (DEPRECIATION) | |||||||||||||||
68 | Long | U.S. Treasury Note 10 Year March 2007 | $ | 7,307,875 | $ | (58,854 | ) | ||||||||||||
22 | Short | U.S. Treasury Bond 20 Year March 2007 | (2,451,625 | ) | 54,088 | ||||||||||||||
45 | Short | U.S. Treasury Note 5 Year March 2007 | (4,727,813 | ) | 45,720 | ||||||||||||||
58 | Short | U.S. Treasury Note 2 Year March 2007 | (11,833,813 | ) | 37,060 | ||||||||||||||
Net Unrealized Appreciation | $ | 78,014 |
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT DECEMBER 31, 2006:
CONTRACTS TO DELIVER | IN EXCHANGE FOR | DELIVERY DATE | UNREALIZED APPRECIATION (DEPRECIATION) | ||||||||||||
EUR | 61,000 | $ | 77,220 | 01/29/07 | $ | (3,401 | ) | ||||||||
EUR | 1,725,000 | $ | 2,308,085 | 03/06/07 | 24,748 | ||||||||||
Net Unrealized Appreciation | $ | 21,347 |
See Notes to Financial Statements
48
Flexible Income
Portfolio of Investments n December 31, 2006 continued
CREDIT DEFAULT SWAP CONTRACTS OPEN AT DECEMBER 31, 2006:
SWAP COUNTERPARTY & REFERENCE OBLIGATION | BUY/SELL PROTECTION | NOTIONAL AMOUNT (000'S) | PAY/RECEIVE FIXED RATE | TERMINATION DATE | UNREALIZED APPRECIATION (DEPRECIATION) | ||||||||||||||||||
Goldman Sachs International The Hartford Financial Services Group Inc. | Buy | $ | 280 | 0.12 | % | December 20, 2011 | $ | (64 | ) | ||||||||||||||
Goldman Sachs International Lehman Brothers Holdings Inc. | Buy | 280 | 0.20 | December 20, 2011 | 246 | ||||||||||||||||||
Goldman Sachs International Southwest Airlines Co. | Buy | 230 | 0.22 | December 20, 2011 | 1,191 | ||||||||||||||||||
Goldman Sachs International Motorola, Inc. | Buy | 90 | 0.15 | December 20, 2011 | (10 | ) | |||||||||||||||||
Goldman Sachs International Motorola, Inc. | Buy | 190 | 0.157 | December 20, 2011 | (80 | ) | |||||||||||||||||
Goldman Sachs International Union Pacific Corporation | Buy | 270 | 0.20 | December 20, 2011 | 69 | ||||||||||||||||||
Net Unrealized Appreciation | $ | 1,352 |
SUMMARY OF INVESTMENTS
LONG-TERM CREDIT ANALYSIS
AAA | 51.4 | % | |||||
AA | 4.7 | ||||||
A | 5.3 | ||||||
BBB | 9.0 | ||||||
BB | 13.2 | ||||||
B | 14.9 | ||||||
NR | 1.5 | ||||||
100.0 | %* |
* Does not include open long futures contracts with underlying face amount of $7,307,875 and unrealized depreciation of $58,854 and open short futures contracts with underlying face amount of $19,013,251 and unrealized appreciation of $136,868, open forward currency contracts with net unrealized appreciation of $21,347, and open swap contracts with net unrealized appreciation of $1,352.
See Notes to Financial Statements
49
Balanced Growth
Portfolio of Investments n December 31, 2006
NUMBER OF SHARES | VALUE | ||||||||||
COMMON STOCKS (68.8%) | |||||||||||
Aerospace & Defense (1.5%) | |||||||||||
7,350 | Northrop Grumman Corp. | $ | 497,595 | ||||||||
14,720 | Raytheon Co. | 777,216 | |||||||||
1,274,811 | |||||||||||
Beverages: Alcoholic (0.4%) | |||||||||||
3,860 | Diageo PLC (ADR) (United Kingdom) | 306,137 | |||||||||
Beverages: Non-Alcoholic (1.3%) | |||||||||||
23,490 | Coca-Cola Co. (The) | 1,133,393 | |||||||||
Broadcasting (0.5%) | |||||||||||
11,809 | Clear Channel Communications, Inc. | 419,692 | |||||||||
Cable/Satellite TV (0.5%) | |||||||||||
10,800 | Comcast Corp. (Class A)* | 457,164 | |||||||||
Chemicals: Major Diversified (2.9%) | |||||||||||
31,480 | Bayer AG (ADR) (Germany) | 1,679,773 | |||||||||
15,200 | Du Pont (E.I.) de Nemours & Co. | 740,392 | |||||||||
2,420,165 | |||||||||||
Computer Processing Hardware (0.3%) | |||||||||||
5,690 | Hewlett-Packard Co. | 234,371 | |||||||||
Department Stores (0.3%) | |||||||||||
4,100 | Kohl's Corp.* | 280,563 | |||||||||
Discount Stores (1.1%) | |||||||||||
20,950 | Wal-Mart Stores, Inc. | 967,471 | |||||||||
Electric Utilities (3.1%) | |||||||||||
16,880 | American Electric Power Co., Inc. | 718,750 | |||||||||
11,780 | Entergy Corp. | 1,087,530 | |||||||||
13,200 | FirstEnergy Corp. | 795,960 | |||||||||
2,602,240 | |||||||||||
Finance/Rental/Leasing (1.6%) | |||||||||||
20,570 | Freddie Mac | 1,396,703 | |||||||||
Financial Conglomerates (5.8%) | |||||||||||
35,350 | Citigroup, Inc. | 1,968,995 | |||||||||
49,986 | JPMorgan Chase & Co. | 2,414,324 | |||||||||
7,670 | State Street Corp. | 517,265 | |||||||||
4,900,584 | |||||||||||
Food Retail (0.4%) | |||||||||||
4,150 | Safeway Inc. | 143,424 | |||||||||
5,200 | SUPERVALU, Inc. | 185,900 | |||||||||
329,324 |
See Notes to Financial Statements
50
Balanced Growth
Portfolio of Investments n December 31, 2006 continued
NUMBER OF SHARES | VALUE | ||||||||||
Food: Major Diversified (1.4%) | |||||||||||
10,600 | ConAgra Foods, Inc. | $ | 286,200 | ||||||||
32,440 | Unilever N.V. (NY Registered Shares) (Netherlands) | 883,990 | |||||||||
1,170,190 | |||||||||||
Food: Specialty/Candy (0.8%) | |||||||||||
16,290 | Cadbury Schweppes PLC (ADR) (United Kingdom) | 699,330 | |||||||||
Household/Personal Care (0.7%) | |||||||||||
3,450 | Kimberly-Clark Corp. | 234,427 | |||||||||
5,550 | Procter & Gamble Co. (The) | 356,699 | |||||||||
591,126 | |||||||||||
Industrial Conglomerates (3.6%) | |||||||||||
45,250 | General Electric Co. | 1,683,753 | |||||||||
3,640 | Ingersoll-Rand Co. Ltd. (Class A) (Bermuda) | 142,433 | |||||||||
12,200 | Siemens AG (ADR) (Germany) | 1,202,310 | |||||||||
3,028,496 | |||||||||||
Insurance Brokers/Services (1.6%) | |||||||||||
43,600 | Marsh & McLennan Companies, Inc. | 1,336,776 | |||||||||
Integrated Oil (3.1%) | |||||||||||
830 | BP PLC (ADR) (United Kingdom) | 55,693 | |||||||||
13,710 | ConocoPhillips | 986,435 | |||||||||
8,000 | Exxon Mobil Corp. | 613,040 | |||||||||
14,240 | Royal Dutch Shell PLC (ADR) (Class A) (United Kingdom) | 1,008,050 | |||||||||
2,663,218 | |||||||||||
Internet Retail (0.4%) | |||||||||||
9,200 | Amazon.com, Inc.* | 363,032 | |||||||||
Internet Software/Services (0.5%) | |||||||||||
17,100 | Yahoo!, Inc.* | 436,734 | |||||||||
Investment Banks/Brokers (2.8%) | |||||||||||
700 | Goldman Sachs Group, Inc. (The) | 139,545 | |||||||||
14,000 | Merrill Lynch & Co., Inc. | 1,303,400 | |||||||||
49,600 | Schwab (Charles) Corp. (The) | 959,264 | |||||||||
2,402,209 | |||||||||||
Life/Health Insurance (0.4%) | |||||||||||
16,570 | Aegon N.V. (NY Registered Shares) (Netherlands) | 314,002 | |||||||||
Major Banks (1.7%) | |||||||||||
15,007 | Bank of America Corp. | 801,224 | |||||||||
8,700 | PNC Financial Services Group | 644,148 | |||||||||
1,445,372 |
See Notes to Financial Statements
51
Balanced Growth
Portfolio of Investments n December 31, 2006 continued
NUMBER OF SHARES | VALUE | ||||||||||
Major Telecommunications (3.8%) | |||||||||||
6,077 | Embarq Corp. | $ | 319,407 | ||||||||
17,420 | France Telecom S.A. (ADR) (France) | 482,534 | |||||||||
56,658 | Sprint Nextel Corp. | 1,070,270 | |||||||||
37,188 | Verizon Communications, Inc. | 1,384,881 | |||||||||
3,257,092 | |||||||||||
Managed Health Care (0.6%) | |||||||||||
3,920 | CIGNA Corp. | 515,754 | |||||||||
Media Conglomerates (3.5%) | |||||||||||
87,780 | Time Warner, Inc. | 1,911,848 | |||||||||
24,710 | Viacom, Inc. (Class B)* | 1,013,851 | |||||||||
2,925,699 | |||||||||||
Medical Specialties (0.9%) | |||||||||||
9,880 | Applera Corp. - Applied Biosystems Group | 362,497 | |||||||||
21,600 | Boston Scientific Corp.* | 371,088 | |||||||||
733,585 | |||||||||||
Motor Vehicles (0.7%) | |||||||||||
14,330 | Honda Motor Co., Ltd. (ADR) (Japan) | 566,608 | |||||||||
Multi-Line Insurance (0.8%) | |||||||||||
7,240 | Hartford Financial Services Group, Inc. (The) (Note 4) | 675,564 | |||||||||
Oil & Gas Pipelines (0.3%) | |||||||||||
10,880 | Williams Companies, Inc. (The) | 284,186 | |||||||||
Oilfield Services/Equipment (0.8%) | |||||||||||
10,390 | Schlumberger Ltd. (Netherlands Antilles) | 656,232 | |||||||||
Other Consumer Services (0.1%) | |||||||||||
2,700 | Block (H.&R.), Inc. | 62,208 | |||||||||
Packaged Software (1.7%) | |||||||||||
70,570 | Symantec Corp.* | 1,471,385 | |||||||||
Pharmaceuticals: Major (10.6%) | |||||||||||
27,340 | Abbott Laboratories | 1,331,731 | |||||||||
41,630 | Bristol-Myers Squibb Co. | 1,095,702 | |||||||||
7,690 | GlaxoSmithKline PLC (ADR) (United Kingdom) | 405,724 | |||||||||
25,560 | Lilly (Eli) & Co. | 1,331,676 | |||||||||
30,100 | Pfizer, Inc. | 779,590 | |||||||||
12,920 | Roche Holdings Ltd. (ADR) (Switzerland) | 1,159,247 | |||||||||
8,810 | Sanofi-Aventis (ADR) (France) | 406,758 | |||||||||
63,910 | Schering-Plough Corp. | 1,510,832 | |||||||||
18,470 | Wyeth | 940,492 | |||||||||
8,961,752 |
See Notes to Financial Statements
52
Balanced Growth
Portfolio of Investments n December 31, 2006 continued
NUMBER OF SHARES | VALUE | ||||||||||
Precious Metals (0.8%) | |||||||||||
14,630 | Newmont Mining Corp. | $ | 660,544 | ||||||||
Property - Casualty Insurers (3.2%) | |||||||||||
18,040 | Chubb Corp. (The) | 954,496 | |||||||||
20,876 | St. Paul Travelers Companies, Inc. (The) | 1,120,832 | |||||||||
8,300 | XL Capital Ltd. (Class A) (Cayman Islands) | 597,766 | |||||||||
2,673,094 | |||||||||||
Regional Banks (0.6%) | |||||||||||
13,000 | Fifth Third Bancorp | 532,090 | |||||||||
Restaurants (0.4%) | |||||||||||
7,580 | McDonald's Corp. | 336,021 | |||||||||
Semiconductors (1.5%) | |||||||||||
41,589 | Intel Corp. | 842,177 | |||||||||
33,670 | Micron Technology, Inc.* | 470,033 | |||||||||
1,312,210 | |||||||||||
Specialty Stores (0.3%) | |||||||||||
6,990 | Office Depot, Inc.* | 266,808 | |||||||||
Telecommunication Equipment (0.4%) | |||||||||||
15,480 | Motorola, Inc. | 318,269 | |||||||||
Tobacco (1.1%) | |||||||||||
10,980 | Altria Group, Inc. | 942,304 | |||||||||
Total Common Stocks (Cost $44,860,545) | 58,324,508 |
PRINCIPAL AMOUNT IN THOUSANDS | COUPON RATE | MATURITY DATE | |||||||||||||||||
CORPORATE BONDS (6.7%) | |||||||||||||||||||
Aerospace & Defense (0.1%) | |||||||||||||||||||
$ | 10 | Raytheon Co. | 6.15 | % | 11/01/08 | 10,132 | |||||||||||||
88 | Systems 2001 Asset Trust - 144A** (Cayman Islands) | 6.664 | 09/15/13 | 91,823 | |||||||||||||||
101,955 | |||||||||||||||||||
Air Freight/Couriers (0.1%) | |||||||||||||||||||
50 | FedEx Corp. | 2.65 | 04/01/07 | 49,663 | |||||||||||||||
Airlines (0.1%) | |||||||||||||||||||
100 | America West Airlines, Inc. (Series 01-1) | 7.10 | 04/02/21 | 106,056 |
See Notes to Financial Statements
53
Balanced Growth
Portfolio of Investments n December 31, 2006 continued
PRINCIPAL AMOUNT IN THOUSANDS | COUPON RATE | MATURITY DATE | VALUE | ||||||||||||||||
Beverages: Alcoholic (0.2%) | |||||||||||||||||||
$ | 70 | FBG Finance Ltd. - 144A** (Australia) | 5.125 | % | 06/15/15 | $ | 66,283 | ||||||||||||
70 | Miller Brewing Co. - 144A** | 4.25 | 08/15/08 | 68,787 | |||||||||||||||
135,070 | |||||||||||||||||||
Cable/Satellite TV (0.1%) | |||||||||||||||||||
10 | Comcast Cable Communications, Inc. | 6.75 | 01/30/11 | 10,487 | |||||||||||||||
10 | Lenfest Communications | 7.625 | 02/15/08 | 10,236 | |||||||||||||||
55 | TCI Communications, Inc. | 7.875 | 02/15/26 | 62,972 | |||||||||||||||
83,695 | |||||||||||||||||||
Chemicals: Major Diversified (0.0%) | |||||||||||||||||||
40 | ICI Wilmington Inc. | 4.375 | 12/01/08 | 39,265 | |||||||||||||||
Computer Processing Hardware (0.1%) | |||||||||||||||||||
60 | Hewlett-Packard Co. | 5.496 | † | 05/22/09 | 60,135 | ||||||||||||||
Department Stores (0.1%) | |||||||||||||||||||
65 | May Department Stores Co. | 6.70 | 07/15/34 | 64,313 | |||||||||||||||
Drugstore Chains (0.1%) | |||||||||||||||||||
20 | CVS Corp. | 5.75 | 08/15/11 | 20,261 | |||||||||||||||
100 | CVS Corp. - 144A** | 6.036 | 12/10/28 | 99,888 | |||||||||||||||
120,149 | |||||||||||||||||||
Electric Utilities (0.8%) | |||||||||||||||||||
70 | Ameren Corp. | 4.263 | 05/15/07 | 69,642 | |||||||||||||||
70 | Arizona Public Service Co. | 5.80 | 06/30/14 | 69,945 | |||||||||||||||
70 | Carolina Power & Light Co. | 5.125 | 09/15/13 | 68,913 | |||||||||||||||
75 | CC Funding Trust I | 6.90 | 02/16/07 | 75,093 | |||||||||||||||
25 | Consolidated Natural Gas Co. (Series C) | 6.25 | 11/01/11 | 25,848 | |||||||||||||||
45 | Consumers Energy Co. | 4.80 | 02/17/09 | 44,432 | |||||||||||||||
40 | Detroit Edison Co. (The) | 6.125 | 10/01/10 | 40,927 | |||||||||||||||
30 | Entergy Gulf States, Inc. | 3.60 | 06/01/08 | 29,218 | |||||||||||||||
45 | Entergy Gulf States, Inc. | 5.769 | † | 12/01/09 | 44,939 | ||||||||||||||
65 | Ohio Power Company - IBC (Series K) | 6.00 | 06/01/16 | 66,863 | |||||||||||||||
15 | Panhandle Eastern Pipe Line Co. (Series B) | 2.75 | 03/15/07 | 14,912 | |||||||||||||||
45 | Public Service Electric & Gas Co. (Series MTNB) | 5.00 | 01/01/13 | 44,105 | |||||||||||||||
35 | Texas Eastern Transmission, LP | 7.00 | 07/15/32 | 39,418 | |||||||||||||||
55 | Wisconsin Electric Power Co. | 3.50 | 12/01/07 | 54,111 | |||||||||||||||
688,366 | |||||||||||||||||||
Electrical Products (0.2%) | |||||||||||||||||||
70 | Cooper Industries, Inc. | 5.25 | 07/01/07 | 69,794 | |||||||||||||||
65 | Cooper Industries, Inc. | 5.25 | 11/15/12 | 64,423 | |||||||||||||||
134,217 |
See Notes to Financial Statements
54
Balanced Growth
Portfolio of Investments n December 31, 2006 continued
PRINCIPAL AMOUNT IN THOUSANDS | COUPON RATE | MATURITY DATE | VALUE | ||||||||||||||||
Electronics/Appliances (0.1%) | |||||||||||||||||||
$ | 45 | LG Electronics Inc. - 144A** (South Korea) | 5.00 | % | 06/17/10 | $ | 44,143 | ||||||||||||
Finance/Rental/Leasing (0.4%) | |||||||||||||||||||
95 | Countrywide Home Loans, Inc. | 3.25 | 05/21/08 | 92,386 | |||||||||||||||
85 | Nationwide Building Society - 144A** (United Kingdom) | 4.25 | 02/01/10 | 82,407 | |||||||||||||||
125 | Residential Capital Corp. | 6.375 | 06/30/10 | 126,553 | |||||||||||||||
70 | SLM Corp. | 4.00 | 01/15/10 | 67,565 | |||||||||||||||
368,911 | |||||||||||||||||||
Financial Conglomerates (0.2%) | |||||||||||||||||||
105 | Bank One Corp. (Series MTNA) | 6.00 | 02/17/09 | 106,364 | |||||||||||||||
30 | General Electric Capital Corp. | 4.25 | 12/01/10 | 29,052 | |||||||||||||||
10 | General Electric Capital Corp. (Series A) | 5.875 | 02/15/12 | 10,294 | |||||||||||||||
145,710 | |||||||||||||||||||
Food Retail (0.1%) | |||||||||||||||||||
55 | Fred Meyer, Inc. | 7.45 | 03/01/08 | 56,206 | |||||||||||||||
Food: Major Diversified (0.2%) | |||||||||||||||||||
30 | ConAgra Foods, Inc. | 7.00 | 10/01/28 | 32,595 | |||||||||||||||
30 | ConAgra Foods, Inc. | 8.25 | 09/15/30 | 36,953 | |||||||||||||||
25 | Kraft Foods Inc. | 5.25 | 06/01/07 | 24,983 | |||||||||||||||
40 | Sara Lee Corp. | 6.125 | 11/01/32 | 36,304 | |||||||||||||||
130,835 | |||||||||||||||||||
Forest Products (0.0%) | |||||||||||||||||||
5 | Weyerhaeuser Co. | 6.125 | 03/15/07 | 5,004 | |||||||||||||||
Gas Distributors (0.1%) | |||||||||||||||||||
45 | NiSource Finance Corp. | 5.94 | † | 11/23/09 | 45,049 | ||||||||||||||
45 | Sempra Energy | 4.621 | 05/17/07 | 44,832 | |||||||||||||||
89,881 | |||||||||||||||||||
Home Furnishings (0.0%) | |||||||||||||||||||
40 | Mohawk Industries, Inc. (Series D) | 7.20 | 04/15/12 | 41,592 | |||||||||||||||
Home Improvement Chains (0.0%) | |||||||||||||||||||
30 | Home Depot, Inc. | 5.486 | † | 12/16/09 | 30,022 | ||||||||||||||
Hotels/Resorts/Cruiselines (0.1%) | |||||||||||||||||||
70 | Hyatt Equities LLC - 144A** | 6.875 | 06/15/07 | 70,299 | |||||||||||||||
Household/Personal Care (0.1%) | |||||||||||||||||||
85 | Clorox Co. (The) | 5.485 | † | 12/14/07 | 85,115 | ||||||||||||||
Industrial Conglomerates (0.1%) | |||||||||||||||||||
50 | Textron Financial Corp. (Series E) | 4.125 | 03/03/08 | 49,312 | |||||||||||||||
55 | Textron Financial Corp. | 5.125 | 02/03/11 | 54,643 | |||||||||||||||
103,955 |
See Notes to Financial Statements
55
Balanced Growth
Portfolio of Investments n December 31, 2006 continued
PRINCIPAL AMOUNT IN THOUSANDS | COUPON RATE | MATURITY DATE | VALUE | ||||||||||||||||
Insurance Brokers/Services (0.2%) | |||||||||||||||||||
$ | 200 | Farmers Exchange Capital - 144A** | 7.05 | % | 07/15/28 | $ | 209,294 | ||||||||||||
Major Banks (0.3%) | |||||||||||||||||||
30 | Bank of New York Co., Inc. (The) | 5.20 | 07/01/07 | 29,999 | |||||||||||||||
55 | HSBC Finance Corp. | 6.75 | 05/15/11 | 58,264 | |||||||||||||||
45 | Popular North America Inc. | 5.65 | 04/15/09 | 45,130 | |||||||||||||||
130 | Unicredit (Luxembourg) Finance S.A. - 144A** | 5.426 | 10/24/08 | 130,063 | |||||||||||||||
263,456 | |||||||||||||||||||
Major Telecommunications (0.5%) | |||||||||||||||||||
75 | France Telecom S.A. (France) | 8.50 | 03/01/31 | 98,747 | |||||||||||||||
45 | SBC Communications, Inc. | 6.15 | 09/15/34 | 44,406 | |||||||||||||||
15 | Sprint Capital Corp. | 8.75 | 03/15/32 | 18,105 | |||||||||||||||
35 | Telecom Italia Capital SA (Luxembourg) | 4.00 | 11/15/08 | 34,100 | |||||||||||||||
60 | Telecom Italia Capital SA (Luxembourg) | 4.00 | 01/15/10 | 57,334 | |||||||||||||||
70 | Telefonica Europe BV (Netherlands) | 8.25 | 09/15/30 | 83,636 | |||||||||||||||
60 | Verizon New England Inc. | 6.50 | 09/15/11 | 61,750 | |||||||||||||||
398,078 | |||||||||||||||||||
Managed Health Care (0.0%) | |||||||||||||||||||
5 | WellPoint Inc. | 3.75 | 12/14/07 | 4,922 | |||||||||||||||
Media Conglomerates (0.3%) | |||||||||||||||||||
30 | News America Holdings, Inc. | 7.75 | 02/01/24 | 33,565 | |||||||||||||||
15 | News America, Inc. | 7.28 | 06/30/28 | 16,188 | |||||||||||||||
110 | Time Warner, Inc. | 5.606 | † | 11/13/09 | 110,158 | ||||||||||||||
65 | Viacom, Inc. | 6.875 | 04/30/36 | 64,465 | |||||||||||||||
224,376 | |||||||||||||||||||
Motor Vehicles (0.0%) | |||||||||||||||||||
35 | DaimlerChrysler North American Holdings Co. | 8.50 | 01/18/31 | 41,782 | |||||||||||||||
Multi-Line Insurance (0.4%) | |||||||||||||||||||
180 | AIG SunAmerica Global Financing VI - 144A** | 6.30 | 05/10/11 | 187,496 | |||||||||||||||
80 | American General Finance Corp. (Series H) | 4.625 | 09/01/10 | 78,135 | |||||||||||||||
35 | Equitable Co. | 6.50 | 04/01/08 | 35,431 | |||||||||||||||
30 | International Lease Finance Corp. | 3.75 | 08/01/07 | 29,713 | |||||||||||||||
330,775 | |||||||||||||||||||
Oil & Gas Pipelines (0.1%) | |||||||||||||||||||
65 | Plains All American Pipeline. L.P. | 6.70 | 05/15/36 | 67,078 | |||||||||||||||
Other Metals/Minerals (0.1%) | |||||||||||||||||||
70 | Brascan Corp. (Canada) | 7.125 | 06/15/12 | 74,667 | |||||||||||||||
Property - Casualty Insurers (0.5%) | |||||||||||||||||||
200 | Mantis Reef Ltd. - 144A** (Australia) | 4.692 | 11/14/08 | 197,519 | |||||||||||||||
30 | Platinum Underwriters Finance Inc. (Series B) | 7.50 | 06/01/17 | 31,695 |
See Notes to Financial Statements
56
Balanced Growth
Portfolio of Investments n December 31, 2006 continued
PRINCIPAL AMOUNT IN THOUSANDS | COUPON RATE | MATURITY DATE | VALUE | ||||||||||||||||
$ | 55 | Platinum Underwriters Holdings, Ltd. (Series B) (Bermuda) | 6.371 | % | 11/16/07 | $ | 54,670 | ||||||||||||
70 | St. Paul Travelers Companies, Inc. (The) | 5.01 | 08/16/07 | 69,743 | |||||||||||||||
100 | XLLIAC Global Funding - 144A** | 4.80 | 08/10/10 | 98,084 | |||||||||||||||
451,711 | |||||||||||||||||||
Railroads (0.2%) | |||||||||||||||||||
35 | Burlington North Santa Fe Railway Co. | 6.125 | 03/15/09 | 35,571 | |||||||||||||||
45 | Norfolk Southern Corp. | 7.35 | 05/15/07 | 45,316 | |||||||||||||||
35 | Union Pacific Corp. | 6.625 | 02/01/08 | 35,415 | |||||||||||||||
25 | Union Pacific Corp. (Series E) | 6.79 | 11/09/07 | 25,246 | |||||||||||||||
141,548 | |||||||||||||||||||
Real Estate Development (0.2%) | |||||||||||||||||||
148 | World Financial Properties - 144A** | 6.91 | 09/01/13 | 154,805 | |||||||||||||||
Real Estate Investment Trusts (0.0%) | |||||||||||||||||||
25 | EOP Operating LP | 6.763 | 06/15/07 | 25,164 | |||||||||||||||
Regional Banks (0.1%) | |||||||||||||||||||
110 | Marshall & Ilsley Bank (Series T) | 3.80 | 02/08/08 | 108,286 | |||||||||||||||
Restaurants (0.0%) | |||||||||||||||||||
35 | Tricon Global Restaurants, Inc. | 8.875 | 04/15/11 | 39,297 | |||||||||||||||
Savings Banks (0.3%) | |||||||||||||||||||
40 | Household Finance Corp. | 4.125 | 12/15/08 | 39,224 | |||||||||||||||
20 | Household Finance Corp. | 5.875 | 02/01/09 | 20,297 | |||||||||||||||
25 | Household Finance Corp. | 6.375 | 10/15/11 | 26,169 | |||||||||||||||
55 | Household Finance Corp. | 6.40 | 06/17/08 | 55,862 | |||||||||||||||
55 | Washington Mutual Bank | 5.50 | 01/15/13 | 54,843 | |||||||||||||||
45 | Washington Mutual Inc. | 8.25 | 04/01/10 | 48,506 | |||||||||||||||
244,901 | |||||||||||||||||||
Trucks/Construction/Farm Machinery (0.1%) | |||||||||||||||||||
20 | Caterpillar Financial Services Corp. (Series F) | 3.625 | 11/15/07 | 19,712 | |||||||||||||||
80 | Caterpillar Financial Services Corp. (Series F) | 5.445 | † | 08/20/07 | 80,083 | ||||||||||||||
99,795 | |||||||||||||||||||
Wireless Telecommunications (0.1%) | |||||||||||||||||||
70 | Vodafone Group PLC (United Kingdom) | 5.454 | † | 12/28/07 | 70,054 | ||||||||||||||
Total Corporate Bonds (Cost $5,649,422) | 5,704,546 | ||||||||||||||||||
U.S Government Obligations (9.9%) | |||||||||||||||||||
U.S. Treasury Bonds | |||||||||||||||||||
25 | 6.125 | 08/15/29 | 29,227 | ||||||||||||||||
410 | 6.375 | 08/15/27 | 487,996 |
See Notes to Financial Statements
57
Balanced Growth
Portfolio of Investments n December 31, 2006 continued
PRINCIPAL AMOUNT IN THOUSANDS | COUPON RATE | MATURITY DATE | VALUE | ||||||||||||||||
$ | 1,540 | 7.625 | % | 02/15/25 | $ | 2,038,697 | |||||||||||||
790 | 8.125 | 08/15/19 - 08/15/21 | 1,048,963 | ||||||||||||||||
200 | 8.50 | 02/15/20 | 270,172 | ||||||||||||||||
425 | 8.75 | 08/15/20 | 587,696 | ||||||||||||||||
U.S. Treasury Notes | |||||||||||||||||||
275 | 3.875 | 02/15/13 | 263,280 | ||||||||||||||||
2,560 | ‡ | 4.25 | 08/15/13 | 2,496,704 | |||||||||||||||
625 | 4.25 | 11/15/13 | 608,692 | ||||||||||||||||
560 | ‡ | 4.50 | 02/28/11 | 556,084 | |||||||||||||||
Total U.S. Government Obligations (Cost $8,337,899) | 8,387,511 | ||||||||||||||||||
Mortgage-Backed Securities (6.3%) | |||||||||||||||||||
1,168 | Federal Home Loan Mortgage Corp. | 7.50 | 08/01/30 | 1,217 | |||||||||||||||
Federal Home Loan Mortgage Corp. Gold | |||||||||||||||||||
165 | 6.50 | 03/01/33 | 168,263 | ||||||||||||||||
195 | 7.50 | 09/01/25 - 06/01/32 | 202,328 | ||||||||||||||||
Federal National Mortgage Assoc. | |||||||||||||||||||
235 | 6.50 | 01/01/32 | 240,748 | ||||||||||||||||
581 | 7.00 | 05/01/31 - 11/01/34 | 597,630 | ||||||||||||||||
250 | 7.00 | †† | 256,641 | ||||||||||||||||
251 | 7.219 | 05/01/36 | 256,658 | ||||||||||||||||
258 | 7.50 | 08/01/29 - 09/01/35 | 269,131 | ||||||||||||||||
193 | 8.00 | 12/01/28 - 10/01/31 | 203,351 | ||||||||||||||||
Federal National Mortgage Assoc. (ARM) | |||||||||||||||||||
70 | 5.96 | 07/01/33 | 70,553 | ||||||||||||||||
239 | 6.731 | 03/01/36 | 243,963 | ||||||||||||||||
523 | 6.774 | 01/01/36 | 534,394 | ||||||||||||||||
488 | 6.778 | 01/01/36 | 498,320 | ||||||||||||||||
226 | 6.786 | 03/01/36 | 231,159 | ||||||||||||||||
251 | 7.216 | 05/01/36 | 256,670 | ||||||||||||||||
176 | 7.237 | 07/01/36 | 179,699 | ||||||||||||||||
599 | 7.246 | 04/01/36 - 07/01/36 | 612,046 | ||||||||||||||||
482 | 7.271 | 04/01/36 | 495,626 | ||||||||||||||||
Government National Mortgage Assoc. | |||||||||||||||||||
56 | 7.50 | 08/15/23 - 10/15/29 | 58,080 | ||||||||||||||||
Total Mortgage-Backed Securities (Cost $5,429,270) | 5,376,477 | ||||||||||||||||||
Asset-Backed Securities (5.4%) | |||||||||||||||||||
Finance/Rental/Leasing | |||||||||||||||||||
175 | Banc of America Securities Auto Trust 2005-WF1 A3 | 3.99 | 08/18/09 | 173,602 |
See Notes to Financial Statements
58
Balanced Growth
Portfolio of Investments n December 31, 2006 continued
PRINCIPAL AMOUNT IN THOUSANDS | COUPON RATE | MATURITY DATE | VALUE | ||||||||||||||||
$ | 175 | Capital Auto Receivables Asset Trust - 2006-2 | 4.98 | % | 05/15/11 | $ | 175,000 | ||||||||||||
150 | Capital Auto Receivables Asset Trust 2002-3 A - 144A** | 5.31 | 10/20/09 | 150,108 | |||||||||||||||
51 | Capital Auto Receivables Asset Trust 2004-2 A | 3.35 | 02/15/08 | 51,129 | |||||||||||||||
175 | Capital Auto Receivables Asset Trust 2005-1 A4 | 4.05 | 07/15/09 | 173,887 | |||||||||||||||
100 | Captial One Auto Finance Trust - 2006-C | 5.07 | 07/15/11 | 99,873 | |||||||||||||||
123 | Caterpillar Financial Asset Trust 2005-A A3 | 3.90 | 02/25/09 | 121,767 | |||||||||||||||
175 | Caterpillar Financial Asset Trust 2006-A A3 | 5.57 | 05/25/10 | 176,170 | |||||||||||||||
125 | CIT Equipment Collateral - 2006-VT2 | 5.07 | 02/20/10 | 124,839 | |||||||||||||||
29 | CIT Equipment Collateral 2004-EF1 A3 | 3.50 | 09/20/08 | 28,483 | |||||||||||||||
94 | CNH Equipment Trust 2005-A A3 | 4.02 | 04/15/09 | 93,263 | |||||||||||||||
225 | CNH Equipment Trust 2005-B A3 | 4.27 | 01/15/10 | 222,698 | |||||||||||||||
106 | DaimlerChrysler Auto Trust 2005-B A3 | 4.04 | 09/08/09 | 104,961 | |||||||||||||||
87 | Ford Credit Auto Owner Trust 2005-B A3 | 4.17 | 01/15/09 | 86,854 | |||||||||||||||
100 | Ford Credit Auto Owner Trust 2006-A A3 | 5.05 | 03/15/10 | 99,789 | |||||||||||||||
175 | GE Equipment Small Ticket LLC - 2005-2A | 4.88 | 10/22/09 | 174,373 | |||||||||||||||
175 | GS Auto Loan Trust 2006-1 A3 | 5.37 | 12/15/10 | 175,521 | |||||||||||||||
200 | Harley-Davidson Motorcycle Trust 2005-1 A2 | 3.76 | 12/17/12 | 196,933 | |||||||||||||||
125 | Harley-Davidson Motorcycle Trust 2005-2 A2 | 4.07 | 02/15/12 | 122,894 | |||||||||||||||
100 | Hertz Vehicle Financing LLC 2005-2A - 144A** | 4.93 | 02/25/10 | 99,475 | |||||||||||||||
79 | Honda Auto Receivables Owner Trust 2005-2 A3 | 3.93 | 01/15/09 | 78,856 | |||||||||||||||
146 | Honda Auto Receivables Owner Trust 2005-3 A3 | 3.87 | 04/20/09 | 144,988 | |||||||||||||||
125 | Honda Auto Receivables Owner Trust 2005-6 A3 | 4.85 | 10/19/09 | 124,577 | |||||||||||||||
100 | Hyundai Auto Receivables Trust 2005-A A3 | 3.98 | 11/16/09 | 98,956 | |||||||||||||||
100 | MBNA Master Credit Card Trust 1999-B A | 5.90 | 08/15/11 | 101,833 | |||||||||||||||
200 | Merrill Auto Trust Securitization 2005-1 A3 | 4.10 | 08/25/09 | 198,577 | |||||||||||||||
125 | National City Auto Receivables Trust 2004-A A4 | 2.88 | 05/15/11 | 122,722 | |||||||||||||||
154 | Nissan Auto Receivables Owner Trust 2005-B A3 | 3.99 | 07/15/09 | 152,606 | |||||||||||||||
50 | TXU Electric Delivery Transition Bond Co. LLC 2004-1 A2 | 4.81 | 11/17/14 | 49,601 | |||||||||||||||
200 | USAA Auto Owner Trust 2004-2 A-4 | 3.58 | 02/15/11 | 197,550 | |||||||||||||||
84 | USAA Auto Owner Trust 2004-3 A3 | 3.16 | 02/17/09 | 82,991 | |||||||||||||||
85 | USAA Auto Owner Trust 2005-1 A3 | 3.90 | 07/15/09 | 84,475 | |||||||||||||||
77 | Volkswagen Auto Lease Trust 2005-A A3 | 3.82 | 05/20/08 | 76,975 | |||||||||||||||
175 | Volkswagen Auto Loan Enhanced Trust 2005-1 A3 | 4.80 | 07/20/09 | 174,465 | |||||||||||||||
29 | Wachovia Auto Owner Trust 2004-B A3 | 2.91 | 04/20/09 | 29,129 | |||||||||||||||
70 | Wachovia Auto Owner Trust 2005-A A3 | 4.06 | 09/21/09 | 69,152 | |||||||||||||||
125 | Wachovia Auto Owner Trust 2005-B A3 | 4.79 | 04/20/10 | 124,491 | |||||||||||||||
23 | World Omni Auto Receivables Trust 2004-A A3 | 3.29 | 11/12/08 | 23,259 | |||||||||||||||
Total Asset-Backed Securities (Cost $4,606,289) | 4,586,822 |
See Notes to Financial Statements
59
Balanced Growth
Portfolio of Investments n December 31, 2006 continued
PRINCIPAL AMOUNT IN THOUSANDS | COUPON RATE | MATURITY DATE | VALUE | ||||||||||||||||
Collateralized Mortgage Obligations (1.0%) | |||||||||||||||||||
$ | 145 | Federal Home Loan Mortgage Corp. Whole Loan 2005-S001 2A2 | 5.50 | †% | 09/25/45 | $ | 145,569 | ||||||||||||
236 | Federal National Mortgage Assoc. 2006-28 1A1 | 5.46 | † | 03/25/36 | 236,088 | ||||||||||||||
268 | Federal National Mortgage Assoc. 2006-118 A2 | 5.41 | † | 12/25/36 | 267,203 | ||||||||||||||
2,891 | Federal National Mortgage Assoc. 2006-28 1P (IO) | 1.243 | † | 03/25/36 | 68,196 | ||||||||||||||
359 | Federal National Mortgage Assoc. 2005-68 XI (IO) | 6.00 | 08/25/35 | 115,906 | |||||||||||||||
Total Collateralized Mortgage Obligations (Cost $778,769) | 832,962 |
NUMBER OF CONTRACTS | |||||||||||
Put Option Purchased (0.0%) | |||||||||||
65 | 90 day Euro $ June/2007 @ $94.25 (Cost $20,674) | 1,300 |
PRINCIPAL AMOUNT IN THOUSANDS | |||||||||||||||||||
Short-Term Investments (5.4%) | |||||||||||||||||||
U.S. Government Obligation (a) (0.1%) | |||||||||||||||||||
$ | 100 | U.S. Treasury Bill*** (Cost $99,858) | 5.09 | 01/11/07 | 99,830 | ||||||||||||||
Repurchase Agreement (5.3%) | |||||||||||||||||||
4,457 | Joint repurchase agreement account (dated 12/29/06; proceeds $4,459,607) (b) (Cost $4,457,000) | 5.265 | 01/02/07 | 4,457,000 | |||||||||||||||
Total Short-Term Investments (Cost $4,556,858) | 4,556,830 | ||||||||||||||||||
Total Investments (Cost $74,239,726) (c) (d) | 103.5 | % | 87,770,956 | ||||||||||||||||
Liabilities in Excess of Other Assets | (3.5 | ) | (3,005,102 | ) | |||||||||||||||
Net Assets | 100.0 | % | $ | 84,765,854 |
ADR American Depositary Receipt.
ARM Adjustable Rate Mortgage.
IO Interest Only Security.
* Non-income producing security.
** Resale is restricted to qualified institutional investors.
*** This security has been physically segregated in connection with open futures contracts in the amount of $10,358.
† Floating rate security; rate shown is the rate in effect at December 31, 2006.
†† Security purchased on a forward commitment basis with an approximate principal amount and no definite maturity date; the actual principal amount and maturity date will be determined upon settlement.
See Notes to Financial Statements
60
Balanced Growth
Portfolio of Investments n December 31, 2006 continued
‡ Security purchased on a forward commitment basis.
(a) Purchased on a discount basis. The interest rate shown has been adjusted to reflect a money market equivalent yield.
(b) Collateralized by federal agency and U.S. Treasury obligations.
(c) Securities have been designated as collateral in an amount equal to $9,111,346 in connection with open futures contracts, securities purchased on a forward commitment basis and open credit default swap contracts.
(d) The aggregate cost for federal income tax purposes is $75,101,939. The aggregate gross unrealized appreciation is $13,811,157 and the aggregate gross unrealized depreciation is $1,142,140, resulting in net unrealized appreciation of $12,669,017.
FUTURES CONTRACTS OPEN AT DECEMBER 31, 2006:
NUMBER OF CONTRACTS | LONG/SHORT | DESCRIPTION, DELIVERY MONTH AND YEAR | UNDERLYING FACE AMOUNT AT VALUE | UNREALIZED APPRECIATION (DEPRECIATION) | |||||||||||||||
19 | Long | U.S. Treasury Notes 5 Year, March 2007 | $ | 1,996,188 | $ | (10,904 | ) | ||||||||||||
10 | Long | U.S. Treasury Bonds 20 Year, March 2007 | 1,114,375 | (18,426 | ) | ||||||||||||||
5 | Short | U.S. Treasury Notes 10 Year, March 2007 | (537,344 | ) | 7,424 | ||||||||||||||
10 | Short | U.S. Treasury Notes 2 Year, March 2007 | (2,040,313 | ) | 6,629 | ||||||||||||||
Net Unrealized Depreciation | $(15,277) |
CREDIT DEFAULT SWAP CONTRACTS OPEN AT DECEMBER 31, 2006:
SWAP COUNTERPARTY & REFERENCE OBLIGATION | BUY/SELL PROTECTION | NOTIONAL AMOUNT (000's) | PAY/RECEIVE FIXED RATE | TERMINATION DATE | UNREALIZED APPRECIATION (DEPRECIATION) | ||||||||||||||||||
Goldman Sachs International The Hartford Financial Services Group Inc. | Buy | $ | 130 | 0.12 | % | December 20, 2011 | $ | (30 | ) | ||||||||||||||
Goldman Sachs International Lehman Brothers Holdings Inc. | Buy | 130 | 0.20 | December 20, 2011 | 114 | ||||||||||||||||||
Goldman Sachs International Southwest Airlines Co. | Buy | 130 | 0.22 | December 20, 2011 | 673 | ||||||||||||||||||
Goldman Sachs International Motorola, Inc. | Buy | 50 | 0.15 | December 20, 2011 | (6 | ) | |||||||||||||||||
Goldman Sachs International Motorola, Inc. | Buy | 90 | 0.157 | December 20, 2011 | (38 | ) | |||||||||||||||||
Goldman Sachs International Union Pacific Corporation | Buy | 120 | 0.20 | December 20, 2011 | 31 | ||||||||||||||||||
Net Unrealized Appreciation | $744 |
See Notes to Financial Statements
61
Balanced Growth
Portfolio of Investments n December 31, 2006 continued
SUMMARY OF INVESTMENTS
TYPE OF INVESTMENT | VALUE | PERCENT OF NET ASSETS | |||||||||
Common Stocks | $ | 58,324,508 | 68.8 | % | |||||||
U.S. Government Obligations | 8,387,511 | 9.9 | |||||||||
Corporate Bonds | 5,704,546 | 6.7 | |||||||||
Mortgage-Backed Securities | 5,376,477 | 6.3 | |||||||||
Asset-Backed Securities | 4,586,822 | 5.4 | |||||||||
Short-Term Investments | 4,556,830 | 5.4 | |||||||||
Collateralized Mortgage Obligations | 832,962 | 1.0 | |||||||||
Put Option Purchased | 1,300 | 0.0 | |||||||||
$ | 87,770,956 | * | 103.5 | % |
* Does not include open long futures contracts with an underlying face amount of $3,110,563 with unrealized depreciation of $29,330, open short futures contracts with an underlying face amount of $2,577,657 with unrealized appreciation of $14,053, and credit default swap contracts with net appreciation of $744.
See Notes to Financial Statements
62
Utilities
Portfolio of Investments n December 31, 2006
NUMBER OF SHARES | VALUE | ||||||||||
Common Stocks (98.2%) | |||||||||||
Electric Utilities (59.6%) | |||||||||||
86,000 | AES Corp. (The)* | $ | 1,895,440 | ||||||||
37,000 | Allegheny Energy, Inc.* | 1,698,670 | |||||||||
22,000 | Ameren Corp. | 1,182,060 | |||||||||
33,000 | American Electric Power Co., Inc. | 1,405,140 | |||||||||
22,000 | Consolidated Edison, Inc. | 1,057,540 | |||||||||
20,000 | Constellation Energy Group, Inc. | 1,377,400 | |||||||||
21,000 | Dominion Resources, Inc. | 1,760,640 | |||||||||
31,000 | DPL, Inc. | 861,180 | |||||||||
15,000 | DTE Energy Co. | 726,150 | |||||||||
58,710 | Duke Energy Corp. | 1,949,759 | |||||||||
48,000 | Edison International | 2,183,040 | |||||||||
29,500 | Entergy Corp. | 2,723,440 | |||||||||
32,000 | Exelon Corp. | 1,980,480 | |||||||||
35,000 | FirstEnergy Corp. | 2,110,500 | |||||||||
51,000 | FPL Group, Inc. | 2,775,420 | |||||||||
21,000 | Mirant Corp.* | 662,970 | |||||||||
28,000 | NSTAR | 962,080 | |||||||||
48,000 | PG&E Corp. | 2,271,840 | |||||||||
13,400 | Pinnacle West Capital Corp. | 679,246 | |||||||||
29,000 | PNM Resources Inc. | 901,900 | |||||||||
58,000 | PPL Corp. | 2,078,720 | |||||||||
28,000 | Public Service Enterprise Group | 1,858,640 | |||||||||
42,000 | SCANA Corp. | 1,706,040 | |||||||||
43,000 | Southern Co. (The) | 1,584,980 | |||||||||
32,000 | TXU Corp. | 1,734,720 | |||||||||
38,000 | Wisconsin Energy Corp. | 1,803,480 | |||||||||
41,931,475 | |||||||||||
Energy (18.8%) | |||||||||||
44,000 | AGL Resources, Inc. | 1,712,040 | |||||||||
40,620 | Dynegy, Inc. (Class A)* | 294,089 | |||||||||
19,000 | El Paso Corp. | 290,320 | |||||||||
32,000 | Equitable Resources, Inc. | 1,336,000 | |||||||||
63,750 | MDU Resources Group, Inc. | 1,634,550 | |||||||||
22,000 | New Jersey Resources Corp. | 1,068,760 | |||||||||
32,000 | NRG Energy, Inc.* | 1,792,320 |
NUMBER OF SHARES | VALUE | ||||||||||
15,000 | Questar Corp. | $ | 1,245,750 | ||||||||
39,000 | Sempra Energy | 2,185,560 | |||||||||
65,000 | Williams Companies, Inc. (The) | 1,697,800 | |||||||||
13,257,189 | |||||||||||
Telecommunications (19.8%) | |||||||||||
23,160 | ALLTEL Corp. | 1,400,717 | |||||||||
18,000 | America Movil S.A. de C.V. (Series L) (ADR) (Mexico) | 813,960 | |||||||||
34,000 | American Tower Corp. (Class A)* | 1,267,520 | |||||||||
46,272 | AT&T Inc. | 1,654,224 | |||||||||
35,500 | BellSouth Corp. | 1,672,405 | |||||||||
16,000 | Citizens Communications Co. | 229,920 | |||||||||
9,000 | NII Holdings, Inc. (Class B)* | 579,960 | |||||||||
32,000 | Qwest Communications International, Inc.* | 267,840 | |||||||||
16,000 | Rogers Communications, Inc. (Class B) (Canada) | 953,600 | |||||||||
35,025 | Sprint Nextel Corp. | 661,622 | |||||||||
19,400 | Telefonica de Espana S.A. (ADR) (Spain) | 1,236,750 | |||||||||
41,000 | Telefonos de Mexico S.A. (Series L) (ADR) (Mexico) | 1,158,660 | |||||||||
34,394 | Verizon Communications, Inc. | 1,280,833 | |||||||||
50,979 | Windstream Corp. | 724,921 | |||||||||
13,902,932 | |||||||||||
Total Common Stocks (Cost $37,566,700) | 69,091,596 |
See Notes to Financial Statements
63
Utilities
Portfolio of Investments n December 31, 2006 continued
PRINCIPAL AMOUNT IN THOUSANDS | VALUE | ||||||||||
Short-Term Investment (1.7%) Repurchase Agreement | |||||||||||
$ | 1,232 | Joint repurchase agreement account 5.265% due 01/02/07 (dated 12/29/06; proceeds $1,232,721) (a) (Cost $1,232,000) | $ | 1,232,000 | |||||||
Total Investments (Cost $38,798,700) (b) | 99.9 | % | 70,323,596 | ||||||||
Other Assets in Excess of Liabilities | 0.1 | 63,142 | |||||||||
Net Assets | 100.0 | % | $ | 70,386,738 |
ADR American Depositary Receipt.
* Non-income producing security.
(a) Collateralized by federal agency and U.S. Treasury obligations.
(b) The aggregate cost for federal income tax purposes is $39,675,018. The aggregate gross unrealized appreciation is $30,657,546 and the aggregate gross unrealized depreciation is $8,968 resulting in net unrealized appreciation of $30,648,578.
INDUSTRY | VALUE | PERCENT OF NET ASSETS | |||||||||
Electric Utilities | $ | 41,931,475 | 59.6 | % | |||||||
Telecommunications | 13,902,932 | 19.8 | |||||||||
Energy | 13,257,189 | 18.8 | |||||||||
Repurchase Agreement | 1,232,000 | 1.7 | |||||||||
$ | 70,323,596 | 99.9 | % |
See Notes to Financial Statements
64
Dividend Growth
Portfolio of Investments n December 31, 2006
NUMBER OF SHARES | VALUE | ||||||||||
Common Stocks (93.4%) | |||||||||||
Aerospace & Defense (2.7%) | |||||||||||
41,747 | Boeing Co. (The) | $ | 3,708,802 | ||||||||
48,279 | Northrop Grumman Corp. | 3,268,488 | |||||||||
6,977,290 | |||||||||||
Apparel/Footwear (1.5%) | |||||||||||
47,724 | V.F. Corp. | 3,917,186 | |||||||||
Beverages: Alcoholic (1.4%) | |||||||||||
46,533 | Diageo PLC (ADR) (United Kingdom) | 3,690,532 | |||||||||
Beverages: Non-Alcoholic (2.7%) | |||||||||||
112,016 | PepsiCo, Inc. | 7,006,601 | |||||||||
Biotechnology (0.9%) | |||||||||||
33,279 | Amgen Inc.* | 2,273,288 | |||||||||
Chemicals: Agricultural (1.2%) | |||||||||||
58,335 | Monsanto Co. | 3,064,338 | |||||||||
Computer Communications (2.3%) | |||||||||||
211,020 | Cisco Systems, Inc.* | 5,767,177 | |||||||||
Computer Processing Hardware (0.8%) | |||||||||||
78,309 | Dell Inc.* | 1,964,773 | |||||||||
Data Processing Services (2.8%) | |||||||||||
99,896 | Automatic Data Processing, Inc. | 4,919,878 | |||||||||
100,643 | Western Union Co. | 2,256,416 | |||||||||
7,176,294 | |||||||||||
Department Stores (0.5%) | |||||||||||
33,700 | Federated Department Stores, Inc. | 1,284,981 | |||||||||
Discount Stores (2.0%) | |||||||||||
11,293 | Sears Holdings Corp.* | 1,896,433 | |||||||||
58,141 | Target Corp. | 3,316,944 | |||||||||
5,213,377 |
NUMBER OF SHARES | VALUE | ||||||||||
Drugstore Chains (0.5%) | |||||||||||
43,680 | CVS Corp. | $ | 1,350,149 | ||||||||
Electric Utilities (1.9%) | |||||||||||
57,783 | Exelon Corp. | 3,576,190 | |||||||||
23,417 | TXU Corp. | 1,269,436 | |||||||||
4,845,626 | |||||||||||
Finance/Rental/ Leasing (1.0%) | |||||||||||
51,557 | SLM Corp. | 2,514,435 | |||||||||
Financial Conglomerates (11.8%) | |||||||||||
104,662 | American Express Co. | 6,349,844 | |||||||||
179,021 | Citigroup, Inc. | 9,971,470 | |||||||||
105,722 | JPMorgan Chase & Co. | 5,106,373 | |||||||||
72,695 | Prudential Financial, Inc. | 6,241,593 | |||||||||
43,277 | UBS AG (Switzerland) | 2,610,901 | |||||||||
30,280,181 | |||||||||||
Financial Publishing/ Services (1.5%) | |||||||||||
57,440 | McGraw-Hill Companies, Inc. (The) | 3,907,069 | |||||||||
Home Improvement Chains (1.4%) | |||||||||||
111,201 | Lowe's Companies, Inc. | 3,463,911 | |||||||||
Hotels/Resorts/ Cruiselines (1.6%) | |||||||||||
64,199 | Starwood Hotels & Resorts Worldwide, Inc. | 4,012,438 | |||||||||
Household/Personal Care (2.9%) | |||||||||||
114,941 | Procter & Gamble Co. (The) | 7,387,258 | |||||||||
Industrial Conglomerates (7.0%) | |||||||||||
38,516 | 3M Co. | 3,001,552 | |||||||||
218,043 | General Electric Co. | 8,113,380 | |||||||||
106,697 | United Technologies Corp. | 6,670,696 | |||||||||
17,785,628 |
See Notes to Financial Statements
65
Dividend Growth
Portfolio of Investments n December 31, 2006 continued
NUMBER OF SHARES | VALUE | ||||||||||
Information Technology Services (1.3%) | |||||||||||
90,630 | Accenture Ltd. (Class A) (Bermuda) | $ | 3,346,966 | ||||||||
Integrated Oil (3.1%) | |||||||||||
101,694 | Exxon Mobil Corp. | 7,792,811 | |||||||||
Internet Software/ Services (1.6%) | |||||||||||
2,655 | Google, Inc. (Class A)* | 1,222,574 | |||||||||
108,342 | Yahoo!, Inc.* | 2,767,055 | |||||||||
3,989,629 | |||||||||||
Investment Banks/ Brokers (3.0%) | |||||||||||
13,642 | Goldman Sachs Group, Inc. (The) | 2,719,533 | |||||||||
53,628 | Merrill Lynch & Co., Inc. | 4,992,767 | |||||||||
7,712,300 | |||||||||||
Investment Managers (1.8%) | |||||||||||
109,376 | Mellon Financial Corp. | 4,610,198 | |||||||||
Life/Health Insurance (1.1%) | |||||||||||
20,333 | Lincoln National Corp. | 1,350,111 | |||||||||
22,931 | MetLife, Inc. | 1,353,158 | |||||||||
2,703,269 | |||||||||||
Major Banks (1.0%) | |||||||||||
45,000 | Wachovia Corp. | 2,562,750 | |||||||||
Major Telecommunications (1.2%) | |||||||||||
52,645 | ALLTEL Corp. | 3,183,969 | |||||||||
Managed Health Care (1.4%) | |||||||||||
64,568 | UnitedHealth Group Inc. | 3,469,239 | |||||||||
Media Conglomerates (2.7%) | |||||||||||
318,341 | Time Warner, Inc. | 6,933,467 | |||||||||
Medical Specialties (2.2%) | |||||||||||
14,480 | Alcon, Inc. (Switzerland) | 1,618,430 | |||||||||
86,657 | Thermo Fisher Scientific, Inc.* | 3,924,696 | |||||||||
5,543,126 |
NUMBER OF SHARES | VALUE | ||||||||||
Multi-Line Insurance (1.5%) | |||||||||||
52,603 | American International Group, Inc. | $ | 3,769,531 | ||||||||
Office Equipment/ Supplies (1.4%) | |||||||||||
76,091 | Pitney Bowes, Inc. | 3,514,643 | |||||||||
Oil & Gas Production (1.3%) | |||||||||||
71,025 | XTO Energy Inc. | 3,341,726 | |||||||||
Oilfield Services/ Equipment (3.3%) | |||||||||||
32,038 | Cameron International Corp.* | 1,699,616 | |||||||||
64,687 | Schlumberger Ltd. (Netherlands Antilles) | 4,085,631 | |||||||||
62,192 | Weatherford International Ltd. (Bermuda)* | 2,599,004 | |||||||||
8,384,251 | |||||||||||
Other Consumer Services (0.6%) | |||||||||||
49,827 | eBay Inc.* | 1,498,298 | |||||||||
Other Metals/Minerals (0.5%) | |||||||||||
11,231 | Phelps Dodge Corp. | 1,344,575 | |||||||||
Packaged Software (2.6%) | |||||||||||
229,214 | Microsoft Corp. | 6,844,330 | |||||||||
Pharmaceuticals: Major (6.7%) | |||||||||||
74,985 | Johnson & Johnson | 4,950,510 | |||||||||
193,356 | Pfizer, Inc. | 5,007,920 | |||||||||
138,922 | Wyeth | 7,073,908 | |||||||||
17,032,338 | |||||||||||
Property - Casualty Insurers (1.6%) | |||||||||||
32,200 | Progressive Corp. (The) | 779,884 | |||||||||
45,051 | XL Capital Ltd. (Class A) (Cayman Islands) | 3,244,573 | |||||||||
4,024,457 | |||||||||||
Semiconductors (1.4%) | |||||||||||
176,795 | Intel Corp. | 3,580,099 |
See Notes to Financial Statements
66
Dividend Growth
Portfolio of Investments n December 31, 2006 continued
NUMBER OF SHARES | VALUE | ||||||||||
Specialty Stores (0.6%) | |||||||||||
55,847 | Staples, Inc. | $ | 1,491,115 | ||||||||
Telecommunication Equipment (0.3%) | |||||||||||
20,200 | QUALCOMM, Inc. | 763,358 | |||||||||
Tobacco (2.8%) | |||||||||||
83,505 | Altria Group, Inc. | 7,166,399 | |||||||||
Total Common Stocks (Cost $204,754,323) | 238,485,376 |
PRINCIPAL AMOUNT IN THOUSANDS | VALUE | ||||||||||
Short-Term Investment (5.9%) | |||||||||||
Repurchase Agreement | |||||||||||
$ | 15,039 | Joint repurchase agreement account 5.265% due 01/02/07 (dated 12/29/06; proceeds $15,047,798) (a) (Cost $15,039,000) | $ | 15,039,000 | |||||||
Total Investments (Cost $219,793,323) (b) | 99.3 | % | 253,524,376 | ||||||||
Other Assets in Excess of Liabilities | 0.7 | 1,899,228 | |||||||||
Net Assets | 100.0 | % | $ | 255,423,604 |
ADR American Depositary Receipt.
* Non-income producing security.
(a) Collateralized by federal agency and U.S. Treasury obligations.
(b) The aggregate cost for federal income tax purposes is $220,503,546. The aggregate gross unrealized appreciation is $35,017,274 and the aggregate gross unrealized depreciation is $1,996,444, resulting in net unrealized appreciation of $33,020,830.
See Notes to Financial Statements
67
Dividend Growth
Summary of Investments n December 31, 2006
INDUSTRY | VALUE | PERCENT OF NET ASSETS | |||||||||
Financial Conglomerates | $ | 30,280,181 | 11.8 | % | |||||||
Industrial Conglomerates | 17,785,628 | 7.0 | |||||||||
Pharmaceuticals: Major | 17,032,338 | 6.7 | |||||||||
Repurchase Agreement | 15,039,000 | 5.9 | |||||||||
Oilfield Services/ Equipment | 8,384,251 | 3.3 | |||||||||
Integrated Oil | 7,792,811 | 3.1 | |||||||||
Investment Banks/Brokers | 7,712,300 | 3.0 | |||||||||
Household/Personal Care | 7,387,258 | 2.9 | |||||||||
Data Processing Services | 7,176,294 | 2.8 | |||||||||
Tobacco | 7,166,399 | 2.8 | |||||||||
Beverages: Non-Alcoholic | 7,006,601 | 2.7 | |||||||||
Aerospace & Defense | 6,977,290 | 2.7 | |||||||||
Media Conglomerates | 6,933,467 | 2.7 | |||||||||
Packaged Software | 6,844,330 | 2.6 | |||||||||
Computer Communications | 5,767,177 | 2.3 | |||||||||
Medical Specialties | 5,543,126 | 2.2 | |||||||||
Discount Stores | 5,213,377 | 2.0 | |||||||||
Electric Utilities | 4,845,626 | 1.9 | |||||||||
Investment Managers | 4,610,198 | 1.8 | |||||||||
Property - Casualty Insurers | 4,024,457 | 1.6 | |||||||||
Hotels/Resorts/Cruiselines | 4,012,438 | 1.6 | |||||||||
Internet Software/Services | 3,989,629 | 1.6 | |||||||||
Apparel/Footwear | 3,917,186 | 1.5 | |||||||||
Financial Publishing/ Services | 3,907,069 | 1.5 |
INDUSTRY | VALUE | PERCENT OF NET ASSETS | |||||||||
Multi-Line Insurance | $ | 3,769,531 | 1.5 | % | |||||||
Beverages: Alcoholic | 3,690,532 | 1.4 | |||||||||
Semiconductors | 3,580,099 | 1.4 | |||||||||
Office Equipment/Supplies | 3,514,643 | 1.4 | |||||||||
Managed Health Care | 3,469,239 | 1.4 | |||||||||
Home Improvement Chains | 3,463,911 | 1.4 | |||||||||
Information Technology Services | 3,346,966 | 1.3 | |||||||||
Oil & Gas Production | 3,341,726 | 1.3 | |||||||||
Major Telecommunications | 3,183,969 | 1.2 | |||||||||
Chemicals: Agricultural | 3,064,338 | 1.2 | |||||||||
Life/Health Insurance | 2,703,269 | 1.1 | |||||||||
Major Banks | 2,562,750 | 1.0 | |||||||||
Finance/Rental/Leasing | 2,514,435 | 1.0 | |||||||||
Biotechnology | 2,273,288 | 0.9 | |||||||||
Computer Processing Hardware | 1,964,773 | 0.8 | |||||||||
Other Consumer Services | 1,498,298 | 0.6 | |||||||||
Specialty Stores | 1,491,115 | 0.6 | |||||||||
Drugstore Chains | 1,350,149 | 0.5 | |||||||||
Other Metals/Minerals | 1,344,575 | 0.5 | |||||||||
Department Stores | 1,284,981 | 0.5 | |||||||||
Telecommunication Equipment | 763,358 | 0.3 | |||||||||
$ | 253,524,376 | 99.3 | % |
See Notes to Financial Statements
68
Equally-Weighted S&P 500
Portfolio of Investments n December 31, 2006
NUMBER OF SHARES | VALUE | ||||||||||
Common Stocks (98.9%) | |||||||||||
Advertising/Marketing Services (0.4%) | |||||||||||
36,517 | Interpublic Group of Companies, Inc. (The)* | $ | 446,968 | ||||||||
4,094 | Omnicom Group, Inc. | 427,987 | |||||||||
874,955 | |||||||||||
Aerospace & Defense (1.6%) | |||||||||||
4,779 | Boeing Co. | 424,566 | |||||||||
5,977 | General Dynamics Corp. | 444,390 | |||||||||
9,520 | Goodrich Corp. | 433,636 | |||||||||
5,177 | L-3 Communications Holdings, Inc. | 423,375 | |||||||||
4,813 | Lockheed Martin Corp. | 443,133 | |||||||||
6,444 | Northrop Grumman Corp. | 436,259 | |||||||||
8,231 | Raytheon Co. | 434,597 | |||||||||
6,899 | Rockwell Collins, Inc. | 436,638 | |||||||||
3,476,594 | |||||||||||
Agricultural Commodities/ Milling (0.2%) | |||||||||||
13,247 | Archer-Daniels-Midland Co. | 423,374 | |||||||||
Air Freight/Couriers (0.3%) | |||||||||||
3,772 | FedEx Corp. | 409,715 | |||||||||
5,654 | United Parcel Service, Inc. (Class B) | 423,937 | |||||||||
833,652 | |||||||||||
Airlines (0.2%) | |||||||||||
27,278 | Southwest Airlines Co. | 417,899 | |||||||||
Aluminum (0.2%) | |||||||||||
13,964 | Alcoa, Inc. | 419,060 | |||||||||
Apparel/Footwear (1.0%) | |||||||||||
10,073 | Coach, Inc.* | 432,736 | |||||||||
12,809 | Jones Apparel Group, Inc. | 428,205 | |||||||||
9,883 | Liz Claiborne, Inc. | 429,515 | |||||||||
4,513 | Nike, Inc. (Class B) | 446,922 | |||||||||
5,258 | V.F. Corp. | 431,577 | |||||||||
2,168,955 |
NUMBER OF SHARES | VALUE | ||||||||||
Apparel/Footwear Retail (0.8%) | |||||||||||
21,258 | Gap, Inc. (The) | $ | 414,531 | ||||||||
14,235 | Limited Brands, Inc. | 411,961 | |||||||||
8,617 | Nordstrom, Inc. | 425,163 | |||||||||
14,921 | TJX Companies, Inc. (The) | 425,547 | |||||||||
1,677,202 | |||||||||||
Auto Parts: O.E.M. (0.4%) | |||||||||||
5,786 | Eaton Corp. | 434,760 | |||||||||
5,151 | Johnson Controls, Inc. | 442,574 | |||||||||
877,334 | |||||||||||
Automotive Aftermarket (0.2%) | |||||||||||
22,576 | Goodyear Tire & Rubber Co. (The)* | 473,870 | |||||||||
Beverages: Alcoholic (0.8%) | |||||||||||
8,948 | Anheuser-Busch Companies, Inc. | 440,242 | |||||||||
6,494 | Brown-Forman Corp. (Class B) | 430,163 | |||||||||
15,322 | Constellation Brands Inc. (Class A)* | 444,644 | |||||||||
5,865 | Molson Coors Brewing Co. (Class B) | 448,321 | |||||||||
1,763,370 | |||||||||||
Beverages: Non-Alcoholic (0.8%) | |||||||||||
8,859 | Coca-Cola Co. (The) | 427,447 | |||||||||
21,405 | Coca-Cola Enterprises Inc. | 437,090 | |||||||||
13,584 | Pepsi Bottling Group, Inc. (The) | 419,881 | |||||||||
6,894 | PepsiCo, Inc. | 431,220 | |||||||||
1,715,638 | |||||||||||
Biotechnology (1.3%) | |||||||||||
6,173 | Amgen Inc.* | 421,678 | |||||||||
8,440 | Biogen Idec Inc.* | 415,164 | |||||||||
7,408 | Celgene Corp.* | 426,182 | |||||||||
6,838 | Genzyme Corp.* | 421,084 | |||||||||
6,721 | Gilead Sciences, Inc.* | 436,394 | |||||||||
13,235 | MedImmune, Inc.* | 428,417 | |||||||||
6,332 | Millipore Corp.* | 421,711 | |||||||||
2,970,630 |
See Notes to Financial Statements
69
Equally-Weighted S&P 500
Portfolio of Investments n December 31, 2006 continued
NUMBER OF SHARES | VALUE | ||||||||||
Broadcasting (0.4%) | |||||||||||
12,210 | Clear Channel Communications, Inc. | $ | 433,943 | ||||||||
12,269 | Univision Communications, Inc. (Class A)* | 434,568 | |||||||||
868,511 | |||||||||||
Building Products (0.4%) | |||||||||||
9,592 | American Standard Companies, Inc. | 439,793 | |||||||||
14,804 | Masco Corp. | 442,195 | |||||||||
881,988 | |||||||||||
Cable/Satellite TV (0.4%) | |||||||||||
10,092 | Comcast Corp. (Class A)* | 427,194 | |||||||||
17,220 | DIRECTV Group, Inc. (The)* | 429,467 | |||||||||
856,661 | |||||||||||
Casino/Gaming (0.4%) | |||||||||||
5,452 | Harrah's Entertainment, Inc. | 450,989 | |||||||||
9,628 | International Game Technology | 444,814 | |||||||||
895,803 | |||||||||||
Chemicals: Agricultural (0.2%) | |||||||||||
8,509 | Monsanto Co. | 446,978 | |||||||||
Chemicals: Major Diversified (1.0%) | |||||||||||
10,801 | Dow Chemical Co. (The) | 431,392 | |||||||||
8,891 | Du Pont (E.I.) de Nemours & Co. | 433,081 | |||||||||
7,384 | Eastman Chemical Co. | 437,945 | |||||||||
22,946 | Hercules Inc.* | 443,087 | |||||||||
8,350 | Rohm & Haas Co. | 426,852 | |||||||||
2,172,357 | |||||||||||
Chemicals: Specialty (0.8%) | |||||||||||
5,982 | Air Products & Chemicals, Inc. | 420,415 | |||||||||
6,278 | Ashland Inc. | 434,312 | |||||||||
6,890 | Praxair, Inc. | 408,784 | |||||||||
5,456 | Sigma-Aldrich Corp. | 424,040 | |||||||||
1,687,551 |
NUMBER OF SHARES | VALUE | ||||||||||
Coal (0.3%) | |||||||||||
12,332 | CONSOL Energy, Inc. | $ | 396,227 | ||||||||
9,887 | Peabody Energy Corp.* | 399,534 | |||||||||
795,761 | |||||||||||
Commercial Printing/Forms (0.2%) | |||||||||||
12,155 | Donnelley (R.R.) & Sons Co. | 431,989 | |||||||||
Computer Communications (0.8%) | |||||||||||
32,060 | Avaya Inc.* | 448,199 | |||||||||
15,728 | Cisco Systems, Inc.* | 429,846 | |||||||||
21,892 | Juniper Networks, Inc.* | 414,634 | |||||||||
19,738 | QLogic Corp.* | 432,657 | |||||||||
1,725,336 | |||||||||||
Computer Peripherals (0.6%) | |||||||||||
32,203 | EMC Corp.* | 425,080 | |||||||||
5,993 | Lexmark International, Inc. (Class A)* | 438,688 | |||||||||
10,572 | Network Appliance, Inc.* | 415,268 | |||||||||
5,600 | Seagate Technology Inc. (Escrow) (a)* | 0 | |||||||||
1,279,036 | |||||||||||
Computer Processing Hardware (1.0%) | |||||||||||
4,941 | Apple Computer, Inc.* | 419,194 | |||||||||
16,338 | Dell Inc.* | 409,920 | |||||||||
10,853 | Hewlett-Packard Co. | 447,035 | |||||||||
10,508 | NCR Corp.* | 449,322 | |||||||||
76,718 | Sun Microsystems, Inc.* | 415,812 | |||||||||
2,141,283 | |||||||||||
Construction Materials (0.2%) | |||||||||||
4,774 | Vulcan Materials Co. | 429,039 | |||||||||
Containers/Packaging (1.0%) | |||||||||||
9,962 | Ball Corp. | 434,343 | |||||||||
12,637 | Bemis Company, Inc. | 429,405 | |||||||||
12,094 | Pactiv Corp.* | 431,635 | |||||||||
6,868 | Sealed Air Corp. | 445,871 | |||||||||
9,491 | Temple-Inland Inc. | 436,871 | |||||||||
2,178,125 |
See Notes to Financial Statements
70
Equally-Weighted S&P 500
Portfolio of Investments n December 31, 2006 continued
NUMBER OF SHARES | VALUE | ||||||||||
Contract Drilling (0.7%) | |||||||||||
13,290 | Nabors Industries, Ltd. (Bermuda)* | $ | 395,776 | ||||||||
5,381 | Noble Corp. (Cayman Islands) | 409,763 | |||||||||
11,630 | Rowan Companies, Inc. | 386,116 | |||||||||
5,194 | Transocean Inc. (Cayman Islands)* | 420,143 | |||||||||
1,611,798 | |||||||||||
Data Processing Services (1.8%) | |||||||||||
8,830 | Affiliated Computer Services, Inc. (Class A)* | 431,257 | |||||||||
8,732 | Automatic Data Processing, Inc. | 430,051 | |||||||||
8,088 | Computer Sciences Corp.* | 431,657 | |||||||||
17,993 | Convergys Corp.* | 427,874 | |||||||||
10,611 | Fidelity National Information Services, Inc. | 425,395 | |||||||||
17,563 | First Data Corp. | 448,208 | |||||||||
8,195 | Fiserv, Inc.* | 429,582 | |||||||||
10,634 | Paychex, Inc. | 420,468 | |||||||||
18,854 | Western Union Co. | 422,707 | |||||||||
3,867,199 | |||||||||||
Department Stores (0.8%) | |||||||||||
12,292 | Dillard's, Inc. (Class A) | 429,851 | |||||||||
11,163 | Federated Department Stores, Inc. | 425,645 | |||||||||
6,130 | Kohl's Corp.* | 419,476 | |||||||||
5,450 | Penney (J.C.) Co., Inc. | 421,612 | |||||||||
1,696,584 | |||||||||||
Discount Stores (1.3%) | |||||||||||
18,076 | Big Lots, Inc.* | 414,302 | |||||||||
8,019 | Costco Wholesale Corp. | 423,965 | |||||||||
27,573 | Dollar General Corp. | 442,822 | |||||||||
14,962 | Family Dollar Stores, Inc. | 438,835 | |||||||||
2,476 | Sears Holdings Corp.* | 415,795 | |||||||||
7,377 | Target Corp. | 420,858 | |||||||||
9,332 | Wal-Mart Stores, Inc. | 430,952 | |||||||||
2,987,529 |
NUMBER OF SHARES | VALUE | ||||||||||
Drugstore Chains (0.4%) | |||||||||||
14,202 | CVS Corp. | $ | 438,984 | ||||||||
9,741 | Walgreen Co. | 447,014 | |||||||||
885,998 | |||||||||||
Electric Utilities (5.0%) | |||||||||||
18,978 | AES Corp. (The)* | 418,275 | |||||||||
9,706 | Allegheny Energy, Inc.* | 445,602 | |||||||||
8,025 | Ameren Corp. | 431,183 | |||||||||
10,213 | American Electric Power Co., Inc. | 434,870 | |||||||||
26,206 | CenterPoint Energy, Inc. | 434,495 | |||||||||
25,986 | CMS Energy Corp.* | 433,966 | |||||||||
8,906 | Consolidated Edison, Inc. | 428,111 | |||||||||
6,306 | Constellation Energy Group, Inc. | 434,294 | |||||||||
5,178 | Dominion Resources, Inc. | 434,124 | |||||||||
8,897 | DTE Energy Co. | 430,704 | |||||||||
12,935 | Duke Energy Corp. | 429,571 | |||||||||
9,637 | Edison International | 438,291 | |||||||||
4,681 | Entergy Corp. | 432,150 | |||||||||
6,924 | Exelon Corp. | 428,526 | |||||||||
7,134 | FirstEnergy Corp. | 430,180 | |||||||||
7,890 | FPL Group, Inc. | 429,374 | |||||||||
9,164 | PG&E Corp. | 433,732 | |||||||||
8,617 | Pinnacle West Capital Corp. | 436,796 | |||||||||
11,987 | PPL Corp. | 429,614 | |||||||||
8,794 | Progress Energy, Inc. | 431,610 | |||||||||
6,444 | Public Service Enterprise Group | 427,753 | |||||||||
11,724 | Southern Co. (The) | 432,147 | |||||||||
24,883 | TECO Energy, Inc. | 428,734 | |||||||||
7,783 | TXU Corp. | 421,916 | |||||||||
18,587 | Xcel Energy, Inc. | 428,616 | |||||||||
10,784,634 |
See Notes to Financial Statements
71
Equally-Weighted S&P 500
Portfolio of Investments n December 31, 2006 continued
NUMBER OF SHARES | VALUE | ||||||||||
Electrical Products (0.8%) | |||||||||||
14,179 | American Power Conversion Corp. | $ | 433,736 | ||||||||
4,819 | Cooper Industries Ltd. (Class A) (Bermuda) | 435,782 | |||||||||
10,264 | Emerson Electric Co. | 452,334 | |||||||||
13,399 | Molex Inc. | 423,810 | |||||||||
1,745,662 | |||||||||||
Electronic Components (0.8%) | |||||||||||
15,877 | Jabil Circuit, Inc. | 389,780 | |||||||||
10,197 | SanDisk Corp.* | 438,777 | |||||||||
121,416 | Sanmina-SCI Corp.* | 418,885 | |||||||||
128,622 | Solectron Corp.* | 414,163 | |||||||||
1,661,605 | |||||||||||
Electronic Equipment/ Instruments (1.2%) | |||||||||||
12,719 | Agilent Technologies, Inc.* | 443,257 | |||||||||
24,755 | JDS Uniphase Corp.* | 412,418 | |||||||||
6,917 | Rockwell Automation, Inc. | 422,490 | |||||||||
29,110 | Symbol Technologies, Inc. | 434,903 | |||||||||
15,688 | Tektronix, Inc. | 457,619 | |||||||||
25,348 | Xerox Corp.* | 429,649 | |||||||||
2,600,336 | |||||||||||
Electronic Production Equipment (0.8%) | |||||||||||
23,908 | Applied Materials, Inc. | 441,103 | |||||||||
8,607 | KLA-Tencor Corp. | 428,198 | |||||||||
12,615 | Novellus Systems, Inc.* | 434,208 | |||||||||
28,638 | Teradyne, Inc.* | 428,424 | |||||||||
1,731,933 | |||||||||||
Electronics/Appliance Stores (0.6%) | |||||||||||
8,602 | Best Buy Co., Inc. | 423,132 | |||||||||
18,708 | Circuit City Stores - Circuit City Group | 355,078 | |||||||||
24,926 | RadioShack Corp. | 418,258 | |||||||||
1,196,468 |
NUMBER OF SHARES | VALUE | ||||||||||
Electronics/Appliances (0.6%) | |||||||||||
16,450 | Eastman Kodak Co. | $ | 424,410 | ||||||||
4,241 | Harman International Industries, Inc. | 423,718 | |||||||||
5,267 | Whirlpool Corp. | 437,266 | |||||||||
1,285,394 | |||||||||||
Engineering & Construction (0.2%) | |||||||||||
5,128 | Fluor Corp. | 418,701 | |||||||||
Environmental Services (0.4%) | |||||||||||
34,401 | Allied Waste Industries, Inc.* | 422,788 | |||||||||
11,724 | Waste Management, Inc. | 431,091 | |||||||||
853,879 | |||||||||||
Finance/Rental/ Leasing (1.4%) | |||||||||||
5,658 | Capital One Financial Corp. | 434,648 | |||||||||
8,073 | CIT Group, Inc. | 450,231 | |||||||||
10,392 | Countrywide Financial Corp. | 441,140 | |||||||||
7,192 | Fannie Mae | 427,133 | |||||||||
6,283 | Freddie Mac | 426,616 | |||||||||
8,436 | Ryder System, Inc. | 430,742 | |||||||||
8,805 | SLM Corp. | 429,420 | |||||||||
3,039,930 | |||||||||||
Financial Conglomerates (1.2%) | |||||||||||
7,032 | American Express Co. | 426,631 | |||||||||
8,017 | Citigroup, Inc. | 446,547 | |||||||||
8,974 | JPMorgan Chase & Co. | 433,444 | |||||||||
7,434 | Principal Financial Group, Inc. | 436,376 | |||||||||
5,037 | Prudential Financial, Inc. | 432,477 | |||||||||
6,451 | State Street Corp. | 435,055 | |||||||||
2,610,530 | |||||||||||
Financial Publishing/ Services (0.6%) | |||||||||||
10,526 | Equifax, Inc. | 427,356 | |||||||||
6,282 | McGraw-Hill Companies, Inc. (The) | 427,302 | |||||||||
6,177 | Moody's Corp. | 426,584 | |||||||||
1,281,242 |
See Notes to Financial Statements
72
Equally-Weighted S&P 500
Portfolio of Investments n December 31, 2006 continued
NUMBER OF SHARES | VALUE | ||||||||||
Food Distributors (0.2%) | |||||||||||
11,961 | SYSCO Corp. | $ | 439,686 | ||||||||
Food Retail (0.8%) | |||||||||||
17,755 | Kroger Co. (The) | 409,608 | |||||||||
12,734 | Safeway Inc. | 440,087 | |||||||||
12,142 | SUPERVALU, Inc. | 434,077 | |||||||||
8,835 | Whole Foods Market, Inc. | 414,627 | |||||||||
1,698,399 | |||||||||||
Food: Major Diversified (1.2%) | |||||||||||
10,918 | Campbell Soup Co. | 424,601 | |||||||||
16,369 | ConAgra Foods, Inc. | 441,963 | |||||||||
7,519 | General Mills, Inc. | 433,094 | |||||||||
9,316 | Heinz (H.J.) Co. | 419,313 | |||||||||
8,570 | Kellogg Co. | 429,014 | |||||||||
25,588 | Sara Lee Corp. | 435,764 | |||||||||
2,583,749 | |||||||||||
Food: Meat/Fish/Dairy (0.4%) | |||||||||||
10,055 | Dean Foods Co.* | 425,125 | |||||||||
25,955 | Tyson Foods, Inc. (Class A) | 426,960 | |||||||||
852,085 | |||||||||||
Food: Specialty/Candy (0.6%) | |||||||||||
8,496 | Hershey Foods Co. (The) | 423,101 | |||||||||
10,999 | McCormick & Co., Inc. (Non-Voting) | 424,121 | |||||||||
8,336 | Wrigley (Wm.) Jr. Co. | 431,138 | |||||||||
1,278,360 | |||||||||||
Forest Products (0.2%) | |||||||||||
6,026 | Weyerhaeuser Co. | 425,737 | |||||||||
Gas Distributors (1.4%) | |||||||||||
61,222 | Dynegy, Inc. (Class A)* | 443,247 | |||||||||
10,498 | KeySpan Corp. | 432,308 | |||||||||
8,839 | Nicor Inc. | 413,665 | |||||||||
17,801 | NiSource, Inc. | 429,004 | |||||||||
9,743 | Peoples Energy Corp. | 434,246 | |||||||||
4,928 | Questar Corp.* | 409,270 | |||||||||
7,638 | Sempra Energy | 428,034 | |||||||||
2,989,774 |
NUMBER OF SHARES | VALUE | ||||||||||
Home Building (1.0%) | |||||||||||
7,706 | Centex Corp. | $ | 433,617 | ||||||||
15,983 | D.R. Horton, Inc. | 423,390 | |||||||||
8,379 | KB Home | 429,675 | |||||||||
8,175 | Lennar Corp. (Class A) | 428,861 | |||||||||
13,040 | Pulte Homes, Inc. | 431,885 | |||||||||
2,147,428 | |||||||||||
Home Furnishings (0.4%) | |||||||||||
18,351 | Leggett & Platt, Inc. | 438,589 | |||||||||
14,763 | Newell Rubbermaid, Inc. | 427,389 | |||||||||
865,978 | |||||||||||
Home Improvement Chains (0.6%) | |||||||||||
10,866 | Home Depot, Inc. (The) | 436,379 | |||||||||
13,800 | Lowe's Companies, Inc. | 429,870 | |||||||||
6,828 | Sherwin-Williams Co. | 434,124 | |||||||||
1,300,373 | |||||||||||
Hospital/Nursing Management (0.6%) | |||||||||||
21,217 | Health Management Associates, Inc. (Class A) | 447,891 | |||||||||
9,193 | Manor Care, Inc. | 431,336 | |||||||||
63,556 | Tenet Healthcare Corp.* | 442,985 | |||||||||
1,322,212 | |||||||||||
Hotels/Resorts/ Cruiselines (1.0%) | |||||||||||
9,089 | Carnival Corp† (Panama) | 445,815 | |||||||||
12,477 | Hilton Hotels Corp. | 435,447 | |||||||||
9,437 | Marriott International, Inc. (Class A) | 450,334 | |||||||||
6,828 | Starwood Hotels & Resorts Worldwide, Inc. | 426,750 | |||||||||
13,809 | Wyndham Worldwide Corp.* | 442,164 | |||||||||
2,200,510 |
See Notes to Financial Statements
73
Equally-Weighted S&P 500
Portfolio of Investments n December 31, 2006 continued
NUMBER OF SHARES | VALUE | ||||||||||
Household/Personal Care (1.4%) | |||||||||||
13,103 | Avon Products, Inc. | $ | 432,923 | ||||||||
6,802 | Clorox Co. (The) | 436,348 | |||||||||
6,635 | Colgate-Palmolive Co. | 432,867 | |||||||||
10,562 | Estee Lauder Companies, Inc. (The) (Class A) | 431,141 | |||||||||
8,851 | International Flavors & Fragrances, Inc. | 435,115 | |||||||||
6,447 | Kimberly-Clark Corp. | 438,074 | |||||||||
6,761 | Procter & Gamble Co. (The) | 434,529 | |||||||||
3,040,997 | |||||||||||
Industrial Conglomerates (1.8%) | |||||||||||
5,535 | 3M Co. | 431,343 | |||||||||
5,898 | Danaher Corp. | 427,251 | |||||||||
11,602 | General Electric Co.** | 431,710 | |||||||||
9,937 | Honeywell International, Inc. | 449,550 | |||||||||
11,063 | Ingersoll-Rand Co. Ltd. (Class A) (Bermuda) | 432,895 | |||||||||
7,977 | ITT Corp. | 453,253 | |||||||||
4,621 | Textron, Inc. | 433,311 | |||||||||
14,287 | Tyco International Ltd. (Bermuda) | 434,325 | |||||||||
6,941 | United Technologies Corp. | 433,951 | |||||||||
3,927,589 | |||||||||||
Industrial Machinery (0.4%) | |||||||||||
9,178 | Illinois Tool Works Inc. | 423,932 | |||||||||
5,487 | Parker Hannifin Corp. | 421,841 | |||||||||
845,773 | |||||||||||
Industrial Specialties (0.4%) | |||||||||||
9,682 | Ecolab Inc. | 437,626 | |||||||||
6,560 | PPG Industries, Inc. | 421,218 | |||||||||
858,844 |
NUMBER OF SHARES | VALUE | ||||||||||
Information Technology Services (1.0%) | |||||||||||
14,844 | Citrix Systems, Inc.* | $ | 401,530 | ||||||||
5,389 | Cognizant Technology Solutions Corp. (Class A)* | 415,815 | |||||||||
15,728 | Electronic Data Systems Corp. | 433,306 | |||||||||
4,548 | International Business Machines Corp. | 441,838 | |||||||||
58,182 | Unisys Corp.* | 456,147 | |||||||||
2,148,636 | |||||||||||
Insurance Brokers/ Services (0.4%) | |||||||||||
11,971 | AON Corp. | 423,055 | |||||||||
14,133 | Marsh & McLennan Companies, Inc. | 433,318 | |||||||||
856,373 | |||||||||||
Integrated Oil (0.9%) | |||||||||||
5,750 | Chevron Corp. | 422,798 | |||||||||
5,957 | ConocoPhillips | 428,606 | |||||||||
5,607 | Exxon Mobil Corp. | 429,664 | |||||||||
8,296 | Hess Corp. | 411,233 | |||||||||
8,209 | Murphy Oil Corp. | 417,428 | |||||||||
2,109,729 | |||||||||||
Internet Retail (0.4%) | |||||||||||
10,834 | Amazon.com, Inc.* | 427,510 | |||||||||
11,273 | IAC/InterActiveCorp* | 418,905 | |||||||||
846,415 | |||||||||||
Internet Software/ Services (0.6%) | |||||||||||
902 | Google, Inc. (Class A)* | 415,353 | |||||||||
17,079 | VeriSign, Inc.* | 410,750 | |||||||||
16,114 | Yahoo!, Inc.* | 411,552 | |||||||||
1,237,655 |
See Notes to Financial Statements
74
Equally-Weighted S&P 500
Portfolio of Investments n December 31, 2006 continued
NUMBER OF SHARES | VALUE | ||||||||||
Investment Banks/ Brokers (1.8%) | |||||||||||
7,917 | Ameriprise Financial, Inc. | $ | 431,476 | ||||||||
2,648 | Bear Stearns Companies, Inc. (The) | 431,041 | |||||||||
813 | Chicago Mercantile Exchange Holdings, Inc. | 414,427 | |||||||||
18,691 | E*TRADE Group, Inc.* | 419,052 | |||||||||
2,169 | Goldman Sachs Group, Inc. (The) | 432,390 | |||||||||
5,696 | Lehman Brothers Holdings Inc. | 444,972 | |||||||||
4,734 | Merrill Lynch & Co., Inc. | 440,735 | |||||||||
5,469 | Morgan Stanley (Note 4) | 445,341 | |||||||||
22,424 | Schwab (Charles) Corp. (The) | 433,680 | |||||||||
3,893,114 | |||||||||||
Investment Managers (1.2%) | |||||||||||
13,001 | Federated Investors, Inc. (Class B) | 439,174 | |||||||||
3,813 | Franklin Resources, Inc. | 420,078 | |||||||||
20,383 | Janus Capital Group, Inc. | 440,069 | |||||||||
4,512 | Legg Mason, Inc. | 428,866 | |||||||||
10,206 | Mellon Financial Corp. | 430,183 | |||||||||
9,741 | Price (T.) Rowe Group, Inc. | 426,364 | |||||||||
2,584,734 | |||||||||||
Life/Health Insurance (1.2%) | |||||||||||
9,630 | AFLAC, Inc. | 442,980 | |||||||||
12,801 | Genworth Financial Inc. (Class A) | 437,922 | |||||||||
6,686 | Lincoln National Corp. | 443,950 | |||||||||
7,380 | MetLife, Inc. | 435,494 | |||||||||
6,754 | Torchmark Corp. | 430,635 | |||||||||
21,565 | UnumProvident Corp. | 448,121 | |||||||||
2,639,102 | |||||||||||
Major Banks (2.4%) | |||||||||||
8,129 | Bank of America Corp. | 434,007 | |||||||||
10,960 | Bank of New York Co., Inc. (The) | 431,495 | |||||||||
9,816 | BB&T Corp. | 431,217 | |||||||||
7,310 | Comerica, Inc. | 428,951 | |||||||||
17,401 | Huntington Bancshares, Inc. | 413,274 |
NUMBER OF SHARES | VALUE | ||||||||||
11,449 | KeyCorp | $ | 435,405 | ||||||||
11,840 | National City Corp. | 432,870 | |||||||||
5,895 | PNC Financial Services Group | 436,466 | |||||||||
11,627 | Regions Financial Corp. | 434,850 | |||||||||
5,118 | SunTrust Banks, Inc. | 432,215 | |||||||||
7,602 | Wachovia Corp. | 432,934 | |||||||||
12,159 | Wells Fargo & Co. | 432,374 | |||||||||
5,176,058 | |||||||||||
Major Telecommunications (1.2%) | |||||||||||
7,472 | ALLTEL Corp. | 451,907 | |||||||||
12,155 | AT&T Inc. | 434,541 | |||||||||
9,322 | BellSouth Corp. | 439,159 | |||||||||
8,361 | Embarq Corp. | 439,454 | |||||||||
22,217 | Sprint Nextel Corp. | 419,679 | |||||||||
11,882 | Verizon Communications, Inc. | 442,486 | |||||||||
2,627,226 | |||||||||||
Managed Health Care (1.4%) | |||||||||||
10,034 | Aetna, Inc. | 433,268 | |||||||||
8,617 | Caremark Rx, Inc. | 492,117 | |||||||||
3,343 | CIGNA Corp. | 439,839 | |||||||||
8,660 | Coventry Health Care, Inc.* | 433,433 | |||||||||
7,865 | Humana, Inc.* | 435,013 | |||||||||
8,654 | UnitedHealth Group Inc. | 464,979 | |||||||||
5,620 | WellPoint Inc.* | 442,238 | |||||||||
3,140,887 | |||||||||||
Media Conglomerates (1.0%) | |||||||||||
13,550 | CBS Corp. (Class B) | 422,489 | |||||||||
12,637 | Disney (Walt) Co. (The) | 433,070 | |||||||||
20,456 | News Corp. (Class A) | 439,395 | |||||||||
20,012 | Time Warner, Inc. | 435,861 | |||||||||
11,413 | Viacom, Inc. (Class B)* | 468,275 | |||||||||
2,199,090 | |||||||||||
Medical Distributors (0.8%) | |||||||||||
9,336 | AmerisourceBergen Corp. | 419,747 | |||||||||
6,674 | Cardinal Health, Inc. | 430,006 | |||||||||
8,469 | McKesson Corp. | 429,378 | |||||||||
11,690 | Patterson Companies, Inc.* | 415,112 | |||||||||
1,694,243 |
See Notes to Financial Statements
75
Equally-Weighted S&P 500
Portfolio of Investments n December 31, 2006 continued
NUMBER OF SHARES | VALUE | ||||||||||
Medical Specialties (3.2%) | |||||||||||
11,422 | Applera Corp. - Applied Biosystems Group | $ | 419,073 | ||||||||
5,172 | Bard (C.R.), Inc. | 429,121 | |||||||||
8,353 | Bausch & Lomb, Inc. | 434,857 | |||||||||
9,312 | Baxter International, Inc. | 431,984 | |||||||||
6,022 | Becton, Dickinson & Co. | 422,443 | |||||||||
10,320 | Biomet, Inc. | 425,906 | |||||||||
26,609 | Boston Scientific Corp.* | 457,143 | |||||||||
12,667 | Hospira, Inc.* | 425,358 | |||||||||
7,983 | Medtronic, Inc. | 427,170 | |||||||||
12,445 | Pall Corp. | 429,975 | |||||||||
19,472 | PerkinElmer, Inc. | 432,863 | |||||||||
11,543 | St. Jude Medical, Inc.* | 422,012 | |||||||||
7,846 | Stryker Corp. | 432,393 | |||||||||
9,493 | Thermo Fisher Scientific, Inc.* | 429,938 | |||||||||
8,659 | Waters Corp.* | 424,031 | |||||||||
5,632 | Zimmer Holdings, Inc.* | 441,436 | |||||||||
6,885,703 | |||||||||||
Miscellaneous Commercial Services (0.4%) | |||||||||||
10,144 | Cintas Corp. | 402,818 | |||||||||
13,592 | Sabre Holdings Corp. (Class A) | 433,449 | |||||||||
836,267 | |||||||||||
Miscellaneous Manufacturing (0.2%) | |||||||||||
8,751 | Dover Corp. | 428,974 | |||||||||
Motor Vehicles (0.6%) | |||||||||||
61,222 | Ford Motor Co. | 459,777 | |||||||||
14,814 | General Motors Corp. | 455,086 | |||||||||
6,236 | Harley-Davidson, Inc. | 439,451 | |||||||||
1,354,314 | |||||||||||
Multi-Line Insurance (0.8%) | |||||||||||
6,009 | American International Group, Inc. | 430,605 | |||||||||
4,711 | Hartford Financial Services Group, Inc. (The) (Note 4) | 439,583 | |||||||||
10,401 | Loews Corp. | 431,329 | |||||||||
6,808 | SAFECO Corp. | 425,840 | |||||||||
1,727,357 |
NUMBER OF SHARES | VALUE | ||||||||||
Office Equipment/ Supplies (0.4%) | |||||||||||
6,429 | Avery Dennison Corp. | $ | 436,722 | ||||||||
9,322 | Pitney Bowes, Inc. | 430,583 | |||||||||
867,305 | |||||||||||
Oil & Gas Pipelines (0.6%) | |||||||||||
28,312 | El Paso Corp. | 432,607 | |||||||||
4,111 | Kinder Morgan, Inc. | 434,738 | |||||||||
15,965 | Williams Companies, Inc. (The) | 417,006 | |||||||||
1,284,351 | |||||||||||
Oil & Gas Production (1.3%) | |||||||||||
9,526 | Anadarko Petroleum Corp. | 414,572 | |||||||||
6,297 | Apache Corp. | 418,813 | |||||||||
13,915 | Chesapeake Energy Corp. | 404,231 | |||||||||
6,092 | Devon Energy Corp. | 408,651 | |||||||||
6,317 | EOG Resources, Inc. | 394,497 | |||||||||
8,349 | Occidental Petroleum Corp. | 407,682 | |||||||||
8,690 | XTO Energy Inc. | 408,865 | |||||||||
2,857,311 | |||||||||||
Oil Refining/Marketing (0.6%) | |||||||||||
4,539 | Marathon Oil Corp. | 419,858 | |||||||||
6,350 | Sunoco, Inc. | 395,986 | |||||||||
7,864 | Valero Energy Corp. | 402,322 | |||||||||
1,218,166 | |||||||||||
Oilfield Services/ Equipment (1.3%) | |||||||||||
5,539 | Baker Hughes Inc. | 413,542 | |||||||||
13,482 | BJ Services Co. | 395,292 | |||||||||
13,187 | Halliburton Co. | 409,456 | |||||||||
6,467 | National-Oilwell Varco, Inc.* | 395,651 | |||||||||
6,417 | Schlumberger Ltd. (Netherlands Antilles) | 405,298 | |||||||||
9,847 | Smith International, Inc. | 404,416 | |||||||||
9,328 | Weatherford International Ltd. (Bermuda)* | 389,817 | |||||||||
2,813,472 |
See Notes to Financial Statements
76
Equally-Weighted S&P 500
Portfolio of Investments n December 31, 2006 continued
NUMBER OF SHARES | VALUE | ||||||||||
Other Consumer Services (0.6%) | |||||||||||
11,100 | Apollo Group, Inc. (Class A)* | $ | 432,567 | ||||||||
18,368 | Block (H.&R.), Inc. | 423,199 | |||||||||
13,167 | eBay Inc.* | 395,932 | |||||||||
1,251,698 | |||||||||||
Other Consumer Specialties (0.2%) | |||||||||||
5,204 | Fortune Brands, Inc. | 444,370 | |||||||||
Other Metals/Minerals (0.2%) | |||||||||||
3,538 | Phelps Dodge Corp. | 423,569 | |||||||||
Packaged Software (2.0%) | |||||||||||
10,125 | Adobe Systems, Inc.* | 416,340 | |||||||||
10,367 | Autodesk, Inc.* | 419,449 | |||||||||
13,382 | BMC Software, Inc.* | 430,900 | |||||||||
19,011 | CA Inc. | 430,599 | |||||||||
50,892 | Compuware Corp.* | 423,930 | |||||||||
13,756 | Intuit Inc.* | 419,696 | |||||||||
14,358 | Microsoft Corp.** | 428,730 | |||||||||
69,912 | Novell, Inc.* | 433,454 | |||||||||
24,464 | Oracle Corp.* | 419,313 | |||||||||
20,475 | Symantec Corp.* | 426,904 | |||||||||
4,249,315 | |||||||||||
Personnel Services (0.4%) | |||||||||||
9,174 | Monster Worldwide, Inc.* | 427,875 | |||||||||
11,553 | Robert Half International, Inc. | 428,847 | |||||||||
856,722 | |||||||||||
Pharmaceuticals: Generic Drugs (0.6%) | |||||||||||
8,408 | Barr Pharmaceuticals Inc.* | 421,409 | |||||||||
21,082 | Mylan Laboratories, Inc. | 420,797 | |||||||||
16,431 | Watson Pharmaceuticals, Inc.* | 427,699 | |||||||||
1,269,905 | |||||||||||
Pharmaceuticals: Major (1.6%) | |||||||||||
8,943 | Abbott Laboratories | 435,614 | |||||||||
16,925 | Bristol-Myers Squibb Co. | 445,466 | |||||||||
6,539 | Johnson & Johnson | 431,705 | |||||||||
7,950 | Lilly (Eli) & Co. | 414,195 |
NUMBER OF SHARES | VALUE | ||||||||||
9,851 | Merck & Co., Inc. | $ | 429,504 | ||||||||
16,905 | Pfizer, Inc. | 437,840 | |||||||||
18,359 | Schering-Plough Corp. | 434,007 | |||||||||
8,471 | Wyeth | 431,343 | |||||||||
3,459,674 | |||||||||||
Pharmaceuticals: Other (0.6%) | |||||||||||
3,528 | Allergan, Inc. | 422,443 | |||||||||
8,417 | Forest Laboratories, Inc.* | 425,900 | |||||||||
26,625 | King Pharmaceuticals, Inc.* | 423,870 | |||||||||
1,272,213 | �� | ||||||||||
Precious Metals (0.4%) | |||||||||||
7,215 | Freeport-McMoRan Copper & Gold, Inc. (Class B) | 402,092 | |||||||||
9,049 | Newmont Mining Corp. | 408,562 | |||||||||
810,654 | |||||||||||
Property - Casualty Insurers (1.4%) | |||||||||||
7,139 | ACE Ltd. (Cayman Islands) | 432,409 | |||||||||
6,645 | Allstate Corp. (The) | 432,656 | |||||||||
8,297 | Chubb Corp. (The) | 438,994 | |||||||||
9,286 | Cincinnati Financial Corp. | 420,749 | |||||||||
17,934 | Progressive Corp. (The) | 434,361 | |||||||||
8,093 | St. Paul Travelers Companies, Inc. (The) | 434,513 | |||||||||
6,014 | XL Capital Ltd. (Class A) (Cayman Islands) | 433,128 | |||||||||
3,026,810 | |||||||||||
Publishing: Books/ Magazines (0.2%) | |||||||||||
7,698 | Meredith Corp. | 433,782 | |||||||||
Publishing: Newspapers (1.0%) | |||||||||||
11,143 | Dow Jones & Co., Inc. | 423,434 | |||||||||
7,077 | Gannett Co., Inc. | 427,875 | |||||||||
17,932 | New York Times Co. (The) (Class A) | 436,824 | |||||||||
8,595 | Scripps (E.W.) Co. (Class A) | 429,234 | |||||||||
13,652 | Tribune Co. | 420,209 | |||||||||
2,137,576 |
See Notes to Financial Statements
77
Equally-Weighted S&P 500
Portfolio of Investments n December 31, 2006 continued
NUMBER OF SHARES | VALUE | ||||||||||
Pulp & Paper (0.4%) | |||||||||||
12,463 | International Paper Co. | $ | 424,988 | ||||||||
14,249 | MeadWestvaco Corp. | 428,325 | |||||||||
853,313 | |||||||||||
Railroads (0.8%) | |||||||||||
5,722 | Burlington Northern Santa Fe Corp. | 422,341 | |||||||||
12,238 | CSX Corp. | 421,354 | |||||||||
8,478 | Norfolk Southern Corp. | 426,359 | |||||||||
4,615 | Union Pacific Corp. | 424,672 | |||||||||
1,694,726 | |||||||||||
Real Estate Development (0.4%) | |||||||||||
13,159 | CB Richard Ellis Group, Inc. (Class A)* | 436,879 | |||||||||
16,998 | Realogy Corp.* | 515,379 | |||||||||
952,258 | |||||||||||
Real Estate Investment Trusts (2.2%) | |||||||||||
7,679 | Apartment Investment & Management Co. (Class A) | 430,178 | |||||||||
7,384 | Archstone-Smith Trust | 429,823 | |||||||||
3,764 | Boston Properties, Inc. | 421,116 | |||||||||
9,059 | Equity Office Properties Trust | 436,372 | |||||||||
8,353 | Equity Residential | 423,915 | |||||||||
9,421 | Kimco Realty Corp. | 423,474 | |||||||||
11,229 | Plum Creek Timber Co., Inc. | 447,476 | |||||||||
6,971 | ProLogis | 423,628 | |||||||||
4,495 | Public Storage, Inc. | 438,263 | |||||||||
4,313 | Simon Property Group, Inc. | 436,864 | |||||||||
3,513 | Vornado Realty Trust | 426,830 | |||||||||
4,737,939 | |||||||||||
Recreational Products (0.8%) | |||||||||||
13,424 | Brunswick Corp. | 428,226 | |||||||||
8,049 | Electronic Arts Inc.* | 405,348 | |||||||||
16,048 | Hasbro, Inc. | 437,308 | |||||||||
18,978 | Mattel, Inc. | 430,041 | |||||||||
1,700,923 |
NUMBER OF SHARES | VALUE | ||||||||||
Regional Banks (2.0%) | |||||||||||
11,849 | Commerce Bancorp, Inc. | $ | 417,914 | ||||||||
7,265 | Compass Bancshares, Inc. | 433,357 | |||||||||
10,606 | Fifth Third Bancorp | 434,104 | |||||||||
10,495 | First Horizon National Corp. | 438,481 | |||||||||
3,550 | M&T Bank Corp. | 433,668 | |||||||||
9,062 | Marshall & Ilsley Corp. | 435,973 | |||||||||
7,305 | Northern Trust Corp. | 443,340 | |||||||||
14,296 | Synovus Financial Corp. | 440,746 | |||||||||
12,011 | U.S. Bancorp | 434,678 | |||||||||
5,300 | Zions Bancorporation | 436,932 | |||||||||
4,349,193 | |||||||||||
Restaurants (1.0%) | |||||||||||
10,718 | Darden Restaurants, Inc. | 430,542 | |||||||||
9,985 | McDonald's Corp. | 442,635 | |||||||||
11,802 | Starbucks Corp.* | 418,027 | |||||||||
12,962 | Wendy's International, Inc. | 428,913 | |||||||||
7,387 | Yum! Brands, Inc. | 434,356 | |||||||||
2,154,473 | |||||||||||
Savings Banks (0.4%) | |||||||||||
16,905 | Sovereign Bancorp, Inc. | 429,218 | |||||||||
9,583 | Washington Mutual, Inc. | 435,931 | |||||||||
865,149 | |||||||||||
Semiconductors (2.7%) | |||||||||||
19,596 | Advanced Micro Devices, Inc.* | 398,779 | |||||||||
21,662 | Altera Corp.* | 426,308 | |||||||||
13,300 | Analog Devices, Inc. | 437,171 | |||||||||
12,904 | Broadcom Corp. (Class A)* | 416,928 | |||||||||
20,456 | Intel Corp. | 414,234 | |||||||||
13,804 | Linear Technology Corp. | 418,537 | |||||||||
45,917 | LSI Logic Corp.* | 413,253 | |||||||||
14,041 | Maxim Integrated Products, Inc. | 429,935 | |||||||||
31,639 | Micron Technology, Inc.* | 441,680 | |||||||||
18,547 | National Semiconductor Corp. | 421,017 | |||||||||
11,559 | NVIDIA Corp.* | 427,799 | |||||||||
59,716 | PMC - Sierra, Inc.* | 400,694 | |||||||||
14,609 | Texas Instruments Inc. | 420,739 | |||||||||
17,443 | Xilinx, Inc. | 415,318 | |||||||||
5,882,392 |
See Notes to Financial Statements
78
Equally-Weighted S&P 500
Portfolio of Investments n December 31, 2006 continued
NUMBER OF SHARES | VALUE | ||||||||||
Services to the Health Industry (1.0%) | |||||||||||
6,313 | Express Scripts, Inc.* | $ | 452,011 | ||||||||
15,620 | IMS Health Inc. | 429,238 | |||||||||
5,979 | Laboratory Corp. of America Holdings* | 439,277 | |||||||||
8,326 | Medco Health Solutions, Inc.* | 444,941 | |||||||||
8,294 | Quest Diagnostics Inc. | 439,582 | |||||||||
2,205,049 | |||||||||||
Specialty Insurance (0.6%) | |||||||||||
4,909 | Ambac Financial Group, Inc. | 437,245 | |||||||||
5,967 | MBIA Inc. | 435,949 | |||||||||
6,977 | MGIC Investment Corp. | 436,342 | |||||||||
1,309,536 | |||||||||||
Specialty Stores (1.4%) | |||||||||||
20,749 | AutoNation, Inc.* | 442,369 | |||||||||
3,705 | AutoZone, Inc.* | 428,150 | |||||||||
10,655 | Bed Bath & Beyond Inc.* | 405,956 | |||||||||
10,764 | Office Depot, Inc.* | 410,862 | |||||||||
8,512 | OfficeMax Inc. | 422,621 | |||||||||
15,814 | Staples, Inc. | 422,234 | |||||||||
11,218 | Tiffany & Co. | 440,194 | |||||||||
2,972,386 | |||||||||||
Specialty Telecommunications (0.8%) | |||||||||||
10,134 | CenturyTel, Inc. | 442,450 | |||||||||
30,290 | Citizens Communications Co. | 435,267 | |||||||||
54,523 | Qwest Communications International, Inc.* | 456,358 | |||||||||
30,206 | Windstream Corp. | 429,529 | |||||||||
1,763,604 | |||||||||||
Steel (0.6%) | |||||||||||
4,899 | Allegheny Technologies, Inc. | 444,241 | |||||||||
7,312 | Nucor Corp. | 399,674 | |||||||||
5,776 | United States Steel Corp. | 422,457 | |||||||||
1,266,372 |
NUMBER OF SHARES | VALUE | ||||||||||
Telecommunication Equipment (1.4%) | |||||||||||
29,110 | ADC Telecommunications, Inc.* | $ | 422,968 | ||||||||
15,045 | Ciena Corp.* | 416,897 | |||||||||
20,710 | Comverse Technology, Inc.* | 437,188 | |||||||||
22,240 | Corning, Inc.* | 416,110 | |||||||||
20,930 | Motorola, Inc. | 430,321 | |||||||||
10,974 | QUALCOMM, Inc. | 414,707 | |||||||||
41,008 | Tellabs, Inc.* | 420,742 | |||||||||
2,958,933 | |||||||||||
Tobacco (0.6%) | |||||||||||
5,087 | Altria Group, Inc. | 436,566 | |||||||||
6,721 | Reynolds American, Inc. | 440,024 | |||||||||
7,684 | UST, Inc. | 447,209 | |||||||||
1,323,799 | |||||||||||
Tools/Hardware (0.6%) | |||||||||||
5,539 | Black & Decker Corp. | 442,954 | |||||||||
9,174 | Snap-On, Inc. | 437,049 | |||||||||
8,741 | Stanley Works (The) | 439,585 | |||||||||
1,319,588 | |||||||||||
Trucks/Construction/Farm Machinery (1.0%) | |||||||||||
7,012 | Caterpillar Inc. | 430,046 | |||||||||
3,560 | Cummins Inc. | 420,721 | |||||||||
4,535 | Deere & Co. | 431,142 | |||||||||
6,597 | PACCAR, Inc. | 428,145 | |||||||||
6,820 | Terex Corp.* | 440,436 | |||||||||
2,150,490 | |||||||||||
Wholesale Distributors (0.4%) | |||||||||||
9,174 | Genuine Parts Co. | 435,123 | |||||||||
6,105 | Grainger (W.W.), Inc. | 426,984 | |||||||||
862,107 | |||||||||||
Total Common Stocks (Cost $120,889,569) | 214,304,867 |
See Notes to Financial Statements
79
Equally-Weighted S&P 500
Portfolio of Investments n December 31, 2006 continued
NUMBER OF WARRANTS | VALUE | ||||||||||
Warrant (0.0%) | |||||||||||
Aerospace & Defense (0.0%) | |||||||||||
111 | Raytheon Co. (06/16/11) (Cost $1,354)* | $ | 1,989 | ||||||||
PRINCIPAL AMOUNT IN THOUSANDS |
Short-Term Investment (1.0%) | |||||||||||
Repurchase Agreement | |||||||||||
$ | 2,106 | Joint repurchase agreement account 5.265% due 01/02/07 (dated 12/29/06; proceeds $2,107,232) (b) (Cost $2,106,000) | 2,106,000 | ||||||||
Total Investments (Cost $122,996,923) (c) (d) | 99.9 | % | 216,412,856 | ||||||||
Other Assets in Excess of Liabilities | 0.1 | 308,513 | |||||||||
Net Assets | 100.0 | % | $ | 216,721,369 |
* Non-income producing security.
** A portion of this security is physically segregated in connection with open futures contracts in the amount of $82,500.
† Consists of one or more class of securities traded together as a unit. Stocks with attached paired trust shares.
(a) A security with total market value equal to $0 has been valued at its fair value as determined in good faith under procedures established by and under the general supervision of the Fund's Trustees.
(b) Collateralized by federal agency and U.S. Treasury obligations.
(c) Securities have been designated as collateral in an amount equal to $2,224,613 in connection with open futures contracts.
(d) The aggregate cost for federal income tax purposes is $123,358,011. The aggregate gross unrealized appreciation is $95,038,709, and the aggregate gross unrealized depreciation is $1,983,864, resulting in net unrealized appreciation of $93,054,845.
FUTURES CONTRACTS OPEN AT DECEMBER 31, 2006
NUMBER OF CONTRACTS | LONG/SHORT | DESCRIPTION, DELIVERY MONTH AND YEAR | UNDERLYING FACE AMOUNT AT VALUE | UNREALIZED APPRECIATION (DEPRECIATION) | |||||||||||||||
3 | Long | S&P Midcap 400 Index March 2007 | $ | 1,216,950 | $ | (20,035 | ) | ||||||||||||
3 | Long | S&P 500 Index March 2007 | 1,071,300 | 1,152 | |||||||||||||||
Net Unrealized Depreciation | $(18,883) |
See Notes to Financial Statements
80
Equally-Weighted S&P 500
Summary of Investments n December 31, 2006
SECTOR | VALUE | PERCENT OF NET ASSETS | |||||||||
Finance | $ | 37,768,083 | 17.4 | % | |||||||
Electronic Technology | 23,459,437 | 10.9 | |||||||||
Health Technology | 15,858,125 | 7.3 | |||||||||
Retail Trade | 15,261,354 | 7.1 | |||||||||
Consumer Non-Durables | 14,726,953 | 6.8 | |||||||||
Utilities | 13,774,408 | 6.4 | |||||||||
Consumer Services | 12,998,104 | 6.0 | |||||||||
Producer Manufacturing | 11,725,115 | 5.4 | |||||||||
Technology Services | 11,502,805 | 5.4 | |||||||||
Consumer Durables | 9,591,865 | 4.4 | |||||||||
Process Industries | 8,620,542 | 4.0 | |||||||||
Industrial Services | 6,982,201 | 3.2 | |||||||||
Energy Minerals | 6,980,967 | 3.1 |
SECTOR | VALUE | PERCENT OF NET ASSETS | |||||||||
Health Services | $ | 6,668,148 | 3.0 | % | |||||||
Communications | 4,390,830 | 2.0 | |||||||||
Commercial Services | 4,281,175 | 2.0 | |||||||||
Non-Energy Minerals | 3,774,431 | 1.8 | |||||||||
Distribution Services | 2,996,036 | 1.4 | |||||||||
Transportation | 2,946,277 | 1.3 | |||||||||
Repurchase Agreement | 2,106,000 | 1.0 | |||||||||
$ | 216,412,856 | * | 99.9 | % |
* Does not include open long futures contracts with an underlying face amount of $2,288,250 with net unrealized depreciation of $18,883.
See Notes to Financial Statements
81
Growth
Portfolio of Investments n December 31, 2006
NUMBER OF SHARES | VALUE | ||||||||||
Common Stocks (98.2%) | |||||||||||
Air Freight/Couriers (3.1%) | |||||||||||
18,096 | C.H. Robinson Worldwide, Inc. | $ | 739,945 | ||||||||
20,614 | Expeditors International of Washington, Inc. | 834,867 | |||||||||
1,574,812 | |||||||||||
Apparel/Footwear (1.5%) | |||||||||||
18,057 | Coach, Inc.* | 775,729 | |||||||||
Apparel/Footwear Retail (2.0%) | |||||||||||
14,409 | Abercrombie & Fitch Co. (Class A) | 1,003,299 | |||||||||
Beverages: Non-Alcoholic (1.5%) | |||||||||||
15,761 | Coca-Cola Co. (The) | 760,468 | |||||||||
Biotechnology (1.3%) | |||||||||||
8,467 | Genentech, Inc.* | 686,928 | |||||||||
Broadcasting (3.3%) | |||||||||||
62,627 | Grupo Televisa S.A. (ADR) (Mexico) | 1,691,555 | |||||||||
Casino/Gaming (3.1%) | |||||||||||
17,640 | International Game Technology | 814,968 | |||||||||
8,386 | Wynn Resorts, Ltd. | 787,026 | |||||||||
1,601,994 | |||||||||||
Chemicals: Agricultural (5.4%) | |||||||||||
52,492 | Monsanto Co. | 2,757,405 | |||||||||
Computer Peripherals (0.0%) | |||||||||||
20,100 | Seagate Technology Inc. (Escrow) (a)* | 0 | |||||||||
Computer Processing Hardware (1.7%) | |||||||||||
10,505 | Apple Computer, Inc.* | 891,244 | |||||||||
Construction Materials (1.5%) | |||||||||||
22,401 | Cemex SAB de C.V. (ADR) (Mexico)* | 758,946 | |||||||||
Data Processing Services (1.6%) | |||||||||||
35,422 | Western Union Co. | 794,161 |
NUMBER OF SHARES | VALUE | ||||||||||
Discount Stores (8.0%) | |||||||||||
29,347 | Costco Wholesale Corp. | $ | 1,551,576 | ||||||||
15,197 | Sears Holdings Corp.* | 2,552,032 | |||||||||
4,103,608 | |||||||||||
Environmental Services (1.4%) | |||||||||||
19,788 | Waste Management, Inc. | 727,605 | |||||||||
Financial Conglomerates (9.0%) | |||||||||||
29,894 | American Express Co. | 1,813,669 | |||||||||
57,855 | Brookfield Asset Management Inc. (Class A) (Canada) | 2,787,454 | |||||||||
4,601,123 | |||||||||||
Financial Publishing/ Services (4.7%) | |||||||||||
13,211 | McGraw-Hill Companies, Inc. (The) | 898,612 | |||||||||
21,616 | Moody's Corp. | 1,492,801 | |||||||||
2,391,413 | |||||||||||
Food: Major Diversified (1.5%) | |||||||||||
8,750 | Nestle SA (ADR) (Registered Shares) (Switzerland) | 775,938 | |||||||||
Home Improvement Chains (1.6%) | |||||||||||
20,242 | Home Depot, Inc. (The) | 812,919 | |||||||||
Hotels/Resorts/ Cruiselines (3.3%) | |||||||||||
34,990 | Marriott International, Inc. (Class A) | 1,669,723 | |||||||||
Internet Retail (3.2%) | |||||||||||
40,832 | Amazon.com, Inc.* | 1,611,231 | |||||||||
Internet Software/ Services (9.3%) | |||||||||||
6,578 | Google Inc. (Class A)* | 3,029,037 | |||||||||
67,424 | Yahoo! Inc.* | 1,722,009 | |||||||||
4,751,046 | |||||||||||
Investment Banks/ Brokers (1.4%) | |||||||||||
1,377 | Chicago Mercantile Exchange Holdings Inc. (Class A) | 701,926 |
See Notes to Financial Statements
82
Growth
Portfolio of Investments n December 31, 2006 continued
NUMBER OF SHARES | VALUE | ||||||||||
Managed Health Care (1.6%) | |||||||||||
15,165 | UnitedHealth Group Inc. | $ | 814,815 | ||||||||
Medical Specialties (1.3%) | |||||||||||
17,120 | Dade Behring Holdings, Inc. | 681,547 | |||||||||
Miscellaneous Commercial Services (3.9%) | |||||||||||
14,066 | Corporate Executive Board Co. (The) | 1,233,588 | |||||||||
18,733 | Iron Mountain Inc.* | 774,422 | |||||||||
2,008,010 | |||||||||||
Oil & Gas Production (3.6%) | |||||||||||
38,468 | Ultra Petroleum Corp. (Canada)* | 1,836,847 | |||||||||
Other Consumer Services (5.1%) | |||||||||||
86,124 | eBay Inc.* | 2,589,749 | |||||||||
Personnel Services (1.6%) | |||||||||||
17,069 | Monster Worldwide, Inc.* | 796,098 | |||||||||
Property - Casualty Insurers (3.2%) | |||||||||||
439 | Berkshire Hathaway Inc. (Class B)* | 1,609,374 | |||||||||
Recreational Products (1.3%) | |||||||||||
12,844 | Electronic Arts Inc.* | 646,824 | |||||||||
Restaurants (1.6%) | |||||||||||
17,788 | McDonald's Corp. | 788,542 | |||||||||
Semiconductors (1.1%) | |||||||||||
29,615 | Marvell Technology Group, Ltd. (Bermuda)* | 568,312 | |||||||||
Specialty Telecommunications (1.3%) | |||||||||||
19,911 | Crown Castle International Corp.* | 643,125 | |||||||||
Wireless Telecommunications (3.2%) | |||||||||||
36,426 | America Movil SAB de C.V. (Series L) (ADR) (Mexico) | 1,647,184 | |||||||||
Total Common Stocks (Cost $40,276,520) | 50,073,500 |
PRINCIPAL AMOUNT IN THOUSANDS | VALUE | ||||||||||
Short-Term Investment (1.9%) | |||||||||||
Repurchase Agreement | |||||||||||
$ | 951 | Joint repurchase agreement account 5.265% due 01/02/07 (dated 12/29/06; proceeds $951,556) (b) (Cost $951,000) | $ | 951,000 | |||||||
Total Investments (Cost $41,227,520) (c) | 100.1 | % | 51,024,500 | ||||||||
Liabilities in Excess of Other Assets | (0.1 | ) | (40,230 | ) | |||||||
Net Assets | 100.0 | % | $ | 50,984,270 |
ADR American Depositary Receipt.
* Non-income producing security.
(a) A security with total market value equal to $0 has been valued at its fair value as determined in good faith under procedures established by and under the general supervision of the Fund's Trustees.
(b) Collateralized by federal agency and U.S. Treasury obligations.
(c) The aggregate cost for federal income tax purposes is $41,321,891. The aggregate gross unrealized appreciation is $10,950,592 and the aggregate gross unrealized depreciation is $1,247,983, resulting in net unrealized appreciation of $9,702,609.
See Notes to Financial Statements
83
Growth
Summary of Investments n December 31, 2006
INDUSTRY | VALUE | PERCENT OF NET ASSETS | |||||||||
Internet Software/Services | $ | 4,751,046 | 9.3 | % | |||||||
Financial Conglomerates | 4,601,123 | 9.0 | |||||||||
Discount Stores | 4,103,608 | 8.0 | |||||||||
Chemicals: Agricultural | 2,757,405 | 5.4 | |||||||||
Other Consumer Services | 2,589,749 | 5.1 | |||||||||
Financial Publishing/ Services | 2,391,413 | 4.7 | |||||||||
Miscellaneous Commercial Services | 2,008,010 | 3.9 | |||||||||
Oil & Gas Production | 1,836,847 | 3.6 | |||||||||
Broadcasting | 1,691,555 | 3.3 | |||||||||
Hotels/Resorts/Cruiselines | 1,669,723 | 3.3 | |||||||||
Wireless Telecommunications | 1,647,184 | 3.2 | |||||||||
Internet Retail | 1,611,231 | 3.2 | |||||||||
Property - Casualty Insurers | 1,609,374 | 3.2 | |||||||||
Casino/Gaming | 1,601,994 | 3.1 | |||||||||
Air Freight/Couriers | 1,574,812 | 3.1 | |||||||||
Apparel/Footwear Retail | 1,003,299 | 2.0 | |||||||||
Repurchase Agreement | 951,000 | 1.9 |
INDUSTRY | VALUE | PERCENT OF NET ASSETS | |||||||||
Computer Processing Hardware | $ | 891,244 | 1.7 | % | |||||||
Managed Health Care | 814,815 | 1.6 | |||||||||
Home Improvement Chains | 812,919 | 1.6 | |||||||||
Personnel Services | 796,098 | 1.6 | |||||||||
Data Processing Services | 794,161 | 1.6 | |||||||||
Restaurants | 788,542 | 1.6 | |||||||||
Food: Major Diversified | 775,938 | 1.5 | |||||||||
Apparel/Footwear | 775,729 | 1.5 | |||||||||
Beverages: Non-Alcoholic | 760,468 | 1.5 | |||||||||
Construction Materials | 758,946 | 1.5 | |||||||||
Environmental Services | 727,605 | 1.4 | |||||||||
Investment Banks/Brokers | 701,926 | 1.4 | |||||||||
Biotechnology | 686,928 | 1.3 | |||||||||
Medical Specialties | 681,547 | 1.3 | |||||||||
Recreational Products | 646,824 | 1.3 | |||||||||
Specialty Telecommunications | 643,125 | 1.3 | |||||||||
Semiconductors | 568,312 | 1.1 | |||||||||
$ | 51,024,500 | 100.1 | % |
See Notes to Financial Statements
84
Focus Growth
Portfolio of Investments n December 31, 2006
NUMBER OF SHARES | VALUE | ||||||||||
Common Stocks (98.8%) | |||||||||||
Air Freight/Couriers (4.7%) | |||||||||||
90,369 | C.H. Robinson Worldwide, Inc. | $ | 3,695,188 | ||||||||
109,382 | Expeditors International of Washington, Inc. | 4,429,971 | |||||||||
8,125,159 | |||||||||||
Apparel/Footwear Retail (2.3%) | |||||||||||
56,941 | Abercrombie & Fitch Co. (Class A) | 3,964,802 | |||||||||
Biotechnology (1.5%) | |||||||||||
32,825 | Genentech, Inc.* | 2,663,092 | |||||||||
Broadcasting (4.7%) | |||||||||||
305,671 | Grupo Televisa S.A. (ADR) (Mexico) | 8,256,174 | |||||||||
Chemicals: Agricultural (6.0%) | |||||||||||
198,343 | Monsanto Co. | 10,418,958 | |||||||||
Data Processing Services (2.7%) | |||||||||||
212,158 | Western Union Co. | 4,756,583 | |||||||||
Discount Stores (9.5%) | |||||||||||
122,815 | Costco Wholesale Corp. | 6,493,229 | |||||||||
59,380 | Sears Holdings Corp.* | 9,971,683 | |||||||||
16,464,912 | |||||||||||
Financial Conglomerates (11.5%) | |||||||||||
140,486 | American Express Co. | 8,523,286 | |||||||||
236,729 | Brookfield Asset Management Inc. (Class A) (Canada) | 11,405,603 | |||||||||
19,928,889 | |||||||||||
Financial Publishing/ Services (4.5%) | |||||||||||
113,408 | Moody's Corp. | 7,831,956 | |||||||||
Hotels/Resorts/ Cruiselines (4.7%) | |||||||||||
169,493 | Marriott International, Inc. (Class A) | 8,088,206 |
NUMBER OF SHARES | VALUE | ||||||||||
Internet Retail (3.7%) | |||||||||||
163,820 | Amazon.com, Inc.* | $ | 6,464,337 | ||||||||
Internet Software/ Services (10.5%) | |||||||||||
24,936 | Google Inc. (Class A)* | 11,482,529 | |||||||||
268,089 | Yahoo! Inc.* | 6,846,993 | |||||||||
18,329,522 | |||||||||||
Investment Banks/ Brokers (2.1%) | |||||||||||
7,302 | Chicago Mercantile Exchange Holdings Inc. (Class A) | 3,722,195 | |||||||||
Managed Health Care (2.2%) | |||||||||||
69,576 | UnitedHealth Group Inc. | 3,738,318 | |||||||||
Miscellaneous Commercial Services (3.0%) | |||||||||||
59,427 | Corporate Executive Board Co. (The) | 5,211,748 | |||||||||
Oil & Gas Production (6.0%) | |||||||||||
216,783 | Ultra Petroleum Corp. (Canada)* | 10,351,388 | |||||||||
Other Consumer Services (5.9%) | |||||||||||
339,809 | eBay Inc.* | 10,218,057 | |||||||||
Personnel Services (2.2%) | |||||||||||
82,926 | Monster Worldwide Inc.* | 3,867,669 | |||||||||
Property - Casualty Insurers (3.9%) | |||||||||||
1,869 | Berkshire Hathaway Inc. (Class B)* | 6,851,754 | |||||||||
Recreational Products (1.3%) | |||||||||||
46,121 | Electronic Arts Inc.* | 2,322,654 | |||||||||
Specialty Telecommunications (1.8%) | |||||||||||
98,067 | Crown Castle International Corp.* | 3,167,564 |
See Notes to Financial Statements
85
Focus Growth
Portfolio of Investments n December 31, 2006 continued
NUMBER OF SHARES | VALUE | ||||||||||
Wireless Telecommunications (4.1%) | |||||||||||
159,134 | America Movil SAB de C.V. (Series L) (ADR) (Mexico) | $ | 7,196,039 | ||||||||
Total Common Stocks (Cost $149,050,997) | 171,939,976 |
PRINCIPAL AMOUNT IN THOUSANDS | VALUE | ||||||||||
Short-Term Investment (1.4%) Repurchase Agreement | |||||||||||
$ | 2,324 | Joint repurchase agreement account 5.265% due 01/02/07 (dated 12/29/06; proceeds $2,325,360) (a) (Cost $2,324,000) | $ | 2,324,000 | |||||||
Total Investments (Cost $151,374,997) (b) | 100.2 | % | 174,263,976 | ||||||||
Liabilities in Excess of Other Assets | (0.2 | ) | (287,783 | ) | |||||||
Net Assets | 100.0 | % | $ | 173,976,193 |
ADR American Depositary Receipt.
* Non-income producing security.
(a) Collateralized by federal agency and U.S. Treasury obligations.
(b) The aggregate cost for federal income tax purposes is $151,394,212. The aggregate gross unrealized appreciation is $30,294,509 and the aggregate gross unrealized depreciation is $7,424,745, resulting in net unrealized appreciation of $22,869,764.
See Notes to Financial Statements
86
Focus Growth
Summary of Investments n December 31, 2006
INDUSTRY | VALUE | PERCENT OF NET ASSETS | |||||||||
Financial Conglomerates | $ | 19,928,889 | 11.5 | % | |||||||
Internet Software/Services | 18,329,522 | 10.5 | |||||||||
Discount Stores | 16,464,912 | 9.5 | |||||||||
Chemicals: Agricultural | 10,418,958 | 6.0 | |||||||||
Oil & Gas Production | 10,351,388 | 6.0 | |||||||||
Other Consumer Services | 10,218,057 | 5.9 | |||||||||
Broadcasting | 8,256,174 | 4.7 | |||||||||
Air Freight/Couriers | 8,125,159 | 4.7 | |||||||||
Hotels/Resorts/Cruiselines | 8,088,206 | 4.7 | |||||||||
Financial Publishing/ Services | 7,831,956 | 4.5 | |||||||||
Wireless Telecommunications | 7,196,039 | 4.1 | |||||||||
Property - Casualty Insurers | 6,851,754 | 3.9 | |||||||||
Internet Retail | 6,464,337 | 3.7 |
INDUSTRY | VALUE | PERCENT OF NET ASSETS | |||||||||
Miscellaneous Commercial Services | $ | 5,211,748 | 3.0 | % | |||||||
Data Processing Services | 4,756,583 | 2.7 | |||||||||
Apparel/Footwear Retail | 3,964,802 | 2.3 | |||||||||
Personnel Services | 3,867,669 | 2.2 | |||||||||
Managed Health Care | 3,738,318 | 2.2 | |||||||||
Investment Banks/Brokers | 3,722,195 | 2.1 | |||||||||
Specialty Telecommunications | 3,167,564 | 1.8 | |||||||||
Biotechnology | 2,663,092 | 1.5 | |||||||||
Repurchase Agreement | 2,324,000 | 1.4 | |||||||||
Recreational Products | 2,322,654 | 1.3 | |||||||||
$ | 174,263,976 | 100.2 | % |
See Notes to Financial Statements
87
Capital Opportunities
Portfolio of Investments n December 31, 2006
NUMBER OF SHARES | VALUE | ||||||||||
Common Stocks (97.1%) | |||||||||||
Air Freight/Couriers (4.6%) | |||||||||||
18,505 | C.H. Robinson Worldwide, Inc. | $ | 756,669 | ||||||||
21,138 | Expeditors International of Washington, Inc. | 856,089 | |||||||||
1,612,758 | |||||||||||
Apparel/Footwear Retail (2.6%) | |||||||||||
13,279 | Abercrombie & Fitch Co. (Class A) | 924,617 | |||||||||
Biotechnology (0.5%) | |||||||||||
3,177 | Techne Corp.* | 176,165 | |||||||||
Broadcasting (3.4%) | |||||||||||
44,527 | Grupo Televisa S.A. (ADR) (Mexico) | 1,202,674 | |||||||||
Casino/Gaming (2.6%) | |||||||||||
9,691 | Wynn Resorts, Ltd. | 909,500 | |||||||||
Chemicals: Agricultural (5.3%) | |||||||||||
35,262 | Monsanto Co. | 1,852,313 | |||||||||
Discount Stores (8.0%) | |||||||||||
21,056 | Costco Wholesale Corp. | 1,113,231 | |||||||||
10,231 | Sears Holdings Corp.* | 1,718,092 | |||||||||
2,831,323 | |||||||||||
Financial Conglomerates (9.1%) | |||||||||||
21,277 | American Express Co. | 1,290,875 | |||||||||
40,121 | Brookfield Asset Management Inc. (Class A) (Canada) | 1,933,030 | |||||||||
3,223,905 | |||||||||||
Financial Publishing/ Services (3.0%) | |||||||||||
15,252 | Moody's Corp. | 1,053,303 | |||||||||
Home Building (2.4%) | |||||||||||
14,532 | Desarrolladora Homex S.A. de C.V. (ADR) (Mexico)* | 858,405 | |||||||||
Hotels/Resorts/ Cruiselines (3.4%) | |||||||||||
24,883 | Marriott International, Inc. (Class A) | 1,187,417 |
NUMBER OF SHARES | VALUE | ||||||||||
Internet Retail (3.1%) | |||||||||||
28,141 | Amazon.com, Inc.* | $ | 1,110,444 | ||||||||
Internet Software/ Services (9.5%) | |||||||||||
4,542 | Google, Inc. (Class A)* | 2,091,500 | |||||||||
48,891 | Yahoo!, Inc.* | 1,248,676 | |||||||||
3,340,176 | |||||||||||
Investment Banks/ Brokers (3.2%) | |||||||||||
15,226 | Greenhill & Co., Inc. | 1,123,679 | |||||||||
Investment Trusts/Mutual Funds (1.0%) | |||||||||||
24,439 | Aeroplan Income Fund† (Canada) | 355,442 | |||||||||
Medical Specialties (2.8%) | |||||||||||
24,567 | Dade Behring Holdings, Inc. | 978,012 | |||||||||
Miscellaneous Commercial Services (7.0%) | |||||||||||
17,797 | Corporate Executive Board Co. (The) | 1,560,797 | |||||||||
21,812 | Iron Mountain Inc.* | 901,708 | |||||||||
2,462,505 | |||||||||||
Oil & Gas Production (6.2%) | |||||||||||
45,881 | Ultra Petroleum Corp. (Canada)* | 2,190,818 | |||||||||
Other Consumer Services (5.1%) | |||||||||||
59,763 | eBay Inc.* | 1,797,073 | |||||||||
Personnel Services (2.1%) | |||||||||||
16,081 | Monster Worldwide, Inc.* | 750,018 | |||||||||
Property - Casualty Insurers (3.2%) | |||||||||||
307 | Berkshire Hathaway Inc. (Class B)* | 1,125,462 | |||||||||
Restaurants (2.4%) | |||||||||||
25,098 | Wendy's International, Inc. | 830,493 | |||||||||
Services to the Health Industry (1.1%) | |||||||||||
5,334 | Stericycle, Inc.* | 402,717 |
See Notes to Financial Statements
88
Capital Opportunities
Portfolio of Investments n December 31, 2006 continued
NUMBER OF SHARES | VALUE | ||||||||||
Specialty Telecommunications (2.2%) | |||||||||||
23,593 | Crown Castle International Corp.* | $ | 762,054 | ||||||||
Wireless Telecommunications (3.3%) | |||||||||||
25,771 | America Movil S.A. de C.V. (Series L) (ADR) (Mexico) | 1,165,365 | |||||||||
Total Common Stocks (Cost $26,078,992) | 34,226,638 |
PRINCIPAL AMOUNT IN THOUSANDS | VALUE | ||||||||||
Short-Term Investment (3.4%) Repurchase Agreement | |||||||||||
$ | 1,212 | Joint repurchase agreement account 5.265% due 01/02/07 (dated 12/29/06; proceeds $1,212,709) (a) (Cost $1,212,000) | $ | 1,212,000 | |||||||
Total Investments (Cost $27,290,992) (b) | 100.5 | % | 35,438,638 | ||||||||
Liabilities in Excess of Other Assets | (0.5 | ) | (199,993 | ) | |||||||
Net Assets | 100.0 | % | $ | 35,238,645 |
ADR American Depositary Receipt.
* Non-income producing security.
† Consists of one or more class of securities traded together as a unit; stocks with attached warrants.
(a) Collateralized by federal agency and U.S. Treasury obligations.
(b) The aggregate cost for federal income tax purposes is $27,293,302. The aggregate gross unrealized appreciation is $9,285,765 and the aggregate gross unrealized depreciation is $1,140,429, resulting in net unrealized appreciation of $8,145,336.
See Notes to Financial Statements
89
Capital Opportunities
Portfolio of Investments n December 31, 2006 continued
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT DECEMBER 31, 2006
CONTRACTS TO DELIVER | IN EXCHANGE FOR | DELIVERY DATE | UNREALIZED DEPRECIATION | ||||||||||||
$ | 7,361 | CAD | 8,535 | 01/02/07 | $ | (46 | ) | ||||||||
$ | 48,955 | CAD | 56,865 | 01/03/07 | (220 | ) | |||||||||
Total Unrealized Depreciation | $(266) |
Currency Abbreviation:
CAD Canadian Dollar
See Notes to Financial Statements
90
Capital Opportunities
Summary of Investments n December 31, 2006
INDUSTRY | VALUE | PERCENT OF NET ASSETS | |||||||||
Internet Software/Services | $ | 3,340,176 | 9.5 | % | |||||||
Financial Conglomerates | 3,223,905 | 9.1 | |||||||||
Discount Stores | 2,831,323 | 8.0 | |||||||||
Miscellaneous Commercial Services | 2,462,505 | 7.0 | |||||||||
Oil & Gas Production | 2,190,818 | 6.2 | |||||||||
Chemicals: Agricultural | 1,852,313 | 5.3 | |||||||||
Other Consumer Services | 1,797,073 | 5.1 | |||||||||
Air Freight/Couriers | 1,612,758 | 4.6 | |||||||||
Repurchase Agreement | 1,212,000 | 3.4 | |||||||||
Broadcasting | 1,202,674 | 3.4 | |||||||||
Hotels/Resorts/Cruiselines | 1,187,417 | 3.4 | |||||||||
Wireless Telecommunications | 1,165,365 | 3.3 | |||||||||
Property - Casualty Insurers | 1,125,462 | 3.2 | |||||||||
Investment Banks/ Brokers | 1,123,679 | 3.2 | |||||||||
Internet Retail | 1,110,444 | 3.1 | |||||||||
Financial Publishing/ Services | 1,053,303 | 3.0 |
INDUSTRY | VALUE | PERCENT OF NET ASSETS | |||||||||
Medical Specialties | $ | 978,012 | 2.8 | % | |||||||
Apparel/Footwear Retail | 924,617 | 2.6 | |||||||||
Casino/Gaming | 909,500 | 2.6 | |||||||||
Home Building | 858,405 | 2.4 | |||||||||
Restaurants | 830,493 | 2.4 | |||||||||
Specialty Telecommunications | 762,054 | 2.2 | |||||||||
Personnel Services | 750,018 | 2.1 | |||||||||
Services To The Health Industry | 402,717 | 1.1 | |||||||||
Investment Trusts/Mutual Funds | 355,442 | 1.0 | |||||||||
Biotechnology | 176,165 | 0.5 | |||||||||
$ | 35,438,638 | * | 100.5 | % |
* Does not include open forward foreign currency contracts with unrealized depreciation of $266.
See Notes to Financial Statements
91
Global Equity
Portfolio of Investments n December 31, 2006
NUMBER OF SHARES | VALUE | ||||||||||
Common Stocks (98.7%) Australia (3.2%) | |||||||||||
Data Processing Services | |||||||||||
191,000 | Computershare Ltd. | $ | 1,341,901 | ||||||||
Other Consumer Services | |||||||||||
146,000 | A.B.C. Learning Centres Ltd. | 968,120 | |||||||||
Total Australia | 2,310,021 | ||||||||||
Bermuda (4.3%) | |||||||||||
Insurance Brokers/Services | |||||||||||
33,900 | Willis Group Holdings Ltd. | 1,346,169 | |||||||||
Multi-Line Insurance | |||||||||||
37,700 | Axis Capital Holdings Ltd. | 1,258,049 | |||||||||
Semiconductors | |||||||||||
23,600 | Marvell Technology Group, Ltd.* | 452,884 | |||||||||
Total Bermuda | 3,057,102 | ||||||||||
British Virgin Islands (1.0%) | |||||||||||
Electronic Equipment/Instruments | |||||||||||
48,200 | Nam Tai Electronics, Inc. | 732,158 | |||||||||
Canada (1.6%) | |||||||||||
Biotechnology | |||||||||||
61,000 | Angiotech Pharmaceuticals, Inc.* | 501,115 | |||||||||
Food: Specialty/Candy | |||||||||||
71,600 | SunOpta Inc.* | 630,080 | |||||||||
Total Canada | 1,131,195 | ||||||||||
France (1.0%) | |||||||||||
Pharmaceuticals: Other | |||||||||||
15,800 | Ipsen S.A. | 734,326 | |||||||||
Germany (5.9%) | |||||||||||
Apparel/Footwear | |||||||||||
21,200 | Adidas AG | 1,055,516 | |||||||||
Finance/Rental/Leasing | |||||||||||
18,200 | Grenkeleasing AG | 866,043 | |||||||||
Financial Conglomerates | |||||||||||
22,200 | Hypo Real Estate Holding AG | 1,398,549 |
NUMBER OF SHARES | VALUE | ||||||||||
Medical Specialties | |||||||||||
4,500 | Fresenius AG | $ | 900,884 | ||||||||
Total Germany | 4,220,992 | ||||||||||
Greece (2.8%) | |||||||||||
Regional Banks | |||||||||||
30,776 | EFG Eurobank Ergasias | 1,114,394 | |||||||||
Wireless Telecommunications | |||||||||||
30,400 | Cosmote Mobile Telecommunications S.A. | 898,595 | |||||||||
Total Greece | 2,012,989 | ||||||||||
Hong Kong (4.7%) | |||||||||||
Agricultural Commodities/Milling | |||||||||||
1,638,600 | Global Bio-chem Technology Group Co., Ltd. | 551,894 | |||||||||
Apparel/Footwear Retail | |||||||||||
142,500 | Esprit Holdings Ltd. | 1,590,987 | |||||||||
Wholesale Distributors | |||||||||||
386,800 | Li & Fung Ltd. | 1,203,327 | |||||||||
Total Hong Kong | 3,346,208 | ||||||||||
India (1.0%) | |||||||||||
Construction Materials | |||||||||||
27,400 | Associated Cement Co., Ltd. | 674,784 | |||||||||
Israel (1.5%) | |||||||||||
Pharmaceuticals: Other | |||||||||||
33,700 | Teva Pharmaceutical Industries Ltd. (ADR) | 1,047,396 | |||||||||
Italy (3.0%) | |||||||||||
Major Banks | |||||||||||
245,900 | UniCredito Italiano SpA | 2,154,611 | |||||||||
Japan (3.1%) | |||||||||||
Home Building | |||||||||||
25,200 | Daito Trust Construction Co., Ltd. | 1,155,653 | |||||||||
Industrial Machinery | |||||||||||
64,800 | OSG Corp. | 1,061,314 | |||||||||
Total Japan | 2,216,967 |
See Notes to Financial Statements
92
Global Equity
Portfolio of Investments n December 31, 2006 continued
NUMBER OF SHARES | VALUE | ||||||||||
Mexico (1.1%) | |||||||||||
Beverages: Non-Alcoholic | |||||||||||
6,600 | Fomento Economico Mexicano, S.A.B. de C.V. (ADR) (Units)† | $ | 764,016 | ||||||||
Singapore (4.2%) | |||||||||||
Airlines | |||||||||||
95,100 | Singapore Airlines Ltd. | 1,084,697 | |||||||||
Electronic Components | |||||||||||
65,860 | Flextronics International Ltd.* | 756,073 | |||||||||
Marine Shipping | |||||||||||
752,000 | Cosco Corp Ltd. | 1,127,289 | |||||||||
Total Singapore | 2,968,059 | ||||||||||
South Africa (1.0%) | |||||||||||
Pharmaceuticals: Generic Drugs | |||||||||||
156,500 | Aspen Pharmacare Holdings Ltd.* | 722,054 | |||||||||
Spain (8.3%) | |||||||||||
Apparel/Footwear Retail | |||||||||||
14,900 | Industria de Diseno Textil, S.A. | 802,408 | |||||||||
Broadcasting | |||||||||||
47,000 | Gestevision Telecinco S.A. | 1,338,417 | |||||||||
Major Banks | |||||||||||
41,265 | Banco Bilbao Vizcaya Argentaria, S.A. | 993,228 | |||||||||
77,700 | Banco Santander Central Hispano S.A. | 1,449,815 | |||||||||
2,443,043 | |||||||||||
Major Telecommunications | |||||||||||
63,928 | Telefonica S.A. | 1,359,873 | |||||||||
Total Spain | 5,943,741 | ||||||||||
Switzerland (2.2%) | |||||||||||
Financial Conglomerates | |||||||||||
25,600 | UBS AG (Registered Shares) | 1,555,366 |
NUMBER OF SHARES | VALUE | ||||||||||
Taiwan (1.9%) | |||||||||||
Semiconductors | |||||||||||
126,482 | Taiwan Semiconductor Manufacturing Co., Ltd. (ADR) | $ | 1,382,448 | ||||||||
United Kingdom (10.3%) | |||||||||||
Beverages: Alcoholic | |||||||||||
77,800 | SABMiller PLC | 1,789,814 | |||||||||
Investment Managers | |||||||||||
163,494 | Man Group PLC | 1,673,348 | |||||||||
451,000 | RAB Capital PLC | 927,164 | |||||||||
2,600,512 | |||||||||||
Investment Trusts/Mutual Funds | |||||||||||
74,000 | Hirco PLC†* | 623,004 | |||||||||
Major Banks | |||||||||||
51,000 | Standard Chartered PLC | 1,489,805 | |||||||||
Pharmaceuticals: Other | |||||||||||
42,072 | Shire PLC | 872,328 | |||||||||
Total United Kingdom | 7,375,463 | ||||||||||
United States (36.6%) | |||||||||||
Apparel/Footwear | |||||||||||
22,600 | Under Armour, Inc. (Class A)* | 1,140,170 | |||||||||
Beverages: Non-Alcoholic | |||||||||||
13,500 | PepsiCo, Inc. | 844,425 | |||||||||
Biotechnology | |||||||||||
21,600 | Amgen Inc.* | 1,475,496 | |||||||||
13,100 | Genentech, Inc.* | 1,062,803 | |||||||||
11,915 | Gilead Sciences, Inc.* | 773,641 | |||||||||
3,311,940 | |||||||||||
Broadcasting | |||||||||||
47,300 | XM Satellite Radio Holdings Inc. (Class A)* | 683,485 | |||||||||
Computer Processing Hardware | |||||||||||
20,360 | Apple Computer, Inc.* | 1,727,342 | |||||||||
Data Processing Services | |||||||||||
37,600 | Western Union Co. | 842,992 | |||||||||
Electric Utilities | |||||||||||
20,100 | Constellation Energy Group | 1,384,287 |
See Notes to Financial Statements
93
Global Equity
Portfolio of Investments n December 31, 2006 continued
NUMBER OF SHARES | VALUE | ||||||||||
Electronic Components | |||||||||||
21,700 | Amphenol Corp. (Class A) | $ | 1,347,136 | ||||||||
Electronic Equipment/Instruments | |||||||||||
19,100 | Mine Safety Appliances Co. | 700,015 | |||||||||
Financial Conglomerates | |||||||||||
15,000 | Prudential Financial, Inc. | 1,287,900 | |||||||||
Hospital/Nursing Management | |||||||||||
22,600 | United Surgical Partners International, Inc.* | 640,710 | |||||||||
Investment Banks/Brokers | |||||||||||
7,100 | Goldman Sachs Group, Inc. (The) | 1,415,385 | |||||||||
12,200 | Merrill Lynch & Co., Inc. | 1,135,820 | |||||||||
2,551,205 | |||||||||||
Investment Trusts/Mutual Funds | |||||||||||
31,200 | KKR Private Equity Investors LP (Units)† | 712,920 | |||||||||
Life/Health Insurance | |||||||||||
24,500 | AFLAC, Inc. | 1,127,000 | |||||||||
Media Conglomerates | |||||||||||
82,500 | News Corp. (Class A) | 1,772,100 | |||||||||
Medical Specialties | |||||||||||
13,350 | Bard (C.R.), Inc. | 1,107,650 | |||||||||
25,210 | Thermo Fisher Scientific, Inc.* | 1,141,761 | |||||||||
2,249,411 | |||||||||||
Medical/Nursing Services | |||||||||||
33,100 | Matria Healthcare, Inc.* | 950,963 | |||||||||
Miscellaneous Commercial Services | |||||||||||
27,200 | FTI Consulting Inc.* | 758,608 | |||||||||
Real Estate Development | |||||||||||
22,000 | CB Richard Ellis Group, Inc. (Class A)* | 730,400 | |||||||||
Specialty Stores | |||||||||||
32,200 | Staples, Inc. | 859,740 | |||||||||
Telecommunication Equipment | |||||||||||
30,280 | Corning, Inc.* | 566,539 | |||||||||
Total United States | 26,189,288 | ||||||||||
Total Common Stocks (Cost $58,178,991) | 70,539,184 |
PRINCIPAL AMOUNT IN THOUSANDS | VALUE | ||||||||||
Short-Term Investment (2.2%) | |||||||||||
Repurchase Agreement | |||||||||||
$ | 1,593 | Joint repurchase agreement account 5.265% due 01/02/07 (dated 12/29/06; proceeds $1,593,932) (a) (Cost $1,593,000) | $ | 1,593,000 | |||||||
Total Investments (Cost $59,771,991) (b) | 100.9 | % | 72,132,184 | ||||||||
Liabilities in Excess of Other Assets | (0.9 | ) | (655,125 | ) | |||||||
Net Assets | 100.0 | % | $ | 71,477,059 |
ADR American Depositary Receipt.
* Non-income producing security.
† Consists of one or more class of securities traded together as a unit; stocks with attached warrants.
(a) Collateralized by federal agency and U.S. Treasury obligations.
(b) The aggregate cost for federal income tax purposes is $59,771,991. The aggregate gross unrealized appreciation is $14,653,994 and the aggregate gross unrealized depreciation is $2,293,801, resulting in net unrealized appreciation of $12,360,193.
See Notes to Financial Statements
94
Global Equity
Portfolio of Investments n December 31, 2006 continued
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT DECEMBER 31, 2006:
CONTRACTS TO DELIVER | IN EXCHANGE FOR | DELIVERY DATE | UNREALIZED APPRECIATION | ||||||||||||
$ | 313,373 | EUR | 238,307 | 01/02/07 | $ | 1,096 | |||||||||
$ | 247,315 | EUR | 187,772 | 01/03/07 | 470 | ||||||||||
Total Unrealized Appreciation | $1,566 |
Currency Abbreviation:
EUR Euro.
See Notes to Financial Statements
95
Global Equity
Summary of Investments n December 31, 2006
INDUSTRY | VALUE | PERCENT OF NET ASSETS | |||||||||
Major Banks | $ | 6,087,459 | 8.5 | % | |||||||
Financial Conglomerates | 4,241,815 | 5.9 | |||||||||
Biotechnology | 3,813,055 | 5.3 | |||||||||
Medical Specialties | 3,150,295 | 4.4 | |||||||||
Pharmaceuticals: Other | 2,654,050 | 3.7 | |||||||||
Investment Managers | 2,600,512 | 3.6 | |||||||||
Investment Banks/Brokers | 2,551,205 | 3.6 | |||||||||
Apparel/Footwear Retail | 2,393,395 | 3.3 | |||||||||
Apparel/Footwear | 2,195,686 | 3.1 | |||||||||
Data Processing Services | 2,184,893 | 3.1 | |||||||||
Electronic Components | 2,103,209 | 2.9 | |||||||||
Broadcasting | 2,021,902 | 2.8 | |||||||||
Semiconductors | 1,835,332 | 2.6 | |||||||||
Beverages: Alcoholic | 1,789,814 | 2.5 | |||||||||
Media Conglomerates | 1,772,100 | 2.5 | |||||||||
Computer Processing Hardware | 1,727,342 | 2.4 | |||||||||
Beverages: Non-Alcoholic | 1,608,441 | 2.2 | |||||||||
Repurchase Agreement | 1,593,000 | 2.2 | |||||||||
Electronic Equipment/ Instruments | 1,432,173 | 2.0 | |||||||||
Electric Utilities | 1,384,287 | 1.9 | |||||||||
Major Telecommunications | 1,359,873 | 1.9 | |||||||||
Insurance Brokers/Services | 1,346,169 | 1.9 | |||||||||
Investment Trusts/Mutual Funds | 1,335,924 | 1.9 |
INDUSTRY | VALUE | PERCENT OF NET ASSETS | |||||||||
Multi-Line Insurance | $ | 1,258,049 | 1.8 | % | |||||||
Wholesale Distributors | 1,203,327 | 1.7 | |||||||||
Home Building | 1,155,653 | 1.6 | |||||||||
Marine Shipping | 1,127,289 | 1.6 | |||||||||
Life/Health Insurance | 1,127,000 | 1.6 | |||||||||
Regional Banks | 1,114,394 | 1.6 | |||||||||
Airlines | 1,084,697 | 1.5 | |||||||||
Industrial Machinery | 1,061,314 | 1.5 | |||||||||
Other Consumer Services | 968,120 | 1.4 | |||||||||
Medical/Nursing Services | 950,963 | 1.3 | |||||||||
Wireless Telecommunications | 898,595 | 1.3 | |||||||||
Finance/Rental/Leasing | 866,043 | 1.2 | |||||||||
Specialty Stores | 859,740 | 1.2 | |||||||||
Miscellaneous Commercial Services | 758,608 | 1.1 | |||||||||
Real Estate Development | 730,400 | 1.0 | |||||||||
Pharmaceuticals: Generic Drugs | 722,054 | 1.0 | |||||||||
Construction Materials | 674,784 | 0.9 | |||||||||
Hospital/Nursing Management | 640,710 | 0.9 | |||||||||
Food: Specialty/Candy | 630,080 | 0.9 | |||||||||
Telecommunication Equipment | 566,539 | 0.8 | |||||||||
Agricultural Commodities/ Milling | 551,894 | 0.8 | |||||||||
$ | 72,132,184 | * | 100.9 | % |
* Does not include open forward foreign currency contracts with total unrealized appreciation of $1,566.
See Notes to Financial Statements
96
Developing Growth
Portfolio of Investments n December 31, 2006
NUMBER OF SHARES | VALUE | ||||||||||
Common Stocks (95.9%) | |||||||||||
Advertising/Marketing Services (2.7%) | |||||||||||
8,227 | Focus Media Holdings Ltd. (ADR) (China)* | $ | 546,190 | ||||||||
13,034 | Lamar Advertising Co. (Class A)* | 852,293 | |||||||||
1,398,483 | |||||||||||
Air Freight/Couriers (4.8%) | |||||||||||
28,354 | C.H. Robinson Worldwide, Inc. | 1,159,395 | |||||||||
32,652 | Expeditors International of Washington, Inc. | 1,322,406 | |||||||||
2,481,801 | |||||||||||
Apparel/Footwear Retail (4.5%) | |||||||||||
21,906 | Abercrombie & Fitch Co. (Class A) | 1,525,315 | |||||||||
34,306 | Urban Outfitters, Inc.* | 790,067 | |||||||||
2,315,382 | |||||||||||
Biotechnology (3.0%) | |||||||||||
18,213 | Gen-Probe Inc.* | 953,815 | |||||||||
10,530 | Techne Corp.* | 583,889 | |||||||||
1,537,704 | |||||||||||
Broadcasting (3.3%) | |||||||||||
63,789 | Grupo Televisa S.A. (Sponsored ADR) (Mexico) | 1,722,941 | |||||||||
Casino/Gaming (3.8%) | |||||||||||
8,485 | Station Casinos, Inc. | 692,970 | |||||||||
13,843 | Wynn Resorts, Ltd. | 1,299,166 | |||||||||
1,992,136 | |||||||||||
Chemicals: Major Diversified (1.1%) | |||||||||||
13,065 | Cabot Corp. | 569,242 | |||||||||
Construction Materials (1.1%) | |||||||||||
12,959 | Florida Rock Industries, Inc. | 557,885 | |||||||||
Electronic Production Equipment (1.4%) | |||||||||||
17,722 | Tessera Technologies, Inc.* | 714,905 |
NUMBER OF SHARES | VALUE | ||||||||||
Electronics/Appliances (1.0%) | |||||||||||
20,442 | Eastman Kodak Co. | $ | 527,404 | ||||||||
Financial Conglomerates (1.9%) | |||||||||||
5,407 | Brookfield Asset Management Inc. (Class A) (Canada) | 260,509 | |||||||||
25,491 | Leucadia National Corp. | 718,846 | |||||||||
979,355 | |||||||||||
Gas Distributors (1.0%) | |||||||||||
6,424 | Questar Corp. | 533,513 | |||||||||
Home Building (3.4%) | |||||||||||
19,737 | Desarrolladora Homex S.A. de C.V. (ADR) (Mexico)* | 1,165,865 | |||||||||
957 | NVR, Inc.* | 617,265 | |||||||||
1,783,130 | |||||||||||
Hotels/Resorts/Cruiselines (5.6%) | |||||||||||
15,842 | Choice Hotels International, Inc. | 666,948 | |||||||||
16,955 | Hilton Hotels Corp. | 591,730 | |||||||||
65,539 | Intercontinental Hotels (ADR) (United Kingdom) | 1,654,860 | |||||||||
2,913,538 | |||||||||||
Insurance Brokers/ Services (2.9%) | |||||||||||
15,617 | Brown & Brown, Inc. | 440,555 | |||||||||
26,983 | ChoicePoint, Inc.* | 1,062,590 | |||||||||
1,503,145 | |||||||||||
Internet Retail (3.2%) | |||||||||||
42,379 | Amazon.com, Inc.* | 1,672,275 | |||||||||
Internet Software/ Services (1.4%) | |||||||||||
6,376 | Baidu.com, Inc. (ADR) (Cayman Islands)* | 718,703 | |||||||||
Investment Managers (2.7%) | |||||||||||
33,887 | Calamos Asset Management Inc. (Class A) | 909,188 | |||||||||
22,152 | Janus Capital Group, Inc. | 478,262 | |||||||||
1,387,450 |
See Notes to Financial Statements
97
Developing Growth
Portfolio of Investments n December 31, 2006 continued
NUMBER OF SHARES | VALUE | ||||||||||
Investment Trusts/ Mutual Funds (1.0%) | |||||||||||
36,265 | Aeroplan Income Fund† (Canada) | $ | 527,440 | ||||||||
Medical Specialties (2.7%) | |||||||||||
34,856 | Dade Behring Holdings, Inc. | 1,387,617 | |||||||||
Miscellaneous Commercial Services (6.3%) | |||||||||||
22,032 | Corporate Executive Board Co. (The) | 1,932,206 | |||||||||
32,581 | Iron Mountain Inc.* | 1,346,899 | |||||||||
3,279,105 | |||||||||||
Miscellaneous Manufacturing (1.6%) | |||||||||||
25,918 | Pentair, Inc. | 813,825 | |||||||||
Oil & Gas Production (6.9%) | |||||||||||
36,582 | Southwestern Energy Co.* | 1,282,199 | |||||||||
47,627 | Ultra Petroleum Corp. (Canada)* | 2,274,189 | |||||||||
3,556,388 | |||||||||||
Other Consumer Services (4.5%) | |||||||||||
13,627 | Apollo Group, Inc. (Class A)* | 531,044 | |||||||||
32,484 | Expedia, Inc.* | 681,514 | |||||||||
7,381 | ITT Educational Services, Inc.* | 489,877 | |||||||||
11,639 | Weight Watchers International, Inc. | 611,397 | |||||||||
2,313,832 | |||||||||||
Packaged Software (1.5%) | |||||||||||
20,870 | Salesforce.com Inc.* | 760,712 | |||||||||
Personnel Services (3.1%) | |||||||||||
34,309 | Monster Worldwide, Inc.* | 1,600,172 | |||||||||
Property - Casualty Insurers (1.2%) | |||||||||||
1,644 | Alleghany Corp.* | 597,758 | |||||||||
Pulp & Paper (1.0%) | |||||||||||
17,017 | MeadWestvaco Corp. | 511,531 | |||||||||
Real Estate Development (2.2%) | |||||||||||
19,483 | Realogy Corp.* | 590,725 | |||||||||
10,372 | St. Joe Co. (The) | 555,628 | |||||||||
1,146,353 |
NUMBER OF SHARES | VALUE | ||||||||||
Recreational Products (1.0%) | |||||||||||
30,743 | Activision, Inc.* | $ | 530,009 | ||||||||
Restaurants (2.3%) | |||||||||||
35,937 | Wendy's International, Inc. | 1,189,155 | |||||||||
Savings Banks (1.6%) | |||||||||||
18,147 | People's Bank | 809,719 | |||||||||
Semiconductors (1.7%) | |||||||||||
44,693 | Marvell Technology Group, Ltd. (Bermuda)* | 857,659 | |||||||||
Services to the Health Industry (2.3%) | |||||||||||
15,867 | Stericycle, Inc.* | 1,197,959 | |||||||||
Specialty Stores (0.9%) | |||||||||||
16,174 | PETsMART, Inc. | 466,782 | |||||||||
Specialty Telecommunications (2.1%) | |||||||||||
33,392 | Crown Castle International Corp.* | 1,078,562 | |||||||||
Wireless Telecommunications (3.2%) | |||||||||||
25,256 | NII Holdings, Inc.* | 1,627,497 | |||||||||
Total Common Stocks (Cost $41,860,999) | 49,561,067 | ||||||||||
PRINCIPAL AMOUNT IN THOUSANDS | |||||||||||
Short-Term Investment (4.9%) | |||||||||||
Repurchase Agreement | |||||||||||
$ | 2,519 | Joint repurchase agreement account 5.265% due 01/02/07 (dated 12/29/06; proceeds $2,520,474) (a) (Cost $2,519,000) | 2,519,000 | ||||||||
Total Investments (Cost $44,379,999) (b) | 100.8 | % | 52,080,067 | ||||||||
Liabilities in Excess of Other Assets | (0.8 | ) | (422,342 | ) | |||||||
Net Assets | 100.0 | % | $ | 51,657,725 |
See Notes to Financial Statements
98
Developing Growth
Portfolio of Investments n December 31, 2006 continued
ADR American Depositary Receipt.
* Non-income producing security.
† Consists of one or more class of securities traded together as an unit; stocks with attached warrants.
(a) Collateralized by federal agency and U.S. Treasury obligations.
(b) The aggregate cost for federal income tax purposes is $44,411,628. The aggregate gross unrealized appreciation is $9,028,204 and the aggregate gross unrealized depreciation is $1,359,765, resulting in net unrealized appreciation of $7,668,439.
FORWARD FOREIGN CURRENCY CONTRACTS OPEN DECEMBER 31, 2006:
CONTRACTS TO DELIVER | IN EXCHANGE FOR | DELIVERY DATE | UNREALIZED DEPRECIATION | ||||||||||||
$ | 10,893 | CAD | 12,631 | 01/02/07 | $ | (68 | ) | ||||||||
$ | 72,464 | CAD | 84,172 | 01/03/07 | (325 | ) | |||||||||
Total Unrealized Depreciation | $ | (393 | ) |
Currency Abbreviation:
CAD Canadian Dollar.
See Notes to Financial Statements
99
Developing Growth
Summary of Investments n December 31, 2006
INDUSTRY | VALUE | PERCENT OF NET ASSETS | |||||||||
Oil & Gas Production | $ | 3,556,388 | 6.9 | % | |||||||
Miscellaneous Commercial Services | 3,279,105 | 6.3 | |||||||||
Hotels/Resorts/Cruiselines | 2,913,538 | 5.6 | |||||||||
Repurchase Agreement | 2,519,000 | 4.9 | |||||||||
Air Freight/Couriers | 2,481,801 | 4.8 | |||||||||
Apparel/Footwear Retail | 2,315,382 | 4.5 | |||||||||
Other Consumer Services | 2,313,832 | 4.5 | |||||||||
Casino/Gaming | 1,992,136 | 3.8 | |||||||||
Home Building | 1,783,130 | 3.4 | |||||||||
Broadcasting | 1,722,941 | 3.3 | |||||||||
Internet Retail | 1,672,275 | 3.2 | |||||||||
Wireless Telecommunications | 1,627,497 | 3.2 | |||||||||
Personnel Services | 1,600,172 | 3.1 | |||||||||
Biotechnology | 1,537,704 | 3.0 | |||||||||
Insurance Brokers/ Services | 1,503,145 | 2.9 | |||||||||
Advertising/Marketing Services | 1,398,483 | 2.7 | |||||||||
Medical Specialties | 1,387,617 | 2.7 | |||||||||
Investment Managers | 1,387,450 | 2.7 | |||||||||
Services To The Health Industry | 1,197,959 | 2.3 |
INDUSTRY | VALUE | PERCENT OF NET ASSETS | |||||||||
Restaurants | $ | 1,189,155 | 2.3 | % | |||||||
Real Estate Development | 1,146,353 | 2.2 | |||||||||
Specialty Telecommunications | 1,078,562 | 2.1 | |||||||||
Financial Conglomerates | 979,355 | 1.9 | |||||||||
Semiconductors | 857,659 | 1.7 | |||||||||
Miscellaneous Manufacturing | 813,825 | 1.6 | |||||||||
Savings Banks | 809,719 | 1.6 | |||||||||
Packaged Software | 760,712 | 1.5 | |||||||||
Internet Software/Services | 718,703 | 1.4 | |||||||||
Electronic Production Equipment | 714,905 | 1.4 | |||||||||
Property - Casualty Insurers | 597,758 | 1.2 | |||||||||
Chemicals: Major Diversified | 569,242 | 1.1 | |||||||||
Construction Materials | 557,885 | 1.1 | |||||||||
Gas Distributors | 533,513 | 1.0 | |||||||||
Recreational Products | 530,009 | 1.0 | |||||||||
Investment Trusts/Mutual Funds | 527,440 | 1.0 | |||||||||
Electronics/Appliances | 527,404 | 1.0 | |||||||||
Pulp & Paper | 511,531 | 1.0 | |||||||||
Specialty Stores | 466,782 | 0.9 | |||||||||
$ | 52,080,067 | * | 100.8 | % |
* Does not include open forward foreign currency contracts with total unrealized depreciation of $393.
See Notes to Financial Statements
100
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Morgan Stanley Select Dimensions Investment Series
Financial Statements
Statements of Assets and Liabilities
For the year ended December 31, 2006
Money Market | Flexible Income | Balanced Growth | Utilities | Dividend Growth | Equally- Weighted S&P 500 | ||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||
Investments in securities, at value* | $ | 120,801,579 | $ | 54,438,915 | $ | 87,095,392 | $ | 70,323,596 | $ | 253,524,376 | $ | 215,527,932 | |||||||||||||||
Investment in affiliates** | — | — | 675,564 | — | — | 884,924 | |||||||||||||||||||||
Cash | 7,090 | 43,218 | 368 | 19 | 547 | 527 | |||||||||||||||||||||
Receivable for: | |||||||||||||||||||||||||||
Investments sold | — | — | — | 110,666 | 3,358,459 | 410,850 | |||||||||||||||||||||
Interest | 342,382 | 646,142 | 277,508 | 540 | 6,598 | 924 | |||||||||||||||||||||
Dividends | — | — | 60,071 | 139,744 | 236,837 | 288,962 | |||||||||||||||||||||
Shares of beneficial interest sold | 14,230 | — | 43,107 | — | — | — | |||||||||||||||||||||
Foreign withholding taxes reclaimed | — | — | — | — | 31,688 | — | |||||||||||||||||||||
Variation margin | — | 906 | — | — | — | — | |||||||||||||||||||||
Unrealized appreciation on open forward foreign currency contracts | — | 24,748 | — | — | — | — | |||||||||||||||||||||
Unrealized appreciation on open swap contracts | — | 1,506 | 818 | — | — | — | |||||||||||||||||||||
Prepaid expenses and other assets | 4,709 | 937 | 146,743 | 124,886 | 38,382 | 18,639 | |||||||||||||||||||||
Total Assets | 121,169,990 | 55,156,372 | 88,299,571 | 70,699,451 | 257,196,887 | 217,132,758 | |||||||||||||||||||||
Liabilities: | |||||||||||||||||||||||||||
Payable for: | |||||||||||||||||||||||||||
Investments purchased | — | 102,960 | 3,389,396 | 106,535 | 1,295,020 | — | |||||||||||||||||||||
Shares of beneficial interest redeemed | 107,088 | 22,669 | 58,663 | 141,189 | 287,563 | 290,702 | |||||||||||||||||||||
Investment advisory fee | 43,028 | 14,939 | 37,488 | 34,284 | 118,173 | 22,296 | |||||||||||||||||||||
Variation margin | — | — | 719 | — | — | 12,300 | |||||||||||||||||||||
Distribution fee | 14,590 | 5,445 | 6,458 | 3,716 | 11,554 | 24,100 | |||||||||||||||||||||
Administration fee | 4,781 | 3,735 | 5,767 | 4,812 | 17,454 | 14,864 | |||||||||||||||||||||
Periodic payments on swap contracts | — | 96 | 40 | — | — | — | |||||||||||||||||||||
Transfer agent fee | 500 | 500 | 500 | 500 | 500 | 500 | |||||||||||||||||||||
Unrealized depreciation on open forward foreign currency contracts | — | 3,401 | — | — | — | — | |||||||||||||||||||||
Unrealized depreciation on open swap contracts | — | 154 | 74 | — | — | — | |||||||||||||||||||||
Accrued expenses and other payables | 29,869 | 71,886 | 34,612 | 21,677 | 43,019 | 46,627 | |||||||||||||||||||||
Total Liabilities | 199,856 | 225,785 | 3,533,717 | 312,713 | 1,773,283 | 411,389 | |||||||||||||||||||||
Net Assets | $ | 120,970,134 | $ | 54,930,587 | $ | 84,765,854 | $ | 70,386,738 | $ | 255,423,604 | $ | 216,721,369 | |||||||||||||||
Composition of Net Assets: | |||||||||||||||||||||||||||
Paid-in-capital | $ | 120,970,089 | $ | 79,301,201 | $ | 65,426,827 | $ | 59,726,686 | $ | 295,988,749 | $ | 102,857,336 | |||||||||||||||
Accumulated undistributed net investment income (net investment loss) | 45 | (71,861 | ) | (159,787 | ) | 2,961 | 10,812 | 2,733,714 | |||||||||||||||||||
Accumulated net realized gain (loss) | — | (21,120,093 | ) | 5,982,117 | (20,867,805 | ) | (74,307,010 | ) | 17,733,269 | ||||||||||||||||||
Net unrealized appreciation (depreciation) | — | (3,178,660 | ) | 13,516,697 | 31,524,896 | 33,731,053 | 93,397,050 | ||||||||||||||||||||
Net Assets | $ | 120,970,134 | $ | 54,930,587 | $ | 84,765,854 | $ | 70,386,738 | $ | 255,423,604 | $ | 216,721,369 | |||||||||||||||
*Cost | $ | 120,801,579 | $ | 57,718,591 | $ | 73,901,246 | $ | 38,798,700 | $ | 219,793,323 | $ | 122,770,194 | |||||||||||||||
Class X Shares: | |||||||||||||||||||||||||||
Net Assets | $ | 46,731,017 | $ | 29,165,724 | $ | 54,203,906 | $ | 52,891,620 | $ | 201,169,012 | $ | 103,824,266 | |||||||||||||||
Shares Outstanding (unlimited authorized shares of $.01 par value) | 46,730,975 | 3,998,039 | 3,085,428 | 2,091,455 | 11,117,794 | 3,740,812 | |||||||||||||||||||||
Net Asset Value Per Share | $ | 1.00 | $ | 7.30 | $ | 17.57 | $ | 25.29 | $ | 18.09 | $ | 27.75 | |||||||||||||||
Class Y Shares: | |||||||||||||||||||||||||||
Net Assets | $ | 74,239,117 | $ | 25,764,863 | $ | 30,561,948 | $ | 17,495,118 | $ | 54,254,592 | $ | 112,897,103 | |||||||||||||||
Shares Outstanding (unlimited authorized shares of $.01 par value) | 74,239,114 | 3,543,398 | 1,743,982 | 692,306 | 3,002,863 | 4,109,842 | |||||||||||||||||||||
Net Asset Value Per Share | $ | 1.00 | $ | 7.27 | $ | 17.52 | $ | 25.27 | $ | 18.07 | $ | 27.47 |
** Investments in affiliates cost $338,480 and $226,729, respectively.
† Net of capital gain country tax of $1,254.
†† Net of $3,658 deferred capital gain country tax.
See Notes to Financial Statements
102
Growth | Focus Growth | Capital Opportunities | Global Equity | Developing Growth | |||||||||||||||||||
Assets: | |||||||||||||||||||||||
Investments in securities, at value* | $ | 51,024,500 | $ | 174,263,976 | $ | 35,438,638 | $ | 72,132,184 | $ | 52,080,067 | |||||||||||||
Investment in affiliates** | — | — | — | — | — | ||||||||||||||||||
Cash | 353 | 144 | 637 | 64,044 | 758 | ||||||||||||||||||
Receivable for: | |||||||||||||||||||||||
Investments sold | — | — | — | — | — | ||||||||||||||||||
Interest | 417 | 1,020 | 177 | 699 | 1,105 | ||||||||||||||||||
Dividends | 7,737 | 26,860 | 5,896 | 57,806 | 10,702 | ||||||||||||||||||
Shares of beneficial interest sold | 2,035 | — | 12,554 | — | — | ||||||||||||||||||
Foreign withholding taxes reclaimed | — | — | — | 12,833 | — | ||||||||||||||||||
Variation margin | — | — | — | — | — | ||||||||||||||||||
Unrealized appreciation on open forward foreign currency contracts | — | — | — | 1,566 | — | ||||||||||||||||||
Unrealized appreciation on open swap contracts | — | — | — | — | — | ||||||||||||||||||
Prepaid expenses and other assets | 11,445 | 8,724 | 4,986 | 4,841 | 12,824 | ||||||||||||||||||
Total Assets | 51,046,487 | 174,300,724 | 35,462,888 | 72,273,973 | 52,105,456 | ||||||||||||||||||
Liabilities: | |||||||||||||||||||||||
Payable for: | |||||||||||||||||||||||
Investments purchased | — | — | 165,099 | 562,254 | 238,823 | ||||||||||||||||||
Shares of beneficial interest redeemed | 5,903 | 183,203 | 11,010 | 146,145 | 156,079 | ||||||||||||||||||
Investment advisory fee | 21,921 | 82,124 | 20,294 | 46,966 | 18,692 | ||||||||||||||||||
Variation margin | — | — | — | — | — | ||||||||||||||||||
Distribution fee | 5,794 | 7,960 | 3,441 | 2,267 | 2,182 | ||||||||||||||||||
Administration fee | 3,507 | 12,055 | 2,423 | 4,880 | 3,560 | ||||||||||||||||||
Periodic payments on swap contracts | — | — | — | — | — | ||||||||||||||||||
Transfer agent fee | 500 | 500 | 500 | 500 | 500 | ||||||||||||||||||
Unrealized depreciation on open forward foreign currency contracts | — | — | 266 | — | 393 | ||||||||||||||||||
Unrealized depreciation on open swap contracts | — | — | — | — | — | ||||||||||||||||||
Accrued expenses and other payables | 24,592 | 38,689 | 21,210 | 33,902 | 27,502 | ||||||||||||||||||
Total Liabilities | 62,217 | 324,531 | 224,243 | 796,914 | 447,731 | ||||||||||||||||||
Net Assets | $ | 50,984,270 | $ | 173,976,193 | $ | 35,238,645 | $ | 71,477,059 | $ | 51,657,725 | |||||||||||||
Composition of Net Assets: | |||||||||||||||||||||||
Paid-in-capital | $ | 73,267,113 | $ | 372,148,176 | $ | 108,057,458 | $ | 49,080,332 | $ | 65,448,019 | |||||||||||||
Accumulated undistributed net investment income (net investment loss) | (125 | ) | (586 | ) | (98 | ) | 412,477 | 238,860 | |||||||||||||||
Accumulated net realized gain (loss) | (32,079,698 | ) | (221,060,376 | ) | (80,966,423 | ) | 9,629,172 | † | (21,729,331 | ) | |||||||||||||
Net unrealized appreciation (depreciation) | 9,796,980 | 22,888,979 | 8,147,708 | 12,355,078 | †† | 7,700,177 | |||||||||||||||||
Net Assets | $ | 50,984,270 | $ | 173,976,193 | $ | 35,238,645 | $ | 71,477,059 | $ | 51,657,725 | |||||||||||||
*Cost | $ | 41,227,520 | $ | 151,374,997 | $ | 27,290,992 | $ | 59,771,991 | $ | 44,379,999 | |||||||||||||
Class X Shares: | |||||||||||||||||||||||
Net Assets | $ | 23,975,471 | $ | 137,081,327 | $ | 19,111,818 | $ | 60,727,233 | $ | 41,465,667 | |||||||||||||
Shares Outstanding (unlimited authorized shares of $.01 par value) | 1,317,259 | 7,945,080 | 1,513,951 | 3,234,772 | 1,577,640 | ||||||||||||||||||
Net Asset Value Per Share | $ | 18.20 | $ | 17.25 | $ | 12.62 | $ | 18.77 | $ | 26.28 | |||||||||||||
Class Y Shares: | |||||||||||||||||||||||
Net Assets | $ | 27,008,799 | $ | 36,894,866 | $ | 16,126,827 | $ | 10,749,826 | $ | 10,192,058 | |||||||||||||
Shares Outstanding (unlimited authorized shares of $.01 par value) | 1,502,602 | 2,154,612 | 1,298,348 | 576,968 | 394,145 | ||||||||||||||||||
Net Asset Value Per Share | $ | 17.97 | $ | 17.12 | $ | 12.42 | $ | 18.63 | $ | 25.86 |
103
Morgan Stanley Select Dimensions Investment Series
Financial Statements continued
Statements of Operations
For the year ended December 31, 2006
Money Market | Flexible Income | Balanced Growth | Utilities | Dividend Growth | Equally- Weigthed S&P 500 | ||||||||||||||||||||||
Investment Income: | |||||||||||||||||||||||||||
Income | |||||||||||||||||||||||||||
Interest | $ | 5,517,684 | $ | 3,918,111 | $ | 1,428,773 | $ | 77,635 | $ | 509,423 | $ | 183,235 | |||||||||||||||
Interest and dividends from affiliates | — | 534 | 12,605 | — | — | 15,838 | |||||||||||||||||||||
Dividends | — | 6,388 | 1,315,918 | * | 1,897,140 | * | 4,912,143 | * | 3,448,096 | ||||||||||||||||||
Total Income | 5,517,684 | 3,925,033 | 2,757,296 | 1,974,775 | 5,421,566 | 3,647,169 | |||||||||||||||||||||
Expenses | |||||||||||||||||||||||||||
Investment advisory fee | 483,515 | 183,043 | 453,698 | 407,233 | 1,463,146 | 261,963 | |||||||||||||||||||||
Distribution fee (Class Y shares) | 143,561 | 63,024 | 72,313 | 41,074 | 136,654 | 267,524 | |||||||||||||||||||||
Administration fee | 53,724 | 45,761 | 69,800 | 57,156 | 219,171 | 174,642 | |||||||||||||||||||||
Transfer agent fees and expenses | 500 | 500 | 500 | 500 | 500 | 500 | |||||||||||||||||||||
Shareholder reports and notices | 27,864 | 26,831 | 26,548 | 23,929 | 75,067 | 44,891 | |||||||||||||||||||||
Professional fees | 25,033 | 13,035 | 34,033 | 23,126 | 27,112 | 25,242 | |||||||||||||||||||||
Custodian fees | 21,327 | 37,165 | 38,752 | 10,541 | 27,900 | 36,825 | |||||||||||||||||||||
Trustees' fees and expenses | 1,746 | 959 | 1,452 | 1,203 | 4,690 | 3,611 | |||||||||||||||||||||
Other | 9,493 | 10,749 | 19,966 | 8,487 | 21,111 | 38,566 | |||||||||||||||||||||
Total Expenses | 766,763 | 381,067 | 717,062 | 573,249 | 1,975,351 | 853,764 | |||||||||||||||||||||
Net Investment Income (Loss) | 4,750,921 | 3,543,966 | 2,040,234 | 1,401,526 | 3,446,215 | 2,793,405 | |||||||||||||||||||||
Net Realized and Unrealized Gain (Loss): | |||||||||||||||||||||||||||
Net Realized Gain (Loss) on: | |||||||||||||||||||||||||||
Investments | — | (799,676 | ) | 6,975,087 | 7,880,331 | 63,875,624 | 17,561,043 | ||||||||||||||||||||
Investment in affiliates | 52 | 9,759 | 73,853 | ||||||||||||||||||||||||
Futures contracts | — | 90,582 | 45,973 | — | — | 526,946 | |||||||||||||||||||||
Options contracts | — | 6,782 | 3,134 | — | — | — | |||||||||||||||||||||
Swap contracts | — | (144 | ) | (67 | ) | — | — | — | |||||||||||||||||||
Foreign exchange transactions | — | (352,781 | ) | — | — | (5,820 | ) | — | |||||||||||||||||||
Capital gain distribution received | — | — | — | — | — | 2,030 | |||||||||||||||||||||
Net Realized Gain (Loss) | — | (1,055,185 | ) | 7,033,886 | 7,880,331 | 63,869,804 | 18,163,872 | ||||||||||||||||||||
Net Change in Unrealized Appreciation/Depreciation on: | |||||||||||||||||||||||||||
Investments | — | 581,985 | 1,130,416 | 3,815,315 | (39,187,495 | ) | 10,288,775 | ||||||||||||||||||||
Investment in affiliates | 380 | 43,276 | 124,657 | ||||||||||||||||||||||||
Future contracts | — | 90,917 | 9,295 | — | — | (1,737 | ) | ||||||||||||||||||||
Option contracts | — | (48,183 | ) | (19,374 | ) | — | — | — | |||||||||||||||||||
Swap contracts | — | 1,352 | 744 | — | — | — | |||||||||||||||||||||
Translation of forward foreign currency contracts and other assets and liabilities denominated in foreign currencies | — | 21,917 | — | — | — | — | |||||||||||||||||||||
Net Appreciation (Depreciation) | — | 648,368 | 1,164,357 | 3,815,315 | (39,187,495 | ) | 10,411,695 | ||||||||||||||||||||
Net Gain (Loss) | — | (406,817 | ) | 8,198,243 | 11,695,646 | 24,682,309 | 28,575,567 | ||||||||||||||||||||
Net Increase (Decrease) | $ | 4,750,921 | $ | 3,137,149 | $ | 10,238,477 | $ | 13,097,172 | $ | 28,128,524 | $ | 31,368,972 |
* Net of foreign withholding tax of $37,267, $7,305, $24,910, $6,321, $20,515, $3,863, $84,850 and $3,016.
† Net of capital gain country tax of $1,254.
†† Net of $3,658 deferred capital gain country tax.
See Notes to Financial Statements
104
Growth | Focus Growth | Capital Opportunities | Global Equity | Developing Growth | |||||||||||||||||||
Investment Income: | |||||||||||||||||||||||
Income | |||||||||||||||||||||||
Interest | $ | 38,376 | $ | 238,871 | $ | 35,470 | $ | 64,333 | $ | 37,184 | |||||||||||||
Interest and dividends from affiliates | — | 13,280 | — | — | — | ||||||||||||||||||
Dividends | 304,503 | * | 814,578 | * | 186,153 | * | 1,127,061 | * | 584,197 | * | |||||||||||||
Total Income | 342,879 | 1,066,729 | 221,623 | 1,191,394 | 621,381 | ||||||||||||||||||
Expenses | |||||||||||||||||||||||
Investment advisory fee | 256,617 | 1,068,809 | 254,698 | 602,282 | 237,223 | ||||||||||||||||||
Distribution fee (Class Y shares) | 61,240 | 97,497 | 41,073 | 24,572 | 27,727 | ||||||||||||||||||
Administration fee | 41,059 | 156,889 | 30,412 | 57,686 | 45,185 | ||||||||||||||||||
Transfer agent fees and expenses | 500 | 500 | 500 | 500 | 500 | ||||||||||||||||||
Shareholder reports and notices | 20,308 | 69,951 | 18,109 | 33,255 | 23,121 | ||||||||||||||||||
Professional fees | 23,438 | 28,195 | 21,508 | 25,410 | 25,620 | ||||||||||||||||||
Custodian fees | 13,419 | 18,831 | 11,936 | 21,084 | 16,432 | ||||||||||||||||||
Trustees' fees and expenses | 838 | 3,317 | 630 | 1,179 | 932 | ||||||||||||||||||
Other | 5,810 | 15,666 | 4,942 | 13,686 | 6,401 | ||||||||||||||||||
Total Expenses | 423,229 | 1,459,655 | 383,808 | 779,654 | 383,141 | ||||||||||||||||||
Net Investment Income (Loss) | (80,350 | ) | (392,926 | ) | (162,185 | ) | 411,740 | 238,240 | |||||||||||||||
Net Realized and Unrealized Gain (Loss): | |||||||||||||||||||||||
Net Realized Gain (Loss) on: | |||||||||||||||||||||||
Investments | 1,573,408 | 29,599,850 | 4,021,887 | 9,629,184 | † | 8,697,638 | |||||||||||||||||
Investment in affiliates | 161,292 | ||||||||||||||||||||||
Futures contracts | — | — | — | — | — | ||||||||||||||||||
Options contracts | — | — | — | — | — | ||||||||||||||||||
Swap contracts | — | — | — | — | — | ||||||||||||||||||
Foreign exchange transactions | — | 17,944 | 477 | 52,287 | 693 | ||||||||||||||||||
Capital gain distribution received | — | — | — | — | — | ||||||||||||||||||
Net Realized Gain (Loss) | 1,573,408 | 29,779,086 | 4,022,364 | 9,681,471 | 8,698,331 | ||||||||||||||||||
Net Change in Unrealized Appreciation/Depreciation on: | |||||||||||||||||||||||
Investments | 341,544 | (30,055,687 | ) | (1,100,037 | ) | 3,997,860 | †† | (3,381,562 | ) | ||||||||||||||
Investment in affiliates | (351,920 | ) | |||||||||||||||||||||
Future contracts | — | — | — | — | — | ||||||||||||||||||
Option contracts | — | — | — | — | — | ||||||||||||||||||
Swap contracts | — | — | — | — | — | ||||||||||||||||||
Translation of forward foreign currency contracts and other assets and liabilities denominated in foreign currencies | — | (1,009 | ) | 62 | (4,702 | ) | 109 | ||||||||||||||||
Net Appreciation (Depreciation) | 341,544 | (30,408,616 | ) | (1,099,975 | ) | 3,993,158 | (3,381,453 | ) | |||||||||||||||
Net Gain (Loss) | 1,914,952 | (629,530 | ) | 2,922,389 | 13,674,629 | 5,316,878 | |||||||||||||||||
Net Increase (Decrease) | $ | 1,834,602 | $ | (1,022,456 | ) | $ | 2,760,204 | $ | 14,086,369 | $ | 5,555,118 |
105
Morgan Stanley Select Dimensions Investment Series
Financial Statements continued
Statements of Changes in Net Assets
Money Market | Flexible Income | Balanced Growth | |||||||||||||||||||||||||
For The Year Ended December 31, 2006 | For The Year Ended December 31, 2005 | For The Year Ended December 31, 2006 | For The Year Ended December 31, 2005 | For The Year Ended December 31, 2006 | For The Year Ended December 31, 2005 | ||||||||||||||||||||||
Increase (Decrease) in Net Assets: | |||||||||||||||||||||||||||
Operations: | |||||||||||||||||||||||||||
Net investment income | $ | 4,750,921 | $ | 2,423,482 | $ | 3,543,966 | $ | 3,287,640 | $ | 2,040,234 | $ | 1,921,217 | |||||||||||||||
Net realized gain (loss) | — | — | (1,055,185 | ) | 146,613 | 7,033,886 | 9,685,731 | ||||||||||||||||||||
Net change in unrealized appreciation/depreciation | — | — | 648,368 | (1,654,643 | ) | 1,164,357 | (4,242,486 | ) | |||||||||||||||||||
Net Increase | 4,750,921 | 2,423,482 | 3,137,149 | 1,779,610 | 10,238,477 | 7,364,462 | |||||||||||||||||||||
Dividends and Distributions to Shareholders from: | |||||||||||||||||||||||||||
Net investment income | |||||||||||||||||||||||||||
Class X shares | (2,251,668 | ) | (1,554,481 | ) | (2,061,634 | ) | (2,853,279 | ) | (1,472,120 | ) | (1,507,473 | ) | |||||||||||||||
Class Y shares | (2,499,264 | ) | (868,981 | ) | (1,561,924 | ) | (1,823,025 | ) | (684,320 | ) | (532,905 | ) | |||||||||||||||
Net realized gain | |||||||||||||||||||||||||||
Class X shares | — | — | — | — | (2,930,416 | ) | — | ||||||||||||||||||||
Class Y shares | — | — | — | — | (1,474,726 | ) | — | ||||||||||||||||||||
Total Dividends and Distributions | (4,750,932 | ) | (2,423,462 | ) | (3,623,558 | ) | (4,676,304 | ) | (6,561,582 | ) | (2,040,378 | ) | |||||||||||||||
Net increase (decrease) from transactions in shares of beneficial interest | 31,930,535 | (12,373,297 | ) | (5,962,604 | ) | (6,308,765 | ) | (11,544,412 | ) | (15,515,138 | ) | ||||||||||||||||
Total Increase (Decrease) | 31,930,524 | (12,373,277 | ) | (6,449,013 | ) | (9,205,459 | ) | (7,867,517 | ) | (10,191,054 | ) | ||||||||||||||||
Net Assets: | |||||||||||||||||||||||||||
Beginning of period | 89,039,610 | 101,412,887 | 61,379,600 | 70,585,059 | 92,633,371 | 102,824,425 | |||||||||||||||||||||
End of period | $ | 120,970,134 | $ | 89,039,610 | $ | 54,930,587 | $ | 61,379,600 | $ | 84,765,854 | $ | 92,633,371 | |||||||||||||||
Accumulated Undistributed Net Investment Income (Net Investment Loss) | $ | 45 | $ | 56 | $ | (71,861 | ) | $ | 480,573 | $ | (159,787 | ) | $ | (99,929 | ) |
See Notes to Financial Statements
106
Utilities | Dividend Growth | Equally-Weighted S&P 500 | |||||||||||||||||||||||||
For The Year Ended December 31, 2006 | For The Year Ended December 31, 2005 | For The Year Ended December 31, 2006 | For The Year Ended December 31, 2005 | For The Year Ended December 31, 2006 | For The Year Ended December 31, 2005 | ||||||||||||||||||||||
Increase (Decrease) in Net Assets: | |||||||||||||||||||||||||||
Operations: | |||||||||||||||||||||||||||
Net investment income | $ | 1,401,526 | $ | 1,627,272 | $ | 3,446,215 | $ | 3,958,751 | $ | 2,793,405 | $ | 2,611,872 | |||||||||||||||
Net realized gain (loss) | 7,880,331 | 10,568,009 | 63,869,804 | 29,123,199 | 18,163,872 | 11,527,484 | |||||||||||||||||||||
Net change in unrealized appreciation/depreciation | 3,815,315 | (315,935 | ) | (39,187,495 | ) | (16,681,483 | ) | 10,411,695 | 2,122,380 | ||||||||||||||||||
Net Increase | 13,097,172 | 11,879,346 | 28,128,524 | 16,400,467 | 31,368,972 | 16,261,736 | |||||||||||||||||||||
Dividends and Distributions to Shareholders from: | |||||||||||||||||||||||||||
Net investment income | |||||||||||||||||||||||||||
Class X shares | (1,119,915 | ) | (1,313,166 | ) | (2,848,225 | ) | (3,377,533 | ) | (1,392,883 | ) | (1,219,310 | ) | |||||||||||||||
Class Y shares | (301,849 | ) | (304,838 | ) | (589,644 | ) | (572,922 | ) | (1,139,754 | ) | (707,827 | ) | |||||||||||||||
Net realized gain | |||||||||||||||||||||||||||
Class X shares | — | — | — | — | (5,833,944 | ) | (1,943,393 | ) | |||||||||||||||||||
Class Y shares | — | — | — | — | (5,717,915 | ) | (1,375,977 | ) | |||||||||||||||||||
Total Dividends and Distributions | (1,421,764 | ) | (1,618,004 | ) | (3,437,869 | ) | (3,950,455 | ) | (14,084,496 | ) | (5,246,507 | ) | |||||||||||||||
Net increase (decrease) from transactions in shares of beneficial interest | (17,378,352 | ) | (12,874,305 | ) | (74,844,792 | ) | (73,279,335 | ) | (21,836,041 | ) | (12,961,790 | ) | |||||||||||||||
Total Increase (Decrease) | (5,702,944 | ) | (2,612,963 | ) | (50,154,137 | ) | (60,829,323 | ) | (4,551,565 | ) | (1,946,561 | ) | |||||||||||||||
Net Assets: | |||||||||||||||||||||||||||
Beginning of period | 76,089,682 | 78,702,645 | 305,577,741 | 366,407,064 | 221,272,934 | 223,219,495 | |||||||||||||||||||||
End of period | $ | 70,386,738 | $ | 76,089,682 | $ | 255,423,604 | $ | 305,577,741 | $ | 216,721,369 | $ | 221,272,934 | |||||||||||||||
Accumulated Undistributed Net Investment Income (Net Investment Loss) | $ | 2,961 | $ | 16,244 | $ | 10,812 | $ | 8,286 | $ | 2,733,714 | $ | 2,558,833 |
107
Morgan Stanley Select Dimensions Investment Series
Financial Statements continued
Statements of Changes in Net Assets continued
Growth | Focus Growth | Capital Opportunities | |||||||||||||||||||||||||
For The Year Ended December 31, 2006 | For The Year Ended December 31, 2005 | For The Year Ended December 31, 2006 | For The Year Ended December 31, 2005 | For The Year Ended December 31, 2006 | For The Year Ended December 31, 2005 | ||||||||||||||||||||||
Increase (Decrease) in Net Assets: | |||||||||||||||||||||||||||
Operations: | |||||||||||||||||||||||||||
Net investment income (loss) | $ | (80,350 | ) | $ | (15,139 | ) | $ | (392,926 | ) | $ | 52,595 | $ | (162,185 | ) | $ | (155,320 | ) | ||||||||||
Net realized gain | 1,573,408 | 2,602,183 | 29,779,086 | 10,800,250 | 4,022,364 | 5,418,673 | |||||||||||||||||||||
Net change in unrealized appreciation/depreciation | 341,544 | 4,489,067 | (30,408,616 | ) | 18,446,646 | (1,099,975 | ) | 2,192,107 | |||||||||||||||||||
Net Increase (Decrease) | 1,834,602 | 7,076,111 | (1,022,456 | ) | 29,299,491 | 2,760,204 | 7,455,460 | ||||||||||||||||||||
Dividends and Distributions to Shareholders from: | |||||||||||||||||||||||||||
Net investment income | |||||||||||||||||||||||||||
Class X shares | — | (113,999 | ) | (35,137 | ) | (1,350,337 | ) | — | — | ||||||||||||||||||
Class Y shares | — | (39,568 | ) | — | (182,664 | ) | — | — | |||||||||||||||||||
Net realized gain | |||||||||||||||||||||||||||
Class X shares | — | — | — | — | — | — | |||||||||||||||||||||
Class Y shares | — | — | — | — | — | — | |||||||||||||||||||||
Total Dividends and Distributions | — | (153,567 | ) | (35,137 | ) | (1,533,001 | ) | — | — | ||||||||||||||||||
Net increase (decrease) from transactions in shares of beneficial interest | (3,722,481 | ) | 977,238 | (54,505,323 | ) | (54,233,048 | ) | (7,505,548 | ) | (6,859,148 | ) | ||||||||||||||||
Total Increase (Decrease) | (1,887,879 | ) | 7,899,782 | (55,562,916 | ) | (26,466,558 | ) | (4,745,344 | ) | 596,312 | |||||||||||||||||
Net Assets: | |||||||||||||||||||||||||||
Beginning of period | 52,872,149 | 44,972,367 | 229,539,109 | 256,005,667 | 39,983,989 | 39,387,677 | |||||||||||||||||||||
End of period | $ | 50,984,270 | $ | 52,872,149 | $ | 173,976,193 | $ | 229,539,109 | $ | 35,238,645 | $ | 39,983,989 | |||||||||||||||
Accumulated Undistributed Net Investment Income (Net Investment Loss) | $ | (125 | ) | $ | (57 | ) | $ | (586 | ) | $ | 34,807 | $ | (98 | ) | $ | (47 | ) |
See Notes to Financial Statements
108
Global Equity | Developing Growth | ||||||||||||||||||
For The Year Ended December 31, 2006 | For The Year Ended December 31, 2005 | For The Year Ended December 31, 2006 | For The Year Ended December 31, 2005 | ||||||||||||||||
Increase (Decrease) in Net Assets: | |||||||||||||||||||
Operations: | |||||||||||||||||||
Net investment income (loss) | $ | 411,740 | $ | 603,656 | $ | 238,240 | $ | (113,555 | ) | ||||||||||
Net realized gain | 9,681,471 | 8,080,636 | 8,698,331 | 9,390,269 | |||||||||||||||
Net change in unrealized appreciation/depreciation | 3,993,158 | (1,352,882 | ) | (3,381,453 | ) | 483,072 | |||||||||||||
Net Increase (Decrease) | 14,086,369 | 7,331,410 | 5,555,118 | 9,759,786 | |||||||||||||||
Dividends and Distributions to Shareholders from: | |||||||||||||||||||
Net investment income | |||||||||||||||||||
Class X shares | (460,965 | ) | (450,564 | ) | — | — | |||||||||||||
Class Y shares | (53,742 | ) | (38,510 | ) | — | — | |||||||||||||
Net realized gain | |||||||||||||||||||
Class X shares | (4,401,631 | ) | — | — | — | ||||||||||||||
Class Y shares | (716,087 | ) | — | — | — | ||||||||||||||
Total Dividends and Distributions | (5,632,425 | ) | (489,074 | ) | — | — | |||||||||||||
Net increase (decrease) from transactions in shares of beneficial interest | (10,329,241 | ) | (15,179,555 | ) | (13,717,808 | ) | (11,241,461 | ) | |||||||||||
Total Increase (Decrease) | (1,875,297 | ) | (8,337,219 | ) | (8,162,690 | ) | (1,481,675 | ) | |||||||||||
Net Assets: | |||||||||||||||||||
Beginning of period | 73,352,356 | 81,689,575 | 59,820,415 | 61,302,090 | |||||||||||||||
End of period | $ | 71,477,059 | $ | 73,352,356 | $ | 51,657,725 | $ | 59,820,415 | |||||||||||
Accumulated Undistributed Net Investment Income (Net Investment Loss) | $ | 412,477 | $ | 463,157 | $ | 238,860 | $ | (73 | ) |
109
Morgan Stanley Select Dimensions Investment Series
Financial Statements continued
Statements of Changes in Net Assets continued
Summary of Transactions in Shares of Beneficial Interest
Money Market | Flexible Income | Balanced Growth | |||||||||||||||||||||||||
For The Year Ended December 31, 2006 | For The Year Ended December 31, 2005 | For The Year Ended December 31, 2006 | For The Year Ended December 31, 2005 | For The Year Ended December 31, 2006 | For The Year Ended December 31, 2005 | ||||||||||||||||||||||
Class X Shares | |||||||||||||||||||||||||||
Shares | |||||||||||||||||||||||||||
Sold | 25,663,978 | 25,422,553 | 102,776 | 143,276 | 99,897 | 153,509 | |||||||||||||||||||||
Reinvestment of dividends and distributions | 2,251,668 | 1,554,481 | 285,367 | 384,390 | 269,614 | 92,265 | |||||||||||||||||||||
Redeemed | (33,214,539 | ) | (42,891,928 | ) | (1,256,801 | ) | (1,349,263 | ) | (1,115,273 | ) | (1,148,143 | ) | |||||||||||||||
Net decrease - Class X | (5,298,893 | ) | (15,914,894 | ) | (868,658 | ) | (821,597 | ) | (745,762 | ) | (902,369 | ) | |||||||||||||||
Amount | |||||||||||||||||||||||||||
Sold | $ | 25,663,978 | $ | 25,422,553 | $ | 746,143 | $ | 1,070,048 | $ | 1,655,881 | $ | 2,504,210 | |||||||||||||||
Reinvestment of dividends and distributions | 2,251,668 | 1,554,481 | 2,061,631 | 2,853,279 | 4,402,536 | 1,507,473 | |||||||||||||||||||||
Redeemed | (33,214,539 | ) | (42,891,928 | ) | (9,108,213 | ) | (10,076,678 | ) | (18,898,544 | ) | (18,690,123 | ) | |||||||||||||||
Net decrease - Class X | $ | (5,298,893 | ) | $ | (15,914,894 | ) | $ | (6,300,439 | ) | $ | (6,153,351 | ) | $ | (12,840,127 | ) | $ | (14,678,440 | ) | |||||||||
Class Y Shares | |||||||||||||||||||||||||||
Shares | |||||||||||||||||||||||||||
Sold | 86,294,328 | 30,390,244 | 775,040 | 617,267 | 148,540 | 159,591 | |||||||||||||||||||||
Reinvestment of dividends and distributions | 2,499,264 | 868,981 | 216,856 | 246,385 | 132,633 | 32,645 | |||||||||||||||||||||
Redeemed | (51,564,164 | ) | (27,717,628 | ) | (946,293 | ) | (883,707 | ) | (198,107 | ) | (246,766 | ) | |||||||||||||||
Net increase (decrease) - Class Y | 37,229,428 | 3,541,597 | 45,603 | (20,055 | ) | 83,066 | (54,530 | ) | |||||||||||||||||||
Amount | |||||||||||||||||||||||||||
Sold | $ | 86,294,328 | $ | 30,390,244 | $ | 5,607,433 | $ | 4,596,574 | $ | 2,496,976 | $ | 2,614,737 | |||||||||||||||
Reinvestment of dividends and distributions | 2,499,264 | 868,981 | 1,561,924 | 1,823,025 | 2,159,046 | 532,905 | |||||||||||||||||||||
Redeemed | (51,564,164 | ) | (27,717,628 | ) | (6,831,522 | ) | (6,575,013 | ) | (3,360,307 | ) | (3,984,340 | ) | |||||||||||||||
Net increase (decrease) - Class Y | $ | 37,229,428 | $ | 3,541,597 | $ | 337,835 | $ | (155,414 | ) | $ | 1,295,715 | $ | (836,698 | ) |
See Notes to Financial Statements
110
Utilities | Dividend Growth | Equally-Weighted S&P 500 | |||||||||||||||||||||||||
For The Year Ended December 31, 2006 | For The Year Ended December 31, 2005 | For The Year Ended December 31, 2006 | For The Year Ended December 31, 2005 | For The Year Ended December 31, 2006 | For The Year Ended December 31, 2005 | ||||||||||||||||||||||
Class X Shares | |||||||||||||||||||||||||||
Shares | |||||||||||||||||||||||||||
Sold | 37,839 | 109,433 | 106,132 | 290,573 | 145,503 | 258,801 | |||||||||||||||||||||
Reinvestment of dividends and distributions | 49,105 | 62,808 | 168,303 | 212,823 | 289,536 | 132,054 | |||||||||||||||||||||
Redeemed | (786,512 | ) | (731,587 | ) | (4,298,055 | ) | (4,781,282 | ) | (1,365,361 | ) | (1,539,510 | ) | |||||||||||||||
Net decrease - Class X | (699,568 | ) | (559,346 | ) | (4,023,620 | ) | (4,277,886 | ) | (930,322 | ) | (1,148,655 | ) | |||||||||||||||
Amount | |||||||||||||||||||||||||||
Sold | $ | 866,975 | $ | 2,198,991 | $ | 1,757,286 | $ | 4,570,165 | $ | 3,800,860 | $ | 6,289,680 | |||||||||||||||
Reinvestment of dividends and distributions | 1,119,915 | 1,313,166 | 2,848,225 | 3,377,533 | 7,226,827 | 3,162,703 | |||||||||||||||||||||
Redeemed | (17,861,538 | ) | (14,922,675 | ) | (72,590,541 | ) | (75,728,076 | ) | (36,087,618 | ) | (37,656,881 | ) | |||||||||||||||
Net decrease - Class X | $ | (15,874,648 | ) | $ | (11,410,518 | ) | $ | (67,985,030 | ) | $ | (67,780,378 | ) | $ | (25,059,931 | ) | $ | (28,204,498 | ) | |||||||||
Class Y Shares | |||||||||||||||||||||||||||
Shares | |||||||||||||||||||||||||||
Sold | 31,525 | 86,563 | 105,973 | 266,223 | 543,498 | 1,133,459 | |||||||||||||||||||||
Reinvestment of dividends and distributions | 13,212 | 14,571 | 34,898 | 36,130 | 277,302 | 87,702 | |||||||||||||||||||||
Redeemed | (111,875 | ) | (173,814 | ) | (544,997 | ) | (651,676 | ) | (681,604 | ) | (586,503 | ) | |||||||||||||||
Net increase (decrease) - Class Y | (67,138 | ) | (72,680 | ) | (404,126 | ) | (349,323 | ) | 139,196 | 634,658 | |||||||||||||||||
Amount | |||||||||||||||||||||||||||
Sold | $ | 713,626 | $ | 1,755,196 | $ | 1,786,154 | $ | 4,212,365 | $ | 14,352,004 | $ | 27,352,074 | |||||||||||||||
Reinvestment of dividends and distributions | 301,849 | 304,838 | 589,644 | 572,922 | 6,857,669 | 2,083,804 | |||||||||||||||||||||
Redeemed | (2,519,179 | ) | (3,523,821 | ) | (9,235,560 | ) | (10,284,244 | ) | (17,985,783 | ) | (14,193,170 | ) | |||||||||||||||
Net increase (decrease) - Class Y | $ | (1,503,704 | ) | $ | (1,463,787 | ) | $ | (6,859,762 | ) | $ | (5,498,957 | ) | $ | 3,223,890 | $ | 15,242,708 |
111
Morgan Stanley Select Dimensions Investment Series
Financial Statements continued
Statements of Changes in Net Assets continued
Summary of Transactions in Shares of Beneficial Interest
Growth | Focus Growth | Capital Opportunities | |||||||||||||||||||||||||
For The Year Ended December 31, 2006 | For The Year Ended December 31, 2005 | For The Year Ended December 31, 2006 | For The Year Ended December 31, 2005 | For The Year Ended December 31, 2006 | For The Year Ended December 31, 2005 | ||||||||||||||||||||||
Class X Shares | |||||||||||||||||||||||||||
Shares | |||||||||||||||||||||||||||
Sold | 38,904 | 45,621 | 85,463 | 160,189 | 79,795 | 118,513 | |||||||||||||||||||||
Reinvestment of dividends and distributions | — | 7,520 | 2,134 | 91,054 | — | — | |||||||||||||||||||||
Redeemed | (499,691 | ) | (512,566 | ) | (2,996,731 | ) | (3,450,991 | ) | (622,269 | ) | (721,670 | ) | |||||||||||||||
Net decrease - Class X | (460,787 | ) | (459,425 | ) | (2,909,134 | ) | (3,199,748 | ) | (542,474 | ) | (603,157 | ) | |||||||||||||||
Amount | |||||||||||||||||||||||||||
Sold | $ | 680,201 | $ | 701,221 | $ | 1,430,663 | $ | 2,445,263 | $ | 964,660 | $ | 1,200,955 | |||||||||||||||
Reinvestment of dividends and distributions | — | 113,999 | 35,137 | 1,350,336 | — | — | |||||||||||||||||||||
Redeemed | (8,631,987 | ) | (7,862,509 | ) | (50,131,141 | ) | (52,562,192 | ) | (7,500,919 | ) | (7,112,174 | ) | |||||||||||||||
Net decrease - Class X | $ | (7,951,786 | ) | $ | (7,047,289 | ) | $ | (48,665,341 | ) | $ | (48,766,593 | ) | $ | (6,536,259 | ) | $ | (5,911,219 | ) | |||||||||
Class Y Shares | |||||||||||||||||||||||||||
Shares | |||||||||||||||||||||||||||
Sold | 418,406 | 751,355 | 69,710 | 106,325 | 285,870 | 155,416 | |||||||||||||||||||||
Reinvestment of dividends and distributions | — | 2,633 | — | 12,367 | — | — | |||||||||||||||||||||
Redeemed | (170,547 | ) | (224,282 | ) | (423,640 | ) | (484,568 | ) | (363,454 | ) | (259,330 | ) | |||||||||||||||
Net increase (decrease) - Class Y | 247,859 | 529,706 | (353,930 | ) | (365,876 | ) | (77,584 | ) | (103,914 | ) | |||||||||||||||||
Amount | |||||||||||||||||||||||||||
Sold | $ | 7,176,934 | $ | 11,461,513 | $ | 1,170,015 | $ | 1,644,441 | $ | 3,388,336 | $ | 1,600,462 | |||||||||||||||
Reinvestment of dividends and distributions | — | 39,568 | — | 182,665 | — | — | |||||||||||||||||||||
Redeemed | (2,947,629 | ) | (3,476,554 | ) | (7,009,997 | ) | (7,293,561 | ) | (4,357,625 | ) | (2,548,391 | ) | |||||||||||||||
Net increase (decrease) - Class Y | $ | 4,229,305 | $ | 8,024,527 | $ | (5,839,982 | ) | $ | (5,466,455 | ) | $ | (969,289 | ) | $ | (947,929 | ) |
See Notes to Financial Statements
112
Global Equity | Developing Growth | ||||||||||||||||||
For The Year Ended December 31, 2006 | For The Year Ended December 31, 2005 | For The Year Ended December 31, 2006 | For The Year Ended December 31, 2005 | ||||||||||||||||
Class X Shares | |||||||||||||||||||
Shares | |||||||||||||||||||
Sold | 67,142 | 96,667 | 41,264 | 66,506 | |||||||||||||||
Reinvestment of dividends and distributions | 297,406 | 29,839 | — | — | |||||||||||||||
Redeemed | (962,808 | ) | (1,086,697 | ) | (531,062 | ) | (615,572 | ) | |||||||||||
Net decrease - Class X | (598,260 | ) | (960,191 | ) | (489,798 | ) | (549,066 | ) | |||||||||||
Amount | |||||||||||||||||||
Sold | $ | 1,178,092 | $ | 1,498,231 | $ | 1,018,016 | $ | 1,391,587 | |||||||||||
Reinvestment of dividends and distributions | 4,862,596 | 450,564 | — | — | |||||||||||||||
Redeemed | (17,033,668 | ) | (16,883,416 | ) | (13,193,063 | ) | (12,779,261 | ) | |||||||||||
Net decrease - Class X | $ | (10,992,980 | ) | $ | (14,934,621 | ) | $ | (12,175,047 | ) | $ | (11,387,674 | ) | |||||||
Class Y Shares | |||||||||||||||||||
Shares | |||||||||||||||||||
Sold | 65,712 | 53,393 | 65,851 | 68,441 | |||||||||||||||
Reinvestment of dividends and distributions | 47,403 | 2,566 | — | — | |||||||||||||||
Redeemed | (74,106 | ) | (70,931 | ) | (128,590 | ) | (63,548 | ) | |||||||||||
Net increase (decrease) - Class Y | 39,009 | (14,972 | ) | (62,739 | ) | 4,893 | |||||||||||||
Amount | |||||||||||||||||||
Sold | $ | 1,169,532 | $ | 812,220 | $ | 1,632,493 | $ | 1,442,286 | |||||||||||
Reinvestment of dividends and distributions | 769,829 | 38,510 | — | — | |||||||||||||||
Redeemed | (1,275,622 | ) | (1,095,664 | ) | (3,175,254 | ) | (1,296,073 | ) | |||||||||||
Net increase (decrease) - Class Y | $ | 663,739 | $ | (244,934 | ) | $ | (1,542,761 | ) | $ | 146,213 |
113
Morgan Stanley Select Dimensions Investment Series
Notes to Financial Statements n December 31, 2006
1. Organization and Accounting Policies
Morgan Stanley Select Dimensions Investment Series (the "Fund") is registered under the Investment Company Act of 1940 as amended (the "Act"), as a diversified, open-end management investment company. The Fund, which consists of 11 separate portfolios ("Portfolios"), was organized on June 2, 1994, as a Massachusetts business trust and commenced operations on November 9, 1994, with the exception of Capital Opportunities which commenced operations on January 21, 1997.
On July 24, 2000, the Fund commenced offering one additional class of shares (Class Y shares). The two classes are identical except that Class Y shares incur distribution expenses. Class X shares are generally available to holders of contracts offered before May 1, 2000. Class Y shares are available to holders of contracts offered on or after July 24, 2000.
The investment objectives of each Portfolio are as follows:
PORTFOLIO | INVESTMENT OBJECTIVE | ||||||
Money Market | Seeks high current income, preservation of capital and liquidity. | ||||||
Flexible Income | Seeks, as a primary objective, to earn a high level of current income and, as a secondary objective, to maximize total return, but only to the extent consistent with its primary objective. | ||||||
Balanced Growth | Seeks to provide capital growth with reasonable current income. | ||||||
Utilities | Seeks both capital appreciation and current income. | ||||||
Dividend Growth | Seeks to provide reasonable current income and long-term growth of income and capital. | ||||||
Equally-Weighted S&P 500 | Seeks to achieve a high level of total return on its assets through a combination of capital appreciation and current income. | ||||||
Growth | Seeks long-term growth of capital. | ||||||
Focus Growth (formerly American Opportunities) | Seeks long-term capital growth consistent with an effort to reduce volatility. | ||||||
Capital Opportunities | Seeks long-term capital growth. | ||||||
Global Equity | Seeks to obtain total return on its assets primarily through long-term capital growth and to a lesser extent from income. | ||||||
Developing Growth | Seeks long-term capital growth. | ||||||
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Notes to Financial Statements n December 31, 2006 continued
The following is a summary of significant accounting policies:
A. Valuation of Investments — Money Market: securities are valued at amortized cost which approximates market value, in accordance with rule 2a-7 of the Investment Company Act of 1940. All remaining Portfolios: (1) an equity portfolio security listed or traded on the New York Stock Exchange ("NYSE") or American Stock Exchange or other exchange is valued at its latest sale price prior to the time when assets are valued; if there were no sales that day, the security is valued at the mean between the last reported bid and asked price; (2) an equity portfolio security listed or traded on the Nasdaq is valued at the Nasdaq Official Closing Price; if there were no sales that day, the security is valued at the mean between the last reported bid and asked price; (3) all other portfolio securities for which over-the-counter market quotations are readily a vailable are valued at the mean between the last reported bid and asked price. In cases where a security is traded on more than one exchange, the security is valued on the exchange designated as the primary market; (4) for equity securities traded on foreign exchanges, the last reported sale price or the latest bid price may be used if there were no sales on a particular day; (5) futures are valued at the latest price published by the commodities exchange on which they trade; (6) credit default swaps are marked-to-market daily based upon quotations from market makers and the change, if any, is recorded as unrealized appreciation or depreciation in the Statement of Operations; (7) listed options are valued at the latest sale price on the exchange on which they are listed unless no sales of such options have taken place that day, in which case they are valued at the mean between their latest bid and asked price; (8) when market quotations are not readily available including circumstances under which Morgan Sta nley Investment Advisors Inc. (the "Investment Adviser") determines that the latest sale price, the bid price or the mean between the last reported bid and asked price do not reflect a security's market value, portfolio securities are valued at their fair value as determined in good faith under procedures established by and under the general supervision of the Fund's Trustees. Occasionally, developments affecting the closing prices of securities and other assets may occur between the times at which valuations of such securities are determined (that is, close of the foreign market on which the securities trade) and the close of business on the NYSE. If developments occur during such periods that are expected to materially affect the value of such securities, such valuations may be adjusted to reflect the estimated fair value of such securities as of the close of the NYSE, as determined in good faith by the Fund's Trustees or by the Investment Adviser using a pricing service and/or procedures approved by the T rustees of the Fund; (9) certain portfolio securities may be valued by an outside pricing service approved by the Fund's Trustees; and (10) short-term debt securities having a maturity date of more than sixty days at time of purchase are valued on a mark-to-market basis until sixty days prior to maturity and thereafter at amortized cost based on their value on the 61st day. Short-term debt securities having a maturity date of sixty days or less at the time of purchase are valued at amortized cost.
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Notes to Financial Statements n December 31, 2006 continued
B. Accounting for Investments — Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Realized gains and losses on security transactions are determined by the identified cost method. Dividend income and other distributions are recorded on the ex-dividend date except certain dividends on foreign securities which are recorded as soon as the Fund is informed after the ex-dividend date. Interest income is accrued daily except where collection is not expected. The Fund amortizes premiums and accretes discounts over the life of the respective securities.
C. Repurchase Agreements — Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other affiliated entities managed by the Investment Adviser, may transfer uninvested cash balances into one or more joint repurchase agreement accounts. These balances are invested in one or more repurchase agreements and are collateralized by cash, or U.S. Treasury or federal agency obligations. The Fund may also invest directly with institutions in repurchase agreements. The Fund's custodian receives the collateral, which is marked-to-market daily to determine that the value of the collateral does not decrease below the repurchase price plus accrued interest.
D. Multiple Class Allocations — Investment income, expenses (other than distribution fees), and realized and unrealized gains and losses are allocated to each class of shares based upon the relative net asset value on the date such items are recognized. Distribution fees are charged directly to the respective class.
E. Futures Contracts — A futures contract is an agreement between two parties to buy and sell financial instruments or contracts based on financial indices at a set price on a future date. Upon entering into such a contract, the Fund is required to pledge to the broker cash, U.S. government securities or other liquid portfolio securities equal to the minimum initial margin requirements of the applicable futures exchange. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract which is known as variation margin. Such receipts or payments are recorded by the Fund as unrealized gains or losses. Upon closing of the contract, the Fund realizes a gain or loss equal to the difference between the value of the contract at the time it was opened and the val ue at the time it was closed.
F. Credit Default Swaps — A credit default swap is an agreement between two parties to exchange the credit risk of an issuer. The Fund may purchase credit protection on the referenced obligation of the credit default swap ("Buy Contract"), or provide credit protection on the referenced obligation of the credit default swap ("Sale Contract"). A buyer of a credit default swap is said to buy protection by paying periodic fees in return for a contingent payment from the seller if the issuer has a credit event such as bankruptcy, failure to pay outstanding obligations or deteriorating credit while the swap is outstanding. A seller of a credit default
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Notes to Financial Statements n December 31, 2006 continued
swap is said to sell protection and thus collect the periodic fees and profits if the credit of the issuer remains stable or improves while the swap is outstanding. If a credit event occurs, the seller pays to the buyer the maximum payout amount limited to the Notional Amount of the swap contract as disclosed in the table following the Portfolio of Investments. During the term of the swap agreement, the Fund receives or pays periodic fixed payments from or to the respective counterparty calculated at the agreed upon interest rate applied to the Notional Amount. These periodic payments are accrued daily and recorded as realized gains or losses in the Statement of Operations. In addition, upon termination of the swap contract, gains and losses are also realized. Any upfront payment received or paid by the Fund is recorded as assets/liabilities on the Fund's books.
G. Options — When the Fund writes a call option, an amount equal to the premium received is included in the Fund's Statement of Assets and Liabilities as a liability which is subsequently marked-to-market to reflect the current market value of the option written. If a written option either expires or the Fund enters into a closing purchase transaction, the Fund realizes a gain or loss without regard to any unrealized gain or loss on the underlying security or currency and the liability related to such option is extinguished. If a written call option is exercised, the Fund realizes a gain or loss from the sale of the underlying security or currency and the proceeds from such sale are increased by the premium originally received.
When the Fund purchases a call or put option, the premium paid is recorded as an investment and is subsequently marked-to-market to reflect the current market value. If a purchased option expires, the Fund will realize a loss to the extent of the premium paid. If the Fund enters into a closing sale transaction, a gain or loss is realized for the difference between the proceeds from the sale and the cost of the option. If a put option is exercised, the cost of the security or currency sold upon exercise will be increased by the premium originally paid. If a call option is exercised, the cost of the security purchased upon exercise will be increased by the premium originally paid.
H. Foreign Currency Translation and Forward Foreign Currency Contracts — The books and records of the Fund are maintained in U.S. dollars as follows: (1) the foreign currency market value of investment securities, other assets and liabilities and forward foreign currency contracts ("forward contracts") are translated at the exchange rates prevailing at the end of the period; and (2) purchases, sales, income and expenses are translated at the exchange rates prevailing on the respective dates of such transactions. The resultant exchange gains and losses are recorded as realized and unrealized gain/loss on foreign exchange transactions. Pursuant to U.S. Federal income tax regulations, certain foreign exchange gains/losses included in realized and unrealized gain/loss are included in or are a reduction of ordinary
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income for federal income tax purposes. The Fund does not isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the changes in the market prices of the securities held. Forward contracts are valued daily at the appropriate exchange rates. The resultant unrealized exchange gains and losses are recorded as unrealized foreign currency gain or loss. The Fund records realized gains or losses on delivery of the currency or at the time the forward contract is extinguished (compensated) by entering into a closing transaction prior to delivery.
I. Federal Income Tax Policy — It is the Fund's policy to comply individually for each Portfolio with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Accordingly, no federal income tax provision is required.
J. Dividends and Distributions to Shareholders — The Fund records dividends and distributions to its shareholders on the ex-dividend date.
K. Expenses — Direct expenses are charged to the respective Portfolio and general Fund expenses are allocated on the basis of relative net assets or equally among the Portfolios.
L. Use of Estimates — The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates.
2. Investment Advisory/Administration Agreements
Pursuant to an Investment Advisory Agreement, the Fund pays the Investment Adviser an advisory fee, accrued daily and payable monthly, by applying the annual rates listed below to each Portfolio's net assets determined at the close of each business day.
Money Market — 0.45% to the portion of the daily net assets not exceeding $250 million; 0.375% to the portion of the daily net assets exceeding $250 million but not exceeding $750 million; 0.325% to the portion of the daily net assets exceeding $750 million but not exceeding $1.25 billion; 0.30% to the portion of the daily net assets exceeding $1.25 billion but not exceeding $1.5 billion and 0.275% to the portion of the daily net assets in excess of $1.5 billion.
Flexible Income — 0.32%.
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Notes to Financial Statements n December 31, 2006 continued
Balanced Growth — 0.52% to the portion of the daily net assets not exceeding $500 million and 0.495% to the portion of the daily net assets in excess of $500 million.
Utilities — 0.57% to the portion of the daily net assets not exceeding $500 million; 0.47% to the portion of the daily net assets exceeding $500 million but not exceeding $1 billion; 0.445% to the portion of the daily net assets exceeding $1 billion but not exceeding $1.5 billion; 0.42% to the portion of the daily net assets exceeding $1.5 billion but not exceeding $2.5 billion; 0.395% to the portion of the daily net assets exceeding $2.5 billion but not exceeding $3.5 billion; 0.37% to the portion of the daily net assets exceeding $3.5 billion but not exceeding $5 billion and 0.345% to the portion of the daily net assets in excess of $5 billion.
Dividend Growth — 0.545% to the portion of the daily net assets not exceeding $250 million; 0.42% to the portion of the daily net assets exceeding $250 million but not exceeding $1 billion; 0.395% to the portion of the daily net assets exceeding $1 billion but not exceeding $2 billion and 0.37% to the portion of the daily net assets in excess of $2 billion.
Equally-Weighted S&P 500 — 0.12% to the portion of the daily net assets not exceeding $2 billion and 0.10% to the portion of the daily net assets in excess of $2 billion.
Growth — 0.50% to the portion of the daily net assets not exceeding $1 billion; 0.45% to the portion of the daily net assets exceeding $1 billion but not exceeding $2 billion; 0.40% to the portion of the daily net assets exceeding $2 billion but not exceeding $3 billion and 0.35% to the portion of the daily net assets in excess of $3 billion.
Focus Growth — 0.545% to the portion of the daily net assets not exceeding $250 million; 0.42% to the portion of the daily net assets exceeding $250 million but not exceeding $2.5 billion; 0.395% to the portion of the daily net assets exceeding $2.5 billion but not exceeding $3.5 billion; 0.37% to the portion of the daily net assets exceeding $3.5 billion but not exceeding $4.5 billion and 0.345% to the portion of the daily net assets in excess of $4.5 billion.
Capital Opportunities — 0.67% to the portion of the daily net assets not exceeding $500 million; 0.645% to the portion of the daily net assets exceeding $500 million but not exceeding $2 billion; 0.62% to the portion of the daily net assets exceeding $2 billion but not exceeding $3 billion and 0.595% to the portion of the daily net assets in excess of $3 billion.
Global Equity — 0.77%. (Prior to June 1, 2006, 0.92%)
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Notes to Financial Statements n December 31, 2006 continued
Developing Growth — 0.42% to the portion of the daily net assets not exceeding $500 million and 0.395% to the portion of the daily net assets in excess of $500 million.
Pursuant to an Administration Agreement with Morgan Stanley Services Company Inc. (the "Administrator"), an affiliate of the Investment Adviser, each Portfolio pays an administration fee, accrued daily and payable monthly, by applying the annual rate of 0.08% (Money Market 0.05%) to each Portfolio's daily net assets.
3. Plan of Distribution
Shares of the Fund are distributed by Morgan Stanley Distributors Inc. (the "Distributor"), an affiliate of the Investment Adviser and Administrator. The Fund has adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act. Under the Plan, Class Y shares of each Portfolio bear a distribution fee which is accrued daily and paid monthly at the annual rate of 0.25% of the average daily net assets of the class.
4. Security Transactions and Transactions with Affiliates
Purchases and sales/maturities of portfolio securities, excluding short-term investments (except for the Money Market Portfolio), for the year ended December 31, 2006 were as follows:
U.S. GOVERNMENT SECURITIES | OTHER | ||||||||||||||||||
PURCHASES | SALES/PREPAYMENTS/ MATURITIES | PURCHASES | SALES/PREPAYMENTS/ MATURITIES | ||||||||||||||||
Money Market | $ | 25,689,001 | $ | 17,495,910 | $ | 1,169,684,588 | $ | 1,150,064,756 | |||||||||||
Flexible Income | 2,882,481 | 8,547,350 | 24,640,715 | 23,694,803 | |||||||||||||||
Balanced Growth | 25,283,038 | 25,520,232 | 12,737,997 | 25,423,898 | |||||||||||||||
Utilities | 26,441 | 101,296 | 14,772,309 | 31,326,307 | |||||||||||||||
Dividend Growth | — | — | 302,045,301 | 382,018,933 | |||||||||||||||
Equally-Weighted S&P 500 | — | — | 37,102,974 | 65,543,832 | |||||||||||||||
Growth | — | — | 30,964,671 | 34,839,926 | |||||||||||||||
Focus Growth | — | — | 189,056,634 | 238,948,133 | |||||||||||||||
Capital Opportunities | — | — | 21,960,542 | 29,751,649 | |||||||||||||||
Global Equity | — | — | 30,009,349 | 45,860,324 | |||||||||||||||
Developing Growth | — | — | 36,587,227 | 50,994,050 |
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Equally-Weighted S&P 500 had transactions in Morgan Stanley common stock, an affiliate of the Investment Adviser, Administrator and Distributor:
PURCHASES | SALES | NET REALIZED GAINS | INCOME | VALUE | |||||||||||||||
— | $ | 154,751 | $ | 50,324 | $ | 7,597 | $ | 445,341 |
The following Portfolios had transactions in Hartford Financial Services Group, Inc., an affiliate of the Fund:
PURCHASES | SALES | NET REALIZED GAINS | INCOME | VALUE | |||||||||||||||||||
Flexible Income | — | $ | 45,000 | $ | 52 | $ | 534 | — | |||||||||||||||
Balanced Growth | — | 49,035 | 9,759 | 12,605 | $ | 675,564 | |||||||||||||||||
Equally-Weighted S&P 500 | $ | 42,911 | 75,273 | 23,529 | 8,241 | 439,583 | |||||||||||||||||
Focus Growth | 213,299 | 2,668,083 | 161,292 | 13,280 | — |
The following Portfolios had transactions with other Morgan Stanley funds during the year ended December 31, 2006:
PURCHASES | SALES | NET REALIZED GAINS (LOSSES) | |||||||||||||
Balanced Growth | $ | 11,570 | — | — | |||||||||||
Utilities | — | $ | 190,358 | $ | 59,823 | ||||||||||
Dividend Growth | 440,155 | 448,471 | (3,826 | ) | |||||||||||
Growth | 236,343 | 532,797 | 173,426 | ||||||||||||
Focus Growth | 4,269,290 | 1,628,734 | 585,353 | ||||||||||||
Capital Opportunities | 11,730 | 646,370 | 188,460 | ||||||||||||
Global Equity | 33,606 | — | — | ||||||||||||
Developing Growth | 580,606 | 580,040 | 150,455 |
For the year ended December 31, 2006, the following Portfolios incurred brokerage commissions with Morgan Stanley & Co., Inc., an affiliate of the Investment Adviser, Administrator and Distributor, for portfolio transactions executed on behalf of the Portfolio:
UTILITIES | DIVIDEND GROWTH | FOCUS GROWTH | CAPITAL OPPORTUNITIES | GLOBAL EQUITY | DEVELOPING GROWTH | ||||||||||||||||||
$ | 23,009 | $ | 91,831 | $ | 44,807 | $ | 384 | $ | 10,280 | $ | 754 |
For the year ended December 31, 2006, Utilities and Dividend Growth had open payables of $106,535 and $651,241, respectively, and open receivables of $110,666 and $782,289, respectively, with Morgan Stanley & Co., Inc., an affiliate of the Investment Adviser, Administrator and Distributor.
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Morgan Stanley Trust, an affiliate of the Investment Adviser, Administrator and Distributor, is the Fund's transfer agent.
5. Purposes of and Risks Relating to Certain Financial Instruments
Some of the Portfolios may enter into forward contracts for many purposes, including to facilitate settlement of foreign currency denominated portfolio transactions or to manage foreign currency exposure associated with foreign currency denominated securities.
Forward contracts involve elements of market risk in excess of the amounts reflected in the Statements of Assets and Liabilities. The Portfolios bear the risk of an unfavorable change in the foreign exchange rates underlying the forward contracts. Risks may also arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts.
Some of the Portfolios may purchase and sell interest rate and index futures ("futures contracts") to facilitate trading, increase or decrease the Portfolio's market exposure, seek higher investment returns, or to seek to protect against a decline in the value of the Portfolio's securities or an increase in prices of securities that may be purchased.
These futures contracts involve elements of market risk in excess of the amount reflected in the Statement of Assets and Liabilities. The Portfolio bears the risk of an unfavorable change in the value of the underlying securities. Risk may also arise upon entering into these contracts from potential inability of the counterparts to meet the terms of their contracts.
Some of the Portfolios may enter into credit default swaps for hedging purposes to add leverage to its portfolio or to gain exposure to a credit in which the Portfolio may otherwise invest. Credit default swaps may involve greater risks than if a fund had invested in the issuer directly. Credit default swaps are subject to general market risk, counterparty risk and credit risk. If the Portfolio is a buyer and no credit event occurs, it will lose its investment. In addition, if the Portfolio is a seller and a credit event occurs, the value of the referenced obligation received by the Portfolio coupled with the periodic payments previously received may be less than the maximum payout amount it pays to the buyer, resulting in a loss to the Portfolio.
6. Federal Income Tax Status
The amount of dividends and distributions from net investment income and net realized capital gains are determined in accordance with federal income tax regulations which may differ from generally accepted accounting principles. These "book/tax" differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the
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capital accounts based on their federal tax-basis treatment; temporary differences do not require reclassification. Dividends and distributions which exceed net investment income and net realized capital gains for tax purposes are reported as distributions of paid-in-capital.
The tax character of distributions paid for the years ended December 31, 2005 and December 31, 2006 for all portfolios was the same as the book character shown on the Statement of Changes except as follows:
Equally-Weighted S&P 500 For the Year Ended December 31, 2006 | Equally-Weighted S&P 500 For the Year Ended December 31, 2005 | ||||||||||
Ordinary income | $ | 4,105,249 | $ | 3,065,501 | |||||||
Long-term capital gains | 9,979,247 | 2,181,006 | |||||||||
Total distributions | $ | 14,084,496 | $ | 5,246,507 |
As of December 31, 2006, the tax-basis components of accumulated earnings (losses) were as follows:
FLEXIBLE INCOME | BALANCED GROWTH | UTILITIES | DIVIDEND GROWTH | EQUALLY- WEIGHTED S&P 500 | |||||||||||||||||||
Undistributed ordinary income | $ | 80,306 | $ | 306,555 | $ | 3,158 | $ | 11,646 | $ | 3,893,644 | |||||||||||||
Undistributed long-term gains | — | 6,343,608 | — | — | 16,916,151 | ||||||||||||||||||
Net accumulated earnings | 80,306 | 6,650,163 | 3,158 | 11,646 | 20,809,795 | ||||||||||||||||||
Capital loss carryforward* | (20,910,072 | ) | — | (19,991,468 | ) | (73,596,702 | ) | — | |||||||||||||||
Post-October losses | (121,874 | ) | — | — | — | — | |||||||||||||||||
Temporary differences | (11,420 | ) | (271 | ) | (216 | ) | (919 | ) | (607 | ) | |||||||||||||
Net unrealized appreciation (depreciation) | (3,407,554 | ) | 12,689,135 | 30,648,578 | 33,020,830 | 93,054,845 | |||||||||||||||||
Total accumulated earnings (losses) | $ | (24,370,614 | ) | $ | 19,339,027 | $ | 10,660,052 | $ | (40,565,145 | ) | $ | 113,864,033 |
123
Morgan Stanley Select Dimensions Investment Series
Notes to Financial Statements n December 31, 2006 continued
GROWTH | FOCUS GROWTH | CAPITAL OPPORTUNITIES | GLOBAL EQUITY | DEVELOPING GROWTH | |||||||||||||||||||
Undistributed ordinary income | $ | — | $ | — | $ | — | $ | 2,738,769 | $ | 239,007 | |||||||||||||
Undistributed long-term gains | — | — | — | 7,303,644 | — | ||||||||||||||||||
Net accumulated earnings | — | — | — | 10,042,413 | 239,007 | ||||||||||||||||||
Foreign tax credit pass-through | — | — | — | 72,495 | — | ||||||||||||||||||
Capital loss carryforward* | (31,985,316 | ) | (219,398,695 | ) | (80,964,105 | ) | — | (21,697,685 | ) | ||||||||||||||
Post-October losses | — | (1,642,406 | ) | — | — | — | |||||||||||||||||
Temporary differences | (136 | ) | (646 | ) | (106 | ) | (73,259 | ) | (164 | ) | |||||||||||||
Net unrealized appreciation | 9,702,609 | 22,869,764 | 8,145,398 | 12,355,078 | 7,668,548 | ||||||||||||||||||
Total accumulated earnings (losses) | $ | (22,282,843 | ) | $ | (198,171,983 | ) | $ | (72,818,813 | ) | $ | 22,396,727 | $ | (13,790,294 | ) |
* As of December 31, 2006, the following Portfolios had a net capital loss carryforward which may be used to offset future capital gains to the extent provided by regulations.
(AMOUNTS IN THOUSANDS) | |||||||||||||||||||||||||||||||||||||||
AVAILABLE THROUGH DECEMBER 31, | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | Total | ||||||||||||||||||||||||||||||
Flexible Income | $ | 941 | $ | 1,681 | $ | 2,688 | $ | 6,782 | $ | 6,161 | $ | 1,199 | $ | 562 | $ | 896 | $ | 20,910 | |||||||||||||||||||||
Utilities | — | — | — | 19,991 | — | — | — | — | 19,991 | ||||||||||||||||||||||||||||||
Dividend Growth | — | — | — | 52,375 | 21,222 | — | — | — | 73,597 | ||||||||||||||||||||||||||||||
Growth | — | — | 12,380 | 16,400 | 3,145 | 60 | — | — | 31,985 | ||||||||||||||||||||||||||||||
Focus Growth | — | — | 144,614 | 74,785 | — | — | — | — | 219,399 | ||||||||||||||||||||||||||||||
Capital Opportunities | — | — | 23,397 | 57,567 | — | — | — | — | 80,964 | ||||||||||||||||||||||||||||||
Developing Growth | — | — | 3,385 | 18,313 | — | — | — | — | 21,698 |
During the year ended December 31, 2006, the following Portfolios utilized net capital loss carryforwards: Utilities — $7,814,313; Dividend Growth — $62,917,950; Growth — $1,589,021; Focus Growth — $31,364,377; Capital Opportunities — $4,021,391; Developing Growth — $8,709,128.
124
Morgan Stanley Select Dimensions Investment Series
Notes to Financial Statements n December 31, 2006 continued
At December 31, 2006, the primary reason(s) for significant temporary/permanent book/tax differences were as follows:
TEMPORARY DIFFERENCES | PERMANENT DIFFERENCES | ||||||||||||||||||
POST- OCTOBER LOSSES | LOSS DEFERRALS FROM WASH SALES | FOREIGN CURRENCY GAINS/LOSSES | NET OPERATING LOSS | ||||||||||||||||
Flexible Income | • | • | • | ||||||||||||||||
Balanced Growth | • | ||||||||||||||||||
Utilities | • | ||||||||||||||||||
Dividend Growth | • | • | |||||||||||||||||
Equally-Weighted S&P 500 | • | ||||||||||||||||||
Growth | • | • | |||||||||||||||||
Focus Growth | • | • | • | • | |||||||||||||||
Capital Opportunities | • | • | • | ||||||||||||||||
Global Equity | • | ||||||||||||||||||
Developing Growth | • | • |
Additionally, the following Portfolios had other temporary differences: Flexible Income — interest on bonds in default; Flexible Income and Balanced Growth — capital loss deferrals on straddles; Flexible Income, Balanced Growth and Equally-Weighted S&P 500 — capital gain/loss from the mark-to-market of futures and/or options contracts; Equally-Weighted S&P 500 — tax adjustments on real estate investment trusts (REITs) held by the Portfolio. The following Portfolios had other permanent differences: Flexible Income and Balanced Growth — reclassification of net losses on paydowns; Equally-Weighted S&P 500 — tax adjustments on REITs held/sold by the Portfolio; Flexible Income — expired capital loss carryforward. The following Portfolios had temporary and/or permanent differences attributable to book amortization of premiums/discounts on debt securities: Flexible Income, Balanced Growth and Utilities.
125
Morgan Stanley Select Dimensions Investment Series
Notes to Financial Statements n December 31, 2006 continued
The permanent differences resulted in the following reclassifications among the Portfolios' components of net assets at December 31, 2006:
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME (LOSS) | ACCUMULATED NET REALIZED GAIN (LOSS) | PAID-IN-CAPITAL | |||||||||||||
Flexible Income | $ | (472,842 | ) | $ | 626,180 | $ | (153,338 | ) | |||||||
Balanced Growth | 56,348 | (56,348 | ) | — | |||||||||||
Utilities | 6,955 | (6,955 | ) | — | |||||||||||
Dividend Growth | (5,820 | ) | 5,820 | — | |||||||||||
Equally-Weighted S&P 500 | (85,887 | ) | 85,887 | — | |||||||||||
Growth | 80,282 | (315 | ) | (79,967 | ) | ||||||||||
Focus Growth | 392,670 | (17,944 | ) | (374,726 | ) | ||||||||||
Capital Opportunities | 162,134 | (477 | ) | (161,657 | ) | ||||||||||
Global Equity | 52,287 | (52,287 | ) | — | |||||||||||
Developing Growth | 693 | (693 | ) | — |
7. New Accounting Pronouncements
In July 2006, the Financial Accounting Standards Board (FASB) issued Interpretation 48, Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement 109 (FIN 48). FIN 48 clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax position must meet before being recognized in the financial statements. FIN 48 is effective for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. Recent SEC guidance allows implementing FIN 48 in the fund NAV calculations on the fund's last NAV calculation in the first required financial statement period. As a result, the Fund will incorporate FIN 48 in its semiannual report on June 30, 2007. The impact to the Fund's financial statements, if any, is currently being assessed.
In addition, in September 2006, Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157), was issued and is effective for fiscal years beginning after November 15, 2007. SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Management is currently evaluating the impact the adoption of SFAS 157 will have on the Fund's financial statement disclosures.
8. Name Change
On October 31, 2006, the Board approved the name change of Balanced Growth Portfolio to Balanced Portfolio to be effective upon the next updated prospectus, which is scheduled to be May 1, 2007.
126
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Morgan Stanley Select Dimensions Investment Series
Financial Highlights
Selected ratios and per share data for a share of beneficial interest outstanding throughout each period:
FOR THE YEAR ENDED DECEMBER 31 | NET ASSET VALUE BEGINNING OF PERIOD | NET INVESTMENT INCOME (LOSS)* | NET REALIZED AND UNREALIZED GAIN (LOSS) | TOTAL FROM INVESTMENT OPERATIONS | DIVIDENDS TO SHAREHOLDERS | DISTRIBUTIONS TO SHAREHOLDERS | TOTAL DIVIDENDS AND DISTRIBUTIONS | ||||||||||||||||||||||||
MONEY MARKET CLASS X SHARES | |||||||||||||||||||||||||||||||
2002 | $ | 1.00 | $ | 0.01 | — | $ | 0.01 | $ | (0.01 | ) | — | $ | (0.01 | ) | |||||||||||||||||
2003 | 1.00 | 0.01 | — | 0.01 | (0.01 | ) | — | (0.01 | ) | ||||||||||||||||||||||
2004 | 1.00 | 0.01 | — | 0.01 | (0.01 | ) | — | (0.01 | ) | ||||||||||||||||||||||
2005 | 1.00 | 0.03 | — | 0.03 | (0.03 | ) | — | (0.03 | ) | ||||||||||||||||||||||
2006 | 1.00 | 0.04 | — | 0.04 | (0.04 | ) | — | (0.04 | ) | ||||||||||||||||||||||
CLASS Y SHARES | |||||||||||||||||||||||||||||||
2002 | 1.00 | 0.01 | — | 0.01 | (0.01 | ) | — | (0.01 | ) | ||||||||||||||||||||||
2003 | 1.00 | 0.00 | — | 0.00 | (0.00 | ) | — | (0.00 | ) | ||||||||||||||||||||||
2004 | 1.00 | 0.01 | — | 0.01 | (0.01 | ) | — | (0.01 | ) | ||||||||||||||||||||||
2005 | 1.00 | 0.02 | — | 0.02 | (0.02 | ) | — | (0.02 | ) | ||||||||||||||||||||||
2006 | 1.00 | 0.04 | — | 0.04 | (0.04 | ) | — | (0.04 | ) | ||||||||||||||||||||||
FLEXIBLE INCOME CLASS X SHARES | |||||||||||||||||||||||||||||||
2002 | 6.99 | 0.51 | $ | 0.08 | 0.59 | (0.35 | ) | — | (0.35 | ) | |||||||||||||||||||||
2003 | 7.23 | 0.34 | 0.62 | 0.96 | (0.39 | ) | — | (0.39 | ) | ||||||||||||||||||||||
2004 | 7.80 | 0.38 | 0.14 | 0.52 | (0.64 | ) | — | (0.64 | ) | ||||||||||||||||||||||
2005 | 7.68 | 0.38 | (0.17 | ) | 0.21 | (0.54 | ) | — | (0.54 | ) | |||||||||||||||||||||
2006 | 7.35 | 0.46 | (0.04 | ) | 0.42 | (0.47 | ) | — | (0.47 | ) | |||||||||||||||||||||
CLASS Y SHARES | |||||||||||||||||||||||||||||||
2002 | 6.97 | 0.48 | 0.10 | 0.58 | (0.33 | ) | — | (0.33 | ) | ||||||||||||||||||||||
2003 | 7.22 | 0.32 | 0.61 | 0.93 | (0.37 | ) | — | (0.37 | ) | ||||||||||||||||||||||
2004 | 7.78 | 0.36 | 0.13 | 0.49 | (0.62 | ) | — | (0.62 | ) | ||||||||||||||||||||||
2005 | 7.65 | 0.36 | (0.16 | ) | 0.20 | (0.52 | ) | — | (0.52 | ) | |||||||||||||||||||||
2006 | 7.33 | 0.44 | (0.05 | ) | 0.39 | (0.45 | ) | — | (0.45 | ) | |||||||||||||||||||||
BALANCED GROWTH CLASS X SHARES | |||||||||||||||||||||||||||||||
2002 | 14.62 | 0.36 | (2.02 | ) | (1.66 | ) | (0.38 | ) | — | (0.38 | ) | ||||||||||||||||||||
2003 | 12.58 | 0.27 | 2.19 | 2.46 | (0.33 | ) | — | (0.33 | ) | ||||||||||||||||||||||
2004 | 14.71 | 0.31 | 1.28 | 1.59 | (0.35 | ) | — | (0.35 | ) | ||||||||||||||||||||||
2005 | 15.95 | 0.34 | 0.95 | 1.29 | (0.36 | ) | — | (0.36 | ) | ||||||||||||||||||||||
2006 | 16.88 | 0.41 | 1.60 | 2.01 | (0.44 | ) | $ | (0.88 | ) | (1.32 | ) | ||||||||||||||||||||
CLASS Y SHARES | |||||||||||||||||||||||||||||||
2002 | 14.59 | 0.32 | (2.01 | ) | (1.69 | ) | (0.34 | ) | — | (0.34 | ) | ||||||||||||||||||||
2003 | 12.56 | 0.23 | 2.19 | 2.42 | (0.30 | ) | — | (0.30 | ) | ||||||||||||||||||||||
2004 | 14.68 | 0.27 | 1.28 | 1.55 | (0.31 | ) | — | (0.31 | ) | ||||||||||||||||||||||
2005 | 15.92 | 0.30 | 0.94 | 1.24 | (0.32 | ) | — | (0.32 | ) | ||||||||||||||||||||||
2006 | 16.84 | 0.37 | 1.59 | 1.96 | (0.40 | ) | (0.88 | ) | (1.28 | ) |
See Notes to Financial Statements
128
RATIOS TO AVERAGE NET ASSETS** | |||||||||||||||||||||||||||
FOR THE YEAR ENDED DECEMBER 31 | NET ASSET VALUE END OF PERIOD | TOTAL RETURN† | NET ASSETS END OF PERIOD (000'S) | EXPENSES | NET INVESTMENT INCOME | PORTFOLIO TURNOVER RATE | |||||||||||||||||||||
MONEY MARKET CLASS X SHARES | |||||||||||||||||||||||||||
2002 | $ | 1.00 | 1.34 | % | $ | 152,479 | 0.52 | % | 1.34 | % | N/A | ||||||||||||||||
2003 | 1.00 | 0.65 | 91,730 | 0.54 | 0.66 | N/A | |||||||||||||||||||||
2004 | 1.00 | 0.86 | 67,945 | 0.55 | 0.84 | N/A | |||||||||||||||||||||
2005 | 1.00 | 2.73 | 52,030 | 0.57 | 2.68 | N/A | |||||||||||||||||||||
2006 | 1.00 | 4.59 | 46,731 | 0.58 | 4.56 | N/A | |||||||||||||||||||||
CLASS Y SHARES | |||||||||||||||||||||||||||
2002 | 1.00 | 1.09 | 41,006 | 0.77 | 1.09 | N/A | |||||||||||||||||||||
2003 | 1.00 | 0.40 | 39,183 | 0.79 | 0.41 | N/A | |||||||||||||||||||||
2004 | 1.00 | 0.61 | 33,468 | 0.80 | 0.59 | N/A | |||||||||||||||||||||
2005 | 1.00 | 2.48 | 37,010 | 0.82 | 2.43 | N/A | |||||||||||||||||||||
2006 | 1.00 | 4.34 | 74,239 | 0.83 | 4.31 | N/A | |||||||||||||||||||||
FLEXIBLE INCOME CLASS X SHARES | |||||||||||||||||||||||||||
2002 | 7.23 | 8.67 | 54,669 | 0.50 | 7.26 | 115 | % | ||||||||||||||||||||
2003 | 7.80 | 13.54 | 53,270 | 0.57 | 4.49 | 258 | |||||||||||||||||||||
2004 | 7.68 | 7.00 | 43,658 | 0.69 | 4.96 | 201 | |||||||||||||||||||||
2005 | 7.35 | 2.88 | 35,755 | 0.60 | 5.11 | 83 | |||||||||||||||||||||
2006 | 7.30 | 5.76 | 29,166 | 0.56 | 6.30 | 52 | |||||||||||||||||||||
CLASS Y SHARES | |||||||||||||||||||||||||||
2002 | 7.22 | 8.59 | 14,626 | 0.75 | 7.01 | 115 | |||||||||||||||||||||
2003 | 7.78 | 13.15 | 20,955 | 0.82 | 4.24 | 258 | |||||||||||||||||||||
2004 | 7.65 | 6.61 | 26,927 | 0.94 | 4.71 | 201 | |||||||||||||||||||||
2005 | 7.33 | 2.62 | 25,624 | 0.85 | 4.86 | 83 | |||||||||||||||||||||
2006 | 7.27 | 5.68 | 25,765 | 0.81 | 6.05 | 52 | |||||||||||||||||||||
BALANCED GROWTH CLASS X SHARES | |||||||||||||||||||||||||||
2002 | 12.58 | (11.49 | ) | 84,846 | 0.66 | 2.58 | 161 | ||||||||||||||||||||
2003 | 14.71 | 19.84 | 84,151 | 0.68 | 2.01 | 124 | |||||||||||||||||||||
2004 | 15.95 | 10.93 | 75,517 | 0.69 | 2.04 | 62 | |||||||||||||||||||||
2005 | 16.88 | 8.21 | 64,663 | 0.70 | 2.07 | 55 | |||||||||||||||||||||
2006 | 17.57 | 12.67 | 54,204 | 0.74 | 2.42 | 45 | |||||||||||||||||||||
CLASS Y SHARES | |||||||||||||||||||||||||||
2002 | 12.56 | (11.66 | ) | 12,327 | 0.91 | 2.33 | 161 | ||||||||||||||||||||
2003 | 14.68 | 19.51 | 22,898 | 0.93 | 1.76 | 124 | |||||||||||||||||||||
2004 | 15.92 | 10.68 | 27,308 | 0.94 | 1.79 | 62 | |||||||||||||||||||||
2005 | 16.84 | 7.89 | 27,970 | 0.95 | 1.82 | 55 | |||||||||||||||||||||
2006 | 17.52 | 12.37 | 30,562 | 0.99 | 2.17 | 45 |
129
Morgan Stanley Select Dimensions Investment Series
Financial Highlights continued
FOR THE YEAR ENDED DECEMBER 31 | NET ASSET VALUE BEGINNING OF PERIOD | NET INVESTMENT INCOME (LOSS)* | NET REALIZED AND UNREALIZED GAIN (LOSS) | TOTAL FROM INVESTMENT OPERATIONS | DIVIDENDS TO SHAREHOLDERS | DISTRIBUTIONS TO SHAREHOLDERS | TOTAL DIVIDENDS AND DISTRIBUTIONS | ||||||||||||||||||||||||
UTILITIES CLASS X SHARES | |||||||||||||||||||||||||||||||
2002 | $ | 17.10 | $ | 0.47 | $ | (3.93 | ) | $ | (3.46 | ) | $ | (0.48 | ) | — | $ | (0.48 | ) | ||||||||||||||
2003 | 13.16 | 0.35 | 2.31 | 2.66 | (0.36 | ) | — | (0.36 | ) | ||||||||||||||||||||||
2004 | 15.46 | 0.36 | 3.37 | 3.73 | (0.37 | ) | — | (0.37 | ) | ||||||||||||||||||||||
2005 | 18.82 | 0.43 | 2.62 | 3.05 | (0.44 | ) | — | (0.44 | ) | ||||||||||||||||||||||
2006 | 21.43 | 0.46 | 3.88 | 4.34 | (0.48 | ) | — | (0.48 | ) | ||||||||||||||||||||||
CLASS Y SHARES | |||||||||||||||||||||||||||||||
2002 | 17.09 | 0.44 | (3.93 | ) | (3.49 | ) | (0.45 | ) | — | (0.45 | ) | ||||||||||||||||||||
2003 | 13.15 | 0.31 | 2.31 | 2.62 | (0.32 | ) | — | (0.32 | ) | ||||||||||||||||||||||
2004 | 15.45 | 0.32 | 3.37 | 3.69 | (0.33 | ) | — | (0.33 | ) | ||||||||||||||||||||||
2005 | 18.81 | 0.38 | 2.62 | 3.00 | (0.39 | ) | — | (0.39 | ) | ||||||||||||||||||||||
2006 | 21.42 | 0.40 | 3.87 | 4.27 | (0.42 | ) | — | (0.42 | ) | ||||||||||||||||||||||
DIVIDEND GROWTH CLASS X SHARES | |||||||||||||||||||||||||||||||
2002 | 14.71 | 0.26 | (2.88 | ) | (2.62 | ) | (0.26 | ) | — | (0.26 | ) | ||||||||||||||||||||
2003 | 11.83 | 0.24 | 3.00 | 3.24 | (0.24 | ) | — | (0.24 | ) | ||||||||||||||||||||||
2004 | 14.83 | 0.23 | 0.99 | 1.22 | (0.24 | ) | — | (0.24 | ) | ||||||||||||||||||||||
2005 | 15.81 | 0.20 | 0.67 | 0.87 | (0.20 | ) | — | (0.20 | ) | ||||||||||||||||||||||
2006 | 16.48 | 0.22 | 1.62 | 1.84 | (0.23 | ) | — | (0.23 | ) | ||||||||||||||||||||||
CLASS Y SHARES | |||||||||||||||||||||||||||||||
2002 | 14.69 | 0.23 | (2.88 | ) | (2.65 | ) | (0.23 | ) | — | (0.23 | ) | ||||||||||||||||||||
2003 | 11.81 | 0.20 | 3.01 | 3.21 | (0.21 | ) | — | (0.21 | ) | ||||||||||||||||||||||
2004 | 14.81 | 0.20 | 0.98 | 1.18 | (0.20 | ) | — | (0.20 | ) | ||||||||||||||||||||||
2005 | 15.79 | 0.16 | 0.66 | 0.82 | (0.16 | ) | — | (0.16 | ) | ||||||||||||||||||||||
2006 | 16.45 | 0.18 | 1.62 | 1.80 | (0.18 | ) | — | (0.18 | ) | ||||||||||||||||||||||
EQUALLY-WEIGHTED S&P 500 CLASS X SHARES | |||||||||||||||||||||||||||||||
2002 | 19.12 | 0.19 | (3.22 | ) | (3.03 | ) | (0.21 | ) | — | (0.21 | ) | ||||||||||||||||||||
2003 | 15.88 | 0.19 | 5.59 | 5.78 | (0.21 | ) | $ | (0.32 | ) | (0.53 | ) | ||||||||||||||||||||
2004 | 21.13 | 0.23 | 3.27 | 3.50 | (0.18 | ) | — | (0.18 | ) | ||||||||||||||||||||||
2005 | 24.45 | 0.32 | 1.54 | 1.86 | (0.23 | ) | (0.37 | ) | (0.60 | ) | |||||||||||||||||||||
2006 | 25.71 | 0.37 | 3.45 | 3.82 | (0.34 | ) | (1.44 | ) | (1.78 | ) | |||||||||||||||||||||
CLASS Y SHARES | |||||||||||||||||||||||||||||||
2002 | 19.05 | 0.16 | (3.22 | ) | (3.06 | ) | (0.20 | ) | — | (0.20 | ) | ||||||||||||||||||||
2003 | 15.79 | 0.15 | 5.56 | 5.71 | (0.19 | ) | (0.32 | ) | (0.51 | ) | |||||||||||||||||||||
2004 | 20.99 | 0.18 | 3.23 | 3.41 | (0.15 | ) | — | (0.15 | ) | ||||||||||||||||||||||
2005 | 24.25 | 0.26 | 1.53 | 1.79 | (0.19 | ) | (0.37 | ) | (0.56 | ) | |||||||||||||||||||||
2006 | 25.48 | 0.30 | 3.42 | 3.72 | (0.29 | ) | (1.44 | ) | (1.73 | ) |
See Notes to Financial Statements
130
RATIOS TO AVERAGE NET ASSETS** | |||||||||||||||||||||||||||
FOR THE YEAR ENDED DECEMBER 31 | NET ASSET VALUE END OF PERIOD | TOTAL RETURN† | NET ASSETS END OF PERIOD (000'S) | EXPENSES | NET INVESTMENT INCOME | PORTFOLIO TURNOVER RATE | |||||||||||||||||||||
UTILITIES CLASS X SHARES | |||||||||||||||||||||||||||
2002 | $ | 13.16 | (20.37 | )% | $ | 66,825 | 0.70 | % | 3.22 | % | 77 | % | |||||||||||||||
2003 | 15.46 | 20.47 | 63,728 | 0.71 | 2.51 | 91 | |||||||||||||||||||||
2004 | 18.82 | 24.44 | 63,052 | 0.71 | 2.19 | 29 | |||||||||||||||||||||
2005 | 21.43 | 16.28 | 59,823 | 0.72 | 2.12 | 38 | |||||||||||||||||||||
2006 | 25.29 | 20.50 | 52,892 | 0.74 | 2.02 | 21 | |||||||||||||||||||||
CLASS Y SHARES | |||||||||||||||||||||||||||
2002 | 13.15 | (20.58 | ) | 10,749 | 0.95 | 2.97 | 77 | ||||||||||||||||||||
2003 | 15.45 | 20.20 | 13,440 | 0.96 | 2.26 | 91 | |||||||||||||||||||||
2004 | 18.81 | 24.15 | 15,650 | 0.96 | 1.94 | 29 | |||||||||||||||||||||
2005 | 21.42 | 16.00 | 16,267 | 0.97 | 1.87 | 38 | |||||||||||||||||||||
2006 | 25.27 | 20.17 | 17,495 | 0.99 | 1.77 | 21 | |||||||||||||||||||||
DIVIDEND GROWTH CLASS X SHARES | |||||||||||||||||||||||||||
2002 | 11.83 | (17.92 | ) | 341,673 | 0.64 | 1.89 | 22 | ||||||||||||||||||||
2003 | 14.83 | 27.73 | 356,056 | 0.66 | 1.85 | 42 | |||||||||||||||||||||
2004 | 15.81 | 8.29 | 307,093 | 0.65 | 1.54 | 44 | |||||||||||||||||||||
2005 | 16.48 | 5.57 | 249,516 | 0.63 | 1.26 | 38 | |||||||||||||||||||||
2006 | 18.09 | 11.25 | 201,169 | �� | 0.67 | 1.31 | 115 | ||||||||||||||||||||
CLASS Y SHARES | |||||||||||||||||||||||||||
2002 | 11.81 | (18.15 | ) | 29,318 | 0.89 | 1.64 | 22 | ||||||||||||||||||||
2003 | 14.81 | 27.48 | 51,527 | 0.91 | 1.60 | 42 | |||||||||||||||||||||
2004 | 15.79 | 8.03 | 59,314 | 0.90 | 1.29 | 44 | |||||||||||||||||||||
2005 | 16.45 | 5.32 | 56,061 | 0.88 | 1.01 | 38 | |||||||||||||||||||||
2006 | 18.07 | 10.98 | 54,255 | 0.92 | 1.06 | 115 | |||||||||||||||||||||
EQUALLY-WEIGHTED S&P 500 CLASS X SHARES | |||||||||||||||||||||||||||
2002 | 15.88 | (15.97 | ) | 121,065 | 0.54 | 1.09 | 8 | ||||||||||||||||||||
2003 | 21.13 | 37.14 | 143,019 | 0.55 | 1.11 | 24 | |||||||||||||||||||||
2004 | 24.45 | 16.65 | 142,320 | 0.50 | 1.07 | 20 | |||||||||||||||||||||
2005 | 25.71 | 7.81 | 120,117 | 0.27 | 1.30 | 17 | |||||||||||||||||||||
2006 | 27.75 | 15.69 | 103,824 | 0.27 | 1.40 | 17 | |||||||||||||||||||||
CLASS Y SHARES | |||||||||||||||||||||||||||
2002 | 15.79 | (16.21 | ) | 18,843 | 0.79 | 0.84 | 8 | ||||||||||||||||||||
2003 | 20.99 | 36.87 | 47,554 | 0.80 | 0.86 | 24 | |||||||||||||||||||||
2004 | 24.25 | 16.33 | 80,900 | 0.75 | 0.82 | 20 | |||||||||||||||||||||
2005 | 25.48 | 7.57 | 101,156 | 0.52 | 1.05 | 17 | |||||||||||||||||||||
2006 | 27.47 | 15.34 | 112,897 | 0.52 | 1.15 | 17 |
131
Morgan Stanley Select Dimensions Investment Series
Financial Highlights continued
FOR THE YEAR ENDED DECEMBER 31 | NET ASSET VALUE BEGINNING OF PERIOD | NET INVESTMENT INCOME (LOSS)* | NET REALIZED AND UNREALIZED GAIN (LOSS) | TOTAL FROM INVESTMENT OPERATIONS | DIVIDENDS TO SHAREHOLDERS | DISTRIBUTIONS TO SHAREHOLDERS | TOTAL DIVIDENDS AND DISTRIBUTIONS | ||||||||||||||||||||||||
GROWTH CLASS X SHARES | |||||||||||||||||||||||||||||||
2002 | $ | 15.48 | $ | 0.01 | $ | (4.32 | ) | $ | (4.31 | ) | — | — | — | ||||||||||||||||||
2003 | 11.17 | 0.03 | 2.97 | 3.00 | $ | (0.01 | ) | — | $ | (0.01 | ) | ||||||||||||||||||||
2004 | 14.16 | 0.05 | 1.03 | 1.08 | (0.03 | ) | — | (0.03 | ) | ||||||||||||||||||||||
2005 | 15.21 | 0.01 | 2.35 | 2.36 | (0.06 | ) | — | (0.06 | ) | ||||||||||||||||||||||
2006 | 17.51 | (0.01 | ) | 0.70 | 0.69 | — | — | — | |||||||||||||||||||||||
CLASS Y SHARES | |||||||||||||||||||||||||||||||
2002 | 15.42 | (0.02 | ) | (4.30 | ) | (4.32 | ) | — | — | — | |||||||||||||||||||||
2003 | 11.10 | (0.01 | ) | 2.96 | 2.95 | — | — | — | |||||||||||||||||||||||
2004 | 14.05 | 0.03 | 1.01 | 1.04 | (0.01 | ) | — | (0.01 | ) | ||||||||||||||||||||||
2005 | 15.08 | (0.03 | ) | 2.32 | 2.29 | (0.04 | ) | — | (0.04 | ) | |||||||||||||||||||||
2006 | 17.33 | (0.05 | ) | 0.69 | 0.64 | — | — | — | |||||||||||||||||||||||
FOCUS GROWTH CLASS X SHARES | |||||||||||||||||||||||||||||||
2002 | 14.99 | 0.04 | (3.26 | ) | (3.22 | ) | (0.09 | ) | — | (0.09 | ) | ||||||||||||||||||||
2003 | 11.68 | 0.04 | 2.36 | 2.40 | (0.05 | ) | — | (0.05 | ) | ||||||||||||||||||||||
2004 | 14.03 | 0.08 | 1.08 | 1.16 | (0.05 | ) | — | (0.05 | ) | ||||||||||||||||||||||
2005 | 15.14 | 0.01 | 2.15 | 2.16 | (0.11 | ) | — | (0.11 | ) | ||||||||||||||||||||||
2006 | 17.19 | (0.03 | ) | 0.09 | 0.06 | 0.00 | # | — | 0.00 | # | |||||||||||||||||||||
CLASS Y SHARES | |||||||||||||||||||||||||||||||
2002 | 14.93 | 0.01 | (3.25 | ) | (3.24 | ) | (0.06 | ) | — | (0.06 | ) | ||||||||||||||||||||
2003 | 11.63 | 0.01 | 2.34 | 2.35 | (0.02 | ) | — | (0.02 | ) | ||||||||||||||||||||||
2004 | 13.96 | 0.05 | 1.06 | 1.11 | (0.02 | ) | — | (0.02 | ) | ||||||||||||||||||||||
2005 | 15.05 | (0.03 | ) | 2.15 | 2.12 | (0.07 | ) | — | (0.07 | ) | |||||||||||||||||||||
2006 | 17.10 | (0.07 | ) | 0.09 | 0.02 | — | — | — | |||||||||||||||||||||||
CAPITAL OPPORTUNITIES CLASS X SHARES | |||||||||||||||||||||||||||||||
2002 | 9.79 | (0.05 | ) | (4.24 | ) | (4.29 | ) | — | —- | —- | |||||||||||||||||||||
2003 | 5.50 | (0.04 | ) | 2.33 | 2.29 | — | —- | —- | |||||||||||||||||||||||
2004 | 7.79 | (0.03 | ) | 1.79 | 1.76 | — | —- | —- | |||||||||||||||||||||||
2005 | 9.55 | (0.03 | ) | 2.19 | 2.16 | — | —- | —- | |||||||||||||||||||||||
2006 | 11.71 | (0.04 | ) | 0.95 | 0.91 | — | —- | —- | |||||||||||||||||||||||
CLASS Y SHARES | |||||||||||||||||||||||||||||||
2002 | 9.75 | (0.07 | ) | (4.22 | ) | (4.29 | ) | — | —- | —- | |||||||||||||||||||||
2003 | 5.46 | (0.05 | ) | 2.31 | 2.26 | — | —- | —- | |||||||||||||||||||||||
2004 | 7.72 | (0.05 | ) | 1.78 | 1.73 | — | —- | —- | |||||||||||||||||||||||
2005 | 9.45 | (0.06 | ) | 2.16 | 2.10 | — | —- | —- | |||||||||||||||||||||||
2006 | 11.55 | (0.07 | ) | 0.94 | 0.87 | — | —- | —- |
See Notes to Financial Statements
132
RATIOS TO AVERAGE NET ASSETS** | |||||||||||||||||||||||||||
FOR THE YEAR ENDED DECEMBER 31 | NET ASSET VALUE END OF PERIOD | TOTAL RETURN† | NET ASSETS END OF PERIOD (000'S) | EXPENSES | NET INVESTMENT INCOME (LOSS) | PORTFOLIO TURNOVER RATE | |||||||||||||||||||||
GROWTH CLASS X SHARES | |||||||||||||||||||||||||||
2002 | $ | 11.17 | (27.84 | )% | $ | 39,834 | 0.91 | % | 0.08 | % | 135 | % | |||||||||||||||
2003 | 14.16 | 26.90 | 40,356 | 0.93 | 0.21 | 128 | |||||||||||||||||||||
2004 | 15.21 | 7.64 | 34,038 | 0.93 | 0.37 | 168 | |||||||||||||||||||||
2005 | 17.51 | 15.55 | 31,126 | 0.70 | 0.05 | 83 | |||||||||||||||||||||
2006 | 18.20 | 3.94 | 23,975 | 0.71 | (0.04 | ) | 61 | ||||||||||||||||||||
CLASS Y SHARES | |||||||||||||||||||||||||||
2002 | 11.10 | (28.02 | ) | 3,520 | 1.16 | (0.17 | ) | 135 | |||||||||||||||||||
2003 | 14.05 | 26.58 | 6,850 | 1.18 | (0.04 | ) | 128 | ||||||||||||||||||||
2004 | 15.08 | 7.38 | 10,934 | 1.18 | 0.12 | 168 | |||||||||||||||||||||
2005 | 17.33 | 15.21 | 21,746 | 0.95 | (0.20 | ) | 83 | ||||||||||||||||||||
2006 | 17.97 | 3.75 | 27,009 | 0.96 | (0.29 | ) | 61 | ||||||||||||||||||||
FOCUS GROWTH CLASS X SHARES | |||||||||||||||||||||||||||
2002 | 11.68 | (21.56 | ) | 274,710 | 0.66 | 0.27 | 309 | ||||||||||||||||||||
2003 | 14.03 | 20.57 | 260,230 | 0.67 | 0.33 | 261 | |||||||||||||||||||||
2004 | 15.14 | 8.29 | 212,736 | 0.67 | 0.60 | 134 | |||||||||||||||||||||
2005 | 17.19 | 14.39 | 186,633 | 0.67 | 0.06 | 73 | |||||||||||||||||||||
2006 | 17.25 | 0.37 | 137,081 | 0.69 | (0.15 | ) | 98 | ||||||||||||||||||||
CLASS Y SHARES | |||||||||||||||||||||||||||
2002 | 11.63 | (21.73 | ) | 30,035 | 0.91 | 0.02 | 309 | ||||||||||||||||||||
2003 | 13.96 | 20.25 | 46,126 | 0.92 | 0.08 | 261 | |||||||||||||||||||||
2004 | 15.05 | 7.96 | 43,269 | 0.92 | 0.35 | 134 | |||||||||||||||||||||
2005 | 17.10 | 14.16 | 42,906 | 0.92 | (0.19 | ) | 73 | ||||||||||||||||||||
2006 | 17.12 | 0.12 | 36,895 | 0.94 | (0.40 | ) | 98 | ||||||||||||||||||||
CAPITAL OPPORTUNITIES CLASS X SHARES | |||||||||||||||||||||||||||
2002 | 5.50 | (43.82 | ) | 22,097 | 0.90 | (0.71 | ) | 103 | |||||||||||||||||||
2003 | 7.79 | 41.64 | 25,473 | 0.87 | (0.57 | ) | 184 | ||||||||||||||||||||
2004 | 9.55 | 22.59 | 25,408 | 0.90 | (0.32 | ) | 118 | ||||||||||||||||||||
2005 | 11.71 | 22.62 | 24,087 | 0.89 | (0.33 | ) | 87 | ||||||||||||||||||||
2006 | 12.62 | 7.86 | 19,112 | 0.90 | (0.32 | ) | 59 | ||||||||||||||||||||
CLASS Y SHARES | |||||||||||||||||||||||||||
2002 | 5.46 | (44.00 | ) | 6,537 | 1.15 | (0.96 | ) | 103 | |||||||||||||||||||
2003 | 7.72 | 41.39 | 11,302 | 1.12 | (0.82 | ) | 184 | ||||||||||||||||||||
2004 | 9.45 | 22.41 | 13,980 | 1.15 | (0.57 | ) | 118 | ||||||||||||||||||||
2005 | 11.55 | 22.22 | 15,897 | 1.14 | (0.58 | ) | 87 | ||||||||||||||||||||
2006 | 12.42 | 7.53 | 16,127 | 1.15 | (0.57 | ) | 59 |
133
Morgan Stanley Select Dimensions Investment Series
Financial Highlights continued
FOR THE YEAR ENDED DECEMBER 31 | NET ASSET VALUE BEGINNING OF PERIOD | NET INVESTMENT INCOME (LOSS)* | NET REALIZED AND UNREALIZED GAIN (LOSS) | TOTAL FROM INVESTMENT OPERATIONS | DIVIDENDS TO SHAREHOLDERS | DISTRIBUTIONS TO SHAREHOLDERS | TOTAL DIVIDENDS AND DISTRIBUTIONS | ||||||||||||||||||||||||
GLOBAL EQUITY CLASS X SHARES | |||||||||||||||||||||||||||||||
2002 | $ | 12.79 | $ | 0.04 | $ | (2.26 | ) | $ | (2.22 | ) | $ | (0.01 | ) | — | $ | (0.01 | ) | ||||||||||||||
2003 | 10.56 | 0.04 | 3.62 | 3.66 | (0.05 | ) | — | (0.05 | ) | ||||||||||||||||||||||
2004 | 14.17 | 0.09 | 1.06 | 1.15 | (0.03 | ) | — | (0.03 | ) | ||||||||||||||||||||||
2005 | 15.29 | 0.13 | 1.49 | 1.62 | (0.11 | ) | — | (0.11 | ) | ||||||||||||||||||||||
2006 | 16.80 | 0.11 | 3.31 | 3.42 | (0.14 | ) | $ | (1.31 | ) | (1.45 | ) | ||||||||||||||||||||
CLASS Y SHARES | |||||||||||||||||||||||||||||||
2002 | 12.75 | 0.01 | (2.26 | ) | (2.25 | ) | — | — | — | ||||||||||||||||||||||
2003 | 10.50 | 0.01 | 3.60 | 3.61 | (0.02 | ) | — | (0.02 | ) | ||||||||||||||||||||||
2004 | 14.09 | 0.06 | 1.05 | 1.11 | (0.01 | ) | — | (0.01 | ) | ||||||||||||||||||||||
2005 | 15.19 | 0.09 | 1.47 | 1.56 | (0.07 | ) | — | (0.07 | ) | ||||||||||||||||||||||
2006 | 16.68 | 0.06 | 3.30 | 3.36 | (0.10 | ) | (1.31 | ) | (1.41 | ) | |||||||||||||||||||||
DEVELOPING GROWTH CLASS X SHARES | |||||||||||||||||||||||||||||||
2002 | 16.01 | (0.03 | ) | (4.41 | ) | (4.44 | ) | — | — | — | |||||||||||||||||||||
2003 | 11.57 | (0.03 | ) | 4.82 | 4.79 | — | — | — | |||||||||||||||||||||||
2004 | 16.36 | (0.03 | ) | 3.68 | 3.65 | — | — | — | |||||||||||||||||||||||
2005 | 20.01 | (0.03 | ) | 3.78 | 3.75 | — | — | — | |||||||||||||||||||||||
2006 | 23.76 | 0.12 | 2.40 | 2.52 | — | — | — | ||||||||||||||||||||||||
CLASS Y SHARES | |||||||||||||||||||||||||||||||
2002 | 15.95 | (0.06 | ) | (4.40 | ) | (4.46 | ) | — | — | — | |||||||||||||||||||||
2003 | 11.49 | (0.07 | ) | 4.80 | 4.73 | — | — | — | |||||||||||||||||||||||
2004 | 16.22 | (0.07 | ) | 3.64 | 3.57 | — | — | — | |||||||||||||||||||||||
2005 | 19.79 | (0.08 | ) | 3.72 | 3.64 | — | — | — | |||||||||||||||||||||||
2006 | 23.43 | 0.05 | 2.38 | 2.43 | — | — | — |
* The per share amounts were computed using an average number of shares outstanding during the period.
** Reflects overall Portfolio ratios for investment income and non-class specific expenses.
† Calculated based on the net asset value as of the last business day of the period.
# Includes dividends of less than $0.001.
See Notes to Financial Statements
134
RATIOS TO AVERAGE NET ASSETS** | |||||||||||||||||||||||||||
FOR THE YEAR ENDED DECEMBER 31 | NET ASSET VALUE END OF PERIOD | TOTAL RETURN† | NET ASSETS END OF PERIOD (000'S) | EXPENSES | NET INVESTMENT INCOME (LOSS) | PORTFOLIO TURNOVER RATE | |||||||||||||||||||||
GLOBAL EQUITY CLASS X SHARES | |||||||||||||||||||||||||||
2002 | $ | 10.56 | (17.37 | )% | $ | 75,611 | 1.08 | % | 0.35 | % | 44 | % | |||||||||||||||
2003 | 14.17 | 34.71 | 83,607 | 1.08 | 0.35 | 72 | |||||||||||||||||||||
2004 | 15.29 | 8.17 | 73,290 | 1.11 | 0.64 | 48 | |||||||||||||||||||||
2005 | 16.80 | 10.64 | 64,377 | 1.12 | 0.83 | 75 | |||||||||||||||||||||
2006 | 18.77 | 21.59 | 60,727 | 1.05 | 0.60 | 42 | |||||||||||||||||||||
CLASS Y SHARES | |||||||||||||||||||||||||||
2002 | 10.50 | (17.57 | ) | 3,951 | 1.33 | 0.10 | 44 | ||||||||||||||||||||
2003 | 14.09 | 34.33 | 7,593 | 1.33 | 0.10 | 72 | |||||||||||||||||||||
2004 | 15.19 | 7.89 | 8,399 | 1.36 | 0.39 | 48 | |||||||||||||||||||||
2005 | 16.68 | 10.32 | 8,975 | 1.37 | 0.58 | 75 | |||||||||||||||||||||
2006 | 18.63 | 21.35 | 10,750 | 1.30 | 0.35 | 42 | |||||||||||||||||||||
DEVELOPING GROWTH CLASS X SHARES | |||||||||||||||||||||||||||
2002 | 11.57 | (27.73 | ) | 45,892 | 0.61 | (0.26 | ) | 251 | |||||||||||||||||||
2003 | 16.36 | 41.40 | 53,996 | 0.62 | (0.20 | ) | 193 | ||||||||||||||||||||
2004 | 20.01 | 22.31 | 52,359 | 0.64 | (0.19 | ) | 135 | ||||||||||||||||||||
2005 | 23.76 | 18.69 | 49,116 | 0.63 | (0.15 | ) | 102 | ||||||||||||||||||||
2006 | 26.28 | 10.69 | 41,466 | 0.63 | 0.47 | 65 | |||||||||||||||||||||
CLASS Y SHARES | |||||||||||||||||||||||||||
2002 | 11.49 | (27.96 | ) | 2,602 | 0.86 | (0.51 | ) | 251 | |||||||||||||||||||
2003 | 16.22 | 41.17 | 6,798 | 0.87 | (0.45 | ) | 193 | ||||||||||||||||||||
2004 | 19.79 | 21.95 | 8,943 | 0.89 | (0.44 | ) | 135 | ||||||||||||||||||||
2005 | 23.43 | 18.40 | 10,704 | 0.88 | (0.40 | ) | 102 | ||||||||||||||||||||
2006 | 25.86 | 10.42 | 10,192 | 0.88 | 0.22 | 65 |
135
Morgan Stanley Select Dimensions Investment Series
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees of
Morgan Stanley Select Dimensions Investment Series:
We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of Morgan Stanley Select Dimensions Investment Series (the "Fund") comprising the Money Market, Flexible Income, Balanced Growth, Utilities, Dividend Growth, Equally-Weighted S&P 500, Growth, Focus Growth (formerly American Opportunities), Capital Opportunities, Global Equity and Developing Growth Portfolios, as of December 31, 2006, and the related statements of operations for the year then ended and changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility i s to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2006, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the portfolios constituting the Morgan Stanley Select Dimensions Investment Series as of December 31, 2006, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
Deloitte & Touche LLP
New York, New York
February 20, 2007
136
Morgan Stanley Select Dimensions Investment Series
Results of Special Shareholder Meeting (unaudited)
On August 1, 2006, a Special Meeting of Shareholders of the Fund was scheduled in order to vote on the proposals set forth below. The meeting was held on August 1, 2006, and results were as follows:
(1) Election of Trustees:
FOR | WITHHOLD | ABSTAIN | BNV* | ||||||||||||||||
Frank L. Bowman | 172,417,885 | 5,051,649 | 0 | 0 | |||||||||||||||
Kathleen A. Dennis | 172,522,552 | 4,946,982 | 0 | 0 | |||||||||||||||
James F. Higgins | 172,357,886 | 5,111,648 | 0 | 0 | |||||||||||||||
Joseph J. Kearns | 172,317,554 | 5,151,980 | 0 | 0 | |||||||||||||||
Michael F. Klein | 172,323,870 | 5,145,664 | 0 | 0 | |||||||||||||||
W. Allen Reed | 172,301,149 | 5,168,385 | 0 | 0 | |||||||||||||||
Fergus Reid | 171,961,331 | 5,508,203 | 0 | 0 |
The following Trustee were not standing for reelection at this meeting: Michael Bozic, Dr. Manuel H. Johnson and Michael E. Nugent.
(2) Eliminate certain fundamental investment restrictions:
PORTFOLIO | FOR | AGAINST | ABSTAIN | BNV* | |||||||||||||||||||
Eliminate fundamental policy restricting the Portfolio's ability to pledge assets | Balanced Growth | 4,697,256 | 166,805 | 193,137 | 0 | ||||||||||||||||||
Capital Opportunities | 2,992,628 | 119,167 | 129,438 | 0 | |||||||||||||||||||
Developing Growth | 2,161,964 | 94,091 | 90,390 | 0 | |||||||||||||||||||
Dividend Growth | 15,243,648 | 635,805 | 601,415 | 0 | |||||||||||||||||||
Equally-Weighted S&P 500 | 7,292,374 | 488,080 | 325,948 | 0 | |||||||||||||||||||
Flexible Income | 7,468,206 | 241,702 | 265,096 | 0 | |||||||||||||||||||
Focus Growth | 10,959,532 | 503,930 | 511,014 | 0 | |||||||||||||||||||
Global Equity | 3,713,619 | 163,293 | 124,750 | 0 | |||||||||||||||||||
Growth | 2,688,067 | 215,997 | 134,858 | 0 | |||||||||||||||||||
Money Market | 103,563,156 | 4,891,618 | 3,576,753 | 0 | |||||||||||||||||||
Utilities | 2,922,207 | 119,946 | 173,644 | 0 | |||||||||||||||||||
Eliminate the fundamental policy restricting purchases of securities on margin | Balanced Growth | 4,728,109 | 128,768 | 200,321 | 0 | ||||||||||||||||||
Capital Opportunities | 3,008,707 | 105,635 | 126,891 | 0 | |||||||||||||||||||
Developing Growth | 2,156,086 | 92,085 | 98,274 | 0 | |||||||||||||||||||
Dividend Growth | 15,115,928 | 708,919 | 656,021 | 0 | |||||||||||||||||||
Equally-Weighted S&P 500 | 7,275,231 | 507,518 | 323,653 | 0 | |||||||||||||||||||
Flexible Income | 7,455,780 | 276,354 | 242,870 | 0 | |||||||||||||||||||
Focus Growth | 10,969,545 | 507,917 | 497,014 | 0 | |||||||||||||||||||
Global Equity | 3,709,159 | 179,592 | 112,911 | 0 | |||||||||||||||||||
Growth | 2,692,257 | 235,914 | 110,751 | 0 | |||||||||||||||||||
Money Market | 103,673,383 | 5,556,583 | 2,801,561 | 0 | |||||||||||||||||||
Utilities | 2,914,100 | 119,257 | 182,440 | 0 |
137
Morgan Stanley Select Dimensions Investment Series
Results of Special Shareholder Meeting (unaudited) continued
PORTFOLIO | FOR | AGAINST | ABSTAIN | BNV* | |||||||||||||||||||
Eliminate the fundamental policy prohibiting investments in oil, gas, and other types of minerals or mineral leases | Balanced Growth | 4,769,837 | 116,013 | 171,348 | 0 | ||||||||||||||||||
Capital Opportunities | 2,961,361 | 122,573 | 157,299 | 0 | |||||||||||||||||||
Developing Growth | 2,151,458 | 92,487 | 102,500 | 0 | |||||||||||||||||||
Dividend Growth | 15,330,386 | 556,164 | 594,318 | 0 | |||||||||||||||||||
Equally-Weighted S&P 500 | 7,311,258 | 475,245 | 319,899 | 0 | |||||||||||||||||||
Flexible Income | 7,505,202 | 220,069 | 249,733 | 0 | |||||||||||||||||||
Focus Growth | 10,998,780 | 435,035 | 540,661 | 0 | |||||||||||||||||||
Global Equity | 3,726,775 | 140,440 | 134,447 | 0 | |||||||||||||||||||
Growth | 2,723,554 | 206,925 | 108,443 | 0 | |||||||||||||||||||
Money Market | 104,474,690 | 4,617,129 | 2,939,708 | 0 | |||||||||||||||||||
Utilities | 2,971,442 | 104,743 | 139,612 | 0 | |||||||||||||||||||
Eliminate the fundamental policy prohibiting investments for purposes of exercising control | Balanced Growth | 4,787,743 | 104,027 | 165,428 | 0 | ||||||||||||||||||
Capital Opportunities | 2,977,434 | 116,500 | 147,299 | 0 | |||||||||||||||||||
Developing Growth | 2,175,069 | 77,946 | 93,430 | 0 | |||||||||||||||||||
Dividend Growth | 15,290,456 | 618,390 | 572,022 | 0 | |||||||||||||||||||
Equally-Weighted S&P 500 | 7,306,297 | 493,211 | 306,894 | 0 | |||||||||||||||||||
Flexible Income | 7,618,962 | 135,694 | 220,348 | 0 | |||||||||||||||||||
Focus Growth | 11,033,075 | 403,497 | 537,904 | 0 | |||||||||||||||||||
Global Equity | 3,727,821 | 135,549 | 138,292 | 0 | |||||||||||||||||||
Growth | 2,731,583 | 203,537 | 103,802 | 0 | |||||||||||||||||||
Money Market | 104,685,497 | 4,363,808 | 2,982,222 | 0 | |||||||||||||||||||
Utilities | 2,943,429 | 117,991 | 154,377 | 0 | |||||||||||||||||||
Eliminate the fundamental policy regarding investments in unseasoned companies | Balanced Growth | 4,724,435 | 106,272 | 226,491 | 0 | ||||||||||||||||||
Capital Opportunities | 2,994,785 | 135,141 | 111,307 | 0 | |||||||||||||||||||
Developing Growth | 2,151,341 | 77,912 | 117,192 | 0 | |||||||||||||||||||
Dividend Growth | 15,273,262 | 587,968 | 619,638 | 0 | |||||||||||||||||||
Equally-Weighted S&P 500 | 7,368,479 | 468,436 | 269,487 | 0 | |||||||||||||||||||
Flexible Income | 7,474,325 | 260,095 | 240,584 | 0 | |||||||||||||||||||
Focus Growth | 11,028,578 | 402,377 | 543,521 | 0 | |||||||||||||||||||
Global Equity | 3,741,364 | 138,963 | 121,335 | 0 | |||||||||||||||||||
Growth | 2,717,952 | 206,703 | 114,267 | 0 | |||||||||||||||||||
Utilities | 2,951,024 | 97,525 | 167,248 | 0 | |||||||||||||||||||
Eliminate the fundamental policy regarding mortgage-backed securities | Flexible Income | 7,586,091 | 168,565 | 220,348 | 0 |
138
Morgan Stanley Select Dimensions Investment Series
Results of Special Shareholder Meeting (unaudited) continued
(3) Modify certain fundamental investment restrictions:
PORTFOLIO | FOR | AGAINST | ABSTAIN | BNV* | |||||||||||||||||||
Modify fundamental policy regarding diversification | Balanced Growth | 4,787,838 | 95,767 | 173,593 | 0 | ||||||||||||||||||
Capital Opportunities | 3,010,942 | 124,413 | 105,878 | 0 | |||||||||||||||||||
Developing Growth | 2,152,259 | 92,716 | 101,470 | 0 | |||||||||||||||||||
Dividend Growth | 15,407,286 | 521,878 | 551,704 | 0 | |||||||||||||||||||
Equally-Weighted S&P 500 | 7,334,806 | 462,320 | 309,276 | 0 | |||||||||||||||||||
Flexible Income | 7,568,436 | 155,879 | 250,689 | 0 | |||||||||||||||||||
Focus Growth | 11,080,997 | 404,672 | 488,807 | 0 | |||||||||||||||||||
Global Equity | 3,722,505 | 135,834 | 143,323 | 0 | |||||||||||||||||||
Growth | 2,719,298 | 213,548 | 106,076 | 0 | |||||||||||||||||||
Money Market | 105,101,168 | 4,189,107 | 2,741,252 | 0 | |||||||||||||||||||
Utilities | 2,957,369 | 113,306 | 145,122 | 0 | |||||||||||||||||||
Modify fundamental policy regarding borrowing money | Balanced Growth | 4,703,665 | 129,074 | 224,459 | 0 | ||||||||||||||||||
Capital Opportunities | 3,004,737 | 122,220 | 114,276 | 0 | |||||||||||||||||||
Developing Growth | 2,148,511 | 92,139 | 105,795 | 0 | |||||||||||||||||||
Dividend Growth | 15,210,830 | 680,055 | 589,983 | 0 | |||||||||||||||||||
Equally-Weighted S&P 500 | 7,261,126 | 544,342 | 300,934 | 0 | |||||||||||||||||||
Flexible Income | 7,488,494 | 226,271 | 260,239 | 0 | |||||||||||||||||||
Focus Growth | 10,894,475 | 510,201 | 569,800 | 0 | |||||||||||||||||||
Global Equity | 3,708,960 | 169,498 | 123,204 | 0 | |||||||||||||||||||
Growth | 2,725,221 | 217,568 | 96,133 | 0 | |||||||||||||||||||
Money Market | 103,931,006 | 4,995,929 | 3,104,592 | 0 | |||||||||||||||||||
Utilities | 2,937,759 | 121,634 | 156,404 | 0 | |||||||||||||||||||
Modify fundamental policy regarding loans | Balanced Growth | 4,728,057 | 168,449 | 160,692 | 0 | ||||||||||||||||||
Capital Opportunities | 2,975,750 | 113,717 | 151,766 | 0 | |||||||||||||||||||
Developing Growth | 2,143,907 | 85,965 | 116,573 | 0 | |||||||||||||||||||
Dividend Growth | 15,283,978 | 665,553 | 531,337 | 0 | |||||||||||||||||||
Equally-Weighted S&P 500 | 7,257,533 | 550,041 | 298,828 | 0 | |||||||||||||||||||
Flexible Income | 7,465,812 | 239,805 | 269,387 | 0 | |||||||||||||||||||
Focus Growth | 10,938,722 | 508,176 | 527,578 | 0 | |||||||||||||||||||
Global Equity | 3,726,185 | 148,876 | 126,601 | 0 | |||||||||||||||||||
Growth | 2,713,239 | 217,490 | 108,193 | 0 | |||||||||||||||||||
Money Market | 104,279,957 | 4,835,237 | 2,916,333 | 0 | |||||||||||||||||||
Utilities | 2,948,331 | 112,596 | 154,870 | 0 |
139
Morgan Stanley Select Dimensions Investment Series
Results of Special Shareholder Meeting (unaudited) continued
PORTFOLIO | FOR | AGAINST | ABSTAIN | BNV* | |||||||||||||||||||
Modify fundamental policy regarding investment in commodities, commodity contracts, and futures contracts | Balanced Growth | 4,724,345 | 162,527 | 170,326 | 0 | ||||||||||||||||||
Capital Opportunities | 2,995,586 | 120,447 | 125,200 | 0 | |||||||||||||||||||
Developing Growth | 2,152,545 | 78,422 | 115,478 | 0 | |||||||||||||||||||
Dividend Growth | 15,413,543 | 516,232 | 551,093 | 0 | |||||||||||||||||||
Equally-Weighted S&P 500 | 7,351,295 | 506,614 | 248,493 | 0 | |||||||||||||||||||
Flexible Income | 7,505,892 | 232,092 | 237,020 | 0 | |||||||||||||||||||
Focus Growth | 10,963,759 | 413,639 | 597,078 | 0 | |||||||||||||||||||
Global Equity | 3,763,099 | 111,490 | 127,073 | 0 | |||||||||||||||||||
Growth | 2,719,170 | 223,341 | 96,411 | 0 | |||||||||||||||||||
Money Market | 105,173,107 | 4,360,690 | 2,497,730 | 0 | |||||||||||||||||||
Utilities | 2,942,211 | 124,548 | 149,038 | 0 | |||||||||||||||||||
Modify fundamental policy regarding issuance of senior securities | Balanced Growth | 4,812,468 | 128,622 | 116,108 | 0 | ||||||||||||||||||
Capital Opportunities | 3,086,474 | 89,184 | 65,575 | 0 | |||||||||||||||||||
Developing Growth | 2,244,763 | 45,355 | 56,327 | 0 | |||||||||||||||||||
Dividend Growth | 15,653,942 | 454,599 | 372,327 | 0 | |||||||||||||||||||
Equally-Weighted S&P 500 | 7,546,997 | 427,202 | 132,203 | 0 | |||||||||||||||||||
Flexible Income | 7,585,870 | 197,482 | 191,652 | 0 | |||||||||||||||||||
Focus Growth | 11,239,180 | 321,443 | 413,853 | 0 | |||||||||||||||||||
Global Equity | 3,866,548 | 57,547 | 77,567 | 0 | |||||||||||||||||||
Growth | 2,815,499 | 184,535 | 38,888 | 0 | |||||||||||||||||||
Money Market | 106,783,262 | 3,767,024 | 1,481,241 | 0 | |||||||||||||||||||
Utilities | 3,032,134 | 73,684 | 109,979 | 0 |
140
Morgan Stanley Select Dimensions Investment Series
Results of Special Shareholder Meeting (unaudited) continued
(4) Reclassify certain fundamental policies as non-fundamental policies:
PORTFOLIO | FOR | AGAINST | ABSTAIN | BNV* | |||||||||||||||||||
Reclassify as non-fundamental the fundamental policy regarding the short sale of securities | Balanced Growth | 4,764,152 | 118,427 | 174,619 | 0 | ||||||||||||||||||
Capital Opportunities | 2,994,056 | 135,661 | 111,516 | 0 | |||||||||||||||||||
Developing Growth | 2,178,334 | 87,073 | 81,038 | 0 | |||||||||||||||||||
Dividend Growth | 15,326,204 | 636,625 | 518,039 | 0 | |||||||||||||||||||
Equally-Weighted S&P 500 | 7,345,259 | 490,318 | 270,825 | 0 | |||||||||||||||||||
Flexible Income | 7,508,216 | 202,287 | 264,501 | 0 | |||||||||||||||||||
Focus Growth | 10,988,939 | 516,540 | 468,997 | 0 | |||||||||||||||||||
Global Equity | 3,760,661 | 114,641 | 126,360 | 0 | |||||||||||||||||||
Growth | 2,733,051 | 210,850 | 95,021 | 0 | |||||||||||||||||||
Money Market | 105,070,522 | 4,435,268 | 2,525,737 | 0 | |||||||||||||||||||
Utilities | 2,950,210 | 115,259 | 150,328 | 0 | |||||||||||||||||||
Reclassify as non-fundamental the fundamental policy prohibiting or limiting investments in illiquid or restricted securities | Money Market | 104,800,009 | 4,434,443 | 2,797,075 | 0 |
* Broker "non-votes" are shares held in street name for which the broker indicates that instructions have not been received from the beneficial owners or other persons entitled to vote and for which the broker does not have discretionary voting authority.
141
Morgan Stanley Select Dimensions Investment Series
Trustee and Officer Information (unaudited)
Independent Trustees:
Name, Age and Address of Independent Trustee | Position(s) Held with Registrant | Term of Office and Length of Time Served* | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Independent Trustee** | Other Directorships Held by Independent Trustee | ||||||||||||||||||
Frank L. Bowman (62) c/o Kramer Levin Naftalis & Frankel LLP Counsel to the Independent Trustees 1177 Avenue of the Americas New York, NY 10036 | Trustee | Since August 2006 | President and Chief Executive Officer of the Nuclear Energy Institute (policy organization) (since February 2005); Director or Trustee of various Retail Funds and Institutional Funds (since August 2006); formerly variously, Admiral in the U.S. Navy, Director of Naval Nuclear Propulsion Program and Deputy Administrator – Naval Reactors in the National Nuclear Security Administration at the U.S. Department of Energy (1996-2004). Honorary Knight Commander of the Most Excellent Order of the British Empire. | 171 | Director of the National Energy Foundation, the U.S. Energy Association, the American Council for Capital Formation and the Armed Services YMCA of the USA. | ||||||||||||||||||
Michael Bozic (65) c/o Kramer Levin Naftalis & Frankel LLP Counsel to the Independent Trustees 1177 Avenue of the Americas New York, NY 10036 | Trustee | Since April 1994 | Private investor; Chairperson of the Valuation, Insurance and Compliance Committee (since October 2006); Director or Trustee of the Retail Funds (since April 1994) and the Institutional Funds (since July 2003); formerly Chairperson of the Insurance Committee (July 2006-September 2006); Vice Chairman of Kmart Corporation (December 1998-October 2000), Chairman and Chief Executive Officer of Levitz Furniture Corporation (November 1995-November 1998) and President and Chief Executive Officer of Hills Department Stores (May 1991-July 1995); variously Chairman, Chief Executive Officer, President and Chief Operating Officer (1987-1991) of the Sears Merchandise Group of Sears, Roebuck & Co. | 173 | Director of various business organizations. | ||||||||||||||||||
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Morgan Stanley Select Dimensions Investment Series
Trustee and Officer Information (unaudited) continued
Name, Age and Address of Independent Trustee | Position(s) Held with Registrant | Term of Office and Length of Time Served* | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Independent Trustee** | Other Directorships Held by Independent Trustee |
Kathleen A. Dennis (53) c/o Kramer Levin Naftalis & Frankel LLP Counsel to the Independent Trustees 1177 Avenue of the Americas New York, NY 10036 | Trustee | Since August 2006 | President, Cedarwood Associates (mutual fund consulting) (since July 2006); Chairperson of the Money Market and Alternatives Sub-Committee of the Investment Committee (since October 2006) and Director or Trustee of various Retail Funds and Institutional Funds (since August 2006); formerly, Senior Managing Director of Victory Capital Management (1993-2006). | 171 | None. | ||||||||||||||||||
Dr. Manuel H. Johnson (57) c/o Johnson Smick Group, Inc. 888 16th Street, N.W. Suite 740 Washington, D.C. 20006 | Trustee | Since July 1991 | Senior Partner, Johnson Smick International, Inc., (consulting firm); Chairperson of the Investment Committee (since October 2006) and Director or Trustee of the Retail Funds (since July 1991) and the Institutional Funds (since July 2003); Co-Chairman and a founder of the Group of Seven Council (G7C), (international economic commission); formerly Chairperson of the Audit Committee (July 1991-September 2006); Vice Chairman of the Board of Governors of the Federal Reserve System and Assistant Secretary of the U.S. Treasury. | 173 | Director of NVR, Inc. (home construction); Director of KFX Energy; Director of RBS Greenwich Capital Holdings (financial holding company). | ||||||||||||||||||
Joseph J. Kearns (64) c/o Kearns & Associates LLC PMB754 23852 Pacific Coast Highway Malibu, CA 90265 | Trustee | Since August 1994 | President, Kearns & Associates LLC (investment consulting); Chairperson of the Audit Committee (since October 2006) and Director or Trustee of the Retail Funds (since July 2003) and the Institutional Funds (since August 1994); formerly Deputy Chairperson of the Audit Committee (July 2003-September 2006) and Chairperson of the Audit Committee of the Institutional Funds (October 2001-July 2003); formerly CFO of the J. Paul Getty Trust. | 174 | Director of Electro Rent Corporation (equipment leasing), The Ford Family Foundation, and the UCLA Foundation. | ||||||||||||||||||
143
Morgan Stanley Select Dimensions Investment Series
Trustee and Officer Information (unaudited) continued
Name, Age and Address of Independent Trustee | Position(s) Held with Registrant | Term of Office and Length of Time Served* | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Independent Trustee** | Other Directorships Held by Independent Trustee |
Michael F. Klein (48) c/o Kramer Levin Naftalis & Frankel LLP Counsel to the Independent Trustees 1177 Avenue of the Americas New York, NY 10036 | Trustee | Since August 2006 | Chief Operating Officer and Managing Director, Aetos Capital, LLC (since March 2000); Chairperson of the Fixed-Income Sub-Committee of the Investment Committee (since October 2006) and Director or Trustee of various Retail Funds and Institutional Funds (since August 2006); formerly Managing Director, Morgan Stanley & Co. Inc. and Morgan Stanley Dean Witter Investment Management, President, Morgan Stanley Institutional Funds (June 1998-March 2000) and Principal, Morgan Stanley & Co. Inc. and Morgan Stanley Dean Witter Investment Management (August 1997-December 1999). | 171 | Director of certain investment funds managed, or sponsored by Aetos Capital, LLC. | ||||||||||||||||||
Michael E. Nugent (70) c/o Triumph Capital, L.P. 445 Park Avenue New York, NY 10022 | Chairman of the Board and Trustee | Chairman of the Boards since July 2006 and Trustee since July 1991 | General Partner of Triumph Capital, L.P., (private investment partnership); Chairman of the Boards of the Retail Funds and Institutional Funds (since July 2006) and Director or Trustee of the Retail Funds (since July 1991) and the Institutional Funds (since July 2001); formerly Chairperson of the Insurance Committee (until July 2006); Vice President, Bankers Trust Company and BT Capital Corporation (1984-1988). | 173 | None. | ||||||||||||||||||
W. Allen Reed (59) c/o Kramer Levin Naftalis & Frankel LLP Counsel to the Independent Trustees 1177 Avenue of the Americas New York, NY 10036 | Trustee | Since August 2006 | Chairperson of the Equity Sub-Commitee of the Investment Committee (since October 2006) and Director or Trustee of various Retail Funds and Institutional Funds (since August 2006). President and CEO of General Motors Asset Management; formerly, Chairman and Chief Executive Officer of the GM Trust Bank and Corporate Vice President of General Motors Corporation (August 1994-December 2005). | 171 | Director of GMAC (financial services), and Temple-Inland Industries (packaging, banking and forest products); member of the Board of Executives of the Morgan Stanley Capital International Editorial Board; Director of Legg Mason and Director of various investment fund advisory boards. | ||||||||||||||||||
Fergus Reid (74) c/o Lumelite Plastics Corporation 85 Charles Colman Blvd. Pawling, NY 12564 | Trustee | Since June 1992 | Chairman of Lumelite Plastics Corporation; Chairperson of the Governance Committee and Director or Trustee of the Retail Funds (since July 2003) and the Institutional Funds (since June 1992). | 174 | Trustee and Director of certain investment companies in the JPMorgan Funds complex managed by J.P. Morgan Investment Management Inc. | ||||||||||||||||||
144
Morgan Stanley Select Dimensions Investment Series
Trustee and Officer Information (unaudited) continued
Interested Trustee:
Name, Age and Address of Interested Trustee | Position(s) Held with Registrant | Term of Office and Length of Time Served* | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Interested Trustee** | Other Directorships Held by Interested Trustee | ||||||||||||||||||
James F. Higgins (58) c/o Morgan Stanley Trust Harborside Financial Center Plaza Two Jersey City, NJ 07311 | Trustee | Since June 2000 | Director or Trustee of the Retail Funds (since June 2000) and the Institutional Funds (since July 2003); Senior Advisor of Morgan Stanley (since August 2000). | 173 | Director of AXA Financial, Inc. and The Equitable Life Assurance Society of the United States (financial services). | ||||||||||||||||||
* This is the earliest date the Trustee began serving the funds advised by Morgan Stanley Investment Advisors Inc. (the "Investment Adviser") (the "Retail Funds") or the funds advised by Morgan Stanley Investment Management Inc. and Morgan Stanley AIP GP LP (the "Institutional Funds").
** The Fund Complex includes all open-end and closed-end funds (including all of their portfolios) advised by the Investment Adviser and any funds that have an investment adviser that is an affiliated person of the Investment Adviser (including, but not limited to, Morgan Stanley Investment Management Inc.) as of December 31, 2006.
145
Morgan Stanley Select Dimensions Investment Series
Trustee and Officer Information (unaudited) continued
Executive Officers:
Name, Age and Address of Executive Officer | Position(s) Held with Registrant | Term of Office and Length of Time Served* | Principal Occupation(s) During Past 5 Years | ||||||||||||
Ronald E. Robison (67) 1221 Avenue of the Americas New York, NY 10020 | President and Principal Executive Officer | President since September 2005 and Principal Executive Officer since May 2003 | President (since September 2005) and Principal Executive Officer (since May 2003) of funds in the Fund Complex; President (since September 2005) and Principal Executive Officer (since May 2003) of the Van Kampen Funds; Managing Director, Director and/or Officer of the Investment Adviser and various entities affiliated with the Investment Adviser; Director of Morgan Stanley SICAV (since May 2004). Formerly, Executive Vice President (July 2003 to September 2005) of funds in the Fund Complex and the Van Kampen Funds; President and Director of the Institutional Funds (March 2001 to July 2003); Chief Administrative Officer of the Investment Adviser; Chief Administrative Officer of Morgan Stanley Services Company Inc. | ||||||||||||
J. David Germany (52) Morgan Stanley Investment Management Limited 25 Cabot Square Canary Wharf, London United Kingdom E144QA | Vice President | Since February 2006 | Managing Director and (since December 2005) Chief Investment Officer – Global Fixed Income of Morgan Stanley Investment Management; Managing Director and Director of Morgan Stanley Investment Management Limited; Vice President of the Retail and Institutional Funds (since February 2006). | ||||||||||||
Dennis F. Shea (53) 1221 Avenue of the Americas New York, NY 10020 | Vice President | Since February 2006 | Managing Director and (since February 2006) Chief Investment Officer – Global Equity of Morgan Stanley Investment Management; Vice President of the Retail and Institutional Funds (since February 2006). Formerly, Managing Director and Director of Global Equity Research at Morgan Stanley. | ||||||||||||
Barry Fink (51) 1221 Avenue of the Americas New York, NY 10020 | Vice President | Since February 1997 | Managing Director of Morgan Stanley Investment Management; Managing Director of the Investment Adviser and various entities affiliated with the Investment Adviser; Vice President of the Retail Funds and (since July 2003) the Institutional Funds. Formerly, Secretary, General Counsel and/or Director of the Investment Adviser and various entities affiliated with the Investment Adviser; Secretary and General Counsel of the Retail Funds. | ||||||||||||
Amy R. Doberman (44) 1221 Avenue of the Americas New York, NY 10020 | Vice President | Since July 2004 | Managing Director and General Counsel, U.S. Investment Management of Morgan Stanley Investment Management (since July 2004); Vice President of the Retail Funds and the Institutional Funds (since July 2004); Vice President of the Van Kampen Funds (since August 2004); Secretary (since February 2006) and Managing Director (since July 2004) of the Investment Adviser and various entities affiliated with the Investment Adviser. Formerly, Managing Director and General Counsel – Americas, UBS Global Asset Management (July 2000 to July 2004). | ||||||||||||
Carsten Otto (43) 1221 Avenue of the Americas New York, NY 10020 | Chief Compliance Officer | Since October 2004 | Managing Director and U.S. Director of Compliance for Morgan Stanley Investment Management (since October 2004); Managing Director and Chief Compliance Officer of Morgan Stanley Investment Management. Formerly, Assistant Secretary and Assistant General Counsel of the Retail Funds. | ||||||||||||
Stefanie V. Chang Yu (40) 1221 Avenue of the Americas New York, NY 10020 | Vice President | Since December1997 | Executive Director of the Investment Adviser and various entities affiliated with the Investment Adviser; Vice President of the Retail Funds (since July 2002) and the Institutional Funds (since December 1997). Formerly, Secretary of various entities affiliated with the Investment Adviser. | ||||||||||||
146
Morgan Stanley Select Dimensions Investment Series
Trustee and Officer Information (unaudited) continued
Executive Officers:
Name, Age and Address of Executive Officer | Position(s) Held with Registrant | Term of Office and Length of Time Served* | Principal Occupation(s) During Past 5 Years | ||||||||||||
Francis J. Smith (41) c/o Morgan Stanley Trust Harborside Financial Center Plaza Two Jersey City, NJ 07311 | Treasurer and Chief Financial Officer | Treasurer since July 2003 and Chief Financial Officer since September 2002 | Executive Director of the Investment Adviser and various entities affiliated with the Investment Adviser; Treasurer and Chief Financial Officer of the Retail Funds (since July 2003). Formerly, Vice President of the Retail Funds (September 2002 to July 2003). | ||||||||||||
Mary E. Mullin (39) 1221 Avenue of the Americas New York, NY 10020 | Secretary | Since June 1999 | Executive Director of the Investment Adviser and various entities affiliated with the Investment Adviser; Secretary of the Retail Funds (since July 2003) and the Institutional Funds (since June 1999). | ||||||||||||
* This is the earliest date the Officer began serving the Retail Funds or the Institutional Funds.
147
Morgan Stanley Select Dimensions Investment Series
Federal Tax Notice n December 31, 2006 (unaudited)
For the fiscal year ended December 31, 2006 each Portfolio's income dividends had the following qualifying percentages as indicated below:
FUND | DIVIDENDS RECEIVED DEDUCTION% (a) | U.S. GOVERNMENT INCOME% (b) | |||||||||
Money Market Portfolio | 0.00 | % | 0.29 | % | |||||||
Flexible Income Portfolio | 0.00 | % | 11.41 | % | |||||||
Balanced Growth Portfolio | 48.46 | % | 14.83 | % | |||||||
Utilities Portfolio | 100.00 | % | 0.07 | % | |||||||
Dividend Growth Portfolio | 100.00 | % | 0.00 | % | |||||||
Equally-Weighted S&P 500 Portfolio | 100.00 | % | 0.00 | % | |||||||
Growth Portfolio | 0.00 | % | 0.00 | % | |||||||
Focus Growth Portfolio | 100.00 | % | 0.00 | % | |||||||
Capital Opportunities Portfolio | 0.00 | % | 0.00 | % | |||||||
Global Equity Portfolio | 98.19 | % | 0.00 | % | |||||||
Developing Growth Portfolio | 0.00 | % | 0.00 | % |
(a) These percentages represent the portion of income dividends paid by each Portfolio that qualified for the dividends received deduction available to corporations.
(b) These percentages represent the portion of income dividends paid by each Portfolio that were attributable to qualifying U.S. Government obligations.
During the fiscal year ended December 31, 2006 the following per share amounts were paid from long-term capital gains: $0.882 to Balanced Growth Portfolio shareholders, $1.244 to Equally-Weighted S&P 500 Portfolio shareholders and $1.307 to Global Equity Portfolio shareholders. Also during this fiscal year Global Equity Portfolio has elected, pursuant to section 853 of the Internal Revenue Code, to pass through foreign taxes of $0.02 per share to its shareholders, of which 100% would be allowable as a credit. Global Equity Portfolio generated net foreign source income of $0.09 per share with respect to this election.
148
Trustees
Frank L. Bowman | Joseph J. Kearns | ||||||||||
Michael Bozic | Michael F. Klein | ||||||||||
Kathleen A. Dennis | Michael E. Nugent | ||||||||||
James F. Higgins | W. Allen Reed | ||||||||||
Dr. Manuel H. Johnson | Fergus Reid | ||||||||||
Officers
Michael E. Nugent
Chairman of the Board
Ronald E. Robison
President and Principal Executive Officer
J. David Germany
Vice President
Dennis F. Shea
Vice President
Barry Fink
Vice President
Amy R. Doberman
Vice President
Carsten Otto
Chief Compliance Officer
Stefanie V. Chang Yu
Vice President
Francis J. Smith
Treasurer and Chief Financial Officer
Mary E. Mullin
Secretary
Transfer Agent | Independent Registered Public Accounting Firm | ||||||
Morgan Stanley Trust Harborside Financial Center, Plaza Two Jersey City, New Jersey 07311 | Deloitte & Touche LLP Two World Financial Center New York, New York 10281 | ||||||
Investment Adviser
Morgan Stanley Investment Advisors Inc.
1221 Avenue of the Americas
New York, New York 10020
This report is submitted for the general information of shareholders of the Fund. For more detailed information about the Fund, its fees and expenses and other pertinent information, please read its Prospectus. The Fund's Statement of Additional Information contains additional information about the Fund, including its trustees. It is available without charge, by calling (800) 869-NEWS.
This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective Prospectus. Read the Prospectus carefully before investing.
Morgan Stanley Funds are distributed by Morgan Stanley Distributors Inc.
Morgan Stanley Distributors Inc., member NASD.
#40474
SELDIMANR-RA07-00165P-Y12/06
Item 2. Code of Ethics.
(a) The Fund has adopted a code of ethics (the “Code of Ethics”) that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the Fund or a third party.
(b) No information need be disclosed pursuant to this paragraph.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f)
(1) The Fund’s Code of Ethics is attached hereto as Exhibit 12 A.
(2) Not applicable.
(3) Not applicable.
Item 3. Audit Committee Financial Expert.
The Fund’s Board of Trustees has determined that Joseph J. Kearns, an “independent” Trustee, is an “audit committee financial expert” serving on its audit committee. Under applicable securities laws, a person who is determined to be an audit committee financial expert will not be deemed an “expert” for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification of a person as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities that are greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and Board of Trustees in the absence of such designation or identification
Item 4. Principal Accountant Fees and Services.
(a)(b)(c)(d) and (g). Based on fees billed for the periods shown:
2006
| Registrant |
| Covered Entities(1) |
| |||
Audit Fees |
| $ | 174,900 |
| N/A |
| |
|
|
|
|
|
| ||
Non-Audit Fees |
|
|
|
|
| ||
Audit-Related Fees |
| $ | 531 | (2) | $ | 5,162,000 | (2) |
Tax Fees |
| $ | 44,637 | (3) | $ | 1,389,000 | (4) |
All Other Fees |
| $ | — |
| $ | — |
|
Total Non-Audit Fees |
| $ | 45,168 |
| $ | 6,551,000 |
|
|
|
|
|
|
| ||
Total |
| $ | 220,068 |
| $ | 6,551,000 |
|
2005
| Registrant |
| Covered Entities(1) |
| |||
Audit Fees |
| $ | 169,641 |
| N/A |
| |
|
|
|
|
|
| ||
Non-Audit Fees |
|
|
|
|
| ||
Audit-Related Fees |
| $ | 540 | (2) | $ | 3,215,745 | (2) |
Tax Fees |
| $ | 42,107 | (3) | $ | 24,000 | (4) |
All Other Fees |
| $ | — |
| $ | — |
|
Total Non-Audit Fees |
| $ | 42,647 |
| $ | 3,239,745 |
|
|
|
|
|
|
| ||
Total |
| $ | 212,288 |
| $ | 3,239,745 |
|
N/A- Not applicable, as not required by Item 4.
(1) Covered Entities include the Adviser (excluding sub-advisors) and any entity controlling, controlled by or under common control with the Adviser that provides ongoing services to the Registrant.
(2) Audit-Related Fees represent assurance and related services provided that are reasonably related to the performance of the audit of the financial statements of the Covered Entities’ and funds advised by the Adviser or its affiliates, specifically data verification and agreed-upon procedures related to asset securitizations and agreed-upon procedures engagements.
(3) Tax Fees represent tax compliance, tax planning and tax advice services provided in connection with the preparation and review of the Registrant’s tax returns.
(4) Tax Fees represent tax compliance, tax planning and tax advice services provided in connection with the review of Covered Entities’ tax returns.
(e)(1) The audit committee’s pre-approval policies and procedures are as follows:
APPENDIX A
AUDIT COMMITTEE
AUDIT AND NON-AUDIT SERVICES
PRE-APPROVAL POLICY AND PROCEDURES
OF THE
MORGAN STANLEY RETAIL AND INSTITUTIONAL FUNDS
AS ADOPTED AND AMENDED JULY 23, 2004,(1)
1. Statement of Principles
The Audit Committee of the Board is required to review and, in its sole discretion, pre-approve all Covered Services to be provided by the Independent Auditors to the Fund and Covered Entities in order to assure that services performed by the Independent Auditors do not impair the auditor’s independence from the Fund.
The SEC has issued rules specifying the types of services that an independent auditor may not provide to its audit client, as well as the audit committee’s administration of the engagement of the independent auditor. The SEC’s rules establish two different approaches to pre-approving services, which the SEC considers to be equally valid. Proposed services either: may be pre-approved without consideration of specific case-by-case services by the Audit Committee (“general pre-approval”); or require the specific pre-approval of the Audit Committee or its delegate (“specific pre-approval”). The Audit Committee believes that the combination of these two approaches in this Policy will result in an effective and efficient procedure to pre-approve services performed by the Independent Auditors. As set forth in this Policy, unless a type of service has received general pre-approval, it will require specific pre-approval by the Audit Committee (or by any member of the Audit Committee to which pre-approval authority has been delegated) if it is to be provided by the Independent Auditors. Any proposed services exceeding pre-approved cost levels or budgeted amounts will also require specific pre-approval by the Audit Committee.
The appendices to this Policy describe the Audit, Audit-related, Tax and All Other services that have the general pre-approval of the Audit Committee. The term of any general pre-approval is 12 months from the date of pre-approval, unless the Audit Committee considers and provides a different period and states otherwise. The Audit Committee will annually review and pre-approve the services that may be provided by the Independent Auditors without obtaining specific pre-approval from the Audit Committee. The Audit Committee will add to or subtract from the list of general pre-approved services from time to time, based on subsequent determinations.
(1) This Audit Committee Audit and Non-Audit Services Pre-Approval Policy and Procedures (the “Policy”), adopted as of the date above, supersedes and replaces all prior versions that may have been adopted from time to time.
The purpose of this Policy is to set forth the policy and procedures by which the Audit Committee intends to fulfill its responsibilities. It does not delegate the Audit Committee’s responsibilities to pre-approve services performed by the Independent Auditors to management.
The Fund’s Independent Auditors have reviewed this Policy and believes that implementation of the Policy will not adversely affect the Independent Auditors’ independence.
2. Delegation
As provided in the Act and the SEC’s rules, the Audit Committee may delegate either type of pre-approval authority to one or more of its members. The member to whom such authority is delegated must report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next scheduled meeting.
3. Audit Services
The annual Audit services engagement terms and fees are subject to the specific pre-approval of the Audit Committee. Audit services include the annual financial statement audit and other procedures required to be performed by the Independent Auditors to be able to form an opinion on the Fund’s financial statements. These other procedures include information systems and procedural reviews and testing performed in order to understand and place reliance on the systems of internal control, and consultations relating to the audit. The Audit Committee will approve, if necessary, any changes in terms, conditions and fees resulting from changes in audit scope, Fund structure or other items.
In addition to the annual Audit services engagement approved by the Audit Committee, the Audit Committee may grant general pre-approval to other Audit services, which are those services that only the Independent Auditors reasonably can provide. Other Audit services may include statutory audits and services associated with SEC registration statements (on Forms N-1A, N-2, N-3, N-4, etc.), periodic reports and other documents filed with the SEC or other documents issued in connection with securities offerings.
The Audit Committee has pre-approved the Audit services in Appendix B.1. All other Audit services not listed in Appendix B.1 must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated).
4. Audit-related Services
Audit-related services are assurance and related services that are reasonably related to the performance of the audit or review of the Fund’s financial statements and, to the extent they are Covered Services, the Covered Entities or that are traditionally performed by the Independent Auditors. Because the Audit Committee believes that the provision of Audit-related services does not impair the independence of the auditor and is consistent with the SEC’s rules on auditor independence, the Audit Committee may grant general pre-approval to Audit-related services. Audit-related services include, among others, accounting consultations related to accounting, financial reporting or disclosure matters
not classified as “Audit services”; assistance with understanding and implementing new accounting and financial reporting guidance from rulemaking authorities; agreed-upon or expanded audit procedures related to accounting and/or billing records required to respond to or comply with financial, accounting or regulatory reporting matters; and assistance with internal control reporting requirements under Forms N-SAR and/or N-CSR.
The Audit Committee has pre-approved the Audit-related services in Appendix B.2. All other Audit-related services not listed in Appendix B.2 must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated).
5. Tax Services
The Audit Committee believes that the Independent Auditors can provide Tax services to the Fund and, to the extent they are Covered Services, the Covered Entities, such as tax compliance, tax planning and tax advice without impairing the auditor’s independence, and the SEC has stated that the Independent Auditors may provide such services.
Pursuant to the preceding paragraph, the Audit Committee has pre-approved the Tax Services in Appendix B.3. All Tax services in Appendix B.3 must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated).
6. All Other Services
The Audit Committee believes, based on the SEC’s rules prohibiting the Independent Auditors from providing specific non-audit services, that other types of non-audit services are permitted. Accordingly, the Audit Committee believes it may grant general pre-approval to those permissible non-audit services classified as All Other services that it believes are routine and recurring services, would not impair the independence of the auditor and are consistent with the SEC’s rules on auditor independence.
The Audit Committee has pre-approved the All Other services in Appendix B.4. Permissible All Other services not listed in Appendix B.4 must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated).
7. Pre-Approval Fee Levels or Budgeted Amounts
Pre-approval fee levels or budgeted amounts for all services to be provided by the Independent Auditors will be established annually by the Audit Committee. Any proposed services exceeding these levels or amounts will require specific pre-approval by the Audit Committee. The Audit Committee is mindful of the overall relationship of fees for audit and non-audit services in determining whether to pre-approve any such services.
8. Procedures
All requests or applications for services to be provided by the Independent Auditors that do not require specific approval by the Audit Committee will be submitted to the Fund’s Chief Financial Officer and must include a detailed description of the services to be
rendered. The Fund’s Chief Financial Officer will determine whether such services are included within the list of services that have received the general pre-approval of the Audit Committee. The Audit Committee will be informed on a timely basis of any such services rendered by the Independent Auditors. Requests or applications to provide services that require specific approval by the Audit Committee will be submitted to the Audit Committee by both the Independent Auditors and the Fund’s Chief Financial Officer, and must include a joint statement as to whether, in their view, the request or application is consistent with the SEC’s rules on auditor independence.
The Audit Committee has designated the Fund’s Chief Financial Officer to monitor the performance of all services provided by the Independent Auditors and to determine whether such services are in compliance with this Policy. The Fund’s Chief Financial Officer will report to the Audit Committee on a periodic basis on the results of its monitoring. Both the Fund’s Chief Financial Officer and management will immediately report to the chairman of the Audit Committee any breach of this Policy that comes to the attention of the Fund’s Chief Financial Officer or any member of management.
9. Additional Requirements
The Audit Committee has determined to take additional measures on an annual basis to meet its responsibility to oversee the work of the Independent Auditors and to assure the auditor’s independence from the Fund, such as reviewing a formal written statement from the Independent Auditors delineating all relationships between the Independent Auditors and the Fund, consistent with Independence Standards Board No. 1, and discussing with the Independent Auditors its methods and procedures for ensuring independence.
10. Covered Entities
Covered Entities include the Fund’s investment adviser(s) and any entity controlling, controlled by or under common control with the Fund’s investment adviser(s) that provides ongoing services to the Fund(s). Beginning with non-audit service contracts entered into on or after May 6, 2003, the Fund’s audit committee must pre-approve non-audit services provided not only to the Fund but also to the Covered Entities if the engagements relate directly to the operations and financial reporting of the Fund. This list of Covered Entities would include:
Morgan Stanley Retail Funds
Morgan Stanley Investment Advisors Inc.
Morgan Stanley & Co. Incorporated
Morgan Stanley DW Inc.
Morgan Stanley Investment Management Inc.
Morgan Stanley Investment Management Limited
Morgan Stanley Investment Management Private Limited
Morgan Stanley Asset & Investment Trust Management Co., Limited
Morgan Stanley Investment Management Company
Van Kampen Asset Management
Morgan Stanley Services Company, Inc.
Morgan Stanley Distributors Inc.
Morgan Stanley Trust FSB
Morgan Stanley Institutional Funds
Morgan Stanley Investment Management Inc.
Morgan Stanley Investment Advisors Inc.
Morgan Stanley Investment Management Limited
Morgan Stanley Investment Management Private Limited
Morgan Stanley Asset & Investment Trust Management Co., Limited
Morgan Stanley Investment Management Company
Morgan Stanley & Co. Incorporated
Morgan Stanley Distribution, Inc.
Morgan Stanley AIP GP LP
Morgan Stanley Alternative Investment Partners LP
(e)(2) Beginning with non-audit service contracts entered into on or after May 6, 2003, the audit committee also is required to pre-approve services to Covered Entities to the extent that the services are determined to have a direct impact on the operations or financial reporting of the Registrant. 100% of such services were pre-approved by the audit committee pursuant to the Audit Committee’s pre-approval policies and procedures (attached hereto).
(f) Not applicable.
(g) See table above.
(h) The audit committee of the Board of Trustees has considered whether the provision of services other than audit services performed by the auditors to the Registrant and Covered Entities is compatible with maintaining the auditors’ independence in performing audit services.
Item 5. Audit Committee of Listed Registrants.
(a) The Fund has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act whose members are: Frank Bowman, Wayne Hedien, Joseph Kearns, Michael Nugent and Allen Reed.
(b) Not applicable.
Item 6. Schedule of Investments
Refer to Item 1.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Applicable only to reports filed by closed-end funds.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Applicable only to reports filed by closed-end funds.
Item 9. Closed-End Fund Repurchases
Applicable only to reports filed by closed-end funds.
Item 10. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 11. Controls and Procedures
(a) The Fund’s principal executive officer and principal financial officer have concluded that the Fund’s disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the Fund in this Form N-CSR was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, based upon such officers’ evaluation of these controls and procedures as of a date within 90 days of the filing date of the report.
(b) There were no changes in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Exhibits
(a) The Code of Ethics for Principal Executive and Senior Financial Officers is attached hereto.
(b) A separate certification for each principal executive officer and principal financial officer of the registrant are attached hereto as part of EX-99.CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Morgan Stanley Select Dimensions Investment Series
/s/ Ronald E. Robison |
|
Ronald E. Robison | |
Principal Executive Officer | |
February 9, 2007 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
/s/ Ronald E. Robison |
| |
Ronald E. Robison | ||
Principal Executive Officer | ||
February 9, 2007 | ||
| ||
/s/ Francis Smith |
| |
Francis Smith | ||
Principal Financial Officer | ||
February 9, 2007 | ||